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State ex rel. Bank v. Ann Gallagher

Court of Appeals of Ohio, Eighth District, Cuyahoga

May 1, 2018

STATE OF OHIO, EX REL. HOME SAVINGS BANK RELATOR
v.
HONORABLE KELLY ANN GALLAGHER, ET AL. RESPONDENTS

          Writ of Prohibition Motion No. 512996 Order No. 516636

          ATTORNEYS FOR RELATOR Richard J. Thomas, Jerry R. Krzys

          ATTORNEYS FOR RESPONDENTS Michael C. O'Malley, Charles E. Hannan Assistant County Prosecutor

          ATTORNEYS FOR RECEIVER For Matthew L. Fornshell, Esq. Nicole R. Woods, Daniel R. Swetnam

          JOURNAL ENTRY AND OPINION

          LARRY A JONES, SR, JUDGE

         {¶1} Relator, Home Savings Bank, successor by merger to The Home Savings and Loan Company of Youngstown, Ohio ("HSB"), seeks a writ of prohibition to prevent respondent, Judge Kelly Ann Gallagher, and respondent court, the Cuyahoga County Court of Common Pleas, from paying administrative expenses of a receivership while a direct appeal is pending with this court. After careful review of the issues raised, this court grants summary judgment in favor of respondents and denies the writ.

         I. Procedural and Factual History

         {¶2} The litigation in the underlying civil case was spawned by a Ponzi scheme perpetrated by Joanne and Alan Schneider. As the scheme came to light, plans for a large commercial development in Parma Heights, Ohio collapsed. This led to litigation involving numerous parties, including the city of Parma Heights ("Parma Heights"), Cleveland Construction Inc. ("Cleveland Construction"), and HSB. The litigation that ensued has lasted the better part of two decades. The claims of these three creditors were disposed of by the trial court in separate orders and cases, and ultimately directed Matthew L. Fornshell, the receiver appointed to oversee the assets mainly generated from the sale of real estate, to disburse funds to HSB and other parties.

         {¶3} The trial court determined that Parma Heights and Cleveland Construction did not have valid liens on the funds held by the receiver. Both parties appealed the trial court's orders. After those appeals were filed, at the request of Parma Heights, the trial court issued a stay order on March 9, 2016. It stated,

[d]efendant Parma Heights' 3/4/2016 motion for stay of execution pending appeal is granted. The receiver is ordered to stay distribution of all funds pending appeal. The receiver shall continue to perform all other duties under the receivership order. The stay of distribution shall not prohibit further administration of the receivership, including the payment of ongoing fees and expenses of the receiver. Based upon the court's ruling above, defendant Cleveland Construction Inc.'s 3/8/2016 motion to stay distribution of all funds is moot.

         {¶4} Two days later, HSB filed its notice of appeal. All three cases were separately assigned case numbers but ultimately consolidated in this court.

         {¶5} The receiver filed four applications for the payment of administrative claims during the pendency of the appeal: April 6, 2016, October 17, 2016, December 8, 2016, and April 6, 2017. These were all granted by the trial court. HSB contested only one application.

         {¶6} While these appeals were still pending, on November 3, 2017, HSB filed the instant action seeking a writ of prohibition to prevent the court from making further distributions from assets under receivership for administrative claims, and seeking to void the previous four payments made to the receiver. HSB's complaint for writ of prohibition alleges that the trial court lacked subject-matter jurisdiction to grant any of the receiver's fee applications during the pendency of the appeals because the orders directly interfered with the appellate court's jurisdiction "to review, affirm, reverse, or modify" the underlying judgments. According to HSB, "all monies traceable to the Cornerstone Properties sale proceeds" - including the Secured Creditor Allocation Account - are directly at issue in the companion appeals, and therefore, the trial court patently and unambiguously lacks jurisdiction to approve any application for administrative fees (which includes the receiver's fees) that arise from this account.

         {¶7} This court granted an alternative writ and set a briefing schedule on November 6, 2017. Respondent judge and the receiver filed answers. Respondent, the receiver, and HSB filed motions for summary judgment on December 15, 2017. This court issued a decision resolving all three appeals on December 21, 2017. The parties subsequently filed their briefs in opposition to the motions for summary judgment on January 18, 2018. Aside from arguing that HSB was not entitled to a writ of prohibition because there is no showing that the trial court patently and unambiguously lacks jurisdiction, respondents and receiver argue that the action is now moot because this court decided the appeals, approving the Secured Creditor Allocation and holding that the trial court "did not abuse its discretion by approving the receiver's payments of various administrative fees and costs from the Secured Creditor ...


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