Waynesburg Holdings, L.L.C. v. Wells Fargo Bank, N.A. , 2019 Ohio 4764 ( 2019 )

[Cite as Waynesburg Holdings, L.L.C. v. Wells Fargo Bank, N.A., 2019-Ohio-4764.]
COURT OF APPEALS
STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
WAYNESBURG HOLDINGS, LLC, : JUDGES:
: Hon. William B. Hoffman, P.J.
Intervenor - Appellant : Hon. Craig R. Baldwin, J.
: Hon. Earle E. Wise, J.
-vs- :
:
WELLS FARGO BANK, N.A., : Case No. 2019CA00015
:
Defendant - Appellee : OPINION
CHARACTER OF PROCEEDING: Appeal from the Stark County Court
of Common Pleas, Case No. 2012
CV 1294
JUDGMENT: Affirmed
DATE OF JUDGMENT: November 18, 2019
APPEARANCES:
For Intervenor-Appellant For Plaintiff
ROBERT B. PRESTON III JAMES L. ALLEN
WHITNEY L. WILLITS SCOTT LESSER
Black, McCuskey, Souers & Arbaugh Miller Canfield Paddock and Stone, P.L.C.
220 Market Ave. S. Suite 1000 840 W. Long Lake Road, Suite 150
Canton, Ohio 44702 Troy, MI 48098
For Appellees James S. Giannneli and For Receiver The Hayman Company, LLC
Staci Jo Woolf
ROBERT STEFANCIN
JAMES T. ROBERTSON Witmer & Ehrman, LLC
236 3rd St. SW 2344 Canal Road, Suite 1701
Canton, Ohio 44702 Cleveland, Ohio 44113
Stark County, Case No. 2019CA00015 2
Baldwin, J.
{¶1} Appellant Waynesburg Holdings, LLC appeals from the January 2, 2019
and January 18, 2019 Judgment Entries of the Stark County Court of Common Pleas.
STATEMENT OF THE FACTS AND CASE
{¶2} On April 24, 2012, appellee Wells Fargo Bank, N.A. filed a complaint
seeking foreclosure of its leasehold mortgage on commercial property. The property was
a retail strip mall. Appellee, in its complaint requested judgment against Waynesburg
Centre, Ltd. and its owner, Galen Oakes, on his personal guarantee. In addition, appellee,
as the first lien holder on the 99 year ground lease at issue, sought foreclosure of the
same. On April 24, 2012, appellee also filed a motion for the appointment of a receiver
pursuant to the authority granted in the mortgage. An Order appointing The Hayman
Company of Ohio as the receiver was filed on April 30, 2012. However, after Waynesburg
Centre, Ltd. filed a motion seeking a stay of the appointment of a receiver, the
appointment was stayed and a hearing was scheduled for June 4, 2012.
{¶3} Waynesburg Centre, Ltd. filed an answer to the complaint on May 21, 2012
and Galen Oakes filed an answer on May 21, 2012. As memorialized in an Order filed on
June 18, 2012, the trial court vacated the stay and ordered that the receivership be
effective as of June 19, 2012.
{¶4} Appellee filed a Motion for Summary Judgment. Galen Oakes filed a
response to the Motion for Summary Judgment on September 4, 2012. Galen Oakes was
dismissed from the action on July 18, 2013 pursuant to a Dismissal Entry. An Agreed
Judgment Entry and Decree of Foreclosure was filed on the same date, granting judgment
to appellee against Waynesburg Centre, Ltd. On January 20, 2017, a joint motion was
Stark County, Case No. 2019CA00015 3
filed to amend the order appointing the receiver and extend the existing receivership over
certain adjacent additional property. The motion was granted pursuant to an Order filed
on February 6, 2017. The February 6, 2017 Order was vacated on February 13, 2017.
{¶5} On October 18, 2017, the Receiver moved the trial court for authority to sell
the receivership property by public auction free and clear of all claims, liens,
encumbrances and other interests and also to approve procedures for such sale,
schedule an auction, set bid deadlines and establish notice procedures An Order
approving auction sale procedures and establishing notice procedures was filed on
November 2, 2017. The Order provided the Receiver with authority to sell the property
at auction without the need for approval from the ground lessors.
{¶6} The auction was conducted by Zeta Bid and Resolve Commercial, LLC was
the successful bidder. On May 23, 2018, the Receiver filed a motion for an order
confirming the sale of the receivership property to Resolve Commercial, LLC for
$200,000.00 and the motion was granted on June 7, 2018. However, after Resolve
Commercial, LLC did not close the sale, the Receiver, on August 27, 2018, filed a motion
to hold Resolve Commercial, LLC in contempt.
