[Cite as North Valley Bank v. ABC Mfg., Inc., 2017-Ohio-5696.]
COURT OF APPEALS
MUSKINGUM COUNTY, OHIO
FIFTH APPELLATE DISTRICT
NORTH VALLEY BANK : JUDGES:
: Hon. W. Scott Gwin, P.J.
Plaintiff-Appellee : Hon. John W. Wise, J.
: Hon. Earle E. Wise, Jr., J.
-vs- :
:
ABC MANUFACTURING, INC., ET AL. :
:
Defendants-Appellees : Case No. CT2016-0051
:
and :
:
IMAC ENTERPRISES, LLC :
:
Intervening Defendant-Appellant : OPINION
CHARACTER OF PROCEEDING: Appeal from the Court of Common
Pleas, Case No. CH2013-0496
JUDGMENT: Reversed and Remanded
DATE OF JUDGMENT: June 29, 2017
APPEARANCES:
For Plaintiff-Appellee For Intervening Defendant-Appellant
MICHAEL D. STULTZ PAUL R. HOFFER
CHRISTOPHER C. CAMBONI P.O. Box 83
106 East Market Street Clinton, OH 44216
Tiffin, OH 44883
JAMES E. BANAS
P.O. Box 172
Clinton, OH 44216
[Cite as North Valley Bank v. ABC Mfg., Inc., 2017-Ohio-5696.]
For Receiver For James Piggot, Jr.
KENNETH R. GOLDBERG J.W. KREUGER & ASSOC., LLC
575 South Third Street P.O. Box 360135
Columbus, OH 43215 Cleveland, OH 44136
For Morgan County For State of Ohio Development
Commissioners & Treasurer Services Agency
MARK J. HOWDYSHELL SHANNON W. HUSBAND
19 East Main Street 3030 West Grand Boulevard
McConnelsville, OH 43756 Suite 9-600
Detroit, Michigan 48202
For Additional Appellees
ANDREW P. COOKE
JOHN M. KAHLER 260 Market Street
216 South Washington Street P.O. Box 227
Tiffin, OH 44883 New Albany, OH 43054
JOHN K. CHRISTIE
155 East Main Street
Room 230
McConnelsville, OH 43756
Muskingum County, Case No. CT2016-0051 2
Wise, Earle, J.
{¶ 1} Intervening Defendant-Appellant, IMAC Enterprises, LLC, appeals the
August 19, 2016 order of the Court of Common Pleas of Muskingum County, Ohio,
denying its motion to intervene. Plaintiff-Appellee pertinent to this appeal is North
Valley Bank.
FACTS AND PROCEDURAL HISTORY
{¶ 2} On November 27, 2013, appellee filed a complaint in foreclosure against
ABC Manufacturing, Inc. and others, seeking to collect on a debt owed. A receiver was
appointed on same date.
{¶ 3} Appellant became aware of real estate for sale in Malta, Ohio, which was
part of the receiver's estate. On June 11, 2014, appellant and receiver entered into a
lease and purchase agreement for both the real estate and the personal property
therein. By judgment entry filed June 13, 2014, the trial court granted appellee default
judgment as against ABC Manufacturing. On August 8, 2014, receiver filed a motion for
authority to sell the real estate and the personal property. By order file August 19,
2014, the trial court granted the motion.
{¶ 4} Thereafter, appellant took possession of the real estate. Pursuant to the
lease agreement, appellant made rental payments to receiver and made an earnest
money deposit toward the purchase agreement. Subsequently, because appellant
could not obtain financing, appellant and receiver negotiated several modifications to
the closing date for the purchase of the real estate and the personal property, with
appellant making additional earnest money deposits. Appellant made payments totaling
$325,000.00 toward the final purchase price of $1,350,000.00.
Muskingum County, Case No. CT2016-0051 3
{¶ 5} Because appellant was unable to complete the purchase agreement by
the agreed date, on May 5, 2015, receiver filed a motion for authority to sell the real
estate and the personal property at public sale. On May 12, 2015, appellant filed a
motion to intervene in the case to protect its interest in the real estate and the personal
property and a motion in opposition to receiver's motion to sell the property. The trial
court set a hearing for June 12, 2015. Prior to the hearing date, the parties reached an
agreement giving appellant until September 15, 2015 to complete the sale; if appellant
did not complete the sale, receiver could sell the real estate and the personal property
at public auction. This agreement was memorialized in a judgment entry approved by
the parties and signed by the trial court and filed on August 13, 2015.
