David J. Steingart v. Robert P Musgrave ( 2023 )

FILED
Oct 31 2023, 8:45 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEE
Peter S. French James T. Young
John R. Humphrey Morgan A. Decker
Nadine E. McSpadden Rubin & Levin, P.C.
Taft Stettinius & Hollister LLP Indianapolis, Indiana
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
David J. Steingart, Bruce A. October 31, 2023
Steingart, and Kevin C.
Court of Appeals Case No.
Steingart,
22A-CC-2936
Appellants-Defendants,
Appeal from the
v. Bartholomew Superior Court
Robert P. Musgrave, The Honorable
James D. Worton, Judge
Appellee-Receiver.
Trial Court Cause No.
03D01-2111-CC-5724
Opinion by Senior Judge Shepard
Judges Bradford and Weissmann concur.
Shepard, Senior Judge.
[1] In this interlocutory appeal, Appellants David J. Steingart, Bruce A. Steingart,
and Kevin C. Steingart (collectively, “Steingarts”) challenge the court’s
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turnover order and two settlement orders in the receivership action.
Concluding the court was within its discretion to grant the motions, we affirm
and remand solely for recalculation of the amount to be turned over.
Facts and Procedural History
[2] The Steingarts are member-owners of Ameribridge LLC, an Indiana company.
Between July 2019 and March 2021, Ameribridge executed four promissory
notes in favor of German American Bank (“Bank”) that exceeded a total of
$9,000,000.00. Additionally, in April 2021, Ameribridge and the Steingarts,
together, executed a promissory note in favor of the Bank for $1,500,000.00.
[3] In November 2021, the Bank filed suit against Ameribridge and the Steingarts
alleging, among other things, that the promissory notes were all in default. The
Bank also requested appointment of a receiver, and the court appointed Robert
P. Musgrave (“Receiver”).
[4] The following October, Receiver moved to settle and compromise two separate
causes of action that Ameribridge had pending against Greenwalt CPAs, Inc.
and Watermark Group, LLC for accounting services the firms provided to
Ameribridge. Following a hearing, the court granted the motions.
[5] The next month, Receiver filed his “First Motion for Turnover” requesting the
court to order David Steingart to return certain assets of Ameribridge,
specifically funds totaling $296,847.81. The court granted that motion as well.
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[6] David moved to stay the turnover order and then filed an interlocutory appeal
as of right under Appellate Rule 14(A)(1). The Steingarts later filed a separate
notice of appeal of the court’s orders to settle and compromise and alleged the
appeal was interlocutory as of right under Appellate Rule 14(A). This Court
consolidated the two appeals under this cause number.
[7] Receiver then moved to partially dismiss this appeal, contending the court’s
orders to settle and compromise are interlocutory orders that are not appealable
as of right and thus not properly before this Court. The motions panel of this
Court voted to deny Receiver’s motion, and the parties finished briefing.
Issues
[8] The Steingarts present two issues for our review, which we restate as:
I. Whether the trial court erred by granting the motion for
turnover; and
II. Whether the court erred by granting the motions to settle
and compromise.
Discussion and Decision
I. Turnover Order
A. Nature of Receiverships
[9] A receivership is an equitable remedy, the purpose of which is to secure and
preserve property or assets for the benefit of all interested parties, pending
litigation. See 24 Ind. Law Encyc. Receivers §§ 2, 3 (2023); see also Ring v. Ring,
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51 N.E.3d 1245 (Ind. Ct. App. 2016) (quoting In re Marriage of Gore, 527 N.E.2d
191, 196-97 (Ind. Ct. App. 1988)). The court appointing the receiver controls
and continuously supervises the property in a receivership as well as directing
and advising the receiver and, in its discretion, granting him or her the
necessary powers to carry out the duties. 75 C.J.S. Receivers §§ 127, 130 (2023).
Indiana Code section 32-30-5-7 provides a nonexclusive list of powers a court
may grant to a receiver, not the least of which is to “take and keep possession of
the property.” Ind. Code § 32-30-5-7(2) (2003).
[10] For their part, the parties have a duty to deliver to the receiver all property in
their possession that is included in the court’s order. 75 C.J.S. Receivers § 100
(2023). Should the receiver be hindered in obtaining possession of the property,
he or she has the authority to request the court to act to prevent interference
with, or the denial of, his or her possession of the property. 24 Ind. Law Encyc.
