Court Opinion

ID: 9897239
Source: CourtListenerOpinion
Date Created: 2023-11-14 19:09:06.451057+00
Date Added: 2024-06-11T09:16:39.320333
License: Public Domain

FILED
                                                                                Oct 31 2023, 8:45 am

                                                                                    CLERK
                                                                                Indiana Supreme Court
                                                                                   Court of Appeals
                                                                                     and Tax Court

      ATTORNEYS FOR APPELLANTS                                   ATTORNEYS FOR APPELLEE
      Peter S. French                                            James T. Young
      John R. Humphrey                                           Morgan A. Decker
      Nadine E. McSpadden                                        Rubin & Levin, P.C.
      Taft Stettinius & Hollister LLP                            Indianapolis, Indiana
      Indianapolis, Indiana

                                                  IN THE
          COURT OF APPEALS OF INDIANA

      David J. Steingart, Bruce A.                               October 31, 2023
      Steingart, and Kevin C.
                                                                 Court of Appeals Case No.
      Steingart,
                                                                 22A-CC-2936
      Appellants-Defendants,
                                                                 Appeal from the
              v.                                                 Bartholomew Superior Court

      Robert P. Musgrave,                                        The Honorable
                                                                 James D. Worton, Judge
      Appellee-Receiver.
                                                                 Trial Court Cause No.
                                                                 03D01-2111-CC-5724

                                   Opinion by Senior Judge Shepard
                                Judges Bradford and Weissmann concur.

      Shepard, Senior Judge.

[1]   In this interlocutory appeal, Appellants David J. Steingart, Bruce A. Steingart,

      and Kevin C. Steingart (collectively, “Steingarts”) challenge the court’s
      Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023                              Page 1 of 16
      turnover order and two settlement orders in the receivership action.

      Concluding the court was within its discretion to grant the motions, we affirm

      and remand solely for recalculation of the amount to be turned over.

      Facts and Procedural History
[2]   The Steingarts are member-owners of Ameribridge LLC, an Indiana company.

      Between July 2019 and March 2021, Ameribridge executed four promissory

      notes in favor of German American Bank (“Bank”) that exceeded a total of

      $9,000,000.00. Additionally, in April 2021, Ameribridge and the Steingarts,

      together, executed a promissory note in favor of the Bank for $1,500,000.00.

[3]   In November 2021, the Bank filed suit against Ameribridge and the Steingarts

      alleging, among other things, that the promissory notes were all in default. The

      Bank also requested appointment of a receiver, and the court appointed Robert

      P. Musgrave (“Receiver”).

[4]   The following October, Receiver moved to settle and compromise two separate

      causes of action that Ameribridge had pending against Greenwalt CPAs, Inc.

      and Watermark Group, LLC for accounting services the firms provided to

      Ameribridge. Following a hearing, the court granted the motions.

[5]   The next month, Receiver filed his “First Motion for Turnover” requesting the

      court to order David Steingart to return certain assets of Ameribridge,

      specifically funds totaling $296,847.81. The court granted that motion as well.

      Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023      Page 2 of 16
[6]   David moved to stay the turnover order and then filed an interlocutory appeal

      as of right under Appellate Rule 14(A)(1). The Steingarts later filed a separate

      notice of appeal of the court’s orders to settle and compromise and alleged the

      appeal was interlocutory as of right under Appellate Rule 14(A). This Court

      consolidated the two appeals under this cause number.

[7]   Receiver then moved to partially dismiss this appeal, contending the court’s

      orders to settle and compromise are interlocutory orders that are not appealable

      as of right and thus not properly before this Court. The motions panel of this

      Court voted to deny Receiver’s motion, and the parties finished briefing.

