Court Opinion

ID: 9349817
Source: CourtListenerOpinion
Date Created: 2022-12-22 18:07:34.974301+00
Date Added: 2024-06-11T16:46:46.323250
License: Public Domain

[Cite as Rehn v. INVCLE150, L.L.C., 2022-Ohio-4634.]

                             COURT OF APPEALS OF OHIO

                            EIGHTH APPELLATE DISTRICT
                               COUNTY OF CUYAHOGA

LORI REHN,                                             :

                Plaintiff-Appellee,                    :
                                                           No. 111313
                v.                                     :

INVCLE150, LLC, ET AL.,                                :

                Defendants-Appellees.                  :

[Appeal by Pearce Holdings,                            :
LLC, ET AL.,
                                                       :
                Proposed-Intervenors-
                Appellants]

                              JOURNAL ENTRY AND OPINION

                JUDGMENT: AFFIRMED
                RELEASED AND JOURNALIZED: December 16, 2022

            Civil Appeal from the Cuyahoga County Court of Common Pleas
                                Case No. CV-21-947601

                                          Appearances:

                Meyers, Roman, Friedberg & Lewis, Richard M. Bain, and
                R. Scott Heasley, for appellees Zip Management Ohio,
                LLC, and ACE and Deuce Capital LLC.

                Jody M. Oster, for appellants.
EMANUELLA D. GROVES, J.:

              Appellants Pearce Holdings, LLC; R. Deane Linsky; Constance C.

Linsky; Peter Linsky; 1520 Ventures Inc. Solo 401(k); Peter Linsky, Trustee;

Specialized Trust Company Custodian FBO Peter Linsky IRA; Specialized IRA

Services FBO Peter Linsky Roth IRA; Specialized IRA Services FBO Kim Linsky

Roth IRA; Nathan Horner, AKA: Nathan Shawn Horner; Specialized RA Services

FBO Nathan Horner; and Specialized Trust Company Custodian FBO Amy Horner

ROTH IRA (the “Appellants”) appeal the decision of the trial court that granted

appellees ZIP Management Ohio, LLC, and ACE and Deuce Capital, LLC’s (the

“Appellees”) motion to appoint a receiver. For the reasons that follow, we affirm.

Factual and Procedural History

              The underlying case was filed by Lori Rehn (“Rehn”). On May 14,

2021, Rehn filed suit against Matthew Motil (“Motil”), INVCLE150, LLC

(“INVCLE150”),     BUYCLE158,       LLC    (“BUYCLE158”),      BUYCLE175,      LLC

(“BUYCLE175”) (collectively,     the “codefendant entities”)      and John      Doe

Corporations #1 through #5. In her complaint, Rehn alleged that she and Motil

entered into an agreement whereby she would loan Motil $150,000 for a period of

12 months. The money was to be divided into three loans, secured by mortgages on

three separate properties.    Each LLC was the titled owner of one property:

INVCLE150, LLC, owned 13529 Leroy Avenue; BuyCLE158, LLC, owned 13410

Wainfleet Avenue, and BUYCLE175, LLC, owned 3318 Hearthstone Road. The

agreement called for monthly payments on each loan for a period of 12 months, with
a final balloon payment at the end of that term. Motil was also supposed to record

Rehn’s interest in the properties as mortgages.

              Per Rehn’s complaint, Motil represented that she would be the first

lien holder on the properties and that the properties were unencumbered. Rehn

discovered that this was not true. She alleged that unbeknownst to her, the

properties were already mortgaged. Further, she claimed that Motil misrepresented

the value of the properties. Rehn also alleged that Motil did not pay the loans as

agreed, nor did he record her mortgages on the properties. In her complaint, Rehn

sought money damages and a declaratory judgment establishing her interest in the

properties.

              On July 14, 2021, Appellees filed a motion to intervene in the lawsuit.

Appellees alleged that they held unrecorded mortgage interests in the properties on

Wainfleet and Hearthstone and that Motil and the codefendant entities had

defaulted on their loans as well. The trial court granted Appellees’ motion to

intervene on November 8, 2021.

