MEMORANDUM OF DECISION AND ORDER ON PLAINTIFFâS
EMERGENCY MOTION FOR APPOINTMENT OF RECEIVER
Mitchell H. Kaplan, Justice
action arises out of plaintiff ACAS, LLCâs request that a
receiver be appointed to take control over and liquidate all
of the assets of defendant New England Confectionery Company,
Inc. (NECCO) to aid ACAS in the recovery of NECCOâs debt to
it, which, it alleges, is secured by a perfected security
interest in all of NECCOâs assets. On March 21, 2018, ACAS
filed both a Verified Complaint (the Complaint) and a
pleading which it labeled: Request for Expedited/Emergency
Hearing on Assented-To Emergency Motion for Appointment of
Receiver (the Motion). On March 23, 2018, the court convened
a hearing on the Motion. At the hearing, ACAS presented the
court with a proposed from of order entitled: Order
Appointing Receiver and Preliminary Injunction in Aid of
Receivership (the proposed Order). Another party also
appeared at the hearing, Americraft Carton, Inc.
(Americraft). Americraft presented the court with a motion to
intervene in order to oppose the appointment of a receiver.
It asserted that it, too, was a creditor of NECCO and had
previously filed an action against NECCO to recover the debt
(Suffolk Superior Court CA No. 18-0731). It went on to state
that, on March 22, 2018, it obtained a Trustee Process
Attachment in the amount of $515,185.29 on any of NECCOâs
credits held by Eastern Bank, as well as a preliminary
injunction enjoining reach and apply defendants from making
payments to NECCO in a similar amount (both issued by Ames,
J.). After hearing from the parties, the court continued the
matter to March 28, 2018, with leave for the parties to file
additional pleadings in support of their positions. ACAS and
Americraft each filed supplemental pleadings and the court
heard additional argument on the Motion on March 28, 2018.
reasons that follow, ACASâ Motion is denied without
relevant to the Motion, the Complaint alleges that NECCO is
indebted to ACAS through term loans and a revolving line of
credit in the aggregate sum of $102,105,563 and that, as of
March 19, 2018, the debt is in default. This debt is secured
by all of NECCOâs assets and the security interests were
perfected by UCC-1 Financing Statements filed on February 22,
2017 and August 8, 2008.
Complaint also alleges that NECCO is in the process of
negotiating a sale to a prospective buyer, but that the
amount of the sale proceeds will be significantly less than
the secured indebtedness to ACAS. NECCO issued a WARN ACT
notice to its employees on March 6, 2018, notifying them of
their potential termination and starting the 60 day period
during which they must be paid. ACAS has agreed that a
receiver will pay these wages during the 60 day period.
respect to the reason that the court should appoint a
receiver, the Complaint simply states: " Emergency
appointment of a receiver is necessary to provide an orderly
process (a) for NECCOâs operations to be conducted for the
remaining period until NECCOâs assets can be sold, and (b)
for sale of NECCOâs assets to take place on such terms and in
such time frame as will maximize the value to be received for
the assets." No facts supporting this conclusory
allegation are alleged.
Complaint did not allege, nor did ACAS explain in either the
Motion or the proposed Order, that, through a holding
company, ACAS is the indirect owner of all of NECCOâs capital
stock and has appointed a majority of its Board of Directors.
These facts were first disclosed by Americraft and then
confirmed by ACAS.
is an unsecured trade creditor of NECCO. It represented to
the court that, on information and belief, at least one other
NECCO creditor has filed suit against NECCO in Middlesex
Superior Court, and that there are numerous other such
creditors. Americraft also contends that ACAS sold, or caused
the sale of, NECCOâs real estate in May, 2017 for in excess
of $50 million and used that sum to retire debt due it. It
posits that this payment might constitute a preferential
payment to an insider avoidable in bankruptcy under 11 U.S.C.
Â§ 547, if a petition is filed within a year of the transfer.
ACAS responds that it, or its predecessor entity, has owned
that real estate since 2007.
exists very little appellate case law in Massachusetts
describing the Superior Courtâs equitable authority to
appoint a non-statutory receiver to assist creditors in
recovering debts from corporate defendants. In Charlette
v. Charlette Brothers Foundry, Inc., 59 Mass.App.Ct. 34
(2003), a case factually very dissimilar from the pending
action, in which the Appeals Court was addressing an issue of
collateral estoppel, it generally explained that:
A receivership is an equitable remedy designed to protect and
preserve the assets of a corporate debtor for those creditors
who the court ultimately decides are entitle to them.... The
appointment of a receiver is incidental to other relief
requested by a plaintiff, ..., because such an appointment
seeks to preserve property until the court can adjudge the
partiesâ rights.... Because receivership seriously interferes
with a defendantâs property interests, a judge should appoint
a receiver only if he sees no other way to protect the
plaintiff and other creditors.... Receivership is not solely
for the benefit of the petitioning creditor or creditors.
Id. at 45-46. (internal quotations and citations
only guidance that the court has found in Massachusetts
appellate case law that addresses a situation such as the one
presented by this case, where the creditor with the debtorâs
acquiescence asks the court to enter a " friendly"
receivership, i.e., one that is supported by the
debtor corporation, is New England Theatres, Inc. v.
Olympia Theatres, Inc.,287 Mass. 485 (1934) (New
England Theatres ). Although the Supreme Judicial Court
(SJC) issued this opinion several decades ago, it appears
still to be authoritative and to explain the factors that a