IN THE COMMON PLEAS COURT OF FAIRFIELD COUNTY, OHIO. Plaintiff(s), : Case No. 07CV1046. v. : Judge Berens

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1 IN THE COMMON PLEAS COURT OF FAIRFIELD COUNTY, OHIO GLOUSTER COMMUNITY BANK, : Plaintiff(s), : Case No. 07CV1046 v. : Judge Berens ANDREW FLOWERS, ET AL., : ENTRY GRANTING RECEIVER AUTHORITY TO SELL REAL ESTATE AND MOTIONS TO INTERVENE Defendant(s). : This matter is before the Court upon three motions: (1) Jeff Watson s Motion to Intervene, filed July 19, 2013; (2) Gummer Wholesale, Inc. s Motion to Intervene, filed July 22, 2013; and (3) the motion of Reg Martin, in his capacity as Receiver in this action (hereinafter Receiver ), for an order authorizing the sale of real estate located at 1510 Sheridan Dr., Lancaster, OH 43130, filed June 13, In response to the Receiver s motion, several subsequent motions have been made in objection and support of the Receiver s request for authority. Gummer Wholesale, Inc., filed a Memorandum in Opposition to the Receiver s proposed sale of assets on July 22, 2013 and a request for an oral hearing on July 2, Vinton County National Bank, holder of the first mortgage on the property, filed a Memorandum in Support of the Receiver s proposed sale on July 22, Circleville Oil Company, a junior mortgage holder of the property, filed an objection to the Receiver s proposed sale on June 28, The Receiver filed two supplemental memoranda in support of his original motion on June 28, 2013 and July 22, STATEMENT OF THE CASE On August 24, 2007, Glouster Community Bank filed a Complaint against several defendants, alleging a fraudulent transfer of the real property at issue 1510 Sheridan Drive,

2 Lancaster, OH The property was being used as a gas station and convenience store, operated by an entity named Sheridan One Stop Carryout, Inc. ( Sheridan ). On December 3, 2010 Sheridan filed a Motion to Intervene and requested the appointment of a receiver to manage the operation and maintenance of the business and real property. On January 31, 2011, the Court granted Sheridan s motion and appointed Martin Management Services, Inc., by and through its principal, Reg Martin, as receiver. The Court further granted the receiver all powers necessary and usual in such cases for the protection, possession, control, management, and operation of the Property. See Order Granting Motion to Intervene and Order Appointing Receiver (January 31, 2011). Since that time, the Receiver has filed several reports and valuation estimates with the Court to keep it apprised of the status of the receivership. The property was first valued at $667, See First Report of Receiver (March 14, 2011). However, since that time, several environmental issues associated with the property have been discovered which has drastically deflated the property s estimated value and has negatively affected the interest of potential purchasers. Specifically, due to a detrimental decision by the Petroleum Underground Storage Tank Release Compensation Board, the Receiver estimated the property s value to have dropped to the $250,000 to $300,000 range. See Third Report of Receiver (July 3, 2013). In addition, the Receiver informed the Court that a financial institution would be extremely reluctant to lend money for purchase. Thus, the Receiver emphasized that the pool of potential purchasers was likely limited to those who would (a) be a cash purchaser and (b) agree to a purchase agreement with no contingencies. Id. After 30 months of negotiations, evaluations, investments, and inspections, the Receiver notified the Court that, after competitive bidding at a private sale, he had entered into a Purchase

3 Agreement with a potential buyer for $400,000.00, contingent upon the Court s approval. The Receiver notified the Court that he believed this price to be fair and reflective of the initial valuation of the property ($400,000 + estimated $250,000 in future environmental remediation costs = $650,000.00). Vinton County National Bank, the primary mortgage holder, supported the proposed purchase agreement, despite taking a loss on the sale. Gummer Wholesale, Inc. ( Gummer ) and Circleville Oil Company ( Circleville ) then filed objections to the Receiver s motion and requesting an oral hearing on the matter. Gummer and Circleville argue that the Court must deny the Receiver s request for authority to sell the property for two main reasons: (1) their due process rights were violated as they did not receive notice of the initial appointment of a receiver or the private sale that resulted in the proposed purchase agreement; and (2) the proposed sale is not in the best interests of all creditors. LAW & ANALYSIS I. Motions to Intervene of Jeff Watson and Gummer Wholesale, Inc. The Court has reviewed the motions of Jeff Watson and Gummer Wholesale, Inc. and their corresponding requests for intervention in the matter. For good cause shown, both Jeff Watson and Gummer Wholesale, Inc. are granted permission to intervene in order to ensure protection of their alleged rights and interests in the subject real estate. II. Receiver s Motion for Authority to Sell Property Ohio Revised Code Section gives courts discretion to appoint receivers in certain situations. Once appointed, the receiver s primary function is to carry out the court s orders and act as the administrative arm of the court who takes charge of the assets... for the purpose of conserving them to the ends of equity and for the benefit of creditors generally. Tonti v. Tonti, 118 N.E.2d 200, 202, 66 Ohio Law Abs. 356 (1951). In performing his or her duties, a receiver