              On August 24, 2021, Ryan Maider filed a motion to intervene in the

lawsuit alleging that he had an interest in the Leroy property. Additionally, on

October 1, 2021, Lou-Ann Krause and Mark D. O’Limpio filed a motion to intervene,

alleging an interest in the Wainfleet and Hearthstone properties, as well as another

property at 4027 Rocky River Drive, also owned by a Motil company. The court

granted both parties’ motions to intervene on November 8, 2021.
              On January 18, 2022, Appellees filed a motion for the appointment of

a receiver. Appellees requested that the receiver take charge of, operate, manage,

preserve, and collect accounts, revenues, and other income of the codefendant

entities. The motion included a draft court order that requested that the receiver

have the power to “control, operate, and manage the Investment Properties and any

other real property owned by, held on behalf of, or purchased by [Motil] * * * under

any entity owned or controlled by Motil, including, but not limited to [the

codefendant entities].”

              On January 25, 2022, Motil and the codefendant entities filed a

motion objecting to the appointment of a receiver, arguing “summarily Defendants

do not disagree with Plaintiffs, specifically, that the appointment of a receiver over

the Defendants and their assets is in Plaintiff’s interests.” Rather, they argued that

they, through a nonparty entity in which Motil held an interest, had made a similar

request in another case pending in the common pleas court. That motion was

already scheduled for a hearing before a magistrate.

              The trial court scheduled a hearing on the motion for receiver in this

case for January 27, 2022.

              On January 26, 2022, an attorney for Bridge Loan Venture V Trust

2017-1 (“Bridge”) filed a limited appearance in the case as a nonparty creditor.

Bridge alleged that it held a mortgage on one of the properties, specifically 4027

Rocky River Drive, and that it had initiated a foreclosure on the property in the

common pleas court. Counsel also filed an objection to Appellees’ motion for
appointment of a receiver and requested to participate in the motion hearing.

Bridge did not object to the appointment of a receiver, per se. The company

informed the court in its objection that it had requested the appointment of a

receiver in its foreclosure action. Bridge argued its motion filed in the foreclosure

action should take priority.

               On January 27, 2022, an attorney for Appellants filed a limited

appearance in the case as nonparty creditors for the purpose of objecting to and

participating in the receivership hearing.        Appellants alleged that they held

mortgages on the Leroy, Wainfleet, and Hearthstone properties. The motion did not

state the nature of or the basis for their objection to the appointment of a receiver.

               The trial court held the receivership hearing on the afternoon of

January 27, 2022. The plaintiff, defendants, and intervening parties participated in

the hearing. It is unclear from the record on appeal whether Appellants’ or Bridge’s

representative participated in the hearing.1 The trial court subsequently granted

Appellees’ motion and appointed a receiver. On February 9, 2022, the trial court

filed a supplemental order describing the scope of the receiver’s authority. The order

included a list of 88 “Receivership Properties,” consisting of real property owned by

a variety of LLCs controlled by defendant Motil. It also contained a list of “Related

Entities,” i.e., LLCs other than the defendants, owned or controlled by Motil. The

trial court gave the receiver the power to “control, operate, and manage the

      1 Although both Appellants and Bridge filed limited appearances and requested to
participate in the hearing, the record does not reflect whether that request was granted.
Additionally, Appellants have not submitted the transcript of the hearing for our review.
Receivership Properties and any other real property owned by, held on behalf of, or

purchased by Motil and/or any entity owned or controlled by Motil including, but

not limited to, the [co]Defendant Entities and the Related Entities.”

              On February 22, 2022, Appellants filed a notice to intervene in the

proceedings. On February 25, 2022, Appellants filed a notice of appeal. On

March 11, 2022, Motil filed a “Notice of Order for Relief in Bankruptcy Case of

Defendant Matthew Motil and Suggestion of Stay.”

The Suggestion of Bankruptcy Stay

              Preliminarily, we asked the parties to show cause why this appeal

should not be stayed due to defendant Motil’s suggestion of bankruptcy stay.

Appellants, noting that Motil only filed personal bankruptcy, argue that the stay

does not apply to the codefendant entities or the properties held in their names.

Appellants concede, however, that the stay would affect any proceedings that involve

Motil personally or any property in his name. Appellees agree with this stance and

also argue that the bankruptcy stay under 11 U.S.C. 362(a)(1) only applies to

nondebtor codefendants, i.e., the codefendant entities, in unusual circumstances

that do not apply here.

