KS StateBank Corporation v. Peters et al

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WO
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
KS StateBank Corporation,
Plaintiff,
v.
Kathleen K. Peters, et al.,
Defendants.
No. CV-25-02576-PHX-ROS
ORDER
Pursuant to this Court’s order dated September 16, 2025, (Doc. 13), on October 1,
2025, Plaintiff KS StateBank Corporation filed a Renewed Application for the
Appointment of a Receiver (Doc. 15, “Application”). Defendants Kathleen K. Peters and
Gerald P. Peters III responded on October 8, 2025, (Doc. 16), joined by Defendants Joseph
Thompson and Donald A. Gonzales in their capacity as trustees1 (collectively, the
“Additional Pledgors”)2 (Doc. 17). Plaintiff replied on October 17, 2025. (Doc. 20.)
On November 17, 2025, the Court ordered Defendants to show cause why a receiver
should not be appointed in light of Defendants’ express authorization to such appointment.
(Doc. 21.) An evidentiary hearing was held on November 25, 2025, at the conclusion of
which the Court granted Plaintiff’s Application and directed the parties to file a proposed
order governing the receivership in one week. The reasons for the ruling follow.
1 Defendant Thompson acts as trustee for the Soren G. Peters 2012 Trust, the Devin B.A.
Peters 2012 Trust, and the Krista N.A. Peters 2012 Trust. (Doc. 1 ¶ 3.) Defendant Gonzales
acts as trustee for the Erica B. Peters 2012 Trust. (Id. ¶ 4.)
2 General references to “Defendants” include both the Additional Pledgors and Mr. and
Mrs. Peters.
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I. BACKGROUND
From 2019 to 2024, Plaintiff KS StateBank Corporation, a Kansas banking
corporation, executed a series of agreements (collectively, “Loan Documents”) extending
and securing two loans (collectively, “Loans”) totaling $37 million3 to Defendants.
Defendant Gerald Peters III is an alleged real estate investor, business entrepreneur, and
art dealer based in Sante Fe, New Mexico, and the controlling shareholder and former
chairman of Century Financial Services Corporation (“CFS”), a bank holding company
(“BHC”)4 headquartered in Santa Fe. (Doc. 16 at 1–2.) CFS controls Century Bank, an
FDIC-insured bank also headquartered in Santa Fe. (Id. at 1.)
On July 19, 2019, Plaintiff and Defendants signed a Loan Agreement (collectively
with subsequent modifications,5 “Loan Agreement”) detailing the terms for repayment of
the Loans alongside two Collateral Assignment, Equity Pledge and Security Agreements
(collectively, “Security Agreements”). (Doc. 1-1 at 3–4.) In the Security Agreements,
Defendants pledged their collective shares of stock in CFS (“Shares”)—the Peterses’ 44%
stake as collateral for both Loans, and the Additional Pledgors’ 27% stake as collateral for
only the larger loan of $24,280,000. (Doc. 16 at 4–5.)
On February 27, 2025, Plaintiff’s counsel sent a letter notifying Defendants of an
alleged missed interest payment on January 19, 2025, which would constitute an Event of
3 The smaller of the Loans was for $12,720,000; the larger of the Loans, originally for
$17,280,000, was later increased to $24,280,000 by the First Modification Agreement
dated December 22, 2020. (Doc. 1-1 at 100.). In its Application, Plaintiff alleges the Loans
“totaled $35,000,000 in principal,” equal to the unpaid principal balance as of the filing
date. (Doc. 15 at 1–2.) But letters from Plaintiff’s counsel instead describing the combined
maximum principal as $37,000,000 seem to confirm the Court’s calculation, (Doc. 1-1 at
242, 247), so it is possible $35,000,000 is simply the unpaid principal balance.
