Simon PLC Attorneys & Counselors – 2025 Update of Receivership Case Studies
Note: This is an update to the article Receivership Case Studies published on August 12th, 2019, as well as our February 1, 2022 Update which you can read here.
Troy, Michigan – Court appointed receiver Frank R. Simon, Esq., along with the receivership and turnaround Team of Simon PLC Attorneys and Counselors, are often asked to summarize their experience handling different types of cases involving court supervised borrowers and their collateral. Simon’s appointments have included receiverships, assignments for the benefit of creditors, bankruptcy, and similar actions in both state and federal court across the nation. Simon and the Team have a proven track record of working with difficult assets, debtors and businesses. In addition to the goal of maximizing creditor recoveries to the receivership estate, the Team employs an approach that in all cases attempts to leave the collateral in an improved position for future growth and productivity.
The following topical case studies represent a broad array of Simon’s and the Team’s recent experience with complex assets, businesses and their circumstances.
- Blight and Eyesores. Municipalities call upon court appointed receivership as a remedy to blight, ordinance violations and when property owners fail to take active control of their assets. This summer our Team has nearly completed an impressive turnaround at the request of a local city. The property was once a massive hospital campus occupying extremely desirable real estate. What had been a great source of pride to the local community, had since been closed for some time and severely neglected. Its prominent location among historic homes and neighborhoods and alongside an international border only served to magnify the blight. The Receiver’s demolition of the massive concrete structures, terraforming and grading have been completed over the last eighteen months. The tearing down of the buildings exposed tons of concrete for crushing along with the separation of significant amounts of steel and rebar. Proximity to the waterfront required environmental abatement, underground tank removal and concerns for natural wildflife. Coordinating with state and local authorities, the Receiver managed demolition and environmental financial grants while also maintaining ongoing and regular investment of payment installments from the property owner. Before the end of the year the entire property will be a remediated, grass covered, graciously sloping field, ready and marketable for its next best use.
- Liquor. Receivership is a great resource for creditors secured to assets that include a liquor license, even ones that are operating under that license. A recurring theme in our Team’s appointments are liquor, convenience and party stores. The primary additional benefit here is that the receiver can take custody of the license, be recognized by the licensing authority, and continue regular business sales. In just the last few years our Team has assisted a secured creditor in maintaining operations and goodwill at a liquor store by installing a new manager, all while marketing, securing a purchaser, and closing the sale of the business as a going concern. Frequently, party stores are also private loan relationships. These types of receiverships often manifest in the form of inter-family or shareholder disputes. One party may have been the financial backer with the operator being a tenant who is gradually paying off the purchase obligations on an installment note. Our Team has responded to a number of these complicated transactions this year. In one instance we even had a “sub-tenant” who was in possession of the premises without the knowledge and consent of the owner and in violation of many licensing requirements. Critical to success in control of cash generating, licensed, and ongoing operations is a receiver who can install new management, audit accounts, quickly inventory and assess retail collateral, and assert authority over often heated litigants who have been pouring their personal effort into a business for many years.
- Marijuana. Our Team’s asset management includes all variety of businesses related to the sale of marijuana. Whereas many states have legalized recreational or medical marijuana, the federal laws continue to prohibit any use, sale or manufacture. This results in a complex non traditional loan relationship, investment protections, ownership structures and creative loan portfolios. Absent from traditional remedies for the industry are federal law protection like bankruptcy. Receivership at the state level is almost a perfect solution to to this split in authority. Indeed, many state marijuana enabling acts specifically provide for a receiver’s appointment with the right to maintain and operate licenses in trust. Our experience has shown that the secured assets for marijauna debtors tend to be geographically limited and challenged by zoning to avoid locations near schools, churches and the like. When building out a marijuana operation significant investments can be made into real and personal property that really has no other best use when things go wrong. As many creditors and borrowers in this sector have learned, price, supply and demand are very volatile and when things go wrong, they go wrong quickly. In the past years our Team has been appointed over nearly every aspect of the marijuana industry. We have operated a prominent dispensary in the heart of a Big Ten campus. We have operated a contentious grow operation hotly contested by its ousted owner resulting in criminal contempt charges before the successful sale. Receiver Simon has also maintained, secured and marketed abandoned growing and processing facilities for out of state lenders all while negotiating new financing and creditor supported restructuring for potential takeovers.
- Ownership/Shareholder/Partnership Battles. A reoccuring theme in our receivership workload are disputes between shareholders and partners. These are particulary complex when the additional variable of family relationships is added to the mix. Recently the Team has managed and resolved a restaurant asset dispute between two extremely hostile and violent owners. What had started as the realization of a dream and manifested into an exceptionally attractive business property had turned out to be quite the opposite. Mediating and managing the tension while seeking a positive resolution is a great use of a receiver. In another case we were appointed to manage a beautiful resort property, inclusive of a restaurant, with a reputation as an event and wedding planner’s dream destination. The only thing holding it back was the multi layered group of family, inlaws and management disputes preventing the funding of improvements and operations. In an effort at restructure the Receiver successfully implemented new branding, website design and portals, improved guest experience and onsite management, all while the parties worked out their matter in court.