              Appellants’ appeal deals with the authority of the trial court to

appoint a receiver in this matter. The trial court’s order purports to address the

properties owned by the codefendant entities, nonparty entities, and any properties

owned by Motil directly. The Receivership Properties list attached to the court’s

order only includes properties owned by codefendant entities and nonparty entities.
Furthermore, the properties in which Appellants have an interest are owned by

codefendant entities.     Pursuant to 11 U.S.C. 362(a)(1), a bankruptcy filing

automatically stays

      the commencement or continuation, including the issuance or
      employment of process, of a judicial, administrative, or other action or
      proceeding against the debtor that was or could have been commenced
      before the commencement of the case under this title, or to recover a
      claim against the debtor that arose before the commencement of the
      case under this title.

              Courts have noted, however, that “while these automatic stay

provisions stay all proceedings against the debtor, they generally do not operate to

stay claims against nondebtor defendants.” Baechel v. Republic Storage Sys., LLC,

N.D.Ohio No. 5:16-cv-1403, 2018 U.S. Dist. LEXIS 39164, 7 (Mar. 9, 2018). See also

Patton v. Bearden, 8 F.3d 343, 349 (6th Cir.1993) (“[T]he stay of § 362 is extremely

broad in scope * * * and should apply to almost any type of formal or informal action

against the debtor or the property of the estate. * * * [The stay] does not extend,

however, to separate legal entities such as corporate affiliates, partners in debtor

partnerships or to codefendants in pending litigation.” 2 Collier on Bankruptcy P

362.04 (15th Ed.1993)).

              Nevertheless, the stay may apply to those defendants in ““‘unusual

circumstances.’”” Baechel, quoting Parry v. Mohawk Motors of Michigan, Inc., 236

F.3d 299, 314 (6th Cir.2000), quoting In re Eagle-Picher Indus., Inc., 963 F.2d 855,

861 (6th Cir.1992). Notably, however, these “extensions” are “in fact injunctions

issued by the bankruptcy court after hearing and the establishment of unusual need
to take * * * action to protect the administration of the bankruptcy estate.” Patton

at id.

                Citing to Patton, this court has found that we lack authority to extend

a bankruptcy stay to nondebtor codefendants. Such relief must be sought through

bankruptcy court. Jo-Rene Corp. v. Jastrzebski, 8th Dist. Cuyahoga Nos. 79933 and

80310, 2002-Ohio-1550, citing Patton at id.

                This appeal addresses receivership property owned by the

codefendant entities. Accordingly, the bankruptcy stay does not apply to this action

unless someone petitions the bankruptcy court to extend the stay to the codefendant

entities. The record fails to show that the codefendant entities filed for bankruptcy,

which would create their own automatic stay. Nor is there evidence that Motil’s stay

was extended to his companies. Based on the foregoing, we find that the stay does

not prevent this appeal from going forward.

                Therefore, we turn to the assignments of error Appellants have raised

for our review:

                            Assignment of Error No. 1

         The trial court failed to specify what evidence it relied upon, and
         therefore, the Receivership Order should be vacated.

                            Assignment of Error No. 2

         The trial court abused its discretion in appointing a receiver in an
         action where only money damages were sought.
                           Assignment of Error No. 3

      The trial court abused its discretion in appointing a receiver because
      Appellees did not satisfy all elements of R.C. 2735.01(A)(1).

                           Assignment of Error No. 4

      The trial court erred in granting a receiver authority to sell properties
      free and clear of liens when secured creditors were not served with the
      Receivership Motion and opposed appointment of a receiver.

