Clarkwestern Dietrich Bldg. Sys., L.L.C. v. Certified Steel Stud Assn. , 98 N.E.3d 860 ( 2017 )

[Cite as Clarkwestern Dietrich Bldg. Sys., L.L.C. v. Certified Steel Stud Assn., 2017-Ohio-8129.]
IN THE COURT OF APPEALS
TWELFTH APPELLATE DISTRICT OF OHIO
BUTLER COUNTY
CLARKWESTERN DIETRICH :
BUILDING SYSTEMS, LLC, CASE NO. CA2017-04-040
:
Plaintiff-Appellee, OPINION
: 10/9/2017
- vs - :
:
CERTIFIED STEEL STUD
ASSOCIATION, et al., :
Defendants-Appellants. :
APPEAL FROM BUTLER COUNTY COURT OF COMMON PLEAS
Case No. CV2013-10-2809
Frost Brown Todd, LLC, Matthew Blickensderfer and Stephen R. Hernick, 3300 Great
American Tower, 301 East Fourth Street, Cincinnati, Ohio 45202, for plaintiff-appellee
Cohen & Girgsby, P.C., Anthony Cillo, 625 Liberty Avenue, Pittsburgh, Pennsylvania 15222-
3152, for plaintiff-appellee
Faurki Ireland Cox Rhinehart & Dusing P.L.L., D. Jeffrey Ireland, Stephen A. Weigand, Jason
W. Palmer, 201 East Fifth Street, Suite 1420, Cincinnati, Ohio 45202, for defendant-
appellant
John W. Hust, 5300 Socialville-Foster Road, Suite 200, Mason, Ohio 45040, for defendant-
appellant
S. POWELL, P.J.
{¶ 1} Defendant-appellant, Certified Steel Stud Association, Inc. ("the Association"),
Butler CA2017-04-040
appeals a decision of the Butler County Court of Common Pleas granting the motion of
plaintiff-appellee, Clarkwestern Dietrich Building Systems LLC, DBA ClarkDietrich, for the
appointment of a receiver to investigate and prosecute a cause of action on behalf of the
Association.1 For the reasons outlined below, we affirm.
{¶ 2} On October 8, 2013, ClarkDietrich commenced the present case asserting
claims in its complaint for violations of the Ohio Deceptive Trade Practices Act and unfair
competition, defamation, disparagement, and civil conspiracy. ClarkDietrich asserted these
claims against the Association, and three other later-dismissed defendants. On September
15, 2015, the matter proceeded to an 11-week jury trial. Before closing arguments, pursuant
to Civ.R. 41(A)(1), ClarkDietrich offered to dismiss all of its claims with prejudice by
stipulation. The Association refused the offer. Next, ClarkDietrich filed a motion to dismiss
its claims with prejudice, pursuant to Civ.R. 41(A)(2), which the Association opposed and the
trial court denied. On November 16, 2015, the jury returned a unanimous verdict in favor of
ClarkDietrich, and awarded it $49.5 million, $43 million of which was apportioned to the
Association. The trial court subsequently entered a judgment against the Association in the
amount of $43 million.2
{¶ 3} The Association stipulated it has insufficient tangible assets to satisfy the
judgment. ClarkDietrich filed a motion for assignment of the Association's possible breach of
fiduciary duty claim against its officers, directors, and agents, based on their decisions to
decline ClarkDietrich's offer to dismiss by stipulation, oppose ClarkDietrich's motion to
dismiss, and proceed with the case through the jury determination. The trial court held a
1. Pursuant to Loc.R. 6(A), we sua sponte remove this case from the accelerated calendar and place it on the
regular calendar for purposes of issuing this opinion.
2. We note we previously affirmed the decision of the trial court denying the Association's motion for a judgment
notwithstanding the verdict, or in the alternative, motion for a new trial. See Clarkwestern Dietrich Bldg. Sys.,
L.L.C. v. Certified Steel Stud Assn., Inc., 12th Dist. Butler No. CA2016-06-113, 2017-Ohio-2713.