      Issues
[8]   The Steingarts present two issues for our review, which we restate as:

              I.       Whether the trial court erred by granting the motion for
                       turnover; and

              II.      Whether the court erred by granting the motions to settle
                       and compromise.

      Discussion and Decision
      I. Turnover Order
      A. Nature of Receiverships

[9]   A receivership is an equitable remedy, the purpose of which is to secure and

      preserve property or assets for the benefit of all interested parties, pending

      litigation. See 24 Ind. Law Encyc. Receivers §§ 2, 3 (2023); see also Ring v. Ring,

      Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023         Page 3 of 16
       51 N.E.3d 1245 (Ind. Ct. App. 2016) (quoting In re Marriage of Gore, 527 N.E.2d

       191, 196-97 (Ind. Ct. App. 1988)). The court appointing the receiver controls

       and continuously supervises the property in a receivership as well as directing

       and advising the receiver and, in its discretion, granting him or her the

       necessary powers to carry out the duties. 75 C.J.S. Receivers §§ 127, 130 (2023).

       Indiana Code section 32-30-5-7 provides a nonexclusive list of powers a court

       may grant to a receiver, not the least of which is to “take and keep possession of

       the property.” Ind. Code § 32-30-5-7(2) (2003).

[10]   For their part, the parties have a duty to deliver to the receiver all property in

       their possession that is included in the court’s order. 75 C.J.S. Receivers § 100

       (2023). Should the receiver be hindered in obtaining possession of the property,

       he or she has the authority to request the court to act to prevent interference

       with, or the denial of, his or her possession of the property. 24 Ind. Law Encyc.

       Receivers § 32 (2023).

       B. Standard of Review

[11]   The court’s turnover order is an interlocutory order for the payment of money

       appealable pursuant to Appellate Rule 14(A)(1). “We generally review

       interlocutory orders under an abuse of discretion standard.” In re Paternity of

       Duran, 900 N.E.2d 454, 462 (Ind. Ct. App. 2009). We review the court’s order

       under this standard for the additional reason that this is an appeal from an order

       in a receivership where “orders of the court will not be disturbed unless an

       abuse of discretion is clearly shown.” First Nat. Bank v. Gregg, 91 Ind. App. 405,

       169 N.E. 691, 692 (1930); see also 75 C.J.S. Receivers § 131 (2023) (on appeal,
       Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023        Page 4 of 16
       order of receivership court will not be interfered with absent abuse of

       discretion). An abuse of discretion occurs when the court’s decision is clearly

       against the logic and effect of the facts and circumstances or the court has

       misinterpreted the law. In re Paternity of Duran, 900 N.E.2d 454 (quoting In re

       Estate of Long, 804 N.E.2d 1176, 1178 (Ind. Ct. App. 2004)).

       C. Turnover Order

[12]   On November 8, 2021, the court appointed Musgrave as Receiver and

       authorized him, “without limitation,” “[t]o take and have complete and

       exclusive control, possession and custody” of the property of Ameribridge,

       including all accounts, deposit accounts, money, and other rights to payment in

       existence or thereafter acquired, and “[t]o receive and collect any and all sums

       of money due and owing to Ameribridge in any manner, whether the same is

       now due or shall hereafter become due and payable.” Appellants’ App. Vol. 2,

       p. 168. The court further ordered that “all persons are enjoined from in any

       way disturbing the possession of the Receiver.” Id.

[13]   A full year later, Receiver moved the court to direct David to turn over assets of

       Ameribridge. Receiver had discovered that in October 2021, eleven days prior

       to Receiver’s appointment, David opened a bank account with US Bank in

       Minnesota. Receiver obtained bank records for the account showing:

                    • October 29, 2021 – an initial deposit of $100,000 was
                      made to the account by way of a check made payable to
                      Ameribridge; a second deposit of $35,000 was wired into
                      the account from an account at an institution referred to as

       Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023      Page 5 of 16
                        “First Fin Hamilton,” and $20,158 was withdrawn in three
                        separate transactions for prepaid credit cards

                    • November 5 - another check made payable to Ameribridge
                      was deposited into the account in the amount of
                      $55,477.81

                    • November 8 – Receiver appointed by court; account
                      balance = $170,319.81

                    • November 9 - $170,000 was wired from the account to the
                      First Fin Hamilton account

                    • November 10 – a deposit of $85,343.70 was made to the
                      account by way of a check made payable to Ameribridge,
                      but these funds were later recovered by Receiver

                    • November 12 – $7,559.25 was withdrawn for prepaid
                      credit card(s) and $78,000 was wired to the First Fin
                      Hamilton account

                    • November 16 – a deposit of $106,370 was made to the
                      account by way of a check made payable to Ameribridge

                    • November 19 - $21,000 was wired to the First Fin
                      Hamilton account

       Id. at 233-35, 238-42.

