RREF RB-AL SLDL, LLC v. Saxon Land Development LLC et al

Filing 17

ORDER GRANTING 14 MOTION for Appointment of Receiver; ORDERING (1) Franklin Street Management Services is hereby APPOINTED as Receiver authorized to take immediate possession and control of the Property herein described; (2) defendants are ORDERED and DIRECTED to comply in all respects with this order, and are hereby enjoined and restrained from impeding or interfering in any manner with the Receiver's exercise of its rights, powers, and duties hereunder, as further set out in order; (3) Defendants and their agents, employees, and principals shall cooperate fully with the Receiver in the conduct of its duties, and shall provide to the Receiver immediately any and all such information and access to any and all such people and records as the Receiver shall request; (4) ORDERING and DIRECTED the defendants to deliver to the Receiver immediate unrestricted physical custody, control, and possession of the Receivership Property, as further set out in order; (5) Defendants and their ag ents, servants, employees, and all other persons acting in concert with them, are hereby restrained and enjoined, as further set out in order; (6) all tenants, bailees, or other persons in possession of the Receivership Property, are DIRECTED to attorn to the Receiver, and until further order of this Court, as further directed in order. Signed by Honorable Judge Mark E. Fuller on 2/23/12. (Attachments: # 1 civil appeals checklist)(djy, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
RREF RB-AL SLDL, LLC,
Plaintiff,
v.

SAXON LAND DEVELOPMENT, LLC,
et al.,
Defendants.

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CASE NO. 2:11-cv-925-MEF
[WO – Publish]

ORDER
Before the Court is Plaintiff RREF RB-AL SLDL, LLC’s (“RREF”) Motion for
Appointment of Receiver (Doc. # 14), to which Defendants Saxon Land Development, LLC
(“Saxon”) and Clifford W. Cleveland (“Cleveland”) have responded. Upon consideration
of the arguments of the parties, the evidentiary submissions, and the relevant law, the Court
finds that Plaintiff’s motion is due to be GRANTED.
Regions Bank made a loan to Saxon in the principal amount of $711,696.00 for
Saxon’s acquisition of certain real property located in Elmore County, Alabama. The loan
is evidenced and secured by a promissory note and a mortgage. Regions assigned the loan
and the original loan documents (the note and mortgage) to RREF RB Acquisitions, LLC,
who assigned them to Plaintiff.
Plaintiff alleges that the Saxon loan is in default, with $712,721.23 in principal and
interest due, and that Plaintiff intends to exercise its contractual rights and remedies under

the note and mortgage, including acceleration of the debt, entitlement to rents, and
foreclosure. One such right set forth in the mortgage (Doc. # 1-2) is the right to have a
receiver appointed: “Lender shall have the right, without notice to Grantor, to take
possession of the Property and collect the Rents, including amounts past due and unpaid, and
apply the net proceeds, over and above Lender’s costs, against the indebtedness . . . .”
(Mortgage 4.)
Plaintiff states that the property has been “grossly mismanaged,” which creates a
danger of diminution in value thereof unless a receiver is appointed. (Mot. 7.) On October
7, 2011, a representative of Franklin Street Management Services (“Franklin Street”), Bruce
Keen, inspected the property, and observed the following conditions: (1) no tenants or
customers were using the storage facilities in the rear of the property; (2) the main structure
is in “fair” condition; (3) surrounding areas of the property were dilapidated and abandoned;
(4) the fence has been knocked over in many places; (5) the exterior of the property is littered
with trash, wooden pallets, an abandoned tractor trailer, various signs and a half-full
dumpster, all of which are visible from the higway; (6) the parking lot has no defined
parking, many cracks, areas with standing water, botched repairs, and potential drainage
issues; (7) the gravel lot and grassy areas are unkempt; (8) many of the storage facility doors
are damaged; (9) the inside of the storage facility is littered with piles of wood, carpet,
mattresses, clothing, flooring samples and other debris; and (10) the property is infested with
cats.

