Huntington Natl. Bank v. SSA Ltd. , 2011 Ohio 5264 ( 2011 )

[Cite as Huntington Natl. Bank v. SSA Ltd., 2011-Ohio-5264.]
COURT OF APPEALS
DELAWARE COUNTY, OHIO
FIFTH APPELLATE DISTRICT
THE HUNTINGTON NATIONAL BANK : JUDGES:
: Hon. William B. Hoffman. P.J.
Plaintiff-Appellee : Hon. Sheila G. Farmer, J.
: Hon. John W. Wise, J.
-vs- :
:
SSA LTD. AND SSA-STOR, LLC : Case No. 11CAE050048
:
Defendants-Appellants : OPINION
CHARACTER OF PROCEEDING: Appeal from the Court of Common
Pleas, Case No. 11CVE030285
JUDGMENT: Affirmed
DATE OF JUDGMENT: October 12, 2011
APPEARANCES:
For Plaintiff-Appellee For Defendants-Appellants
ROBERT T. CASTOR A. C. STRIP
DAVID K. CONRAD PAUL W. LEITHART, II
100 South Third Street NICHOLAS W. REEVES
Columbus, OH 43215 575 South Third Street
Columbus, OH 43215
Delaware County, Case No. 11CAE050048 2
Farmer, J.
{¶1} On March 1, 2011, appellee, The Huntington National Bank, filed a
complaint in foreclosure against appellants, SSA Ltd. and SSA-Stor, LLC. Appellee
sought to recover on a judgment it had obtained against appellants on October 13, 2010
for default on a promissory note, secured by mortgages, in the amount of $5,940,889.23
(Franklin Case No. 10-CV-14948). Appellee requested the appointment of a receiver.
By judgment entry filed May 9, 2011, the trial court granted the motion and appointed a
receiver.
{¶2} Appellants filed an appeal and this matter is now before this court for
consideration. Assignments of error are as follows:
I
{¶3} "THE TRIAL COURT ERRED IN THE APPOINTMENT OF A RECEIVER
BECAUSE THE APPOINTMENT OF A RECEIVER WAS CONTRARY TO THE
AGREEMENT OF THE PARTIES AND CONTRARY TO EQUITABLE PRINCIPLES
GOVERNING THE APPOINTMENT OF A RECEIVER."
II
{¶4} "THE TRIAL COURT ERRED WHEN IT APPOINTED A RECEIVER
BASED UPON OHIO REVISED CODE SECTION 2735.01 (B) BECAUSE THE
APPELLEE FAILED TO PROVE THAT THE MORTGAGED PROPERTY WAS IN
DANGER OF BEING LOST, REMOVED OR MATERIALLY INJURED, OR THAT THE
PROPERTY IS PROBABLY INSUFFICIENT TO DISCHARGE THE MORTGAGE
DEBT."
Delaware County, Case No. 11CAE050048 3
I
{¶5} Appellants claim the trial court erred in appointing a receiver because it
was contrary to the parties' agreement and contrary to equitable principles governing
the appointment of a receiver. We disagree.
{¶6} A trial court is vested with the sound discretion to appoint a receiver.
State ex rel. Celebrezze v. Gibbs (1991), 60 Ohio St.3d 69. In order to find an abuse of
discretion, we must determine the trial court's decision was unreasonable, arbitrary or
unconscionable and not merely an error of law or judgment. Blakemore v. Blakemore
(1983) 5 Ohio St.3d 217.
{¶7} In determining whether to appoint a receiver, a trial court " '***must take
into account all the circumstances and facts of the case, the presence of conditions and
grounds justifying the relief, the ends of justice, the rights of all the parties interested in
the controversy and subject matter, and the adequacy and effectiveness of other
remedies.' " State ex rel. Celebrezze at fn.3, quoting 65 American Jurisprudence 2d
(1972) 873-874, Receivers, Sections 19-20.
{¶8} The trial court based its decision in appointing a receiver on the following
clear and unambiguous language contained in the mortgage agreement, attached to the
March 1, 2011 complaint as Exhibit D:
{¶9} "RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of an
Event of Default and at any time thereafter, Lender, at Lender's option, may exercise
any one or more of the following rights and remedies, in addition to any other rights or
remedies provided by law:
{¶10} "***
Delaware County, Case No. 11CAE050048 4
{¶11} "Appoint Receiver. Lender shall have the right to have a receiver
appointed to take possession of all or any part of the Property, with the power to protect
and preserve the Property, to operate the Property preceding foreclosure or sale, and to
collect the Rents from the Property and apply the proceeds, over and above the cost of
the receivership, against the Indebtedness. The receiver may serve without bond if
permitted by law. Lender's right to the appointment of a receiver shall exist whether or
not the apparent value of the Property exceeds the Indebtedness by a substantial
amount. Employment by Lender shall not disqualify a person from serving as receiver."
