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IN THE COURT OF COMMON PLEAS
FOR DELAWARE COUNTY, OHIO
KBI CONSTRUCTION, ET AL.,
Plaintiffs, : CASENO.: 07 CV E09 1079
v.
b00z
DELAWARE LODGE NO. 76 : JUDGE W. DUNCAN WHITNEY
BENEVOLENT AND PROTECTIVE =
ORDER OF ELKS OF THE UNITED
STATES OF AMERICA, ET AL.,
Defendants.
‘OU 22 aad
Lunds S¥2TTHOWNOD
OIHO “ALK
re
RECEIVER’S MOTION FOR AUTHORITY TO BORROW MONEYS
9E
NOW COMES the Receiver, by and through counsel, and herein requests an Order of the
Court authorizing it to borrow moneys up to $30,000.00 from secured creditor Delaware County
Bank & Trust, and to provide administrative priority to Delaware County Bank & Trust, to the
extent of the moneys advanced. The Receiver incorporates the attached memorandum in
support.
Respectfully submitted,
(0018262)
Aaron C, Firstenberger (0072261)
Attorneys for Receiver
Strip, HOPPERS, LEITHART, MCGRATH
& TERLECKY Co., L.P.A.
575 South Third Street
Columbus, Ohio 43215
(614) 228-6345 (telephone)
(614) 228-6369 (facsimile)
{AQUA ANA = ®
00074148944
wMOMS
Page | of 4
[RARWECEIVERSHIPSIDelaware Lage No_76 (Eths)inotion to Borrow 071501 oeMEMORANDUM IN SUPPORT.
The Receiver requests permission from this Court to borrow moneys up to $30,000.00, so
as to permit the Receiver to simply meet business obligations necessary to maintain the value of
the assets. Specifically, this money will be used to pay utilities, insurance, and other normal
administrative and operating expenses. At current, the receivership does not have adequate
funds to meet these obligations. Within its accountings to the Court, the Receiver will produce
records as to the moneys advanced, and expenditures made from that fund.
The powers of the Receiver herein are governed by R.C. §2735.04, which provides:
“Under the control of the court which appointed him, as provided
in section 2735.01 of the Revised Code, a receiver may bring and
defend actions in his own name as receiver, 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.”
R.C. §2735.04 (emphasis added).
The power of a receiver flows from the order of the court which appointed the receiver.
The purpose of this receivership, as authorized by this Court, is to preserve the assets of the
estate.
Ohio courts have addressed the authority of the receiver to borrow money for the purpose
of making repairs to the property which was the subject of the receivership “The power of a
receiver to borrow money even for the purpose of preserving the property entrusted into his
hands, is not inherent in the receiver, but is so vested in him by the authority of the court.”
In American Savings Bank Co. v. Union Trust Co., 1931 WL 2573 (Ohio App. 8 Dist.) at *2 (see
attached), rev'd on other grounds, 124 Ohio St. 126 (1931). The American Savings court found
that the expenditures were necessary, benefited the estate, and added to the value of the property
Page 2 of 4
[RARIRECEIVERSHIPSDelavare Lodge No. 16 (Elhs\nolion to barra 021508 doeand security of the creditors. Id. at *3. Thus, the court approved the expenditures made by the
receiver, and his borrowing money to pay for the expenditures. Id. at *4,
By permitting the Receiver to borrow up to $30,000.00, the value of the assets will be
maintained at their maximum value, thus providing a benefit to all creditors. However, no party
will lend the Receiver any money unless it has the assurance that it will be paid as an
administrative priority at such time as disbursements are made.
For these reasons, the Receiver requests that this Court enter an Order Approving
Receiver’s Motion To Borrow Moneys up to $30,000.00 from secured creditor Delaware County
Bank & Trust, for the payment of vital business obligations necessary to maintain the value of '
the assets, and providing further that those moneys advanced to the Receiver will receive an
administrative priority as to repayment from the liquidation of assets.
Respectfully submitted,
(0018262)
er (0072261)
Attorneys for Receiver
Strip, Hoppers, LEITHART, MCGRATH
& TERLECKY Co., L.P.A.
575 South Third Street
Columbus, Ohio 43215
(614) 228-6345 (telephone)
(614) 228-6369 (facsimile)
Page 3 of 4
[RARIRECEIVERSHIPSWDelavare Lodge No, 76 (Elks) to bortow 021508 doeal
CERTIFICATE OF SERVICE
The undersigned hereby certifies that the aforementioned Receiver’s Motion for
Authority to Borrow Moneys has been served via ordinary United States Mail, postage prepaid,
on this wee. of February, 2008 upon:
Scott D. Eickelberger, Esquire
Kincaid Taylor & Geyer
P.O. Box 1030
Zanesville, OH 43702-1030
Attorney for Plaintiffs
Charles M. Diersing, Esquire
P.O. Box 623
Lewis Center, OH 43035
Attorney for Delaware County Bank & Trust
Company
Christopher D. Betts, Esquire
140 North Sandusky Street
Delaware, OH 43015
Attorney for Delaware County Treasurer
Delaware Lodge No. 76 Benevolent and
Protective Order Of Elks of The United States
of America
1502 West William Street
Delaware, OH 43015
Aaron C. re
Page 4 of 4
[RAWORECEIVERSHIPS\Delaware Lodge No. 76 (Etks)\notion to borrow 024508 docWestlaw.
