Lucas v. Reywal Co. Ltd. Partnership

[Cite as Lucas v. Reywal Co. Ltd. Partnership, 2019-Ohio-27.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
John C. Lucas, Trustee for the Miriam C. :
Lucas Trust et al.,
:
Plaintiffs-Appellees, No. 17AP-479
: (C.P.C. No. 14CV-4953)
v.
: (REGULAR CALENDAR)
Reywal Co. Limited Partnership et al.,
:
Defendants-Appellants.
:
D E C I S I O N
Rendered on January 8, 2019
On brief: Stephen H. Dodd, for appellants. Argued:
Stephen H. Dodd.
On brief: Carpenter Lipps & Leland, and Angela Paul
Whitfield, for appellees. Argued: Cherry Poteet.
APPEAL from the Franklin County Court of Common Pleas
TYACK, J.
{¶ 1} Defendant-appellant, William F. Newman ("Newman"), appeals the June 7,
2017 decision and entry of the Franklin County Court of Common Pleas granting the motion
of receiver, Kenneth A. Gamble ("Receiver"), for instructions that directed the Receiver to
proceed with a purchase agreement between intervenor-appellee, LRC Development
Company, LLC ("LRC") and Reywal Co. Limited Partnership ("Reywal"). For the reasons
that follow, we affirm the judgment of the trial court.
No. 17AP-479 2
I. FACTS AND PROCEDURAL HISTORY
{¶ 2} This appeal arises from a receivership action, but the trial court's decision
and entry relates to a purchase agreement between Reywal and LRC that the parties entered
into prior to the appointment of the Receiver. On June 24, 2013, Reywal executed a
purchase agreement for the sale to LRC of a 28-acre piece of property in central Ohio called
the Sawmill Road Property for $5,000,000.
{¶ 3} At the time the purchase agreement was signed, the property was the subject
of a detachment proceeding that was concluded in March 2017. See Reywal Co. Ltd.
Partnership v. Dublin, 10th Dist. No. 15AP-635, 2017-Ohio-367. Closing was delayed due
to the detachment litigation, but the purchase agreement had not been terminated by either
party and by its terms, it became effective and fully enforceable on the mutual execution of
the agreement.
{¶ 4} On May 7, 2014, nearly one year after the purchase agreement was executed,
plaintiffs John C. Lucas, as trustee of the Miriam C. Lucas Trust (a limited partner), and the
Prendegast Family Partnership (a limited partner), filed a complaint requesting a judicial
dissolution of the Reywal Limited Partnership. The Reywal partnership was originally
formed for the purpose of investing in real estate. The complaint requested an accounting
from the general partner, the appointment of a receiver, and money damages for conversion
("the receivership case"). The defendants were appellant William Newman, the sole general
partner, and the Estate of Robert E. Albright, who was a general partner at the time of his
death in 2013.
{¶ 5} Kenneth Gamble was appointed by the trial court as the Receiver for Reywal
on May 30, 2014. The Receiver began liquidating Reywal's assets and distributing the
proceeds to the partners. The Receiver sold real estate after receiving approval from the
trial court. He initiated a lawsuit on behalf of Reywal to recover past due rent from a tenant.
He oversaw the detachment litigation.
{¶ 6} On February 17, 2017, the partners settled all claims among themselves. Over
$5,000,000 in assets were distributed to the partners. All claims in the underlying action
were dismissed with prejudice, except the receivership. The purchase agreement was the
sole asset of the receivership estate that remained at issue in the proceeding. The trial court
retained jurisdiction to enforce the settlement agreement and to adjudicate any disputes
No. 17AP-479 3
arising out of that agreement or its implementation including the liquidation of the Sawmill
Road Property.
