2017 Ohio 9232
Ohio Ct. App.2017Background
- In 2006 Courthouse Crossing Acquisitions, LLC and Schon C.C. Holding, LLC borrowed $12.7 million secured by a mortgage and assignment of leases/rents on commercial property in Dayton; the note matured March 1, 2016 and went unpaid.
- After assignments, U.S. Bank held the note, mortgage, and assignment and filed foreclosure and receivership actions in October 2016, seeking appointment of a receiver to preserve rents and property value.
- U.S. Bank supported its receivership motion with an affidavit from the loan special servicer’s asset manager asserting default, unpaid taxes, and collected-but-unturned rents; the affidavit authenticated loan documents.
- Courthouse moved to dismiss before the receivership hearing, asserting lack of service/personal jurisdiction, lack of standing (U.S. Bank not holder), and lack of capacity to sue in Ohio (business trust registration); defendants appeared at the hearing by counsel though not formally served.
- The trial court appointed the receiver after the hearing; Courthouse appealed the appointment and later the trial court overruled its motion to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Jurisdiction/service over defendants before receiver appointment | U.S. Bank: ancillary receivership may proceed; defendants appeared and court had authority to appoint receiver | Courthouse: court lacked personal jurisdiction because formal service had not occurred when receiver was appointed | Court: Jurisdiction/service challenges are dispositive defenses to the main action, not to ancillary receivership; not proper in this interlocutory appeal; overruled |
| 2. Standing to sue (holder of note) | U.S. Bank: affidavit and authenticated documents show it is owner/holder | Courthouse: U.S. Bank was not holder at filing and thus lacks standing | Court: Standing challenge is a dispositive defense to main foreclosure and not properly resolved in this ancillary appeal; overruled here |
| 3. Capacity to sue in Ohio (business trust registration) | U.S. Bank: capacity not in issue for receivership; bank proceeded properly | Courthouse: U.S. Bank failed to register under Ohio business trust statute and lacks capacity | Court: Capacity challenge is dispositive to main action; not decided in this ancillary appeal; overruled here |
| 4. Appropriateness of receiver / clear and convincing evidence | U.S. Bank: affidavit shows default, unpaid taxes, and rents being withheld; mortgage contains written consent clause for receiver; relief authorized by R.C. 2735.01 | Courthouse: affidavit merely parrots complaint; insufficient evidence; local rule misapplied | Court: Trial court did not abuse discretion; affidavit and mortgage consent suffice to show need under R.C. 2735.01 and appointment is affirmed |
Key Cases Cited
- Community First Bank & Trust v. Dafoe, 844 N.E.2d 825 (Ohio 2006) (appointment of receiver is ancillary to and supports the principal foreclosure action)
- Polikoff v. Adam, 616 N.E.2d 213 (Ohio 1993) (denial of a motion to dismiss is not immediately appealable)
- Natl. City Commercial Capital Corp. v. AAAA At Your Serv., Inc., 868 N.E.2d 663 (Ohio 2007) (parties challenging jurisdiction have remedy by appeal from the court’s jurisdictional ruling)
- State v. Muncie, 746 N.E.2d 1092 (Ohio 2001) (receivership aids and conserves interests in the principal proceeding)