Dayton Lodge, L.L.C. v. Hoffman ( 2013 )

[Cite as Dayton Lodge, L.L.C. v. Hoffman, 2013-Ohio-5755.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
MONTGOMERY COUNTY
FIFTH THIRD BANK
Plaintiff-Appellant
v.
DAYTON LODGE, LLC, dba
DAYTON EXECUTIVE HOTEL, et al.
Defendant-Appellant
and
WILLIAM D. HOFFMAN
Receiver-Appellee
Appellate Case No. 25531
Trial Court Case No. 2007-CV-02432
(Civil Appeal from
(Common Pleas Court)
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OPINION
Rendered on the 27th day of December, 2013.
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JARED A. WAGNER, Atty. Reg. No. 76674, JONATHAN F. HUNG, Atty. Reg. No 82434, 800
Performance Place, 109 North Main Street, Dayton, Ohio 45402
Attorneys for Plaintiff-Appellant-Fifth Third Bank and for
Defendant-Appellant-Dayton Lodge, LLC
MATTHEW C. SORG, Atty. Reg No. 62971, 40 North Main Street, Suite 2700, Dayton, Ohio 45423
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Attorney for Receiver-Appellee
MARK SHERIFF, Atty. Reg. No. 19273, 300 Spruce Street, Floor One, Columbus, Ohio 43215
Attorney for Defendant-Appellee-Auto Owners Insurance
THOMAS TALBOT, Atty. Reg. No. 2615, P.O. Box 384, Wright Bros. Station, Dayton, Ohio
45409
Attorney for Defendant-Appellee-HHP Corporation
DONALD JORDAN, Atty. Reg. No. 23095, 41 South High Street, Columbus, Ohio 43215
Attorney for Defendant-Appellee-Huntington National Bank
JOSEPH STRINES, Atty. Reg. No. 69878, 1065 Woodman Drive, Dayton, Ohio 45432
Attorney for Defendant-Appellee-Miami Valley Resources
CHARLES GEIDNER, Atty. Reg. No. 23889, 15 West Fourth Street, Suite 250, Dayton, Ohio
45402
Attorney for Defendant-Appellee-Ohio Department of Taxation
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WELBAUM, J.
{¶ 1} Plaintiff-Appellant, Fifth Third Bank, and Defendant-Appellant, Dayton Lodge,
LLC, appeal from a trial court order discharging a receiver and approving the receiver’s final
account. Appellants contend that the trial court exceeded its jurisdiction when it entered the
order because: (1) the order was entered after the trial court had already entered a final appealable
order closing the receivership; (2) the order ruled on the receiver’s liability, which was not an
issue raised in the pleadings or argued by the parties; and (3) the order unconstitutionally released
the receiver from liability against nonparties who did not have notice or reason to believe that
their claims would be foreclosed.
{¶ 2} In addition, Appellants challenge the order on grounds that the trial court
improperly held Fifth Third liable for the receivership estate deficit. Appellants also argue that
the trial court’s findings were against the preponderance of the evidence.
{¶ 3} We conclude that the trial court did not exceed its jurisdiction when it entered the
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order discharging the receiver and approving the final account. The prior final appealable order
allegedly closing the receivership did not discharge the receiver or approve the final account.
Therefore, the receivership was not officially closed, and the trial court retained jurisdiction to
complete the actions necessary to close the matter. The trial court also did not exceed its
jurisdiction when it ruled on the receiver’s liability, because a ruling on liability was necessary to
discharge the receiver. Additionally, Appellants do not have standing to assert the claims of
unknown nonparties who did not receive notice of the receiver’s discharge.
{¶ 4} While the trial court had jurisdiction to enter the order approving the final
account and discharging the receiver, we conclude that the trial court erred and abused its
discretion in failing to articulate specific circumstances that justify holding Fifth Third liable for
the receivership estate deficit. Additionally, the trial court abused its discretion in failing to hold
a required hearing prior to approving the final account and discharging the Receiver.