Law and Analysis

Standard of Review

              The appointment of a receiver is “‘an extraordinary, drastic and

sometimes harsh power which equity possesses and is only to be exercised where

the failure to do so would place the petitioning party in danger of suffering an

irreparable loss or injury.’” Jardine v. Jardine, 8th Dist. Cuyahoga No. 110670,

2022-Ohio-1754, ¶ 11, quoting Equity Ctrs. Dev. Co. v. S. Coast Ctrs., Inc., 83 Ohio

App.3d 643, 649, 615 N.E.2d 662 (8th Dist.1992), citing Hoiles v. Watkins, 117 Ohio

St. 165, 157 N.E. 557 (1927). The receivership statute, R.C. 2735.01, provides both

legal and equitable remedies. See Helms v. Thomas, 2018-Ohio-1534, 111 N.E.3d

72, ¶ 28 (2d Dist.) (noting that R.C. 2734.01(7) is a catchall provision which

authorizes the appointment of a receiver “[i]n all other cases in which receivers have

been appointed by the usages of equity,” and that, for example, R.C. 2735.01(A)(1)

and (6) are legal remedies permitting the appointment of a receiver, citing Gemmell

v. Anthony, 2016-Ohio-2686, 51 N.E.3d 663, ¶ 41 (4th Dist.)), citing Victory White
Metal Co. v. N.P. Motel Sys., Inc., 7th Dist. Mahoning No. 04 MA 245, 2005-Ohio-

2706, ¶ 74-75.

                 The party requesting the receivership bears the burden of showing

“‘by clear and convincing evidence that the appointment is necessary for the

preservation of the complainant’s rights.’” Jardine at ¶ 29, quoting Equity Ctrs.

Dev. Co. at 649, citing Malloy v. Malloy Color Lab, Inc., 63 Ohio App.3d 434, 437,

579 N.E.2d 248 (10th Dist.1989). “‘Clear and convincing evidence’ is that ‘measure

or degree of proof’ that ‘produce[s] in the mind of the trier of facts a firm belief or

conviction as to the facts sought to be established.’” In re V.F., 8th Dist. Cuyahoga

No. 111388, 2022-Ohio-2960, ¶ 54, quoting Cross v. Ledford, 161 Ohio St. 469, 120

N.E.2d 118 (1954), paragraph three of the syllabus. The decision to appoint a

receiver is discretionary and, therefore, will not be disturbed unless the trial court

abuses that discretion. Jardine at ¶ 11, citing State ex rel. Celebrezze v. Gibbs, 60

Ohio St.3d 69, 72-73, 573 N.E.2d 62 (1991). A trial court abuses its discretion when

its decision is arbitrary, unconscionable, or unreasonable. Id., citing Gibbs at 74.

Appellants’ Assignments of Error

                 For ease of analysis, we will address the assignments of error in

combination and/or out of order as necessary.

                 The first and third assignments of error are interrelated in that they

both question the evidence the trial court used to support the appointment of the

receiver. In the first assignment of error, Appellants argue that the trial court erred

when it did not specify the evidence it relied on when it decided to grant the motion
for receivership. In the third assignment of error, Appellants argue that the trial

court abused its discretion in appointing a receiver because Appellees did not satisfy

all elements of R.C. 2735.01(A)(1).

               While the trial court did not identify the specific evidence it relied on

to make its ruling, its February 9, 2022 journal entry noted that the January 27,

2022 hearing was to address Appellees’ motion for receiver, the codefendant

entities’ objections and supplemental objections to that motion, the objection of

nonparty Bridge; the joinder of Motil to Bridge’s objection, and the objection of

nonparty Appellants. The trial court then found that after considering the

      pleadings, filings, and evidence submitted by the parties, and the
      arguments made before the Court at the hearing held on January 27,
      2022, the Court finds the Motion for the Appointment of a Receiver
      well-taken and hereby GRANTS the same.

               Appellants argue that the trial court was required to explain what

evidence supported its conclusions and that the failure to do so requires its order to

be vacated. However, R.C. 2735.01 does not require the trial court to make findings

of facts or conclusions of law.

               While Appellants challenge the content of the journal entry, none of

the cases they cite stand for the proposition that the trial court is required to place

its findings in a journal entry. In those cases, the appellate courts were focused on

the lack of evidence supporting the trial court’s decision and sometimes looked at

the journal entry to determine the reasoning behind it. In Jensen v. Zanesville

Heart Specialists, Inc., 5th Dist. Muskingum No. CT2003-0043, 2004-Ohio-873,
the trial court appointed a receiver. The court of appeals, however, found that the

trial court did not hold a hearing, there were no affidavits attached to the

receivership motion, and, in addition, the journal entry did not denote what

evidence the trial court considered. Those factors led the appellate court to find that

the trial court’s order was not supported in the record. Id. at ¶ 15. In BFD Investors

v. Hershey Pasta Group, 8th Dist. Cuyahoga No. 67831, 1995 Ohio App. LEXIS 963,

4 (Mar. 16, 1995), this court found the trial court abused its discretion in appointing

a receiver when there was no hearing, affidavits, depositions, or other evidentiary

material to support the trial court’s order. We did not overrule the decision based

on the contents of the trial court’s journal entry. Similarly, in Huntington Natl.