{¶7} The Receiver, as approved by the trial court, notified other bidders from the
auction that the Receivership Property was still for sale.
{¶8} On November 1, 2018, counsel for the ground lessors, who were Staci Jo
Wolf and James Gianelli, filed a motion for an oral hearing to consider offers to purchase
the receivership property and the interest of the ground lessors. A hearing was
scheduled for December 19, 2018. Thereafter, on November 13, 2018, the Receiver filed
a motion for an order approving the sale of the receivership property to appellant
Stark County, Case No. 2019CA00015 4
Waynesburg Holdings, LLC, the “bidder with the highest and best offer on the resale of
the Receivership Property.” The Receiver, in such motion, stated, in relevant part, as
follows:
{¶9} “As an initial offer, the Purchaser proposed to pay the receivership estate
$200,000 as consideration for the purchase of the Receivership Property, subject to due
diligence. After due diligence was performed, the Purchaser lowered its bid to $50,000
based upon the condition of the property and other considerations. Based upon the
Purchaser’s due diligence and in consideration of the factors presented by the Purchaser,
the Receiver believes that $50,000 is the highest and best purchase price for the
Receivership Property.”
{¶10} Appellee, on December 13, 2018, filed a memorandum in support of the
sale of the Receivership Property to appellant.
{¶11} A hearing before the trial court was held on December 19, 2018. The trial
court, in a Judgment Entry filed on January 2, 2019, noted that a prospective buyer
secured by the ground lessors, namely Joseph Sarchione, had notified the Receiver that
the prospective buyer was prepared to purchase the property for $60,000.00, which was
$10,000.00 more than the price accepted by the Receiver. The trial court stated, in
relevant part, as follows: “the Receiver chose to accept the bid of Waynesburg Holding
LLC for the sale agreement. However, it is this Court’s opinion that this Court still
maintains the authority to make the determination of the final buyer.” The trial court
ordered that Sarchione had 45 days to contact the Receiver and conduct the necessary
paperwork to make the transaction.
Stark County, Case No. 2019CA00015 5
{¶12} Thereafter, on January 11, 2019, appellant filed a Motion to Intervene as an
additional party defendant pursuant to Civ.R. 24, noting that it had been the successful
bidder at the auction. The trial court, as memorialized in a Judgment Entry filed on
January 18, 2019, denied the motion.
{¶13} Appellant then appealed from the January 2, 2019 and January 18, 2019
Judgment Entries, raising the following assignments of error on appeal:
{¶14} “I. THE TRIAL COURT ERRED BY FAILING TO FOLLOW THE
ESTABLISHED AUCTION SALE PROCEDURES AND, FURTHER, BY FAILING TO
COMPLY WITH THE RECEIVERSHIP STATUTE AS IT PERTAINS TO THE SALE OF
PROPERTY.”
{¶15} “II. THE TRIAL COURT SHOWED BIAS IN FAVOR OF A LOCAL, IN-
STATE NON-BIDDER AND PREJUDICE TO THE APPELLANT, WHICH IS AN ENTITY
OWNED BY OUT-OF-STATE MEMBERS, IN VIOLATION OF THE U.S.
CONSTITUTION.”
{¶16} “III. THE TRIAL COURT ERRED BY ALLOWING JOSEPH SARCHIONE,
WHO DID NOT BID AT THE DULY AUTHORIZED AUCTION, TO PURCHASE THE
PROPERTY.”
{¶17} “IV. THE TRIAL COURT ERRED BY FAILING TO PERMIT WAYNESBURG
HOLDINGS, LLC TO INTERVENE IN THIS MATTER AFTER IT RENDERED A
JUDGMENT ALLOWING JOSEPH SARCHIONE, A NON-BIDDER, NON-PARTY, TO
PURCHASE THE PROPERTY AT ISSUE HEREIN.”
I
Stark County, Case No. 2019CA00015 6
{¶18} Appellant, in its first assignment of error, argues that the trial court erred by
failing to follow the established auction procedures and by failing to comply with the
receivership statute as it pertains to the sale of the property. Appellant notes that Joseph
Sarchione was not a proper bidder pursuant to the trial court’s auction order and argues
that the only valid bid was appellant’s bid. According to appellant, if the trial court chose
not to confirm the sale to appellant, its only recourse was to order another auction of the
Receivership Property.
{¶19} R.C. 2735.04, which outline the powers of a receiver, states, in relevant
part, as follows:
{¶20} (A) The powers of a receiver shall be set forth in the order of the court that
appointed the receiver as those powers may be modified by the court or as otherwise
approved by the court upon application of the receiver or a party to the action.
