## Facts

- Congress-Kenilworth Corp. (C-K) operated a water-slide amusement business in Illinois.
- C-K hired W.E. Erickson Construction, Inc. (Erickson) to construct a concrete water-slide facility under a contract with a total cost not to exceed $535,000.
- The contract required Erickson to submit monthly applications for progress payments and required C-K to pay within 30 days.
- On June 16, 1981, when the project was about 60% complete, Erickson submitted a progress-payment application for $246,958 that was not paid.
- To address payment and financing problems, Erickson agreed to accept a deed to the property as security for payment on the project.
- The water-slide facility was completed and opened to the public on July 4, 1981.
- By the end of the project, Erickson claimed C-K owed about $550,000 under the construction contract.
- Shortly after completion, C-K’s three principal stockholders formed a new corporation, Thunder Mountain Rapids Corp., which effectively took over operation of the water-slide business.
- C-K’s bank accounts were closed, and revenues from the water slide were collected by Thunder Mountain and deposited into Thunder Mountain’s accounts; C-K also entered into a management contract with Thunder Mountain.
- The water park closed at the end of its first season on Labor Day. During that season, the park generated about $224,000 in gross revenue, and Erickson received about $150,000 in payments.
- The parties later discovered that C-K did not own the land, making the deed given to Erickson as security worthless.
- Erickson sued for breach of contract and sought equitable relief, including appointment of a receiver, alleging it feared that money generated by the water-slide project would be diverted.
- Erickson’s pleading stated this fear without alleging supporting underlying facts. After a four-day evidentiary hearing, the trial court appointed a receiver over C-K.
- C-K appealed on an interlocutory basis from the order appointing the receiver.

## Issues

1. Whether the trial court erred by appointing a receiver over C-K’s ongoing water-slide business when Erickson alleged only a general fear that revenues would be diverted and did not prove concrete facts showing an imminent risk of loss, waste, or diversion.

## Decision

- The Illinois Appellate Court reversed the order appointing a receiver.
- The court held the record did not justify this extraordinary remedy because Erickson’s asserted fear of diversion was not supported by specific facts showing imminent danger to the property or revenues.
- The case was remanded for further proceedings on Erickson’s underlying claims without a receivership in place.

## Legal Principles

- Appointment of a receiver is an extraordinary remedy to be used only in cases of emergency and necessity and with great caution.
- A receiver should not be appointed to secure payment of a debt or to resolve a contract dispute absent a strong factual showing that property is in immediate danger of being lost, removed, wasted, or materially injured.
- Allegations of possible diversion of funds must be supported by underlying facts; a generalized fear or suspicion, standing alone, is insufficient.
- Even when a plaintiff may have equitable rights (such as an equitable lien arising from a defective security deed caused by mutual mistake), those circumstances do not automatically justify displacing management through a receivership.
- A trial court’s decision to appoint a receiver is reviewed for abuse of discretion, and reversal is warranted when the record lacks the factual basis required for the remedy.

## Conclusion

The appellate court reversed the receivership because Erickson’s request rested on an unparticularized fear that water-slide revenues might be diverted after C-K’s principals formed a new operating entity and shifted deposits, and the evidence from the four-day hearing did not show the immediate danger to property or funds required to justify placing a going business under a receiver.


W.E. Erickson Construction, Inc. v. Congress-Kenilworth Corp., 445 N.E.2d 1209 (1983)