{¶ 5} Accordingly, the judgment of the trial court will be affirmed in part, reversed in
part, and remanded.
I. Facts and Course of Proceedings
{¶ 6} On March 22, 2007, Fifth Third Bank initiated a foreclosure action on real
property located at 2401 Needmore Road, Harrison Township, Montgomery County, Ohio (the
Property). The Property is a hotel owned by Dayton Lodge, LLC. At Fifth Third’s request, the
trial court appointed a receiver to take possession, custody, and control of the Property and its
business. By a consent order dated April 11, 2007, Appellee, William D. Hoffman (Receiver),
was appointed as receiver.
{¶ 7} The consent order set forth various terms and conditions for the receivership.
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Pursuant to the consent order, expenses for the management of the Property and the Receiver’s
compensation were to be paid from revenue generated by the hotel business. The consent order
also stated that the receivership was not to take effect unless Dayton Lodge failed to meet certain
forbearance conditions. As long as the forbearance conditions were met, Dayton Lodge could
manage the Property and make periodic payments to Fifth Third. In that situation, the
Receiver’s role was limited to monitoring the business finances and management.
{¶ 8} Between April 11, 2007, and February 8, 2008, Dayton Lodge operated the
Property in compliance with the forbearance conditions. However, Dayton Lodge eventually
breached the conditions and caused the receivership to take effect on February 8, 2008.
Thereafter, the Receiver took exclusive possession and control over the Property.
{¶ 9} As the Receiver carried out his duties, he discovered that the Property was in
poor condition, needed substantial repairs, and that there was insufficient revenue to operate the
business and maintain the Property. Between February 2008, and June 2008, the Receiver filed
interim reports summarizing the business revenue, disbursements, and net income. In his report
filed on May 28, 2008, the receiver indicated that he had closed the business on April 29, 2008.
{¶ 10} Meanwhile, on April 2, 2008, the trial court entered a final judgment entry and
decree of foreclosure in favor of Fifth Third. In lieu of holding a sheriff’s sale, the court
authorized Bambeck Auctioneers, Inc. to hold a public auction of the Property. The public
auction was held on August 7, 2008, and the Property was sold to Salam Said Shaja (Purchaser),
who bid $1,150,000. Dayton Lodge objected to the sale on grounds that the Property should not
have been sold for less than $1,675,000. In response, Fifth Third filed a motion for an order
confirming the sale.
{¶ 11} On July 19, 2009, the parties settled their issues concerning the sale and executed
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a settlement agreement. The settlement agreement stated that Fifth Third would not execute a
deficiency judgment against Dayton Lodge, as long as Dayton Lodge made certain forbearance
payments to Fifth Third. In addition, the settlement agreement stated that Dayton Lodge
released the Receiver from any and all claims relating “to the Receiver, [or] any act or omission
to act by Receiver during the Receivership.” See Exhibit A attached to Receiver’s Final Account
and Report and Motion to Discharge the Receiver (Mar. 4, 2011), Docket No. 143, p. 10, ¶ E(1).
{¶ 12} After the Receiver was notified of the settlement, he filed a motion to close the
receivership on August 18, 2009. Dayton Lodge filed a memorandum opposing the closure on
grounds that there was a criminal action pending in Vandalia Municipal Court concerning the
Property. The criminal action was filed in April 2009, against Dayton Lodge’s controller for
failing to maintain the Property’s fire suppression system in good working order. Dayton Lodge
contended that the receivership should remain in effect, because the violation arose during the
receivership and was due to the acts and/or omissions of the Receiver. The trial court did not
rule on the Receiver’s August 18, 2009 motion to close the receivership.
{¶ 13} On May 4, 2010, the Receiver filed a second motion to close the receivership.