Receivers § 32 (2023).
B. Standard of Review
[11] The court’s turnover order is an interlocutory order for the payment of money
appealable pursuant to Appellate Rule 14(A)(1). “We generally review
interlocutory orders under an abuse of discretion standard.” In re Paternity of
Duran, 900 N.E.2d 454, 462 (Ind. Ct. App. 2009). We review the court’s order
under this standard for the additional reason that this is an appeal from an order
in a receivership where “orders of the court will not be disturbed unless an
abuse of discretion is clearly shown.” First Nat. Bank v. Gregg, 91 Ind. App. 405,
169 N.E. 691, 692 (1930); see also 75 C.J.S. Receivers § 131 (2023) (on appeal,
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order of receivership court will not be interfered with absent abuse of
discretion). An abuse of discretion occurs when the court’s decision is clearly
against the logic and effect of the facts and circumstances or the court has
misinterpreted the law. In re Paternity of Duran, 900 N.E.2d 454 (quoting In re
Estate of Long, 804 N.E.2d 1176, 1178 (Ind. Ct. App. 2004)).
C. Turnover Order
[12] On November 8, 2021, the court appointed Musgrave as Receiver and
authorized him, “without limitation,” “[t]o take and have complete and
exclusive control, possession and custody” of the property of Ameribridge,
including all accounts, deposit accounts, money, and other rights to payment in
existence or thereafter acquired, and “[t]o receive and collect any and all sums
of money due and owing to Ameribridge in any manner, whether the same is
now due or shall hereafter become due and payable.” Appellants’ App. Vol. 2,
p. 168. The court further ordered that “all persons are enjoined from in any
way disturbing the possession of the Receiver.” Id.[13] A full year later, Receiver moved the court to direct David to turn over assets of
Ameribridge. Receiver had discovered that in October 2021, eleven days prior
to Receiver’s appointment, David opened a bank account with US Bank in
Minnesota. Receiver obtained bank records for the account showing:
• October 29, 2021 – an initial deposit of $100,000 was
made to the account by way of a check made payable to
Ameribridge; a second deposit of $35,000 was wired into
the account from an account at an institution referred to as
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“First Fin Hamilton,” and $20,158 was withdrawn in three
separate transactions for prepaid credit cards
• November 5 - another check made payable to Ameribridge
was deposited into the account in the amount of
$55,477.81
• November 8 – Receiver appointed by court; account
balance = $170,319.81
• November 9 - $170,000 was wired from the account to the
First Fin Hamilton account
• November 10 – a deposit of $85,343.70 was made to the
account by way of a check made payable to Ameribridge,
but these funds were later recovered by Receiver
• November 12 – $7,559.25 was withdrawn for prepaid
credit card(s) and $78,000 was wired to the First Fin
Hamilton account
• November 16 – a deposit of $106,370 was made to the
account by way of a check made payable to Ameribridge
• November 19 - $21,000 was wired to the First Fin
Hamilton account
Id. at 233-35, 238-42.
[14] Based on this information, Receiver informed the court in his motion for
turnover that a total of $382,191.51 of Ameribridge’s assets were deposited into
the account and were disbursed without notice to or authorization from
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Receiver, contrary to the court’s November 8 order appointing Receiver.
Receiver recovered $85,343.70 and secured those assets into the receivership
account, leaving $296,847.81 unaccounted for. Consequently, Receiver
requested the court to direct David to turn over $296,847.81. On November 9,
2022, the court granted Receiver’s motion and ordered David to turn over
$296,847.81 to Receiver within seven days. On appeal, the Steingarts challenge
the turnover order, claiming the Receiver’s concerns of misappropriation of the
funds are unfounded. Yet, the real issue is whether the court abused its
discretion by issuing the turnover order.
[15] As soon as a receiver is appointed and qualified, the entity’s assets become
receivership assets until final distribution by the court. Porter Hosp., LLC v. TRK
Valpo, LLC, 212 N.E.3d 683 (Ind. Ct. App. 2023) (quoting King v. King, 982
N.E.2d 1026, 1032 (Ind. Ct. App. 2013), trans. denied); see also 24 Ind. Law
Encyc. Receivers § 27 (2023) (right and interest of receiver with respect to entity’s
assets become fixed as of date of receiver’s appointment). Therefore, any
money in the US Bank account on the day Receiver was appointed was within
the scope of and subject to the receivership order, and Ameribridge was
obligated to remit to Receiver any and all deposit accounts, money, and other
property listed in the order. The Steingarts’ failure to turn over to Receiver the
funds existing in the US Bank account on November 8, 2021, or thereafter
deposited into that account, or to notify Receiver of the existence of such funds
was a violation of the receivership order.