{¶ 7} On April 4, 2017, the Receiver filed a motion to seek guidance from the trial
court regarding the purchase agreement. The Receiver had received another offer from a
third party for the Sawmill Road Property that was approximately $900,000 higher than
the $5,000,000 price agreed to in the purchase agreement. Neither accepting nor rejecting
the third-party offer, and not wanting to incur liability for a breach of the purchase
agreement, the Receiver sought instructions from the trial court. Meanwhile, LRC
continued to perform under the purchase agreement and submitted a $25,000 deposit to
the escrow agent on April 7, 2017. Further obligations by the Receiver were stayed by the
trial court, and LRC intervened in this case to protect its interest under the purchase
agreement.
{¶ 8} After briefing by the parties, the trial court held a hearing on June 7, 2017. At
that time, counsel for Newman represented to the trial court that the third party had
rescinded its offer. After consideration of all the facts and circumstances of the case
including maximizing the return from the property to the receivership estate, the trial court
lifted the stay on the Receiver's obligations under the purchase agreement and ordered the
Receiver to proceed with the purchase agreement between LRC and Reywal. This appeal
followed.
II. MOTION TO DISMISS
{¶ 9} As a preliminary matter, this court must first address our subject-matter
jurisdiction in this appeal. LRC filed a motion to dismiss the appeal for lack of a final
appealable order for two reasons. First, LRC argues that the decision lacks Civ.R. 54(B)
language, and the trial court declined to add such language when requested. Second, LRC
contends that R.C. 2735.04(D)(2)(d), which states that an order of sale is a final appealable
order with respect to the matters contained in the order, is inapplicable because the
purchase agreement is not an order of sale of property pursuant to Ohio's receivership
statutes contained in R.C. Chapter 2735.
{¶ 10} A trial court order is a final appealable order if it meets the requirements of
R.C. 2505.02 and, if applicable, Civ.R. 54(B). Eng. Excellence Inc. v. Northland Assocs.,
LLC, 10th Dist. No. 10AP-402, 2010-Ohio-6535, ¶ 10.
No. 17AP-479 4
{¶ 11} R.C. 2505.02 defines a final order and provides, in pertinent part:
As used in this section:
(1) "Substantial right" means a right that the United States
Constitution, the Ohio Constitution, a statute, the common
law, or a rule of procedure entitles a person to enforce or
protect.
(2) "Special proceeding" means an action or proceeding that
is specially created by statute and that prior to 1853 was not
denoted as an action at law or a suit in equity.
(3) "Provisional remedy" means a proceeding ancillary to an
action, including, but not limited to, a proceeding for a
preliminary injunction, attachment, discovery of privileged
matter, suppression of evidence, a prima-facie showing
pursuant to section 2307.85 or 2307.86 of the Revised Code,
a prima-facie showing pursuant to section 2307.92 of the
Revised Code, or a finding made pursuant to division (A)(3)
of section 2307.93 of the Revised Code.
(B) An order is a final order that may be reviewed, affirmed,
modified, or reversed, with or without retrial, when it is one
of the following:
(1) An order that affects a substantial right in an action that in
effect determines the action and prevents a judgment;
(2) An order that affects a substantial right made in a special
proceeding or upon a summary application in an action after
judgment;
(3) An order that vacates or sets aside a judgment or grants a
new trial;
(4) An order that grants or denies a provisional remedy and to
which both of the following apply:
(a) The order in effect determines the action with respect to
the provisional remedy and prevents a judgment in the action
in favor of the appealing party with respect to the provisional
remedy.
(b) The appealing party would not be afforded a meaningful
or effective remedy by an appeal following final judgment as
to all proceedings, issues, claims, and parties in the action.
No. 17AP-479 5
{¶ 12} Civ.R. 54(B) provides as follows:
When more than one claim for relief is presented in an action
whether as a claim, counterclaim, cross-claim, or third-party
claim, and whether arising out of the same or separate
transactions, or when multiple parties are involved, the court
may enter final judgment as to one or more but fewer than all
of the claims or parties only upon an express determination
that there is no just reason for delay. In the absence of a
determination that there is no just reason for delay, any order
or other form of decision, however designated, which
adjudicates fewer than all the claims or the rights and
liabilities of fewer than all the parties, shall not terminate the
action as to any of the claims or parties, and the order or other
form of decision is subject to revision at any time before the
entry of judgment adjudicating all the claims and the rights
and liabilities of all the parties.
