JPMCC 2004-CIBC10 7th St. Office, L.L.C. v. URS Tower, L.L.C.

2013 Ohio 796

• Court: Ohio Court of Appeals
• Decided: March 8, 2013
• Docket: C-120294
• Status: Published

Opinion

[Cite as JPMCC 2004-CIBC10 7th St. Office, L.L.C. v. URS Tower, L.L.C., 2013-Ohio-796.] IN THE COURT OF APPEALS FIRST APPELLATE DISTRICT OF OHIO HAMILTON COUNTY, OHIO

JPMCC 2004-CIBC10 7th STREET : APPEAL NO. C-120294 OFFICE, LLC, TRIAL NO. A-1101287 : Plaintiff-Appellee, : O P I N I O N. vs. : URS TOWER LLC, : Defendant-Appellant, : and : HAMILTON COUNTY TREASURER,

Defendant. :

Civil Appeal From: Hamilton County Court of Common Pleas

Judgment Appealed From Is: Affirmed

Date of Judgment Entry on Appeal: March 8, 2013

Porter, Wright, Morris & Arthur LLP, William G. Deas, Walter Reynolds, Tami Hart Kirby and James P. Botti, for Plaintiff-Appellee,

Taft Stettinius & Hollister, LLP, Earl K. Messer and Nicholas J. Pieczonka, for Defendant- Appellant.

Please note: this case has been removed from the accelerated calendar. OHIO FIRST DISTRICT COURT OF APPEALS

Per Curiam.

{¶1} In this foreclosure action, plaintiff-appellee JPMCC 2004-CIBC10 7th

Street Office, LLC (“Lender”), moved for the appointment of a receiver to manage

property encumbered by an open-end mortgage, assignment of leases and rents, and

security agreement (the “Mortgage”) that was executed by defendant-appellant URS

Tower LLC (“URS Tower”). The trial court appointed a receiver, and URS Tower now

appeals, raising two assignments of error. We affirm.

Background

{¶2} According to the amended complaint, in November 2004, URS Tower

executed two promissory notes in the principal amounts of $16,500,000 and

$1,050,000 (the “Notes”), as well as the Mortgage to secure them. The Mortgage

encumbers property located in downtown Cincinnati, Ohio, commonly known as part

of the URS Office Tower (the “Property”). Through a series of allonges and

assignments, Lender became the holder of all three instruments.

{¶3} Lender has alleged default on the Notes and the Mortgage and has

declared the entire unpaid balance on the Notes immediately payable. Lender seeks to

foreclose on the Property to pay that sum which, together with interest and fees,

exceeds $19,700,000.

{¶4} Upon bringing this action, Lender moved for the appointment of a

receiver under R.C. 2735.01(B) and (F), which provide:

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

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his county, or the probate court, in causes pending in such

courts respectively, in the following cases:

***

(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;

(F) In all other cases in which receivers have been

appointed by the usages of equity.

{¶5} In its motion, Lender primarily relied upon Section 3.1(d) of the

Mortgage, in which URS Tower had agreed that:

If there shall occur an Event of Default under this

Mortgage, then the Property shall be subject to sale and

this Mortgage shall be subject to foreclosure, all as

provided by law, and Lender may * * * exercise any or

all of the following rights, remedies and recourses,

either successively or concurrently:

(d) Appointment of a Receiver. Upon, or at any time

prior to or after, initiating the exercise of any power of

sale, instituting any judicial foreclosure or instituting

any other foreclosure of the liens and security interests

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provided for herein or any other legal proceedings

hereunder, make application to a court of competent

jurisdiction for appointment of a receiver for all or any

part of the Property, as a matter of strict right and

without notice to Borrower and without regard to the

adequacy of the Property for the repayment of the

Obligations or the solvency of Borrower or any person

or persons liable for the payment of the Obligations, and

Borrower does hereby irrevocably consent to such

appointment, waives any and all notices of and defenses

to such appointment and agrees not to oppose any

application therefor by Lender * * * . (Emphasis added.)

{¶6} The case was referred to a magistrate who prepared a decision denying

the motion. The magistrate held that the “existence of a provision allowing the

appointment of a receiver in a foreclosure action, without a showing of proof required

under R.C. 2735.01(B), is not sufficient grounds for the appointment of a receiver.” The

magistrate further determined that the appointment of a receiver under R.C.

2735.01(B) and (F) was unwarranted because the Property was not in danger of being

lost, Lender had not established that the value of the Property was probably insufficient

to cover the debt, and Lender was not in danger of suffering irreparable harm.

