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The Huntington National Bank, et al. v. Prospect Park

October 20, 2011

THE HUNTINGTON NATIONAL BANK, ET AL. PLAINTIFFS-APPELLEES
v.
PROSPECT PARK, LLC, ET AL. DEFENDANTS-APPELLANTS



Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-720895

The opinion of the court was delivered by: Sean C. Gallagher, J.:

Cite as Huntington Natl. Bank v. Prospect Park, L.L.C.,

JOURNAL ENTRY AND OPINION

JUDGMENT: AFFIRMED

BEFORE: S. Gallagher, J., Stewart, P.J., and Cooney, J.

{¶1} Defendant-appellant, Prospect Park LLC, appeals the decision of the Cuyahoga County Court of Common Pleas that granted the motion for appointment of receiver filed by plaintiffs-appellees, The Huntington National Bank, successor by merger to Sky Bank and Metropolitan Bank and Trust Company, et al.*fn1 For the reasons stated herein, we affirm the decision of the trial court.

{¶2} Plaintiffs filed a verified complaint on March 10, 2010, seeking to foreclose on property owned by Prospect Park at 4614 Prospect Avenue in Cleveland ("the property"). Plaintiffs each possess an ownership interest in the loan documents that are the subject of this action. Plaintiffs aver in their complaint that Prospect Park executed a cognovit promissory note in the principal amount of $1,700,000. A cognovit guaranty was executed by David B. Snider and Sam P. Cannata. In order to secure payment of the note, Prospect Park executed an open-end mortgage and security agreement on the property. Following a default under the note and guaranty, plaintiffs obtained a cognovit judgment in excess of $1 million in Cuyahoga County Common Pleas Court Case No. CV-715934. They then commenced this foreclosure action.

{¶3} In conjunction with the complaint, plaintiffs filed a motion for the appointment of a receiver without notice. They sought the appointment of a receiver pursuant to R.C. 2735.01 et seq. and the terms of the mortgage. The mortgage contains a provision pertaining to the appointment of a receiver that provides in pertinent part as follows: "At any time following an Event of Default, Lender shall be entitled as a matter of right, without notice to Mortgagor * * *, to the appointment of a receiver for the benefit of Lender, with power to take immediate possession of the Mortgaged Property, manage, rent and collect the rents, issues and profits thereof. * * *."

{¶4} On June 23, 2010, Prospect Park filed a response to the motion to appoint a receiver. Prospect Park requested that the current property manager, Snider-Cannata Property Management LLC (hereafter "SCPM"), be appointed as receiver. Prospect Park asserted that SCPM had been managing the property, was experienced and familiar with the property, and would provide proper accounting services and reports. It claimed that the financial problems with the property stemmed from market conditions and that the termination of the current property manager's services would be detrimental to the property.

{¶5} On November 23, 2010, the trial court granted the motion and appointed Jack Cornachio of Midwest Realty Advisors as the receiver. The trial court found as follows: "[T]he court finds that [Prospect Park] has not met obligations as they come due and that a Receiver should be appointed to take charge of, collect rents, income and profits and to otherwise manage and preserve the real and personal property of Defendant Prospect Park located at 4614 Prospect Avenue, Cleveland, Ohio 44103 and described in further detail in the Mortgage * * *. The Court finds that a Receiver should be appointed * * *. The Court further finds that the facts in this matter support a finding that the requirements of Ohio Revised Code § 2735.01 have been met and that the appointment of a Receiver is an appropriate remedy."

{¶6} Prospect Park timely filed this appeal, raising seven assignments of error. As all the assignments of error challenge the appointment of the receiver, we shall address them together. Prospect Park argues that the trial court abused its discretion in appointing a receiver because the trial court (1) failed to apply the clear and convincing evidence standard; (2) failed to conduct an evidentiary hearing; (3) appointed a receiver when plaintiffs failed in their burden of persuasion and proof; (4) appointed a receiver based solely upon the satisfaction of a statutory condition; (5) appointed a receiver without proof that a receivership is necessary for preservation of the complainants' rights; (6) appointed a receiver without proof and establishment of irreparable harm and injury; and (7) violated the constitutional due process rights of appellant.

{¶7} R.C. 2735.01 permits a court to appoint a receiver in certain cases, including in relevant part: "(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; (C) After judgment, to carry the judgment into effect; * * * [and] (F) In all other cases in which receivers have been appointed by the usages of equity."

{¶8} It is well recognized that the appointment of a receiver is an extraordinary remedy. Malloy v. Malloy Color Lab, Inc. (1989), 63 Ohio App.3d 434, 437, 579 N.E.2d 248. As such, 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. Id. "Clear and convincing evidence" is defined as "that degree of proof which will provide in the mind of the trier of fact a firm belief or conviction as to the facts sought to be established." (Citations omitted.) Barkley v. Barkley (1997), 119 Ohio App.3d 155, 168-169, 694 N.E.2d 989.

{ΒΆ9} The decision to appoint a receiver is vested in the sound discretion of the trial court. State ex rel. Celebrezze v. Gibbs (1991), 60 Ohio St.3d 69, 73, 573 N.E.2d 62. When 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 the parties interested in the controversy and subject matter, and the adequacy ...


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