1931 WL 2573
1931 WL 2573, 10 Ohio Law Abs. 82, 34 Ohio Law Rep. 303
{Cite as: 1931 WL 2573)
Pp
AMERICAN SAVINGS BANK CO v. UNION
TRUST CO
Ohio App. 8 Dist. Cuyahoga Co. 1931.
Court of Appeals of Ohio, Eighth District,
Cuyahoga County.
AMERICAN SAVINGS BANK CO
v.
UNION TRUST CO
Decided Feb. 9, 1931.
West Headnotes
Mortgages 266 €=473
266 Mortgages
266X Foreclosure by Action
266X(I) Receiver
266k473 k. Management and Disposition
of Property and Proceeds by Receiver. Most Cited
Cases
Receivers 323 €=115
323 Receivers
3231V Management and Disposition of Property
323IV(B) Supervision and Instructions of
Court
323k115 k. Confirmation of Acts or Con-
tracts of Receiver. Most Cited Cases
In view of Gen.Code, § 11897, where court in ap-
pointing receiver authorized receiver to make such
Tepairs as were necessary for proper maintenance of
property, court did not abuse its discretion in grant-
ing receiver's motion to tax as costs amount of
money borrowed for expenditure or necessary re-
pairs to a furnace and for decorating suites without
prior application for authority from court, notwith-
standing former decree of foreclosure and confirm-
ation of sale thereunder, where repairs were neces-
sary, made in good faith and enhanced value of the
property.
Mortgages 266 €=473
Page 2 of 6
Page 1
266 Mortgages
266X Foreclosure by Action
266X(I) Receiver
266k473 k. Management and Disposition
of Property and Proceeds by Receiver. Most Cited
Cases
Receivers 323 & 115
323 Receivers
3231V Management and Disposition of Property
323IV(B) Supervision and Instructions of
Court
323k115 k. Confirmation of Acts or Con-
tracts of Receiver. Most Cited Cases
Final decree of foreclosure and sale had thereunder,
would not bar exercise of court's discretion in mak-
ing a subsequent order approving expenditure of
money by receiver on property without express au-
thority from court.
Receivers 323 €=97
323 Receivers
3231V Management and Disposition of Property
3231V(A) Administration in General
323k97 k. Loans and Advances to Receiv-
er, and Securities Therefor. Most Cited Cases
Power of receiver to borrow money for purpose of
Preserving property is not inherent in receiver, but
is vested in him by authority of the court.
Receivers 323 €=113
323 Receivers
3231V Management and Disposition of Property
3231V(B) Supervision and Instructions of
Court
323k111 Instructions or Authority to Re-
ceiver to Act
323k113 k. Proceedings to Obtain.
Most Cited Cases
Interested parties are entitled to notice of proceed-
ing to vest authority in receiver to borrow money
for purpose of making expenditures on property.
© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.
http://web2.westlaw.com/print/printstream.aspx?prft=HTMLE&destination=atp&sv=Split.... 2/19/20081931 WE 2573
Page 3 of 6
Page 2
1931 WL 2573, 10 Ohio Law Abs. 82, 34 Ohio Law Rep. 303
(Cite as: 1931 WL 2573)
Receivers 323 €=114
323 Receivers
3231V Management and Disposition of Property
323IV(B) Supervision and Instructions of
Court
323k111 Instructions or Authority to Re-
ceiver to Act
323k114 k. Operation and Effect. Most
Cited Cases
When a receiver is ordered to do a particular thing,
there is vested in him implied and incidental au-
thority necessary to carry out the court's order.
Receivers 323 115
323 Receivers
3231V Management and Disposition of Property
3231V(B) Supervision and Instructions of
Court
323k115 k. Confirmation of Acts or Con-
tracts of Receiver. Most Cited Cases
Court has discretion by a subsequent order to sup-
plement authority of referee theretofore lacking, by
approving receiver's expenditure of money on prop-
erty without express authority from court.
*1 HISTORY:-—Action to foreclose a mortgage.
Motion to appoint a receiver allowed. Receiver
ordered to make repairs necessary to maintain the
property. Sheriff ordered to sell property and dis-
tribute proceeds. Sale made for $21,930 and con-
firmed. Receiver borrowed money from the Union
Trust Co. to make repairs without getting court au-
thority to make the loan, or giving notice to inter-
ested parties. Court decreed payment therefor,
$1173.37. Exceptions taken by American Savings
Bank Co., second mortgagee. Judgment affirmed.
