Wells Fargo Bank, N.A. v. Atmore-Brewton-Marshall Properties, LLC et al

Filing 22

ORDER granting 3 Motion to Appoint Focus Management Group USA, Inc. as Receiver, as set out. Signed by Chief Judge William H. Steele on 2/18/2014. Copy mailed to Michael W. Dendy (tgw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
WELLS FARGO BANK, N.A.,
Plaintiff,
v.
ATMORE-BREWTON-MARSHALL
PROPERTIES, LLC, et al.,
Defendants.

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CIVIL ACTION 14-0015-WS-C

ORDER
This matter comes before the Court on the Motion for the Appointment of a Receiver
(doc. 3) filed by plaintiff, Wells Fargo Bank, N.A.
To afford defendants a reasonable opportunity to be heard, the undersigned entered an
Order (doc. 9) on January 17, 2014, directing defendants “to file a response (supported by
exhibits and legal authority, as appropriate) to the Motion for Appointment of a Receiver on or
before February 3, 2014.” (Doc. 9, at 5.) On January 31, 2014, defendant Michael W. Dendy,
proceeding pro se, requested an enlargement of time to prepare a response, based on the recent
crippling ice storm that struck southern Alabama, Dendy’s travel schedule and his desire to
retain counsel. (See doc. 15.) On February 3, 2014, the undersigned entered an Order (doc. 19)
extending the time for defendants to respond to the Motion for Appointment of Receiver through
and including February 11, 2014. One day before that deadline, Dendy filed a response stating
that he “agree[s] to the Motion for Appointment of Receiver.” (Doc. 21, at 1.)1 Defendant
1

Although this Court previously explained that Dendy cannot represent defendant
Atmore-Brewton-Marshall Properties, LLC (of which he is a member) in this matter, Dendy’s
February 10 response purported to state that the LLC defendant likewise agrees to the Motion.
By way of explanation, Dendy indicated that “we cannot afford legal representation on behalf of
the LLC.” (Doc. 21, at 1.) Be that as it may, the law remains clear that the LLC cannot proceed
pro se and Dendy cannot represent it. See, e.g., Udoinyion v. The Guardian Security, 2011 WL
3911087, *3 (11th Cir. Sept. 7, 2011) (“A corporation is an artificial entity that cannot appear pro
se and must be represented by counsel.”). The LLC’s financial status and ability to afford
(Continued)

Atmore-Brewton-Marshall Properties, LLC (“ABM”) has not availed itself of this opportunity to
be heard, despite actual notice of the Motion. Accordingly, the Court finds that Wells Fargo’s
Motion is unopposed.
Subject to the foregoing, the Court has considered the 160 pages of materials that Wells
Fargo submitted in its Motion and accompanying exhibits, and makes the following
determinations:
1.

This Court has jurisdiction over the parties and venue is proper in this Court.

2.

On January 14, 2014, plaintiff, Wells Fargo Bank, N.A. (“Wells Fargo”), filed a

Complaint Requesting Appointment of Receiver and Other Legal and Equitable Relief (doc. 1) in
this District Court against named defendants, Atmore-Brewton-Marshall Properties, LLC
(“ABM”) and Michael W. Dendy (“Dendy”). The Complaint alleges state-law causes of action
for breach of contract and appointment of a receiver.
3.

According to the well-pleaded allegations of the Complaint, on January 29, 2009,

Wells Fargo’s predecessor made a commercial loan (the “Loan”) to defendants in the original
principal amount of $5,234,238.11. As security for the Loan, ABM granted to Wells Fargo a
mortgage and assignment of rents (the “Mortgage”) encumbering certain real property owned by
ABM and located in Escambia County, Alabama and Marshall County, Alabama, together with
improvements thereon and rents arising therefrom (collectively, the “Property”). The Mortgage
also assigns and transfers to Wells Fargo all rents of the Property. The Complaint identifies the
Property as consisting of a retail center in Atmore, Alabama; a retail center in Brewton,
Alabama; an apartment building in or around Albertville, Alabama; a single-tenant retail
building in or around Guntersville, Alabama; and an industrial property in or around Boaz,
Alabama.
retained counsel are irrelevant. See generally Industrial Unlimited v. Viacom Entertainment
Int’l, Inc., 2005 WL 1177931, *1 (D. Md. May 18, 2005) (“Without the ability to proceed in
forma pauperis, an artificial entity such as Industrial Unlimited is not eligible for appointment of
counsel.”). The bottom line is this: If the LLC wishes to appear and defend against Wells
Fargo’s claims in this litigation, then it must make arrangements for counsel to represent it. If it
does not do so, then Atmore-Brewton-Marshall Properties, LLC, will be subject to entry of
default and default judgment upon proper service of process by plaintiff and the expiration of
time for responsive pleadings. Accordingly, defendants are strongly encouraged to consult
with counsel immediately to evaluate their options with respect to the LLC.