4 A bank holding company is “any company which has control over any bank . . . or bank
holding company.” 12 U.S.C. § 1841(a)(1). A company has “control” if it “directly or
indirectly” controls 25% of a bank’s or BHC’s voting securities, “controls in any manner
the election of a majority of the directors or trustees of the bank or [BHC],” or upon
determination of the Board of Governors of the Federal Reserve “that the company directly
or indirectly exercises a controlling influence over the management or policies of the bank
or [BHC].” Id. § 1841(2).
5 Subsequent modifications include: the First Modification Agreement increasing amount
of the larger loan from $17,280,000 to $24,280,000 (Doc. 1-1 at 100); the Second
Modification Agreement extending the maturity date to May 27, 2025 (id. at 113); and the
Loan Modification Agreement and Waiver of Default giving Defendants an opportunity to
cure a missed quarterly interest payment and a covenant breached by a reduction in the
Shares’ value (id. at 121).
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Default under the Loan Documents if not cured within 30 days.6 (Doc. 1-1 at 242–44.) The
Loans matured and were due in full on May 27, 2025. (Doc. 1-1 at 113.) Defendants failed
to repay the Loans by this date, and on June 3, 2025, Plaintiff’s counsel sent another letter
notifying Defendants of their maturity default and failure to cure the violations noted in the
February 27 letter. (Id. at 249.)
On June 18, 2025, Plaintiff filed a Verified Complaint in Maricopa County Superior
Court for breach of contract against Defendants, along with an Ex Parte Application
requesting a receiver be appointed to manage and take control of the Shares. (Id. at 11–16,
55–63.) The superior court scheduled an expedited hearing for June 24, 2025, ordering
Defendants to show cause why a receiver should not be appointed. (Id. at 6–8.) At the
hearing, the judge reassigned the case to commercial court, and another hearing was
scheduled for July 25, 2025. (Id. at 273.) But on July 21, 2025, Defendants filed a Notice
of Removal with this Court, (Doc. 1), and thereafter filed their Answers (Docs. 6, 8).
Plaintiff then filed its Renewed Application for the Appointment of a Receiver. (Doc. 15.)
In their Response, (Doc. 16), Defendants contest the appointment of a receiver; or
alternatively, if a receiver is appointed, Defendants object to Plaintiff’s proposed receiver,
the scope of the receiver’s proposed duties and rights, and request the Court to require a
bond be posted.
Prior to the November 25 evidentiary hearing, the parties filed a Joint Pre-Hearing
Statement in which Defendants alternatively propose, should the Court grant a receiver,
that Eric Corrigan of MJC Partners be appointed given his “extensive experience with
regulated bank transactions.” (Doc. 22 at 11.) Mr. Corrigan is currently retained by Mr.
and Mrs. Peters to “negotiate a loan on behalf of the Peters [sic] that is secured by the
Shares and is sufficient to resolve the Peters’ obligations to KS.” (Doc. 23 at 4.)7
6 The February 27 letter also set forth 10 other violations of the Loan Agreement that would
allegedly constitute an Event of Default. (Doc. 1-1 at 244.)
7 Based on his testimony at the November 25 hearing, Mr. Corrigan has also been retained
and authorized by CFS’s board of directors to market and sell the entirety of CFS, not just
the disputed Shares. It is unclear how his competing duties to Mr. Peters and to CFS were
to be resolved—Mr. Peters seeks to use the Shares as collateral on another loan to pay off
the debt to Plaintiff; CFS seeks to sell 100% of its stock (including the Shares), and Mr.
Peters would then use his sale proceeds to pay off the debt to Plaintiff. But these goals are
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II. LEGAL STANDARD
Under Rule 66 of the Federal Rules of Civil Procedure, federal law and federal
equitable principles govern the appointment of a receiver in diversity actions. Can. Life
Assurance Co. v. LaPeter, 563 F.3d 837, 843 (9th Cir. 2009); Aviation Supply Corp. v.
R.S.B.I. Aerospace, Inc., 999 F.2d 314, 316 (8th Cir. 1993). Appointing a receiver under
federal law “‘is an extraordinary equitable remedy,’ which should be applied with caution.”