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Federal law governs the appointment of a receiver by a federal court exercising
diversity jurisdiction. National P’ship Inv. Corp. v. Nat’l Hous. Dev. Corp., 153 F.3d 1289,
1292 (11th Cir. 1998). Among the federal courts, “[t]here is a split of authority over whether
the parties’ advance consent to the appointment of a receiver in the mortgage documents is
dispositive of the issue of appointment, or whether it is simply one factor among the others
that a court must consider.” Fed. Nat. Mortg. Ass’n v. Mapletree Investors Ltd. P’ship, No.
10cv10381, 2011 WL 1753112, at *3 (E.D. Mich. April 30, 2010) (collecting cases). As did
the Eastern District of Michigan in Federal National Mortgage Association, this Court will
consider (conservatively) that the receivership clause is only a “strong factor weighing in . . .
favor” of appointing a receiver, id., but need not resolve the above-described conflict because
the appointment of a receiver is also warranted for equitable reasons. In short, Plaintiff’s
contractual right to a receiver, in addition to the observed condition of the property, weigh
strongly in favor of appointing a receiver.
Accordingly, it is ORDERED:
(1)

Franklin Street Management Services (“Franklin Street”) is hereby
APPOINTED as Receiver authorized to take immediate possession and control
of the Property herein described;

(2)

Defendants are ORDERED and DIRECTED to comply in all respects with this
Order, and are hereby enjoined and restrained from impeding or interfering in
any manner with the Receiver’s exercise of its rights, powers, and duties

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hereunder. From and after the entry of this Order, Defendants shall not enter
into any lease, contract, or agreement of any kind or character relating to its
assets, and shall not grant any lien upon or security interest in the Receivership
Property;
(3)

Defendants and their agents, employees, and principals shall cooperate fully
with the Receiver in the conduct of its duties, and shall provide to the Receiver
immediately any and all such information and access to any and all such
people and records as the Receiver shall request;

(4)

Defendants are hereby ORDERED and DIRECTED to deliver to the Receiver
immediate unrestricted physical custody, control, and possession of the
Receivership Property; and all rents, revenues, and proceeds of the
Receivership Property, any and all proceeds from insurance claims related to
the Receivership Property, and all surety bonds, letters of credit, security
deposits, tax deposits, performance deposits, escrow deposits, keys, books,
records, bank accounts, checkbooks, ledgers, accounts payable and accounts
receivable records, leases, rent polls, reports, insurance policies and
certificates, executory contracts, plans, specifications, drawings, surveys,
operating procedures, warranties, records required to be kept under applicable
safety and environmental laws, licenses, permits, proffers, entitlements,
trademarks, service marks, trade names, intellectual property rights, claims,

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causes of action, choses in action, and in general all other instruments,
documents, rights, properties, or assets of any kind or character whatsoever
(whether tangible or intangible and whether real, personal, or mixed) forming
a part of or related to the ownership, development, use, operation, and
management of the Receivership Property (collectively, together with all rents,
revenues, or proceeds received by the Receiver at any time from or by virtue
of the Receivership Property, the “Receivership Assets”), until such time as the
Court orders otherwise;
(5)

Defendants and their agents, servants, employees, and all other persons acting
in concert with them, are hereby restrained and enjoined from:

(i)

withdrawing, paying, or otherwise transferring funds derived from the
Receivership Property, except to the Receiver; (ii) removing, disposing of,
destroying, concealing, changing, or altering the Receivership Property,
whatsoever; (iii) removing, disposing of, destroying, concealing, changing, or
altering any of the business records of Defendants relating to the Receivership
Property; (iv) taking any action on behalf of Defendants or related to the
Receivership Property without the express consent and permission of the
Receiver; and (v) collecting any rents, revenues, proceeds, or other sums
payable with respect to the Receivership Property. Should Defendants come
into possession of any such rents, revenues, proceeds, or other sums

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subsequent to the date of entry of this Order, Defendants are ORDERED and
DIRECTED promptly to remit the same to Receiver in the form received;
(6)

All tenants, bailees, or other persons in possession of the Receivership
Property, and current tenants of the Receivership Property, are DIRECTED to
attorn to the Receiver, and until further order of this Court: (i) are hereby
DIRECTED to pay over to the Receiver or its duly designated agent all rents,
revenues, proceeds, or other sums payable with respect to the Receivership
Property which are now due and unpaid or hereafter become due; and (ii) are
hereby ENJOINED and RESTRAINED from paying to Defendants, or their
agents, officers, directors, employees, or attorneys any such rents, revenues,
proceeds, or other sums;

(7)

The Receiver shall take immediate possession of, hold, secure, take charge of,
preserve, and protect the Receivership Property and the Receivership Assets;

(8)