{¶12} The trial court reviewed this language and concluded the following:
{¶13} "The Court finds that the 'Appoint Receiver' provision in the mortgage put
the Defendants on notice that the Plaintiff had the right to have a receiver appointed
upon the occurrence of an event of default by the Defendants. The Plaintiff has
exercised this right by moving the Court for an immediate appointment of a receiver.
Upon motion of the Plaintiff, the Court must determine whether the appointment of a
receiver is appropriate under the circumstances. The Court finds that the language in
the subject mortgage provision is sufficient to create a contractual agreement between
the parties regarding the appointment of a receiver upon the occurrence of an event of
default by the Defendants. The instant matter is not distinguishable from Pangborn
[Federal Land Bank of Louisville v. (October 7, 1987), Morrow App. No. CA-667] since
even if the provision in the mortgage provided that the Court shall appoint a receiver
upon default by the Defendants, the mortgagor still must apply to the Court for
appointment of a receiver and the Court must still determine that the conditions for the
appointment of a receiver have been met.
Delaware County, Case No. 11CAE050048 5
{¶14} "The Court finds that the provision in the mortgage grants the Court
authority to appoint a receiver in this case as it is undisputed that the occurrence of an
event of default has occurred. The Defendants have been given notice of the Plaintiff's
exercise of this right in the Motion for Immediate Appointment of Receiver which was
served upon the Defendants by Certified Mail." Judgment Entry filed May 9, 2011.
{¶15} We agree with this analysis. In the Pangborn case cited supra, this court
upheld a similar provision in a mortgage agreement and determined R.C. 2735.01, the
statute governing the appointment of a receiver, was inapplicable due to the parties'
express agreement in the mortgage for the appointment of a receiver in the event of a
default.
{¶16} Appellants argue despite the clear language contained in the mortgage
agreement, it does not divest the trial court of its obligation to determine the
appropriateness of the appointment. It is appellants' position that with the parcels
involved in this case, only one has any rental income (Route 42 property), and the
remaining parcels consist of vacant land where the receiver would have no rents to
collect or manage. Although it is undisputed that appellants are in default, appellants
argue the appointment of a receiver is unnecessary as there is no reason for the
receiver to protect undeveloped land.
{¶17} Although the trial court correctly determined the appointment of a receiver
was proper under the terms of the mortgage contract, the trial continued in its analysis
and examined the appointment of a receiver under R.C. 2735.01(B) which states the
following:
Delaware County, Case No. 11CAE050048 6
{¶18} "A receiver may be appointed by the supreme court or a judge thereof, the
court of appeals or a judge thereof in his district, the court of common pleas or a judge
thereof in his county, or the probate court, in causes pending in such courts
respectively, in the following cases:
{¶19} "(B) In an action by a mortgagee, for the foreclosure of his mortgage and
sale of the mortgaged property, when it appears that the mortgaged property is in
danger of being lost, removed, or materially injured, or that the condition of the
mortgage has not been performed, and the property is probably insufficient to discharge
the mortgage debt."
{¶20} As the trial court noted in its May 9, 2011 judgment entry at 5-7, the sole
issue is not the "danger of being lost, removed, or materially injured," but in the
alternative, a receiver can be appointed if a condition of the mortgage has not been
performed and the property is probably insufficient to discharge the mortgage. The trial
court concluded the alternative conditions were met. Clearly, the trial court did not
merely "rubberstamp" the clear language of the mortgage agreement.
{¶21} Upon review, we find the trial court did not err in appointing a receiver.
{¶22} Assignment of Error I is denied.
II
{¶23} Appellant claims the trial court erred in appointing a receiver pursuant to
R.C. 2735.01(B). As we noted in Assignment of Error I, the clear language of the
mortgage agreement renders an analysis under R.C. 2735.01(B) moot.
Delaware County, Case No. 11CAE050048 7
{¶24} The judgment of the Court of Common Pleas of Delaware County, Ohio is
hereby affirmed.
By Farmer, J.
Hoffman, P.J. and
Wise, J. concur.
_s/ Sheila G. Farmer_______________
_s/ William B. Hoffman_____________
_s/ John W. Wise_________________
JUDGES
SGF/sg 909
[Cite as Huntington Natl. Bank v. SSA Ltd., 2011-Ohio-5264.]
IN THE COURT OF APPEALS FOR DELAWARE COUNTY, OHIO
FIFTH APPELLATE DISTRICT
THE HUNTINGTON NATIONAL BANK :
:
Plaintiff-Appellee :
:
-vs- : JUDGMENT ENTRY
:
SSA LTD. AND SSA-STOR, LLC :
:
Defendants-Appellants : CASE NO. 11CAE050048
For the reasons stated in our accompanying Memorandum-Opinion, the
judgment of the Court of Common Pleas of Delaware County, Ohio is affirmed. Costs to
appellants.
_s/ Sheila G. Farmer_______________
_s/ William B. Hoffman_____________
_s/ John W. Wise_________________
JUDGES