Truett v. Freedom Leaf, LLC
| Decision Date | 19 April 2021 |
| Docket Number | Case No. 118,928 |
| Citation | 495 P.3d 153 |
| Parties | Mark TRUETT, II, an individual, Plaintiff/Appellee, v. FREEDOM LEAF, LLC, an Oklahoma limited liability company, and Aaron Goldberg, an individual, Defendants/Appellants. |
| Court | United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma |
MaryGaye LeBoeuf, Oklahoma City, Oklahoma, E.J. Buckholts, II, Carl Buckholts, ELLIS & BUCKHOLTS, Duncan, Oklahoma, for Plaintiff/Appellee,
J. Blake Johnson, Justin R. Williams, Weston O. Watts, OVERMAN LEGAL GROUP, PLLC, Oklahoma City, Oklahoma, for Defendants/Appellants.
OPINION BY THOMAS E. PRINCE, JUDGE:
¶1 Defendants/Appellants Freedom Leaf, LLC ("Freedom Leaf") and Aaron Goldberg ("Goldberg") (collectively the "Appellants") appeal the trial court's July 16, 2020, Order denying the Motion to Vacate the trial court's July 9, 2020 Order Appointing Receiver, which Plaintiff/Appellee Mark Truett II ("Appellee") obtained ex parte . Appellant has asked this Court to review whether the notice given, the evidence supplied, and the inquiry made into the fitness of the receiver were sufficient to justify the Order Appointing Receiver and whether the appeal bond, which the trial court set at 500% of the receiver's bond, was proper. While notice is not a prerequisite for the ex parte appointment of a receiver, upon review we nevertheless find the trial court abused its discretion when it refused to vacate the Order Appointing Receiver because it was issued over and against the clear weight of the evidence. Moreover, the inquiry made into the fitness of the receiver was insufficient under the circumstances, and the appeal bond was set in error. For these reasons, the trial court's Order Appointing Receiver should have been vacated upon Appellants' Motion. Therefore, we reverse.
BACKGROUND
¶2 The record in this case begins with Appellee's July 7, 2020, Petition against Appellants for an accounting (Count I — "Accounting at Law"; and, Count I "(Alternative) Equitable Accounting"), breach of fiduciary duty (Count II), and an emergency application to appoint a receiver (Count III). In his Verified Petition ("Petition"), Appellee made, inter alia , two concrete allegations: first , that his request for an accounting of Freedom Leaf's finances, to which he was entitled under the company's 2019 Operating Agreement ("Operating Agreement"), had gone unanswered; and second , that Goldberg, Freedom Leaf's other manager,1 breached his fiduciary duty by mismanaging company assets. On these allegations, Appellee requested the trial court grant the provisional relief "that a receiver be appointed immediately to manage the affairs of Freedom Leaf" (emphasis added).
¶3 On July 9, 2020, just two days after Appellee filed his Petition, the trial court granted Appellee's request and signed an Order Appointing Receiver "for good cause shown, and ... for the preservation of the assets and opportunities of [Freedom Leaf], and its respective members." No other reasons were cited in the trial court's order; and, no evidence was identified therein other than "the pleadings."2 The trial court's Order Appointing Receiver was procured and entered before process was served on Freedom Leaf or Goldberg. In fact, Appellants had no notice of the Order Appointing Receiver until the court-appointed receiver and his deputies arrived, unannounced, at Freedom Leaf's Chickasha and Duncan stores on Friday, July 10, 2020, around 7:00 PM. According to several eyewitnesses, upon their arrival the receiver and his deputies merely produced the Order Appointing Receiver and, with little to no explanation, took operational control of the stores.3 With the courts closed for the weekend, Appellants filed their Emergency Motion to Vacate ("Motion to Vacate") the trial court's Order Appointing Receiver on Monday, July 13, 2020. The trial court set the matter for a hearing on July 16, 2020, at which time the trial court denied Appellants' Motion to Vacate.
¶4 This interlocutory appeal timely followed.
Appellee's First Allegation: Denial of Accounting
¶5 On May 7, 2020, counsel for Appellee sent a certified letter to Freedom Leaf, to the attention of Goldberg, requesting an accounting of the company's finances in accordance with several provisions of Freedom Leaf's ostensible Operating Agreement,4 which states, in pertinent part:
¶6 As of July 7, 2020, the date Appellee filed his Petition and made application for the emergency appointment of a receiver, Appellee had not received any of the financial information he had requested in his May 7, 2020, letter. At the July 16, 2020 hearing, the trial court asked Goldberg, Freedom Leaf's day-to-day manager and registered agent, for an explanation about why books and records had not been provided to Appellee:
July 16, 2020 Tr. at 55-56.
¶7 Later in the proceedings, the court again asked Goldberg about the company's alleged failure to furnish books and records to Appellee. Mr. Johnson, Counsel for Appellant, made the initial reply:
Goldberg further explained that:
Appellee's Second Allegation: Breach of Fiduciary Duty
¶8 In addition to his allegation regarding the denial of an accounting of Freedom Leaf's finances, in his Petition Appellee also alleged Goldberg breached his fiduciary duty by mismanaging company assets. In particular, Appellee alleged Goldberg Notwithstanding this allegation, prior to the July 16, 2020, hearing—at which Appellee produced a check after the trial court claimed it "was shown a check that was allegedly written by [Freedom Leaf to another company]"5 —Appellee provided no evidence Goldberg used Freedom Leaf's finances to issue payroll to persons employed by other entities. Ironically, Goldberg himself testified Freedom Leaf had indeed paid another entity's employee $614.72 for work completed for another entity. Goldberg also testified Freedom Leaf made over $200,000 worth of payments to another entity to, inter alia , buy equipment, issue payroll, and make rent. Rather than accept Appellee's characterization—i.e. , that the payments were evidence of Goldberg's breach of duty to Freedom Leaf—Goldberg testified the payments were instead "loans" Freedom Leaf's members had agreed to make "until [the other entity] could start producing revenue." While Goldberg's counsel told the trial court he didn't think there were written records of the transactions, Goldberg also testified all members of Freedom Leaf, including Appellee, approved the loans, and that he had text messages to prove it. Although neither text messages nor other documentation were presented to demonstrate Appellee had agreed to the transfers, at the hearing on Appellants' Motion to Vacate Appellee did not challenge, or otherwise refute, Goldberg's testimony.
STANDARD OF REVIEW
¶9 A trial court's decision to appoint a receiver is reviewed for abuse of discretion. Mitchell v. Murphy , 1935 OK 361, ¶ 9, 171 Okla. 326, 43 P.2d 424, 426 (citation...
To continue reading
Request your trial
-
Shoemaker Corp. v. Garrett
...Compl. ¶¶ 80-81. After reviewing the factors considered to justify the appointment of a receiver, Truett, 2021 OK CIV APP ¶ 11, 495 P.3d at 159-60 (citations omitted), and construing alleged facts and drawing all reasonable inferences in favor of the non-movant Garrett-Fellman Parties, the ......
- Burleson v. Wayne