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hearing on the matter, and at the suggestion of the trial court, ClarkDietrich withdrew its
motion for assignment and filed a motion for the appointment of a receiver. On March 29,
2017, over the Association's objection, the trial court appointed a receiver "to investigate and,
if he determines it to be appropriate, bring, prosecute, and manage claims against [the
Association's] officers, directors and agents arising from the decisions to reject
ClarkDietrich's settlement offer and oppose ClarkDietrich's motion to dismiss."3
{¶ 4} The Association timely appealed the trial court's decision, raising two
assignments of error for appeal. For ease of discussion, the assignments of error will be
addressed together.
{¶ 5} Assignment of Error No. 1:
{¶ 6} THE COURT ERRED IN APPOINTING A RECEIVER OVER UNASSERTED
AND UNFILED CAUSES OF ACTION.
{¶ 7} Assignment of Error No. 2:
{¶ 8} THE COURT ERRED IN APPOINTING A RECEIVER DESPITE
CLARKDIETRICH'S FAILURE TO SHOW BY CLEAR AND CONVINCING EVIDENCE THAT
APPOINTMENT IS PROPER.
{¶ 9} In its two assignments of error, the Association asserts the trial court erred in
appointing a receiver to investigate and prosecute an unasserted cause of action because it
was not statutorily authorized to do so. The Association further contends the trial court erred
in appointing a receiver because ClarkDietrich failed to meet its burden of demonstrating a
receiver is appropriate and necessary by clear and convincing evidence. We disagree with
the Association's claims.
3. We note that during the pendency of these proceedings, an officer for the Association filed a declaratory
judgment action in Delaware, seeking a determination of whether he breached his fiduciary duties to the
Association.
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{¶ 10} A trial court has the authority to appoint receivers pursuant to R.C. 2735.01.
Fifth Third Bank v. Q.W.V. Properties, L.L.C., 12th Dist. Butler No. CA2010-09-245, 2011-
Ohio-4341, ¶ 17. "R.C. 2735.01 is a procedural statute and is to be liberally construed."
State ex rel. Petro v. Gold, 10th Dist. Franklin Nos. 04AP-863 and 04AP-873, 2006-Ohio-
943, ¶ 66.
{¶ 11} The decision to appoint a receiver is left to the sound discretion of the trial
court. TD Ltd., L.L.C. v. Dudley, 12th Dist. Butler No. CA2014-01-009, 2014-Ohio-3996, ¶
25. "Because the trial court is in a better position to evaluate all the facts and circumstances,
an appellate court should give due deference to the trial court's factual findings and limit its
review to the narrow question of whether the court abused its sound judicial discretion." In re
Dissolution of Madison County Health Group, 12th Dist. Madison No. CA98-03-012, 1998
Ohio App. LEXIS 5177, *10 (Nov. 2, 1998). This is especially important in a discretionary
decision made by the trial court concerning a complicated matter with which it had intimate
working knowledge. Id. An abuse of discretion is more than an error of law or judgment;
rather, it suggests that the trial court's decision is unreasonable, arbitrary, or unconscionable.
Park Natl. Bank v. Cattani, Inc., 187 Ohio App. 3d 186, 2010-Ohio-1291, ¶ 14 (12th Dist.).
{¶ 12} The primary purpose of a receiver is to carry out orders of the court. Id. at ¶ 10.
R.C. 2735.01(A) provides that a receiver may be appointed by the court of common pleas or
a judge thereof in his or her county, in the following cases:
(1) In an action by a vendor to vacate a fraudulent purchase of
property, or by a creditor to subject property or a fund to the
creditor's claim, or between partners or others jointly owning or
interested in any property or fund, on the application of the
plaintiff, or of a party whose right to or interest in the property or
fund, or the proceeds of the property or fund, is probable, and
when it is shown that the property or fund is in danger of being
lost, removed, or materially injured;
(2) In an action by a mortgagee, for the foreclosure of the
mortgagee's mortgage and sale of the mortgaged property, when
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it appears that the mortgaged property is in danger of being lost,
removed, materially injured, diminished in value, or squandered,
or that the condition of the mortgage has not been performed,
and either of the following applies:
(a) The property is probably insufficient to discharge the
mortgage debt.
