In recent years, some question has arisen under Ohio law regarding the authority of a receiver to sell property, thus avoiding a traditional foreclosure sale.  While there is some authority for the position that a receiver may not sell property that is subject to a foreclosure proceeding, a growing number of courts have permitted a receiver to sell property at a private or public sale free and clear of all liens and encumbrances.  Having permitted receiver sales, these courts have also been called to consider the extent to which Ohio’s statutory requirements for judicial sales in aid of execution apply to receiver sales.

In Huntington National Bank v. Motel 4 Baps, Inc.,[1] the Eighth District Court of Appeals directly addressed this question.  In that case, the bank sought foreclosure of a property consisting of a Super 8 Motel.  During the course of the foreclosure proceedings, and at the bank’s request, the trial court appointed a receiver to manage, market, and ultimately sell the property.  After several months marking the property, the receiver arranged for a public auction of the property.  Shortly before the sale, the property owner filed a motion to stay the sale asserting that he never received notice of sale as required by R.C. § 2329.26.  The trial court denied the property owner’s motion to stay and allowed the receiver’s auction to proceed.  The property owner then appealed.

On appeal, the Eighth District Court of Appeals joined the growing number of Ohio courts to hold that a receiver may sell property free and clear of all liens and encumbrances.  More importantly, however, the court further held that a receiver is not required to follow the notice requirements of R.C. § 2329.26.  In support of that position, the court explained that a receiver sale is an equitable alternative to a sheriff’s sale and is not subject to the detailed statutory requirements applicable to sheriff’s sales. Further, the statutory language of R.C. § 2329.26 indicates that it applies only to sales of property “taken in execution.”  The court noted, however, that the property owner’s constitutional due process rights do require, at a minimum, actual notice of the receiver sale.  Because the property owner had received actual notice of the sale, the court denied the appeal and held that the receiver sale was a proper sale of the property.

This decision reinforces the value of a receivership in appropriate cases.  As courts continue to uphold—and expand—the authority of receivers to preserve, protect, and sell property, it is likely that creditors will continue to view receiverships as a valuable tool in protecting their interests.