Can. Life, 563 F.3d at 844 (quoting Aviation Supply, 999 F.2d at 316). Because Rule 66
provides “no precise formula for determining when a receiver may be appointed,” Aviation
Supply, 999 F.2d at 316, district courts have “broad discretion” and “may consider a host
of relevant factors” including:
(1) “whether [the party] seeking the appointment has a valid claim”;
(2) “whether there is fraudulent conduct or the probability of fraudulent
conduct,” by the defendant;
(3) whether the property is in imminent danger of “being lost, concealed,
injured, diminished in value, or squandered”;
(4) whether legal remedies are inadequate;
(5) whether the harm to plaintiff by denial of the appointment would
outweigh injury to the party opposing appointment;
(6) “the plaintiff’s probable success in the action and the possibility of
irreparable injury to plaintiff’s interest in the property”; and,
(7) “whether [the] plaintiff’s interests sought to be protected will in fact be
well-served by receivership.”
Can. Life, 563 F.3d at 844–45 (first quoting 13 Moore’s Federal Practice, § 66.04[2][b]
(3d ed. 2008); and then quoting N.Y. Life Ins. Co. v. Watt West Inv. Corp., 755 F. Supp.
287, 292 (E.D. Cal. 1991)). No one factor under Canada Life is dispositive, and courts may
consider other circumstances beyond these enumerated factors. Id. at 845. One factor
entitled to “great weight” in favor of appointment is an agreement between parties
expressly authorizing the appointment of a receiver. E.g., N.Y. Life Ins., 755 F. Supp. at
292; HFC Acceptance, LLC v. AEZ Rent A Car LLC, No. CV 23-7744-GW-AGRX, 2023
mutually exclusive, as Mr. Peters cannot retain his stake if 100% of CFS is sold. And it
appears Mr. Peters and CFS may have no right to sell the Shares on their own now that
Plaintiff’s rights attached following Defendants’ undisputed default.
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WL 11950398, at *3 (C.D. Cal. Nov. 15, 2023); see also D.B. Zwirn Special Opportunities
Fund, L.P. v. Tama Broadcasting, Inc., 550 F. Supp. 2d 481, 491 (S.D.N.Y. 2008) (shifting
the burden to the opposing party to demonstrate why a receiver should not be appointed in
spite of their prior authorization).
III. ANALYSIS
A. Canada Life Factors
1. Valid Claim
It is undisputed that Plaintiff has a valid claim against Defendants for ownership of
the Shares.8 In their Answer, Defendants admit Plaintiff made two loans to Defendants for
$35,000,000, (Doc. 6 ¶ 13), Defendants promised to repay the Loans, (id. ¶ 14), Defendants
granted Plaintiff a security interest in the Shares as collateral, (id. ¶ 20), the loans matured
and were payable in full on or about May 27, 2025, (id. ¶ 26), and Defendants have not yet
repaid the loans (id. ¶¶ 15, 34). Because the Loans are in default, it appears undisputed
Plaintiff has a valid claim as a secured party with a legally recognized right in the Shares.
See Paradise v. USPLabs, LLC, No. SA CV 16-0200-DOC, 2016 WL 11505594 (C.D. Cal.
Apr. 11, 2016) (noting a party seeking appointment of a receiver must show some legally
recognized right in the property “amount[ing] to more than a mere claim against the
defendant” (quoting Manuel v. Gembala, No. 7:10-CV-4-FL, 2010 WL 3860407 (E.D.N.C.
Sept. 30, 2010))).
Nevertheless, Defendants argue this factor weighs against appointing a receiver
because “Plaintiff does not assert claims against non-parties CFS or Century Bank, the
entities that Plaintiff seeks to control through a general receivership.” (Doc. 16 at 11.) But
this factor concerns whether Plaintiff has a valid claim against Defendants for the Shares;
it is irrelevant whether Plaintiff also has a claim against the entities subject to the control
of Shares’ holder. What is more, CFS expressly consented to the relevant transactions.
