Summary
holding trial court did not abuse its discretion in empowering receiver to perform actions specifically enumerated in R.C. 2735.04
Summary of this case from Clarkwestern Dietrich Bldg. Sys., LLC v. Certified Steel Stud Ass'nOpinion
No. 88-1660
Submitted April 16, 1991 —
Decided May 29, 1991.
Receivership — Courts vested with sound discretion to appoint a receiver — Appointment not disturbed unless there is a clear abuse of sound judicial discretion — R.C. 2735.04 — Powers a trial court may grant to a receiver — Responsibility to comply with a court order is on the party against whom the order is rendered.
APPEAL and CROSS-APPEAL from the Court of Appeals for Lake County, No. 12-178.
On July 2, 1985, the Attorney General of Ohio filed a complaint in the Lake County Common Pleas Court at the request of the Director of Environmental Protection. The named defendants were Robert E. Gibbs and Gibbs Industrials, Inc., as owners and operators of Gibbs Industrial Park (hereinafter "Gibbs"). The complaint sought permanent injunctive relief and civil penalties, alleging that Gibbs was causing a public nuisance by discharging raw or inadequately treated sewage from the industrial park into a nearby creek running through a residential neighborhood and into the Grand River. Specifically, the complaint charged Gibbs with discharging sewage into waters of the state without a permit, in violation of R.C. 6111.04, and burning materials without an air pollution permit, in violation of R.C. 3704.05(H). The industrial park itself consists of seven buildings, each having a number of bays. Gibbs leases these bays to small businesses such as machine shops and auto body repair shops.
On July 2, 1985, the same day the complaint was filed, the state also filed a motion for a preliminary injunction and memorandum in support thereof, seeking to prohibit Gibbs from placing sewage, industrial wastes, and/or other wastes in locations where they pollute the waters of Ohio, and from causing or allowing the open burning of any material in violation of the Ohio Revised Code. The trial court granted the preliminary injunction on September 10, 1985. This order of the trial court was agreed to by the parties, and enjoined Gibbs from discharging sewage from the industrial park into the waters of the state. In addition, the order required Gibbs to submit to the Ohio Environmental Protection Agency ("EPA") an application for a permit to construct a sewer line that would connect the industrial park with the city of Painesville sewer system, and to complete construction of the sewer line within forty-five days from the issuance of a permit by the EPA. The order also required Gibbs to install EPA-approved devices to stop the discharge of sewage off-site. Lastly, the order stipulated that a penalty of $500 would be imposed for each day of a violation of its terms.
On October 1, 1985, the state filed a motion to show cause why Gibbs should not be held in contempt of court for violating the preliminary injunction of September 10. On October 3, 1985, the trial court entered a judgment, agreed to by the parties as a settlement of the contempt charges, requiring Gibbs to store sewage in EPA-approved containers and to haul the sewage to approved sites. This judgment entry stipulated that any violation of the time deadlines contained therein would render Gibbs in contempt of court and result in a fine of $11,000 plus $500 per day thereafter for noncompliance.
On November 12, 1985, the state filed a second motion to show cause why Gibbs should not be held in contempt of court for violating the court orders of September 10 and October 3. On November 29, 1985, the trial court issued a judgment entry which was once again agreed to by the parties as a resolution of the contempt charges filed November 12. This judgment found Gibbs in contempt of both the preliminary injunction of September 10 and the judgment entry of October 3. Gibbs was found in contempt because he was storing sewage and other wastes at the industrial park in tanks not approved by the EPA; was hauling the sewage and other wastes to a site which had not previously been approved by the EPA; and had failed to file with the EPA any documentation, plans, data sheets or service agreements necessary for a permit to install a sanitary sewer extension and tie-in. This last requirement was required by a previous court order, and even though an October 24 order granted Gibbs an extension to accomplish said filing, Gibbs had not yet complied. As a result of being found in contempt, Gibbs was ordered to serve six days in county jail, and fined $20,000. The fine, however, was suspended pending the performance of the following acts by Gibbs: (1) to commence hauling of all sewage and other wastes generated at the industrial park to a site approved by the EPA and by a hauler approved by the EPA; and (2) to submit to the EPA by December 9, 1985 all documentation regarding a sanitary sewer tie-in with a municipal sewer system. The trial court also ordered that in all other respects, the two previous orders of September 10 and October 3 were to remain in full force and effect.