(b) The mortgagor has consented in writing to the
appointment of a receiver.
(3) To enforce a contractual assignment of rents and leases;
(4) After judgment, to carry the judgment into effect;
(5) After judgment, to dispose of the property according to the
judgment, or to preserve it during the pendency of an appeal, or
when an execution has been returned unsatisfied and the
judgment debtor refuses to apply the property in satisfaction of
the judgment;
(6) When a corporation, limited liability company, partnership,
limited partnership, or other entity has been dissolved, is
insolvent, is in imminent danger of insolvency, or has forfeited its
corporate, limited liability company, partnership, limited
partnership, or other entity rights;
(7) In all other cases in which receivers have been appointed by
the usages of equity.
{¶ 13} Pursuant to R.C. 2735.04(B)(1) and (8), the trial court is authorized to empower
the receiver to "[b]ring and defend actions in the receiver's own name" and "[g]enerally do
any other acts that the court authorizes." Therefore, "'R.C. Chapter 2735 does not contain
any restrictions on what the court may authorize when it issues orders regarding receivership
property.'" Fifth Third Bank at ¶ 18, quoting Quill v. Troutman Ent., Inc., 2d Dist. Montgomery
No. 20536, 2005-Ohio-2020, ¶ 34. Further, the Ohio Supreme Court has "interpret[ed] th[e]
statute as enabling the trial court to exercise its judicial discretion to limit or expand a
receiver's powers as it deems appropriate." State ex rel. Celebrezze v. Gibbs, 60 Ohio St. 3d
69, 74 (1991).
{¶ 14} The trial court appointed a receiver to investigate and prosecute claims against
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directors, officers, and agents of the Association for breach of fiduciary duty in order to satisfy
ClarkDietrich's judgment. R.C. 2735.01(4) and (5) specifically authorize a trial court to
appoint a receiver to carry the judgment into effect and to dispose of and preserve property
to satisfy the judgment. Additionally, R.C. 2735.04 specifically empowers a trial court to
authorize a receiver to bring actions in the receiver's own name as well as generally to do any
other acts authorized by the court. See, e.g., Bobb v. Marchant, 14 Ohio St. 3d 1, 3 (1984)
(holding receivers are authorized to sue officers pursuant to R.C. 2735.04).
{¶ 15} The Association contends ClarkDietrich failed to demonstrate the existence of
specific property for which the receiver was sought; therefore, the trial court appointed the
receiver for the sole purpose of securing evidence and not bringing forward a claim. Contrary
to the Association's claim otherwise, the trial court did not appoint the receiver to determine if
a claim exists. Rather, the trial court found a potential claim for breach of fiduciary duty
exists based on the evidence presented. In turn, the appointment of the receiver was
necessary to develop and prosecute this claim. The trial court stated in its entry the
Association "possesses 'property' in the form of potentially viable claims and choses in
actions that may be used to satisfy the judgment against it * * *, including but not limited to a
cause of action against Directors, Officers or Agents of [the Association] for breach of
fiduciary duty to [the Association]." See Edwards v. Edwards, 12th Dist. Warren No.
CA2006-04-044, 2007-Ohio-123, ¶ 14 (stating the holder of a claim possesses property).
{¶ 16} Thus, the Association's contention fails to distinguish between appointing a
receiver to search out any relevant claims, as compared to developing and prosecuting an
already identified claim. Compare Schultze v. Schultze, 5 Ohio App. 2d 261, 263 (2d
Dist.1964) (holding trial court abused its discretion in appointing receiver to secure evidence
based on feeling of misrepresented earnings), with State ex rel. Petro v. Gold, 10th Dist.