In that motion, the Receiver indicated that as of May 1, 2009, he had determined that it was not in
the best interest of the receivership estate to continue operating the Property. He came to this
conclusion because there was no cash flow to cover business operations, and excessive capital
expenditures were needed to bring the Property into a condition that was safe for guests and
employees. The Receiver also indicated that despite numerous requests, Fifth Third had not
advanced sufficient funds to fully repair the Property. Fifth Third filed a memorandum
supporting the closure of the receivership and Dayton Lodge once again opposed it on grounds of
the criminal proceeding. The trial court did not rule on the Receiver’s May 4, 2010 motion to
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close the receivership.
{¶ 14} Nine months later, the trial court confirmed the sale of the Property to the
Purchaser. Thereafter, on March 4, 2011, the Receiver filed a final account and motion to
discharge receiver. The final account reported that the receivership’s operating account had a
balance of $7.53 and a deficit of $39,409.90. The receivership owed $31,991.93 for outstanding
accounts payable, $425 for attorney fees, and $7,000 for accrued fees and expenses, which
included unpaid receiver fees in the amount of $6,725.1 The Receiver requested that the court
order Fifth Third to pay the entire deficit. Neither Fifth Third nor Dayton Lodge filed objections
to the final account. The trial court did not rule on the final account and motion to discharge
receiver.
{¶ 15} On October 18, 2012, the Receiver filed another motion to discharge receiver.
The motion requested the trial court to adopt the Receiver’s final account and proposed order
discharging the receiver filed on March 4, 2011. The Receiver’s proposed order ratified the
Receiver’s acts during his administration and released the Receiver from liability as to “any
person or entity, including taxing authorities.” See Receiver’s Final Account and Report and
Motion to Discharge Receiver (Mar. 4, 2011), Montgomery County Common Pleas Court Case
No. 2007-CV-2432, Docket No. 143, p. 4-6. The proposed order also instructed Fifth Third to
pay the $39,409.90 receivership estate deficit. Id. at 5.
{¶ 16} On November 19, 2012, Fifth Third and Dayton Lodge filed an agreed motion
moving the court to withdraw the confirmation of sale; vacate the decree of foreclosure; dismiss
1
The Receiver’s final account does not specifically state that the $6,725 unpaid receiver fee is included with the $7,000 accrued
fees and expenses figure. However, we presume that the receiver fee is included within the $7,000, because the receiver did not request to
be paid the receiver fee in addition to the $39,409.90 deficit.
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the foreclosure action; and order the funds on deposit from the sale to be paid to the auctioneers
and the Purchaser. In addition, the agreed motion tangentially requested the court to close the
receivership. The agreed motion indicated that the Purchaser and auctioneers approved the relief
being requested.
{¶ 17} The same day, the trial court entered an order granting all of the requests in the
agreed motion, including closing the receivership. The order did not approve the Receiver’s
final account, discharge the Receiver, address the receivership estate deficit, or release the
Receiver from liability. Included with the order was a court notice stating that it may be a final
appealable order.
{¶ 18} On November 20, 2012, the trial court filed an order in response to the October
18, 2012 motion to discharge receiver. The order approved the Receiver’s final account, ordered
Fifth Third to pay the receivership estate deficit, discharged the Receiver, and released the
Receiver from liability. The trial court entered the order without holding a hearing.
{¶ 19} Fifth Third and Dayton Lodge both appeal from the trial court’s order of
November 20, 2012.
II. The Trial Court Did Not Exceed its Jurisdiction When It
Issued the Discharge Order of November 20, 2012.
{¶ 20} Appellants’ First Assignment of Error is as follows:
The Trial Court Was Without Jurisdiction to Issue the November 20, 2012
Order Purportedly Discharging the Receivership and Relieving Hoffman of
Liability for the Damage He Caused the Property.
{¶ 21} Under this assignment of error, Appellants claim that the order filed on
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November 19, 2012, was the trial court’s ruling on the motion to discharge receiver, and that said
ruling was a final appealable order closing the receivership. Appellants contend that the trial
court improperly modified the final appealable order sua sponte and exceeded its jurisdiction
when it subsequently entered the discharge order of November 20, 2012.