{¶7} Lender objected to the magistrate’s decision, arguing that Section 3.1(d)

of the Mortgage was sufficient authority to appoint a receiver, and that in the

alternative, the prerequisites of R.C. 2735.01(B) and (F) had been satisfied. At an

evidentiary hearing before the trial court, asset manager James Perillo testified that

URS Tower had defaulted on the Notes and the Mortgage as of May 2010, and

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commercial real estate appraiser Eric Gardner estimated that the value of the

Property was $9,000,000.

{¶8} In November 2011, the trial court sustained Lender’s objections to the

magistrate’s decision, observing that “Defendant contractually agreed to the

appointment of a receiver in the mortgage documents at issue in this matter,” and

ordering that “the Magistrate’s Decision is not adopted by this court.” The court also

ordered that “Plaintiff shall be entitled to the appointment of a receiver over the

property at issue in this matter pursuant to a further order of this Court and that the

matter is remanded to the Magistrate to make a decision respecting that appointment

and the powers to be granted said receiver.” In April 2012, the court granted Lender’s

motion and appointed a receiver. This appeal followed.

Propriety of Receivership

{¶9} In its first assignment of error, URS Tower argues that the trial court

erred in appointing a receiver. Before we address the merits of this assigned error,

however, we turn first to Lender’s assertion that URS Tower has waived review of this

issue by not appealing from the trial court’s November 2011 decision indicating that

Lender was “entitled to the appointment of a receiver.” Lender maintains that this

decision was a final appealable order under R.C. 2505.02(B), and therefore, that URS

Tower had only 30 days to appeal under App.R. 4(A) to avoid waiving review of the

eventual appointment. See Hummer v. Hummer, 8th Dist. No. 96132, 2011-Ohio-3767,

¶ 8; Hartley v. Hartley, 9th Dist. No. 03CA0094-M, 2004-Ohio-4956, ¶ 12.

{¶10} It is widely recognized that an order appointing a receiver is a final

order under R.C. 2505.02(B)(2) because it “affects a substantial right made in a special

proceeding.” See, e.g., Cunningham v. Ohio Police & Fire Pension Fund, 175 Ohio

App.3d 566, 2008-Ohio-218, 888 N.E.2d 453, ¶ 6 (8th Dist.); Mandalaywala v.

5 OHIO FIRST DISTRICT COURT OF APPEALS

Zaleski, 124 Ohio App.3d 321, 329, 706 N.E.2d 344 (1oth Dist.1997); Castlebrook, Ltd.

v. Dayton Properties Ltd. Partnership, 78 Ohio App.3d 340, 345, 604 N.E.2d 808 (2d

Dist.1992); see also Forest City Invest. Co. v. Haas, 110 Ohio St. 188, 143 N.E. 549

(1924), syllabus. The Ohio Supreme Court has further suggested that such an order is

final under R.C. 2505.02(B)(4) because it grants relief in a provisional-remedy

proceeding. See Community First Bank & Trust v. Dafoe, 108 Ohio St.3d 472, 2006-

Ohio-1503, 844 N.E.2d 825, ¶ 25-26; Collins v. Collins, 8th Dist. No. 87986, 2007-

Ohio-283, ¶ 7, citing Dafoe.

{¶11} Under either theory of finality, however, we cannot say that the

November 2011 decision was a final appealable order. The decision neither affected a

substantial right nor granted relief in a provisional-remedy proceeding because the

court simply sustained Lender’s objections to the magistrate’s decision and declined to

adopt that decision; the court did not separately rule on Lender’s motion until April

2012 when it actually appointed a receiver. See Civ.R. 53(D)(4)(e) (“A court that

adopts, rejects, or modifies a magistrate’s decision shall also enter a judgment or

interim order.”); see also Javidan-Nejad v. Navadeh, 8th Dist. No. 97661, 2012-Ohio-

3950, ¶ 15 (“But as this court determined in the first appeal, the trial court’s judgment

was not a final appealable order because the trial court ‘simply sustained in part

appellant’s objections to the magistrate’s report[,] [t]here was no independent

judgment, no express adoption of any of the magistrate’s findings, and no clear

pronouncement of the judgment as required by Civ.R. 53(D)(4)(e).’ ”), quoting

Javidan-Nejad v. Navadeh, 8th Dist. No. 95406, 2011-Ohio-2283, ¶ 60. Moreover, the

court qualified its decision, noting that Lender was entitled to the appointment of a

receiver only “pursuant to further order of this Court.” This demonstrates that the

court was contemplating further action before appointing a receiver, which indeed

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occurred. See Elliott v. Rhodes, 4th Dist. No. 10CA26, 2011-Ohio-339, ¶ 17-18 (“In

general, when an order does not contemplate further action and no other related issues

remain pending, the order normally constitutes a final appealable order.”).