{¶ 6} Appellant failed to complete the purchase by September 15, 2015.
Receiver sold the real estate via a public sale on September 16, 2015. By order filed
September 29, 2015, the trial court approved receiver's report, confirmed the public
sale, and authorized closing.
{¶ 7} On October 5, 2015, receiver filed a report, informing the trial court that he
was proceeding with the sale of the personal property, and made a request for
instructions regarding the $325,000.00 earnest money deposits paid by appellant. On
October 15, 2015, the trial court filed a journal entry directing the parties to submit their
respective positions as to the earnest money deposits. Briefs were filed and appellant
requested a hearing on the issue. On March 28, 2016, appellant again requested a
hearing. A hearing was held on July 22, 2016. During the hearing, the trial court
entertained arguments on appellant being made a party to the case. The trial court
Muskingum County, Case No. CT2016-0051 4
denied the motion to intervene which was memorialized by order filed August 19, 2016.
Appellant filed an appeal to the trial court's order.
{¶ 8} On September 20, 2016, the trial court filed findings of fact and
conclusions of law, determining the earnest money deposits paid by appellant were
nonrefundable and appellant lost all interest it had in the property and was therefore not
an interested party to the action.
{¶ 9} This matter is now before this court for consideration. Assignments of
error are as follows:
I
{¶ 10} "THE TRIAL COURT ERRED TO THE PREJUDICE OF APPELLANT BY
ABUSING IT'S DISCRETION IN OVERRULING APPELLANT'S MOTION TO
INTERVENE IN THE CASE AS A PARTY DEFENDANT, PURSUANT TO CIV. R. 24,
THUS DENYING APPELLANT THE OPPORTUNITY TO PROTECT IT'S INTEREST IN
FUNDS HELD BY THE COURT APPOINTED RECEIVER."
II
{¶ 11} "THE TRIAL COURT ERRED TO THE PREJUDICE OF APPELLANT BY
ABUSING IT'S (SIC) DISCRETION IN OVERRULING APPELLANT'S MOTION TO
INTERVENE IN THE CASE AS A PARTY DEFENDANT, PURSUANT TO CIV.R. 24,
THEN MAKING A DETERMINATION IN IT'S (SIC) FINDING OF FACTS AND
CONCLUSION OF LAW THAT APPELLANT WAS NOT ENTITLED TO ANY FUNDS
AS THEY WERE NON-REFUNDABLE."
Muskingum County, Case No. CT2016-0051 5
III
{¶ 12} "THE TRIAL COURT ERRED TO THE PREJUDICE OF APPELLANT BY
FAILING TO RULE ON APPELLANT'S OBJECTION TO THE RECEIVER'S MOTION
FOR AUTHORITY TO SELL REAL ESTATE IN WHICH APPELLANT HAD AN
INTEREST, AND LATER GRANTING AUTHORITY WITHOUT ALLOWING AN ORAL
HEARING."
{¶ 13} At the outset, appellee argues the trial court's denial of appellant's motion
to intervene is not a final appealable order. We find the decision is a final appealable
order under R.C. 2502.02(B)(1). The trial court's August 19, 2016 denial affected a
substantial right determining the action and preventing a judgment, and appellant could
not assert its claims in other litigation as discussed later in this opinion. The August 13,
2015 judgment entry did not specifically resolve appellant's motion to intervene as
evidenced by the trial court entertaining argument on the motion during the July 22,
2016 hearing. The trial court denied the motion on August 19, 2016, and appellant filed
its notice of appeal on September 13, 2016. The appeal was timely filed and is properly
before this court.
I
{¶ 14} Appellant claims the trial court erred in denying its motion to intervene to
protect its interest in the earnest money deposits. We agree.
{¶ 15} Civ.R. 24 governs intervention. Subsection (A) states the following:
(A) Intervention of right
Muskingum County, Case No. CT2016-0051 6
Upon timely application anyone shall be permitted to intervene in
an action: (1) when a statute of this state confers an unconditional right to
intervene; or (2) when the applicant claims an interest relating to the
property or transaction that is the subject of the action and the applicant is
so situated that the disposition of the action may as a practical matter
impair or impede the applicant's ability to protect that interest, unless the
applicant's interest is adequately represented by existing parties.
