N.Y. Mental Hygiene Law § 19.41: Facilities; receivership

§ 19.41 Facilities; receivership.

a. The owner or owners of any facility may at any time request the

office to take over the operation of such facility by the appointment of

a receiver. Upon receiving such a request, the office may, if it deems

such action desirable, enter into an agreement with any such owners with

respect to the appointment of a receiver to take charge of the facility

under conditions as found acceptable by both parties. Receivership

commenced in accordance with the provisions of this subdivision shall

terminate at such time as may be provided in the receivership agreement,

or at such time as either party notifies the other in writing that he or

she wishes to terminate such receivership.

b. (1) Upon issuing a notice that the commissioner will revoke or

suspend a license or operating certificate in accordance with this

article and article thirty-two of this chapter, or that he or she will

disapprove an application of renewal of such certificate or license

pursuant to this article and article thirty-two of this chapter the

commissioner may apply to the supreme court in the county where the

facility is located for an order to show cause why a receiver should not

be appointed to operate the facility. The court shall, upon determining

that the notice was properly issued and that it would be in the best

interests of the persons served by the facility to have services

continued after the effective date of the revocation or suspension,

appoint a receiver for the facility to take effect upon the revocation

or suspension of the operating certificate or license in accordance with

the provisions of this article.

The order to show cause shall be returnable not less than five days

after service is completed and shall provide for personal service of a

copy thereof and the papers upon which it is based on the operator of

the facility and upon the owner or owners of the land and/or owners of

the land and/or structure on or in which the facility is located. If any

such operator or owner cannot with due diligence be served personally

within the county where the property is located and within the time

fixed in such order, then service may be made on such person by posting

a copy thereof in a conspicuous place within the facility in question,

and by sending a copy thereof by registered mail, return receipt

requested, to such owner at the last address registered to him or her

with the office, or in the absence of such registration, to the address

set forth in the last recorded deed with respect to such facility.

Service shall be deemed complete on filing proof of service thereof in

the office of the county clerk, or the clerk of the city of New York, as

the case may be.

(2) The commissioner may, prior to suspending an operating certificate

or license pursuant to this article and article thirty-two of this

chapter, request a temporary restraining order appointing a receiver for

a facility effective with the commissioner's issuance of the notice of

the suspension. The court shall issue the temporary restraining order if

it is satisfactorily shown by the commissioner that he or she has

reasonable grounds for finding that continued operation of the facility

by the current provider of services presents an imminent danger to the

health and welfare of any of the public or any of the individuals served

by the facility.

(3) The court shall appoint a receiver which should, where reasonably

possible, be a voluntary association or other not-for-profit corporation

recommended by the commissioner which holds a valid and current

operating certificate or license for a similar type facility, or which

shall satisfactorily demonstrate to the commissioner its qualifications

for such operating certificate or license.

(4) On the return of said order to show cause, determination shall

have precedence over every other business of the court unless the court

shall find that some other pending proceeding, having similar statutory

precedence, shall have priority. The court may conduct a hearing at

which all interested parties shall have the opportunity to present

evidence pertaining to the application. If the court shall find that the

facts warrant the granting thereof, the court shall determine a fair

monthly rental for the facility consistent with its usage as such

facility, which amount shall, except in the case where the receiver is

assuming an existing bona fide arm's length lease, not exceed the amount

which would be reimbursable to the facility in accordance with current

guidelines established by the office. Such rental shall be paid by the

receiver to the owner or owners of the facility for each month that the

receivership remains in effect, provided, however, that nothing

contained herein shall be construed to alter and diminish any rental

obligation the operator may have under any currently valid bona fide

arm's length lease.

(5) If the operating certificate or license of the operator of the

facility is revoked or suspended, then the receiver shall apply for the

issuance of an appropriate operating certificate or license for the

facility and shall for the duration of the receivership comply with all

applicable statutes and regulations.

(6) Any receiver appointed pursuant to this subdivision shall have all

of the powers and duties of a receiver appointed in an action to

foreclose a mortgage on real property, together with such additional

powers and duties as are herein granted and imposed. The receiver shall

with all reasonable speed, but in any case, within eighteen months after

the date on which the receivership was ordered, provide for the orderly

transfer of all clients in the facility to other care or make other

arrangements as authorized in subparagraph (a) of paragraph eight of

this subdivision. During the interim period when such clients must

remain in the facility, the receiver may correct or eliminate those

deficiencies in the facility that seriously endanger the life, health,

or safety of such clients; provided that such correction or elimination

of deficiencies does not include major alterations of the physical

structure of the facility. The receiver shall, during this period,

operate the facility in such a manner as to guarantee safety and

adequate care for such clients. The receiver shall have the power to let

contracts therefor or incur expenses in accordance with the provisions

of applicable statutes, rules and regulations, and applicable guidelines

established by the office. Any receiver who is an official or employee

of the state of New York shall not be required to file any bond. Such

receiver shall collect incoming payments from all sources and apply them

to the costs incurred in the performance of its functions as a receiver.