{¶21} (B) Under the control of the court that appointed the receiver as provided
in section 2735.01 of the Revised Code, the receiver may do any of the following:
{¶22} (D)(1)(a) Subject to the approval and supervision of the court and the
requirements of this section, a receiver may sell property free and clear of liens by private
sale pursuant to a written contract between the receiver and the prospective purchaser,
by private auction, by public auction, or by any other method that the court determines is
fair to the owner of the property and all other parties with an interest in the property, is
reasonable under the circumstances, and will maximize the return from the property to
the receivership estate, taking into account the potential cost of holding and operating the
property.
Stark County, Case No. 2019CA00015 7
{¶23} (b) Before entering an order authorizing the sale of the property by the
receiver, the court may require that the receiver provide evidence of the value of the
property. That valuation may be provided by any evidence that the court determines is
appropriate. In a public or private auction, the court may establish a minimum bid.
{¶24} (c) If the receiver requests authority to sell the property pursuant to a
prospective purchase contract and if warranted by the circumstances, the court may
require that the receiver solicit and consider additional offers. If the receiver ultimately
sells the property to a party other than the original proposed purchaser, if approved by
the court, the receiver may pay to the unsuccessful original proposed purchaser a
reasonable amount of costs and expenses from the sale proceeds in an amount
determined by the court to compensate that proposed purchaser for participation in the
sale process to the extent that participation brought value to the receivership.
{¶25} It has long been recognized that the trial court is vested with sound
discretion to appoint a receiver. State ex rel. Celebrezze v. Gibbs, 60 Ohio St.3d 69, 73,
573 N.E.2d 62 (1991). The Supreme Court of Ohio has held that R.C. 2735.04, which
sets forth the powers a trial court may grant to a receiver, is broad enough to enable “the
trial court to exercise its sound judicial discretion to limit or expand a receiver's powers
as it deems appropriate,” subject to appellate review for abuse of discretion. State ex rel.
Id. at 74. An abuse of discretion occurs where a trial court's decision is “unreasonable,
arbitrary or unconscionable.” Blakemore v. Blakemore, 5 Ohio St.3d 217, 219, 450 N.E.2d
1140 (1983).
{¶26} The trial court, in paragraph 8 of its November 2, 2017 Judgment Entry
Approving Auction Sale, had specifically retained jurisdiction over any matter or dispute
Stark County, Case No. 2019CA00015 8
arising from or relating to its Order. Furthermore, paragraph 10 of the Judgment Entry
states as follows:
{¶27} “Following the Auction End Date, and after the Receiver declares a Winning
Bidder in accordance with the Auction Sale Process, Receiver shall file a motion with the
Court within ten (10) days of identification of the Winning Bidder and the Auction End
Date, seeking confirmation and approval of the Sale of Real Estate and seeking certain
findings that (i) the sale of Real estate and selection of such Winning Bidder was in
accordance with this Order and the Auction Sale Process; and (ii) consummation of the
Sale of Real Estate as contemplated in the Winning Bid will provide the highest or
otherwise best value for the Real Estate and is in the best interests of the receivership
estate pursuant to the Sale Order.”
{¶28} In the case sub judice, as noted by appellees, appellant, in its December
13, 2018 Memorandum in support of Sale, stated that the receiver believed that
$50,000.00, which was appellant’s offer, was the highest and best price for the
Receivership Property. This occurred after the original winning bid of $200,000.00 was
not fulfilled.
{¶29} We concur with appellees that the trial court acted within its discretion in
modifying its sale procedures and allowing the Receiver to sell the property to a non-
bidder. R.C. 2735.04(D)(1)(c) authorized the trial court, which had to approve any sale of
the property, to permit the Receiver to solicit and consider other offers. The trial court,
through its actions, maximized the return from the property.
{¶30} Appellant’s first assignment of error is, therefore, overruled.
II
Stark County, Case No. 2019CA00015 9
{¶31} Appellant, in its second assignment of error, contends that the trial court
showed bias in favor of Joseph Sarchione, a local, in-state non-bidder, and prejudice to
appellant, which an entity is owned by out-of-stated members, in violation of the U.S.
Constitution.
{¶32} According to appellant, the trial court, at the December 2018 hearing, made
numerous references to Joseph Sarchione not receiving a “fair shot” at the purchase and
made references to him being a local businessman and having local ties. Appellant also
maintains that the trial court questioned how appellant would benefit the local community
since it is owned by two members from Florida.
{¶33} However, the trial court, in acting as it did, clearly was trying to maximize
the return from the property as required by R.C. 2735.04(D)(1)(a). Such section
authorized a private sale of the property as long as it was reasonable under the
circumstances and maximized the return from the property. Moreover, as is stated above,
pursuant to R.C. 2735.04(c), the Receiver was authorized by the trial court to solicit and
consider additional offers. We note that the trial court, at the December 19, 2018 hearing,
voiced concerns over the fact that the price of the property had gone from $200,000.00,
the amount the original bid, to $50,000.00 and noted that “60,000 is better than $50,000.”