{¶ 13} In determining whether a judgment or order is final and appealable, the
appellate court engages in a two-step analysis. In re Estate of L.P.B., 10th Dist. No. 11AP-
81, 2011-Ohio-4656, ¶ 10. "First, we must determine if the order is final within the
requirements of R.C. 2505.02. Second, if the order satisfies R.C. 2505.02, we must
determine whether Civ.R. 54(B) applies and, if so, whether the order contains a certification
that there is no just reason for delay." Id.
{¶ 14} "Civ.R. 54(B), however, is merely a procedural device. It cannot affect the
finality of an order." Gen. Acc. Ins. Co. v. Ins. Co. of N. Am., 44 Ohio St. 3d 17, 21 (1989);
Meisner v. Walker, 10th Dist. No. 15AP-671, 2016-Ohio-215, ¶ 11. The absence of Civ.R.
54(B) language will not render an otherwise final order not final. Gen. Acc. Ins. Co. at 21.
Moreover, "even though all the claims or parties are not expressly adjudicated by the trial
court, if the effect of the judgment as to some of the claims is to render moot the remaining
claims or parties, then compliance with Civ. R. 54(B) is not required to make the judgment
final and appealable." Id.
{¶ 15} Here, the trial court's June 7, 2017 decision and entry is a final order under
R.C. 2505.02 because the trial court's decision and entry "affects a substantial right made
in a special proceeding" pursuant to R.C. 2505.02(B)(2). A receivership is a special
proceeding. PNC Bank, N.A. v. Creative Cabinet Sys., 2d Dist. No. 2013-CA-14, 2014-Ohio-
3264, ¶ 9, citing Huntington Natl. Bank v. HPM Div., 10th Dist. No. 10AP-200, 2010-
No. 17AP-479 6
Ohio-6176, ¶ 16, fn. 1. The right to enforcement and performance of a contract involves a
substantial right. PNC Bank at ¶ 10, citing Kierland Crossing, LLC v. Ruth's Chris Steak
House, Inc., 10th Dist. No. 11AP-627, 2011-Ohio-5626, ¶ 8; Niehaus v. Columbus
Maennerchor, 10th Dist. No. 07AP-1024, 2008-Ohio-4067, ¶ 19 ("The parties' rights to
enforcement and performance of the purchase contract involved substantial rights.").
{¶ 16} The underlying case is a receivership with multiple parties. The trial court's
decision does not end the underlying receivership action. However, all claims in the
underlying action were dismissed with prejudice, except the receivership. The purchase
agreement is the sole asset of the receivership estate that remains at issue in the proceeding.
The receivership remains in place to facilitate the sale of the remaining asset, the Sawmill
Road Property. The trial court retained jurisdiction to enforce the settlement agreement
and to adjudicate any disputes arising out of that agreement or its implementation
including the liquidation of the Sawmill Road Property. Based on the trial court's decision,
the Receiver does not need to apply to the trial court for authorization before proceeding
with the sale and closing. Therefore, in order for Newman to have a meaningful right to
appeal, he must appeal before the property is sold. Compare Whipps v. Ryan, 10th Dist.
No. 10AP-167, 2011-Ohio-3300, ¶ 9 ("The trial court order approving the first report in this
case does not determine the action with respect to the assets concerned, nor is a remedy
foreclosed upon appeal from an eventual confirmation of sale, which would be the final
order in the case.").
{¶ 17} Here, it appears that all claims, rights, and liabilities of all the parties have
now been resolved, and therefore Civ.R. 54(B) language is not required. Accordingly, we
find the trial court's June 7, 2017 decision and entry instructing the Receiver to proceed
with the purchase agreement is a final appealable order, and the motion to dismiss is hereby
denied.