{¶ 22} Alternatively, Appellants contend that if the November 19 order is not deemed to
be a ruling on the motion to discharge receiver, that the Receiver’s motion should be presumed
overruled, because the trial court did not otherwise rule on it. This argument has no merit,
because the record clearly indicates that the trial court ruled on the motion to discharge receiver
via the November 20 order.
{¶ 23} We also note that the language of the November 19 order does not indicate that it
was a ruling on the motion to discharge receiver. The order specifically states that it was made
in response to Appellants’ agreed motion to withdraw confirmation of sale and vacate/dismiss
foreclosure. Additionally, the November 19 order does not address any of the matters presented
in the motion to discharge receiver. The November 19 order merely states that the receivership
is closed.
{¶ 24} The court that appoints a receiver “ ‘retain[s] and continue[s] its jurisdiction until
the estate is finally closed by the settlement of the receiver's final account and his discharge.’ ”
(Citations omitted.) Shawnee Lumber Co. v. Phillips, 21 Ohio N.P. (N.S.) 1, 5, 29 Ohio Dec.
58, 1917 WL 1502 (C.P.1917), quoting State v. Germania Bank, 103 Minn. 129, 143, 114 N.W.
651 (1908). Therefore, in order to terminate a receivership, the court must also enter an order
discharging the receiver. Hoover-Bond Co. v. Sun-Glow Industries, 57 Ohio App. 246, 251, 13
N.E.2d 368 (3d Dist.1936). Additionally, approval of the Receiver’s final account is required by
local rule. Mont. Co. C.P.R. 2.29(I)(A)(4)(d). Such approval ordinarily precedes the receiver’s
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discharge. S.E.C. v. Kirkland, M.D.Florida No. 6:06-cv-183-Orl-28KRS, 2012 WL 3871922,
1-2 (Aug. 6, 2012), quoting 65 American Jurisprudence 2d, Receivers, Section 146 (2012).
{¶ 25} A trial court order purportedly closing a receivership is not a final appealable
order if it does not properly discharge the receiver or leaves unresolved matters that the receiver
must address. Regents Mgt. Co. v. Connor, 10th Dist. Franklin No. 78AP-172, 1978 WL
217266, *2 (Dec. 21, 1978).
{¶ 26} In this case, the November 19 order did not discharge the Receiver or approve the
final account. Therefore, the receivership was not officially closed, and the November 19 order
was not a final appealable order with respect to the receivership. As a result, the trial court
retained jurisdiction to officially close the receivership by entering the November 20 order
discharging the receiver and approving the final account.
{¶ 27} For the foregoing reasons, the Appellants’ First Assignment of Error is overruled.
III. The Trial Court Did Not Exceed Its Jurisdiction When
It Ruled on the Receiver’s Liability.
{¶ 28} For purposes of convenience, we will address Appellants’ assignments of error
out of order. Appellants’ Third Assignment of Error is as follows:
The Trial Court Erred by Ruling Upon Hoffman’s Liability to Others
Because Such Issue Was Not Raised in Pleadings Nor Argued or Litigated Fully
By the Parties.
{¶ 29} Under this assignment of error, Appellants maintain that the trial court exceeded
its jurisdiction when it ruled on the Receiver’s liability to others, because the Receiver’s liability
was not an issue raised in the pleadings or argued by the parties.
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{¶ 30} One of the effects of discharging a receiver is releasing him or her from further
liability in the receivership proceeding. Madorsky v. Suburban Homes Co., 45 Ohio App. 83,
85-86, 186 N.E. 371 (8th Dist.1933), quoting 53 Corpus Juris, Section 110, at 90. As previously
stated, the trial court retains its jurisdiction until the receivership estate is officially closed by the
settlement of the receiver’s final account and the discharge of the receiver. (Citations omitted.)
