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Rooney v. Biaggio, Inc.

A-2615-07T3 (N.J. Super. App. Div. 2008) (Unpublished)

RECEIVERS — A receiver has the right to sell property if it can be shown that the creditors would benefit without harming the interests of any encumbrance holders, such as where failure to sell the property quickly could result in a drastic loss in the property’s value.

A buyer acquired 250 shares in a beauty salon corporation and also executed an employment agreement to work at the salon. She later brought, and subsequently settled, a claim that the salon and the salon’s predecessor had breached the stock purchase contract and the employment agreement. Under the settlement, the salon and its owners were to repay the buyer for the stock, with interest. The lower court subsequently vacated the settlement for one of the owners, ordered the other owner to pay the buyer, and appointed a receiver for the salon. The receiver sought to sell the salon through a private sale after discovering that employees had not been paid, that its landlord had filed an eviction action, and that the salon’s finances were in disarray. The lower court allowed the sale to proceed and the salon was sold to the suing buyer and three other investors.

A creditor objected to the private sale and appealed the lower court’s decision, arguing that he should have had the opportunity to bid at a public sale. The Appellate Division pointed out that receivers have the right to sell a property if it can be shown that the creditors would benefit without harming the interests of any encumbrance holders. The Court found that it was reasonable for the receiver to believe that the salon’s inability to pay its employees and to pay its rent justified a short notice sale because the salon would have had nothing to sell if the sale was delayed. In such a case, the creditors would have lost out on any opportunity to receive payment. It also found that the complaining creditor could have moved for a stay of the sale or bid for the salon through a private sale, but chose not to do so. Additionally the Court pointed out that purchasers of a property sold by a receiver have the right to rely on court orders authorizing such a purchase unless the sale has been stayed. Based on its findings and conclusions, it affirmed the lower court’s approval of a private sale of the salon to the buyer and the other three investors.


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