Carr v. Acacia Country Club Co. , 2012 Ohio 4723 ( 2012 )

[Cite as Carr v. Acacia Country Club Co., 2012-Ohio-4723.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 97989
LEONARD F. CARR
PLAINTIFF-APPELLANT
vs.
ACACIA COUNTRY CLUB CO., ET AL.
DEFENDANTS-APPELLEES
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-682363
BEFORE: S. Gallagher, J., Celebrezze, P.J., and Kilbane, J.
RELEASED AND JOURNALIZED: October 11, 2012
ATTORNEYS FOR APPELLANT
Leonard F. Carr
Kenneth A. Bossin
L. Bryan Carr
The Carr Law Firm
1392 S.O.M. Center Road
Mayfield Heights, OH 44124
ATTORNEYS FOR APPELLEES
For Acacia Country Club Co.
Timothy J. Fitzgerald
Gallagher Sharp
6th Floor, Bulkley Building
1501 Euclid Avenue
Cleveland, OH 44115
For Joseph Aveni, et al.
Scott H. Kahn
Mark F. Kruse
Kahn Kruse Co., L.P.A.
Galleria & Tower at Erieview
1301 East Ninth Street, Suite 2200
Cleveland, OH 44114
For Michael Murman, Receiver
M. Colette Gibbons
Jonathon W. Groze
Ice Miller LLP
600 Superior Avenue, East, Suite 1701
Cleveland, OH 44114
Michael E. Murman
Murman & Associates
14701 Detroit Avenue, Suite 555
Lakewood, OH 44107
SEAN C. GALLAGHER, J.:
{¶1} Appellant, Leonard F. Carr, appeals the decision of the Cuyahoga County
Court of Common Pleas that found him responsible for the compensation of the receiver,
Michael E. Murman, and the fees of the receiver’s legal counsel. For the reasons stated
herein, we affirm.
{¶2} On January 21, 2009, Carr, a then shareholder in the Acacia Country Club
Company (“Acacia”), filed a complaint for appointment of a receiver and for breach of
fiduciary duty against the Acacia Country Club Company Board of Directors, individually
and collectively, nine individually named directors, and Acacia. 1 Among other relief
sought under the complaint, Carr demanded the appointment of a receiver “to take
possession and control of Acacia’s assets and property and operations” and an order
directing the receiver “to take any and all immediate action to mitigate shareholder cost
and expenses * * * and to carry out the liquidation and dissolution of the corporation at
the earliest reasonable time * * *.”
{¶3} Carr sought the appointment of a receiver under R.C. 2735.01, which permits
the prejudgment appointment of a receiver by a court of common pleas in certain cases,
including “by a party whose right to or interest in the property or fund * * * is probable,
and when it is shown that the property is in danger of being * * * materially injured”;
“[w]hen a corporation has been dissolved, or is insolvent, or in imminent danger of
1
Acacia Development Company, Ltd., intervened in the action. The individual members of
the board of directors are not parties to the appeal.
insolvency, or has forfeited its corporate rights”; and “[i]n all other cases in which
receivers have been appointed by the usages of equity.” R.C. 2735.01(A), (E), and (F).
Each of these grounds was alleged by Carr.
{¶4} The case was assigned to the trial court judge, who presided over related
cases. Following an attorney conference, the court issued an order on January 27, 2009,
that appointed Michael Murman as receiver. The order stated in pertinent part:
Motion to appoint receiver is granted; attorney Michael Murman is
appointed receiver; receiver to post bond in the amount of $5000 and to
provide order for receiver by 2/6/09.
The receiver posted a bond on February 2, 2009. On February 3, 2009, the trial court
entered an order stating the authorized powers of the receiver. In that order, the trial
court indicated that the receiver was to be paid a $2,000 initial set-up fee and, thereafter,
$3,000 per month, plus additional compensation as allowed by the court.