Shawnee Lumber Co., 21 Ohio N.P. (N.S.) at 5, 29 Ohio Dec. 58, 1917 WL 1502, quoting
Germania Bank, 103 Minn. at 143, 114 N.W. 651.
{¶ 31} In order to close the receivership in this case, the trial court had to discharge the
Receiver, which necessitates releasing him from liability. Because a trial court retains
jurisdiction until a receiver is discharged, it logically follows that the trial court had jurisdiction
to rule on the Receiver’s liability. Therefore, it is immaterial that the issue of liability was not
raised in the pleadings.
{¶ 32} Appellants’ Third Assignment of Error is overruled.
IV. The Trial Court Did Not Exceed Its Jurisdiction When
It Released the Receiver From Liability.
{¶ 33} Appellants’ Fourth Assignment of Error is as follows:
The Trial Court Erred When it Released Hoffman From Liability.
{¶ 34} Under this assignment of error, Appellants claim that the trial court’s November
20, 2012 order erroneously released the receiver from liability as to the claims of “any person or
entity.” According to Appellants, this unconstitutionally forecloses the claims of nonparties who
had no notice or reason to believe that their claims would be foreclosed. Therefore, Appellants
argue that the trial court exceeded its jurisdiction upon determining the rights of nonparties
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without due notice.
{¶ 35} “Generally, an appellant does not have standing to argue issues affecting another
person.” Benjamin v. Ernst & Young, L.L.P., 167 Ohio App. 3d 350, 2006-Ohio-2739, 855
N.E.2d 128, ¶ 4 (10th Dist.). Furthermore, “[a]n appealing party is not permitted to vicariously
assert that a nonparty's constitutional due process rights were violated.” (Citation omitted.)
Mulqueeny v. Mentor Chiropractic Ctr., Inc., 11th Dist. Lake No. 2001-L-034, 2002 WL
549969, *2 (Apr. 12, 2002). “However, an appellant may ‘complain of an error committed
against a nonappealing party when the error is prejudicial to the rights of the appellant.’ ”
Benjamin at ¶ 4, quoting In re Smith, 77 Ohio App. 3d 1, 13, 601 N.E.2d 45 (6th Dist.1991).
{¶ 36} Here, the Appellants are attempting to assert a nonparty’s constitutional right to
notice of the Receiver’s discharge. This is inappropriate because lack of notice to nonparties
does not prejudice the Appellants. If a nonparty with a viable claim against the Receiver
happened to exist, the claim would be between the nonparty claimant and the Receiver, not the
Appellants.
{¶ 37} Furthermore, the prevailing view in various states is that an order discharging a
receiver from liability is not effective against subsequent claims of nonparties who were not
given notice of the discharge proceeding. E.g., Miller v. Everest, 212 N.W.2d 522, 525 (Iowa
1973) (holding that the discharge of the receiver and termination of the receivership were void as
to the nonparty claimant for want of notice); Copeland v. Salomon, 56 N.Y.2d 222, 233-234, 451
N.Y.S.2d 682, 436 N.E.2d 1284 (1982); Vitug v. Griffin, 214 Cal. App. 3d 488, 495-497, 262
Cal. Rptr. 588 (1989); Norman v. Trison Dev. Corp., 1992 Okla. 67, 832 P.2d 6, 10-11, (1992)
(the discharge order releasing the receiver from liability would be invalid as to the nonparty
claimant if the circumstances surrounding his claim demonstrate that the lack of notice had an
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adverse effect on his interest).
{¶ 38} Under this principle, Appellants’ concern about nonparty claims being
unconstitutionally foreclosed as a result of not receiving notice of the Receiver’s discharge is
unfounded.
{¶ 39} For the foregoing reasons, the Appellants’ Fourth Assignment of Error is
overruled.
V. The Trial Court Erred in Ordering Fifth Third to
Pay the Receivership Estate Deficit.
{¶ 40} Appellants’ Second Assignment of Error is as follows:
The Trial Court Erred When it Ordered Fifth Third to Pay the
Receivership Estate’s Deficit Because Such Order is Contrary to the Consent
Order’s Terms and Ohio Law.