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4.

The Complaint alleges that, as additional security for the Loan, ABM and Wells

Fargo entered into a Lockbox Account Agreement dated March 20, 2009, pursuant to which
Wells Fargo established a unique postal address (the “Lockbox”) to receive Property rents, which
were then deposited in a Deposit Account established and maintained by Wells Fargo.
According to the Complaint, ABM granted Wells Fargo a security interest in the Lockbox and
related collateral, as well as in the Deposit Account and its profits and proceeds.
5.

The Complaint alleges that ABM and Dendy are in default on the Loan in

multiple respects, including failure to make required monthly principal payments, failure to
maintain the Property in good condition and repair, failure to pay ad valorem taxes on the
Property that are due and owing, and failure to provide certain financial documents and records
to Wells Fargo. On the basis of these and other purported forms of default, Wells Fargo
accelerated the Loan and demanded immediate payment in full, which defendants have not done.
6.

According to the Complaint, as of January 9, 2014, the total principal amount

outstanding under the Loan was $4,488,083.89, plus accrued interest, late fees, attorney’s fees
and costs.
7.

The Complaint alleges that, in light of defendants’ default on the Loan, Wells

Fargo is invoking its contractual right to appointment of a receiver. In particular, Wells Fargo
relies on language in the “Remedies of Bank on Default” section of the Mortgage providing that
Wells Fargo may apply to a court of competent jurisdiction for appointment of receiver and that
ABM (as mortgagor) consents to appointment of a receiver without notice.
8.

Wells Fargo further invokes this Court’s equitable power to appoint a receiver.

See, e.g., Gilchrist v. General Elec. Capital Corp., 262 F.3d 295, 302 (4th Cir. 2001) (“We begin
our analysis by recognizing that the district court has within its equity power the authority to
appoint receivers and to administer receiverships.”); Santibanez v. Wier McMahon & Co., 105
F.3d 234, 241 (5th Cir. 1997) (“[T]he District Court had the power to appoint a receiver to take
possession of the judgment debtor’s property for preservation under Federal Rule of Civil
Procedure 66.”). The Court recognizes that “[r]eceivership is an extraordinary remedy that
should be employed with the utmost caution and is justified only where there is a clear necessity
to protect a party’s interest in property, legal and less drastic equitable remedies are inadequate,
and the benefits of receivership outweigh the burdens on the affected parties.” Netsphere, Inc. v.
Baron, 703 F.3d 296, 305 (5th Cir. 2012) (“citations and internal quotation marks omitted). The

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Court finds that Wells Fargo has made the requisite equitable showing here, given plaintiff’s
allegations that its collateral may be devalued by defendants’ ongoing failure to maintain and
repair the Property, failure to pay ad valorem taxes on the Property, and failure to take action to
preserve tenants and cash flow from rent payments on the Property. Moreover, there is no
indication of an undue burden on defendants, particularly given ABM’s contractual assent to
appointment of a receiver upon default, Dendy’s express acquiescence to the Motion for
Appointment of Receiver, and ABM’s failure to appear to contest the Motion.
9.

Plaintiff has made a substantial showing that Focus Management Group USA,

Inc., by and through Keith G. Hyatt, has significant experience in the management of properties
such as the Property, and that it is well suited to serve as receiver for the Property.
10.

For purposes of the Motion for Appointment of a Receiver, defendants have

objected to none of the facts and conclusions recited above.
Based upon the foregoing, the Motion for the Appointment of a Receiver (doc. 3) is
granted. To effectuate such appointment, it is hereby ORDERED as follows:
A.

Focus Management Group USA, Inc. (“Focus”) is hereby appointed as Receiver for the
Property, which includes all those certain tracts of land as described in Exhibit A to
document 3-1 (the “Land”), all buildings, improvements, and fixtures on the Land, and
all estates, rights, tenements, hereditaments, privileges, rents, issues, profits, easements,
and appurtenances of any kind benefitting the Land, all means of access to and from the
Land, all water and mineral rights, and all leases, rents, issues, and profits. Keith G.
Hyatt shall serve as primary representative of the Receiver in this matter. The Receiver is
authorized to take immediate possession and control of the Property (hereinafter referred
to as the “Receivership Property”) and associated assets;

B.