[14]   Based on this information, Receiver informed the court in his motion for

       turnover that a total of $382,191.51 of Ameribridge’s assets were deposited into

       the account and were disbursed without notice to or authorization from

       Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023    Page 6 of 16
       Receiver, contrary to the court’s November 8 order appointing Receiver.

       Receiver recovered $85,343.70 and secured those assets into the receivership

       account, leaving $296,847.81 unaccounted for. Consequently, Receiver

       requested the court to direct David to turn over $296,847.81. On November 9,

       2022, the court granted Receiver’s motion and ordered David to turn over

       $296,847.81 to Receiver within seven days. On appeal, the Steingarts challenge

       the turnover order, claiming the Receiver’s concerns of misappropriation of the

       funds are unfounded. Yet, the real issue is whether the court abused its

       discretion by issuing the turnover order.

[15]   As soon as a receiver is appointed and qualified, the entity’s assets become

       receivership assets until final distribution by the court. Porter Hosp., LLC v. TRK

       Valpo, LLC, 212 N.E.3d 683 (Ind. Ct. App. 2023) (quoting King v. King, 982

       N.E.2d 1026, 1032 (Ind. Ct. App. 2013), trans. denied); see also 24 Ind. Law

       Encyc. Receivers § 27 (2023) (right and interest of receiver with respect to entity’s

       assets become fixed as of date of receiver’s appointment). Therefore, any

       money in the US Bank account on the day Receiver was appointed was within

       the scope of and subject to the receivership order, and Ameribridge was

       obligated to remit to Receiver any and all deposit accounts, money, and other

       property listed in the order. The Steingarts’ failure to turn over to Receiver the

       funds existing in the US Bank account on November 8, 2021, or thereafter

       deposited into that account, or to notify Receiver of the existence of such funds

       was a violation of the receivership order.

       Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023       Page 7 of 16
[16]   The turnover order—the order now at issue—merely ordered the Steingarts’

       compliance with the court’s previous receivership order. A receivership is a

       means of safeguarding an entity’s assets. To that end, property in receivership

       remains under the court’s control and continuous supervision, and it is the duty

       of the receivership court to protect the property from interference. 75 C.J.S.

       Receivers § 127; 24 Ind. Law Encyc. Receivers § 32. Accordingly, the receivership

       court has the power to control all controversies that affect such property. 75

       C.J.S. Receivers § 127. In addition, courts have the inherent power to enforce

       compliance with their orders. Noble Cnty. v. Rogers, 745 N.E.2d 194 (Ind. 2001)

       (quoting State ex rel. Brubaker v. Pritchard, 236 Ind. 222, 226-27, 138 N.E.2d 233,

       235 (1956)). Thus, we find no error with the court issuing a turnover order to

       obtain the assets of Ameribridge.

[17]   Receiver was appointed on November 8, 2021. The evidence before this Court

       is that the balance in the US Bank account on that date was $170,319.81.

       Accordingly, those funds became receivership assets. Further, $106,370.00 was

       deposited into the US Bank account on November 16, and those funds, too, are

       receivership assets. Together these funds total $276,689.81. Lastly, the parties

       agree that on November 19, $21,000.00 was transferred out of the US Bank

       account. The Steingarts claim this money was later turned over to Receiver.

       Consequently, the amount that should have been turned over to Receiver is

       either $276,689.81 or $255,689.81 (i.e., $276,689.81 - $21,000.00). Thus, we

       remand for the sole purpose of amendment of the turnover order directing turn

       over of either $276,689.81 or $255,689.81 (i.e., $276,689.81 - $21,000.00).

       Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023      Page 8 of 16
[18]   To the extent the Steingarts argue David was deprived of due process because

       the turnover order was granted without a hearing, we again observe that the

       order for turnover was not a new, standalone order; rather, it merely directed

       David to comply with the previously issued receivership order.

       II. Orders to Settle and Compromise
       A. Interlocutory Nature of Orders

[19]   The Steingarts next contend the court erred by granting Receiver’s motions to

       settle and compromise. Receiver has responded to the merits of their claims,

       but he has also reasserted his argument that this part of the Steingarts’ appeal is

       subject to dismissal. While we acknowledge that the motions panel of this

       Court has already denied Receiver’s motion to dismiss, it is well established

       that we have inherent authority to reconsider the ruling while an appeal

       remains pending. See Pryor v. State, 189 N.E.3d 167 (Ind. Ct. App. 2022)

       (quoting Core v. State, 122 N.E.3d 974, 976-77 (Ind. Ct. App. 2019)). We do so

       here because “‘[i]t is the duty of this Court to determine whether we have

       jurisdiction before proceeding to determine the rights of the parties on the

       merits.’” DuSablon v. Jackson Cnty. Bank, 132 N.E.3d 69, 75 (Ind. Ct. App.

       2019) (quoting Allstate Ins. Co. v. Scroghan, 801 N.E.2d 191, 193 (Ind. Ct. App.

       2004), trans. denied), trans. denied.

[20]   The appellate authority of this Court is generally limited to appeals from final

       judgments. See Ind. Appellate Rule 5. In addition, generally in a receivership

       proceeding, an appeal may be taken from a judgment or order only if it is final.

       Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023      Page 9 of 16
       State ex rel. Unemployment Comp. Bd. of Unemployment Comp. Div. v. Burton, 112

       Ind. App. 268, 44 N.E.2d 506 (1942); see also 1A Ind. Law Encyc. Appeals § 22

       (2023). The parties here agree that the court’s orders to settle and compromise

       are not final orders.

[21]   An appeal from a non-final interlocutory order is not permitted unless

       specifically authorized by the Indiana Constitution, statutes, or the rules of

       court. Elda Corp. v. Holliday, LLC, 171 N.E.3d 124 (Ind. Ct. App. 2021)

       (quoting Allstate Ins. Co., 801 N.E.2d at 193), trans. denied. Appellate Rule 14

       confers appellate jurisdiction over interlocutory appeals and provides three

       avenues by which this Court can acquire jurisdiction in cases other than those

       involving class action certification: (1) Rule 14(A) allows interlocutory appeals

       as of right; (2) Rule 14(B) permits discretionary interlocutory appeals; and (3)

       Rule 14(D) authorizes other interlocutory appeals only as provided by statute.

       The authorization to file an interlocutory appeal is strictly construed, and any

       attempt to perfect an appeal without it warrants dismissal. Elda Corp., 171

       N.E.3d 124 (quoting Allstate Ins. Co., 801 N.E.2d at 193). While acknowledging

       that interlocutory appeals are strictly limited and conceding that these orders do

       not necessarily fit within the narrow confines of Appellate Rule 14(A), the

       Steingarts nevertheless maintain that the subject of the orders is “closely

       aligned” with the type appealable as of right under Appellate Rule 14(A)(3).

       Appellants’ Br. p. 20.

[22]   Appellate Rule 14(A)(3) provides in relevant part that appeals from

       interlocutory orders compelling the delivery or assignment of “things in action”

       Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023     Page 10 of 16
       can be taken as a matter of right. It has been established that the rule involves

       court orders that “‘carry financial and legal consequences akin to those more

       typically found in final judgments . . . .’” Ball State Univ. v. Irons, 27 N.E.3d

       717, 721 (Ind. 2015) (quoting State v. Hogan, 582 N.E.2d 824, 825 (Ind. 1991)).