Accordingly, URS Tower has not waived review of the appointment of the receiver by

not appealing from the November 2011 decision.

{¶12} We, therefore, turn to the merits of this issue. URS Tower argues that

the trial court abused its discretion in relying solely on Section 3.1(d) of the Mortgage

without considering the equities of this case. URS Tower primarily relies on our

previous statements that a “trial court should exercise its power of equitable

appointment of a receiver only where the failure to do so would place the petitioning

party in danger of suffering an irreparable loss or injury,” and that “[b]ecause the

appointment of a receiver is such an extraordinary and potentially harsh remedy, the

party requesting the receivership must show by clear and convincing evidence that the

appointment is necessary for the preservation of the complainant’s rights.” Tessler v.

Ayer, 1st Dist. Nos. C-940574, C-940632, C-940780, and C-940849, 1995 Ohio App.

LEXIS 4686, *13-14 (Oct. 25, 1995), citing Hoiles v. Watkins, 117 Ohio St. 165, 174, 157

N.E. 557 (1927) and Equity Ctrs. Dev. Co. v. S. Coast Ctrs., Inc., 83 Ohio App.3d 643,

649, 615 N.E.2d 662 (8th Dist.1992).

{¶13} Despite this broad language, however, Ohio courts have recognized in

other foreclosure actions that the requirements of R.C. 2735.01, including those read

into the statute by the judiciary, may be effectively waived. For instance, the Sixth

Appellate District affirmed the appointment of a receiver even though the trial court

had refused to hear evidence concerning the value of the encumbered property and

other “equitable defenses” because the mortgage “allow[ed] the trial court, in the event

of default, to appoint a receiver ‘upon application of the Mortgagee or at any time

7 OHIO FIRST DISTRICT COURT OF APPEALS

thereafter, * * * without notice to the Mortgagor * * * and without regard to the solvency

or insolvency at the time of such application of any Person then liable for the payment

of any of the Secured Obligations, [and] without regard to the then value of the

Premises * * * .’ ” Harajli Mgmt. & Inv., Inc. v. A&M Inv. Strategies, Inc., 167 Ohio

App.3d 546, 2006-Ohio-3052, 855 N.E.2d 1262, ¶ 57 (6th Dist.). The appeals court

held that because an event of default had occurred, the parties had “waived the right to

a determination of the value of the property.” Id.

{¶14} Similarly, the Ninth Appellate District affirmed the appointment of a

receiver because the mortgagor had agreed in the mortgage that

upon the commencement of any action to foreclose this

mortgage or any other lien upon said premises, whether

instituted by [the mortgagee] or any other party, or at

any other time during the pendency of such action, [the

mortgagee] shall have the immediate right to the

appointment of a receiver, and the Court may at once,

and without notice to [the mortgagor] or any other party

claiming under him, appoint a receiver * * *.

Metropolitan Sav. Bank v. Papadelis, 9th Dist. No. 2380-M, 1995 Ohio App. LEXIS

4038, *3, *8 (Sept. 13, 1995). The appellate court recognized that because R.C. 2735.01

is a procedural, as opposed to a substantive, statute, “if the parties to a mortgage

contracted to allow the mortgagee to foreclose upon the occasion of the mortgagor’s

default without regard to the ability of the property to discharge the mortgage debt,

then such contractual agreement was enforceable.” Id. at *8, citing Cypress Sav. Assn.

v. Richfield Assocs., 9th Dist. No. 13679, 1989 Ohio App. LEXIS 785 (Mar. 8, 1989).

See also U.S. Bank Natl. Assn. v. Minnillo, 8th Dist. No. 98593, 2012-Ohio-5188, ¶ 20

8 OHIO FIRST DISTRICT COURT OF APPEALS

(holding that the trial court did not abuse its discretion in appointing a receiver because

the borrowers had consented to such appointment upon default under the note);

Huntington Natl. Bank v. Prospect Park, LLC, 8th Dist. No. 96218, 2011-Ohio-5391,

¶ 13 (“Here, plaintiffs presented evidence that Prospect Park had consented to the

appointment of a receiver upon the incidence of default. Under such circumstances, a

trial court does not abuse its discretion in appointing a receiver.”).

