GRAND ARCADE CONDOMINIUM OWNERS ASSOCIATION INC v. GA 130 (2019)

JOURNAL ENTRY AND OPINION

{¶1} This case came to be heard upon the accelerated calendar pursuant to App.R. 11.1 and Loc.App.R. 11.1. Plaintiff-appellant Grand Arcade Condominium Owners' Association, Inc. (“the Association”) is a corporate entity created to manage 99 condominium units in the Grand Arcade, Waring Block, Klein-Marks, and Blair Block buildings in Cleveland.

{¶2} Defendant-appellee GA 130, L.L.C. (“GA 130”) owns the condominium unit known as 408 West St. Clair Avenue, #130, Cleveland, OH 44113 (“the unit”) in the Grand Arcade Building. By virtue of GA 130's ownership of the unit, it is a member of the Association and subject to the corresponding Declaration, Bylaws, and Rules.

{¶3} Defendant-appellee GA Storage, L.L.C. (“GA Storage”) is a limited liability company and holds a mortgage against the unit.

{¶4} The Association appeals from the trial court's order denying its motion to appoint a receiver, arguing that the trial court misinterpreted R.C. 5311.18(B)(2) and ignored this court's binding precedent.

{¶5} For the reasons that follow, we reverse and remand for the trial court to appoint a receiver.

Procedural and Substantive History

{¶6} On November 3, 2006, the titled owner of the property was West Sixth Associates Limited Partnership (“West Sixth”). On that date, West Sixth granted a mortgage against the unit to GA Storage. The mortgage secures payment on a $ 1,561,523.23 note dated November 1, 2006.

{¶7} On May 5, 2011, West Sixth conveyed the unit to Grand Arcade, Ltd. On August 18, 2014, Grand Arcade, Ltd. conveyed the unit to GA 130. GA 130 then granted a second mortgage to GA Storage.

{¶8} On October 24, 2016, the Association commenced a foreclosure action against GA 130 as the owner of the unit and GA Storage as the holder of the first mortgage against the unit.

{¶9} On June 15, 2018, the Association filed a motion for the appointment of a receiver. GA 130 and GA Storage each filed briefs in opposition to the motion. On August 29, 2018, the trial court denied the motion. The Association appealed, presenting one assignment of error for our review.

{¶10} The instant case stems from a dispute surrounding a 2013 assessment issued to condominium owners, including GA 130, in connection with a window replacement project. This court determined that this assessment was valid. Grand Arcade, Ltd. v. Grand Arcade Condo. Owners' Assn., 8th Dist. Cuyahoga No. 104890, 2017-Ohio-2760, 2017 WL 1955287. The Association sought to enforce the assessment against GA 130 and filed a certificate of lien on the unit to secure payment on the assessments pursuant to R.C. 5311.18. On October 24, 2016, the Association filed a foreclosure complaint against GA 130. The complaint sought to foreclose on the previously recorded lien. The matter was stayed until May 22, 2018, while the appeal in Grand Arcade, Ltd. v. Grand Arcade Condo Owners' Assn. was pending.

{¶11} On June 15, 2018, the Association filed a motion for appointment of receiver. GA Storage and GA 130 opposed this motion. GA 130 argued that it had voluntarily tendered the amounts that came due and owing for monthly expenses to the Association but the Association refused to accept these payments. On June 29, 2018, the Association moved for leave to file a reply brief to the opposition motions, seeking additional time to respond to the arguments raised in those motions.

{¶12} On August 29, 2018, the trial court issued an order denying the Association's motion for appointment of receiver. The trial court also issued an order stating that the Association's motion for leave to file a reply brief was granted and deemed timely filed, although the Association had not filed a separate reply brief.

{¶13} On August 30, 2018, GA Storage filed a cross-claim against GA 130, asserting that it holds two mortgages against the unit — the original and undischarged mortgage granted by West Sixth in 2006 and the mortgage granted by GA 130.

{¶14} The Association filed a notice of appeal on September 28, 2018. On November 1, 2018, GA Storage filed a motion to dismiss the appeal, alleging that the denial of a motion to appoint a receiver is not a final appealable order. The Association opposed this motion. On December 19, 2018, this court found that the denial of a motion to appoint a receiver “constitutes a final appealable order when the statute provides the party with the right to a receiver,” and because “R.C. 5311.18(B)(2) provides for the appointment of a receiver on behalf of a condominium owner's association in a foreclosure,” the denial of the motion to appoint a receiver in this case was a final appealable order.

Law and Analysis

{¶15} The Association presents one assignment of error for our review, arguing that the trial court abused its discretion in denying the Association its mandatory statutory right to the appointment of a receiver set forth in R.C. 5311.18.

