N.Y. Mental Hygiene Law § 31.28: Facilities; receivership

§ 31.28 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 notified the other in writing that he

wishes to terminate such receivership.

(b) (1) Upon issuing a notice that he will revoke or suspend an

operating certificate in accordance with subdivision (a) of section

31.16 of this article, or that he will disapprove an application for

renewal of such certificate pursuant to section 31.05 of this article

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 person 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 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 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

for up to sixty days pursuant to subdivision (b) of section 31.16 of

this article, 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 has reasonable grounds for finding that continued operating of the

facility presents an immediate 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 not-for-profit corporation

recommended by the commissioner which holds a valid and current

operating certificate for a similar type facility, or which shall

satisfactorily demonstrate to the commissioner its qualifications for

such operating certificate.

(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, taking into account all relevant factors, including the

condition of 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 under the

medical assistance program for real property costs if each patient in

the facility were a recipient of medical assistance. 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 lease.

(5) If the operating certificate of the operator of the facility is

revoked or suspended, then the receiver shall apply for the issuance of

an operating certificate for the facility and shall for the duration of

the receivership comply with all applicable statute and regulations for

such operating certificate.

(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 facilities or make

other provisions for their continued safety and 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. He shall, during this period operate the

facility in such a manner as to guarantee safety and adequate care for

such clients. He shall have the power to let contracts therefor or incur

expenses in accordance with the provisions of local laws, ordinances,

rules and regulations applicable to contracts for public works except

that advertisement shall not be required for each such contract.

Notwithstanding any such laws, ordinances, rules or regulations, the

receiver may let contracts or incur expenses for individual items of

repairs, improvements or supplies without the procurement of competitive

bids where the total amount of any such individual item does not exceed

five hundred dollars. Any receiver who is an official or employee of the

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

collect incoming payments from all sources and apply them to the costs

incurred in the performance of his functions as 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

residing within such facility. No security interest in any real or

personal property comprising the facility or contained within the

facility, or in any fixture of 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

he uses or causes to be used in reimbursing the costs of such goods,

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 his 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 he operates such facility in

compliance with the terms of his appointment he shall not have any

liability in his 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 was 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 owner's 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 for the

continued operation of the facility; or

(iii) at such time 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 him. The receipt of the receiver for any sum paid to him 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 persons 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 of 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 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 therefor 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 finance 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.

(d) This section shall apply only to the facilities under the

jurisdiction of the office of mental health. Reference to the

commissioner in this section shall mean the commissioner of mental

health.