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[16] The turnover order—the order now at issue—merely ordered the Steingarts’
compliance with the court’s previous receivership order. A receivership is a
means of safeguarding an entity’s assets. To that end, property in receivership
remains under the court’s control and continuous supervision, and it is the duty
of the receivership court to protect the property from interference. 75 C.J.S.
Receivers § 127; 24 Ind. Law Encyc. Receivers § 32. Accordingly, the receivership
court has the power to control all controversies that affect such property. 75
C.J.S. Receivers § 127. In addition, courts have the inherent power to enforce
compliance with their orders. Noble Cnty. v. Rogers, 745 N.E.2d 194 (Ind. 2001)
(quoting State ex rel. Brubaker v. Pritchard, 236 Ind. 222, 226-27, 138 N.E.2d 233,
235 (1956)). Thus, we find no error with the court issuing a turnover order to
obtain the assets of Ameribridge.
[17] Receiver was appointed on November 8, 2021. The evidence before this Court
is that the balance in the US Bank account on that date was $170,319.81.
Accordingly, those funds became receivership assets. Further, $106,370.00 was
deposited into the US Bank account on November 16, and those funds, too, are
receivership assets. Together these funds total $276,689.81. Lastly, the parties
agree that on November 19, $21,000.00 was transferred out of the US Bank
account. The Steingarts claim this money was later turned over to Receiver.
Consequently, the amount that should have been turned over to Receiver is
either $276,689.81 or $255,689.81 (i.e., $276,689.81 - $21,000.00). Thus, we
remand for the sole purpose of amendment of the turnover order directing turn
over of either $276,689.81 or $255,689.81 (i.e., $276,689.81 - $21,000.00).
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[18] To the extent the Steingarts argue David was deprived of due process because
the turnover order was granted without a hearing, we again observe that the
order for turnover was not a new, standalone order; rather, it merely directed
David to comply with the previously issued receivership order.
II. Orders to Settle and Compromise
A. Interlocutory Nature of Orders
[19] The Steingarts next contend the court erred by granting Receiver’s motions to
settle and compromise. Receiver has responded to the merits of their claims,
but he has also reasserted his argument that this part of the Steingarts’ appeal is
subject to dismissal. While we acknowledge that the motions panel of this
Court has already denied Receiver’s motion to dismiss, it is well established
that we have inherent authority to reconsider the ruling while an appeal
remains pending. See Pryor v. State, 189 N.E.3d 167 (Ind. Ct. App. 2022)
(quoting Core v. State, 122 N.E.3d 974, 976-77 (Ind. Ct. App. 2019)). We do so
here because “‘[i]t is the duty of this Court to determine whether we have
jurisdiction before proceeding to determine the rights of the parties on the
merits.’” DuSablon v. Jackson Cnty. Bank, 132 N.E.3d 69, 75 (Ind. Ct. App.
2019) (quoting Allstate Ins. Co. v. Scroghan, 801 N.E.2d 191, 193 (Ind. Ct. App.
2004), trans. denied), trans. denied.
[20] The appellate authority of this Court is generally limited to appeals from final
judgments. See Ind. Appellate Rule 5. In addition, generally in a receivership
proceeding, an appeal may be taken from a judgment or order only if it is final.
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State ex rel. Unemployment Comp. Bd. of Unemployment Comp. Div. v. Burton, 112
Ind. App. 268, 44 N.E.2d 506 (1942); see also 1A Ind. Law Encyc. Appeals § 22
(2023). The parties here agree that the court’s orders to settle and compromise
are not final orders.
[21] An appeal from a non-final interlocutory order is not permitted unless
specifically authorized by the Indiana Constitution, statutes, or the rules of
court. Elda Corp. v. Holliday, LLC, 171 N.E.3d 124 (Ind. Ct. App. 2021)
(quoting Allstate Ins. Co., 801 N.E.2d at 193), trans. denied. Appellate Rule 14
confers appellate jurisdiction over interlocutory appeals and provides three
avenues by which this Court can acquire jurisdiction in cases other than those
involving class action certification: (1) Rule 14(A) allows interlocutory appeals
as of right; (2) Rule 14(B) permits discretionary interlocutory appeals; and (3)
Rule 14(D) authorizes other interlocutory appeals only as provided by statute.