Gabriel Leeb, for American Savings Bank.
Cannon, Spieth, Taggart, Spring & Annat, Cleve-
land, for Union Trust Co.
STATEMENT OF FACTS
This case is brought into the Court of Appeals
on a petition in error seeking a reversal of the order
of the Common Pleas Court relative to the taxing of
certain expenditures incurred by the receiver, as
costs of the case.
It appears that on October 29, 1929, the Union
Trust Co. filed its petition in the Common Pleas
Court praying for money, foreclosure and equitable
relief. The American Savings Bank Company, one
M. C. Barkin and others were made defendants. On
October 31, 1929, M. C. Barkin filed a motion for a
receiver. This motion was granted on November 4,
1929.
The order of the court appointing a receiver
reads in part as follows:
“It is therefore ordered that Selmo C. Glenn
upon his giving bond in the sum of $500, be and is
hereby appointed receiver to take charge of the
property described in the motion with full authority
to collect the rents and income thereof, and all per-
sons occupying said premises are hereby ordered to
pay all money now due or to become due as rental
or otherwise to the receiver herein until further or-
der of the court.
By virtue of authority hereby conferred to
make such expenditures, it shall be incumbent upon
the receiver to pay insurance premiums, water,
coal, gas and light bills, and make such repairs as
are necessary for the proper maintenance of the
property in his charge.”
The receiver qualified on November 6, 1929, A
decree entered on May 17, 1930, ordered the sheriff
to sell the property and distribute the proceeds
thereof as follows:
“1. The costs of the action, including the sum
of $97 to be paid plaintiff for the judicial sales cer-
tificate, and payment of the sheriff's appraisers.
2. Taxes and assessments due on said premises.
3. To the Union Trust Company, plaintiff, the
amount due it on its note,
© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.
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Page 4 of 6
Page 3
1931 WL 2573, 10 Ohio Law Abs. 82, 34 Ohio Law Rep. 303
(Cite as: 1931 WL 2573)
4. To the defendant, the amount due it on its
note.
To the rest of the lienholders in the order of
their priority as therein set forth.”
Pursuant to said decree, the sheriff offered the
premises for sale on July 18, 1930. The highest bid
was $21,930 and the property was accordingly sold
to the person who offered the highest bid for the
premises.
The sale was confirmed on July 22, 1930. On
August 4, 1930, the receiver filed his report and
also a motion to assess as court costs certain ex-
penditures for repairs. The final entry relative
thereto, was made Sept. 4, 1930, and is in part as
follows:
*2 “The court does further find that the Union
Trust Co., plaintiff herein, loaned the sum of Elev-
en Hundred Seventy-Three and 37.100 Dollars
($1,173.37) to the receiver for plumbing and fur-
nace repairs necessary to be made upon said
premises and for decorating the suites in the build-
ing on said premises without prior application by
the receiver to the court for authority to borrow said
money, and without prior notice to any of the
parties interested. It is therefore ordered, adjudged
and decreed that the sum of Thirteen Hundred Eight
and 37,100 Dollars ($1,308.37) be taxed as costs in
this action; of which sum $135 be paid to the said
Selmo C. Glenn, and $1,173.37 be paid to the Uni-
on Trust Company.”
The American Savings Bank Company, which
is the holder of a second mortgage on said
premises, took exception to the ruling of the court,
taxing these expenditures by the receiver which
went into the repair of the property as costs, and the
matter is now before us for determination of the
following questions:
1. Can money borrowed by a receiver, without
authority of the court and without prior notice to
the parties interested, be made a lien on the corpus
of the property?
2. Has the court the power to order such money
so borrowed, to be taxed as costs in the action, after
the final decree of foreclosure was already entered
in the case and a sale had thereunder?
It is claimed that the interjection of the addi-
tional sum of $1,173.37 to the original costs will
deprive the American Savings Bank Company of
that sum of money by displacing its mortgage lien
to that extent upon the proceeds of the sheriffs sale,
inasmuch as the said proceeds were merely suffi-
cient to pay the American Savings Bank Company
the amount found due to it.
Sec 11897 GC, entitled “Powers of Receivers”
reads as follows:
“Under the control of the court, the receiver
may bring and defend actions in his own name, as
teceiver, take and keep possession of the property,
receive rents, collect, compound for, and comprom-
ise demands, make transfers and generally do such
acts representing the property as the court author-
izes.”
LEVINE, J.
It will be noticed that certain specified powers
are vested in the receiver, such as “take and keep
possession of the property, receive rents, etc.”The
power to borrow money for the purpose of making
repairs is not specified in this section and would, of
course, have to be embraced in the phrase “and
generally do such acts respecting the property, as
the court authorizes.”