The receiver shall honor all existing leases, mortgages, and chattel

mortgages that had previously been undertaken as obligations of the

owners or operators of the facility. However, such receiver may make

application to the appointing court for recision, reformation, or such

other relief as may be appropriate with respect to the executory

covenants or provisions of any contractual obligations of such owners or

operators as may be necessary or appropriate to protect the best

interests of the clients served by such facility. No security interest

in any real or personal property comprising the facility or contained

within the facility shall be impaired or diminished in priority by the

receiver. The receiver shall compensate the owner or owners of any goods

held in inventory for those goods which it uses or causes to be used,

except that no such compensation shall be made for any such goods for

which the owner or operators of the facility have already been

reimbursed. Neither the receiver nor the office shall engage in any

activity that constitutes a confiscation of property without the payment

of fair compensation.

(7) The appointing court, upon application of the receiver, may make

such provision as justice may require for a reasonable compensation and

reimbursement of the reasonable expenses of such receiver. The receiver

shall be liable only in its official capacity for injury to person and

property by reason of conditions of the facility in a case where an

owner would have been liable; provided that it operates such facility in

compliance with the terms of its appointment, it shall not have any

liability in its personal capacity, except for gross negligence and

intentional acts.

(8) (a) The court shall terminate the receivership only under any of

the following circumstances:

(i) eighteen months after the date on which it is ordered;

(ii) when the receiver, or other voluntary agency or not-for-profit

corporation satisfactory to the commissioner, has (A) agreed to continue

the operation of the facility, (B) entered into a satisfactory long-term

(not less than two years) arrangement reached on a bona fide arm's

length basis with the owner or owners of land and/or structure on or in

which the facility is or is to be located, and (C) applied for and

received from the commissioner a new operating certificate or license,

as appropriate, for the continued operation of the facility; or

(iii) at such times as all of the persons served by the facility have

been provided alternative services.

(b) At the time of termination, the receiver shall render a full and

complete accounting to the court and shall make disposition of surplus

money at the direction of the court.

(9) (a) Any person who is served a copy of an order of the court

appointing the receiver shall, upon being notified of the name and

address of the receiver, make all payments for goods supplied by the

facility, or services rendered by the facility, to the receiver. A

receipt shall be given for each such payment, and copies of all such

receipts shall be kept on file by the receiver. The amount so received

shall be deposited by the receiver in a special account, which shall

also be used for all disbursements made by the receiver.

(b) Any person refusing or omitting to make such a payment after such

service and notice may be sued therefor by the receiver. Such person

shall not in such suit dispute the authority of the receiver to incur or

order such expenses, or the right of the receiver to have such payments

made to it. The receipt of the receiver for any sum paid to it shall, in

all suits and proceedings and for every purpose, be as effectual in

favor of any person holding the same as actual payment of the amount

thereof to the owner or other person or persons who would, but for the

provisions of this subdivision, have been entitled to receive the sum to

be paid. No person shall be discharged, nor shall any contract or rights

be forfeited or impaired, nor any forfeiture or liability be incurred,

by reason of any omission to pay any owner, contractor or other person

any sum so paid to the receiver.

(10) (a) No provision contained herein shall be deemed to relieve the

owner or operator of any civil or criminal liability incurred, or any

duty imposed by law, by reason of acts or omissions of the owner or

operator prior to the appointment of any receiver hereunder, nor shall

anything contained herein be construed to suspend during the

receivership any obligation of the owner or operator for the payment of

mortgages or liens.

(b) The receiver shall not be responsible for any obligations incurred

by the owner, operator, or prime lessor, if any, prior to the

appointment of the receiver.

(c) The receiver shall be entitled to use for operating and

maintenance expenses and the basic needs of persons served by the

facility a portion of the revenues due the operator during the month in

which the receiver is appointed, which portion shall be established on

the basis of the amounts of the unpaid operating and maintenance

expenses for such month.

(d) Any sums determined to be due and owing by the receiver to the

owner, operator, or prime lessor shall be off-set by any charges

determined to be the obligations of the owner, operator, or prime

lessor.

c. (1) Subject to paragraph two of this subdivision, and subject to

the approval of the director of the budget, the commissioner is

authorized to make payments to receivers appointed pursuant to the

provisions of subdivision b of this section only if the receiver

demonstrates to the satisfaction of the commissioner that the facility's

funds which are available are insufficient to meet the operating and

maintenance expenses of the facility and the basic needs of those served

by the facility.

(2) Notwithstanding any inconsistent provisions of law, payments made

pursuant to this section shall be made from funds appropriated therefor

and such payments shall be made only if a certificate of allocation and

a schedule of amounts to be available therefore shall have been issued

by the director of the budget and a copy of such certificate filed with

the comptroller, the chairman of the senate fiance committee, and the

chairman of the assembly ways and means committee. Such certificate may

be amended from time to time by the director of the budget, and a copy

of each such amendment shall be filed with the comptroller, the chairman

of the senate finance committee, and the chairman of the assembly ways

and means committee.