       The question here is whether the orders of the trial court authorizing Receiver

       to compromise and settle Ameribridge’s claims against Greenwalt and

       Watermark Group are such orders. Under the facts of this case, we believe they

       are.

[23]   A “thing in action,” also termed “chose in action,” is defined as “[t]he right to

       bring an action to recover a debt, money, or thing.” Chose in Action, BLACK’S

       LAW DICTIONARY (11th ed. 2019). Here, if Receiver exercises the authority

       given him by the orders, Ameribridge will most certainly lose its right to pursue

       its claims against the accounting firms. Therefore, though the orders to

       compromise and settle are technically interlocutory, due to the nature of the

       orders producing financial and legal consequences akin to those more typically

       found in final judgments and in the interest of judicial economy in this

       consolidated appeal, we review them here. See, e.g., Edwards v. Miller, 47 R.I.

       235, 132 A. 609 (1926) (order authorizing receiver to adjust and compromise

       claims, though technically interlocutory, had element of finality such that court

       could properly review it).

       B. Standard of Review

[24]   As with the first issue, we review this interlocutory receivership order under an

       abuse of discretion standard. See First Nat. Bank, 169 N.E. 691; see also Bancroft
       Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023       Page 11 of 16
       v. Allen, 138 Fla. 841, 190 So. 885 (1939) (in absence of abuse of discretion,

       order of court authorizing its receiver to compromise an action will not be

       disturbed on appeal).

       C. Orders to Compromise and Settle

[25]   Ameribridge had actions pending against both Greenwalt and Watermark

       Group with regard to accounting services provided by the firms. After

       investigating the claims, Receiver moved the court for authority to settle, and

       the court granted the motion as to both firms following a hearing. After this

       appeal was filed, Receiver finalized Ameribridge’s settlement with Greenwalt,

       and the cause was dismissed with prejudice. Consequently, the issue raised
                                              1
       here is moot as to Greenwalt. Accordingly, we decide the propriety of the

       order to compromise and settle only with regard to Ameribridge’s action

       against Watermark Group, which has been stayed pending resolution of this

       appeal.

[26]   The importance of the court’s role vis-à-vis a receivership cannot be

       understated—the court controls and continuously supervises the property in a

       receivership and, in its discretion, grants the receiver the necessary powers to

       carry out his or her duties. 75 C.J.S. Receivers §§ 127, 130. To that end, the

       court may authorize or approve a compromise when it is in the best interests of

       1
        In February 2023, acknowledging that Ameribridge’s lawsuit against Greenwalt had been dismissed in
       anticipation of settlement, the Steingarts alleged the payment of money and final settlement had not yet
       occurred and moved the court to stay the order to compromise and settle. The motions panel of this Court
       considered the Steingarts’ motion and voted to deny it.

       Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023                         Page 12 of 16
       the entity, as where the claim or the recovery is doubtful. 75 C.J.S. Receivers §

       149 (2023); see also Boucher v. Hamilton Mfg. Co., 259 Mass. 259, 270, 156 N.E.

       424, 428 (1927) (“The power of the court to authorize the receiver to

       compromise claims of the corporation against third persons cannot be

       doubted.”). In determining whether a compromise should be authorized, the

       court must exercise its business judgment to decide whether the proposed

       compromise is reasonable in the circumstances. 75 C.J.S. Receivers § 149.

[27]   At the hearing, counsel for the Steingarts contended that the amount of the

       proposed settlements was not sufficient for Ameribridge’s claims against the

       accounting firms. In response, Receiver summarized his background that

       includes more than twenty-five years of experience of asset valuation. He

       explained that in valuing the claims and assessing a compromise with the

       accounting firms, he considered that (1) the attorney handling the litigation

       against the accounting firms was charging by the hour, which meant the

       attorney was unsure of the strength of the case; (2) the attorney estimated his

       total fees would be $400,000 to $500,000, which meant recovery from the

       lawsuit would have to be more than $500,000 to assure that the receivership

       would obtain even $1 for Ameribridge’s creditors; (3) the second opinion he

       obtained from another major law firm indicated it would take the case only on

       an hourly basis due to the uncertainty of the recovery; (4) it was a complicated

       case in which the jury would need to understand accounting standards, what

       went wrong, and why it went wrong, and even then, if the jury awarded

       Ameribridge anything less than $500,000, the receivership would get $0 for

       Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023     Page 13 of 16
       creditors; (5) his investigation also showed a causation issue; and (6) although

       the Steingarts offered to finance the litigation, their terms of financing included