From the various authorities cited by both
sides, we are convinced that the orderly practice
which should be followed by a receiver when ever
he finds it necessary to borrow money, even for the
purpose of carrying out the orders of the court, if
the amount to be expended is a substantial sum, is
to first apply to the court for authority so to do and
that notice of said application be given to the inter-
ested parties. The power of a receiver to borrow
© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.
http://web2.westlaw.com/print/printstream.aspx?prft=HTMLE&destination=atp&sv=Split...
2/19/20081931 WL 2573
Page 5 of 6
Page 4
1931 WL 2573, 10 Ohio Law Abs. 82, 34 Ohio Law Rep. 303
(Cite as: 1931 WE 2573)
money even for the purpose of preserving the prop-
erty entrusted into his hands, is not inherent in the
receiver, but is so vested in him by the authority of
the court. Since the vesting of authority in the re-
ceiver to borrow money is a judicial act, the inter-
ested parties are entitled to notice so that they may
oppose it, and so that they may have an opportunity
to show that it is not to the best interests of the
parties involved that such authority be granted.
*3 Persons holding mortgages or possesing li-
ens on the property entrusted to a receiver should
not be displaced under the guise of expenditures
even though necessary without first giving the
parties interested, an opportunity to have a full
hearing before the court as to the wisdom of vesting
authority in the receiver to borrow money for the
purpose of making such expenditures.
In the case at bar, the court in express language
made it incumbent upon the receiver to make such
repairs as are necessary for the proper maintenance
of the property in his charge. Had the receiver pro-
ceeded under this authority to make necessary re-
pairs upon credit, the persons extending credit to
the receiver could reasonably depend upon the
journal entry, which in no uncertain terms com-
manded the receiver to make such repairs. The
property in question was in a badly neglected state,
and there is no doubt that the premises would be
entirelly uninhabitable unless necessary repairs
were made. The repairs so made by the expenditure
of money borrowed by the receiver, undoubtedly
went into enhancement of the value of the property.
We find that the expenditures which were ne-
cessary were made in good faith and for the benefit
of the estate; that the repairs added to the value of
the property and to the security of the lienholders,
including the American Savings Bank Co. The re-
ceiver was ordered by the court to “make such re-
pairs as are necessary for the proper maintenance of
the property in his charge.”The ways and means of
accomplishing this result were not provided for in
the court's order. It is not unreasonable to say that
when a receiver is ordered to do a particular thing,
there is vested in him implied and incidental au-
thority necessary to carry out the court's order.
The case of Haines v Buckeye Wheel Co., 224
Fed., 289, seems to us in point. It holds as follows:
“A naked order of the court requiring affirmat-
ive action of any kind by receiver, carries with it by
implication the power to do whatever is reasonably
necessary in its performance * * *.”
We are not putting our stamp of approval upon
indiscriminate expenditures of money by receivers
without first having secured express authority from
the court so to do, It seems to us that sound practice
would require the enactment of rules by the Com-
mon Pleas Court for the government and guidance
of receivers, and that such rules should be strictly
observed. The receiver should not be allowed to
keep the court in the dark during the period of his
receivership, concerning the state of the property;
he should not be permitted to wait until the filing of
his final report before he discloses the extent of the
expenditures made. The provisions of the code, as
well as the general chancery practice, contemplate
that the receiver be subject to the control of the
court. Such control over the receiver cannot be effi-
ciently exercised by the court unless the receiver be
required to keep the court fully informed concern-
ing the exact state for the receivership and its vari-
ous developments, if any.
*4 We gather, however, from the authorities
cited, that a large discretion is vested in the court
and that each case, therefore, must be made to rest
upon its own footing. If in the opinion of the court
the ends of justice so require it, it may in its discre-
tion supplement the authority heretofore lacking, by
a subsequent order. The fact that the order was
made by the court after the final decree of foreclos-
ure was already entered, and a sale had thereunder
cannot bar the exercise of such discretion.
In the case at bar, it appearing to this court that
the order of appointment was not only broad to au-
thorize the making of necessary repairs, but that the
© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.
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2/19/2008. Page 6 of 6
e ®
1931 WL 2573 Page 5
1931 WL 2573, 10 Ohio Law Abs. 82, 34 Ohio Law Rep. 303
{Cite as: 1931 WL 2573)
same was tantamount to an order upon the receiver
to make such necessary repairs, and it also appear-
ing that the repairs were made in good faith and
that they were necessary, and went to the enhance-
ment of the value of the property, we are of the
opinion that the Common Pleas Court did not abuse
it discretion in granting the motion of the receiver
to tax the amount for the expenditures so made as
costs in the action.
Holding as we do, the judgment of the Com-
mon Pleas Court is affirmed.
WEYGANDT, J, concurs.
VICKERY, PJ, not participating.
Ohio App. 8 Dist. Cuyahoga Co. 1931.