{¶ 41} Under this assignment of error, Appellants claim that Fifth Third cannot be held
personally liable for the $39,409.90 receivership estate deficit. Appellants argue that Ohio law
and the consent order require the expenses and fees of the receivership to be paid from the
receivership estate’s revenue.
{¶ 42} In Atlantic Trust Co. v. Chapman, 208 U.S. 360, 28 S. Ct. 406, 52 L. Ed. 528
(1908), the United States Supreme Court outlined the general principle that expenses and fees of
a receivership estate are to be paid from the property or fund that is subject to the receivership.
Id. at 376. When the receivership estate has insufficient funds, a receiver is not allowed to
automatically hold the party who requested the receiver’s appointment personally liable for the
expenses and fees. Id. at 370-371, 375-376. However, “cases may arise in which, because of
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their special circumstances, it is equitable to require the parties, at whose instance a receiver of
property was appointed, to meet the expenses of the receivership, when the fund in court is
ascertained to be insufficient for that purpose.” (Emphasis sic.) Id. at 375.
{¶ 43} Some examples of special circumstances that render a party liable for a
receivership estate deficit include: (1) when there has been an irregular or unauthorized
appointment of a receiver; (2) when the plaintiff has given a bond or other contract to pay the
expenses and fees of the receivership as a condition of the receiver’s appointment; (3) where a
party has received benefits from the receivership in excess of the amount required to be paid; and
(4) where an action has unjustly been maintained without right. Id. at 373-375, citing Ephraim
v. Pacific Bank, 129 Cal. 589, 592, 62 P. 177 (1900); Farmers’ Nat. Bank of Owatonna v.
Backus, 74 Minn. 264, 77 N.W.142 (1898); Cutter v. Pollock, 7 N.D. 631, 634, 76 N.W. 235
(1898).
{¶ 44} The Supreme Court of Ohio applied Atlantic Trust Co. to Richey v. Brett, 112
Ohio St. 582, 148 N.E. 92 (1925), a case where the trial court appointed a receiver to an insolvent
theater company in foreclosure. The receivership estate in Richey had many debts that the sale
of company property failed to satisfy. Id. at 586-587. As a result, the receiver requested the
court to tax the receivership deficit as costs against the plaintiffs in the foreclosure action. Id.
In determining whether taxing the costs to the plaintiffs was appropriate, the supreme court stated
that:
It is not doubted that under special circumstances parties who invoke the
processes of the court to have a receiver appointed, and to conduct the business of
an insolvent concern, may become personally liable for expenses of the receiver,
even including losses resulting from unsuccessful operation. In nearly all cases
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in which this principle has been declared, facts and circumstances were shown to
the effect that the assets of the insolvent concern were exhausted, and that the
connection of the plaintiffs in the action was such as to make it inequitable not to
hold them responsible for a deficiency. Id. at 586-587.
{¶ 45} The supreme court determined that there were no special circumstances or
equitable considerations that justified holding the plaintiffs responsible for the receivership estate
deficit. Id. at 588. The court intimated that the receiver’s negligence and failure to follow the
correct procedures contributed to the deficit controversy. Id. at 587. As a result, the court
found it inequitable to hold the plaintiffs liable for the deficiency. Id. at 588, 590.
{¶ 46} The same principles were applied in Dyczkiewycz v. Tremont Ridge Phase I Ltd.
Partnership, 2012-Ohio-5173, 981 N.E.2d 941 (8th Dist.). In Dyczkiewycz, the plaintiffs were
attempting to collect a judgment against an insolvent contracting company. Id. at ¶ 2-4.
Plaintiffs requested that a receiver be appointed to find and manage the contracting company’s
assets. Id. at ¶ 5. A receiver was appointed, and he reported that the company had no assets.