8 The Court interprets Defendants’ assertion that “Plaintiff has a claim for money damages
against Peters only,” (Doc. 16 at 11), to mean that Plaintiff has a claim against all
Defendants but not against CFS or Century Bank. Defendants also note that the Peterses’
shares secured both Loans, while the Additional Pledgors’ shares only secured the larger
loan. (Id. at 4.) Nevertheless, Plaintiff alleges Defendants defaulted on both Loans.
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Thus, this factor weighs in favor of appointing a receiver.
2. Probability of Fraudulent Conduct
Plaintiff argues this factor weighs in favor of appointing a receiver because “Gerald
Peters is the subject of multiple lawsuits . . . related to the non-payment of debts, so the
likelihood of fraud is high.” (Doc. 15 at 10.) Defendants contend “Plaintiff’s allegation that
Peters faces additional claims for ‘non-payment of debts’ is not suggestive of fraudulent
conduct.” (Doc. 16 at 12.)
This factor does not require actual fraud be established, and non-fraudulent conduct
can give rise to an inference of fraud. See Morgan Stanley Smith Barney LLC v. Johnson,
952 F.3d 978, 981 (8th Cir. 2020) (finding receiver may be appropriate to protect judgment
creditor’s interest in debtor’s property when debtor has shown intention to frustrate
attempts to collect judgment). But Defendants’ alleged breach of other loan agreements,
unless seemingly fraudulent, does not alone risk fraudulent conduct here. See Signal Hill
Serv., Inc. v. Macquarie Bank Ltd., No. CV 11-01539 MMM, 2011 WL 13220305, at *26
(C.D. Cal. June 29, 2011) (“The fact that [a defendant] may have breached the contract,
however, does not prove it engaged in fraud. To conclude otherwise would convert all
contract claims into tort claims.”); see also id. (suggesting doubts over a defendant’s
financial standing are better considered under the third factor regarding imminent danger
to the property (citing Regions Bank v. R&D Development Corp., Civil No. 10-759-GPM,
2011 WL 2149086, at *4 (S.D. Ill. May 31, 2011))). In the absence of specific facts
supporting an inference of fraud, this factor is neutral.
3. Imminent Danger to Property
Plaintiff argues the Shares are in imminent danger because “Peters remains in voting
control” and “has the ability to diminish the value of the [Shares].” (Doc. 15 at 10.)
Defendants urge the Court to reject Plaintiff’s “unspoken inferences that Peters would in
fact attempt or is incentivized to diminish the value of the collateral,” (Doc. 16 at 13),
noting Plaintiff merely speculates about future value yet admits “[t]he anticipated value of
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CFS is sufficient to pay of Plaintiff” (Doc. 1-1 at 61).9 Also, Defendants suggest a receiver
without experience in BHCs poses a greater danger to the Shares, and thus to CFS and
Century Bank, in contrast to Mr. Peters’s “longtime, expert guiding hand.” (Doc. 16 at 13.)
Without more, the Court cannot conclude there is imminent risk to the Shares and
CFS—whether by concealment, waste, or diminished value—merely because Mr. Peters
remains in voting control with capacity to diminish their value. However, the Court also
does not find Mr. Peters’s sole control of the Shares inherently poses less risk to their value
than control by a neutral officer of the court with the requisite expertise.10 See Fed. Home
Loan Mortg. Corp. v. Tsinos, 854 F. Supp. 113, 115 (E.D.N.Y. 1994) (noting a receiver is
an “arm of the court,” not the plaintiff’s agent). Given the unique nature of this collateral,
the value of the Shares could be affected not only by the controlling shareholder’s conduct
but by public perception of the controlling shareholder and his role at CFS. Public
knowledge of Mr. Peters’s recent outstanding or defaulted obligations11 belies Defendants’
suggestion that a neutral receiver with expertise and subject to the Court’s oversight and
control would be perceived as riskier than Mr. Peters. See Signal Hill Serv., 2011 WL
13220305, at *26; Rio Verde Plantas, LLC v. O&S Holdings, LLC, No. 3:25-cv-00098-JR,
2025 WL 1368639, at *5 (D. Or. Mar. 21, 2025) (finding a defendant’s “fraught financial
state” was sufficient to show imminent danger).