{¶16} A trial court's decision to appoint a receiver is within its sound discretion and will not be disturbed absent an abuse of that discretion. Grand Arcade Condo. Owners' Assn. v. GA 110, L.L.C., 8th Dist. Cuyahoga No. 105619, 2017-Ohio-8736, 2017 WL 5904780, ¶ 19, citing Jamestown Village Condominium Owners Assn. v. Mkt. Media Research, 96 Ohio App.3d 678, 689, 645 N.E.2d 1265 (8th Dist.1994), citing State ex rel. Celebrezze v. Gibbs, 60 Ohio St.3d 69, 73, 573 N.E.2d 62 (1991). An abuse of discretion implies that the trial court decision was unreasonable, arbitrary, or unconscionable. Magano v. 1033 Water Street, L.L.C., 8th Dist. Cuyahoga No. 106861, 2018-Ohio-5349, 2018 WL 6928286, ¶ 11, citing Ginn v. Stonecreek Dental Care, 12th Dist. Fayette Nos. CA2015-01-001 and CA2015-01-002, 2015-Ohio-4452, 2015 WL 6472584, ¶ 11.

{¶17} R.C. 5311.18(B)(1) states:

The lien described in division (A)(1) of this section is prior to any lien or encumbrance subsequently arising or created except liens for real estate taxes and assessments of political subdivisions and liens of first mortgages that have been filed for record and may be foreclosed in the same manner as a mortgage on real property in an action brought on behalf of the unit owners association * * *.

{¶18} R.C. 5311.18(B)(2) states:

In a foreclosure action a unit owners association commences pursuant to division (B)(1) of this section or a foreclosure action the holder of a first mortgage or other lien on a unit commences, the owner of the unit, as the defendant in the action, shall be required to pay a reasonable rental for the unit during the pendency of the action. The unit owners association or the holder of the lien is entitled to the appointment of a receiver to collect the rental. Each rental payment a receiver collects during the pendency of the foreclosure action shall be applied first to the payment of the portion of the common expenses chargeable to the unit during the foreclosure action.

{¶19} Unlike the general receivership statute, R.C. 2735.01, the condominium statute provides that a condominium association or the holder of a first mortgage who has commenced a foreclosure action pursuant to R.C. 5311.18 is entitled to the appointment of a receiver. R.C. 5311.18(B)(2). Further, this court has interpreted the statutory language regarding this entitlement to be mandatory. GA 110, L.L.C., 8th Dist. Cuyahoga No. 105619, 2017-Ohio-8736, at ¶ 21, citing Jamestown Village Condominium Owners Assn., 96 Ohio App.3d at 691, 645 N.E.2d 1265.

{¶20} In the GA 110 case,¹ this court affirmed the appointment of a receiver. The Association argues that the instant case presents the “procedural converse” of the GA 110 case because here, the trial court denied the Association's motion for an appointment of a receiver, ignoring the plain language of R.C. 5311.18(B)(2) and this court's case law. We agree.

{¶21} The plain language of the statute provides that when a condominium association or the holder of a first mortgage commences a foreclosure action against the unit owner, the unit owner “shall be required to pay a reasonable rental for the unit during the pendency of the action,” and the condominium association or lienholder “is entitled to the appointment of a receiver to collect the rental.” R.C. 5311.18(B)(2). Here, the condominium association commenced a foreclosure action pursuant to the statute and is therefore entitled to the appointment of a receiver.

{¶22} GA 130 and GA Storage both argue that GA Storage's first mortgage lien has priority over the Association's assessment lien, and therefore, GA Storage's opposition to the appointment of a receiver has priority. R.C. 5311.18(B)(1) provides that a condominium association's lien under section (A)(1) “is prior to any lien or encumbrance subsequently arising or created except liens for real estate taxes and assessments of political subdivisions and liens of first mortgages that have been filed for record * * *.” The Association does not challenge GA Storage's priority. Likewise, we acknowledge that GA Storage is a first mortgage lienholder and, pursuant to R.C. 5311.18(B)(1), its mortgage has priority over the Association's lien. We do not find that this priority in any way implicates the Association's entitlement to the appointment of a receiver. While the statute explicitly provides that GA Storage's mortgage has priority over the Association's lien, nothing in the statutory language supports GA Storage's assertion that it also “has priority” to oppose the appointment of a receiver. For these reasons, we sustain the Association's sole assignment of error.

{¶23} Judgment reversed and remanded. This case is remanded to the trial court for proceedings consistent with this opinion.

FOOTNOTES

1.   In this case, GA 110, L.L.C. was the property owner, but the facts and parties otherwise mirror the instant case.

RAYMOND C. HEADEN, J.:

ANITA LASTER MAYS, P.J., and MICHELLE J. SHEEHAN, J., CONCUR