Defendants must comply with this Order, and are hereby enjoined and restrained from
impeding or interfering with the Receiver’s exercise of its rights, powers and duties.
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 these assets, and shall not grant any lien
upon or security interest in the Receivership Property;

C.

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

D.

Defendants are hereby ordered and directed to deliver to the Receiver 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,
ledgers, accounts payable and accounts receivable records, leases, rent rolls, reports,
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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, 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 this Court orders
otherwise;
E.

Defendants and their agents, servants, employees, and all other persons acting in concert
with them, are 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; (iii) removing, disposing of, destroying, concealing, changing, or altering
business records relating to the Receivership Property; (iv) taking any action 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 following entry of this Order, Defendants must
promptly remit the same to the Receiver in the form received;

F.

All tenants, bailees or other persons in possession of the Receivership Property, and
current tenants of the Receivership Property, are hereby directed to attorn to the Receiver,
and until further order of this Court: (i) are 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 enjoined and restrained from paying to Defendants, or their agents, officers, directors,
employees, or attorneys any such rents, revenues, proceeds or other sums;

G.

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

H.

Funds received by the Receiver or its designee that are attributable to or relate to the
Receivership Property must be held in bank accounts in the name of the Receiver or its
designee, and therefore the Receiver is authorized to open and maintain bank and trade
accounts relating to the Receivership Property, so that all such accounts are in the name
of the Receiver or its designee;

I.

The Receiver is further authorized to receive and take charge of any receivables, actions
and choses in action, and all other property of any kind and every kind, character and
description used in connection with the operation of the Receivership Property and
reduce the same to possession and to collect all outstanding accounts, receivables, leases,
rents, actions and choses in action, or other evidence of indebtedness, and may bring suit
to recover the same in its own name;

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J.

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, 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;

K.

The Receiver shall manage, control, and operate the Receivership Property and 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 Defendants to fulfill the Receiver's duties, including but
not limited to, negotiating new or existing leases and access and control over the
Lockbox and Deposit Account;

L.

Any and all funding by Wells Fargo shall only be made pursuant to a budget agreed upon
by Wells Fargo and the Receiver;

M.

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

N.

Without limiting the foregoing, the Receiver is hereby authorized to use its personnel 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;

O.

The Receiver shall prepare monthly financial reports due at the end of each calendar
month, beginning in March 2014, regarding the value, profitability, operations, and
expenses of the Receivership Property. Such reports shall include, but are not limited to,
a current rent roll, 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;

P.

The Receiver shall deliver such monthly reports to Wells Fargo and Defendants, along
with any other additional or relevant information obtained from time to time by the
Receiver in connection with the Receivership Property, within three (3) calendar days
from completion of such report;

Q.

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 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 Wells Fargo or its affiliates, and they are hereby authorized, but are not
obligated to, advance to the Receiver such funds as may be necessary to pay such costs

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and expenses (the “Receivership Advance”). The Receivership Advance shall be added
to the outstanding indebtedness owing to Wells Fargo by Defendants, shall bear interest
at the rate of 5.5% (the fixed per annum rate of interest specified in the Loan
Modification Agreement dated March 1, 2013, and found at Exhibit F to document 3-2),
and continue to be secured by a fully perfected lien on the Receivership Property in favor
of Wells Fargo to the same extent, validity, and priority as Wells Fargo holds via the
Mortgage and the other Loan Documents without further action by Wells Fargo. No
personal recourse shall be had against the Receiver with respect to the Receivership
Advance, and Wells Fargo shall look to the Receivership Property and its rights and
remedies under the Loan Documents to satisfy the Receivership Advance;
R.

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 Wells Fargo, pursuant to the Mortgage and
other Loan Documents;

S.

Neither the Receiver nor Plaintiff shall be liable for any expenses incurred with regard to
the Receivership Property prior to the Receiver taking possession of same, 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 Defendants prior to the
Receiver taking possession of the Receivership Assets if the Receiver determines that
payment of any such pre-existing expense is in furtherance of the ongoing operation,
maintenance, management, protection and/or preservation of the Receivership Property;

T.

The Receiver shall be entitled to payment of a rate pursuant to the following fee
structure:
§

$225 per hour for Keith G. Hyatt; $200 per hour for senior consultants;
and $85 per hour for administrative personnel; and

§

Reimbursement for all reasonable out-of-pocket expenses, including travel
expenses, reasonably incurred in the discharge of the Receiver’s rights and
duties as receiver.

U.