Franklin Nos. 04AP-863 and 04AP-873, 2006-Ohio-943, ¶ 67-69 (finding trial court did not
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abuse its discretion in appointing receiver to determine the amount of charitable contributions
misappropriated where necessary to effectuate goal of asserting claim). The association's
claim otherwise lacks merit.
{¶ 17} The Association further contends the trial court's decision to empower the
receiver to prosecute the possible breach of fiduciary duty claim is analogous to a First
District holding that found "[i]n considering a creditor's bill, or any other remedy in aid of
execution upon a judgment, the trial court does not have the authority to allow the judgment
creditor to usurp prosecution of a chose in action belonging to the judgment debtor * * *."
Lakeshore Motor Freight v. Glenway Industries, Inc., 2 Ohio App. 3d 8 (1st Dist.1981),
paragraph three of the syllabus. However, Lakeshore is distinguishable from the present
case because it involved prosecution by a judgment creditor of a claim "to become due," as
compared to being "confronted with faithless or fraudulent debtors" which "permits a court,
exercising its equitable powers, to appoint a receiver of the debtor's property who may then
assume the burden of prosecuting the debtor's chose in action." Id. at 9, n.2.
{¶ 18} Likewise, the Eighth District's opinion in Sullivans, Inc. v. Haehn, 8th Dist.
Cuyahoga No. 100150, 2014-Ohio-399, provides little guidance to the facts before this court.
Contrary to the Association's claim, Sullivans does not stand for the proposition that a
receiver cannot be appointed to investigate and prosecute causes of action. Rather, the
Eighth District found the trial court did not abuse its discretion in denying a judgment
creditor's motion for a receiver "to stand in the shoes" of a judgment debtor in order to
accelerate a note "due and owing" from a third party. Id. at ¶ 15. The opinion in Sullivans
follows the guidance of Lakeshore, and similarly, was not confronted with the possibility of
faithless or fraudulent debtors. Therefore, the Eighth District found the trial court's
discretionary decision not to appoint a receiver did not constitute an abuse of discretion.
Accordingly, based on the facts and circumstances in this case, the trial court had statutory
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authorization to appoint a receiver and the authority to empower the receiver to investigate
and prosecute the claims. State ex rel. Celebrezze v. Gibbs, 60 Ohio St. 3d 69, 74 (1991)
(holding trial court did not abuse its discretion in empowering receiver to perform actions
specifically enumerated in R.C. 2735.04).
{¶ 19} The Association further argues that the trial court's appointment of a receiver to
investigate and prosecute the breach of fiduciary duty claim "threatens to violate the
receiver's core characteristic of neutrality * * * [b]y conditioning further payment to the
receiver on the receiver's finding of a claim to ultimately pursue[;]" thus, "the receiver is
placed in a position that creates the appearance of impropriety * * *." The Association
correctly asserts that a receiver must be a disinterested party pursuant to R.C. 2735.02.
However, the Association fails to identify how the appointed receiver does not meet such
requirement under the statute. The mere fact that the receiver is compensated based on the
amount of work he completes does not effectuate impropriety. A receiver is "an officer of the
court and at all time subject to its order and direction." Park Natl. Bank v. Cattani, Inc., 187
Ohio App. 3d 186, 2010-Ohio-1291, ¶ 10 (12th Dist.). Thus, the receiver's primary purpose is
to carry out the orders of the appointing court. Id. In the event the receiver fails to
competently and efficiently carry out these orders, the appointing court may remove the
receiver. Absent any basis in the record, the Association's argument the receiver will act
outside the court's orders for personal financial gain is merely speculative and not well-taken.
{¶ 20} Next, the Association contends the trial court further erred in appointing a
receiver because ClarkDietrich failed to demonstrate such appointment was appropriate and
necessary by clear and convincing evidence. In so doing, the Association asserts
ClarkDietrich failed to present evidence that a viable breach of fiduciary duty claim existed
and that the appointment was necessary to protect its rights. We find no merit to the
Association's claim.
