Court Opinion

ID: 2697125
Source: CourtListenerOpinion
Date Created: 2014-08-04 15:48:25.289462+00
Date Added: 2024-06-11T11:17:10.716806
License: Public Domain

[Cite as Natl. City Bank v. Semco, Inc., 183 Ohio App.3d 229, 2009-Ohio-3319.]

                      IN THE COURT OF APPEALS OF OHIO
                          THIRD APPELLATE DISTRICT
                              MARION COUNTY

NATIONAL CITY BANK,

        APPELLEE;
                                                               CASE NO. 9-09-10

LAZEAR,

        APPELLANT,

        v.                                                     OPINION

SEMCO, INC., ET AL.,

        APPELLEES.

                 Appeal from Marion County Common Pleas Court
                            Trial Court No. 06-CV-711

      Judgment Affirmed in Part, Reversed in Part and Cause Remanded

                              Date of Decision: July 6, 2009

APPEARANCES:

        John C. Bartram, for appellee National City Bank.

        Sherri B. Lazear and Gregory R. Flax, for appellant.
Case No. 9-09-10

       Clifford C. Spohm, for appellees Semco, Inc. and Leonard and
Florence Furman.

       PRESTON, Presiding Judge.

       {¶1} Receiver-appellant, Bruce C. Lazear, appeals the judgment of the

Marion County Court of Common Pleas, which reduced his receivership

compensation from $103,809.12 to $28,698.31. For the reasons that follow, we

affirm in part and reverse in part.

       {¶2} This matter stems from a promissory note between plaintiff National

City Bank and defendant-appellee, Semco, Inc., and defendants Leonard and

Florence Furman (“the Furmans”). On September 15, 2006, National City Bank

filed a complaint against Semco and the Furmans alleging that a promissory note

executed by Semco on October 6, 2004, was due and unpaid in the principal

amount of $993,392.87, plus interest, and that the Furmans had executed a

commercial guaranty agreement guaranteeing the payment of the promissory note.

The trial court entered judgment on September 15, 2006, in favor of National City

Bank and against Semco and the Furmans in the amount of $993,392.87, plus

interest. Subsequently, National City Bank filed a motion for the appointment of a

receiver, and on September 22, 2006, the trial court granted the motion and

appointed appellant Lazear as receiver.

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Case No. 9-09-10

         {¶3} On September 27, 2006, Semco filed a motion to set aside the order

appointing the receiver. A hearing on the motion was held on October 30, 2006,

and seven witnesses were presented before the trial court. On November 1, 2006,

the trial court issued an order and judgment entry denying the motion and

declaring that “the Receiver shall remain in place pursuant to the Court’s Order

Appointing Receiver entered on September 22, 2006 until further order of the

Court.”

         {¶4} On December 1, 2006, Semco filed a motion for the receiver to remit

his fees and requested leave to pursue the receiver for damages and accounting. In

this motion, Semco alleged that the receiver’s fees were excessive. On February

2, 2008, Semco filed an amendment to its original motion and deleted the portion

of the motion seeking leave to pursue the receiver for damages. On July 15, 2008,

Semco filed a memorandum in support of its motion, and Lazear responded by

filing a motion in opposition and filing a motion for three orders (1) approving his

compensation, (2) approving his inventory and final report, and (3) discharging,

terminating, and prohibiting actions against him and his agents without leave of

court.

         {¶5} On January 20, 2009, the trial court issued a judgment entry finding

that the fees Lazear and his associates had charged were not reasonable, and as a

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Case No. 9-09-10

result, the trial court reduced Lazear’s compensation as receiver to $28,698.31 and

ordered him to return $75,110.81 to Semco.

        {¶6} Lazear now appeals and raises one assignment of error.

                           ASSIGNMENT OF ERROR

        The trial court erred by reducing appellant’s compensation as
        receiver to $28,698.31 and ordering the receiver to return $75,110.81
        to defendant-appellee Semco, Inc.

        {¶7} Within his assignment of error, Lazear raises three specific issues for

this court’s review: (1) whether the trial court was precluded from reconsidering

its prior orders, which had set the receiver’s compensation at $300 per hour, (2) if

the trial court had the discretion to reconsider its prior orders, whether the trial

court abused its discretion by reversing its prior orders in the absence of

exceptional circumstances, and (3) if the trial court had the discretion to disregard

its prior orders, whether the trial court abused its discretion by ordering Lazear to

be compensated at $150 per hour and his associates to be compensated at $75 per

hour.

