ZAHAV REFI, LLC, ZAHAV FLORIDA, LLC, ZAHAV REFI I I, LLC, SP POOL 7 ZAHAV FL, LLC, BOG TWELVE ZAHAV FL, LLC, AND POOL7 ZAHAV FLORIDA, LLC v. WHITE HAWK ASSET MANAGEMENT, INC. ( 2023 )

DISTRICT COURT OF APPEAL OF FLORIDA
SECOND DISTRICT
ZAHAV REFI LLC; ZAHAV FLORIDA, LLC;
ZAHAV REFI LL LLC; SP POOL 7 ZAHAV FL LLC;
BOG TWELVE ZAHAV FL LLC; and
POOL7 ZAHAV FLORIDA, LLC,
Appellants,
v.
WHITE HAWK ASSET MANAGEMENT, INC.,
Appellee.
No. 2D23-675
December 27, 2023
Appeal pursuant to Fla. R. App. P. 9.130 from the Circuit Court for
Hillsborough County; Melissa M. Polo, Judge.
Dwayne A. Robinson and Eric S. Kay of Kozyak Tropin & Throckmorton
LLP, Miami, for Appellants.
Matthew D. Wolf of Ivanov & Wolf, PLLC, Tampa, for Appellee.
SMITH, Judge.
Appellants (collectively Zahav) appeal the trial court's order
appointing a receiver over commercial properties pursuant to chapter
714, Florida Statutes (2022), the Uniform Commercial Real Estate
Receivership Act (UCRERA). Because the trial court failed to conduct an
evidentiary hearing to determine whether there was a need for the
receivership under subsections 714.06(1)(b) or (c), we reverse and
remand with instructions.
I.
In March 2021, White Hawk entered into a contract to purchase
twenty-three residential properties from Zahav for $3.26 million.
Delivery of those properties was to occur sixty days from the date of the
contract. When that delivery did not occur, White Hawk filed an
amended petition for judicial relief to compel mandatory, binding
arbitration for breach and specific performance of the contract. The trial
court granted the petition and ordered the parties to binding arbitration.
White Hawk prevailed in its claims for specific performance of the
contract in the arbitration proceedings pursuant to the May 13, 2022,
final award of arbitrator.
In August 2022, White Hawk filed a motion for confirmation of the
Final Award of Arbitrator. That motion was granted, and the trial court
entered a final judgment confirming the arbitrator's award and directing
the parties to close the sale "expeditiously." Thereafter, Zahav appealed
the final judgment, and in turn, White Hawk filed with the trial court a
motion seeking the appointment of a receiver to manage the subject
properties.
In the motion, White Hawk sought receivership over the properties
pursuant to UCRERA, Florida common law, and "other relevant
statutes." Specifically, the motion stated that the receivership was
required "in order to preserve nonexempt property pending appeal or for
equitable ground [sic]. Fla. Stat. [§]714.061(1)(b) and (c)." White Hawk
argued that a receivership was necessary to preserve the subject
properties due to (1) protracted litigation as a result of the notice of
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appeal filed by Zahav and (2) mismanagement, waste, or foreclosure of
the subject properties, which were operating at a loss as of January 13,
2022, referencing a prior evidentiary hearing in which White Hawk
successfully sought a $3,550,000 bond in the trial court during the
pendency of the arbitration. Alternatively, White Hawk contended that to
the extent the subject properties were profitable, there was a need for a
neutral third party to collect the rents. No affidavits or other exhibits
were attached or filed contemporaneously with the motion, and Zahav
was quick to note this in its response to the motion for appointment of
receiver. In addition to noting that the drastic relief of a receiver should
not be granted, Zahav alleged further deficiencies—"[White Hawk] offers
this Court no guidance on how a receivership would be administered . . .
does not identify a receiver, how it would be paid, or how this Court
would monitor the receivership."
The hearing on the motion for appointment of receiver was held on
February 20, 2023, pursuant to a standard notice of hearing via Zoom,
and was set for fifteen minutes. There was no indication in the notice of
hearing that it was set as an evidentiary hearing. On the morning of the
hearing, White Hawk filed approximately thirty pages of documents,
including a notice of special set hearing that had occurred on January
13, 2022, along with correspondence and financial documents that had
been exchanged between Zahav's and White Hawk's counsel. The
documents, which were admitted into evidence at that hearing, included
loan history, rent roll, and income statement records.
At the February 20, 2023, hearing, Zahav objected to the
appointment of a receiver and, relevant here, argued that the trial court
could not appoint a receiver without some evidence to support the
appointment, which could not fairly include the belatedly filed
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documents, and without the hearing being properly noticed as an
evidentiary hearing. As to the merits of the receivership, Zahav disputed
the facts argued by White Hawk that the properties were currently
operating at a loss based upon the evidence received by the trial court at
the January 13, 2022, hearing, which had occurred more than a year
before the February 2023 hearing on the motion to appoint receiver.