- Divorce. Courts handling family law, divorce and probate turn to our Team for receivership support under their enabling Acts and legislation. Family disputes are a particularly challenging aspect of receivership and among the most contentious that Receiver Simon has managed. This year, in one case alone our Team has obtained Court approval to chase down and recover fradulently transferred real property assets by a litigious husband in a divorce action. In that very same case, the trial court’s appointment of Receiver Simon was also challenged to the Court of Appeals wherein the appellate court unanimously upheld the propriety of the court’s action and the need for receivership to preserve and liquidate the parties’ assets following the divorce.
- Judgment Creditors. Judgment creditors call upon the appointment of a receiver when the more traditional efforts of garnishment, debtor examination, and seizure orders have fallen short. A receiver is empowered by the court to investigate, subpoena, and audit a debtor. Our Team just completed an intense seven month audit of an extremely complex and sophisticated debtor structure for such a creditor earlier this year. The debtor had organized its real and personal assets across a variety of LLCs. Pledged assets to secured creditors were sorted and assessed by Receiver Simon. A myriad of lawsuits from as many as thirty separate parties were processed and prioritized for claims against the Estate during Receiver Simon’s tenure. Litigants included a municipality, utilities, personal injury victims along with more traditional creditors. A comprehensive written report and financial audit was ultimately able to satisfy the Court’s inquiries into the propriety of the debtors’ actions and structure allowing for the completion of the investigation.
- Residential. Lenders frequently call upon a receiver to assist them with exercising their remedies against the real and personal property collateral securing debts and financial arrangments. Receivership is particularly helpful to creditors in the context of occupied rental properties such as apartments. Whereas foreclosure is usually a cost effective option in recovering collateral, its inherent procedural and redemption timeframes routinely create delays and other problems of their own. Likewise, assignment of rents are only as valuable as the tenants willing to honor them. Receivership delivers much better results in the form of quick operational control, security of facilities, custody of rents, resolution of blight, investigation of mismanagement, and much more. A Receiver can ensure that rents are properly paid and collected while the property is prepared for market. A Receiver also enjoys the power of sale and often without any redemption period.
In the past year our Receivership Team has been appointed to manage tenant related assets of all sizes and complexities. For example, our Team quickly seized, marketed, and turned over a ten unit facility (in less than five months) to new ownership with a 100% recovery to the lender, inclusive of all costs of the receivership as well as payment of most of lender’s own attorneys’ fees. In another matter, we took action within a simultaneous foreclosure redemption period to secure three single family homes, control rents, and address the Court’s concerns with the real estate owner until such time as the Lender became fee title holder. In one of our largest appointments, Receiver Simon was appointed to manage and market fourteen apartment buildings originally built between 1924 to 1954 that are listed on the historic register. These particular buidlings are significantly neglected and subject to crime and blight but also highly desireable to the right investors. Some high stakes negotiations have yielded significant offers for the properties that advocate for the additional value of receivership. Whereas foreclosure bids might be lowball and anonymous at a county auction, Receivership allows for carefully drafted letter of intent, purchase agreements, exchange of due diligence, hard money escrow deposits and direct negotiations through Receiver with lender and prospective purchaser. Continuing this trend, just last month we accepted another appointment over a brand new state of the art apartment complex suffering not so much from aging infrastructure but instead from ownership burdened with an ambitious but overextended geographic footprint.
- Financial Crime. Not all receivership appointments are an asset based endeavor. Over the years the Team was appointed to establish control of the receivership estate in the instance of crime, fraud and other suspicious activities. This year we were appointed in a fairly unique matter for a national title underwriter. The local title agency had suffered crippling financial losses from the embezzlement activities of one of its trusted employee managers. Not only had the funds been lost, the closings, deeds, title, mortgages, fees and the like that were expected to be paid on settlement statements had never been presented. The list of victims from botched closings and their claims quickly escalated. In appointing Receiver Simon the court ensured that the losses would stop, remaining accounts were under control, and the claims process could proceed. Simultaneously, the Receiver’s fraud investigation could begin which included account audit, investigative subpoenas, records production, and critically, the depositions of the wrongdoer. In less than sixty days the Receiver had filed comprehensive reports with the court detailing the transactions and disposition of the funds. The embezzlement had gone on for the better part of two years and was not revealed as a self enrichment scheme but instead a standard Nigerian email wire transfer scam leaving the assets mostly outside of the country. Nevertheless, receivership provided the necessary stay of claims, securing of evidence, and the financial audit necessary to protect the victims and stop the losses.
Simon PLC Attorneys & Counselors is a full-service financial institution and commercial litigation law firm with its main office in Troy, Michigan that for more than two decades has provided service to clients in multiple jurisdictions throughout the United States and Canada. Frank R. Simon is a distinguished specialist in receivership, turnaround and resolution of distressed assets who has regularly been called upon and appointed as Receiver in multiple jurisdictions. Mr. Simon is admitted to practice law in Michigan, Illinois, New York, and the District of Columbia and is a licensed real estate broker.
N.B. Not Legal Advice: Please contact us if you would like to discuss the facts and circumstances of your specific matter. Simon PLC Attorneys & Counselors expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this memorandum. The information contained herein may not reflect current legal developments and is provided without any knowledge as to the recipient’s location, industry, identity or specific circumstances. No recipients of this content, clients or otherwise, should act, or refrain from acting, on the basis of any content included in this memorandum without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the jurisdiction for which the recipient’s legal issue(s) involve. The application and impact of relevant laws varies from jurisdiction to jurisdiction, and our attorneys do not seek to practice law in states, territories and foreign countries where they are not properly authorized to do so.