The Receiver shall not be required to give bond conditioned for the faithful discharge of
its duties unless and until cause therefore is shown. The Receiver shall however, remain
insured during the term of this receivership under its existing insurance policies;

V.

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

W.

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 United States, the State of Alabama, and otherwise;

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X.

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

Y.

Without limiting the foregoing, Receiver is vested with all of the powers, rights and
duties provided under applicable law and the following specific powers and rights all of
which must comply with the terms herein: undertake construction, repairs or alterations
of the Receivership Property, with such changes, additions or modifications 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 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 liens, claims and other
encumbrances; employ such contractors, subcontractors, materialmen, architects,
engineers, consultants, managers, brokers, 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 of the receivership; execute and deliver such
documents and instruments as are necessary or appropriate to consummate authorized
transactions on behalf of Defendants as its attorney-in-fact; 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 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 leases or other agreements; sue for unpaid rents and profits,
payments, income or proceeds in the name of Defendants; 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;

Z.

Except by leave of this Court and except with respect to Plaintiff's right to foreclose its
Mortgage, during the pendency of the receivership, Defendants, and all other persons,
creditors and entities are stayed from taking any action to establish or enforce any claim,
right or interest for, against, on behalf of, in, or in the name of the Receiver, the
Receivership Property or any other Receivership Assets, or the Receiver's duly
authorized agent acting in their capacities as such, including but not limited to, the
following actions: (i) commencing, prosecuting, litigating or enforcing suit, except that
the actions may be filed to toll any applicable statute of limitations; (ii) accelerating the
due date of any obligation or claimed obligation, enforcing any lien upon, or taking or
attempting to take possession of, or retaining possession of, property of defendants that
relates in any way to the Receivership Property, or attempting to foreclose, forfeit, alter
or terminate any of defendants' interest in the Receivership Property, whether such acts
are part of a judicial proceeding or otherwise; (iii) using self-help or executing or issuing,
or causing the execution or issuance of any court attachment, subpoena, replevin,
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execution or other process for the purpose of impounding or taking possession of or
interfering with, or creating or enforcing a lien upon the Receivership Property; and (iv)
doing any act or thing to interfere with the Receiver taking control, possession or
management of the property subject to the receivership, or to in any way interfere with
the Receiver or the duties of the Receiver, or to interfere with the Receivership Property;
AA.

No funds due or held by the Receiver shall be subject to any garnishment, levy, execution
or similar action of any kind, whether such are earned before or after entry of this Order;

BB.

The Receiver shall have no obligation to file tax returns on the Defendants' behalf in
accordance with the Internal Revenue Code or otherwise;

CC.

The Receiver may, but is not required to, pay any past due taxes assessed on any of the
Receivership Property, as is necessary to redeem the Receivership Property or prevent it
from being sold at tax sales;

DD.

Plaintiff's interest in the rents, issues, profits, and revenues of the Receivership Property
shall not be impaired by the appointment of the Receiver;

EE.

This Order shall not affect Plaintiff's Mortgage lien upon and security interest in the
Receivership Property and the other collateral, or its right to enforce the terms of the
Mortgage and the other loan documents executed in connection therewith against
Defendants or the Receivership Property. Nothing in this order shall preclude Plaintiff
from proceeding with any and all other remedies available under the loan documents or
applicable law;

FF.

The Receiver may, in its sole and absolute discretion, resign its office as Receiver by
providing at least thirty (30) days written notice to Plaintiff and Defendants, and by filing
such notice with this Court;

GG.

The Receiver and/or Plaintiff may cause a copy of this Order to be recorded in the Office
of the Judge of Probate for Escambia County and/or Marshall County, Alabama and in all
such other filing offices within or without the State of Alabama as the Receiver and/or
Plaintiff may deem necessary or advantageous;

HH.

Any action that is due under this Order on a day that is a weekend or a federal legal
holiday shall not be due until the next business day; and

II.

The Court shall retain jurisdiction of the specific matters addressed in this Order. The
Receiver (or any party) may seek clarification or modification of this Order upon notice
to all other parties; provided, however, that Defendants will not be heard to object to
particular provisions of this Order by raising arguments available to them prior to entry of
this Order, but that they elected not to present at that time. Notwithstanding the
foregoing, Defendants remain free to litigate the merits of this lawsuit, including the
breach of contract and receivership causes of action therein, and nothing herein can or
should be construed as a final adjudication on the merits by this Court of any party’s
rights, remedies or liabilities vis a vis the subject Loan, Mortgage and Property.

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DONE and ORDERED this 18th day of February, 2014.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

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