Transcript at 19. The trial court also questioned why the Receiver, who was supposed to
get the highest price for the property, did not go back and contact appellant to determine
if appellant could meet or exceed Sarchione’s price. In, short, we find no abuse of
discretion.
{¶34} Appellant’s second assignment of error is, therefore, overruled.
III
Stark County, Case No. 2019CA00015 10
{¶35} Appellant, in its third assignment of error, argues that the trial court erred by
allowing Joseph Sarchione, who did not bid at the authorized auction, to purchase the
property.
{¶36} However, as is stated above, R.C. 2735.04(D)(1)(a) states as follows:
{¶37} “Subject to the approval and supervision of the court and the requirements
of this section, a receiver may sell property free and clear of liens by private sale pursuant
to a written contract between the receiver and the prospective purchaser, by private
auction, by public auction, or by any other method that the court determines is fair to the
owner of the property and all other parties with an interest in the property, is reasonable
under the circumstances, and will maximize the return from the property to the
receivership estate, taking into account the potential cost of holding and operating the
property.”
{¶38} “By its express language, R.C. 2735.04(D)(1)(a) sets forth various methods
by which a receiver, with court approval, may sell property free and clear of liens. They
are: a written contract between the receiver and the prospective purchaser; private
auction; public auction; or a catch-all provision that permits the court to authorize a sale
if the trial court makes additional determinations including a determination that the method
of sale will maximize the return from the property to the receivership estate.” Lucas v.
Reywal Co., L.P., 10th Dist. No. 17AP-479, 2019-Ohio-27, paragraph 23. The trial court
was within its authority to allow a private sale of the property to Sarchione.
{¶39} Appellant’s third assignment of error is, therefore, overruled.
IV
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{¶40} Appellant, in its fourth assignment of error, maintains that the trial court
erred by failing to permit appellant to intervene in this action after the trial court allowed
Joseph Sarchione, a non-bidder, non-party, to purchase the property at issue.
{¶41} As is stated above, on January 11, 2019, appellant filed a Motion to
Intervene as an additional party defendant pursuant to Civ.R. 24, noting that it had been
the successful bidder at the auction. The trial court, as memorialized in a Judgment Entry
filed on January 18, 2019, denied the motion.
{¶42} We review a trial court's decision on a motion to intervene for abuse of
discretion. State ex rel. N.G. v. Cuyahoga Cty. Court of Common Pleas, 147 Ohio St.3d
432, 2016-Ohio-1519, 67 N.E.3d 728, ¶ 21, citing State ex rel. Merrill v. Ohio Dept. of
Natural Resources, 130 Ohio St.3d 30, 2011-Ohio-4612, 955 N.E.2d 935.
{¶43} Civ.R. 24 states, in relevant part, as follows: “(C) Procedure. A person
desiring to intervene shall serve a motion to intervene upon the parties as provided in
Civ.R. 5. The motion and any supporting memorandum shall state the grounds for
intervention and shall be accompanied by a pleading, as defined in Civ.R. 7(A), setting
forth the claim or defense for which intervention is sought. The same procedure shall be
followed when a statute of this state gives a right to intervene.”
{¶44} In turn, Civ. R. 7(A) provides as follows: “(A) Pleadings. There shall be a
complaint and an answer; a reply to a counterclaim denominated as such; an answer to
a cross-claim, if the answer contains a cross-claim; a third-party complaint, if a person
who was not an original party is summoned under the provisions of Civ.R. 14; and a third-
party answer, if a third-party complaint is served. No other pleading shall be allowed,
except that the court may order a reply to an answer or a third-party answer.”
Stark County, Case No. 2019CA00015 12
{¶45} Upon review of the record, appellant’s motion to intervene was not
accompanied by a pleading, as defined in Civ.R. 7(A), setting forth the claim or defense
for which intervention was sought. Accordingly, the trial court properly denied appellants'
motion for failure to comply with Civil Rule 24(C) on that basis alone. Avanti Corp. v.
Morelli Realty Corp., 5th Dist., Stark App.2005CA00147, 2005–Ohio–6698. See also
Deutsche Bank Natl. Trust Co. v. Hill, 5th Dist. Perry No. 14 CA 00021, 2015-Ohio-1575,
2015 WL 1875906.
{¶46} Appellant’s fourth assignment of error is, therefore, overruled.
{¶47} Accordingly, the judgment of the Stark County Court of Common Pleas is
affirmed.
By: Baldwin, J.
Hoffman, P.J. and
Wise, Earle, J. concur.