25.0257.03000
Sixty-ninth
Legislative Assembly SENATE BILL NO. 2122
of North Dakota
Introduced by
Industry and Business Committee
(At the request of the Commission on Uniform State Laws)
1 A BILL for an Act to create and enact chapter 32-10.1 and a new section to chapter 32-19.2 of
2 the North Dakota Century Code, relating to the Uniform Commercial Real Estate Receivership
3 Act and trustees for commercial buildings during foreclosures; and to provide for application.
4 BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA:
5 SECTION 1. Chapter 32-10.1 of the North Dakota Century Code is created and enacted as
6 follows:
7 32-10.1-01. Definitions.
8 As used in this chapter:
9 1. "Affiliate" means:
10 a. With respect to an individual:
11 (1) A companion of the individual;
12 (2) A lineal ancestor or descendant, whether by blood or adoption, of:
13 (a) The individual; or
14 (b) A companion of the individual;
15 (3) A companion of an ancestor or descendant described in paragraph 2;
16 (4) A sibling, aunt, uncle, great aunt, great uncle, first cousin, niece, nephew,
17 grandniece, or grandnephew of the individual, whether related by the whole
18 or the half blood or adoption, or a companion of any of those individuals; or
19 (5) Any other individual occupying the residence of the individual; and
20 b. With respect to a person other than an individual:
21 (1) Another person that directly or indirectly controls, is controlled by, or is
22 under common control with the person;
23 (2) An officer, director, manager, member, partner, employee, or trustee or other
24 fiduciary of the person; or
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1 (3) A companion of, or an individual occupying the residence of, an individual
2 described in paragraph 1 or 2.
3 2. "Companion" means:
4 a. The spouse of an individual;
5 b. The domestic partner of an individual; or
6 c. Another individual in a civil union with an individual.
7 3. "Court" means the district court.
8 4. "Executory contract" means a contract under which each party has an unperformed
9 obligation and the failure of a party to complete performance would constitute a
10 material breach. The term includes a lease.
11 5. "Governmental unit" means an office, department, division, bureau, board,
12 commission, or other agency of this state or a subdivision of this state.
13 6. "Lien" means an interest in property which secures payment or performance of an
14 obligation.
15 7. "Mortgage" means a record, however denominated, that creates or provides for a
16 consensual lien on real property or rents, even if it also creates or provides for a lien
17 on personal property.
18 8. "Mortgagee" means a person entitled to enforce an obligation secured by a mortgage.
19 9. "Mortgagor" means a person that grants a mortgage or a successor in ownership of
20 the real property described in the mortgage.
21 10. "Owner" means the person for whose property a receiver is appointed.
22 11. "Person" means an individual, estate, business or nonprofit entity, public corporation,
23 government or governmental subdivision, agency, or instrumentality, or other legal
24 entity.
25 12. "Proceeds" means:
26 a. Whatever is acquired on the sale, lease, license, exchange, or other disposition
27 of receivership property;
28 b. Whatever is collected on, or distributed on account of, receivership property;
29 c. Rights arising out of receivership property;
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1 d. To the extent of the value of receivership property, claims arising out of the loss,
2 nonconformity, or interference with the use of, defects or infringement of rights in,
3 or damage to the property; or
4 e. To the extent of the value of receivership property and to the extent payable to
5 the owner or mortgagee, insurance payable by reason of the loss or
6 nonconformity of, defects or infringement of rights in, or damage to the property.
7 13. "Property" means all of a person's right, title, and interest, both legal and equitable, in
8 real and personal property, tangible and intangible, wherever located and however
9 acquired. The term includes proceeds, products, offspring, rents, or profits of or from
10 the property.
11 14. "Receiver" means a person appointed by the court as the court's agent, and subject to
12 the court's direction, to take possession of, manage, and, if authorized by this chapter
13 or court order, transfer, sell, lease, license, exchange, collect, or otherwise dispose of
14 receivership property.
15 15. "Receivership" means a proceeding in which a receiver is appointed.
16 16. "Receivership property" means the property of an owner which is described in the
17 order appointing a receiver or a subsequent order. The term includes any proceeds,
18 products, offspring, rents, or profits of or from the property.