The action filed July 2, 1985 continued in other respects, with the state filing an amended complaint and Gibbs filing an answer thereto; interrogatories were propounded and requests for documents were made. On July 3, 1986, the trial court granted a motion by the state to compel discovery. On August 6, 1986, the state filed its third motion to show cause why Gibbs should not be held in contempt of court for violating the trial court's orders of September 10, 1985, October 24, 1985 and November 29, 1985. In its motion, the state charged the following violations of said orders: (1) that Gibbs still had not filed the appropriate documentation with the EPA regarding a sanitary sewer service agreement with an appropriate city or county authority; (2) had not installed or commenced operation of an improved treatment system, sanitary sewer system, and pump station; and (3) in spite of the fact that the Lake County Sanitary Engineer's office had provided Gibbs with a second notice of the county's pretreatment requirements, Gibbs had not complied with these regulations. The state also concurrently filed a motion to remove the suspension of the $20,000 fine imposed under the order of November 29, 1985.
At a hearing on September 8, 1986, the parties indicated to the court that the case had been settled, and the terms of the agreement were read into the record. This agreement was to resolve the contempt charges filed August 6, the complaint for injunctive relief and civil penalties filed July 2, 1985, and all other matters pending at that time. On September 17, 1986, the trial court issued a judgment entry and permanent injunction, as agreed to by the parties, granting judgment to the state on its complaint and all pending charges of contempt (hereinafter "consent order"). The consent order awarded the state a civil penalty of $170,000 and imposed a contempt fine of $30,000, with the sum of $200,000 to be paid according to an installment schedule. The consent order also called for the following: that the $200,000 judgment would be doubled if any installment were missed; that Gibbs would provide the state with two mortgages executed by Robert Gibbs' wife as security for the judgment; that Gibbs would bring the industrial park into compliance with R.C. Chapter 6111 in ninety days, specifying six alternative methods of achieving compliance; and that a stipulated penalty of $100,000 and a jail sentence of thirty days would be imposed in the event of Gibbs' failure to bring the industrial park into compliance within ninety days.
The methods or options afforded Gibbs to comply with R.C. Chapter 6111, to which he consented in the September 17, 1986 order, are contained in Paragraph 4 of the order, as follows:
"Within ninety (90) days of the filing of this Judgment Entry, Defendants shall bring the Gibbs Industrial Park into compliance with all applicable state and county laws and regulations pertaining to solid waste disposal, open burning, sewage treatment and disposal, industrial waste treatment and disposal, water supply and building codes relating to water usage and supply. * * *
"Defendants shall be deemed in compliance with this Paragraph, if they do any of the following:
"A. Install, construct and commence operation of a sewer line to Painesville City or to Lake County.
"B. Install, construct and commence operation of a method of sewage disposal acceptable to and approved by the Ohio Environmental Protection Agency.
"C. Convert the use of the Industrial Park to a non-water use operation which is in compliance with all Ohio and County laws and regulations pertaining to the supply of water and sanitary facilities.
"D. Sell the property to an informed buyer after the State of Ohio's Mortgage Deed applicable thereto has been satisfied.
"E. If a foreclosure action is filed in the Lake County Court of Common Pleas prior to ninety (90) days after the filing of this judgment entry for said Gibbs Industrial Park property on North Ridge Road and Defendants, or any immediate relative of Defendant, Robert E. Gibbs, are no longer involved in any manner in the management, control, operation, collection or receipt of rents, or maintenance of said Gibbs Industrial Park, then Paragraph 4 shall be considered complied with until such time as Defendants, or any immediate relative of Defendant, Robert E. Gibbs, should regain control over said Gibbs Industrial Park.
