2013 Ohio 5755
Ohio Ct. App.2013Background
- Fifth Third Bank foreclosed on the Dayton Lodge hotel and a receiver was appointed (Hoffman) to manage the property and business under a consent order.
- The receivership was designed to use hotel revenue to pay expenses; forbearance conditions allowed Dayton Lodge to manage the property unless breached.
- Dayton Lodge initially complied, but breached the forbearance, triggering the receivership on February 8, 2008, after which the Receiver took exclusive possession.
- Sale of the property occurred after foreclosure; the property was bought by a purchaser at auction, and a settlement later promised Fifth Third would not pursue a deficiency if Dayton Lodge made certain payments and the Receiver was released from claims.
- Receiver filed a final account showing a deficit of $39,409.90 and requested Fifth Third cover the deficit; no objections were filed at that time, but a later motion sought discharge of the Receiver.
- In November 2012 the trial court issued orders: a November 19 order indicating the receivership was closed (not discharging or approving the final account), and a November 20 order discharging the Receiver, approving the final account, and ordering Fifth Third to pay the deficit, all without a hearing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the discharge/final account order exceeded jurisdiction | Appellants argued the November 20 discharge/order closing the receivership exceeded jurisdiction after a purported final order closing the receivership. | Appellees argued the November 20 order was within jurisdiction to finalize the receivership and approve the final account. | Discharge order within jurisdiction; but need hearing and findings for liability and deficit. |
| Whether the court could rule on receiver liability | Liability of Hoffman was not raised in pleadings or argued. | Ruling on liability was necessary to discharge the Receiver. | Court had jurisdiction to rule on liability. |
| Whether releasing the Receiver from liability for nonparties violated due process or notice | Releasing the Receiver from liability as to nonparties without notice was improper. | Nonparties lack standing to challenge; discharge not invalid for nonparties. | Appellants lacked standing; the discharge as to nonparties was not improper. |
| Whether Fifth Third should be held liable for the deficit | Ohio law and the consent order require paying expenses from the estate, not personally by Fifth Third. | Special circumstances could justify taxing the deficit to Fifth Third. | Second Assignment sustained; trial court failed to articulate required special circumstances and liability findings. |
| Whether a hearing was required before approving the final account and discharge | No additional hearing was needed. | A hearing was required under R.C. 2109.32 and local rules. | Hearing required; failure to hold a hearing was an abuse of discretion. |
Key Cases Cited
- Atlantic Trust Co. v. Chapman, 208 U.S. 360 (1908) (receivership expenses paid from property; special circumstances may shift burden)
- Richey v. Brett, 112 Ohio St. 582, 148 N.E. 92 (1925) (special circumstances may render plaintiffs liable for receiver deficits)
- Dyczkiewycz v. Tremont Ridge Phase I Ltd. Partnership, 2012-Ohio-5173, 981 N.E.2d 941 (8th Dist. 2012) (trial court must articulate special circumstances; errors in fee award; remand for allocable liability)
- Miller v. Everest, 212 N.W.2d 522 (Iowa 1973) (nonparties' rights in discharge orders require notice in some contexts)
- Copeland v. Salomon, 56 N.Y.2d 222, 451 N.Y.S.2d 682, 436 N.E.2d 1284 (1982) (discharge of receiver; nonparty interests and notice considerations)