American Savings Bank Co. v. Union Trust Co.
1931 WL 2573, 10 Ohio Law Abs. 82, 34 Ohio
Law Rep. 303
END OF DOCUMENT
© 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works.
http://web2.westlaw.com/print/printstream.aspx ?prft-HTMLE&destination=atp&sv=Split... 2/19/2008
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IN THE COURT OF COMMON PLEAS FOR DELAWARE COUNTY, OHIO KBI CONSTRUCTION, ET AL., Plaintiffs, : CASENO.: 07 CV E09 1079 v. b00z DELAWARE LODGE NO. 76 : JUDGE W. DUNCAN WHITNEY BENEVOLENT AND PROTECTIVE = ORDER OF ELKS OF THE UNITED STATES OF AMERICA, ET AL., Defendants. ‘OU 22 aad Lunds S¥2TTHOWNOD OIHO “ALK re RECEIVER’S MOTION FOR AUTHORITY TO BORROW MONEYS 9E NOW COMES the Receiver, by and through counsel, and herein requests an Order of the Court authorizing it to borrow moneys up to $30,000.00 from secured creditor Delaware County Bank & Trust, and to provide administrative priority to Delaware County Bank & Trust, to the extent of the moneys advanced. The Receiver incorporates the attached memorandum in support. Respectfully submitted, (0018262) Aaron C, Firstenberger (0072261) Attorneys for Receiver Strip, HOPPERS, LEITHART, MCGRATH & TERLECKY Co., L.P.A. 575 South Third Street Columbus, Ohio 43215 (614) 228-6345 (telephone) (614) 228-6369 (facsimile) {AQUA ANA = ® 00074148944 wMOMS Page | of 4 [RARWECEIVERSHIPSIDelaware Lage No_76 (Eths)inotion to Borrow 071501 oeMEMORANDUM IN SUPPORT. The Receiver requests permission from this Court to borrow moneys up to $30,000.00, so as to permit the Receiver to simply meet business obligations necessary to maintain the value of the assets. Specifically, this money will be used to pay utilities, insurance, and other normal administrative and operating expenses. At current, the receivership does not have adequate funds to meet these obligations. Within its accountings to the Court, the Receiver will produce records as to the moneys advanced, and expenditures made from that fund. The powers of the Receiver herein are governed by R.C. §2735.04, which provides: “Under the control of the court which appointed him, as provided in section 2735.01 of the Revised Code, a receiver may bring and defend actions in his own name as receiver, 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.” R.C. §2735.04 (emphasis added). The power of a receiver flows from the order of the court which appointed the receiver. The purpose of this receivership, as authorized by this Court, is to preserve the assets of the estate. Ohio courts have addressed the authority of the receiver to borrow money for the purpose of making repairs to the property which was the subject of the receivership “The power of a receiver to borrow money even for the purpose of preserving the property entrusted into his hands, is not inherent in the receiver, but is so vested in him by the authority of the court.” In American Savings Bank Co. v. Union Trust Co., 1931 WL 2573 (Ohio App. 8 Dist.) at *2 (see attached), rev'd on other grounds, 124 Ohio St. 126 (1931). The American Savings court found that the expenditures were necessary, benefited the estate, and added to the value of the property Page 2 of 4 [RARIRECEIVERSHIPSDelavare Lodge No. 16 (Elhs\nolion to barra 021508 doeand security of the creditors. Id. at *3. Thus, the court approved the expenditures made by the receiver, and his borrowing money to pay for the expenditures. Id. at *4, By permitting the Receiver to borrow up to $30,000.00, the value of the assets will be maintained at their maximum value, thus providing a benefit to all creditors. However, no party will lend the Receiver any money unless it has the assurance that it will be paid as an administrative priority at such time as disbursements are made. For these reasons, the Receiver requests that this Court enter an Order Approving Receiver’s Motion To Borrow Moneys up to $30,000.00 from secured creditor Delaware County Bank & Trust, for the payment of vital business obligations necessary to maintain the value of ' the assets, and providing further that those moneys advanced to the Receiver will receive an administrative priority as to repayment from the liquidation of assets. Respectfully submitted, (0018262) er (0072261) Attorneys for Receiver Strip, Hoppers, LEITHART, MCGRATH & TERLECKY Co., L.P.A. 575 South Third Street Columbus, Ohio 43215 (614) 228-6345 (telephone) (614) 228-6369 (facsimile) Page 3 of 4 [RARIRECEIVERSHIPSWDelavare Lodge No, 76 (Elks) to bortow 021508 doeal CERTIFICATE OF SERVICE The undersigned hereby certifies that the aforementioned Receiver’s Motion for Authority to Borrow Moneys has been served via ordinary United States Mail, postage prepaid, on this wee. of February, 2008 upon: Scott D. Eickelberger, Esquire Kincaid Taylor & Geyer P.O. Box 1030 Zanesville, OH 43702-1030 Attorney for Plaintiffs Charles M. Diersing, Esquire P.O. Box 623 Lewis Center, OH 43035 Attorney for Delaware County Bank & Trust Company Christopher D. Betts, Esquire 140 North Sandusky Street Delaware, OH 43015 Attorney for Delaware County Treasurer Delaware Lodge No. 76 Benevolent and Protective Order Of Elks of The United States of America 1502 West William Street Delaware, OH 43015 Aaron C. re Page 4 of 4 [RAWORECEIVERSHIPS\Delaware Lodge No. 76 (Etks)\notion to borrow 024508 docWestlaw. 