{¶5} The defendants filed emergency motions to stay and vacate the appointment
of the receiver. They claimed that the appointment was made before the defendants were
served with the complaint, that no hearing was held or evidence submitted regarding the
appointment, and that the effect of the appointment was to enter a default judgment on the
receivership count of the complaint.
{¶6} Carr filed an opposition brief in which he maintained that the appointment of
the receiver was appropriate. Carr asserted that the receiver’s appointment was well
founded and supported by the factual allegations in the complaint and that the
appointment of the receiver without a hearing was within the court’s discretion.
{¶7} On March 19, 2009, the case was transferred to the commercial docket and
assigned to a new judge. On March 24, 2009, the court, on its own motion, vacated the
entry appointing the receiver. On March 27, 2009, Carr filed a motion for appointment
of receiver, which incorporated his previously filed brief in opposition to the emergency
motion to vacate the appointment of the receiver.
{¶8} Because Acacia had appealed from the January 27, 2009 order appointing the
receiver and subsequent related orders, on June 8, 2009, the trial court issued a journal
entry indicating that it may have acted inconsistent with the court’s jurisdiction in
vacating the appointment of the receiver. Therefore, upon a limited remand from this
court, the trial court vacated the order appointing the receiver, the order regarding the
powers of the receiver, and the order regarding the imposition and collection of
assessments. The prior appeals were then dismissed as moot.
{¶9} On May 29, 2009, Murman filed his first receiver’s report. On August 14,
2009, Murman filed a motion for award of attorney fees for his services in the amount of
$42,563.30. He also sought compensation for the fees and expenses of his attorneys:
Edward G. Kagels, Esq., in the amount of $20,250.00; and Schottenstein, Zox and Dunn
Co., LPA, now known as Ice Miller LLP, in the amount of $25,831.20.2 While Acacia
opposed these motions, Carr did not file any opposition until the trial court instructed the
parties to brief certain issues.
2
A second motion seeking an award of $33,340.32 for Ice Miller LLP was denied.
{¶10} On March 23, 2010, Carr voluntarily dismissed his claims. The remaining
counterclaims were later voluntarily dismissed, and the cross-claim of intervenor Acacia
Development Company, Ltd., was disposed of on summary judgment.
{¶11} On April 1, 2011, the trial court issued an order that held Carr responsible
for the receiver’s compensation. An appeal from that ruling was dismissed for a lack of
a final appealable order. Thereafter, the parties waived an evidentiary hearing on the
amount of fees and expenses to be awarded the receiver and his counsel. Ultimately, on
February 6, 2012, the trial court found Carr responsible for the expense of the
receivership in the following amounts: a total of $8,147.05 to the receiver; $10,125.00 to
Edward G. Kagels, Esq.; and $12,951.45 to Ice Miller LLP. The total allowance was
$31,223.50.
{¶12} Carr timely filed this appeal, raising three assignments of error for our
review. His first assignment of error provides as follows:
The trial court erred in finding the appellant responsible for the receiver’s
fees as well as fees for the receiver’s counsel.
{¶13} Carr argues that it was error for the trial court to hold him personally
responsible for the receiver’s fees when he never filed a motion for the appointment of a
receiver and the appointment was made sua sponte by the trial court. He further claims
that the receiver’s fees should have been paid from the receivership property.
{¶14} A trial court’s award regarding the compensation of a receiver is reviewed
for an abuse of discretion. Natl. City Bank v. Semco, Inc., 183 Ohio App.3d 229,
2009-Ohio-3319, 916 N.E.2d 857, ¶ 8 (3d Dist.). An abuse of discretion suggests that
the trial court’s decision is unreasonable, arbitrary, or unconscionable. Blakemore v.
Blakemore, 5 Ohio St.3d 217, 219, 450 N.E.2d 1140 (1983).
{¶15} When the appointment of a receiver is improper or invalid, the party at
whose instance the receiver was appointed, and not the receivership fund, must pay all
costs and expenses incurred as a result of the appointment. Real Estate Capital Corp. v.