{¶ 16} As explained by this court in Deutsche Bank National Trust Co. v. Hill, 5th
Dist. Perry No. 14 CA 00021, 2015-Ohio-1575, ¶ 25:
In order for a party to intervene as a matter of right, pursuant to
Civ.R. 24(A), all four of the following elements must be met: (1) the
intervenor must claim an interest relating to the property or transaction
that is the subject of [the] action; (2) the intervenor must be so situated
that the disposition of the action may, as a practical matter, impair or
impede the intervenor's ability to protect his or her interest; (3) the
intervenor must demonstrate that his or her interest is not adequately
represented by the existing parties; and (4) the motion to intervene must
be timely. Fairview Gen. Hosp. v. Fletcher, 69 Ohio App.3d 827, 591
N.E.2d 1312 (10th Dist.1990). "Failure to meet any one of the elements in
Civ.R. 24(A) will result in denial of the right to intervene." Id. at 831. Civil
rule 24(A) is to be liberally construed in favor of intervention, but the
Muskingum County, Case No. CT2016-0051 7
putative intervenor still bears the burden of establishing each of the
elements to intervene. Grover Court Condominium Unit Owners' Assn. v.
Hartman, 8th Dist. No. 94910, 2011-Ohio-218.
{¶ 17} Our standard of review based on Civ.R. 24(A) is de novo. Deutsche Bank
at ¶ 21. Accord McKinney v. Omni Die Casting, Inc., 5th Dist. Stark No. 2015CV00838,
2017-Ohio-2949, ¶ 22.
{¶ 18} Appellant is claiming an interest in the $325,000.00 earnest money
deposits relating to the lease and purchase agreement governing real and personal
property subject to the receivership and the action sub judice. Appellee argues
because the earnest money deposits were nonrefundable as outlined in the parties'
lease and purchase agreement and subsequent modifications, appellant did not have
any interest in the funds.
{¶ 19} During the July 22, 2016 hearing, appellant acknowledged the agreements
indicated the earnest money deposits were nonrefundable, but argued the following (T.
at 4-5 and 10-13):
MR. HOFFER: * * * However, as I indicated in my brief with the
case law, there's - - there's also equity that has to be taken in to
consideration. The understanding of my client in entering in to those
agreements and the purpose of earnest money down deposit is - - is that if
he's not able to complete the sale and it's to cover - - it's a liquidated
damage, the expenses of - - of the seller and the loss of the benefit of the
Muskingum County, Case No. CT2016-0051 8
bargain and the seller, in this case because the property sold for several
hundred thousand dollars more than what the purchase contract actually
was, and because my client occupied the premises, improved the
premises, did repairs with the agreement of the receiver, the receivership
has stayed, actually materially benefited, from the transaction. And we
believe based on the case law that we submitted that the equities would
call for a return of that.
Normally, in an earnest money situation, the buyer puts down a - -
a very modest amount of money to hold the purchase. Here my client
paid almost - - well, actually over 25 percent of the total purchase price
and that is far more than just a - - a normal, nominal earnest money
deposit as a liquidated damage. It's far in excess of what normally
happens in a transaction to purchase real estate.
***
MR. HOFFER: Yes, Your Honor. If you take a look at the various
contracts, Your Honor, there was not - - it was not consideration for an
extension of time. The consideration was - - is that the original contract
was for 1.25 million dollars between the receiver - - the testimony - - if you
were to hear testimony between the receiver and Mr. Petit (sic), was that
he would - - that they agreed to increase the purchase price from 1.25
million dollars to 1.35 million dollars.
And the closing statements clearly show that the money was paid,
they're calling consideration for keeping this contract open, was actually
Muskingum County, Case No. CT2016-0051 9
being applied towards the purchase price. So it was not consideration for
any option. They did that by increasing the price of the - - of the purchase
of the realty and the personalty, it was - - but not the - - the individual
payments that were being made.
So the argument that the bank is making does not reflect reality.
They were not a party actually to the transaction between the receiver and
Mr. Petit (sic).
And again, if we were to present testimony, we would clearly show
that - - that the deposits were just that, they were down payment towards
the purchase of the property, not any kind of option or consideration for
anything else.
