David J. Steingart v. Robert P Musgrave

FILED

Oct 31 2023, 8:45 am

CLERK

Indiana Supreme Court

Court of Appeals

and Tax Court

ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEE

Peter S. French James T. Young

John R. Humphrey Morgan A. Decker

Nadine E. McSpadden Rubin & Levin, P.C.

Taft Stettinius & Hollister LLP Indianapolis, Indiana

Indianapolis, Indiana

IN THE

COURT OF APPEALS OF INDIANA

David J. Steingart, Bruce A. October 31, 2023

Steingart, and Kevin C.

Court of Appeals Case No.

Steingart,

22A-CC-2936

Appellants-Defendants,

Appeal from the

v. Bartholomew Superior Court

Robert P. Musgrave, The Honorable

James D. Worton, Judge

Appellee-Receiver.

Trial Court Cause No.

03D01-2111-CC-5724

Opinion by Senior Judge Shepard

Judges Bradford and Weissmann concur.

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

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 1 of 16

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.

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 2 of 16

[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,

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 3 of 16

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,

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 4 of 16

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 US 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

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 5 of 16

“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

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 6 of 16

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 US 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 US 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.

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 7 of 16

[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. 75 C.J.S.

Receivers § 127; 24 Ind. Law Encyc. Receivers § 32. Accordingly, the receivership

court has the power to control all controversies that affect such property. 75

C.J.S. Receivers § 127. In addition, courts have the inherent power to enforce

compliance with their orders. Noble Cnty. v. Rogers, 745 N.E.2d 194 (Ind. 2001)

(quoting State ex rel. Brubaker v. Pritchard, 236 Ind. 222, 226-27, 138 N.E.2d 233,

235 (1956)). Thus, we find no error with the court issuing a turnover order to

obtain the assets of Ameribridge.

[17] Receiver was appointed on November 8, 2021. The evidence before this Court

is that the balance in the US Bank account on that date was $170,319.81.

Accordingly, those funds became receivership assets. Further, $106,370.00 was

deposited into the US Bank account on November 16, and those funds, too, are

receivership assets. Together these funds total $276,689.81. Lastly, the parties

agree that on November 19, $21,000.00 was transferred out of the US Bank

account. The Steingarts claim this money was later turned over to Receiver.

Consequently, the amount that should have been turned over to Receiver is

either $276,689.81 or $255,689.81 (i.e., $276,689.81 - $21,000.00). Thus, we

remand for the sole purpose of amendment of the turnover order directing turn

over of either $276,689.81 or $255,689.81 (i.e., $276,689.81 - $21,000.00).

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 8 of 16

[18] To the extent the Steingarts argue David was deprived of due process because

the turnover order was granted without a hearing, we again observe that the

order for turnover was not a new, standalone order; rather, it merely directed

David to comply with the previously issued receivership order.

II. Orders to Settle and Compromise

A. Interlocutory Nature of Orders

[19] The Steingarts next contend the court erred by granting Receiver’s motions to

settle and compromise. Receiver has responded to the merits of their claims,

but he has also reasserted his argument that this part of the Steingarts’ appeal is

subject to dismissal. While we acknowledge that the motions panel of this

Court has already denied Receiver’s motion to dismiss, it is well established

that we have inherent authority to reconsider the ruling while an appeal

remains pending. See Pryor v. State, 189 N.E.3d 167 (Ind. Ct. App. 2022)

(quoting Core v. State, 122 N.E.3d 974, 976-77 (Ind. Ct. App. 2019)). We do so

here because “‘[i]t is the duty of this Court to determine whether we have

jurisdiction before proceeding to determine the rights of the parties on the

merits.’” DuSablon v. Jackson Cnty. Bank, 132 N.E.3d 69, 75 (Ind. Ct. App.

2019) (quoting Allstate Ins. Co. v. Scroghan, 801 N.E.2d 191, 193 (Ind. Ct. App.

2004), trans. denied), trans. denied.

[20] The appellate authority of this Court is generally limited to appeals from final

judgments. See Ind. Appellate Rule 5. In addition, generally in a receivership

proceeding, an appeal may be taken from a judgment or order only if it is final.

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 9 of 16

State ex rel. Unemployment Comp. Bd. of Unemployment Comp. Div. v. Burton, 112

Ind. App. 268, 44 N.E.2d 506 (1942); see also 1A Ind. Law Encyc. Appeals § 22

(2023). The parties here agree that the court’s orders to settle and compromise

are not final orders.