White Hawk seemed to concede at the receivership hearing that even if
those documents established that the properties were being operated at a
loss then, they did not know if that was still the case as of the hearing on
the motion for appointment of receiver. After hearing argument, the trial
court ruled, "The motion's granted. I will appoint a receiver to maintain
this property and to collect the rent."
On March 28, 2023, the trial court entered its order granting
motion for appointment of receiver.1 The trial court made a finding that
"the subject 23 parcels of rental real property . . . are being subject to or
are in danger of waste, loss, substantial diminution in value, dissipation,
or impairment." The order appointed the firm John Burpee & Associates
as receiver and required the receiver to "file a statement under penalty of
perjury that the appointed Receiver is not disqualified and post a
$10,000.00 bond." The order granted the receiver the authority to collect
the rent and maintain the property and enumerated other duties
1 Prior to the entry of the order, on March 24, 2023, the trial court's
judicial assistant sent White Hawk's counsel an email stating that the
proposed order had not named a receiver. Counsel for White Hawk
responded on March 28, 2023, naming John Burpee & Associates as the
receiver. Minutes later, counsel for Zahav sent an email to White Hawk
and the judicial assistant objecting to the appointment of a receiver
without "any vetting, or any evidentiary hearing." The order was entered
without further hearing.
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consistent therewith. The order also required Zahav to pay the receiver's
fees and expenses pursuant to section 714.15. This appeal followed.
II.
"The appointment of a receiver is not a matter of right, but is one
resting in the sound discretion of the court, to be exercised or withheld,
according to the circumstances and facts of each particular case."
Recarey v. Rader, 320 So. 2d 28, 29-30 (Fla. 3d DCA 1975); see also
Yarborough v. Kilbee, 307 So. 2d 223, 229 (Fla. 4th DCA 1975) ("There is
authority for the appointment of a receiver even in the case of a
superseded judgment where it is necessary for the preservation of
property pending appeal."). "The power to appoint a receiver is always
one that is inherent in a Court of equity . . . ." Edenfield v. Crisp, 186 So.
2d 545, 549 (Fla. 2d DCA 1966) (citing Armour Fertilizer Works v. First
Nat'l Bank, 100 So. 362 (Fla. 1924)). "[A]fter the entry of a final
judgment, the considerations dictating a cautious approach to the
appointment of a receiver may carry less weight." U.S. Bank Nat'l Ass'n v.
Cramer, 113 So. 3d 1020, 1023 (Fla. 2d DCA 2013). Accordingly, "[w]e
review an order granting or denying a motion for the appointment of a
receiver for abuse of discretion." Id. at 1022.
III.
UCRERA was enacted by the Florida Legislature effective July 1,
2020, and provides, from soup to nuts, the necessary steps for obtaining
a receivership over commercial real estate from the inception of the filing
of a motion for receivership to the termination of the receivership. Ch.
2020-106, Laws of Fla. Our research has found only one case citing to
UCRERA since its enactment, but that case has no application here. See
Berk-Fialkoff v. Wilmington Tr., N.A., 358 So. 3d 472, 475-76 (Fla. 5th
DCA 2023) (discussing the requirements of an injunction in a
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receivership under subsections 714.14(2)-(3)). However, our general
review of UCRERA reveals that the Act is a codification of Florida's
substantive common law on receiverships.2
We begin by reviewing the pertinent statutory provisions. Section
714.03(1) imposes the requirements of notice and opportunity, stating
that except as otherwise provided in the statute "the court may issue an
order under this chapter only after notice and opportunity for a hearing
appropriate under the circumstances." (Emphasis added.)3 The trial
court's discretion to appoint a receiver is set forth under section
714.06(1). Section 714.06(1)(a) deals with the appointment of a receiver
before judgment, while section 714.06(1)(b) addresses the appointment of
a receiver after judgment—relevant here. White Hawk also sought the
appointment of a receiver in its motion based upon equitable grounds
under section 714.06(1)(c), subject to the applicable factors of subsection
(b) for postjudgment proceedings.
Subsections 714.06(1)(b)-(c) provide in pertinent part:
(1) The court may appoint a receiver:
....
(b) After judgment:
2 Prior to the enactment of UCRERA, "the substantive and
procedural aspects of receiverships in Florida were governed by a
combination of decisional law and reference to Fla. R. Civ. P. 1.610 and
1.620." See Kendall Coffey and David Freedman, Florida's New
Commercial Real Estate Receivership Act: A Roadmap for Judges and
Practitioners, Fla. Bar Journal, Jan./Feb. 2022, at 18. Both sides have
cited to this article in their briefs.
