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U.S. Bank National Association v. Mountain Blue Hotel Group, LLC

United States District Court, N.D. West Virginia

October 19, 2017

U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR THE BENEFIT OF THE HOLDERS OF COMM2013-CCRE12 MORTGAGE TRUST COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, Plaintiff,
v.
MOUNTAIN BLUE HOTEL GROUP, LLC, Defendant.

         MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF'S EMERGENCY MOTION FOR THE APPOINTMENT OF A RECEIVER [DKT. NO. 3], SUPPLEMENTAL MOTION FOR THE APPOINTMENT OF A RECEIVER [DKT. NO. 20], AND RENEWED MOTION FOR THE APPOINTMENT OF A RECEIVER [DKT. NO. 24]

          IRENE M. KEELEY, UNITED STATES DISTRICT JUDGE.

         On October 18, 2017, the Court conducted an evidentiary hearing by telephone regarding the plaintiff's Emergency Motion for the Appointment of a Receiver (Dkt. No. 3), Supplemental Motion for the Appointment of a Receiver (Dkt. No. 20), and Renewed Motion for the Appointment of a Receiver (Dkt. No. 24). For the reasons stated on the record, as well as the reasons that follow, the Court GRANTED the plaintiff's motions.

         The plaintiff, U.S. Bank National Association, as Trustee for the benefit of the Holders of COMM 2013-CCRE12 Mortgage Trust Commercial Mortgage Pass-Through Certificates (“U.S. Bank”), is the holder of a $15, 470, 000 loan made to the defendant, Mountain Blue Hotel Group, LLC (“Mountain Blue”), in 2013 (Dkt. Nos. 3-4; 3-5; 3- 6). Mountain Blue's obligations under the promissory note are secured by a deed of trust (Dkt. No. 3-7). That deed of trust encompasses real property comprising the “Hilton Garden Inn Morgantown” located at Suncrest Towne Centre, 201 Memorial Highway, Morgantown, West Virginia (“Property”). Id. Due to events of default under the loan documents, U.S. Bank seeks to exercise its right to have a court-appointed receiver manage the Property (Dkt. No. 3 at 2-3).

         District courts possess inherent equitable powers under federal common law that include authority to appoint a receiver. See Liberte Capital Group, LLC v. Capwill, 462 F.3d 543, 551 (6th Cir. 2006). Although federal law governs whether a receiver will be appointed, state statute provides the vehicle by which an appointment is accomplished. Canada Life Assur. Co. v. LaPeter, 563 F.3d 837, 843 (9th Cir. 2009); W.Va. Code § 53-6-1. This Court routinely uses its inherent authority to appoint receivers for distressed real estate assets. See, e.g., U.S. Bank Nat'l Ass'n v. Sayona Hospitality, LLC, No. 3:14cv62, 2014 WL 2918547 (N.D. W.Va. June 26, 2014); First United Bank & Trust v. The Square at Falling Run, LLC, No. 1:11cv31, 2011 WL 1563027 (N.D. W.Va. Apr. 25, 2011).

         Standing alone, a contractual provision for a court-appointed receiver provides strong support for such an appointment if the contractual predicates are satisfied. See U.S. Bank Nat'l Ass'n v. Sayona Hospitality, LLC, No. 3:14cv62, 2014 WL 2918549 (N.D. W.Va. June 26, 2014) (report and recommendation) (citing Citibank, N.A. v. Nyland (CF8) Ltd., 839 F.2d 93, 97 (2d Cir. 1988)). This Court also has applied the following equitable factors to determine whether the appointment of a receiver is appropriate:

i) inadequacy of the security to satisfy the debt;
ii) financial position of the debtor;
iii) fraudulent conduct on defendant's part;
iv) inadequacy of legal remedies;
v) imminent danger of the property being lost, concealed, injured, diminished in value, or squandered;
vi) probability that harm to moving party by denial of appointment would outweigh injury to parties opposing appointment;
vii) probability of moving party's success in the action and the possibility of irreparable injury to its interest ...

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