National City Bank v. Semco, Inc. , 183 Ohio App. 3d 229 ( 2009 )

[Cite as Natl. City Bank v. Semco, Inc., 183 Ohio App.3d 229, 2009-Ohio-3319.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
MARION COUNTY
NATIONAL CITY BANK,
APPELLEE;
CASE NO. 9-09-10
LAZEAR,
APPELLANT,
v. OPINION
SEMCO, INC., ET AL.,
APPELLEES.
Appeal from Marion County Common Pleas Court
Trial Court No. 06-CV-711
Judgment Affirmed in Part, Reversed in Part and Cause Remanded
Date of Decision: July 6, 2009
APPEARANCES:
John C. Bartram, for appellee National City Bank.
Sherri B. Lazear and Gregory R. Flax, for appellant.
Case No. 9-09-10
Clifford C. Spohm, for appellees Semco, Inc. and Leonard and
Florence Furman.
PRESTON, Presiding Judge.
{¶1} Receiver-appellant, Bruce C. Lazear, appeals the judgment of the
Marion County Court of Common Pleas, which reduced his receivership
compensation from $103,809.12 to $28,698.31. For the reasons that follow, we
affirm in part and reverse in part.
{¶2} This matter stems from a promissory note between plaintiff National
City Bank and defendant-appellee, Semco, Inc., and defendants Leonard and
Florence Furman (“the Furmans”). On September 15, 2006, National City Bank
filed a complaint against Semco and the Furmans alleging that a promissory note
executed by Semco on October 6, 2004, was due and unpaid in the principal
amount of $993,392.87, plus interest, and that the Furmans had executed a
commercial guaranty agreement guaranteeing the payment of the promissory note.
The trial court entered judgment on September 15, 2006, in favor of National City
Bank and against Semco and the Furmans in the amount of $993,392.87, plus
interest. Subsequently, National City Bank filed a motion for the appointment of a
receiver, and on September 22, 2006, the trial court granted the motion and
appointed appellant Lazear as receiver.
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{¶3} On September 27, 2006, Semco filed a motion to set aside the order
appointing the receiver. A hearing on the motion was held on October 30, 2006,
and seven witnesses were presented before the trial court. On November 1, 2006,
the trial court issued an order and judgment entry denying the motion and
declaring that “the Receiver shall remain in place pursuant to the Court’s Order
Appointing Receiver entered on September 22, 2006 until further order of the
Court.”
{¶4} On December 1, 2006, Semco filed a motion for the receiver to remit
his fees and requested leave to pursue the receiver for damages and accounting. In
this motion, Semco alleged that the receiver’s fees were excessive. On February
2, 2008, Semco filed an amendment to its original motion and deleted the portion
of the motion seeking leave to pursue the receiver for damages. On July 15, 2008,
Semco filed a memorandum in support of its motion, and Lazear responded by
filing a motion in opposition and filing a motion for three orders (1) approving his
compensation, (2) approving his inventory and final report, and (3) discharging,
terminating, and prohibiting actions against him and his agents without leave of
court.
{¶5} On January 20, 2009, the trial court issued a judgment entry finding
that the fees Lazear and his associates had charged were not reasonable, and as a
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result, the trial court reduced Lazear’s compensation as receiver to $28,698.31 and
ordered him to return $75,110.81 to Semco.
{¶6} Lazear now appeals and raises one assignment of error.
ASSIGNMENT OF ERROR
The trial court erred by reducing appellant’s compensation as
receiver to $28,698.31 and ordering the receiver to return $75,110.81
to defendant-appellee Semco, Inc.
{¶7} Within his assignment of error, Lazear raises three specific issues for
this court’s review: (1) whether the trial court was precluded from reconsidering
its prior orders, which had set the receiver’s compensation at $300 per hour, (2) if
the trial court had the discretion to reconsider its prior orders, whether the trial
court abused its discretion by reversing its prior orders in the absence of
exceptional circumstances, and (3) if the trial court had the discretion to disregard
its prior orders, whether the trial court abused its discretion by ordering Lazear to
be compensated at $150 per hour and his associates to be compensated at $75 per
hour.