"F. Shut down said Gibbs Industrial Park and all non-complying business operations therein and permit no access thereto except for maintenance or storage and not reopen until compliance with Paragraph 4A-E herein."
The record clearly establishes that although Gibbs made attempts to comply with some of the options, none of them was even substantially satisfied.
In January 1987, the state filed an application for imposition of the jail sentence and civil penalty as set forth in the September 17, 1986 consent order. A hearing was held on March 10, 1987, at which time both parties offered evidence and arguments. Additionally, both parties filed post-hearing memoranda regarding the application for imposition of the jail time and civil penalties. Gibbs concluded his post-hearing brief with the following paragraph: "For the foregoing reasons, and based upon the evidence adduced at hearing, the defendant would respectfully request this Honorable Court to overrule the State's application, and, in the alternative, if necessary, to appoint a trustee to oversee and enforce the removal of any and all remaining non-complying businesses from the Industrial Park."
On April 3, 1987, the trial court issued a judgment entry finding Gibbs in contempt of the consent order of September 17, 1986. The court ordered Gibbs to report to jail to serve the full thirty days set forth in the consent order, and entered judgment against Gibbs in the amount of $500,000. This amount was comprised of the $200,000 penalty in the consent order, doubled as the payments were not made on time, and the stipulated penalty of $100,000. In addition, the trial court appointed a receiver to "implement, on behalf of this Court, the order of September 17, 1986, and this order. The receiver shall further collect all rents and monies due from the tenants and occupants, whether they are in compliance or not. The receiver shall account to the Court for all receipts and disbursements."
A careful reading of the entry filed by the trial judge clearly indicates the lax and evasive manner in which Gibbs treated the trial court's previous orders. The trial judge conducted a thorough review of his previous orders, and set forth Gibbs' response to each of them. It is sufficient for our purposes to state that the record bears out the trial judge's findings.
At the appellate level, Gibbs argued that the trial court erred in finding him in contempt of the September 17, 1986 consent order; and that the trial court was without jurisdiction to appoint a receiver for the industrial park. The appellate court rejected Gibbs' defense of substantial compliance with the September 17 consent order, in fact finding that Gibbs had not substantially complied with that order. Gibbs also claimed that the state was estopped or had waived noncompliance with the consent order because the state declined to act on Gibbs' suggestions as to alternative methods of bringing the industrial park into compliance. The court of appeals found this assertion was without merit, holding that Gibbs, and Gibbs alone, had the responsibility to comply with the consent order.
The appellate court dismissed Gibbs' contention that the trial court was without jurisdiction to appoint a receiver, but agreed that the trial court went beyond its authority in granting the receiver the power to collect rents from both complying and non-complying tenants. The appellate court therefore modified the trial court's judgment to "permit the appointment of a trustee or receiver * * * to pursue the removal of all non-complying tenants from the park without any involvement in the rental process."
This cause is now before this court pursuant to the allowance of a motion and cross-motion to certify the record.
Lee I. Fisher, attorney general, James O. Payne, Jr., J. Michael Marous and Lori A. Massey, for appellant and cross-appellee.
Baker, Hackenberg Collins Co., L.P.A., and James M. Speros, for appellees and cross-appellants.
The state has appealed that portion of the appellate court's decision which modifies the trial court's order to appoint a receiver. Specifically, the state argues that the appointment of a receiver is committed to the sound discretion of the trial court, and that it cannot be reversed on appeal absent a finding of an abuse of that discretion. In his cross-appeal to this court, Gibbs renews his arguments that he had substantially complied with the September 17 consent order, and that the state is estopped or has waived any charge of contempt for his non-compliance. Gibbs also argues that the trial court exceeded its authority to appoint a receiver when said court empowered the receiver to collect rents. We will first examine the state's appeal and arguments in support.