{¶15} We, too, have recognized that parties may contractually waive the pre-

appointment notice requirement that the Ohio Supreme Court recognized in Ry. Co. v.

Jewett, 37 Ohio St. 649, (1882), paragraph two of the syllabus. Metropolitan Life Ins.

Co. v. Triskett Ill., Inc., 97 Ohio App.3d 228, 236, 646 N.E.2d 528 (1st Dist.1994)

(“Although courts have imposed a requirement that notice be given prior to the

appointment of a receiver pursuant to R.C. 2735.01(B), the pre-appointment notice

requirement was not, in this instance, transgressed when such notice may be and was

waived by Triskett under the mortgage.”), citing Mfrs. Life Ins. Co. v. Patterson, 51

Ohio App.3d 99, 554 N.E.2d 134 (8th Dist.1988).

{¶16} Following these cases, we cannot say that the trial court abused its

discretion in appointing a receiver in this instance. Under Section 3.1(d) of the

Mortgage, URS Tower agreed that upon an event of default, Lender could “make

application to a court of competent jurisdiction for appointment of a receiver for all

or any part of the Property, as a matter of strict right and without notice to [URS

Tower] and without regard to the adequacy of the Property for the repayment of the

Obligations * * * .” Although the court did not expressly find that an event of default

had occurred, we presume that the court implicitly did so, given the competent,

credible evidence of default presented by Lender. See, e.g., Carrols Corp. v.

Willoughby Planning Comm., 11th Dist. No. 2005-L-112, 2006-Ohio-3209, ¶ 40 (“In

9 OHIO FIRST DISTRICT COURT OF APPEALS

the absence of evidence to the contrary, a court of appeals will presume that the

lower court has applied the correct legal standard.”); State v. Luckeydoo, 5th Dist.

No. 2004CA00105, 2005-Ohio-3823, ¶ 13. For instance, asset manager James

Perillo testified before the trial court that URS Tower had defaulted on the Notes and

the Mortgage as of May 2010. Moreover, nothing in the record suggests that the trial

court felt compelled to appoint a receiver in the absence of default.

{¶17} The first assignment of error is, therefore, overruled.

Power of Sale Free and Clear of All Liens

{¶18} In its second assignment of error, URS Tower argues that the trial court

erred in empowering the receiver to sell the Property free and clear of all liens, thereby

violating URS Tower’s right of redemption. Lender counters that this issue is not ripe

for our review because the court also ordered that the receiver “must file a motion

herein setting forth the essential terms of any proposed sales, serve it upon all parties

having an interest in the Property, and obtain this Court’s approval prior to

consummating any such transaction.”

{¶19} “In order to be justiciable, a controversy must be ripe for review.”

Keller v. Columbus, 100 Ohio St.3d 192, 2003-Ohio-5599, 797 N.E.2d 964, ¶ 26. “A

claim is not ripe for our consideration if it rests on contingent future events that may

not occur as anticipated or may never occur at all.” State v. Loving, 180 Ohio App.3d

424, 2009-Ohio-15, 905 N.E.2d 1234, ¶ 4 (10th Dist.), citing Texas v. United States, 523

U.S. 296, 300, 118 S.Ct. 1257, 140 L.Ed.2d 406 (1998).

{¶20} The Tenth Appellate District addressed this very issue in City Natl.

Bank v. WBP Invests., LLC, 10th Dist. No. 10AP-1134, 2011-Ohio-6129. In affirming

the trial court’s appointment of a receiver, the appellate court declined to review a

provision in the appointment order that authorized the receiver “to advertise and list

10 OHIO FIRST DISTRICT COURT OF APPEALS

the Property for sale and at [the lender’s] subsequent election and upon the Court’s

approval, to sell the Property free and clear of all liens.” Id. at ¶ 15. The court held

that, given the contingent nature of that provision, the issue of whether the trial court

had erred in granting that authority was not yet ripe for review. The appellate court

explained that the borrowers’ arguments “effectively turn[ed] on an assertion that the

receiver might propose a sale of the property, that the trial court might approve the

proposed sale, and that the conditions of such sale might violate [the borrowers’] rights

of redemption and the procedures required under the foreclosure statute.” (Emphasis

sic.) Id. at ¶ 16.

{¶21} We adopt this reasoning, and find it applicable in this case. The second

assignment of error is, therefore, not ripe for our review at this time. Accordingly, the

judgment of the trial court is affirmed.

Judgment affirmed.

H ILDEBRANDT , P.J., D INKELACKER and F ISCHER , JJ.

Please note: The court has recorded its own entry this date.