Ohio Court Of Appeals Grants Appeal To Kidz Real Estate against McKinley Properties and Receiver

LAKE FOREST, Ill. - July 15, 2013 - PRLog -- This case stems from a foreclosure case in which a large multi-unit apartment complex in Toledo, Ohio know as Riviera Maia that was under foreclosure and a Receiver was appointed.  The Receiver then hired McKinley Properties, Inc. as its managing agent.  As a result of a mutually agreed upon settlement between Kidz Real Estate, LLC (hereinafter “Kidz”) and PNC Bank N.A. the lender, the subject property was returned to Kidz.  At this point Kidz objected to the discharge of a Receiver appointed to manage their property due to various claims Kidz alleged against McKinley Properties, Inc. and asked the trial court for leave to ascertain certain individual claims against the receiver and her employer McKinley, Inc.  This motion for leave to ascertain certain individual claims against the Receiver and McKinley Properties, Inc. was denied without an evidentiary hearing, and this appeal ensued by Kidz.  

In its motion for leave to file a complaint against the receiver, Kidz alleged that the receiver “acted negligently, intentionally, and/or maliciously in managing and mismanaging and operating the Toledo property of over 500 units, and/or in preventing waste upon the same.” PNC Bank, Natl. Assn v. Kidz Real Estate Group, LLC.,2013-Ohio-1357 pg.4.  Specifically, “Kidz asserted that the receiver needlessly, grossly and willfully allowed the condition of the property to deteriorate, and failed to make an effort to maintain an acceptable occupancy level in the apartments.” Id. at 8-9.  The receiver filed a memorandum in opposition to Kidz Motion for leave.  In support of its request for leave to file a complaint, Kidz stated that the occupancy of the property was at 31.15 percent in August 2011 the date the property was returned to Kidz but when McKinley took over the property the occupancy was much higher.  Id. at 4.  To highlight the receiver’s mismanagement, Kidz cited statements made by Kenneth Polsinelli of McKinley, who represented at the receiver appointment hearing that the occupancy rates of the apartments was as high as 45% in March 2010.  Polsinelli also stated in this affidavit that, under McKinley’s Properties, Inc. management, it was reasonable to project that occupancy of the units could approach 90%.   Id.  On appeal set forth the following assignment of errors:

1.       The trial court erred as a matter of law when it was determined that leave of court was required in this case for appellant to file claims against the receiver.

2.       The trial court violated appellant’s due process rights by failing to grant’s appellant’s request for an evidentiary on its motion to file its claims against the receiver.

3.       The trial court abused its discretion when it denied appellant’s motion for leave to assert claims against the receiver.

Kidz Real Estate Group, LLC prevailed on this appeal and on ALL assignments of error, and the case has been remanded back to trial court so that Kidz may have its evidentiary hearing in order to prove their allegations and be granted leave to file suit against the Receiver and McKinley Properties, Inc. as their managing agent.  The Court in its Decision specifically states, “that the allegations made by Kidz raise issues as to whether the receiver failed to fulfill the obligations set forth in the appointment orders, and also whether the receiver’s actions constitute a breach of her fiduciary duties that exist outside of those order.” Id. at 10.   McKinley, Inc. has now petitioned the Supreme Court of Ohio rather than the receiver herself, to appeal this Decision.