Bank v. HPM Div., 10th Dist. Franklin No. 10AP-200, 2010-Ohio-6176, and

Debartolo v. Dussault Moving, Inc., 8th Dist. Cuyahoga No. 96667, 2011-Ohio-

6282, the courts simply found that a trial court abuses its discretion by appointing

a receiver when there is no evidence in the record to support it.

               Neece v. Natl. Premier Protective Servs., 8th Dist. Cuyahoga No.

89643, 2007-Ohio-5960, is the closest a court comes to focusing on the journal

entry, but it is likewise distinguishable. The trial court’s entry in that case indicated

it ruled based on the arguments of counsel. However, we found that there was no

evidentiary material in the record supporting the trial court’s appointment of a

receiver. Focusing on the lack of evidence, we found “there was no evidence, in the

form of affidavits or testimony, which addressed the various issues the trial court

was required to consider before appointing a receiver.” Id. at ¶ 12. We then
concluded that the trial court’s order was not supported by clear and convincing

evidence. Id. at ¶ 13. Accordingly, based on the foregoing, we must look at the

evidence in the record to accurately address the trial court’s decision.

               In addressing the trial court’s ruling, we review simply to determine

“whether there is evidence tending to prove the facts essential to sustain the order”

and we “may not consider the weight of the evidence.” Equity Ctrs. Dev. Co., 83

Ohio App.3d at 649-650, 615 N.E.2d 662, citing Malloy, 63 Ohio App.3d at 436, 579

N.E.2d 248.

               In the third assignment of error, Appellants argue that Appellees

failed to establish by clear and convincing evidence that receivership was proper

under R.C. 2735.01(A)(1). However, under R.C. 2735.01, the trial court has the

discretion to appoint a receiver if it determines by clear and convincing evidence

that any of the bases under that statute are present. R.C. 2735.01(A) (“A receiver

may be appointed by * * * the court of common pleas or a judge thereof in the judge’s

county * * * in causes pending in such courts respectively” under certain designated

circumstances.).

               In the instant case, there was evidence in the record that supported

the appointment of a receiver under both R.C. 2735.01(A)(1) and (6). Those sections

provide that a receiver may be appointed:

      (1) In an action by a vendor to vacate a fraudulent purchase of property,
      or by a creditor to subject property or a fund to the creditor’s claim, or
      between partners or others jointly owning or interested in any property
      or fund, on the application of the plaintiff, or of a party whose right to
      or interest in the property or fund, or the proceeds of the property or
      fund, is probable, and when it is shown that the property or fund is in
      danger of being lost, removed, or materially injured;

      ***

      (6) When a corporation, limited liability company, partnership, limited
      partnership, or other entity has been dissolved, is insolvent, is in
      imminent danger of insolvency, or has forfeited its corporate, limited
      liability company, partnership, limited partnership, or other entity
      rights.

               A review of the record establishes that the codefendant entities

submitted exhibits to the trial court detailing what appears to be a plan to sell off its

properties. We say “appears to be” because while we have the exhibits, the transcript

of the hearing in which the exhibits were introduced was not provided for our

review. The burden is on the appellant to provide a transcript to support its

arguments on appeal. App.R. 9(B)(1).

      “When portions of the transcript necessary for resolution of assigned
      errors are omitted from the record, the reviewing court has nothing to
      pass upon and thus, as to those assigned errors, the court has no choice
      but to presume the validity of the lower court’s proceedings and
      affirm.”

Mahoning Natl. Bank v. Wilhelm, 7th Dist. Mahoning Nos. 04 MA 248 and 04 MA
249, 2006-Ohio-6132, ¶ 8, quoting Knapp v. Edwards Laboratories, 61 Ohio St.2d
197, 199, 400 N.E.2d 384 (1980).