Thunder Corp., 31 Ohio Misc. 169, 287 N.E.2d 838 (C.P.1972), paragraph six of the
syllabus; 80 Ohio Jurisprudence 3d, Receivers, Sections 175 and 199 (1988). In such
cases, the receivership costs are directly related to the acts of the plaintiff in filing suit
and seeking the appointment of a receiver and cannot be ordered to be paid from funds
that belong to the corporation, its creditors, and stockholders. Thunder at 189. Thus, a
party who procures the appointment of a receiver runs the risk of being held accountable
for the receiver’s compensation in the event the appointment is found improper or invalid
or is otherwise required under principles of equity.
{¶16} In this case, the trial court recognized that while Carr did not file a motion
for a receiver until after the receivership was vacated, his lawsuit was “for appointment of
a receiver,” he opposed defendants’ motion to vacate the receiver’s appointment, and he
sought to reassure the court that the “appointment of a receiver was well founded” and
that “a receiver is absolutely necessary.” When considering the allowance for the
receiver’s compensation, the trial court found it was inconsistent “for Carr to now argue
that the court’s appointment was void in the first place.”
{¶17} Our review of the record reflects that Carr filed this action pursuing the
appointment of a receiver. Carr’s claim was an individual claim, and he sought
individual relief. He was not acting on behalf of Acacia members, but solely was
addressing issues that impacted him personally. After the appointment of the receiver
was granted, Carr did not oppose the trial court’s action. He did not raise any timely
objection, and he did not appeal the receiver’s appointment. Instead, Carr affirmatively
acknowledged the appointment and opposed the opposing parties’ efforts to have the
appointment vacated.
{¶18} This was not a case where Carr passively acquiesced to the receiver’s
appointment. Rather, he sought the appointment directly, and he aggressively defended
the appointment. Even when the court vacated the original appointment, Carr
immediately sought for another receiver to be appointed. The one constant in this action
was Carr’s insistence on the need for a receiver.
{¶19} Conversely, Acacia fought the appointment and sought the receiver’s
removal. When afforded the opportunity to demonstrate that Acacia was indeed in need
of a receiver, Carr failed to adequately demonstrate the need.
{¶20} It was only when the allowance for the receiver’s compensation became the
issue that Carr complained of procedural failures by the trial court. However, he was
estopped from raising such challenges. A party who has acquiesced in the appointment
of a receiver or fails to raise a timely objection to the appointment is estopped to
complain of defects or irregularities in the appointment or to question the right of the
receiver to compensation for his services. See Grise v. Warrick, 56 Ohio Law Abs. 124,
91 N.E.2d 287 (2d Dist.1949); Lebanon Prod. Credit Assn. v. Felhaus, 34 Ohio Law Abs.
70, 34 N.E.2d 463 (1st Dist.1938); 80 Ohio Jurisprudence 3d, Receivers, Section 173; 75
Corpus Juris Secundum, Receivers, Section 85 (2002).
{¶21} Carr now claims because there was no finding of special circumstances, or
that the corpus was insolvent, or that there was a special connection between the receiver
and the plaintiff, that he should not be accountable. See Richey v. Brett, 112 Ohio St.
582, 148 N.E. 92 (1925). We are unpersuaded by his argument. We find that where the
party seeking a receiver causes or acquiesces in the receiver’s appointment and the
appointment results in expenses being incurred, that party may be held accountable for the
receiver’s compensation even where irregularities in the appointment are later found or
the receiver’s appointment is later vacated.
{¶22} Thus, we cannot say the trial court abused its discretion in finding Carr
accountable for the costs and expenses of the receivership. The first assignment of error
is overruled.
{¶23} Carr’s second assignment of error provides as follows:
The trial court erred in failing to find that the failure of the receiver to take
or file an oath is fatal to his claim for (and entitlement to) fees (and those of
his counsel).