        {¶8} The primary purpose of a receiver is to carry out the orders of the

respective appointing court, which has the power “to exercise its sound discretion

to limit or expand a receiver’s powers as it deems appropriate.” State ex rel.

Celebrezze v. Gibbs (1991), 60 Ohio St.3d 69, 74, 573 N.E.2d 62. Because of this

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Case No. 9-09-10

discretion, a reviewing court must not disturb a trial court’s judgment with regard

to receivers absent an abuse of discretion. Id. An abuse of discretion is more than

an error of law; rather, it suggests that the trial court’s decision is unreasonable,

arbitrary, or unconscionable. Blakemore v. Blakemore (1983), 5 Ohio St.3d 217,

219, 450 N.E.2d 1140.        After a review of the record and based on the

circumstances of this case, we believe that the trial court abused its discretion with

respect to reducing Lazear’s compensation but did not abuse its discretion with

respect to his associates’ compensation.

       {¶9} Here, the parties are disputing the trial court’s order that found

Lazear’s and his associates’ compensation unreasonable, and as a result, reduced

the amount of compensation and ordered that Lazear return the excess amount to

Semco. In its original order appointing Lazear as the receiver and prescribing his

powers as the receiver, the trial court stated the following power:

       To prepare periodic interim statements reflecting the Receiver’s fees
       and administrative costs and expenses incurred in the operation and
       administration of the receivership estate. The Receiver shall be
       compensated for the performance of the duties imposed hereby at the
       rate of $300 per hour; the Receiver may utilize other members,
       associates and employees of his firm, Lazear Capital Partners, Ltd.,
       to assist him in his duties and they shall be compensated at their
       respective customary hourly rates.

With respect to this order, Semco only objected to the overall appointment of the

receiver, which the trial court eventually overruled; however, Semco did not make

a specific objection to the $300 hourly rate of the receiver until after its motion

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Case No. 9-09-10

opposing the appointment of receiver had been overruled. In addition, Semco

never appealed the trial court’s order overruling its motion opposing the

appointment of receiver. The first time Semco raised any issue with Lazear’s

compensation was in its December 1, 2006 motion to have the receiver remit his

fees.   Both parties contested the issue and submitted supporting affidavits,

discovery documents, and even a list of other Ohio counties’ rules regarding

receiver compensation. The issue was finally resolved in 2009, when the trial

court issued an order stating:

        It is incumbent upon this Court to decide whether the $300 per hour
        fee is reasonable. This Court cannot conclude that it is. This
        Court’s own individual evaluation of the fees charged by receivers in
        this area leads the undersigned to the conclusion that somewhere
        between $75 and $150 per hour is a reasonable hourly rate.

Then the trial court reduced the amount of compensation originally requested by

Lazear to $28,698.31 and ordered that he return the excess amount of $75,110.81

to Semco. Overall, we believe that the trial court abused its discretion based on

the circumstances of this case.

        {¶10} First of all, we note that generally orders appointing receivers are

considered final, appealable orders. United Bank v. Harman (Dec. 6, 1983), 3d

Dist. No. 3-83-14, at *2, citing Forest City Invest. Co. v. Haas (1924), 110 Ohio

St. 188, 193, 143 N.E. 549. Here, within the order appointing a receiver, the trial

court specifically prescribed Lazear’s hourly rate at $300, and while this order was

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Case No. 9-09-10

objected to by Semco, Semco failed to raise an objection as to Lazear’s hourly

rate. In addition, because Semco failed to initially object to the reasonableness of

the $300 hourly rate and this rate was preset by the trial court before Lazear

performed his receivership services, this court believes that it was reasonable for

Lazear to have relied on the $300 hourly rate as the basis for his compensation.

       {¶11} Nevertheless, and most importantly in this case, we find the trial

court’s final order vague and therefore problematic.         We acknowledge that

generally determining the amount and measure of compensation is left to the

sound discretion of the trial court. Nozik v. Mentor Lagoons, Inc. (July 2, 1998),

11th Dist. No. 97-L-004, at *3-4, citing Nowman v. Nowman (1930), 8 Ohio Law

Abs. 429. See also Hunt v. Kegerreis (Aug. 25, 1981), 7th Dist. No. 537, at *2.