3 Despite Zahav's contentions to the contrary, Zahav was properly
noticed that White Hawk sought a receivership pursuant to section
714.06(1)(b) and (c), as the statute was specifically noted in the Motion
for Appointment of Receiver referenced on the Notice of Hearing Via
Zoom.
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1. To carry the judgment into effect; or
2. To preserve nonexempt real property pending appeal
or when an execution has been returned unsatisfied
and the owner refuses to apply the property in
satisfaction of the judgment;
(c) In an action in which a receiver for real property may be
appointed on equitable grounds, subject to the
requirements of paragraphs (a) and (b).
The threshold issue we must decide here is whether the trial court
was required to hold an evidentiary hearing before appointing the
receiver.
Zahav cites a litany of cases in favor of holding an evidentiary
hearing that stand for the proposition that a trial court cannot appoint a
receiver without hearing some evidence, either in the form of testimony,
affidavits, or some other sworn pleading. See Lakeview Townhomes of
Cal. Club, Inc. v. Coral Gables Fed. Sav. & Loan Ass'n, 656 So. 2d 240,
240 (Fla. 3d DCA 1995) ("We reverse, as the order was entered 'without
testimony, sworn pleadings or an affidavit demonstrating a show of
"waste" which impairs the equity of security.' " (quoting Boyd v. Banc One
Mortg. Corp., 509 So. 2d 966, 967 (Fla. 3d DCA 1987))); Chromy v.
Midwest Fed. Sav. & Loan Ass'n of Minneapolis, 546 So. 2d 1172, 1173
(Fla. 3d DCA 1989) (reversing an order appointing receiver where, "[a]fter
a hearing on the motion at which the court received no testimony or
affidavit from [the movant], the trial court appointed a receiver"); M.R.D.
Props., Ltd. v. Shangri-La Resorts II, Inc., 546 So. 2d 35, 36 (Fla. 3d DCA
1989) ("We reverse the order under review because no sworn proof was
ever adduced below in support of the . . . motion for the appointment of a
receiver."); Shops of Sunset, Ltd. v. Cohen, 551 So. 2d 1272, 1273 (Fla. 3d
DCA 1989) ("We hold the trial court erred in appointing a receiver
without testimony, sworn pleadings or affidavits submitted in support of
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appellees' motion."); Polycoat Corp. v. City Nat'l Bank of Mia., 327 So. 2d
126, 127 (Fla. 4th DCA 1976) (reversing an order appointing receiver in
part because "no testimony was taken supporting the appointment of a
receiver"). While these cases are resourceful, they fall in the category of
receiverships entered "before judgment," which is not the case before us.4
See § 714.06(1)(a).
Not surprisingly, White Hawk responds that Zahav's cases predate
UCRERA and thus have no application here. Instead, White Hawk
directs our attention to the text of the statute and argues that neither
subsection 714.06(1)(b) nor (c) require that the trial court hold an
evidentiary hearing, much less rely upon any competent evidence to
support the appointment of a receiver. In other words, White Hawk
argues that a movant seeking the appointment of a receiver need only
make conclusory allegations consistent with subsection (1)(b) or (c) in
order to prevail on a motion for appointment of receiver. Other than
relying upon the statutory language, White Hawk cites no other legal
authority for this proposition.
4 In fact, the majority of receivership cases fall in the "before
judgment" category. The "after judgment" receivership cases are more
commonly found under section 56.29, Florida Statutes, in proceedings
supplementary to satisfy a judgment debt. See 212 W. 18 LLC v. Kozel,
320 So. 3d 849, 850 (Fla. 2d DCA 2023) ("[W]hen a plaintiff has an
unsatisfied judgment, proceedings supplementary provide the plaintiff
with an alternate avenue to collect assets owned by the defendant that
are in the possession of nonparties."); Biel Reo, LLC v. Barefoot Cottages
Dev. Co., 156 So. 3d 506, 509 (Fla. 1st DCA 2014) ("Courts have broad
powers in proceedings supplementary over personal property transferred
to a third party by a debtor."). Receiverships have long played a role in
fashioning relief for judgment creditors. Warshall v. Price, 617 So. 2d
751, 752 (Fla. 4th DCA 1993) (Stone, J., concurring specially) (citing
Pusey & Jones Co. v. Hanssen, 261 U.S. 491 (1923)).
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White Hawk argues that we should strictly follow the text of the
statute, which we do not take issue with, and that the trial court
properly applied all elements of UCRERA when it entered the order
granting motion for appointment of receiver. However, the order belies
that the trial court properly applied UCRERA. The trial court entered the
order granting motion for appointment of receiver prepared by White
Hawk, which recited the standard described not in subsection (1)(b) or (c)
but instead subsection (1)(a), which applies to the appointment of a
receiver "before judgment"—if a party demonstrates an interest in the
subject property and establishes that the property is at risk of "waste,
loss, substantial diminution in value, dissipation, or impairment" or
"[h]as been or is about to be the subject of a voidable transaction."