1931 WL 2573 1931 WL 2573, 10 Ohio Law Abs. 82, 34 Ohio Law Rep. 303 {Cite as: 1931 WL 2573) Pp AMERICAN SAVINGS BANK CO v. UNION TRUST CO Ohio App. 8 Dist. Cuyahoga Co. 1931. Court of Appeals of Ohio, Eighth District, Cuyahoga County. AMERICAN SAVINGS BANK CO v. UNION TRUST CO Decided Feb. 9, 1931. West Headnotes Mortgages 266 €=473 266 Mortgages 266X Foreclosure by Action 266X(I) Receiver 266k473 k. Management and Disposition of Property and Proceeds by Receiver. Most Cited Cases Receivers 323 €=115 323 Receivers 3231V Management and Disposition of Property 323IV(B) Supervision and Instructions of Court 323k115 k. Confirmation of Acts or Con- tracts of Receiver. Most Cited Cases In view of Gen.Code, § 11897, where court in ap- pointing receiver authorized receiver to make such Tepairs as were necessary for proper maintenance of property, court did not abuse its discretion in grant- ing receiver's motion to tax as costs amount of money borrowed for expenditure or necessary re- pairs to a furnace and for decorating suites without prior application for authority from court, notwith- standing former decree of foreclosure and confirm- ation of sale thereunder, where repairs were neces- sary, made in good faith and enhanced value of the property. Mortgages 266 €=473 Page 2 of 6 Page 1 266 Mortgages 266X Foreclosure by Action 266X(I) Receiver 266k473 k. Management and Disposition of Property and Proceeds by Receiver. Most Cited Cases Receivers 323 & 115 323 Receivers 3231V Management and Disposition of Property 323IV(B) Supervision and Instructions of Court 323k115 k. Confirmation of Acts or Con- tracts of Receiver. Most Cited Cases Final decree of foreclosure and sale had thereunder, would not bar exercise of court's discretion in mak- ing a subsequent order approving expenditure of money by receiver on property without express au- thority from court. Receivers 323 €=97 323 Receivers 3231V Management and Disposition of Property 3231V(A) Administration in General 323k97 k. Loans and Advances to Receiv- er, and Securities Therefor. Most Cited Cases Power of receiver to borrow money for purpose of Preserving property is not inherent in receiver, but is vested in him by authority of the court. Receivers 323 €=113 323 Receivers 3231V Management and Disposition of Property 3231V(B) Supervision and Instructions of Court 323k111 Instructions or Authority to Re- ceiver to Act 323k113 k. Proceedings to Obtain. Most Cited Cases Interested parties are entitled to notice of proceed- ing to vest authority in receiver to borrow money for purpose of making expenditures on property. © 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works. http://web2.westlaw.com/print/printstream.aspx?prft=HTMLE&destination=atp&sv=Split.... 2/19/20081931 WE 2573 Page 3 of 6 Page 2 1931 WL 2573, 10 Ohio Law Abs. 82, 34 Ohio Law Rep. 303 (Cite as: 1931 WL 2573) Receivers 323 €=114 323 Receivers 3231V Management and Disposition of Property 323IV(B) Supervision and Instructions of Court 323k111 Instructions or Authority to Re- ceiver to Act 323k114 k. Operation and Effect. Most Cited Cases When a receiver is ordered to do a particular thing, there is vested in him implied and incidental au- thority necessary to carry out the court's order. Receivers 323 115 323 Receivers 3231V Management and Disposition of Property 3231V(B) Supervision and Instructions of Court 323k115 k. Confirmation of Acts or Con- tracts of Receiver. Most Cited Cases Court has discretion by a subsequent order to sup- plement authority of referee theretofore lacking, by approving receiver's expenditure of money on prop- erty without express authority from court. *1 HISTORY:-—Action to foreclose a mortgage. Motion to appoint a receiver allowed. Receiver ordered to make repairs necessary to maintain the property. Sheriff ordered to sell property and dis- tribute proceeds. Sale made for $21,930 and con- firmed. Receiver borrowed money from the Union Trust Co. to make repairs without getting court au- thority to make the loan, or giving notice to inter- ested parties. Court decreed payment therefor, $1173.37. Exceptions taken by American Savings Bank Co., second mortgagee. Judgment affirmed. Gabriel Leeb, for American Savings Bank. Cannon, Spieth, Taggart, Spring & Annat, Cleve- land, for Union Trust Co. STATEMENT OF FACTS This case is brought into the Court of Appeals on a petition in error seeking a reversal of the order of the Common Pleas Court relative to the taxing of certain expenditures incurred by the receiver, as costs of the case. It appears that on October 29, 1929, the Union Trust Co. filed its petition in the Common Pleas Court praying for money, foreclosure and equitable relief. The American Savings Bank Company, one M. C. Barkin and others were made defendants. On October 31, 1929, M. C. Barkin filed a motion for a receiver. This motion was granted on November 4, 1929. The order of the court appointing a receiver reads in part as follows: “It is therefore ordered that Selmo C. Glenn upon his giving bond in the sum of $500, be and is hereby appointed receiver to