19 17. "Record" means information inscribed on a tangible medium or stored on an electronic
20 or other medium and retrievable in perceivable form.
21 18. "Rents" means:
22 a. Sums payable for the right to possess or occupy, or for the actual possession or
23 occupation of, real property of another person;
24 b. Sums payable to a mortgagor under a policy of rental-interruption insurance
25 covering real property;
26 c. Claims arising out of a default in the payment of sums payable for the right to
27 possess or occupy real property of another person;
28 d. Sums payable to terminate an agreement to possess or occupy real property of
29 another person;
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1 e. Sums payable to a mortgagor for payment or reimbursement of expenses
2 incurred in owning, operating, and maintaining real property or constructing or
3 installing improvements on real property; or
4 f. Other sums payable under an agreement relating to the real property of another
5 person which constitute rent under any other provision of law.
6 19. "Secured obligation" means an obligation the payment or performance of which is
7 secured by a security agreement.
8 20. "Security agreement" means an agreement that creates or provides for a lien.
9 21. "Sign" means, with present intent to authenticate or adopt a record:
10 a. To execute or adopt a tangible symbol; or
11 b. To attach to or logically associate with the record an electronic sound, symbol, or
12 process.
13 22. "State" means a state of the United States, the District of Columbia, Puerto Rico, the
14 United States Virgin Islands, or any territory or insular possession subject to the
15 jurisdiction of the United States.
16 32-10.1-02. Notice and opportunity for hearing.
17 1. Except as provided under subsection 2, the court may issue an order under this
18 chapter only after notice and opportunity for a hearing appropriate in the
19 circumstances.
20 2. The court may issue an order under this chapter:
21 a. Without prior notice if the circumstances require issuance of an order before
22 notice is given;
23 b. After notice and without a prior hearing if the circumstances require issuance of
24 an order before a hearing is held; or
25 c. After notice and without a hearing if no interested party timely requests a hearing.
26 32-10.1-03. Scope - Exclusions.
27 1. Except as provided under subsection 2 or 3, this chapter applies to a receivership for
28 an interest in real property and any personal property related to or used in operating
29 the real property.
30 2. This chapter does not apply to a receivership for an interest in real property improved
31 by one to four dwelling units unless:
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1 a. The interest is used for agricultural, commercial, industrial, or mineral-extraction
2 purposes, other than incidental uses by an owner occupying the property as the
3 owner's primary residence;
4 b. The interest secures an obligation incurred at a time when the property was used
5 or planned for use for agricultural, commercial, industrial, or mineral-extraction
6 purposes;
7 c. The owner planned or is planning to develop the property into one or more
8 dwelling units to be sold or leased in the ordinary course of the owner's business;
9 or
10 d. The owner is collecting or has the right to collect rents or other income from the
11 property from a person other than an affiliate of the owner.
12 3. This chapter does not apply to a receivership authorized by any other provision of law
13 in which the receiver is a governmental unit or an individual acting in an official
14 capacity on behalf of the unit except to the extent provided by the other law.
15 4. This chapter does not limit the authority of a court to appoint a receiver under any
16 other provision of law.
17 5. Unless displaced by a particular provision of this chapter, the principles of law and
18 equity supplement this chapter.
19 32-10.1-04. Power of court.
20 The court that appoints a receiver under this chapter has exclusive jurisdiction to direct the
21 receiver and determine any controversy related to the receivership or receivership property.
22 32-10.1-05. Appointment of receiver.
23 1. The court may appoint a receiver:
24 a. Before judgment, to protect a party that demonstrates an apparent right, title, or
25 interest in real property that is the subject of the action, if the property or its
26 revenue-producing potential:
27 (1) Is being subjected to or is in danger of waste, loss, dissipation, or
28 impairment; or
29 (2) Has been or is about to be the subject of a voidable transaction;
30 b. After judgment:
31 (1) To carry the judgment into effect; or
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1 (2) To preserve nonexempt real property pending appeal or when an execution
2 has been returned unsatisfied and the owner refuses to apply the property
3 in satisfaction of the judgment;
4 c. In an action in which a receiver for real property may be appointed on equitable
5 grounds; or
6 d. During the time allowed for redemption, to preserve real property sold in an
7 execution or foreclosure sale and secure its rents to the person entitled to the
8 rents.