Id. at ¶ 6-8. The receiver then sought leave to resign and requested the trial court to order the
plaintiffs to pay his fees and expenses. Id. at ¶ 11. The trial court made the order as requested
by the receiver, and the plaintiffs appealed. Id. at ¶ 18-19.
{¶ 47} On appeal, the Eighth District Court of Appeals held that “the trial court did not
articulate or find that any ‘special circumstances’ existed that would justify holding the
[plaintiffs] solely responsible for the receiver’s fees.” Id. at ¶ 42. The court ultimately held
that the trial court abused its discretion in ordering the plaintiffs to pay all of the receiver’s fees,
and remanded the case for the trial court to order the fees to be split equally between the parties.
Id. at ¶ 44.
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{¶ 48} As in Dyczkiewycz, the trial court in this case did not articulate what special
circumstances, if any, it relied on, to justify holding Fifth Third liable for the $39,409.90
receivership estate deficit. Based on the record, one could conclude that special circumstances
existed since Fifth Third effectively released the only assets from which the receivership estate
deficit could be paid when it voluntarily gave up its judgment against the Property; dismissed its
foreclosure claim; and allowed return of the earnest money, minus auction fees, all without the
approval or acquiescence of the Receiver. However, the trial court did not state any findings in
its final entry. The court simply ordered Fifth Third to pay the receivership estate deficit without
any reasoning. Accordingly, the trial court erred when it ordered Fifth Third to pay the
receivership estate deficit without making the required findings.
{¶ 49} The Appellants’ Second Assignment of Error is sustained.
VI. The Trial Court Erred in Entering the
Discharge Order.
{¶ 50} Appellants’ Fifth Assignment of Error is as follows:
The Trial Court Erred When It Entered the Discharge Order Because Its
Findings and Conclusions are Contrary to the Preponderance of the Evidence.
{¶ 51} Under this assignment of error, Appellants claim that the November 20, 2012
order approving the final account and discharging the receiver should be reversed, because the
findings in the order are contrary to the preponderance of the evidence. Specifically, Appellants
claim that there is no evidence supporting the trial court’s decision to hold Fifth Third liable for
the receivership deficit. Appellants also argue that there is no evidence supporting the trial
court’s decision to release the Receiver from liability.
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{¶ 52} The decision whether to terminate a receivership and discharge a receiver is
within the sound discretion of the trial court, and the court’s decision will not be reversed absent
an abuse of discretion. Milo v. Curtis, 100 Ohio App. 3d 1, 7, 651 N.E.2d 1340 (9th Dist.1994).
Therefore, in order to reverse the trial court’s November 20 discharge order, we must determine
whether the court’s findings were an abuse of discretion, not whether they are contrary to the
preponderance of the evidence. “ ‘Abuse of discretion’ has been defined as an attitude that is
unreasonable, arbitrary or unconscionable.” (Citation omitted.) AAAA Enterprises, Inc. v.
River Place Community Urban Redevelopment Corp., 50 Ohio St. 3d 157, 161, 553 N.E.2d 597
(1990).
{¶ 53} We have already determined that the trial court was required to articulate specific
circumstances that justify holding Fifth Third liable for the receivership estate deficit, and that
the court failed to do so. Accordingly, the trial court abused its discretion when it held Fifth
Third liable without making the required findings.
{¶ 54} Regardless of the trial court’s findings, it was also an abuse of discretion for the
court to approve the Receiver’s final account and discharge the Receiver without holding a
hearing. The local rules governing receiverships state that “[u]nless otherwise provided, the
procedure prescribed by the Ohio Revised Code for settling accounts in decedents’ estates shall
govern.” Mont. Co. C.P.R. 2.29(I)(A)(10). Since there is no provision in the local rules
governing the procedure for approving a receiver’s final account, the trial court was required to
follow the procedures set forth in R.C. 2109.32(A), which applies to the accounts of executors
and administrators of decedents’ estates.
