[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.
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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
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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
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(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
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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
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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.
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