{¶8} The primary purpose of a receiver is to carry out the orders of the
respective appointing court, which has the power “to exercise its sound discretion
to limit or expand a receiver’s powers as it deems appropriate.” State ex rel.
Celebrezze v. Gibbs (1991), 60 Ohio St.3d 69, 74, 573 N.E.2d 62. Because of this
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discretion, a reviewing court must not disturb a trial court’s judgment with regard
to receivers absent an abuse of discretion. Id. An abuse of discretion is more than
an error of law; rather, it suggests that the trial court’s decision is unreasonable,
arbitrary, or unconscionable. Blakemore v. Blakemore (1983), 5 Ohio St.3d 217,
219, 450 N.E.2d 1140. After a review of the record and based on the
circumstances of this case, we believe that the trial court abused its discretion with
respect to reducing Lazear’s compensation but did not abuse its discretion with
respect to his associates’ compensation.
{¶9} Here, the parties are disputing the trial court’s order that found
Lazear’s and his associates’ compensation unreasonable, and as a result, reduced
the amount of compensation and ordered that Lazear return the excess amount to
Semco. In its original order appointing Lazear as the receiver and prescribing his
powers as the receiver, the trial court stated the following power:
To prepare periodic interim statements reflecting the Receiver’s fees
and administrative costs and expenses incurred in the operation and
administration of the receivership estate. The Receiver shall be
compensated for the performance of the duties imposed hereby at the
rate of $300 per hour; the Receiver may utilize other members,
associates and employees of his firm, Lazear Capital Partners, Ltd.,
to assist him in his duties and they shall be compensated at their
respective customary hourly rates.
With respect to this order, Semco only objected to the overall appointment of the
receiver, which the trial court eventually overruled; however, Semco did not make
a specific objection to the $300 hourly rate of the receiver until after its motion
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opposing the appointment of receiver had been overruled. In addition, Semco
never appealed the trial court’s order overruling its motion opposing the
appointment of receiver. The first time Semco raised any issue with Lazear’s
compensation was in its December 1, 2006 motion to have the receiver remit his
fees. Both parties contested the issue and submitted supporting affidavits,
discovery documents, and even a list of other Ohio counties’ rules regarding
receiver compensation. The issue was finally resolved in 2009, when the trial
court issued an order stating:
It is incumbent upon this Court to decide whether the $300 per hour
fee is reasonable. This Court cannot conclude that it is. This
Court’s own individual evaluation of the fees charged by receivers in
this area leads the undersigned to the conclusion that somewhere
between $75 and $150 per hour is a reasonable hourly rate.
Then the trial court reduced the amount of compensation originally requested by
Lazear to $28,698.31 and ordered that he return the excess amount of $75,110.81
to Semco. Overall, we believe that the trial court abused its discretion based on
the circumstances of this case.
{¶10} First of all, we note that generally orders appointing receivers are
considered final, appealable orders. United Bank v. Harman (Dec. 6, 1983), 3d
Dist. No. 3-83-14, at *2, citing Forest City Invest. Co. v. Haas (1924), 110 Ohio
St. 188, 193, 143 N.E. 549. Here, within the order appointing a receiver, the trial
court specifically prescribed Lazear’s hourly rate at $300, and while this order was
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objected to by Semco, Semco failed to raise an objection as to Lazear’s hourly
rate. In addition, because Semco failed to initially object to the reasonableness of
the $300 hourly rate and this rate was preset by the trial court before Lazear
performed his receivership services, this court believes that it was reasonable for
Lazear to have relied on the $300 hourly rate as the basis for his compensation.
{¶11} Nevertheless, and most importantly in this case, we find the trial
court’s final order vague and therefore problematic. We acknowledge that
generally determining the amount and measure of compensation is left to the
sound discretion of the trial court. Nozik v. Mentor Lagoons, Inc. (July 2, 1998),
11th Dist. No. 97-L-004, at *3-4, citing Nowman v. Nowman (1930), 8 Ohio Law
Abs. 429. See also Hunt v. Kegerreis (Aug. 25, 1981), 7th Dist. No. 537, at *2.
