CLARKSBURG – U.S. District Judge Irene M. Keeley has granted a request to allow another company to operate the Suncrest Hilton Garden Inn.
On Oct. 18, the court conducted an evidentiary hearing by telephone regarding the plaintiff’s emergency motion for the appointment of a receiver; supplemental motion for the appointment of a receiver; and renewed motion for the appointment of a receiver, according to the Oct. 19 order.
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…constituted a material default that permitted Hilton to cancel Mountain Blue’s franchise agreement,” Keeley wrote. “A material default under the franchise agreement constitutes an event of default under the loan agreement. 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.
Keeley wrote that 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. Thus, 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,” Keeley wrote. “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.”
Additionally, Mountain Blue’s failure to oppose the Monongalia County Commission’s tax complaint against it resulted in a default judgment, imposing a lien on the property for the amount of $144,315.63
Under the loan documents, the property is U.S. Bank’s primary source of recovery, according to the order.
“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,” Keeley wrote.
Keeley believes the appointment of a receiver will effectively protect U.S. Bank’s interest in the property.
“A receiver will be 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,” she wrote. “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 .”
All current employees will be dismissed, but the appointed group will have the option to bring some or all back to work.
U.S. District Court for the Northern District of West Virginia case number: 1:17-cv-00138