The authorization to file an interlocutory appeal is strictly construed, and any
attempt to perfect an appeal without it warrants dismissal. Elda Corp., 171
N.E.3d 124 (quoting Allstate Ins. Co., 801 N.E.2d at 193). While acknowledging
that interlocutory appeals are strictly limited and conceding that these orders do
not necessarily fit within the narrow confines of Appellate Rule 14(A), the
Steingarts nevertheless maintain that the subject of the orders is “closely
aligned” with the type appealable as of right under Appellate Rule 14(A)(3).
Appellants’ Br. p. 20.
[22] Appellate Rule 14(A)(3) provides in relevant part that appeals from
interlocutory orders compelling the delivery or assignment of “things in action”
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can be taken as a matter of right. It has been established that the rule involves
court orders that “‘carry financial and legal consequences akin to those more
typically found in final judgments . . . .’” Ball State Univ. v. Irons, 27 N.E.3d
717, 721 (Ind. 2015) (quoting State v. Hogan, 582 N.E.2d 824, 825 (Ind. 1991)).
The question here is whether the orders of the trial court authorizing Receiver
to compromise and settle Ameribridge’s claims against Greenwalt and
Watermark Group are such orders. Under the facts of this case, we believe they
are.
[23] A “thing in action,” also termed “chose in action,” is defined as “[t]he right to
bring an action to recover a debt, money, or thing.” Chose in Action, BLACK’S
LAW DICTIONARY (11th ed. 2019). Here, if Receiver exercises the authority
given him by the orders, Ameribridge will most certainly lose its right to pursue
its claims against the accounting firms. Therefore, though the orders to
compromise and settle are technically interlocutory, due to the nature of the
orders producing financial and legal consequences akin to those more typically
found in final judgments and in the interest of judicial economy in this
consolidated appeal, we review them here. See, e.g., Edwards v. Miller, 47 R.I.
235, 132 A. 609 (1926) (order authorizing receiver to adjust and compromise
claims, though technically interlocutory, had element of finality such that court
could properly review it).
B. Standard of Review
[24] As with the first issue, we review this interlocutory receivership order under an
abuse of discretion standard. See First Nat. Bank, 169 N.E. 691; see also Bancroft
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v. Allen, 138 Fla. 841, 190 So. 885 (1939) (in absence of abuse of discretion,
order of court authorizing its receiver to compromise an action will not be
disturbed on appeal).
C. Orders to Compromise and Settle
[25] Ameribridge had actions pending against both Greenwalt and Watermark
Group with regard to accounting services provided by the firms. After
investigating the claims, Receiver moved the court for authority to settle, and
the court granted the motion as to both firms following a hearing. After this
appeal was filed, Receiver finalized Ameribridge’s settlement with Greenwalt,
and the cause was dismissed with prejudice. Consequently, the issue raised
1
here is moot as to Greenwalt. Accordingly, we decide the propriety of the
order to compromise and settle only with regard to Ameribridge’s action
against Watermark Group, which has been stayed pending resolution of this
appeal.
[26] The importance of the court’s role vis-à-vis a receivership cannot be
understated—the court controls and continuously supervises the property in a
receivership and, in its discretion, grants the receiver the necessary powers to
carry out his or her duties. 75 C.J.S. Receivers §§ 127, 130. To that end, the
court may authorize or approve a compromise when it is in the best interests of
1
In February 2023, acknowledging that Ameribridge’s lawsuit against Greenwalt had been dismissed in
anticipation of settlement, the Steingarts alleged the payment of money and final settlement had not yet
occurred and moved the court to stay the order to compromise and settle. The motions panel of this Court
considered the Steingarts’ motion and voted to deny it.
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the entity, as where the claim or the recovery is doubtful. 75 C.J.S. Receivers §
149 (2023); see also Boucher v. Hamilton Mfg. Co., 259 Mass. 259, 270, 156 N.E.
424, 428 (1927) (“The power of the court to authorize the receiver to
compromise claims of the corporation against third persons cannot be
doubted.”). In determining whether a compromise should be authorized, the
court must exercise its business judgment to decide whether the proposed
compromise is reasonable in the circumstances. 75 C.J.S. Receivers § 149.
