Sterling Sav. Bank v. Citadel Development Co., Civil No. 09-404-AC.

• Decision Date: 10 September 2009
• Docket Number: Civil No. 09-404-AC.
• Parties: STERLING SAVINGS BANK, Plaintiff, v. CITADEL DEVELOPMENT COMPANY, INC.; J. Kenyon Eagon; Heather Eagon; Eagon Capital Ventures, Inc.; Mark S. Dane; Claudia P. Dane, Defendants.
• Court: U.S. District Court — District of Oregon

656 F.Supp.2d 1248

STERLING SAVINGS BANK, Plaintiff, v. CITADEL DEVELOPMENT COMPANY, INC.; J. Kenyon Eagon; Heather Eagon; Eagon Capital Ventures, Inc.; Mark S. Dane; Claudia P. Dane, Defendants.

Civil No. 09-404-AC.

United States District Court, D. Oregon.

September 10, 2009.

COPYRIGHT MATERIAL OMITTED

Charles R. Markley, Sanford R. Landress, Greene & Markley, PC, Portland, OR, for Plaintiff.

Nena Cook, Sussman Shank, LLP, Portland, OR, for Defendants.

ORDER

HAGGERTY, District Judge:

Magistrate Judge Acosta has issued a Findings and Recommendation [39] in this action. The Magistrate Judge recommends granting defendants' Motion to Strike [19] and defendants' Motion to Dismiss Plaintiffs Claim for Appointment of Receiver [16] and denying plaintiffs Motion to Appoint a Receiver [9]. No objections were filed, and the case was referred to this court.

The matter is now before me pursuant to 28 U.S.C. § 636(b)(1)(B) and Federal Rule of Civil Procedure 72(b). When no timely objection is filed, the court need only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation of the Magistrate Judge. Campbell v. United States Dist. Ct., 501 F.2d 196 (9th Cir.1974).

No clear error appears on the face of the record. This court adopts the Findings and Recommendation in its entirety.

CONCLUSION

The Findings and Recommendation [39] is adopted. Defendants' Motion to Strike [19] and defendants' Motion to Dismiss Plaintiff's Claim for Appointment of Receiver [16] are GRANTED and plaintiff's Motion to Appoint a Receiver [9] is DENIED without prejudice. IT IS SO ORDERED.

FINDINGS AND RECOMMENDATION

ACOSTA, United States Magistrate Judge:

Introduction

Currently before the court is plaintiff Sterling Savings Bank's ("Sterling") motion to appoint a receiver, along with related motions to dismiss and to strike certain evidence. Sterling initiated this action against Citadel Development Company ("Citadel") and J. Kenyon Eagon, Heather Eagon, and Eagon Capital Ventures, Inc. (the last three collectively referred to as the "Eagon Defendants") to foreclose on the real property (the "Property" or "Scott's Bluff") identified in the deed of trust ("Deed of Trust") used to secure Citadel's debt to Sterling. J. Kenyon Eagon is a guarantor of Citadel's debt to Sterling. (Declaration of Robert Luby ("Luby Decl.") ¶ 4.) Sterling argues that the court should appoint a receiver because Citadel consented to appointment of a receiver in the Deed of Trust. Additionally, Sterling argues that a receiver is necessary to preserve and protect the property or, alternatively, that a receiver is necessary to sell the property with the court's approval. Defendants argue that a receiver is not necessary and that consent to a receiver in the Deed of Trust does not allow the court to bypass the required factor-weighing analysis, The court concludes that consent to a receiver is not dispositive of the issue and that Sterling has not produced sufficient evidence of the receivership factors outlined in Canada Life Assurance Co. v. LaPeter, 563 F.3d 837, 844 (9th Cir.2009). Therefore, Sterling's motion to appoint a receiver should be denied at this time.

Background

On August 31, 2006, Citadel borrowed $2,070,000.00 from Sterling, and J. Kenyon Eagon, president of Citadel, executed a promissory note (the "Note") in favor of Sterling. (Luby Decl., Ex. 2 at 1.) The Note was secured by the Deed of Trust including the Property, which is commonly known as Scott's Bluff. (Luby Decl., Ex, 1 at 1.) The Deed of Trust named Pacific Northwest Title ("PNW Title") as the Property's trustee. (Luby Decl., Ex. 1 at 2.) Citadel assigned all lease revenue from the Property to Sterling but retained a license to continue receiving such revenue until default occurred. (Luby Decl., Ex. 1 at 4-5.) The Property is bare land and is not currently generating any rental income. (Declaration of J. Kenyon Eagon ("Eagon Decl.") ¶ 2.)

Citadel has defaulted on the Note. (Luby Decl. ¶ 5.) The Deed of Trust provides that, upon Citadel's default, Sterling has the right to possess, sell, or dispose of the Property. (Luby Decl., Ex. 1 at 7.) The principal sum due is $1,964,488.01. (Luby Decl. ¶ 5.) Interest, late charges, and fees through April 1, 2009, total $148,240.48. (Luby Decl. ¶ 5.)