[21] An appeal from a non-final interlocutory order is not permitted unless

specifically authorized by the Indiana Constitution, statutes, or the rules of

court. Elda Corp. v. Holliday, LLC, 171 N.E.3d 124 (Ind. Ct. App. 2021)

(quoting Allstate Ins. Co., 801 N.E.2d at 193), trans. denied. Appellate Rule 14

confers appellate jurisdiction over interlocutory appeals and provides three

avenues by which this Court can acquire jurisdiction in cases other than those

involving class action certification: (1) Rule 14(A) allows interlocutory appeals

as of right; (2) Rule 14(B) permits discretionary interlocutory appeals; and (3)

Rule 14(D) authorizes other interlocutory appeals only as provided by statute.

The authorization to file an interlocutory appeal is strictly construed, and any

attempt to perfect an appeal without it warrants dismissal. Elda Corp., 171

N.E.3d 124 (quoting Allstate Ins. Co., 801 N.E.2d at 193). While acknowledging

that interlocutory appeals are strictly limited and conceding that these orders do

not necessarily fit within the narrow confines of Appellate Rule 14(A), the

Steingarts nevertheless maintain that the subject of the orders is “closely

aligned” with the type appealable as of right under Appellate Rule 14(A)(3).

Appellants’ Br. p. 20.

[22] Appellate Rule 14(A)(3) provides in relevant part that appeals from

interlocutory orders compelling the delivery or assignment of “things in action”

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 10 of 16

can be taken as a matter of right. It has been established that the rule involves

court orders that “‘carry financial and legal consequences akin to those more

typically found in final judgments . . . .’” Ball State Univ. v. Irons, 27 N.E.3d

717, 721 (Ind. 2015) (quoting State v. Hogan, 582 N.E.2d 824, 825 (Ind. 1991)).

The question here is whether the orders of the trial court authorizing Receiver

to compromise and settle Ameribridge’s claims against Greenwalt and

Watermark Group are such orders. Under the facts of this case, we believe they

are.

[23] A “thing in action,” also termed “chose in action,” is defined as “[t]he right to

bring an action to recover a debt, money, or thing.” Chose in Action, BLACK’S

LAW DICTIONARY (11th ed. 2019). Here, if Receiver exercises the authority

given him by the orders, Ameribridge will most certainly lose its right to pursue

its claims against the accounting firms. Therefore, though the orders to

compromise and settle are technically interlocutory, due to the nature of the

orders producing financial and legal consequences akin to those more typically

found in final judgments and in the interest of judicial economy in this

consolidated appeal, we review them here. See, e.g., Edwards v. Miller, 47 R.I.

235, 132 A. 609 (1926) (order authorizing receiver to adjust and compromise

claims, though technically interlocutory, had element of finality such that court

could properly review it).

B. Standard of Review

[24] As with the first issue, we review this interlocutory receivership order under an

abuse of discretion standard. See First Nat. Bank, 169 N.E. 691; see also Bancroft

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 11 of 16

v. Allen, 138 Fla. 841, 190 So. 885 (1939) (in absence of abuse of discretion,

order of court authorizing its receiver to compromise an action will not be

disturbed on appeal).

C. Orders to Compromise and Settle

[25] Ameribridge had actions pending against both Greenwalt and Watermark

Group with regard to accounting services provided by the firms. After

investigating the claims, Receiver moved the court for authority to settle, and

the court granted the motion as to both firms following a hearing. After this

appeal was filed, Receiver finalized Ameribridge’s settlement with Greenwalt,

and the cause was dismissed with prejudice. Consequently, the issue raised

1

here is moot as to Greenwalt. Accordingly, we decide the propriety of the

order to compromise and settle only with regard to Ameribridge’s action

against Watermark Group, which has been stayed pending resolution of this

appeal.

[26] The importance of the court’s role vis-à-vis a receivership cannot be

understated—the court controls and continuously supervises the property in a

receivership and, in its discretion, grants the receiver the necessary powers to

carry out his or her duties. 75 C.J.S. Receivers §§ 127, 130. To that end, the

court may authorize or approve a compromise when it is in the best interests of

1

In February 2023, acknowledging that Ameribridge’s lawsuit against Greenwalt had been dismissed in

anticipation of settlement, the Steingarts alleged the payment of money and final settlement had not yet

occurred and moved the court to stay the order to compromise and settle. The motions panel of this Court

considered the Steingarts’ motion and voted to deny it.

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 12 of 16

the entity, as where the claim or the recovery is doubtful. 75 C.J.S. Receivers §

149 (2023); see also Boucher v. Hamilton Mfg. Co., 259 Mass. 259, 270, 156 N.E.

424, 428 (1927) (“The power of the court to authorize the receiver to

compromise claims of the corporation against third persons cannot be

doubted.”). In determining whether a compromise should be authorized, the

court must exercise its business judgment to decide whether the proposed

compromise is reasonable in the circumstances. 75 C.J.S. Receivers § 149.