9 Elsewhere in their Response, Defendants note federal regulations “prevent Peters from
selling the shares absent prior approval [from the Federal Reserve] and mitigate any risk
that Peters will dispose of the property during the pendency of the matter, further weighing
against the appointment of a receiver.” (Doc. 16 at 9 n.5.) The Court considers this
argument applicable to whether the property is at imminent risk.
10 Defendants’ concerns regarding the receiver’s expertise are readily addressed by Mr.
Corrigan’s apparent willingness to assist the receiver.
11 The Court notes referenced news reports detailing multiple recent lawsuits against Mr.
Peters for unpaid debts and threatened foreclosures on his properties. E.g., Phaedra
Haywood, Another Creditor Files Suit Against Gerald Peters, Family, Businesses, Santa
Fe New Mexican (Feb. 22, 2025), https://www.pressreader.com/usa/santa-fe-new-
mexican/20250222/281724095284864; Phaedra Haywood, Real Estate Mogul Peters, Wife
Fight to Halt Auction of Pecos-Area Fly Fishing Ranch, Santa Fe New Mexican (Nov. 14,
2025), https://www.santafenewmexican.com/news/local_news/real-estate-mogul-peters-
wife-fight-to-halt-auction-of-pecos-area-fly-fishing-ranch/article_38c24380-b03b-4f4c-
97e3-0ff166ca3b77.html. Further, in 2024 Mr. Peters unsuccessfully defended against a
personal injury suit from a woman injured at one of his properties, resulting in a judgment
of $31 million for the plaintiff. Phaedra Haywood, Jury Awards $31 Million in Fall Outside
Maria’s Restaurant, Santa Fe New Mexican (Apr. 11, 2024),
https://www.yahoo.com/news/jury-awards-31-million-fall-033300381.html.
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Because Plaintiff has not shown imminent risk to the Shares and it is undisputed the
value of the Shares is sufficient to pay off Defendants’ debt, this factor does not weigh
strongly in favor of granting a receivership. But Defendants’ assurances of CFS’s financial
health, (Doc. 16 at 15), are contradicted by Defendants’ 2024 admission to breaching the
Loan Agreement provision requiring the Shares maintain at least 60% of their value as
originally pledged (Doc. 1-1 at 121). And it is Defendants’ financial health, not CFS’s, that
is relevant.12 Further, it appears news outlets have not yet reported on this litigation in
which Defendants allegedly defaulted on the Loans for $37,000,000—significantly greater
than previously reported defaults—that was collateralized by the Shares.13 Any negative
news coverage may not affect the value of the Shares, but appointing a receiver while this
dispute is pending would mitigate any current or future devaluation related to public and
market perception of Mr. Peters as CFS’s controlling shareholder. Overall, this factor
weighs slightly in favor of granting a receivership.
4. Inadequacy of Legal Remedies
Plaintiff asserts “[n]o other legal remedies will work.” (Doc. 15 at 10.) Specifically,
Plaintiff believes “a UCC foreclosure sale . . . [is] the most appropriate alternative remedy,
but Peters objects.” (Id.) Defendants contend “Plaintiff’s breach of contract claim suggests
that compensatory damages provide an adequate remedy.”14 (Doc. 16 at 14.)
