Steingart v. Musgrave

• Docket Number: 22A-CC-2936
• Decision Date: 31 October 2023
• Parties: David J. Steingart, Bruce A. Steingart, and Kevin C. Steingart, Appellants-Defendants, v. Robert P. Musgrave, Appellee-Receiver.
• Court: Court of Appeals of Indiana

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David J. Steingart, Bruce A. Steingart, and Kevin C. Steingart, Appellants-Defendants, v. Robert P. Musgrave, Appellee-Receiver.

No. 22A-CC-2936

Court of Appeals of Indiana

October 31, 2023

Appeal from the Bartholomew Superior Court Trial Court Cause No 03D01-2111-CC-5724 The Honorable James D. Worton, Judge

ATTORNEYS FOR APPELLANTS Peter S. French John R. Humphrey Nadine E. McSpadden Taft Stettinius & Hollister LLP Indianapolis, Indiana

ATTORNEYS FOR APPELLEE James T. Young Morgan A. Decker Rubin & Levin, P.C. Indianapolis, Indiana

OPINION

Shepard, Senior Judge

[¶1] In this interlocutory appeal, Appellants David J. Steingart, Bruce A. Steingart, and Kevin C. Steingart (collectively, "Steingarts") challenge the court's turnover order and two settlement orders in the receivership action. Concluding the court was within its discretion to grant the motions, we affirm and remand solely for recalculation of the amount to be turned over.

Facts and Procedural History

[¶2] The Steingarts are member-owners of Ameribridge LLC, an Indiana company. Between July 2019 and March 2021, Ameribridge executed four promissory notes in favor of German American Bank ("Bank") that exceeded a total of $9,000,000.00. Additionally, in April 2021, Ameribridge and the Steingarts, together, executed a promissory note in favor of the Bank for $1,500,000.00.

[¶3] In November 2021, the Bank filed suit against Ameribridge and the Steingarts alleging, among other things, that the promissory notes were all in default. The Bank also requested appointment of a receiver, and the court appointed Robert P. Musgrave ("Receiver").

[¶4] The following October, Receiver moved to settle and compromise two separate causes of action that Ameribridge had pending against Greenwalt CPAs, Inc. and Watermark Group, LLC for accounting services the firms provided to Ameribridge. Following a hearing, the court granted the motions.

[¶5] The next month, Receiver filed his "First Motion for Turnover" requesting the court to order David Steingart to return certain assets of Ameribridge, specifically funds totaling $296,847.81. The court granted that motion as well.

[¶6] David moved to stay the turnover order and then filed an interlocutory appeal as of right under Appellate Rule 14(A)(1). The Steingarts later filed a separate notice of appeal of the court's orders to settle and compromise and alleged the appeal was interlocutory as of right under Appellate Rule 14(A). This Court consolidated the two appeals under this cause number.

[¶7] Receiver then moved to partially dismiss this appeal, contending the court's orders to settle and compromise are interlocutory orders that are not appealable as of right and thus not properly before this Court. The motions panel of this Court voted to deny Receiver's motion, and the parties finished briefing.

Issues

[¶8] The Steingarts present two issues for our review, which we restate as: I. Whether the trial court erred by granting the motion for turnover; and II. Whether the court erred by granting the motions to settle and compromise.

Discussion and Decision

I. Turnover Order

A. Nature of Receiverships

[¶9] A receivership is an equitable remedy, the purpose of which is to secure and preserve property or assets for the benefit of all interested parties, pending litigation. See 24 Ind. Law Encyc. Receivers §§ 2, 3 (2023); see also Ring v. Ring, 51 N.E.3d 1245 (Ind.Ct.App. 2016) (quoting In re Marriage of Gore, 527 N.E.2d 191, 196-97 (Ind.Ct.App. 1988)). The court appointing the receiver controls and continuously supervises the property in a receivership as well as directing and advising the receiver and, in its discretion, granting him or her the necessary powers to carry out the duties. 75 C.J.S. Receivers §§ 127, 130 (2023). Indiana Code section 32-30-5-7 provides a nonexclusive list of powers a court may grant to a receiver, not the least of which is to "take and keep possession of the property." Ind. Code § 32-30-5-7(2) (2003).

[¶10] For their part, the parties have a duty to deliver to the receiver all property in their possession that is included in the court's order. 75 C.J.S. Receivers § 100 (2023). Should the receiver be hindered in obtaining possession of the property, he or she has the authority to request the court to act to prevent interference with, or the denial of, his or her possession of the property. 24 Ind. Law Encyc. Receivers § 32 (2023).

