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Huntington National Bank v. Sakthi Automotive Group USA, Inc.

United States District Court, E.D. Michigan, Southern Division

June 20, 2019

THE HUNTINGTON NATIONAL BANK, Plaintiff,
v.
SAKTHI AUTOMOTIVE GROUP USA, INC., et al., Defendants.

          OPINION AND ORDER DENYING DEFENDANTS' EX PARTE MOTION TO DELAY THE APPOINTMENT OF A RECEIVER [51], DENYING DEFENDANTS' MOTION FOR RECONSIDERATION [56], [57], AND DENYING PLAINTIFF'S MOTION TO FILE A RESPONSE IN OPPOSITION TO DEFENDANTS' MOTION FOR RECONSIDERATION [61]

          STEPHEN J. MURPHY, III United States District Judge

         On May 16, 2019, the Court denied Plaintiff Huntington National Bank's ("Huntington") motion for a preliminary injunction and granted its renewed motion for appointment of a receiver. ECF 49. The Court allowed either party to file motions for reconsideration within ten days if they believed that further evidence could change the Court's ruling. Id. at 2484. The Court further ordered that "[a]ny such motion must be accompanied by affidavits, declarations, and a summary of the testimony and evidence that would alter the Court's decision." Id. On May 20, 2019, Defendants Sakthi Automotive Group, USA, Inc., Sakthi America Corporation, and Sakthi Real Estate Holdings ("Sakthi Defendants") filed an ex parte motion to delay appointment of a receiver until after the Court considered Sakthi Defendants' motion for reconsideration. ECF 51. On May 21, 2019, Sakthi Defendants filed a motion for reconsideration. ECF 56, 57. On May 28, 2019, Huntington filed a motion for leave to file a response in opposition to Sakthi Defendants' motion for reconsideration. ECF 61. For the reasons that follow, the Court will deny each of these motions and will appoint by separate order Kevin English, managing partner of Lark Advisors, to serve as receiver. See ECF 52, PgID 2514-15.

         STANDARD OF REVIEW

         Before the Court will grant a motion for reconsideration, "[t]he movant must not only demonstrate a palpable defect by which the court and the parties and other persons entitled to be heard on the motion have been misled but also show that correcting the defect will result in a different disposition of the case." E.D. Mich. L.R. 7.1(h)(3). "A 'palpable defect' is a defect which is obvious, clear, unmistakable, manifest, or plain." Fleck v. Titan Tire Corp., 177 F.Supp.2d 605, 624 (E.D. Mich. 2001) (citation omitted).

         DISCUSSION

         As the Court found in its Order granting Huntington's renewed motion for a receiver, "the parties' briefing and evidence, including relevant contractual language in the parties' loan documents, establish that Huntington is entitled to the appointment of a receiver." ECF 49, PgID 2488. Sakthi Defendants admitted that they are in default of the parties' loan agreements. ECF 30, PgID 1522. And Huntington, consistent with the terms of the parties' contracts, sought to have a receiver appointed to protect its interests in certain collateral. See ECF 26-5, PgID 760, ECF 26-8, PgID 946, ¶ 7(d); ECF 26-9, PgID 976 ¶ 7(d).

         Section 11.5 of the parties' credit agreement provides:

Upon the occurrence of an Event of Default and at all times thereafter, the Lender shall be entitled to the immediate appointment of a receiver for all or any part of the Collateral, whether such receivership is incidental to the proposed sale of the Collateral, pursuant to the Uniform Commercial Code or otherwise. Each Loan Party hereby consents to the appointment of such a receiver without notice or bond, to the full extent permitted by applicable statute or law; and waives any and all notices of and defenses to such appointment and agrees not to oppose any application therefor by the Lender, but nothing herein is to be construed to deprive the lender of any other right, remedy, or privilege the Lender may have under law to have a receiver appointed, provided, however, that, the appointment of such receiver shall not impair or in any manner prejudice the rights of the Lender to receive any payments provided for herein. Such receivership shall at the option of the Lender, continue until full payment of all the Obligations.

         ECF 26-5, PgID 760. The mortgage agreements between Huntington and Sakthi America Corporation and Sakthi Automotive Group USA, Inc. contain similar clauses. See ECF 26-8, PgID 946, ¶7(d); ECF 26-9, PgID 976, ¶7(d).

         Defendants do not dispute the validity of the contracts or that they have defaulted under the terms of the contracts. Appointment of a receiver is "an extraordinary equitable remedy that is justified in only extreme situations." Meyer Jewelry Co. v. Meyer Holdings, 906 F.Supp. 428, 432 (E.D. Mich. 1995) (citations omitted)[1]. Here, it is a remedy that Sakthi Defendants explicitly agreed to in their contracts with Huntington. Courts disagree about whether a party's advanced contractual consent to the appointment of a receiver is dispositive of the issue of appointment or simply a factor that favors appointment. Mapletree, 2010 WL 1753112, at *3. Under either scenario, Huntington is entitled to appointment of a receiver. As discussed in the Court's order granting Huntington's renewed motion for appointment of a receiver, the relevant legal and equitable factors clearly favor appointment of a receiver here. See ECF 49, PgID 2488-91.

         Sakthi Defendants focus on the phrase "to the full extent permitted by applicable statute or law" contained in Section 11.5 of the parties' contract and argue that case law does not support appointment of a receiver. The argument is unavailing. The Court fully considered the following factors that were discussed in Meyer:

[1] the existence of a valid claim by the moving party; [2] the probability that fraudulent conduct has occurred or will occur to frustrate the claim; [3] imminent danger that property will be lost, concealed, or diminished in value; [4] inadequacy of legal remedies; [5] lack of a less drastic equitable remedy; and [6] the likelihood that appointment of a receiver will do more harm than good.

         ECF 49, PgID 2489 (quoting Meyer Jewelry Co., 906 F.Supp. at 432); see also Pension Benefit Guar. Corp. v. Evans Tempcon. Inc., 630 Fed.Appx. 410, 414 (6th Cir. 2015) (discussing factors a district court considers when appointing a receiver). The Court found, based not only on the testimony provided at the evidentiary hearing, but also on the arguments and evidence contained in the parties' filings, that the factors favored appointment of a receiver. ECF 49, PgID 2489-91. And Sakthi Defendants have failed to provide evidence in their motion for reconsideration that warrants a different ruling.

         Defendants' motion for reconsideration focuses on three of the factors previously evaluated by the Court: "(a) the probability that fraudulent conduct has occurred or will occur; (b) imminent danger that property will be lost, concealed, or diminished in value; and (c) the likelihood that the appointment of a receiver will do more harm than good." ECF 56, PgID 2623. The evidence Sakthi Defendants submitted fails to establish that these factors weigh in their favor or that appointment of a receiver is not otherwise "permitted by applicable statute or law" as ...


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