               Even without the transcript there is evidence in the record to support

the trial court’s ruling. The defendants’ Exhibits B and C support the ruling. Those

two exhibits indicate that 84 of the defendants’ properties were in foreclosure

actions or pending foreclosure. This evidence supports both R.C. 2735.01(A)(1) and

(6). It shows that properties that the Appellees have interests in were in danger of
being lost, removed, or materially injured under 2735.01(A)(1). Further it suggests

the imminent danger of insolvency of the defendant entities based on the foreclosure

of 84 of its properties under R.C. 2735.01(A)(6).

               Additionally, defendants admitted in their answer to Rehn’s

complaint that she loaned them $150,000.            The defendants’ answer further

indicated that the promissory notes and mortgages “speak for themselves.” The

documents indicate that Rehn supplied $60,000 to be secured by a mortgage on the

Leroy property, $50,000 to be secured by a mortgage on the Hearthstone property,

and $40,000 to be secured by a mortgage on the Wainfleet property.

               Moreover, defendant entities also admitted Appellee Zip loaned them

$42,000 for the Wainfleet property and Appellee ADC loaned them $80,000 for the

Hearthstone property. This evidence suggests that at a minimum, the defendant

entities had received $60,000 to be secured by the Leroy property, $130,000 for the

Hearthstone property, and $82,000 for the Wainfleet property.

               However, according to defendants’ Exhibit B, the tax assessed values

of the properties were as follows: the Leroy property $51,000; the Hearthstone

property $88,500; and the Wainfleet property $23,400. Again, this was evidence

that the properties were overleveraged and in danger of being lost, removed, or

materially injured. Additionally, the fact that two intervenors claimed an interest in

some of the properties illustrated the risk of loss of assets.

               Undeniably, there were facts in the record that supported the trial

court’s order. Additionally, because Appellants failed to provide a transcript of the
receivership hearing, we must presume the validity of those proceedings and

presume that its decision was based upon clear and convincing evidence.

              Accordingly, Appellants first and third assignments of error are

overruled.

              In the second assignment of error, Appellants argue that the trial

court erred and abused its discretion when it appointed a receiver where only money

damages were sought.

              Preliminarily, Appellees sought both monetary damages and

declaratory judgments to establish their interest in the respective properties based

on the applicable promissory notes and mortgages.

              Furthermore, courts have found that the appointment of a receiver

under both R.C. 2735.01(A)(1) and (6) are legal remedies. Helms, 2018-Ohio-1534,

111 N.E.3d 72, at ¶ 28, citing Gemmell, 2016-Ohio-2686, 51 N.E.3d 663, at ¶ 41,

citing Victory White Metal Co., 7th Dist. Mahoning No. 04 MA 245, 2005-Ohio-

2706, at ¶ 74-75.

              R.C. 2735.01 explicitly grants the trial court authority to appoint a

receiver under (A)(1) when the action involves “a creditor to subject property,” or “a

party whose right to or interest in the property or the proceeds of property is

probable and it is shown the property is in danger of being lost, removed, or

materially injured.” Appellants argue that Appellees did not have an interest in the

properties; however, the codefendant entities admitted to issuing promissory notes

and mortgages to Appellees for two of their properties.
              Next, Appellants argues that R.C. 2735.01(A)(1) requires that the

property be the subject of the action. However, in the instant case, Appellees also

requested a declaratory judgment establishing their rights in the defendants’

properties. A declaratory judgment action “provides a remedy in addition to other

legal and equitable remedies that may be available.” Highland Tavern, LLC v.

DeWine, 10th Dist. Franklin No. 21AP-176, 2021-Ohio-4067, ¶ 11, citing Burge v.

Ohio Atty. Gen., 10th Dist. Franklin No. 10AP-856, 2011-Ohio-3997, ¶ 7,

citing Victory Academy of Toledo v. Zelman, 10th Dist. Franklin No. 07AP-1067,

2008-Ohio-3561, ¶ 8. The purpose of declaratory judgment under R.C. Chapter

2721, “‘is to settle and afford relief from uncertainty and insecurity with respect to

rights, status and other legal relations and it is to be liberally construed and

administered.’” State ex rel. CannAscend Ohio LLC v. Williams, 10th Dist. Franklin

No. 18AP-820, 2020-Ohio-359, ¶ 29, quoting One Energy Ents., LLC v. Ohio Dept.

of Transp., 10th Dist. Franklin No. 17AP-829, 2019-Ohio-359, ¶ 30, citing Swander

Ditch Landowners’ Assn. v. Joint Bd. of Huron & Seneca Cty. Commrs., 51 Ohio

St.3d 131, 134, 554 N.E.2d 1324 (1990), citing Radaszewski v. Keating, 141 Ohio St.