[27] At the hearing, counsel for the Steingarts contended that the amount of the

proposed settlements was not sufficient for Ameribridge’s claims against the

accounting firms. In response, Receiver summarized his background that

includes more than twenty-five years of experience of asset valuation. He

explained that in valuing the claims and assessing a compromise with the

accounting firms, he considered that (1) the attorney handling the litigation

against the accounting firms was charging by the hour, which meant the

attorney was unsure of the strength of the case; (2) the attorney estimated his

total fees would be $400,000 to $500,000, which meant recovery from the

lawsuit would have to be more than $500,000 to assure that the receivership

would obtain even $1 for Ameribridge’s creditors; (3) the second opinion he

obtained from another major law firm indicated it would take the case only on

an hourly basis due to the uncertainty of the recovery; (4) it was a complicated

case in which the jury would need to understand accounting standards, what

went wrong, and why it went wrong, and even then, if the jury awarded

Ameribridge anything less than $500,000, the receivership would get $0 for

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 13 of 16

creditors; (5) his investigation also showed a causation issue; and (6) although

the Steingarts offered to finance the litigation, their terms of financing included

“paying the litigation cost and seventy five percent upcharge on top of that plus

fifteen percent for Mr. David Steingart[,]” requiring “a million dollars with

those sort of numbers before the receivership and the creditors of the

Ameribridge would receive a penny.” Tr. Vol. I, p. 19. In summary, he stated,

“Basically, your honor, it came down to this, [$85,000] right now which is

almost ten percent of all the money that I managed to collect so far or taking a

chance of having the Steingarts finance [the litigation] and trusting that in a

couple [or] three years there would be enough to exceed the million dollar cost

of pursuing it. It seemed to be no choice whatsoever.” Id. at 20. The Receiver

finished by noting that he is a representative of the court—appointed by and

accountable to the court—doing his best to liquidate Ameribridge’s assets and

pay its creditors.

[28] In its order granting Receiver’s motion to settle and compromise Ameribridge’s

claim against Watermark Group, the court found:

a. Generally, the Receiver is appointed as an objective

agent of the Court to provide certain ministerial activities

on behalf of the Court, and as such his recommendation to

the Court is treated as a recommendation of an unbiased

entity seeking to perform such ministerial activities, here,

the timely and orderly liquidation to the assets of

defendant Ameribridge LLC;

b. The Receiver at hearing of this matter recited his

background and experience in the liquidation and

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 14 of 16

evaluation of assets in liquidating situations, and the Court

takes judicial notice of the Receiver’s appointment and

service as Chapter 13 Standing Trustee for the United

States Bankruptcy Court for the Southern District of

Indiana, a position which involves significant exposure to

and experience with valuations in a liquidation context;

c. The Receiver at hearing of this matter also reported to

the Court his investigation and evaluation of the Cause of

Action and the factors upon which he based his

recommendation to settle the Cause of Action. These

factors included the difficulty of the case; the significant

defenses available to the defendants to the Cause of

Action; and the six-figure cost of pursuing the Cause of

Action provided by the Ameribridge attorney in the

pending litigation, which cost is being charged by the

attorney for Ameribridge on an hourly basis and so may

create a substantial liability for the receivership estate, to

the harm of the creditors thereof;

d. The attorney for the defendant in the pending Cause of

Action also appeared at the hearing and made statements

in support of the pending motion to settle and the

Receiver’s motion.

3. As to the objection to the amount of the Receiver’s proposed

settlement, the Shareholders assert that the amount is too low,

but provided no factual, evidentiary, or other basis for such

conclusory assertion.

Appellants’ App. Vol. 2, pp. 28-29.

[29] Though it is clear the trial court was not dealing with certainties, it

pragmatically undertook a careful weighing and balancing of a variety of

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 15 of 16

considerations in arriving at a conclusion as to the course of prudence under the

circumstances. In view of these considerations, we cannot say the court’s

decision to authorize Receiver to compromise Ameribridge’s claim against

Watermark Group constitutes an abuse of its discretion.

Conclusion

[30] For the foregoing reasons, we remand for the sole purpose of amendment of the

turnover order directing David Steingart to turn over either $276,689.81 or

$255,689.81 (i.e., $276,689.81 - $21,000.00) as the court may determine. We

affirm the court in all other respects.

[31] Affirmed and remanded.

Bradford, J., and Weissmann, J., concur.

Court of Appeals of Indiana | Opinion 22A-CC-2936 | October 31, 2023 Page 16 of 16