Timber View Properties, Inc v. M&T Property Investments LTD

Filing 26

REPORT AND RECOMMENDATION that 12 MOTION to Intervene be granted. Objections due within fourteen (14) days. Signed by Magistrate Judge Terence P. Kemp on 1/29/2016. (agm)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Timber View Properties, Inc.,
Plaintiff,

:
:

v.

:
:

M&T Property Investments LTD,
Defendant.

Case No. 2:15-cv-2855
JUDGE GEORGE C. SMITH

:

Magistrate Judge Kemp

:

REPORT AND RECOMMENDATION
This case began in this Court as a straightforward mortgage
foreclosure action.

Plaintiff Timber View Properties, Inc., a

Florida corporation, obtained, by assignment from the Citizens
Bank of Logan, Ohio, mortgages on real property located in
Hocking County, Ohio, and owned by Defendant M&T Property
Investments LTD, an Ohio limited liability company.

Timber View

seeks to foreclose on the mortgages and have the property sold at
foreclosure sale.

In its complaint, it also requested the

appointment of a receiver pursuant to Ohio Rev. Code §§2735.01 et
seq.

See Doc. 2.
On the same day the complaint was filed, Timber View moved

for appointment of a receiver.

(Doc. 3).

In its motion, it

represented that M&T consented to the appointment of a receiver
and it identified a proposed receiver.
Court granted the motion.

The following day, the

Its order (Doc. 4) appointed attorney

David A. Skrobot as the receiver.

The order, prepared by the

parties, granted Mr. Skrobot plenary power to deal with the
property in question, as described in Ohio Rev. Code §2735.04.
It contained additional provisions, however, which provided that
representatives of M&T, including Mark Anthony (the principal of
M&T) would have unimpeded access to the property; that the

receiver could contract to have Mr. Anthony become involved in
the management of the property; that the receiver could
“disregard, without prior order of this Court, any lease” which
is (although it does not explain who makes this determination)
“incomplete, ineffective on its face, not in conformity with the
statute of frauds, and/or legally inoperative as to third parties
due to a failure to properly execute and/or record the instrument
required by law.”

(Doc. 5, at 7).

The receiver was authorized

to treat such leasehold interests as void and to seek criminal
charges against anyone, including an “occupying claimant,” who
refused a request by the receiver to leave the property.

Id.

Further, the order directs any person who has any documents or
records pertaining to the property or any income associated with
the property or “business activities presently and/or previously
associated with the Receivership Estate” to turn those records
and income over to the receiver.

Id. at 8.

Lastly, anyone

claiming any interest in the property was enjoined from
“commencing or continuing any action at law or suit or proceeding
in equity to ... enforce any claim and/or right against all or
any part of the property ... or its business operations .....”
Id. at 10.
What neither Timber view nor M&T told the Court, in
connection with the motion to appoint a receiver and the order
granting such powers to the receiver, is that Mr. Anthony, M&T’s
principal, and another individual, Karry Gemmell, a former
business partner of Mr. Anthony’s, had been engaged in litigation
in the Hocking County Court of Common Pleas over issues which, at
least tangentially (how tangentially is the subject of further
discussion below) involve this same property, and that a receiver
had also been appointed in that case.

Mr. Gemmell has moved to

intervene in this case, arguing that he has a legally protected
interest in the subject matter of this action, and that the
-2-

agreed receivership order presented to the Court was specifically
intended by the parties (including Timber View, which appears
from the complaint simply to be an arms-length mortgage holder
but which, according to Mr. Gemmell, is controlled by a friend of
Mr. Anthony’s and which bought the mortgages in order to bring
this collusive case and to obtain the receivership order) to
override orders issued by the Hocking County Common Pleas Court.
The motion to intervene has been referred to the Magistrate Judge
for this issuance of a Report and Recommendation.

See Doc. 13.

For the following reasons, the Court recommends that the motion
to intervene be granted.
I.

Factual Background

The multiple submissions from the parties - a motion to
intervene, two responsive memoranda, and two reply briefs contain a plethora of factual assertions.

Many (like the

reference to the criminal conviction of one of Mr. Gemmell’s
associates and a copy of her photograph as it appears on the Ohio
Department of Rehabilitation and Corrections website) are
irrelevant to the legal issues presented in the motion to
intervene, intended to be inflammatory, or both.

The Court will

attempt to distill a basic statement of relevant facts from these
filings, and resist the temptation to stray down the various side
streets which have been only partially illuminated by the briefs.
These facts appear to be undisputed.

Mark Anthony, Karry

Gemmell, and a company owned by Barry Gemmell (Karry’s father),
were the principals in a company named Hocking Peaks LLC.