489, 496, 49 N.E.2d 167 (1943).        Accordingly, because Appellees’ complaint

contained a prayer for declaratory judgment under R.C. 2721.01 delineating their

rights under the mortgages and notes, the properties were a subject of the action and

subject to receivership under R.C. 2735.01(A)(1).

              Even if that were not the case, R.C. 2735.01(A)(6) allows the

appointment of a receiver when the company is in imminent danger of insolvency.
Based on the record, and the presumption of validity given to the trial court’s

decision, we find that the trial court’s order regarding the properties was supported

by the evidence.

               Accordingly, the second assignment of error is overruled.

               Finally, in the fourth assignment of error, Appellants argue that the

trial court erred in granting a receiver authority to sell properties free and clear of

liens when the secured creditors were not served with the receivership motion and

opposed appointment of the receiver. This argument misstates what the court

ordered.

               The trial court’s order states at paragraphs 11 and 21:

      11. Subject to further [order] of this Court [sic], the Receiver is
      authorized to sell the Receivership Properties free and clear of all liens
      and encumbrances by private sale, private auction, public auction, or
      by any other method the Receiver, in his good faith and reasonable
      discretion, believes will maximize the proceeds received from the sale.

      ***

      21. The Receiver is hereby authorized to take any and all actions
      authorized in R.C. 2735.04, subject to obtaining the Court’s approval in
      those instances that R.C. 2735.04 requires court approval.

               Accordingly, the trial court’s order merely spells out the powers of the

receiver that comport with the powers explicitly defined by statute under R.C.

2735.04. R.C. 2735.04(B)(5) grants the receiver the power “under the control of the

court that appointed the receiver” to “sell and make transfer of real or personal

property.” One of the requirements that must be met prior to such a sale is that
      [a]t least ten days’ prior written notice is given in accordance with the
      Rules of Civil Procedure to all of the owners of the real property, all
      parties to the action, and all other persons with a recorded or filed lien
      encumbering the real property to be sold as those persons are identified
      in a preliminary judicial report or a commitment for an owner’s policy
      of title insurance previously filed with the court pursuant to section
      2329.191 of the Revised Code or, if not previously filed, in a preliminary
      judicial report or a commitment for an owner’s policy of title insurance
      filed with the application of the receiver for authority to sell the real
      property that otherwise complies with the requirements of section
      2329.191 of the Revised Code, unless the lien or interest is barred by lis
      pendens pursuant to section 2703.26 of the Revised Code.

R.C. 2735.04(D)(2)(b).

               Consequently, the receivership statute gives the trial court inherent

authority to appoint a receiver when the statutory conditions are met, and R.C.

2735.04 defines the powers of the receiver, including the sale of the properties free

and clear of liens.

               The cases cited by Appellants are examples of cases that describe what

happens after the receiver is appointed and are thus inapplicable here. Those cases

present a different posture than the one before us.

               In the instant case, the trial court’s order reflects that an appointed

receiver has the power to act as authorized by the applicable statute, R.C. 2735.04,

including the power to sell the properties unencumbered. Further, such a sale may

happen if, and only if, the receiver obtains the court’s approval and creditors are

given notice and an opportunity to be heard.

               Accordingly, the fourth assignment of error is overruled.

               Judgment affirmed.
      It is ordered that appellees recover from appellants costs herein taxed.

      The court finds there were reasonable grounds for this appeal.

      It is ordered that a special mandate be sent to said court to carry this judgment

into execution.

      A certified copy of this entry shall constitute the mandate pursuant to Rule 27

of the Rules of Appellate Procedure.

_________________________
EMANUELLA D. GROVES, JUDGE

SEAN C. GALLAGHER, A.J., and
CORNELIUS J. O’SULLIVAN, JR., J., CONCUR