The Water Works and Sewer Bd. of the City of Prichard v. Synovus Bank, [Ms. SC-2023-0881, May 17, 2024] __ So. 3d __ (Ala. 2024). The Court (Sellers, J.; Parker, C.J., and Wise, Stewart, and Cook, JJ., concur) affirms the Mobile Circuit Court’s appointment of a receiver following the Water Works and Sewer Board of the City of Prichard’s (“the Board”) default on its bond obligations.
On November 1, 2019, the Board entered into a trust indenture (“the indenture”) with Synovus Bank wherein Synovus agreed to serve as the trustee for the Board’s issuance of $55.78 million in “Series 2019 Bonds.” These bonds refunded the 2018 bonds and funded capital improvements for the aging infrastructure of the system. Ms. *2. In June 2023, Synovus filed a breach of contract action against the Board, alleging default and requesting the appointment of a receiver pursuant to § 12.2(c) of the indenture. The trial court found appointment of a receiver was appropriate because no other adequate remedy was available to Synovus. Ms. *5.
The Board argued on appeal that the trial court exceeded its discretion in appointing a receiver because “the legislature has not authorized receivers to be appointed for waterworks and sewer boards organized under § 11-50-230 et seq.” Ms. *9. Section 11-50-235(b) grants the Board power to enter contracts, like the indenture, but does not bar agreements for appointment of a receiver. Ms. *11. A court’s power to appoint a receiver in a pending action is statutorily recognized. See § 6-6-620, Ala. Code 1975. The trial court determined appointment of a receiver was appropriate pursuant to § 12.2(c) of the indenture, and also detailed the compelling circumstances justifying the appointment. Ms. *7. The Court holds the trial court properly considered the indenture and the factors set forth in Carter v. State ex rel. Bullock Cnty., 393 So. 2d 1368 (Ala. 1981) regarding appointment of a receiver. Ms. *8.
The trial court’s order detailed the manner in which the receiver would interact with Synovus, the Board, the Prichard Citizens Advisory Council, and the court. Ms. *18. The Board argued the trustee’s consent power destroys “any notion that the receiver is an impartial officer of the trial court and that the trustee essentially ‘has been empowered to control the actions of the Receiver and thus the operations of the System.’” Ms. *19. The Court holds the appointment properly implemented a checks-and-balances system to allow trustee input and to ensure compliance with the terms of the indenture. Ms. *19.