{¶24} Carr argues that the receiver’s appointment was not lawful because the
receiver failed to take an oath and that the appointment of the receiver was void because
the trial court was without jurisdiction to appoint the receiver. We find no merit to his
argument.
{¶25} R.C. 2735.03 requires that before a receiver enters upon his duties, he must
take an oath and execute a bond. The statute provides as follows:
Before a receiver appointed as provided in section 2735.01 of the
Revised Code enters upon his duties, he must be sworn to perform his
duties faithfully, and, with surety approved by the court, judge, or clerk,
execute a bond to such person, and in such sum as the court or judge
directs, to the effect that such receiver will faithfully discharge the duties of
receiver in the action, and obey the order of the court therein.
R.C. 2735.03. While the record reflects that the receiver posted a bond in this matter,
there is no indication that he was ever sworn to perform his duties faithfully.
{¶26} This court has previously recognized that “the improper qualification of a
receiver does not render the appointment order void, and also does not affect the
jurisdiction of the trial court to go forward in the underlying case.” Hummer v. Hummer,
8th Dist. No. 96132, 2011-Ohio-3767, ¶ 13, citing Larson v. Kaley, 138 Ohio App.3d
120, 122-123, 740 N.E.2d 691 (11th Dist.2000). Further, an oath or bond may be
ordered nunc pro tunc and relate back to the time of the appointment. Fifth Third Bank
v. Q.W.V. Properties, LLC, 12th Dist. No. CA2010-09-245, 2011-Ohio-4341, ¶ 32;
Hummer at ¶ 13. Also, objections to the receiver’s failure to take an oath or give bond
may be waived. 75 Corpus Juris Secundum, Receivers, Section 85. Therefore, “a party
whose counsel has approved entries in the record appointing a receiver, approving his
bond and directing him to enter upon his duties, is estopped to question the right of that
receiver to receive payment for his services.” 80 Ohio Jurisprudence 3d, Receivers,
Section 173.
{¶27} Accordingly, the mere fact that a receiver renders services without first
having taken an oath or executed a bond does not necessarily preclude a court from
awarding adequate compensation to the receiver. The record herein reflects that Carr
failed to raise a timely objection to the qualification of the receiver. In fact, Carr
acquiesced in the receiver’s appointment and recognized the authority of the receiver by
not asking for his discharge. Thus, any irregularities in the qualification of the receiver
were effectively waived by Carr. Accordingly, we find the trial court acted within its
discretion in awarding compensation to the receiver and his counsel for services rendered.
The second assignment of error is overruled.
{¶28} Carr’s third assignment of error provides as follows:
The trial court erred in the amount it awarded * * * and in failing to find
that the fees requested by the receiver (and his counsel) are excessive,
unreasonable and not related to preserving the corpus of the asset (Acacia
Country Club).
{¶29} “The primary purpose of a receiver is to carry out the orders of the * * *
court, which has the power ‘to exercise its sound discretion to limit or expand a receiver’s
powers as it deems appropriate.’” Semco, Inc.,183 Ohio App.3d 229, 2009-Ohio-3319,
at ¶ 8, quoting State ex rel. Celebrezze v. Gibbs, 60 Ohio St.3d 69, 74, 573 N.E.2d 62(1991). A receiver is entitled to reasonable compensation for his services, which
typically requires consideration of the interest involved, the amount of skill necessary to
perform the duties of the receivership, and the time and labor expended. See Semco,
Inc.,183 Ohio App.3d 229, 2009-Ohio-3319, at ¶ 11; 80 Ohio Jurisprudence 3d,
Receivers, Section 174. The amount and measure of compensation is generally left to
the sound discretion of the trial court. Semco, Inc. at ¶ 11.
{¶30} The trial court appointed Michael Murman as receiver on January 27, 2009.