12 While not clearly relevant here, the Court notes the First Modification Agreement
increasing the principal by $7,000,000 was collateralized by certificates referred to as the
“Cow Creek Stock Collateral.” (Doc. 1-1 at 101.) Just two weeks ago, Mr. and Mrs. Peters,
as well as Cow Creek Ranch Club LLC, filed suit in New Mexico state court seeking to
halt a trustee’s sale of Cow Creek Ranch, a fly-fishing resort owned by Peters. Phaedra
Haywood, Real Estate Mogul Peters, Wife Fight to Halt Auction of Pecos-Area Fly Fishing
Ranch, Santa Fe New Mexican (Nov. 14, 2025),
https://www.santafenewmexican.com/news/local_news/real-estate-mogul-peters-wife-
fight-to-halt-auction-of-pecos-area-fly-fishing-ranch/article_38c24380-b03b-4f4c-97e3-
0ff166ca3b77.html; see Cow Creek Ranch Club LLC v. AgAmerica Lending LLC, No. D-
725-CV-202500223 (N.M. Dist. Ct. Nov. 12, 2025). Plaintiff has not sought to sell the
Cow Creek Stock Collateral; but presuming this collateral is stock in Cow Creek Ranch
Club LLC, the pending trustee’s sale raises questions regarding Defendants’ financial
health and the sufficiency of the collateral securing the Loans.
13 Notably, the Loans were to be used, in part, to pay off another outstanding loan to
Defendants that was also collateralized by the Shares. (Doc. 1-1 at 141, 188.)
14 Defendants further argue Plaintiff could alternatively seek replevin or move to attach the
Shares. (Doc. 16 at 14 & n.8.) Because neither replevin nor attachment are legal remedies,
this argument is irrelevant.
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A nonrecourse loan limiting a lender’s recovery to the collateral generally renders
legal remedies inadequate. See U.S. Bank Nat’l Ass’n as Tr. for Registered Holders of Wells
Fargo Com. Mortg. Sec., Inc., Multifamily Mortg. Pass-Through Certificates, Series 2019-
SB63 v. 1078 Whillmore LLC, 740 F. Supp. 3d 157, 177–78 (E.D.N.Y. 2024). Here, Section
5.2(d) of the Security Agreements reserved Plaintiff’s right to alternatively recover
damages from Defendants, (Doc. 1-1 at 153, 200), and Plaintiff requests damages be
awarded for its breach of contract claim (id. at 6). But significantly, in the Loan Agreement
Defendants expressly agreed in the event of default “no remedy of law will provide
adequate relief” to Plaintiff. (Id. at 91.) The limited set of facts offered on this factor renders
it neutral.15
5. Balance of Harms
Plaintiffs argue “[n]o conceivable harm will befall Defendants” by appointing a
receiver. (Doc. 15 at 10.) Defendants object, suggesting they will be harmed because the
Shares’ value will likely diminish if CFS and Century Bank are placed under a receiver’s
control.16 (Doc. 16 at 15.)
If the Court appoints a receiver, Defendants will lose control over CFS and Century
Bank. Indeed, given his history with CFS and Century Bank, Mr. Peters is likely very
familiar with managing the companies’ operations. But Defendants’ “voluntary accession
to a receivership remedy in the bargaining process” suggests “a significant diminution of
15 The parties consented in the Loan Documents to the appointment of a receiver upon
default. The parties’ express consent to this specific equitable remedy, along with the
provision that no legal remedies are adequate, may suggest less weight should be afforded
to this factor overall.
16 At the November 25 hearing, Mr. Corrigan testified for the Defendants that, in his
opinion, a receiver’s sale of the Shares is undesirable as (1) buyers may be more interested
in purchasing 100% of CFS, rather than the 71% via the Shares, thus increasing the
competitiveness of the sale price; and (2) some buyers would be turned away upon learning
of the receivership, thus driving down the Shares’ value. As to the first contention, Mr.
Corrigan’s retention by CFS to market 100% of CFS’s stock is not relevant. Perhaps buyers
would pay a higher price per share to secure 100% of a company’s stock, but any attempt
to sell CFS in its entirety does not affect Plaintiff’s undisputed rights to their collateral.