And again, what we're saying is that - - that the equities in this - - in
this case, because of the amount of money that is involved, because of
the fact that - - of the fact that the property in fact obtained - - obtained
substantially more money from the sale of the property than what the
original contract called for, the purpose of the money is - - was to be a
liquidated damage, not a penalty which is how the bank's argument is,
they should be penalized because of some sort of buyer's remorse when
in fact the bank is seeking a windfall here because my client was not able
to complete the purchase but the estate was able to garner substantially
more money than from anyone else.
Muskingum County, Case No. CT2016-0051 10
And I would remind the Court that prior to my client coming in to
this, this property had been for sale for many years. No purchasers
whatsoever.
THE COURT: How many years in the receivership? Not many.
MR. HOFFER: Well, not as many years in the receivership. But my
client was the only person who - - who made an - - a legitimate offer to
buy the property and, in fact, occupied the premises and made, again,
substantial repairs and improvements to the property at the behest of the
receiver because the receiver did not have any money to make those
repairs. And my client made those repair on behalf of the receiver and, I
guess, arguably, on behalf of the Court itself since the Court - - the
receiver is working for the Court here. So we're asking the Court to - - to
do equity in this case and - -
THE COURT: What - -
MR. HOFFER: - - we're going for - -
THE COURT: What do you think the clear language is that it's
nonrefundable means?
MR. HOFFER: I - - I understand that, Your Honor. I will also
indicate to the Court that - -
THE COURT: What did your client think it meant when they entered
in to it? I mean - -
MR. HOFFER: Again, what he understood was is that if the
property did not - - if he did not complete the transaction and the receiver
Muskingum County, Case No. CT2016-0051 11
had to sell the property and did not get the purchase price that they
agreed to, that he would lose his money. He was - -
THE COURT: It was only nonrefundable if certain things
happened?
MR. HOFFER: That's correct.
THE COURT: It was refundable if other things happened but - -
MR. HOFFER: He understood that if he - - if they got more money
than that, that he would get his money back.
{¶ 20} In support of its arguments, appellant filed the affidavit of Andrew Petitt, its
managing member. The affidavit is attached to appellant's Brief in Regards to
Disposition of its Down Payment Towards Purchase of Real Estate and Personal
Property filed October 26, 2015. Mr. Petitt averred that appellant paid $86,322.69 for
the maintenance, care, and improvements to the real estate, including mowing and
snow removal, clean-up and repairs to the building, welding and electrical work, and
repairs and trenching of water lines to out buildings. Appellant also paid $10,387.19 to
"put into working order a number of items of equipment and personal property located
on the premises, including but not limited to the paint line, tow motors, HVAC, and
locks, etc." Mr. Petitt averred appellant's members "expended their own personal labor
to clean up, maintain, repair, and improve" the real estate and the personal property, the
fair market value of the labor totaling $31,200.00. The total amount expended by
appellant to significantly benefit the property and the receivership was $127,909.88.
Muskingum County, Case No. CT2016-0051 12
{¶ 21} In fact, on October 5, 2015, it was receiver who requested instructions
from the trial court regarding the earnest money deposits, noting the following:
It should be noted by the Court that early in the receivership, the
initial purchase offer for the combined real estate and equipment was
$980,000, the IMAC purchase agreement increased the price to
$1,250,000, and later $1,350,000, and at the Receiver's Public Sale the
real estate, only, was sold for $1,600,000. The auction of the equipment
will likely bring an additional estimated $200,000 to $350,000. Thus, the
final sale price for all receivership assets will likely be almost double the
initial offer, not including the IMAC $325,000 deposit held by the Receiver.
The Receiver acknowledges that IMAC has enhanced the value of
the receivership estate, including the real estate and equipment. IMAC
leased the premises from the Receiver and during that time and has
reportedly spent $200,000 to improve both the equipment and the real
estate. The most recent real estate appraisal valued the real estate at
$1,600,000, significantly higher than the initial $1,100,000 appraised
value. Equipment that was in very poor condition has been cleaned and
repaired and put into good operating condition. The real estate has been
cleaned up enhancing both its appearance and value. The receivership
paid approximately $5,000 to $10,000 less to abate the hazardous waste
situation at the premises because of work performed by IMAC. Although
IMAC is not current on its rent payment to the Receiver, IMAC has paid
Muskingum County, Case No. CT2016-0051 13
costs for the receivership estate including maintenance, repairs, insurance
and utilities and has been a positive presence at the premises which
prevents theft and vandalism. The Receiver is still a weekly presence at
the premises, as well.