III. ASSIGNMENT OF ERROR
{¶ 18} Newman presents a sole assignment of error for our review:
The Common Pleas Court erred by authorizing and ordering a
sale to LRC Development Co., without first determining if such
a sale would satisfy the requirements of Ohio Revised Code
Section 2735.04(D)(1)(a).
No. 17AP-479 7
IV. DISCUSSION
A. Standard of Review
{¶ 19} Under Ohio's receivership statutes, the trial court must exercise sound
judicial discretion in overseeing a receivership. State ex rel. Celebrezze v. Gibbs, 60 Ohio
St.3d 69, 74 (1991). Absent an abuse of discretion, a reviewing court will not disturb the
trial court's judgment. Id; Dispatch Printing Co. v. Recovery L.P., 10th Dist. No. 14AP-473,
2015-Ohio-381, ¶ 24; see also Yidi, L.L.C. v. JHB Hotel, L.L.C., 8th Dist. No. 104856, 2017-
Ohio-1285, ¶ 7 ("We review the trial court's decision approving the receiver's sale of real
property for an abuse of discretion.").
{¶ 20} "Abuse of discretion will not be found where the reviewing court simply could
maintain a different opinion were it deciding the issue de novo, but rather represents an
attitude that is unreasonable, arbitrary, or unconscionable." McGee v. C & S Lounge, 108
Ohio App. 3d 656, 659 (10th Dist.1996). To the extent Newman has raised a question of law
concerning the interpretation of statutes, an appellate court must apply a de novo standard
of review. Reywal Co. Ltd. Partnership at ¶ 8.
B. Does Ohio Revised Code Section 2735.04(D)(1)(a) apply to the
purchase agreement?
{¶ 21} In 2015, the General Assembly revised Ohio's receivership laws that are set
forth in R.C. Chapter 2735. We note that these revisions went into effect after the purchase
agreement was executed in 2013 and after Reywal was placed in receivership in 2014.
Newman contends that R.C. 2735.04(D)(1) governs the sale of the Sawmill Road Property,
and LRC submits that it does not. Newman argues that because the trial court did not take
evidence as to whether the sale to LRC would be reasonable, fair, or maximize the return to
the receivership estate, the trial court was not authorized to order the sale to proceed.
{¶ 22} R.C. 2735.04(D)(1)(a) provides as follows:
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
No. 17AP-479 8
the property to the receivership estate, taking into account the
potential cost of holding and operating the property.
{¶ 23} 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. Newman argues that
the sale of the Sawmill Road Property falls within this catch-all provision and the trial court
erred by not taking evidence and making a determination that selling the property pursuant
to the purchase agreement will maximize the return from the property.
{¶ 24} It is not clear whether subsection (D)(1)(a) even applies to the sale of real
property since the next section, R.C. 2735.04(D)(2), specifically refers to and governs the
sale of real property while R.C. 2735.04(D)(1) only refers to property. However, Newman
does not claim that R.C. 2735.04(D)(2) governs the sale of the Sawmill Road Property.
{¶ 25} Nor does R.C. 2735.04(D)(1)(c) apply, which provides:
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.
{¶ 26} Assuming this section even applies to the sale of real property, this subsection
of the statute establishes a procedure for prospective future sales, but is silent as to existing,
executed purchase contracts such as the purchase agreement at issue here. By the terms of
the purchase agreement at issue in this case, it became binding on the parties and in full
force and effect on June 24, 2013. LRC is no longer a proposed purchaser and the purchase
agreement is not a prospective purchase agreement as contemplated by R.C.
2735.04(D)(1)(c). As acknowledged by Newman, the purchase agreement is not a contract
No. 17AP-479 9
between the Receiver and a prospective purchaser. Thus, R.C. 2735.04(D)(1)(c) does not
apply to the sale of the Sawmill Road Property.
