Appointing a Receiver to Sell Jointly Owned Property

When co-owners of property are at odds over the property, it may be necessary to have a court appoint a receiver to manage and/or sell the property.

This is somewhat common in probate cases given that family members often find themselves joint owners of property with others with whom they did not select as joint owners. The sudden inheritance and joint ownership can strain otherwise strained family relationships.

The appointment of a receiver is not always a remedy that is available. This is evidenced by the In re Estate of Martinez, No. 01-18-00217-CV (Tex. Ct. App.–Houston 2019) case.

Facts & Procedural History

The case involves a probate in Fort Bend County, Texas.

Prior to her death, the decedent had purchased real property and held title jointly with her daughter and son-in-law. The decedent owned half of the property and the daughter and son-in-law owned half. This was spelled out in a Joint Ownership Agreement and Non-Testamentary Transfer Agreement.

The decedent died without a will. The probate was handled as a dependent administration. A probate attorney was appointed as the administrator of the estate.

The daughter who was not a joint owner contended that the written agreement was invalid. The decedent’s two daughters, one of whom owned a joint interest in the property and the other who didn’t, asked the probate court to decide who owned the property.

The attorney serving as the administrator asked the probate court to appoint a receiver to sell the property. The probate court did this and one of the daughters appealed the decision to appoint the receiver.

Joint Ownership of Property

It is common for family members to own property jointly. This is common with bank accounts held by parents and their children. The thought is that the funds should be made available to the children if the parent dies so that the children will have funds to carry out the last affairs.

With jointly owned real estate, the hope is that the property will transfer without the need for a probate administration. In other cases, real estate is held jointly in an attempt to avoid paying a creditor or disqualifying the parent from receiving certain government benefits.

But jointly held property often results in disputes, much like the dispute in the current case. This is where a receiver comes in. A receiver can be appointed to take control of and sell real estate or other assets.

Types of Joint Property Ownership

There isn’t just one type of joint ownership of property. There are several types of joint ownership of property. Here are the most common:

1. Joint Tenancy: Joint tenancy is a form of ownership where two or more individuals have equal ownership interests in the property. One significant feature of joint tenancy is the right of survivorship, which means that when one joint tenant passes away, their share automatically transfers to the surviving joint tenant(s) without going through probate.
2. Tenancy in Common: Tenancy in common is another form of joint ownership where each owner holds a distinct, undivided interest in the property. Unlike joint tenancy, there is no right of survivorship. Each tenant in common can sell or transfer their share independently without the consent of the other co-owners.
3. Tenancy by the Entirety: Tenancy by the entirety is a type of joint ownership that is only available to married couples. In this arrangement, both spouses own the entire property, and neither spouse can individually sell or transfer their interest without the consent of the other. If one spouse passes away, the surviving spouse automatically becomes the sole owner. Texas law does not provide for this type of joint ownership.
4. Community Property: Community property is a type of joint ownership that is recognized in some states or countries. It applies to property acquired by a married couple during their marriage. Each spouse has an equal and undivided interest in the property, and in the event of a divorce or the death of one spouse, the property is divided equally between them.

The default joint ownership in Texas for married couples is community property. In Texas, any property acquired by either spouse during the marriage, with some exceptions such as gifts or inheritances designated as separate property, is considered community property. If individuals who are not married co-own property, the default form of joint ownership is tenancy in common.

What is a Receiver?

In Texas, a receiver is an individual or entity appointed by a court to take possession and control of property or assets that are subject to a legal dispute or in need of protection.

The appointment of a receiver is typically done to preserve and manage the property or assets during the pendency of a legal proceeding, such as a lawsuit or foreclosure.

The role of a receiver in Texas involves several responsibilities, which may vary depending on the specific circumstances of the case.

The appointment of a receiver in Texas is a legal process that involves filing a petition with the court, providing notice to interested parties, and demonstrating the necessity and appropriateness of the appointment. The specific rules and procedures for appointing a receiver can be found in the Texas Civil Practice and Remedies Code.

When a Receiver Can be Appointed

The issue for the appeals court was whether it was proper for the trial court to appoint a receiver.

Texas law provides that a receiver can be appointed in the following circumstances:

1. in an action by a vendor to vacate a fraudulent purchase of property;
2. in an action by a creditor to subject any property or fund to his claim;
3. in an action between partners or others jointly owning or interested in any property or fund;
4. in an action by a mortgagee for the foreclosure of the mortgage and sale of the mortgaged property if it appears that the mortgaged property is in danger of being lost, removed, or materially injured;
5. for a corporation that is insolvent, is in imminent danger of insolvency, has been dissolved, or has forfeited its corporate rights;  or
6. in any other case in which a receiver may be appointed under the rules of equity.

With the first three items, a receiver can be appointed only if the property or fund is in danger of being lost, removed, or materially injured. With the last item, which only applies if the five prior items do not apply, there is no such requirement.

This was the dispute in the case. One daughter argued that the receiver was appointed under number 3, above. The other daughter argued for number 6, above. With number 3, the court would have to have evidence of the potential loss, removal, or injury to the property.

The court appeals concluded that this was a dispute under number 3, which requires additional evidence. Since none was provided to the court, the appeals court concluded that a receiver should not have been appointed. The appeals court vacated the order appointing the receiver.

The Takeaway

In cases of property disputes among co-owners, a court may appoint a receiver to manage or sell the property. However, the availability of this remedy is not guaranteed. This case clarifies that the appointment of a receiver requires evidence of potential harm or injury to the property. Without such evidence, a receiver should not be appointed.

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Disclaimer 

The content of this website is for informational purposes only and should not be construed as legal advice. The information presented may not apply to your situation and should not be acted upon without consulting a qualified probate attorney. We encourage you to seek the advice of a competent attorney with any legal questions you may have.