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{¶ 21} The authority to appoint a receiver is "'an extraordinary, drastic and sometimes
harsh power which equity possesses.'" TD Ltd., L.L.C. v. Dudley, 12th Dist. Butler No.
CA2014-01-009, 2014-Ohio-3996, ¶ 25, quoting Hoiles v. Watkins, 117 Ohio St. 165, 174
(1927). "Because the appointment of a receiver is such an extraordinary remedy, the party
requesting the receivership must show by clear and convincing evidence that the
appointment is necessary for the preservation of the complainant's rights." 2115-2121
Ontario Bldg., L.L.C. v. Anter, 8th Dist. Cuyahoga No. 98627, 2013-Ohio-2995, ¶ 14.
{¶ 22} The trial court weighed the evidence presented to find that ClarkDietrich met its
burden by clear and convincing evidence that the appointment of a receiver was appropriate
and necessary to investigate and prosecute the Association's claims against its directors,
officers, and agents, for breach of their fiduciary duties. The trial court journalized its finding
ClarkDietrich met this burden and that the trial court based such finding on the following
evidence: (1) ClarkDietrich's settlements with the other three defendants prior to trial, leaving
the Association as the sole remaining defendant, (2) the Association's refusal of
ClarkDietrich's offer to dismiss all claims against it with prejudice by stipulation, (3) the
Association's opposition to ClarkDietrich's motion to dismiss all its claims against it, (4) the
Association's opposition to dismissal despite a clear insufficiency in tangible assets to satisfy
a possible large judgment, (5) Association officer Chip Gardner's declaratory judgment action
in Delaware seeking a declaration that he did not breach his fiduciary duty to the Association,
and (6) the possibilities of lost evidence, witness unavailability, and barring of claims by the
statute of limitations, without appointing a receiver to pursue such claims, as there was no
evidence the Association had taken any steps to investigate or prosecute them.
{¶ 23} Based on this evidence, the trial court found that the appointment of a receiver
was necessary to give ClarkDietrich an opportunity to collect upon its judgment.
Furthermore, contrary to the Association's claim, the trial court was not statutorily required to
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find ClarkDietrich presented clear and convincing evidence that a breach of fiduciary duty
claim would be successful. Rather, ClarkDietrich was required to present clear and
convincing evidence to support the trial court's discretionary decision that the appointment of
a receiver was appropriate and necessary.
{¶ 24} Collectively, the evidence presented before the trial court demonstrates it did
not abuse its discretion in finding ClarkDietrich met its evidentiary burden. As discussed
above, ClarkDietrich presented evidence supporting the trial court's finding that the
Association possessed property in the form of a potentially viable breach of fiduciary duty
claim against its directors, officers, and agents. Despite two opportunities presented by
ClarkDietrich to resolve the case before it was submitted to the jury, the Association made
the decision to oppose dismissal. Moreover, the Association made this decision knowing of
the prior settlements and its own inability to satisfy a possible large judgment, as it later
stipulated that it had insufficient tangible assets to satisfy the $43 million judgment against it.
Additionally, an officer for the Association filed his own declaratory judgment action in
Delaware to have a determination made whether he breached his fiduciary duty to the
Association.
{¶ 25} Outside of the declaratory judgment action, the record does not contain any
evidence indicating further investigation over the last two years into a possible breach of
fiduciary duty by the Association's directors, officers, and agents, thereby providing further
support for the trial court's finding that without the appointment of a receiver, the breach of
fiduciary duty claims could lapse, evidence could be lost, witnesses could become
unavailable, and memories could fade. Therefore, the trial court did not abuse its discretion
in finding it was appropriate and necessary to appoint a receiver to investigate and prosecute
such claims. Accordingly, the Association's assignments of error are overruled.
{¶ 26} Judgment affirmed.
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RINGLAND and PIPER, JJ., concur.
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