I
It has long been recognized that the trial court is vested with sound discretion to appoint a receiver. "The question of whether or not a receiver will be appointed in a given case is addressed to the sound discretion of the court under all the circumstances." South Main Akron, Inc. v. Lynn Realty, Inc. (App. 1951), 62 Ohio Law Abs. 103, 112, 106 N.E.2d 325, 331. See Consolidated Rail Corp. v. Fore River Ry. Co. (C.A.1, 1988), 861 F.2d 322, 326: "[T]he decision to appoint a receiver clearly lies within the discretion of the court. * * * Thus, the appointment will not be disturbed unless there is a clear abuse of sound judicial discretion." (Citations omitted.) See, also, 1 Clark, A Treatise on the Law and Practice of Receivers (3 Ed. 1959) 58-63, Section 53.
"The appointment of a receiver is, as a general rule, discretionary * * *.
"* * *
"A court in exercising its discretion to appoint or refuse to appoint a receiver must take into account all the circumstances and facts of the case, the presence of conditions and grounds justifying the relief, the ends of justice, the rights of all the parties interested in the controversy and subject matter, and the adequacy and effectiveness of other remedies." 65 American Jurisprudence 2d (1972) 873, 874, Receivers, Sections 19, 20.
Having set forth the appropriate standard of appellate review, we shall now determine whether the trial court abused its discretion in empowering the receiver with the authority to collect rents from all tenants of Gibbs' industrial park. R.C. 2735.01 governs the appointment of receivers, and provides in pertinent part:
"A receiver may be appointed by * * * the court of common pleas or a judge thereof * * * in causes pending in such courts respectively, in the following cases:
"* * *
"(C) After judgment, to carry the judgment into effect[.]"
In the present case, Gibbs filed a post-hearing brief on March 25, 1987 in which he requested that the trial court either overrule the state's application for contempt of the consent order, or "in the alternative, if necessary, * * * appoint a Trustee to oversee and enforce the removal of any and all remaining non-complying businesses from the Industrial Park." It is therefore clear that Gibbs not only consented to the appointment of a receiver, but also requested that one be appointed. Thus, given the statutory authority granted to the trial court to appoint a receiver, and Gibbs' request that one be appointed, we find that the trial court did not abuse its discretion in appointing a receiver to enforce the consent order of September 17, 1986. In its order appointing the receiver, the trial court specifically found Gibbs in contempt of this consent order, and imposed the stipulated penalty of thirty days in jail and $500,000 in penalties. Moreover, the insouciant manner in which Gibbs responded to the three contempt charges and the numerous court orders set forth above adequately provides a basis for the trial court to impose a receivership. Hence, the trial court was empowered to appoint a receiver "who shall implement, on behalf of this court, the order of September 17, 1986, and this order."
A "receiver" is defined as "[a]n indifferent person between the parties to a cause, appointed by the court to receive and preserve the property or fund in litigation, and receive its rents, issues, profits, and apply or dispose of them at the direction of the court * * *. A fiduciary of the court, appointed as an incident to other proceedings wherein certain ultimate relief is prayed. He is a trustee or ministerial officer representing the court * * *." Black's Law Dictionary (6 Ed. 1990) 1268.
The appellate court, however, ruled that the trial court erred not in appointing a receiver, but rather in granting the receiver the authority to collect rents from both complying and noncomplying tenants. In its judgment entry imposing a receivership, the trial court stated: "The receiver shall further collect all rents and monies due from the tenants and occupants, whether they are in compliance or not."
In resolving this issue, we find R.C. 2735.04 to be dispositive. R.C. 2735.04 sets forth the powers a trial court may grant to a receiver, as follows:
"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." (Emphasis added.)
