Appeal from the United States District Court for the District of Idaho B. Lynn Winmill, District Judge, Presiding D.C. No. CV-07-00254-BLW
The opinion of the court was delivered by: Callahan, Circuit Judge
Submitted December 11, 2008*fn1 Seattle, Washington
Filed March 4, 2009; Amended April 8, 2009
Before: Ronald M. Gould, Richard C. Tallman and Consuelo M. Callahan, Circuit Judges.
Alfred R. LaPeter and Sharon R. LaPeter, as trustees for the LaPeter 1985 Living Trust (referred to collectively as "La-Peter"), appeal the district court's order appointing a receiver to manage the ParkCenter Mall in Boise, Idaho (the "Mall").*fn2
We have jurisdiction under 28 U.S.C. § 1292(a)(2), and we affirm.
In 1996, LaPeter purchased the Mall for $9.6 million, made a $2.4 million down payment, and financed the rest through a promissory note (the "loan") issued by Crown Life Insurance Company ("Crown Life"). The loan was secured by a Deed of Trust, Security Agreement and Fixture Filing ("Deed of Trust") and an "Assignment of Leases and Cash Collateral."
In 1999, Crown Life assigned the loan to Canada Life Assurance Company ("Canada Life"). In early 2005, LaPeter began negotiating with Canada Life to refinance the loan at a lower interest rate. The loan was set to mature in September 2006, at which time a balloon payment on the remaining principal was due, and the leases of important Mall tenants - Key Bank and Talbots - were set to expire around the same time. During the refinancing negotiations, LaPeter made various representations to Canada Life about the Mall's current and projected lease income. On June 21, 2005, Canada Life agreed to refinance the loan at a lower interest rate based, in part, on LaPeter's representations that KeyBank would only renew its lease for reduced rent and that Talbots would not renew its lease at all. Three days later, LaPeter entered into a new lease agreement with Key Bank, which resulted in a significant increase in rental payments to LaPeter. LaPeter did not disclose this modification to Canada Life. Furthermore, LaPeter failed to inform Canada Life that Talbots decided to extend its lease for two years.
Canada Life learned of the Talbots and Key Bank modifications between October 1 and November 3, 2005, and cancelled its refinancing commitment on November 16, 2005.*fn3
Following Canada Life's cancellation, LaPeter was unable to obtain alternative financing, and defaulted on the loan. He made a monthly loan payment on June 10, 2006, in the amount of $59,000, but failed to make the July and August payments. He also missed the balloon payment on September 10, 2006, and failed to pay over $100,000 in property taxes that were due in December 2006 and June 2007. The failure to pay taxes resulted in late charges and penalty interest. During this time, LaPeter continued to collect rents from the Mall's tenants and deposited those proceeds, minus operating expenses, in a segregated account.
The missed payments and failure to pay property taxes constituted defaults under the terms of the loan. Pursuant to the terms of the Deed of Trust and the Assignment of Leases and Cash Collateral, these defaults entitled Canada Life to take possession of and manage the Mall, collect its rents, and apply for the appointment of a receiver.
On March 26, 2007, Canada Life took steps to foreclose on the Deed of Trust by filing a notice of default and a notice of trustee's sale.*fn4 Days later, it filed an action in state court seeking to appoint a receiver pursuant to Idaho Code § 8-601A in order to assume possession, management, and control of the Mall.*fn5 Its motion to appoint a receiver included a request that LaPeter be ordered to turn over to the receiver any rents collected from the date of the motion onward. LaPeter removed the case to federal court on the basis of diversity jurisdiction, and the district court held an evidentiary hearing on July 10, 2007. In connection with the hearing, Canada Life submitted an appraisal reflecting the Mall's capitalized value of $7,140,000. Brian Schwartz, Canada Life's commercial mortgage manager in charge of the refinancing negotiations, testified that this figure should be adjusted downward because the leases had come closer to expiration in the year and a half since the appraisal was made.*fn6
Although Schwartz testified that he did not "know the exact value of the mall today," he opined that it would be insufficient to discharge the debt. He testified that LaPeter currently owed Canada Life $7,310,605, an estimate based on the principal balance of $5,966,541, plus contractual interest, default interest, late charges, attorneys' and trustee's fees, and unpaid taxes. LaPeter offered no formal appraisal to contradict these estimates, and conceded in briefing on appeal the existence of a "small shortfall." At the evidentiary hearing, LaPeter simply testified that he "believe[d], based on the future potential," that the Mall was worth $12 million, and that it would be "filled up or released in the next three to four years," although he also admitted that the "demand for office or retail space is not very high currently."
By order dated July 12, 2007, the district court appointed a receiver. That order specified the receiver's duties and obligations, and ordered LaPeter to turn over any rents collected from the date of LaPeter's default onward ("past rents"). The district court did not indicate whether it was applying state or federal law in making the appointment, but its findings tracked the Idaho statute.*fn7 Specifically, the court found that the appointment was necessary because the Mall "and the rents associated therewith, constituting the collateral" were "in danger of substantial waste and risk of loss because income from the [Mall was] being diverted and not applied to servicing the debt ...