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

Filing 33

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS EMERGENCY MOTION FOR THE APPOINTMENT OF A RECEIVER 3 , SUPPLEMENTAL MOTION FOR THE APPOINTMENT OF A RECEIVER 20 , AND RENEWED MOTION FOR THE APPOINTMENT OF A RECEIVER 24 . A separate Order appointing a receiver for the Property was entered on October 18, 2017 (Docket Number 30 ). Signed by Senior Judge Irene M. Keeley on 10/19/2017. (kd)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
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.

//

CIVIL ACTION NO. 1:17CV138
(Judge Keeley)

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]
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-

U.S. BANK V. MOUNTAIN BLUE

1:17CV138

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]
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).
2

U.S. BANK V. MOUNTAIN BLUE

1:17CV138

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]
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
debt;

of

the

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 in the property; and

3

security

to satisfy the

U.S. BANK V. MOUNTAIN BLUE

1:17CV138

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]
viii)

whether moving party's interests sought to be
protected will in fact be well-served by
receivership.

First United Bank & Trust v. The Square at Falling Run, LLC, No.
1:11cv31, 2011 WL 1563108 (N.D.W. Va. Apr. 25, 2011) (report and
recommendation).
Here, U.S. Bank provided sufficient evidence to satisfy the
Court

that

the

contracts

at

issue,

as

well

as

the

relevant

equitable factors, warrant the appointment of a receiver. First,
Mountain Blue’s failure to pay franchise fees to Hilton Garden Inns
Franchise

LLC

(“Hilton”)

constituted

a

material

default

that

permitted Hilton to cancel Mountain Blue’s franchise agreement
(Dkt. Nos. 3-9; 3-10; 3-12). A material default under the franchise
agreement constitutes an event of default under the loan agreement
(Dkt. No. 3-5 at 35-37). Further, Mountain Blue’s failure to pay
state taxes and local hotel taxes, as well as its inability to pay
operating and other expenses as they became due, constituted
additional events of default under the loan agreement (Dkt. No. 3-5
at 35). Each of these events of default permit U.S. Bank to demand
full payment, seek foreclosure, and apply for the appointment of a
receiver under the deed of trust (Dkt. No. 3-7 at 13-14). Thus,
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U.S. BANK V. MOUNTAIN BLUE

1:17CV138

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]
U.S. Bank is within its contractual rights to seek the appointment
of a receiver.
Second, current circumstances at the Property weigh heavily in
favor of appointing a receiver. The value of the Property, and thus
its adequacy to satisfy Mountain Blue’s debt to U.S. Bank, is
directly tied to its continued operation as a hotel under the
Hilton franchise agreement. Evidence admitted at the evidentiary
hearing established that Mountain Blue recently failed to pay
additional

fees

owed

to

Hilton,

again

putting

the

franchise

agreement at risk of termination (Dkt. No. 27-5). Additionally,
Mountain

Blue’s

Commission’s

tax

failure
complaint

to

oppose

against

it

the

Monongalia

resulted

in

a

County
default

judgment, imposing a lien on the Property for the amount of
$144,315.63 (Dkt. No. 19-2). Moreover, under the loan documents,
the Property is U.S. Bank’s primary source of recovery. Absent the
appointment of a receiver to manage the Property and prevent its
value from being adversely affected by the inability to operate as
a Hilton franchisee, U.S. Bank has no adequate legal remedy.
Finally,

the

appointment

of

a

receiver

will

effectively

protect U.S. Bank’s interest in the Property. A receiver will be
5

U.S. BANK V. MOUNTAIN BLUE

1:17CV138

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]
able to use money advanced by U.S. Bank to remain current with
Mountain Blue’s obligations to Hilton, meet payroll requirements,
and pay operating and other expenses as they become due. U.S.
Bank’s interest in protecting the value of the Property clearly
outweighs Mountain Blue’s interest in avoiding the appointment of
a receiver. In fact, Mountain Blue agreed in the loan documents
that a receivership would be appropriate under these circumstances
(Dkt. Nos. 3-5 at 35-38; 3-7 at 14-15).
In conclusion, for the reasons discussed, the Court ORDERS
that U.S. Bank’s motions for the appointment of a receiver be, and
they

are,

GRANTED

(Dkt.

Nos.

3;

20;

24).

A

separate

Order

appointing a receiver for the Property was entered on October 18,
2017(Dkt. No. 30).
It is so ORDERED.
The Clerk shall transmit copies of this Order to counsel of
record.
DATED: October 19, 2017.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE

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