When Entering Into Litigation Affecting Real Property, Done Limit Your Options

A case decided in July last year, 2115-2121 Ontario Bldg., L.L.C. v. Anter, 2013 Ohio 2995 (8th Dist. Ct. of App., Cuyahoga Cty.) illustrates perfectly the need to not limit your options when initiating litigation, and the need to remain consistent with the path you do elect to follow.


Certain property in downtown Cleveland known as the Stanley Block building was in incredible disrepair and subject to an order by the City of Cleveland that the building was a public nuisance and all building violations had to be cured or the building would be demolished. There was a deadlock among the owners of the building, with 2115-2121 Ontario Bldg., L.L.C. (the “Plaintiff”) owning 50% of the entity owning the property and the remaining 50% held by several other individuals. The Plaintiff filed a complaint against the company Macron Investment Company, the building owner (“Macron”), and the other equity owners of Macron. The Company was limited to the following 3 issues: requesting (i) a declaratory judgment that the Plaintiff was a 50% owner of Macron, (ii) injunctive relief and an order transferring certain equity to the Plaintiff and (iii) an accounting of rents and income related to the building.  The Plaintiff won but the order was promptly appealed by the others.


While the appeal was pending, the fines assessed by the City of Cleveland were steadily racking up.  The Plaintiff filed a motion with the court asking for a receiver to be appointed to take control of the building and proceed with its demolition.  After conducting the appropriate hearing, the court appointed a receiver. The defendants in the litigation appealed, challenging the appointment of a receiver and asserting that the powers granted to the receiver exceeded the underlying action (i.e., the complaint filed by the Plaintiff). Since no stay was requested nor granted when the defendants appealed, the appellate court upheld the appointment of a receiver. However, the complaint originally filed by the Plaintiff was for limited purposes related to ownership of Macron and obtaining an accounting of the building rents and income. The complaint did request any action related to preservation of the property or other related actions.  


The appellate court agreed with the defendants and found that the authority granted to the receiver went beyond the scope of enforcing the lower court’s judgment.


When dealing with complicated disputes, it is often a chess game and parties need to think several steps ahead.  Because the Plaintiff filed a complaint with a very narrow scope, when the litigation process dragged on (as litigation typically does) and the building situation kept deteriorating, the Plaintiff was painted into a corner without any decent options. Seeking the appointment of a receiver was a great next step, but any motion for such an appointment needs to be consistent with the underlying complaint (and if a judgment has been rendered, with the judgment).  In a dispute, if there is any realistic potential need for a receiver to step in a stop further damage to property, then take care to file a complaint that is broad enough to allow the receive to do so.



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