In

2010, the parties signed an operating agreement for a business
venture called Hocking Peaks Adventure Park.

As part of the

business venture, Hocking Peaks entered into a 99-year lease for
real property on which to operate a zipline and apparently some
other types of outdoor adventure activity.

M&T, Mr. Anthony’s

company and the defendant in this foreclosure action, was the
-3-

lessor; some or all of the property which is being foreclosed on
here is also the property leased by M&T to Hocking Peaks.
Karry Gemmell ran the books for Hocking Peaks in 2010 and
2011.

In 2012, Mr. Anthony took over that task.

That same year,

at least according to Mr. Gemmell, Mr. Anthony began to engage in
some questionable financial transactions with company money,
including writing himself a $39,000 check (which subsequently
bounced) and transferring money in one of the company’s bank
accounts into an account belonging to a new start-up business,
Hocking Peaks Adventure Park LLC, which was wholly owned by Mr.
Anthony.
Concerned about this activity, Mr. Gemmell filed a case in
the Hocking County Court of Common Pleas in 2013.
preliminary equitable relief.

He sought

In a judgment entry filed on June

18, 2013, that court found reason to believe that Mr. Anthony had
engaged in substantial self-dealing, and it ordered that a single
new bank account be opened for the business, that all business
receipts be deposited in that account, and that no sums over
$2,000.00 could be withdrawn unless both Mr. Anthony and Mr.
Gemmell authorized that withdrawal.

See Motion to Intervene,

Doc. 12, Ex. A.
Mr. Gemmell and Mr. Anthony continued to litigate their
differences in state court, and that court issued a number of
additional orders, finding that even after the first preliminary
injunction order was issued, Mr. Anthony continued to engage in
questionable transactions.

Eventually, Mr. Gemmell moved for the

appointment of a receiver for Hocking Peaks, pursuant to Ohio
Rev. Code §2735.01.

In a judgment entry filed on June 13, 2014,

the court granted that request.
counsel for the receiver.

It appointed a receiver and

Id., Ex. D.

Finally, the state court

authorized the receiver to borrow funds to reopen the business
(it had apparently been closed by the receiver due to lack of
-4-

insurance), barred both Mr. Anthony and Mr. Gemmell from
interfering with the receiver’s efforts to reopen the business,
authorized the receiver to operate the adventure park for five
years, and, perhaps most significantly, for purposes of this
case, barred both Mr. Anthony and Mr. Gemmell from “entering the
site where the park is located without specific written consent
of the receiver ....”

Id., Ex. E.

Some, if not all, of those

orders were appealed, but it appears they are all still in place,
and that the receiver continues to file reports with the state
court, the last one (which is an exhibit to one of the two reply
briefs, Doc. 25) indicating that the receiver had received
threatening communications from Mr. Anthony, was told by Mr.
Anthony that he (the receiver) was a trespasser, and suggesting
that the court restrict Mr. Anthony to only the portion of the
property where his residence was located so that the receiver
could use the remainder to operate the business.
II.

Analysis

Rule 24(a)(2) states:
On timely motion, the court must permit anyone to
intervene who ... claims an interest relating to the
property or transaction that is the subject of the
action, and is so situated that disposing of the action
may as a practical matter impair or impede the movant's
ability to protect its interest, unless existing
parties adequately represent that interest.
Mr. Gemmell’s motion to intervene is clearly timely.

Further, no

existing party claims to represent his interest in this action
adequately (they deny that he has any interest to represent).
The crux of the disagreement here concerns the existence of a
legally protected interest in the property that is the subject of
this foreclosure action.
There is little dispute about the general principles which

-5-

govern intervention as of right.

“Federal Rule of Civil

Procedure 24, which governs interventions, is ‘broadly construed
in favor of potential intervenors.’”

Gillie v. Law Office of

Eric A. Jones, LLC, 2013 WL 4499955, *1 (S.D. Ohio Aug. 21,
2013), quoting Purnell v. City of Akron, 925 F.2d 941, 950 (6th
Cir. 1991).

Purnell also makes clear that an intervenor, even an

intervenor as of right, need not have either the same standing
required to initiate a lawsuit nor a specific legal or equitable
interest in the subject-matter of the case.

Id. at 948.

The

inquiry as to the interest claimed by the intervenor is
necessarily fact-specific, see id., and “close cases should be
resolved in favor of recognizing an interest under Rule
24(a)....”

Michigan State AFL-CIO v. Miller, 103 F.3d 1240, 1247

(6th Cir. 1997).
The fact-specific inquiry in this case focuses on the
following.