take charge of the property described in the motion with full authority to collect the rents and income thereof, and all per- sons occupying said premises are hereby ordered to pay all money now due or to become due as rental or otherwise to the receiver herein until further or- der of the court. By virtue of authority hereby conferred to make such expenditures, it shall be incumbent upon the receiver to pay insurance premiums, water, coal, gas and light bills, and make such repairs as are necessary for the proper maintenance of the property in his charge.” The receiver qualified on November 6, 1929, A decree entered on May 17, 1930, ordered the sheriff to sell the property and distribute the proceeds thereof as follows: “1. The costs of the action, including the sum of $97 to be paid plaintiff for the judicial sales cer- tificate, and payment of the sheriff's appraisers. 2. Taxes and assessments due on said premises. 3. To the Union Trust Company, plaintiff, the amount due it on its note, © 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works. http://web2.westlaw.com/print/printstream.aspx?prft=HTMLE&destination=atp&sv=Split... 2/19/20081931 WL 2573 Page 4 of 6 Page 3 1931 WL 2573, 10 Ohio Law Abs. 82, 34 Ohio Law Rep. 303 (Cite as: 1931 WL 2573) 4. To the defendant, the amount due it on its note. To the rest of the lienholders in the order of their priority as therein set forth.” Pursuant to said decree, the sheriff offered the premises for sale on July 18, 1930. The highest bid was $21,930 and the property was accordingly sold to the person who offered the highest bid for the premises. The sale was confirmed on July 22, 1930. On August 4, 1930, the receiver filed his report and also a motion to assess as court costs certain ex- penditures for repairs. The final entry relative thereto, was made Sept. 4, 1930, and is in part as follows: *2 “The court does further find that the Union Trust Co., plaintiff herein, loaned the sum of Elev- en Hundred Seventy-Three and 37.100 Dollars ($1,173.37) to the receiver for plumbing and fur- nace repairs necessary to be made upon said premises and for decorating the suites in the build- ing on said premises without prior application by the receiver to the court for authority to borrow said money, and without prior notice to any of the parties interested. It is therefore ordered, adjudged and decreed that the sum of Thirteen Hundred Eight and 37,100 Dollars ($1,308.37) be taxed as costs in this action; of which sum $135 be paid to the said Selmo C. Glenn, and $1,173.37 be paid to the Uni- on Trust Company.” The American Savings Bank Company, which is the holder of a second mortgage on said premises, took exception to the ruling of the court, taxing these expenditures by the receiver which went into the repair of the property as costs, and the matter is now before us for determination of the following questions: 1. Can money borrowed by a receiver, without authority of the court and without prior notice to the parties interested, be made a lien on the corpus of the property? 2. Has the court the power to order such money so borrowed, to be taxed as costs in the action, after the final decree of foreclosure was already entered in the case and a sale had thereunder? It is claimed that the interjection of the addi- tional sum of $1,173.37 to the original costs will deprive the American Savings Bank Company of that sum of money by displacing its mortgage lien to that extent upon the proceeds of the sheriffs sale, inasmuch as the said proceeds were merely suffi- cient to pay the American Savings Bank Company the amount found due to it. Sec 11897 GC, entitled “Powers of Receivers” reads as follows: “Under the control of the court, the receiver may bring and defend actions in his own name, as teceiver, take and keep possession of the property, receive rents, collect, compound for, and comprom- ise demands, make transfers and generally do such acts representing the property as the court author- izes.” LEVINE, J. It will be noticed that certain specified powers are vested in the receiver, such as “take and keep possession of the property, receive rents, etc.”The power to borrow money for the purpose of making repairs is not specified in this section and would, of course, have to be embraced in the phrase “and generally do such acts respecting the property, as the court authorizes.” From the various authorities cited by both sides, we are convinced that the orderly practice which should be followed by a receiver when ever he finds it necessary to borrow money, even for the purpose of carrying out the orders of the court, if the amount to be expended is a substantial sum, is to first apply to the court for authority so to do and that notice of said application be given to the inter- ested parties. The power of a receiver to borrow © 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works. http://web2.westlaw.com/print/printstream.aspx?prft=HTMLE&destination=atp&sv=Split... 