[27] At the hearing, counsel for the Steingarts contended that the amount of the
proposed settlements was not sufficient for Ameribridge’s claims against the
accounting firms. In response, Receiver summarized his background that
includes more than twenty-five years of experience of asset valuation. He
explained that in valuing the claims and assessing a compromise with the
accounting firms, he considered that (1) the attorney handling the litigation
against the accounting firms was charging by the hour, which meant the
attorney was unsure of the strength of the case; (2) the attorney estimated his
total fees would be $400,000 to $500,000, which meant recovery from the
lawsuit would have to be more than $500,000 to assure that the receivership
would obtain even $1 for Ameribridge’s creditors; (3) the second opinion he
obtained from another major law firm indicated it would take the case only on
an hourly basis due to the uncertainty of the recovery; (4) it was a complicated
case in which the jury would need to understand accounting standards, what
went wrong, and why it went wrong, and even then, if the jury awarded
Ameribridge anything less than $500,000, the receivership would get $0 for
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creditors; (5) his investigation also showed a causation issue; and (6) although
the Steingarts offered to finance the litigation, their terms of financing included
“paying the litigation cost and seventy five percent upcharge on top of that plus
fifteen percent for Mr. David Steingart[,]” requiring “a million dollars with
those sort of numbers before the receivership and the creditors of the
Ameribridge would receive a penny.” Tr. Vol. I, p. 19. In summary, he stated,
“Basically, your honor, it came down to this, [$85,000] right now which is
almost ten percent of all the money that I managed to collect so far or taking a
chance of having the Steingarts finance [the litigation] and trusting that in a
couple [or] three years there would be enough to exceed the million dollar cost
of pursuing it. It seemed to be no choice whatsoever.” Id. at 20. The Receiver
finished by noting that he is a representative of the court—appointed by and
accountable to the court—doing his best to liquidate Ameribridge’s assets and
pay its creditors.
[28] In its order granting Receiver’s motion to settle and compromise Ameribridge’s
claim against Watermark Group, the court found:
a. Generally, the Receiver is appointed as an objective
agent of the Court to provide certain ministerial activities
on behalf of the Court, and as such his recommendation to
the Court is treated as a recommendation of an unbiased
entity seeking to perform such ministerial activities, here,
the timely and orderly liquidation to the assets of
defendant Ameribridge LLC;
b. The Receiver at hearing of this matter recited his
background and experience in the liquidation and
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evaluation of assets in liquidating situations, and the Court
takes judicial notice of the Receiver’s appointment and
service as Chapter 13 Standing Trustee for the United
States Bankruptcy Court for the Southern District of
Indiana, a position which involves significant exposure to
and experience with valuations in a liquidation context;
c. The Receiver at hearing of this matter also reported to
the Court his investigation and evaluation of the Cause of
Action and the factors upon which he based his
recommendation to settle the Cause of Action. These
factors included the difficulty of the case; the significant
defenses available to the defendants to the Cause of
Action; and the six-figure cost of pursuing the Cause of
Action provided by the Ameribridge attorney in the
pending litigation, which cost is being charged by the
attorney for Ameribridge on an hourly basis and so may
create a substantial liability for the receivership estate, to
the harm of the creditors thereof;
d. The attorney for the defendant in the pending Cause of
Action also appeared at the hearing and made statements
in support of the pending motion to settle and the
Receiver’s motion.
3. As to the objection to the amount of the Receiver’s proposed
settlement, the Shareholders assert that the amount is too low,
but provided no factual, evidentiary, or other basis for such
conclusory assertion.
Appellants’ App. Vol. 2, pp. 28-29.
[29] Though it is clear the trial court was not dealing with certainties, it
pragmatically undertook a careful weighing and balancing of a variety of
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considerations in arriving at a conclusion as to the course of prudence under the
circumstances. In view of these considerations, we cannot say the court’s
decision to authorize Receiver to compromise Ameribridge’s claim against
Watermark Group constitutes an abuse of its discretion.
Conclusion
[30] For the foregoing reasons, we remand for the sole purpose of amendment of the
turnover order directing David Steingart to turn over either $276,689.81 or
$255,689.81 (i.e., $276,689.81 - $21,000.00) as the court may determine. We
affirm the court in all other respects.
[31] Affirmed and remanded.
Bradford, J., and Weissmann, J., concur.
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