{¶ 55} R.C. 2109.32 states that:
Every fiduciary’s account * * * shall be set for hearing * * *. * * *
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At the hearing * * * the court shall inquire into, consider, and determine
all matters relative to the account and the manner in which the fiduciary has
executed the fiduciary's trust, including the investment of trust funds, and may
order the account approved and settled or make any other order that the court
considers proper. If, at the hearing upon an account, the court finds that the
fiduciary has fully and lawfully administered the estate or trust and has distributed
the assets of the estate or trust in accordance with the law or the instrument
governing distribution, as shown in the account, the court shall order the account
approved and settled and may order the fiduciary discharged.
{¶ 56} In this case, the trial court did not hold a hearing on the Receiver’s final account.
A hearing on the final account would have assisted the court in pinpointing special
circumstances, if any, that justify holding Fifth Third liable for the receivership estate deficit. It
was unreasonable and an abuse of discretion for the trial court to issue the November 20 order
approving the final account and discharging the receiver without first holding a hearing as
required by R.C. 2109.32.
{¶ 57} The Appellants’ Fifth Assignment of Error is Sustained.
VII. Conclusion
{¶ 58} Having sustained Appellants’ Second and Fifth Assignments of Error, and having
overruled Appellants’ other Assignments of Error, the trial court’s November 20, 2012 order
approving the Receiver’s final account, discharging the Receiver, and ordering Fifth Third to pay
the receivership deficit is affirmed in part, reversed in part, and remanded so that the trial court
can: (1) hold a hearing on the Receiver’s final account, (2) address in its final order what special
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circumstances, if any, justify holding Fifth Third solely liable for the receivership estate deficit,
and (3) determine the amounts, if any, which Fifth Third shall be ordered to pay. Because Fifth
Third did not file any objections to the final account,2 it may have waived any objection to the
amounts computed by the Receiver in the final account. This is an issue for the trial court to
resolve. ......
.......
FROELICH, J., concurs.
HALL, J., concurring:
{¶ 59} I agree with the analysis and result reached by the majority. Because of my direct
involvement in the development and use of the Montgomery County E-filing system, I write
separately to express my belief that the timing of the entries in this case was likely caused by the
inaccurate submission of a proposed judgment entry. The entry the court approved, filed
November 19, 2012, had been submitted purportedly as an “agreed entry” by parties other than
the receiver. The proposed entry included the statement that “the receivership is closed.” I note
that the motion preceding the November 19, 2012 entry was submitted as an “AGREED
MOTION, etc. * * *.” It was agreed to only by the plaintiff (Fifth Third Bank) and the principal
defendant (Dayton Lodge), not the receiver, and it was submitted electronically in the court’s
e-filing system. Accompanying the motion was the proposed entry that the court approved
without modification. The electronic docket for the entry states: “ORDER: AGREED
2
Pursuant to Mont. Co. C.P.R. I(A)(7)(b), objections to the final account are due within 14 days after a receiver’s account is
filed.
19
ENTRY,etc. * * *.”
{¶ 60} The “agreed” terminology for the motion itself, and for the motion’s docket entry
in the court’s e-filing system, and the proposed entry’s title was selected by the filer. That
terminology signals, and allows for, prompt and deferential approval of non-contested filings.
When the trial court electronically approved the “AGREED” order for filing, it was probably
unaware that there was still pending an unresolved motion to approve the receiver’s final
account. In my view, the “agreed” language used by the plaintiff for this motion and order was
at best a misnomer and at worst a misrepresentation. But because this entry did not deal with
outstanding issues of compensation or discharge of the receiver it was not a final order in that
respect. Therefore, I agree that the trial court had authority to resolve those incomplete and
essential tasks by issuing an order settling the account and discharging the receiver by entry filed
November 20, 2012.
.............
Copies mailed to:
Jared A. Wagner
Jonathan F. Hung
Matthew C. Sorg
Mark Sheriff
Thomas Talbot
Donald Jordan
Joseph Strines
Charles Geidner
Hon. Gregory F. Singer