2017 Ohio 1569
Ohio Ct. App.2017Background
- The City of Cincinnati sued owners of multiple HUD Section 8 apartment projects for nuisance; U.S. Bank (as trustee) was added as a defendant and filed foreclosure and related third-party claims against borrower-entities that had executed a common amended-and-restated loan, note, mortgage, assignment of leases and rents, and UCC filings.
- Lender alleged the Hamilton County borrower-entities defaulted on the loan, accelerated the debt, and moved (Dec. 2015) to appoint a receiver over three Hamilton County properties; the trial court found those properties a public nuisance and appointed a receiver (Feb. 1, 2016).
- Lender later sought to add the Allen County property (owned by PE Lima Club West Realty, LLC) to that receivership, asserting the same loan documents covered the Allen County property and that borrower entities had not turned over rents and Lender made protective advances.
- PE Lima opposed, submitting an affidavit asserting the Allen County property was well maintained, insured, had a high HUD REAC score, and rents were current and collected.
- The trial court added the Allen County property to the receivership (Apr. 15, 2016); PE Lima appealed, arguing the court lacked sufficient evidence and erred in appointing a receiver under R.C. 2735.01(A)(2).
- The court of appeals reviewed for abuse of discretion and affirmed, holding the receivership was properly extended as to the Allen County property under R.C. 2735.01(A)(3) to enforce a contractual assignment of rents and leases.
Issues
| Issue | Lender's Argument | PE Lima's Argument | Held |
|---|---|---|---|
| Whether trial court erred in adding Allen County property to receivership | Lender relied on loan documents (absolute assignment of rents/leases, mortgage, and Assignment of Leases and Rents) and affidavits showing failure to turn over rents and protective advances | PE Lima argued trial court lacked sufficient evidence and should have held an evidentiary hearing; no proof Allen County property was in danger or that PE Lima consented to a receiver under R.C. 2735.01(A)(2) | Affirmed: court did not abuse discretion; even if (A)(2) not satisfied, appointment was proper under R.C. 2735.01(A)(3) to enforce contractual assignment of rents and leases |
| Whether an evidentiary hearing was required before adding the Allen County property | Not required where movant submitted affidavits and supporting documentation | Argued hearing was necessary to resolve factual disputes about property condition and rents | Held: no mandatory hearing; court may rely on affidavits and documentation when supported; no abuse of discretion |
| Whether Lender presented sufficient evidence under R.C. 2735.01(A)(2) | Lender pointed to defaults shown at Hamilton County properties and alleged similar defaults/ failure to turn over rents for Allen County | PE Lima asserted no defaults at Allen County and cited HUD REAC score and current occupancy | Held: court did not decide (A)(2) sufficiency because (A)(3) provided an independent basis for receivership |
| Whether contractual documents authorized receiver to collect rents and take possession upon default | Lender highlighted absolute, present assignment of rents and express mortgage/assignment provisions revoking license to collect and permitting receiver upon default | PE Lima did not contest the text of the assignment provisions on appeal | Held: contractual assignment and mortgage provisions authorized appointment of receiver under R.C. 2735.01(A)(3); appointment upheld |
Key Cases Cited
- Forest City Invest. Co. v. Haas, 143 N.E. 549 (Ohio 1924) (order appointing receiver in foreclosure affects substantial rights and is appealable)
- State ex rel. Celebreeze v. Gibbs, 573 N.E.2d 62 (Ohio 1991) (abuse-of-discretion standard governing receiver appointments)
- In re A.J.S., 897 N.E.2d 629 (Ohio 2008) (appointment of receiver is final order in provisional-remedy proceedings)
- Community First Bank & Trust v. Dafoe, 844 N.E.2d 825 (Ohio 2006) (same; receivership orders as appealable interlocutory/provisional remedies)
- JPMCC 2004-CIBCIO 7th St. Office, LLC v. URS Tower LLC, 987 N.E.2d 348 (Ohio App. 2013) (appellate discussion of receivership appealability and standards)