9 2. In connection with the foreclosure or other enforcement of a mortgage, the court may
10 appoint a receiver for the mortgaged property if:
11 a. Appointment is necessary to protect the property from waste, loss, transfer,
12 dissipation, or impairment;
13 b. The mortgagor agreed in a signed record to appointment of a receiver on default;
14 c. The owner agreed, after default and in a signed record, to appointment of a
15 receiver;
16 d. The property and any other collateral held by the mortgagee are not sufficient to
17 satisfy the secured obligation;
18 e. The owner fails to turn over to the mortgagee proceeds or rents the mortgagee
19 was entitled to collect; or
20 f. The holder of a subordinate lien obtains appointment of a receiver for the
21 property.
22 3. The court may condition appointment of a receiver without prior notice under
23 subdivision a of subsection 2 of section 32-10.1-02 or without a prior hearing under
24 subdivision b of subsection 2 of section 32-10.1-02 on the giving of security by the
25 person seeking the appointment for the payment of damages, reasonable attorney's
26 fees, and costs incurred or suffered by any person if the court later concludes the
27 appointment was not justified. If the court later concludes the appointment was
28 justified, the court shall release the security.
29 32-10.1-06. Disqualification from appointment as receiver - Disclosure of interest.
30 1. The court may not appoint a person as receiver unless the person submits a
31 statement to the court under penalty of perjury that the person is not disqualified.
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1 2. Except as provided under subsection 3, a person is disqualified from appointment as
2 receiver if the person:
3 a. Is an affiliate of a party;
4 b. Has an interest materially adverse to an interest of a party;
5 c. Has a material financial interest in the outcome of the action, other than
6 compensation the court may allow the receiver;
7 d. Has a debtor-creditor relationship with a party; or
8 e. Holds an equity interest in a party, other than a noncontrolling interest in a
9 publicly traded company.
10 3. A person is not disqualified from appointment as receiver because the person:
11 a. Was appointed receiver or is owed compensation in an unrelated matter involving
12 a party or was engaged by a party in a matter unrelated to the receivership;
13 b. Is an individual obligated to a party on a debt that is not in default and was
14 incurred primarily for personal, family, or household purposes; or
15 c. Maintains with a party a deposit account as defined under section 41-09-02.
16 4. A person seeking appointment of a receiver may nominate a person to serve as
17 receiver, but the court is not bound by the nomination.
18 32-10.1-07. Receiver's bond - Alternative security.
19 1. Except as provided under subsection 2, a receiver shall post a bond with the court
20 which:
21 a. Is conditioned on the faithful discharge of the receiver's duties;
22 b. Has one or more sureties approved by the court;
23 c. Is in an amount the court specifies; and
24 d. Is effective as of the date of the receiver's appointment.
25 2. The court may approve the posting by a receiver with the court of alternative security,
26 including a letter of credit or deposit of funds. The receiver may not use receivership
27 property as alternative security. Interest that accrues on deposited funds must be paid
28 to the receiver on the receiver's discharge.
29 3. The court may authorize a receiver to act before the receiver posts the bond or
30 alternative security required by this section.
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1 4. A claim against a receiver's bond or alternative security must be made not later than
2 twelve months after the date the receiver is discharged.
3 32-10.1-08. Status of receiver as lien creditor.
4 On appointment of a receiver, the receiver has the status of a lien creditor under:
5 1. Chapter 41-09 as to receivership property that is personal property or fixtures; and
6 2. Chapter 47-19 as to receivership property that is real property.
7 32-10.1-09. Security agreement covering after-acquired property.
8 Except as otherwise provided by law, property that a receiver or owner acquires after
9 appointment of the receiver is subject to a security agreement entered before the appointment
10 to the same extent as if the court had not appointed the receiver.
11 32-10.1-10. Collection and turnover of receivership property.
12 1. Unless the court orders otherwise, on demand by a receiver:
13 a. A person that owes a debt that is receivership property and is matured or payable
14 on demand or on order shall pay the debt to or on the order of the receiver,
15 except to the extent the debt is subject to setoff or recoupment; and
16 b. Subject to subsection 3, a person that has possession, custody, or control of
17 receivership property shall turn the property over to the receiver.
18