       “paying the litigation cost and seventy five percent upcharge on top of that plus

       fifteen percent for Mr. David Steingart[,]” requiring “a million dollars with

       those sort of numbers before the receivership and the creditors of the

       Ameribridge would receive a penny.” Tr. Vol. I, p. 19. In summary, he stated,

       “Basically, your honor, it came down to this, [$85,000] right now which is

       almost ten percent of all the money that I managed to collect so far or taking a

       chance of having the Steingarts finance [the litigation] and trusting that in a

       couple [or] three years there would be enough to exceed the million dollar cost

       of pursuing it. It seemed to be no choice whatsoever.” Id. at 20. The Receiver

       finished by noting that he is a representative of the court—appointed by and

       accountable to the court—doing his best to liquidate Ameribridge’s assets and

       pay its creditors.

[28]   In its order granting Receiver’s motion to settle and compromise Ameribridge’s

       claim against Watermark Group, the court found:

                        a. Generally, the Receiver is appointed as an objective
                        agent of the Court to provide certain ministerial activities
                        on behalf of the Court, and as such his recommendation to
                        the Court is treated as a recommendation of an unbiased
                        entity seeking to perform such ministerial activities, here,
                        the timely and orderly liquidation to the assets of
                        defendant Ameribridge LLC;

                        b. The Receiver at hearing of this matter recited his
                        background and experience in the liquidation and

       Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023       Page 14 of 16
                        evaluation of assets in liquidating situations, and the Court
                        takes judicial notice of the Receiver’s appointment and
                        service as Chapter 13 Standing Trustee for the United
                        States Bankruptcy Court for the Southern District of
                        Indiana, a position which involves significant exposure to
                        and experience with valuations in a liquidation context;

                        c. The Receiver at hearing of this matter also reported to
                        the Court his investigation and evaluation of the Cause of
                        Action and the factors upon which he based his
                        recommendation to settle the Cause of Action. These
                        factors included the difficulty of the case; the significant
                        defenses available to the defendants to the Cause of
                        Action; and the six-figure cost of pursuing the Cause of
                        Action provided by the Ameribridge attorney in the
                        pending litigation, which cost is being charged by the
                        attorney for Ameribridge on an hourly basis and so may
                        create a substantial liability for the receivership estate, to
                        the harm of the creditors thereof;

                        d. The attorney for the defendant in the pending Cause of
                        Action also appeared at the hearing and made statements
                        in support of the pending motion to settle and the
                        Receiver’s motion.

               3. As to the objection to the amount of the Receiver’s proposed
               settlement, the Shareholders assert that the amount is too low,
               but provided no factual, evidentiary, or other basis for such
               conclusory assertion.

       Appellants’ App. Vol. 2, pp. 28-29.

[29]   Though it is clear the trial court was not dealing with certainties, it

       pragmatically undertook a careful weighing and balancing of a variety of

       Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023          Page 15 of 16
       considerations in arriving at a conclusion as to the course of prudence under the

       circumstances. In view of these considerations, we cannot say the court’s

       decision to authorize Receiver to compromise Ameribridge’s claim against

       Watermark Group constitutes an abuse of its discretion.

       Conclusion
[30]   For the foregoing reasons, we remand for the sole purpose of amendment of the

       turnover order directing David Steingart to turn over either $276,689.81 or

       $255,689.81 (i.e., $276,689.81 - $21,000.00) as the court may determine. We

       affirm the court in all other respects.

[31]   Affirmed and remanded.

       Bradford, J., and Weissmann, J., concur.

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