B. Standard of Review

[¶11] The court's turnover order is an interlocutory order for the payment of money appealable pursuant to Appellate Rule 14(A)(1). "We generally review interlocutory orders under an abuse of discretion standard." In re Paternity of Duran, 900 N.E.2d 454, 462 (Ind.Ct.App. 2009). We review the court's order under this standard for the additional reason that this is an appeal from an order in a receivership where "orders of the court will not be disturbed unless an abuse of discretion is clearly shown." First Nat. Bank v. Gregg, 91 Ind.App. 405, 169 N.E. 691, 692 (1930); see also 75 C.J.S. Receivers § 131 (2023) (on appeal, order of receivership court will not be interfered with absent abuse of discretion). An abuse of discretion occurs when the court's decision is clearly against the logic and effect of the facts and circumstances or the court has misinterpreted the law. In re Paternity of Duran, 900 N.E.2d 454 (quoting In re Estate of Long, 804 N.E.2d 1176, 1178 (Ind.Ct.App. 2004)).

C. Turnover Order

[¶12] On November 8, 2021, the court appointed Musgrave as Receiver and authorized him, "without limitation," "[t]o take and have complete and exclusive control, possession and custody" of the property of Ameribridge, including all accounts, deposit accounts, money, and other rights to payment in existence or thereafter acquired, and "[t]o receive and collect any and all sums of money due and owing to Ameribridge in any manner, whether the same is now due or shall hereafter become due and payable." Appellants' App. Vol. 2, p. 168. The court further ordered that "all persons are enjoined from in any way disturbing the possession of the Receiver." Id.

[¶13] A full year later, Receiver moved the court to direct David to turn over assets of Ameribridge. Receiver had discovered that in October 2021, eleven days prior to Receiver's appointment, David opened a bank account with U.S. Bank in Minnesota. Receiver obtained bank records for the account showing:

• October 29, 2021 - an initial deposit of $100,000 was made to the account by way of a check made payable to Ameribridge; a second deposit of $35,000 was wired into the account from an account at an institution referred to as "First Fin Hamilton," and $20,158 was withdrawn in three separate transactions for prepaid credit cards

• November 5 - another check made payable to Ameribridge was deposited into the account in the amount of $55,477.81

• November 8 - Receiver appointed by court; account balance = $170,319.81

• November 9 - $170,000 was wired from the account to the First Fin Hamilton account

• November 10 - a deposit of $85,343.70 was made to the account by way of a check made payable to Ameribridge, but these funds were later recovered by Receiver

• November 12 - $7,559.25 was withdrawn for prepaid credit card(s) and $78,000 was wired to the First Fin Hamilton account

• November 16 - a deposit of $106,370 was made to the account by way of a check made payable to Ameribridge

• November 19 - $21,000 was wired to the First Fin Hamilton account

Id. at 233-35, 238-42.

[¶14] Based on this information, Receiver informed the court in his motion for turnover that a total of $382,191.51 of Ameribridge's assets were deposited into the account and were disbursed without notice to or authorization from Receiver, contrary to the court's November 8 order appointing Receiver. Receiver recovered $85,343.70 and secured those assets into the receivership account, leaving $296,847.81 unaccounted for. Consequently, Receiver requested the court to direct David to turn over $296,847.81. On November 9, 2022, the court granted Receiver's motion and ordered David to turn over $296,847.81 to Receiver within seven days. On appeal, the Steingarts challenge the turnover order, claiming the Receiver's concerns of misappropriation of the funds are unfounded. Yet, the real issue is whether the court abused its discretion by issuing the turnover order.

[¶15] As soon as a receiver is appointed and qualified, the entity's assets become receivership assets until final distribution by the court. Porter Hosp., LLC v. TRK Valpo, LLC, 212 N.E.3d 683 (Ind.Ct.App. 2023) (quoting King v. King, 982 N.E.2d 1026, 1032 (Ind.Ct.App. 2013), trans. denied); see also 24 Ind. Law Encyc. Receivers § 27 (2023) (right and interest of receiver with respect to entity's assets become fixed as of date of receiver's appointment). Therefore, any money in the U.S. Bank account on the day Receiver was appointed was within the scope of and subject to the receivership order, and Ameribridge was obligated to remit to Receiver any and all deposit accounts, money, and other property listed in the order. The Steingarts' failure to turn over to Receiver the funds existing in the U.S. Bank account on November 8, 2021, or thereafter deposited into that account, or to notify Receiver of the existence of such funds was a violation of the receivership order.

[¶16] The turnover order-the order now at issue-merely ordered the Steingarts' compliance with the court's previous receivership order. A receivership is a means of safeguarding an entity's assets. To that end, property in receivership remains under the court's control and continuous supervision, and it is the duty of the receivership court to protect the property from interference....