The Deed of Trust also imposes the duty upon Citadel to manage, preserve, and protect the Property. In section 5.7, the Deed of Trust states:

Grantor covenants: (a) to insure the Subject Property ...; (b) to keep the Subject Property in good condition and repair; (c) ... not to remove or demolish the Subject Property or any part thereof; not to alter, restore or add to the Subject Property.; (d) ... to complete or restore promptly and in good and workmanlike manner the Subject Property, or any part thereof which may be damaged or destroyed ...; (e) to comply with all laws, ordinances, regulations and standards ...; (f) not to knowingly commit or permit waste of the Subject Property; (g) to do all other acts which from the character or use of the Subject Property may be necessary to maintain and preserve its value; (h) not to knowingly make any use of the Subject Property which would invalidate any insurance thereon which Grantor is required to carry pursuant to the Loan Agreement; and (I) not to construct any improvements....

(Luby Decl., Ex. 1 at 10-11.) The Deed of Trust also reflects that the parties contemplated the appointment of a receiver by the court in the event of Citadel's default:

At any time after Default, Beneficiary [Sterling] and Trustee [PNW Title] shall each have all the following rights and remedies:

(a) To declare all Secured Obligations immediately due and payable;

. . . .

(d) To apply to a court of competent jurisdiction for and obtain appointment of a receiver of the Subject Property as a matter of strict right and without regard to the adequacy of the security for the repayment of the Secured Obligations, and Grantor hereby consents to such appointment, the existence of a declaration that the Secured Obligations are immediately due and payable, or the filing of a notice of default;

(Luby Decl., Ex. 1 at 14-15.)

Homes Worth Keeping, L.L.C. ("Homes Worth Keeping") offered to purchase the Property for $1,050,000.00 on or before April 24, 2009. (Luby Decl., Ex. 4 at 1, 2.) The Defendants, however, did not agree to sell the Property. (Luby Decl. ¶ 4.) Sterling submitted evidence that the Defendants would have been willing to sell the Property if Sterling would have forgiven any outstanding balance due on the loan after the Property's sale. (Luby Decl. ¶ 4, Ex. 3, 5.) In its brief, Sterling claimed that it would suffer harm by being unable to accept offers, such as the offer from Homes Worth Keeping, and that a receiver is necessary to sell the property. (Luby Decl. ¶ 4.) At the hearing, however, Sterling shifted course: it stated that it no longer sought to have the Property sold, but it argued that a receiver still was necessary to preserve and protect the Property. Sterling's complaint is for the foreclosure of the Deed of Trust, for breach of a guaranty by the Eagon Defendants, and for the appointment of a receiver. Currently, Sterling is seeking foreclosure of real property in eight other cases against the Eagon Defendants and their various business entities. (Pl.'s Reply to Mot. to Appoint a Receiver, Ex. 1.)

Legal Standard

1. Motion to Strike Evidence of Compromise Negotiations

Federal Rule of Evidence 408 ("Rule 408") provides:

(a) Prohibited uses.—Evidence of the following is not admissible on behalf of any party, when offered to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount, or to impeach through a prior inconsistent statement or contradiction:

(1) furnishing or offering or promising to furnish—or accepting or offering or promising to accept—a valuable consideration in compromising or attempting to compromise the claim; and

(2) conduct or statements made in compromise negotiations regarding the claim, except when offered in a criminal case and the negotiations related to a claim by a public office or agency in the exercise of regulatory, investigative, or enforcement authority.

(b) Permitted uses.—This rule does not require exclusion if the evidence is offered for purposes not prohibited by subdivision (a). Examples of permissible purposes include proving a witness's bias or prejudice; negating a contention of undue delay; and proving an effort to obstruct a criminal investigation or prosecution.

FED.R.EVID. 408. One purpose of Rule 408 is the "promotion of the public policy favoring the compromise and settlement of disputes." FED.R.EVID. 408, advisory committee notes; United States v. Contra Costa County Water Dist., 678 F.2d 90, 92 (9th Cir.1982).

2. Motion to Dismiss for Failure to State a Claim

Rule 12(b)(6) of the Federal Rules of Civil Procedure allows dismissal for "failure to state a claim upon which relief can be granted." FED.R.CIV.P. 12(b)(6). A complaint does not require detailed factual allegations to survive dismissal, but it must provide the factual grounds upon which the plaintiff is entitled to relief. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The court must construe the complaint in the light most favorable to the plaintiff, presuming all factual allegations to be true and drawing all reasonable inferences in the plaintiffs favor. E.g. Doe v. United States, 419 F.3d 1058,1062 (9th Cir.2005). The facts, taken as true, still must "plausibly suggest[ ]" at the plaintiff is entitled to relief. Twombly, 550 U.S. at 557, 127 S.Ct. 1955. Merely alleging facts that are not inconsistent with a theory entitling the plaintiff to relief is not sufficient to survive dismissal. Id. If the allegations would not entitle the plaintiff to relief, the court should dismiss the claim quickly in the interest of judicial...