However, here the trial court failed to give sufficient reasons why it was utilizing
its discretion and departing from its originally prescribed hourly rate, other than it
believed $300 was now “unreasonable” based on its “own individual evaluation of
the fees charged by receivers in this area.” Typically, receivers are entitled only to
compensation “ ‘as is reasonable in view of the interest involved, the amount of
skill necessary to conduct the business, and the time and labor given to the
business.’ ” Nozik v. Mentor Lagoons, Inc. at *3-4, quoting Postle v. Wolfram
Guitar Co. (C.P.1902), 13 Ohio Dec. 228, 229. By prescribing $300 as Lazear’s
hourly rate, the trial court had implicitly already found that the hourly rate was
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reasonable under the circumstances of the case at that time. However, in its
January 20, 2009 judgment entry, the trial court found that $300 per hour was now
unreasonable based on its own independent evaluation – not based on the evidence
presented by the parties or because of the particular circumstances of the case.
While we are not stating that a trial court can never go back and modify its
previous order with respect to a receiver’s compensation, here we are unable to
determine from the trial court’s final order why the hourly rate was seemingly
reasonable in the beginning of the receivership but later found to be unreasonable.
See In re Angell (Mich.1902), 131 Mich. 345, 350, 91 N.W. 611 (finding that it
was permissible for the trial court to have reduced the receiver’s hourly rate
because its previous order had been ex parte and the court had not been advised of
the facts of the case); Velez v. Martinez (E.D.Pa.2002), No. 90-6449, at *1-4
(reducing the receiver’s monthly expense allowance of $2,500 because it was no
longer necessary since the receiver’s role had changed since the allowance had
been issued).1
{¶12} Therefore, based on the fact that the trial court failed to adequately
explain its departure from its previously ordered hourly rate, we find that the trial
court abused its discretion with respect to reducing Lazear’s hourly rate for his
1
We would like to note that while the parties did not dispute the number of hours billed by Lazear, this
issue was within the trial court’s discretion and it could have still reduced the hours billed by Lazear as
being unreasonable under the circumstances.
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compensation and that this matter should be remanded for purposes of
recalculation.
{¶13} However, we believe that reducing Lazear’s associates’
compensation was not an abuse of discretion. The issues we have found with
Lazear’s compensation do not exist with respect to his associates. First of all, the
trial court never specifically prescribed an hourly rate for Lazear’s associates;
rather, in its order appointing a receiver, the trial court stated that “other members,
associates and employees of his firm, Lazear Capital Partners, Ltd., to assist him
in his duties * * * shall be compensated at their respective customary hourly
rates.”2 Thus, the reasonableness of their compensation was never officially
determined and in fact was left unresolved and open for objections. Second,
because there was no specific prior determination, unlike with Lazear, we believe
that the associates had no similar reasonable reliance with respect to their
compensation. And finally, because there was no prior determination of the
reasonableness of the associates’ compensation, there was no need for the trial
court to have explained its determination of the associates’ compensation in its
final order, as it should have done with respect to Lazear’s compensation.
2
Lazear argues in his reply brief that no one disputed the evidence he offered that demonstrated $300 per
hour was the customary hourly rate for his associates. However, at oral arguments, Lazear acknowledged
that the only documents that purported to illustrate the associates’ customary rate were the self-serving
invoices submitted by Lazear to the trial court for purposes of a final accounting.
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{¶14} Therefore, as to Lazear’s compensation, we find that the trial court
abused its discretion when it reduced its previously ordered $300 hourly rate
without adequate explanation for its new finding, and that this matter should be
remanded for purposes of recalculation. However, with respect to Lazear’s
associates’ compensation, we find that the trial court did not abuse its discretion
when it ordered that they be compensated at $75 per hour.
{¶15} Lazear’s assignment of error is therefore sustained in part.
{¶16} Having found no error prejudicial to appellant Lazear herein, in the
particulars assigned and argued in his sole assignment of error with respect to his
associates’ compensation, we affirm the trial court’s judgment. However, having
found error prejudicial to appellant Lazear, in the particulars assigned and argued
in his sole assignment of error with respect to his own compensation, we reverse
the trial court’s judgment and remand the matter for further proceedings consistent
with this opinion.
Judgment affirmed in part
and reversed in part,
and cause remanded.
WILLAMOWSKI and ROGERS, JJ., concur.
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