U.S. Bank, N.A. v. 2900 Presidential Drive, L.L.C.
2014 Ohio 1121
Ohio Ct. App.2014Background
- In 2003 2900 Presidential Drive, LLC and 3000 Presidential Drive, LLC borrowed $9.5M, secured by mortgages on commercial properties at 2900 and 3000 Presidential Drive; Munsell and MV Partners executed guaranties.
- Loan was assigned several times and ultimately to U.S. Bank. The loan matured April 1, 2013; Borrowers failed to repay and defaulted. As of June 20, 2013 the balance was about $8.2M.
- U.S. Bank filed foreclosure on August 22, 2013 and concurrently moved to appoint a receiver (nominating Neyer Commercial Real Estate). A temporary restraining order limited the Borrowers’ use of property revenue pending decision.
- Trial court appointed a limited receiver on October 23, 2013 to preserve operation and sale of the project, finding Neyer disinterested and experienced. The order authorized, subject to court confirmation, the receiver to sell receivership property.
- Defendants appealed, arguing (1) U.S. Bank failed to prove by clear and convincing evidence entitlement to a receiver and (2) the receiver’s authority to sell before foreclosure decree violated redemption rights and due process.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a receiver may be appointed after default despite absence of showing of irreparable harm or insufficiency of property to satisfy debt | U.S. Bank: Borrowers defaulted and mortgage contains an express contractual waiver consenting to receiver appointment upon default, permitting appointment "as of strict right" without regard to property adequacy | Defendants: Bank failed to show clear and convincing evidence of irreparable harm; contractual provision insufficient as matter of law to bypass statutory requirements | Court: Affirmed appointment. Default plus contractual waiver justified receiver; trial court did not abuse discretion |
| Whether receiver’s order authorizing sale of property before foreclosure decree improperly extinguishes redemption rights or violates due process | U.S. Bank: Receiver may be authorized to sell subject to court approval and confirmation; sale provisions preserve parties’ rights and are conditional on further court order | Defendants: Order grants pre-decree sale power that could extinguish statutory/equitable redemption and deprive due process | Court: Issue not ripe. Sale authority is conditional on later court approval; no actual sale proposed, so challenges premature |
Key Cases Cited
- Hoiles v. Watkins, 117 Ohio St. 165, 157 N.E. 557 (Ohio 1927) (describing receivership as an extraordinary equitable remedy)
- State ex rel. Celebrezze v. Gibbs, 60 Ohio St.3d 69, 573 N.E.2d 62 (Ohio 1991) (appointment of receiver lies within trial court’s discretion; factors to consider)
- Blakemore v. Blakemore, 5 Ohio St.3d 217, 450 N.E.2d 1140 (Ohio 1983) (standard for abuse of discretion)
- Malloy v. Malloy Color Lab, Inc., 63 Ohio App.3d 434, 579 N.E.2d 248 (Ohio Ct. App.) (movant must show need for receiver by clear and convincing evidence)
- JPMCC 2004‑CIBC10 7th St. Office, L.L.C. v. URS Tower, L.L.C., 987 N.E.2d 348 (Ohio App.) (mortgage clause consenting to receiver upon default can permit appointment without regard to property adequacy)