{¶ 27} We are faced with a fully executed binding purchase agreement that was
entered into before Reywal was placed in receivership and before the Ohio's receivership
statutes were revised. Precedent from this district stands for the proposition that pre-
existing executed contracts are enforceable. Norris v. Dudley, 10th Dist. No. 07AP-425,
2007-Ohio-6646, ¶ 25, 28.
{¶ 28} Newman contends that the appointment of the Receiver and R.C.
2735.04(D)(1)(a) somehow invalidate the purchase agreement that predates the
receivership. Newman argues that because R.C. 2735.04 does not mention contracts
entered into before the appointment of a receiver, they are unenforceable.
{¶ 29} First, there is no language in the revised statutes that R.C. 2735.04(D)(1)(a)
is to be applied retroactively. Second, Ohio Constitution, Article II, Section 28 prohibits
the General Assembly from passing law impairing the obligation of contracts. The Supreme
Court of Ohio has held that legislative enactments cannot be applied retroactively to nullify
contractual rights existing before the enactment of the statute. In Aetna Life Ins. Co. v.
Schilling, 67 Ohio St. 3d 164 (1993), the court held that R.C. 1339.63, under which a divorce
invalidated any designation of a former spouse as the beneficiary of a life insurance policy
could not be applied to invalidate beneficiary designations made prior to the enactment of
the statute even if the death did not occur until after the effective date of the statute.
Similarly, in Ross v. Farmers Ins. Group of Cos., 82 Ohio St. 3d 281, 288 (1998), the court
held that statutory law in effect at the time of entering into a contract for automobile
liability insurance controls the rights and duties of contracting parties. "Subsequent
legislative enactments cannot alter the binding terms of a preexisting agreement entered
into by contracting parties under the law as it existed at the time that the contract was
formed." Id. Therefore, the General Assembly could not have passed the amendments to
the receivership statutes with the intention of impairing the obligation of LRC's pre-existing
contract.
{¶ 30} At the hearing, the trial court was presented with the following facts. The
receivership had settled all claims and disputes, and there was one remaining asset to be
disposed. On the one hand, there was a fully executed binding purchase agreement to sell
No. 17AP-479 10
the Sawmill Road Property for $5,000,000. On the other hand, a recent offer had come in
from a third party that was approximately $900,000 higher than the purchase agreement.
But on the day of the hearing, counsel for Newman reported to the court that the third-
party offer had been rescinded.
{¶ 31} The trial court also heard that under the third-party offer, Reywal would be
paid only for "usable" acreage, and therefore the rescinded third-party offer may have been
less than the LRC purchase price. The Receiver's third quarterly report in April 2017 stated
that the Receiver had obtained a market analysis and reported a gross value of the Sawmill
Road Property of $677,825 to $5,000,000. The trial court had to consider if the Receiver
rejected the purchase agreement, the receivership would likely face new litigation in the
form of a claim for damages or to enforce specific performance under the terms of the
purchase agreement. In his motion for instructions, the Receiver stated: "Receiver does
not want to incur liability for a breach of the LRC Purchase Agreement." (Apr. 4, 2017 Mot.
for Instructions at 5.) Even though the trial court was not required to apply R.C.
2735.04(D)(1), it did consider what course would maximize the return from the property to
the receivership estate, and granted the Receiver's motion for instructions.
{¶ 32} We can find no abuse of discretion in the trial court's decision to order the
Receiver to proceed with the purchase agreement.
{¶ 33} The sole assignment of error is overruled.
V. CONCLUSION
{¶ 34} Based on the foregoing, the motion to dismiss for lack of a final appealable
order is denied, the sole assignment of error is overruled, and the judgment of the Franklin
County Court of Common Pleas is affirmed.
Motion to dismiss denied;
judgment affirmed.
BROWN and BRUNNER, JJ., concur.