The Receiver is authorized to take possession of all bank accounts containing
funds associated with the Receivership Property, whether in the name of Saxon
or any agents or employees of Saxon, wherever located, and to open, transfer,
and change all bank and trade accounts relating to the Receivership Property,
so that all such accounts are in the name of the Receiver;

(9)

The Receiver is authorized to receive and take charge of the Receivership
Property and any receivables, bank accounts, actions, and choses in action, and

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all other property of any kind and every kind, character, and description
wherever the same may be located or found and used in connection with the
operation of the Receivership Property and reduce the same to possession and
shall collect all outstanding accounts, receivables, leases, rents, bank accouts,
actions, and choses in action, or other evidence of indebtedness, and may bring
suit to recover the same in its own name;
(10)

The Receiver is authorized to be named as an additional insured on any
insurance policies covering the Receivership Property. The Receiver may, in
its discretion, or at the direction of Plaintiff or its assigns, obtain additional
insurance covering the Receivership Property, and such insurance expense
shall be deemed a normal, ordinary, and necessary operating expense of the
Receivership Property;

(11)

The Receiver shall manage, control, and operate Saxon’s business to the extent
necessary to facilitate the operations of the Receivership Property and to
collect and use income, earnings, rents, and profits generated by the
Receivership Property for the purpose of facilitating the Receiver’s duties and
to generally take any action which could lawfully be taken by the member(s)
of Saxon to fulfill the Receiver’s duties, including, but not limited to,
negotiating new or existing leases, and exercising the sole authority of Saxon
as to whether or not to file a bankruptcy petition;

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(12)

The Receiver is authorized to employ and to pay property managers,
accountants, and any other persons and professionals, including attorneys, as
the Receiver deems appropriate to perform its duties;

(13)

Without limiting the foregoing, the Receiver is hereby authorized to use the
personnel of the Receiver or hire on a contract basis, personnel necessary to
manage, maintain, and preserve the Receivership Property to retain, hire, and
terminate other personnel, and contract for and obtain such services, utilities,
supplies, equipment, and goods as are reasonably necessary to operate,
preserve, and protect the Receivership Property or to liquidate the
Receivership Property, all as the Receiver may reasonably deem necessary;

(14)

The Receiver shall prepare monthly financial reports to at the end of each
calendar month, beginning with the first full calendar month after the entry of
this Order, which relevant information requested by Plaintiff, or this Court,
regarding the value, profitability, operations, and expenses of Defendants; such
reports shall include, but are not limited to, a current rent poll, all cash
receipts, cash disbursements, accounts receivable and accounts payable for the
preceding calendar month, and copies of leases entered into with tenants for
the preceding calendar month;

(15)

The Receiver shall deliver such monthly reports to Defendants and Plaintiff,
along with any other additional or relevant information obtained from time to

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time by the Receiver in connection with the Receivership Property and the
receivership, within three (3) calendar days from completion of such report;
(16)

The Receiver shall pay the normal, ordinary, and necessary operating expenses
of the Receivership Property from the rents and other revenues collected from
the Receivership Property; and in the event that the rents and other revenues
collected from the Receivership Property are insufficient to pay the normal,
ordinary, and necessary operating expenses of the Receivership Property,
including, but not limited to, the Receiver’s fees, attorney’s fees, costs, and
agents’ compensation, the Receiver is hereby authorized to borrow from
Plaintiff or its affiliates, and they are hereby authorized, but Plaintiff is not
obligated to, advance to the Receiver such funds as may be necessary to pay
such costs and expenses (the “Receivership Advance”). The Receivership
Advance shall be added to the outstanding indebtedness owing to Plaintiff by
Defendants, shall bear interest at the Default Rate set forth in the Notes
secured by the Mortgage, and continue to be secured by a fully perfected lien
on the Receivership Property in favor of Plaintiff to the same extent, validity,
and priority as Plaintiff holds via the Mortgage and the other Loan Documents
without further action by Plaintiff. No personal recourse shall be had against
the Receiver with respect to the Receivership Advance, and Plaintiff shall look
to Defendants and the Receivership Property and its rights and remedies under

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the Loan Documents to satisfy the Receivership Advance;
(17)

The Receiver shall pay to Plaintiff on or before the 15th day of each month all
receipts remaining, if any, after payment of the just and reasonable expenses
of the Receiver to be applied to the indebtedness of Defendants to Plaintiff,
pursuant to the Mortgage and other Loan Documents;

(18)