The Court finds this opinion sincere but speculative, hypothetical, and not supported by
admissible evidence. Also, Defendants and Mr. Corrigan have not established any
prospective buyers expressed concerns with purchasing less than 100% of CFS’s stock or
purchasing the Shares from a receiver. Indeed, CFS knowingly and voluntarily accepted
any risk to CFS’s value posed by Peters’s use of the Shares as collateral for the Loans. (See
Doc. 1-1 at 229.)
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[Defendants’] interest.” Kairos Credit Strategies Operating P’ship v. Friars Nat’l Ass’n,
No. 23-CV-2960 (JPO), 2023 WL 3675921, at *3 (S.D.N.Y. May 26, 2023); see N.Y. Life
Ins., 755 F. Supp. at 293 (“There is little hardship in enforcing the terms of the parties’
bargain.”). And as noted, it is speculative whether the Shares would retain more value
under Mr. Peters than under an experienced receiver, particularly in light of Mr. Peters’s
recent financial troubles and Defendants’ alleged failure to maintain the loan-to-value ratio
above 60%. (Doc. 1-1 at 121.)
Finally, a receiver may enhance Defendants’ position compared to Plaintiff’s
proposed UCC sale. Defendants admit a UCC sale is an option available to Plaintiff, but
Defendants have specifically objected to the sale based on the approximately $40 million
credit bid Plaintiff intended to offer for the Shares that Defendants believe are “worth no
less than $94,000,000 and as much as $134,616,000.” (Doc. 16 at 7.) Assuming arguendo
that Plaintiff’s credit bid would prevail, Defendants’ only recourse would be to challenge
the sale in court, where Defendants would bear the burden of showing the sale price
rendered the sale commercially unreasonable. In the absence of other commercially
unreasonable circumstances, this sale price alone may be insufficient to set aside the sale.
See A.R.S. § 47-9627(A) (“The fact that a greater amount could have been obtained by a
collection, enforcement, disposition or acceptance at a different time or in a different
method from that selected by the secured party is not of itself sufficient to preclude the
secured party from establishing that the collection, enforcement, disposition or acceptance
was made in a commercially reasonable manner.”). But in any event, “commercial
reasonableness” is not a particularly high bar to meet; if a receiver is appointed, the Court’s
control over any sale of the Shares will better protect Defendants’ interests. Any harm
posed to Defendants’ interests by a receiver is thus offset by Defendants’ voluntary
accession and the benefits relative to Plaintiff’s alternative recourse. This factor weighs in
favor of appointing a receiver.
6. Plaintiff’s Probability of Success and Possibility of Irreparable Injury
Plaintiff argues it “is guaranteed success on the merits given the maturity of
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Defendants’ defaults on the Loans.” (Doc. 15 at 10.) Defendants do not dispute Plaintiff’s
probability of success but assert there is no risk of irreparable injury as “CFS and Century
Bank are going concerns with stable finances” and the Shares “cannot be sold absent sixty-
day notice and regulatory approval.” (Doc. 16 at 15.)
Even at this early stage, Plaintiff’s success on the merits appears all but guaranteed.
Significantly, it is undisputed Defendants defaulted on the Loans collateralized by the
Shares; and Defendants’ have not offered a conceivable legal theory to overcome Plaintiff
prevailing on its claim.
The possibility of irreparable injury to Plaintiff’s interest in the Shares is again
hypothetical. Perhaps, as Defendants argue, any disposition of the Shares by Defendants
requires notice and approval,17 but the regulatory framework would conceivably reduce the
risk that Defendants will sell the Shares while Plaintiff’s suit is pending. And even if the
Shares lose value under Defendants’ control and are no longer sufficient to repay the Loans,
Plaintiff might still pursue a deficiency judgment to satisfy any outstanding debt. See
Concorde Equity II, LLC v. Miller, No. 10-1041 SC, 2010 WL 2354189, at *3 (N.D. Cal.