{¶ 22} In his seventh report filed eight days later on October 13, 2015, receiver
noted there "was an immediate adverse response" to the request for instructions, and
clarified he was not an advocate for appellant and "feels that the $325,000 deposit
towards IMAC's purchase of the real estate and equipment was non-refundable." Even
the receiver questioned appellant's interest in the funds and then did an about-face after
receiving an "immediate adverse response."
{¶ 23} We find appellant has adequately claimed an interest "relating to the
property or transaction that is the subject of [the] action" and has fulfilled the first
requirement.
{¶ 24} Under the second requirement, appellant must establish it is "so situated
that the disposition of the action may, as a practical matter, impair or impede the
intervenor's ability to protect his or her interest." Appellee argues as to any claims for
breach of contract, appellant "would not be collaterally estopped from bringing similar
claims in other litigation," and appellant's claims to recover rents and insurance paid
"could be asserted in other litigation." Appellee's Brief at 6.
{¶ 25} In the Purchase and Sale Agreement at ¶ 20(b), the parties agreed to the
following:
Muskingum County, Case No. CT2016-0051 14
(b) It is mutually agreed by and between Seller and Purchaser that
the respective parties hereto shall and do hereby waive any right to a trial
by jury in any action or proceeding to enforce or defend any rights under
this agreement or relating thereto or arising from the relationship which is
the subject of this Agreement and that any such action or proceeding shall
be tried before a court and not before a jury. Each party acknowledges
that it has read and understands this waiver and has been advised by
counsel as necessary or appropriate. This waiver is made knowingly and
voluntarily by the parties hereto. Seller and Purchaser expressly and
exclusively consent to the jurisdiction of the Court in the Receivership
Case and the Muskingum County Common Pleas Court for purposes of
resolving all claims and disputes relating to this Agreement. (Emphasis
added.)
{¶ 26} Appellant argues this language required any dispute involving the receiver
be litigated in the receivership case, and barred appellant "from bringing an action or
proceeding in any other court in another case." Appellant's Reply Brief at 3.
{¶ 27} We find the emphasized language to be unclear. The parties consented
to the jurisdiction of the receivership court AND the Muskingum County Common Pleas
Court to resolve ALL claims and disputes relating to the agreement. In using the
conjunction "and," did the parties agree to the jurisdiction of two separate courts for
different claims? We find this interpretation to be nonsensical. The agreement governs
Muskingum County, Case No. CT2016-0051 15
real estate and personal property subject to the receivership. The Muskingum County
Common Pleas Court is also the receivership court.
{¶ 28} We find appellant adequately established its ability to protect its interest
may be impaired or impeded by the disposition in this case, thereby meeting the second
requirement.
{¶ 29} Appellant's interest is not adequately represented by the existing parties,
as evidenced by the parties' briefs in opposition to appellant receiving any refund of the
earnest money deposits, thereby meeting the third requirement. See Earnest Money
Position of Defendant Morgan County Commissioners filed October 21, 2015; North
Valley Bank's Memorandum Concerning the $325,000 Earnest Money Deposit filed
October 23, 2015; Receiver's Response to Order Directing the Parties to Present
Positions with Regard to the $325,000 Earnest Money Deposit filed October 26, 2015;
and North Valley Bank's Memorandum Opposing IMAC Enterprises, LLC's Claim to
Nonrefundable Earnest Money filed December 3, 2015.
{¶ 30} Receiver filed a motion for authority to sell the real estate and the personal
property at public sale on May 5, 2015. One week later, on May 12, 2015, appellant
filed a motion to intervene in the case to protect its interest in the real estate and the
personal property and a motion in opposition to receiver's motion to sell the property.
We find the motion was timely made, meeting the fourth and last requirement.
{¶ 31} Upon review, we find the trial court erred in denying appellant's motion to
intervene.
{¶ 32} Assignment of Error I is granted. Assignments of Error II and III are moot.
Muskingum County, Case No. CT2016-0051 16
{¶ 33} The judgment of the Court of Common Pleas of Muskingum County, Ohio
is hereby reversed, and the matter is remanded to said court for further proceedings
consistent with this opinion.
By Wise, Earle, J.
Gwin, P.J. and
Wise, John, J. concur.
EEW/sg 605