Therefore, the order prepared by White Hawk and issued by the trial
court did not appoint a receiver under the constraints of subsections
(1)(b) or (c) as requested by White Hawk in its motion.
IV.
Turning to the language of the statute, unlike the "before judgment"
subsection in (1)(a), the "after judgment" subsection (1)(b) does not
provide a list of potential harms that must exist to justify preservation of
the property. This makes sense given that "the concern about effecting a
taking of the owner's property before the entry of judgment is eliminated
or lessened by the entry of the judgment." Cramer, 113 So. 3d at 1024.
But even with this lessened concern, "there must still be some need to
protect the property from waste or depreciation before a receiver may be
appointed postjudgment." Id.Zahav argues that we are bound by our precedent to follow Cramer,
which requires a showing of need pursuant to a burden-shifting
framework, notwithstanding that it predates UCRERA, and we agree.
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In Cramer, U.S. Bank foreclosed its mortgage against real property
Cramer was operating as an automotive repair shop, automotive sales
business, and car wash and prevailed in obtaining a final judgment
against Cramer. 113 So. 3d at 1022. U.S. Bank canceled the foreclosure
sale and moved for the appointment of a receiver, arguing among other
things that a receiver was necessary to remediate the environmental
issues before proceeding to a foreclosure sale. Id. at 1025. In holding
that U.S. Bank had a "compelling presentation" in support of its motion,
we reversed the trial court's order denying the receivership:
We conclude that U.S. Bank established a prima facie case
through [an affidavit] demonstrating the need for the
appointment of a receiver to complete the necessary
environmental studies and any required remediation before it
could proceed to a foreclosure sale. After the movant
establishes a prima facie case for the appointment of a
receiver, the burden of proof shifts to the party opposing the
appointment.
Id. (emphasis added) (citing Howley v. Sage Shopping Plaza Corp., 336
So. 2d 691, 692 (Fla. 4th DCA 1976)).
Since the close of the briefing in this case, our sister court in Storey
Mountain, LLC v. Freestone Enterprise, LLC, 368 So. 3d 473 (Fla. 1st DCA
2023), addressed a motion for receivership "after judgment" in a
commercial dispute, albeit not sought under UCRERA. Quoting Cramer
with approval, the court held that "the considerations dictating a
cautious approach to the appointment of a receiver may carry less weight
after the entry of final judgment, but nevertheless, "there must still be
some need to protect the property" before the court can appoint a
receiver in equity. Id. at 474 (emphasis added) (quoting Cramer, 113 So.
3d at 1023-24).
While the text of the statute does not explicitly state that the trial
court must hold an evidentiary hearing, the only way that a need for a
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receivership can be established is by way of stipulation by the parties or
a prima facie showing of some competent evidence. And where the facts
are in dispute, as was clearly the case here, it is incumbent upon the
trial court to conduct an evidentiary hearing applying the burden-shifting
framework of Cramer in order to determine first whether the moving
party has established a prima facie case of need for a receivership. See,
e.g., Hansen v. Cooper, 733 So. 2d 1144, 1144 (Fla. 4th DCA 1999)
("Because essential facts . . . were in conflict, the court was required to
conduct a limited evidentiary hearing to resolve the disputed facts.");
Parrish & Yarnell, P.A. v. Spruce River Ventures, LLC, 180 So. 3d 1198,
1200-01 (Fla. 2d DCA 2015) (holding, where a motion to strike presented
"a bona fide issue of fact" and the determination of the motion "turn[ed]
on several factual questions," the court erred by not conducting an
evidentiary hearing). Indeed, White Hawk was obviously concerned that
the trial court would not appoint a receiver without some showing of
need—as demonstrated by the late filing of documents on the morning of
the hearing.
Because the facts, as argued by the parties' counsel, were in
dispute as to whether there was a need for a receivership to "carry the
judgment into effect" or "preserve nonexempt real property pending
appeal," the trial court abused its discretion in granting the motion for
appointment of receiver without conducting an evidentiary hearing and
making the requisite findings. See § 714.06(1)(b)-(c). Moreover, the trial
court erred in appointing a receiver pursuant to section 714.06(1)(a)—
pertaining to "before judgment" cases. Because we are remanding for the
trial court to conduct an evidentiary hearing, nothing herein shall be
construed as commenting on the sufficiency of the documents filed by
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White Hawk or the merits of White Hawk's motion for appointment of
receiver.
V.
Accordingly, we reverse and remand for the trial court to hold an
evidentiary hearing under Cramer and consistent with UCRERA on the
motion for appointment of receiver.
Reversed and remanded.
VILLANTI and KHOUZAM, JJ., Concur.
Opinion subject to revision prior to official publication.
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