4 is authorized to take and keep possession of property, receive rents, collect, compound for, and compromise demands, make transfers, and generally do such acts respecting the property as the court authorizes. O.R.C Generally stated, a receiver is obligated to effect a resolution that is in the best interests off all creditors of the property subject to receivership. Castlebrook Ltd. v. Dayton Properties Ltd. Partnership, 78 Ohio App.3d 340, 350, 604 N.E.2d (1992). As a receiver is essentially the administrative arm of the court, the trial court has a duty to independently monitor and evaluate the Receiver's conduct in relation to the duties the Receiver owed the parties and the assets under their control. Fifth Third Bank v. Q.W.V. Properties, L.L.C., 12th Dist. No. CA , 2011-Ohio-4341, 19 (Aug. 29, 2011). The statutory provisions governing the actions of receivers and correlative supervision of the courts contain very few restrictions on the court in overseeing receivership proceedings, enabling the trial court to exercise its sound judicial discretion to limit or expand a receiver's powers as it deems appropriate. State ex rel. Celebrezze v. Gibbs, 60 Ohio St. 3d 69, 74, 573 N.E.2d 62, (1991); King v. King,11th Dist. Nos G 3068, 2012 G 3079, Ohio-2038 (May 20, 2013) ( R.C. Chapter 2735 does not contain any restrictions on what the court may authorize when it issues orders regarding receivership property. ); Quill v. Troutman Ent., Inc., 2d Dist. No , 2005-Ohio-2020 (Apr. 29, 2005). Importantly, this discretion includes the power to authorize a receiver, under certain circumstances, to sell property at a private sale free and clear of all liens and encumbrances. Park Natl. Bank v. Cattani, 187 Ohio App.3d 186, 2010-Ohio-1291, 931 N.E.2d 623, 13; Huntington Natl. Bank v. Motel 4 BAPS, Inc., 191 Ohio App. 3d 90, 2010-Ohio-5792, 944 N.E.2d 1210 (2010).

5 Further, and pertinent to the case sub judice, appellate courts have held that the strict notice and due process rights afforded parties under other statutory schemes similarly dealing with executions against property (such as R.C et seq.) do not apply to receivership actions. See, e.g., Avondale Cmty. Council v. Galarza, 1st Dist. No. C , 2012-Ohio-186, 16 (Jan. 20, 2012) ( R.C. Chapter 2329 does not apply to sales of property by receivers, so a trial court is not required to comply with its provisions before ordering a sale of property by a receiver. ); Huntington Natl. Bank v. Motel 4 BAPS, Inc., 191 Ohio App. 3d 90, 2010-Ohio- 5792, 944 N.E.2d 1210 (noting that statutory notice is not required prior to a receivership sale). Gummer and Circleville make two main arguments against the Court s approval of the Receiver s proposed purchase agreement. First they argue that Gummer, Circleville, and the State of Ohio did not receive proper notice of the receivership appointment and private sale. Initially, the Court notes that the State of Ohio has been silent as regards its position on the proposed purchase agreement and alleged lack of notice. Thus it appears Gummer and Circleville are attempting to raise the issue of notice as third parties, on behalf of the State of Ohio. Regardless of whether Gummer and Circleville have standing to raise such an argument, the Court finds that due process nor the statutes governing receivership (R.C et seq.) require specific notice be effected on all parties prior to sale. Id. at 95 ( Having found that R.C relates only to writs of execution and not receivership sales, which are governed by another chapter of the Ohio Revised Code, we cannot say that the trial court abused its discretion in allowing the receiver to sell the property without following the notice requirements set forth in R.C ). The Court further notes that Gummer was placed on actual, or at least constructive, notice of the appointment of a receiver and potential sale of the property, as it (1) supplied Sheridan s inventory during the pendency of this action and (2) participated in its own