However, here the trial court failed to give sufficient reasons why it was utilizing

its discretion and departing from its originally prescribed hourly rate, other than it

believed $300 was now “unreasonable” based on its “own individual evaluation of

the fees charged by receivers in this area.” Typically, receivers are entitled only to

compensation “ ‘as is reasonable in view of the interest involved, the amount of

skill necessary to conduct the business, and the time and labor given to the

business.’ ” Nozik v. Mentor Lagoons, Inc. at *3-4, quoting Postle v. Wolfram

Guitar Co. (C.P.1902), 13 Ohio Dec. 228, 229. By prescribing $300 as Lazear’s

hourly rate, the trial court had implicitly already found that the hourly rate was

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Case No. 9-09-10

reasonable under the circumstances of the case at that time. However, in its

January 20, 2009 judgment entry, the trial court found that $300 per hour was now

unreasonable based on its own independent evaluation – not based on the evidence

presented by the parties or because of the particular circumstances of the case.

While we are not stating that a trial court can never go back and modify its

previous order with respect to a receiver’s compensation, here we are unable to

determine from the trial court’s final order why the hourly rate was seemingly

reasonable in the beginning of the receivership but later found to be unreasonable.

See In re Angell (Mich.1902), 131 Mich. 345, 350, 91 N.W. 611 (finding that it

was permissible for the trial court to have reduced the receiver’s hourly rate

because its previous order had been ex parte and the court had not been advised of

the facts of the case); Velez v. Martinez (E.D.Pa.2002), No. 90-6449, at *1-4

(reducing the receiver’s monthly expense allowance of $2,500 because it was no

longer necessary since the receiver’s role had changed since the allowance had

been issued).1

        {¶12} Therefore, based on the fact that the trial court failed to adequately

explain its departure from its previously ordered hourly rate, we find that the trial

court abused its discretion with respect to reducing Lazear’s hourly rate for his

1
  We would like to note that while the parties did not dispute the number of hours billed by Lazear, this
issue was within the trial court’s discretion and it could have still reduced the hours billed by Lazear as
being unreasonable under the circumstances.

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Case No. 9-09-10

compensation and that this matter should be remanded for purposes of

recalculation.

        {¶13} However,           we      believe      that    reducing       Lazear’s       associates’

compensation was not an abuse of discretion. The issues we have found with

Lazear’s compensation do not exist with respect to his associates. First of all, the

trial court never specifically prescribed an hourly rate for Lazear’s associates;

rather, in its order appointing a receiver, the trial court stated that “other members,

associates and employees of his firm, Lazear Capital Partners, Ltd., to assist him

in his duties * * * shall be compensated at their respective customary hourly

rates.”2     Thus, the reasonableness of their compensation was never officially

determined and in fact was left unresolved and open for objections. Second,

because there was no specific prior determination, unlike with Lazear, we believe

that the associates had no similar reasonable reliance with respect to their

compensation.        And finally, because there was no prior determination of the

reasonableness of the associates’ compensation, there was no need for the trial

court to have explained its determination of the associates’ compensation in its

final order, as it should have done with respect to Lazear’s compensation.

2
  Lazear argues in his reply brief that no one disputed the evidence he offered that demonstrated $300 per
hour was the customary hourly rate for his associates. However, at oral arguments, Lazear acknowledged
that the only documents that purported to illustrate the associates’ customary rate were the self-serving
invoices submitted by Lazear to the trial court for purposes of a final accounting.

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Case No. 9-09-10

       {¶14} Therefore, as to Lazear’s compensation, we find that the trial court

abused its discretion when it reduced its previously ordered $300 hourly rate

without adequate explanation for its new finding, and that this matter should be

remanded for purposes of recalculation.       However, with respect to Lazear’s

associates’ compensation, we find that the trial court did not abuse its discretion

when it ordered that they be compensated at $75 per hour.

       {¶15} Lazear’s assignment of error is therefore sustained in part.

       {¶16} Having found no error prejudicial to appellant Lazear herein, in the

particulars assigned and argued in his sole assignment of error with respect to his

associates’ compensation, we affirm the trial court’s judgment. However, having

found error prejudicial to appellant Lazear, in the particulars assigned and argued

in his sole assignment of error with respect to his own compensation, we reverse

the trial court’s judgment and remand the matter for further proceedings consistent

with this opinion.

                                                         Judgment affirmed in part
                                                             and reversed in part,
                                                             and cause remanded.

       WILLAMOWSKI and ROGERS, JJ., concur.

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