Temporary Receiver Appointed—Investor Dispute—Defendant Allegedly Reneged on Joint Venture—Allegations of Fraud and Mismanagement—Operation of Apartments as Illegal Hotel

The plaintiff moved for an order pursuant to CPLR 6301, enjoining defendants from “selling, transferring, or hypothecating” the subject premises (property) without the plaintiff's consent and pursuant to CPLR 6401, appointing a temporary receiver during the pendency of the action. The court granted both motions.

“A,” the property owner, had commenced a Chapter 11 bankruptcy proceeding. “A's” sole asset were “two…four-story mixed-use,…buildings and…unused development rights.” The Bankruptcy Court had approved a minimum bid for the property of $9 million. The plaintiff alleged that “B,” on behalf of “A,” had signed the bankruptcy proceeding petition and had represented that “he would be operating the…property during said proceeding.” “B” had signed an affidavit admitting that he is the sole member of “A.” The affidavit stated that the debtor “fell behind on mortgage payments following the 2008 economic crisis and cash flow problems.” “B” admitted that the property is burdened with an approximately $4 million first mortgage, “is subject to a foreclosure judgment” in favor of a second mortgagee in the amount of approximately $1.8 million, and “there is a third mortgage claim on the property in the amount of approximately $4 million.” “B” further swore that “he would be responsible for management of the property during the bankruptcy proceeding.”