First, the state court litigation is related to this

foreclosure action in the sense that the judge in that case has
authorized a receiver to operate a business on the property and,
at least implicitly, has recognized the existence of a lease for
some portion of the property in favor of Hocking Peaks LLC, the
business for which the receiver has been appointed.

Second, Mr.

Gemmell is one of three principals in Hocking Peaks, LLC, a
company which entered into a 99-year lease for the property.
Third, the receivership order in the state court case enjoins Mr.
Anthony from entering into portions of the property (the “park
site”) without written permission from the state court receiver.
Fourth, the receivership order in this case permits the federal
court receiver, under indeterminate standards, to reject and
disregard any lease on the property - presumably including
Hocking Peaks’ lease.

Fifth, that order appears to authorize the

receiver to retain Mr. Anthony and to give him access to any or
all of the property.

It also suggests that the federal court
-6-

receiver may treat the state court receiver or his agents as
trespassers and may seek criminal charges to be brought against
them.

It should also be noted that the zipline equipment on the

property is apparently owned by Mr. Gemmell or by Hocking Peaks.
What inferences can be drawn from these facts?

Certainly,

it is a fair inference that the property in question is now the
subject of two receivership orders, one premised upon a leasehold
interest and the other on a mortgage interest.

Further, those

orders appear to conflict substantially; it is not a stretch to
imagine that, in attempting to carry out the duties imposed by
the state court order, the state court receiver might well
violate the federal court order.

There is thus a substantial

possibility that, should the federal court receiver exercise his
powers, the ability of the state court receiver to operate
Hocking Peaks, LLC, could be adversely affected.

That, in turn,

could affect Mr. Gemmell’s financial interests.
It may well be true that Mr. Gemmell does not have an
individual interest in the foreclosure; he is not a creditor nor
does he claim an ownership interest in the property (other than
the ziplines).

On the other hand, he may well suffer a financial

loss should the property become unavailable to the state court
receiver either as a result of a foreclosure sale or, more
immediately, as a result of the receivership order entered by
this Court.

His interest in contesting that order is not

adequately represented by any existing party and could be impeded
in his absence.
The Court is persuaded that under the liberal standards to
be applied in this circuit, Mr. Gemmell has a sufficient interest
in this case to support intervention as of right.

Even in other

circuits, where the test may be more stringent, his interest
would qualify.

For example, in New Orleans Public Service, Inc.

v. United Gas Pipeline Co., 732 F.2d 452, 463 (5th Cir. 1984),
-7-

the court made this observation about the rule’s requirement that
an intervenor have a legally-protectable interest:
By requiring that the applicant's interest be not only
“direct” and “substantial,” but also “legally
protectable,” it is plain that something more than an
economic interest is necessary. What is required is
that the interest be one which the substantive law
recognizes as belonging to or being owned by the
applicant.

The law recognizes the right of a leaseholder to operate a
business on leased premises, and the Hocking County Court of
Common Pleas has recognized Mr. Gemmell’s interest, as a
principal of Hocking Peaks, LLC, to have that business placed
into receivership and for the receiver to operate a business on
the same property that is subject of this case and the subject of
the order appointing a federal receiver.
under the applicable legal standard.

That is sufficient

Mr. Gemmell may not be able

to contest the foreclosure itself, but he should be allowed to
raise his claim that the receivership order is in contravention
of the state court’s prior order and should be vacated or
modified.
III.

Recommendation

For these reasons, it is recommended that the motion to
intervene (Doc. 12) be granted and that the intervenor be
directed to submit an intervenor complaint within fourteen days
of the Court’s order, should this Report and Recommendation be
adopted.
IV.

Procedure on Objections

If any party objects to this Report and Recommendation, that
party may, within fourteen days of the date of this Report, file
and serve on all parties written objections to those specific

-8-

proposed findings or recommendations to which objection is made,
together with supporting authority for the objection(s).

A judge

of this Court shall make a de novo determination of those
portions of the report or specified proposed findings or
recommendations to which objection is made.

Upon proper

objections, a judge of this Court may accept, reject, or modify,
in whole or in part, the findings or recommendations made herein,
may receive further evidence or may recommit this matter to the
magistrate judge with instructions.

28 U.S.C. §636(b)(1).

The parties are specifically advised that failure to object
to the Report and Recommendation will result in a waiver of the
right to have the district judge review the Report and
Recommendation de novo, and also operates as a waiver of the
right to appeal the decision of the District Court adopting the
Report and Recommendation.

See Thomas v. Arn, 474 U.S. 140

(1985); United States v. Walters, 638 F.2d 947 (6th Cir. 1981).

/s/ Terence P. Kemp
United States Magistrate Judge

-9-