We interpret this statute as enabling the trial court to exercise its sound judicial discretion to limit or expand a receiver's powers as it deems appropriate. Absent a showing that the trial court has abused that discretion, a reviewing court will not disturb the trial court's judgment. It naturally follows that Gibbs would have to demonstrate that the trial court abused its discretion when it empowered the receiver to collect rents. This court has consistently stated that an abuse of discretion is more than an error of law; it implies an unreasonable, arbitrary or unconscionable attitude on the part of a trial court. See In re Jane Doe 1 (1991), 57 Ohio St.3d 135, 137, 566 N.E.2d 1181, 1184. Upon our consideration of the record, we cannot say that Gibbs has met this burden. Because R.C. 2735.04 specifically empowers a trial court to authorize a receiver to collect rents, and given the manner in which Gibbs ignored the trial court's previous orders, we find the trial court did not abuse its discretion in empowering the receiver to collect all rents. We therefore reverse the court of appeals on this issue.
II
In his cross-appeal to this court, Gibbs argues that he had substantially complied with the September 17, 1986 consent order, and therefore the trial court erred in finding him in contempt of that order. Gibbs also contends that under the doctrine of estoppel and waiver, the state is precluded from any challenge for his noncompliance with the consent order. We find these assertions to be without merit.
In support of his argument that the trial court should not have found him in contempt, Gibbs maintains that he made reasonable efforts which amounted to substantial compliance; that the underlying consent order of September 17, 1986 was ambiguous; and finally that he cannot be held in contempt for noncompliance with the consent order because such noncompliance was the result of acts of others over which he had no control, i.e., the tenants of the industrial park.
We reject Gibbs' argument that substantial compliance with the consent order precludes a finding of contempt. "This court will not reverse the decision of the court below in a contempt proceeding in the absence of a showing of an abuse of discretion. See Cady v. Cleveland Worsted Mills Co. (1933), 126 Ohio St. 171. " State, ex rel. Ventrone, v. Birkel (1981), 65 Ohio St.2d 10, 11, 19 O.O. 3d 191, 417 N.E.2d 1249, 1250. See, also, Planned Parenthood Assn. of Cincinnati, Inc. v. Project Jericho (1990), 52 Ohio St.3d 56, 61, 556 N.E.2d 157, 163. The record demonstrates that Gibbs admitted that one third of his tenants were in violation of the consent order, and that thirteen businesses with approximately thirty employees were operating in violation of the consent order. Likewise, the record is replete with examples of Gibbs' noncompliance. We therefore agree with both lower courts that Gibbs has not demonstrated substantial compliance.
Gibbs next asserts that the consent order of September 17, 1986 was ambiguous, and therefore cannot provide a basis for contempt. This argument was not raised in the appellate court, and is therefore waived. See State v. Comen (1990), 50 Ohio St.3d 206, 211, 553 N.E.2d 640, 646. Moreover, we find it disingenuous to assert that this consent order is somehow ambiguous. Both parties agreed to the order as a settlement of all disputes, and when the agreement was read into the record Gibbs clearly expressed that he fully understood the agreement. Gibbs cannot now complain that the consent order was ambiguous, nor that he misunderstood its contents.
Lastly, we are not persuaded by Gibbs' assertion that he cannot be held in contempt when he had no control over the actions of his tenants. The responsibility to comply with a court order is placed directly upon the party against whom the order is rendered. In this regard, Gibbs' claim that the state is estopped or has waived any challenge as to the consent order is also without merit. For example, Gibbs claims that the EPA's refusal to define the term "non-water use" as set forth in the consent order amounts to interference with his efforts to comply with the consent order. Gibbs also advances the argument that the EPA is somehow guilty of misconduct in refusing to participate in his efforts to comply with the consent order. We agree with the court of appeals that "[t]he doctrines of waiver and estoppel are wholly inapplicable" in this case. The duty to comply with a court order lies with the party to whom the order is addressed, and nowhere else.
For all the above reasons, we determine that the trial court did not abuse its discretion in finding Gibbs in contempt of the consent order issued by that court on September 17, 1986. The court of appeals' judgment is reversed in part, and affirmed in part. The trial court's judgment is hereby reinstated in its entirety.
Judgment reversed in part and affirmed in part.
MOYER, C.J., SWEENEY, HOLMES, DOUGLAS, WRIGHT and H. BROWN, JJ., concur.