Thereafter, the court issued an order on February 3, 2009, stating the authorized powers
of the receiver in which the trial court set forth the measure of compensation for the
receiver as a $2,000 initial set-up fee and, thereafter, $3,000 per month, plus additional
compensation as allowed by the court. Carr raised no objections to this order. The
appointment of the receiver was vacated on March 24, 2009, approximately two months
after the appointment.
{¶31} The receiver sought compensation in the total amount of $42,563.30. The
receiver also sought compensation for the fees and expenses of his attorneys, Edward G.
Kagels in the amount of $20,250.00 and Ice Miller LLP in the amount of $25,831.20.
The trial court initially set an evidentiary hearing in this matter; however, all parties
waived the hearing, and the trial court proceeded to issue a ruling.
{¶32} The trial court limited the receiver’s award to $8,000, plus $147.05 in costs.
The receiver’s application for fees was supported by a time sheet that detailed the
activities performed by the receiver and reflected a total of 132 hours spent on the matter.
The time sheet and the receiver’s report reflect that the receiver gathered information,
met with interested parties and their counsel, and attended hearings and meetings with the
court. Fees also were incurred as a result of the challenges brought against the
appointment of the receiver. Although the receiver delayed taking actual control of
Acacia’s assets, income, and operations pending the outcome of the challenges raised, the
receiver made efforts to become familiar with Acacia and its operations and otherwise
prepared to execute his duties and responsibilities under the order of appointment.
{¶33} The trial court also found Carr responsible for the expense of the
receivership in the following amounts: $10,125.00 to Edward G. Kagels, Esq.; and
$12,879.75 plus $71.70 in costs to Ice Miller LLP.
{¶34} Generally, a receiver’s legal counsel may recover fees when it is determined
“‘that the services to be performed are necessary to produce, preserve or protect a fund
which has, or may be, brought into the hands of the receiver and that such payment is to
the interest of the receivership.’” Natl. City Bank v. Semco, Inc., 3d Dist. No. 9-10-42,
2011-Ohio-172, ¶ 21, quoting Liberty Folder Co. v. Anderson, 55 Ohio Law Abs. 268, 89
N.E.2d 500 (2d Dist.1949). Nevertheless, when there has been an improper or invalid
appointment of a receiver, the allowance awarded to the receiver and his attorneys
remains a matter resting in the sound discretion of the trial court. The amount awarded
must be reasonable.
{¶35} Although the receiver’s legal counsel spent time defending the receivership
and on matters following the vacation of the receiver’s appointment, counsel also
performed services that were in the interest of the receivership. A review of the time
sheets provided reflects that the receiver’s legal counsel spent time preparing and
reviewing pleadings and documents regarding the receivership, advising the receiver with
respect to his rights, powers, and duties, attending meetings regarding Acacia and the
receivership, appearing at court hearings, preparing the first receiver’s report, and on
other matters relating to the receivership. After reviewing the documents submitted, the
trial court limited the award to the receiver’s counsel to half of the amount sought.
{¶36} Upon our review, we do not find any abuse of discretion by the trial court in
determining reasonable compensation for the receiver and his legal counsel.
Accordingly, we overrule the third assignment of error.
{¶37} Regrettably, R.C. 2735.01 is not a model of clarity for the appointment,
authority, or conduct of receivers. Many of the requirements are inferred. In its present
form, it is largely an equity statute that gives broad discretion to trial courts in managing
receivers. As recent cases challenging receivership law demonstrate, greater structure
and clarity in the receiver statutes is overdue. The legislature may wish to draft express
language on both the appointment and supervision of receivers. It may also be time for
the legislature to draft express provisions for the costs associated with receivers.
Nonetheless, under the circumstances of this case, we cannot say the trial court abused its
discretion with regard to the compensation of the receiver or his legal counsel.
{¶38} Judgment affirmed.
It is ordered that appellees recover from appellant the costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the common
pleas court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
SEAN C. GALLAGHER, JUDGE
FRANK D. CELEBREZZE, JR., P.J., and
MARY EILEEN KILBANE, J., CONCUR