6 negotiations for the private sale of the property with the Receiver. Gummer and Circleville s first arguments are therefore not well-taken. Gummer and Circleville next argue that the proposed private sale of the real property at issue for $400, is not in the best interests of all parties. Specifically, Gummer asserts that it is willing to purchase the property, on the same terms, for $40,000 more than the proposed purchase price. Circleville, as a junior creditor, similarly contests that the current purchase agreement price is too low. Circleville is concerned that the purchase price of $400, is only sufficient to satisfy the claims of the first mortgage holder, and that Circleville s interest in the property will be extinguished without compensation. Supported by the case law cited above, the Court finds that a receiver, under certain circumstances, is authorized to sell property at a private sale free and clear of all liens and encumbrances. After reviewing the record of these proceedings, the Court finds that under the facts of the case sub judice, the Receiver has acted in the best interests of all parties throughout the pendency of this action, including the execution of the proposed private sale of property. Over the past two and a half years, the Receiver has worked tirelessly to market the property, attain interested purchasers, evaluate and attempt to alleviate environmental concerns, and invest funds to ensure maintenance of the property and the proper functioning of the business. The Receiver has submitted several reports to the Court outlining different bids it has received and considered, the environmental problems with the property, the negative effect said problems have had on the potential pool of interested buyers, rapidly rising administrative costs, and the volatile nature of the real estate market. At the status conference held on May 13, 2013, the Receiver informed the Court that based on consultation with an independent environmental group, the property s value had dropped to $250,000 to $300,000, and that finding buyers willing

7 to take the property on an as is basis was proving difficult. Based on these facts and the limited pool of potential purchasers, the Court finds that the Receiver s actions in pursuing a private sale, with two competing bidders, was prudent and within his, and the Court s, authority. O.R.C ; Park Natl. Bank v. Cattani, 187 Ohio App.3d 186, 2010-Ohio-1291, 931 N.E.2d 623, 13. The Receiver and Vinton County National Bank, being fully apprised of Gummer s competing offer, still maintain that selling the property to Jeff Watson for $400, is the best option. The Receiver and Vinton County note that the additional $40, will affect only one lienholder Vinton County. As indicated in Vinton County s Memorandum in Support, any funds derived from the sale up to $507, will be allocated to Vinton County and the payment of administrative expenses. Otherwise stated, the property s purchase price would have to exceed $507,000 for Circleville Oil, who holds a subordinate mortgage, to acquire any money from the sale of the property. Therefore, selling the property for $400,000 instead of Gummer s proposed bid of $440,000 harms only one lienholder the same lienholder who urges the Court to approve the Receiver s proposed purchase agreement of $400,000. As Vinton County candidly states in its brief, A bird in hand is significantly more valuable than two in the bush. The Court finds that the Receiver has worked diligently to secure the best purchase price and contract terms possible under the circumstances of this case. The proposed buyer is willing to purchase the property in cash, accepting all environmental issues without contingency. After the lengthy pendency of this case, several failed negotiations, multiple environmental concerns and hazards, and the urgency with which this sale needs to occur due to the ongoing operation of the business and the volatile real estate market, the Court finds that the proposed purchase agreement negotiated by the Receiver with Jeff Watson for

8 $400, is in the best interests of the parties. For these reasons, Gummer and Circleville s second argument is not well-taken. The Court last finds that an oral hearing on this matter is unnecessary. The facts of this case as well as the arguments of all parties have been briefed in great detail. The Ohio Rules of Civil Procedure allow a court to determine motions without an oral hearing upon brief written statements of reasons in support and opposition. Civ. R. 7(B)(2). Thus the Court finds no error in considering the Receiver s motion and the several corresponding memoranda in support and opposition on the basis of the previously scheduled non-oral hearing. Gummer s request for an oral hearing is therefore OVERRULED. CONCLUSION For the foregoing reasons, Jeff Watson and Gummer Wholesale, Inc. s Motions to Intervene and the Motion of Receiver for Authority to Sell Real Estate and Business Assets Free and Clear of Liens and Private Sale are GRANTED. All objections to said motion are OVERRULED. IT IS SO ORDERED. Judge Richard E. Berens NOTICE: Brian Shonk, via fax , and courthouse mailbox Ray Michalski, via fax , and courthouse mailbox John Snider, via fax , and courthouse mailbox Richard Ricketts, via fax , and mail: 50 Hill Rd. S, Pickerington, OH Kenneth Goldberg, via fax , and mail: 575 S. Third St., Columbus, OH Jon Clark, via fax , and mail: 414 E. Main St., PO Box 1405, Lancaster, OH Stephen Brown, via fax , and mail: PO Box 244, Lancaster, OH 43130