Neither the Receiver nor Plaintiff shall be liable for any expenses incurred
with regard to the Receivership Property, nor shall the Receiver or Plaintiff be
required to use the Receivership Property for payment of any expenses
incurred with regard to the Receivership Property prior to the date of this
Order. Notwithstanding the foregoing, the Receiver may pay those expenses
which were incurred in the normal and ordinary course of business of Saxon
prior to the Receiver taking possession of the Receivership Assets if, and only
if, the Receiver determines that payment of any such pre-existing expense is
necessary and critical to the ongoing operation, maintenance, management,
protection, and preservation of the Receivership Property. Otherwise, no
expenses or debts that exist prior to the appointment of the Receiver are
required to be paid by the Receiver. The Receiver shall not be required to
perform under any contract or lease entered into prior to the date on which he
assumes possession of the Receivership Assets;

(19)

The Receiver shall be entitled to payment of a monthly fee consisting of

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$500.00 per month; plus actual expenses and costs; plus an additional
$150/hour for certain receivership duties, such as attending attorney meetings,
depositions, hearings, et cetera. The Receiver shall not be required to give
bond conditioned for the faithful discharge of its duties unless and until cause
therefor is shown. The Receiver shall, however, remain insured during the
term of this receivership under its existing insurance policies;
(20)

The Receiver is hereby authorized to notify any parties obligated on any of the
accounts of Saxon to make payment directly to the Receiver of any amounts
due or to become due thereunder;

(21)

The Receiver is hereby authorized to have continuing access to mail or other
correspondence to and from Saxon concerning the Receivership Property;

(22)

The Receiver shall take reasonable actions to ensure that it complies with all
laws applicable to the operation of the Receivership Property as provided
under any laws of the Untied States, the State of Alabama, and otherwise;

(23)

The Receiver shall be entitled to the full use and benefits of any surety bonds,
letters of credit, cash deposits, or similar existing arrangements securing any
obligation owing by Saxon to any third party in connection with the
Receivership Property;

(24)

Without limiting the foregoing, Receiver is vested with all of the powers,
rights, and duties provided under applicable law and the following specific

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powers and rights all of which must comply with the terms herein: make
repairs and alterations to the Receivership Property; undertake construction or
repair of the Receivership Property, with such changes, additions, or
modifications of the Receivership Property as the Receiver may deem
appropriate or desirable; conduct, terminate, or continue, a marketing or
leasing program with respect to all or a portion of the Receivership Property;
employ a marketing or leasing agent or agents to do so, directed to the leasing
or sale of all or portions of the Receivership Property under such terms and
conditions as the Receiver may deem appropriate or desirable; subject to Court
approval, conduct a receiver’s sale of all or a portion of the Receivership
Property, free and clear of all liens, claims and other encumbrances; employ
such contractors, subcontractors, materialmen, architects, engineers,
consultants, managers, brokers, marketing agents, or other employees, agents,
independent contractors or professionals, as the Receiver may deem
appropriate or desirable to implement and effectuate the rights and powers
herein granted, and deeming the expenses of the same as an ordinary expense
fo the receivership; execute and deliver such documents and instruments as are
necessary to consummate authorized transactions on behalf of Saxon; enter
into such leases, or modify the terms of existing leases, whether of real or
personal property, under such terms and conditions as the Receiver may deem

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appropriate or desirable; enter into tenancy agreements, under such terms and
conditions as the Receiver may deem appropriate or desirable; eject tenants or
repossess personal or real property, as provided by law, for breaches of the
conditions of their respective leases or other agreements; sue for unpaid rents
and profits, payments, income, or proceeds in the name of Saxon; maintain
actions in forcible entry and detainer, ejectment for possession and actions in
distress for rent; compromise or give acquittance for rents and profits,
payments, income, or proceeds that may become due; and do any lawful acts
reasonably requested by Plaintiff to protect the security hereof and use such
measures, legal or equitable, reasonably requested by Plaintiff to implement
and effectuate the provisions of the Mortgage or the Loan Documents;
(25)

The Court shall retain jurisdiction and supervision of all matters concerning
the Receiver, the receivership created hereby and the Receivership Property.
Any and all actions which affect the Receiver or the Receivership Property
shall be brought in this Court. The Receiver may seek instructions and
additional authority from this Court with both Plaintiff and Defendants having
the ability to object to the same.

DONE this 23rd day of February, 2012.
/s/ Mark E. Fuller
UNITED STATES DISTRICT JUDGE

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