2/19/20081931 WL 2573 Page 5 of 6 Page 4 1931 WL 2573, 10 Ohio Law Abs. 82, 34 Ohio Law Rep. 303 (Cite as: 1931 WE 2573) money even for the purpose of preserving the prop- erty entrusted into his hands, is not inherent in the receiver, but is so vested in him by the authority of the court. Since the vesting of authority in the re- ceiver to borrow money is a judicial act, the inter- ested parties are entitled to notice so that they may oppose it, and so that they may have an opportunity to show that it is not to the best interests of the parties involved that such authority be granted. *3 Persons holding mortgages or possesing li- ens on the property entrusted to a receiver should not be displaced under the guise of expenditures even though necessary without first giving the parties interested, an opportunity to have a full hearing before the court as to the wisdom of vesting authority in the receiver to borrow money for the purpose of making such expenditures. In the case at bar, the court in express language made it incumbent upon the receiver to make such repairs as are necessary for the proper maintenance of the property in his charge. Had the receiver pro- ceeded under this authority to make necessary re- pairs upon credit, the persons extending credit to the receiver could reasonably depend upon the journal entry, which in no uncertain terms com- manded the receiver to make such repairs. The property in question was in a badly neglected state, and there is no doubt that the premises would be entirelly uninhabitable unless necessary repairs were made. The repairs so made by the expenditure of money borrowed by the receiver, undoubtedly went into enhancement of the value of the property. We find that the expenditures which were ne- cessary were made in good faith and for the benefit of the estate; that the repairs added to the value of the property and to the security of the lienholders, including the American Savings Bank Co. The re- ceiver was ordered by the court to “make such re- pairs as are necessary for the proper maintenance of the property in his charge.”The ways and means of accomplishing this result were not provided for in the court's order. It is not unreasonable to say that when a receiver is ordered to do a particular thing, there is vested in him implied and incidental au- thority necessary to carry out the court's order. The case of Haines v Buckeye Wheel Co., 224 Fed., 289, seems to us in point. It holds as follows: “A naked order of the court requiring affirmat- ive action of any kind by receiver, carries with it by implication the power to do whatever is reasonably necessary in its performance * * *.” We are not putting our stamp of approval upon indiscriminate expenditures of money by receivers without first having secured express authority from the court so to do, It seems to us that sound practice would require the enactment of rules by the Com- mon Pleas Court for the government and guidance of receivers, and that such rules should be strictly observed. The receiver should not be allowed to keep the court in the dark during the period of his receivership, concerning the state of the property; he should not be permitted to wait until the filing of his final report before he discloses the extent of the expenditures made. The provisions of the code, as well as the general chancery practice, contemplate that the receiver be subject to the control of the court. Such control over the receiver cannot be effi- ciently exercised by the court unless the receiver be required to keep the court fully informed concern- ing the exact state for the receivership and its vari- ous developments, if any. *4 We gather, however, from the authorities cited, that a large discretion is vested in the court and that each case, therefore, must be made to rest upon its own footing. If in the opinion of the court the ends of justice so require it, it may in its discre- tion supplement the authority heretofore lacking, by a subsequent order. The fact that the order was made by the court after the final decree of foreclos- ure was already entered, and a sale had thereunder cannot bar the exercise of such discretion. In the case at bar, it appearing to this court that the order of appointment was not only broad to au- thorize the making of necessary repairs, but that the © 2008 Thomson/West. No Claim to Orig. U.S. Govt. Works. http://web2. westlaw.com/print/printstream.aspx?prft=HTMLE&destination=atp&sv=Split... 2/19/2008. Page 6 of 6 e ® 1931 WL 2573 Page 5 1931 WL 2573, 10 Ohio Law Abs. 82, 34 Ohio Law Rep. 303 {Cite as: 1931 WL 2573) same was tantamount to an order upon the receiver to make such necessary repairs, and it also appear- ing that the repairs were made in good faith and that they were necessary, and went to the enhance- ment of the value of the property, we are of the opinion that the Common Pleas Court did not abuse it discretion in granting the motion of the receiver to tax the amount for the expenditures so made as costs in the action. Holding as we do, the judgment of the Com- mon Pleas Court is affirmed. WEYGANDT, J, concurs. VICKERY, PJ, not participating. Ohio App. 8 Dist. Cuyahoga Co. 1931. American Savings Bank Co. v. Union Trust Co. 1931 WL 2573, 10 Ohio Law Abs. 82, 34 Ohio Law Rep. 303 END OF DOCUMENT © 2008 Thomson/West. No Claim to Orig. U.S. Govt. 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