June 9, 2010) (noting that “monetary injury is not normally considered irreparable”
(quoting L.A. Mem’l Coliseum Comm’n v. Nat’l Football League, 634 F.2d 1197, 1202
(9th Cir. 1980))).
Thus, Plaintiff has a high probability of success, but the possibility of irreparable
injury to Plaintiff’s interest in the Shares is unclear. And because the Court will oversee
the receivership, on balance, this factor favors appointing a receiver.
7. Receivership’s Protection of Plaintiff’s Interests
Plaintiff generally asserts its interests “will be greatly served by the appointment of
a receiver.” (Doc. 15 at 10.) Defendants note the lack of clarity over what interests Plaintiff
seeks to protect—whether it be “disposing of the collateral through the receivership,
preservation of the collateral, or some other unspecified interest”—and how a receiver
would protect those interests. (Doc. 16 at 16.) Rather, Defendant argues the only interest
17 Notably, transfers by inheritance or gift are not subject to the notice requirements. See
12 C.F.R. § 225.42(b)(i)–(ii).
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advanced by Plaintiff is “the right to ask the court for ‘guidance on the best way to dispose
of the Shares.’”18 (Id.)
When assessing this factor, courts have found it weighs against appointment of a
receiver if denying the plaintiff’s request would not impede the plaintiff’s ability to
continue prosecuting the action. LPP Mortg. Ltd. v. Ondyn Herschelle, No. 13-cv-04330-
JSC, 2014 WL 3568577, at *4 (N.D. Cal. July 17, 2014); Avalanche Funding, LLC v. Arif,
No. 2:16-cv-02555-TLN-KJN, 2018 WL 1470597, at *3 (E.D. Cal. Mar. 26, 2018). But
see 8th Wonder Pictures, LLC v. Clear Distrib., LLC, No. CV 21-726 DSF, 2021 WL
6882316, at *4 (C.D. Cal. Feb. 4, 2021) (finding a plaintiff’s interest “would be well-served
by a receiver as a receiver would ensure it has the opportunity to recover any collateral for
which it contracted”). Here, denying Plaintiff’s request would not impede its ability to
further prosecute the action or to be awarded the monetary relief it requests. This factor
does not weigh in favor of appointing a receiver.
B. Other Factors
Although the Canada Life factors alone may not clearly favor the appointment of a
receiver, Plaintiff urges the Court to consider other circumstances: namely, that Plaintiff is
entitled to the appointment of a receiver under (1) Arizona law, (2) the Uniform
Commercial Code (“UCC”), and (3) the Loan Documents. (Doc. 15 at 6–9.) Defendants
do not contest the Court’s consideration of these factors.19 Instead, Defendants cite federal
18 Defendants further argue a receiver would merely “ask the Court for permission to
dispose of [the Shares] as he or she sees fit, not for ‘guidance’ about how to do so.” (Doc.
16 at 16.) But a receiver’s right to sell the Shares would be wholly subject to this Court’s
authority, which includes guidance on how the receiver may carry out a sale.
19 Defendants frame Plaintiff’s position to be that the Court should “ignore applicable
federal law” and grant the Application based on Arizona’s standard. (Doc. 16 at 10.)
Plaintiff makes no such argument, merely asking the Court to “consider the Arizona law
as a factor that . . . weigh[s] heavily in favor of granting a receivership.” (Doc. 15 at 7.)
Additionally, Defendants assert that alleged defects in Plaintiff’s prior receivership
application filed with the Maricopa County Superior Court, as well as in Plaintiff’s UCC
sale notification, are “indication[s] of how [Plaintiff] is taking liberties with [Defendants’]
property both in and out of this Court.” (Doc. 16 at 5–8.) But Defendants fail to explain
whether and how the Court should consider these assertions in its analysis. See Can. Life,
563 F.3d at 844 (directing courts to consider “the probability of fraudulent conduct by the
defendant” rather than by the plaintiff (emphasis added)). Lastly, Defendants note that
Plaintiff is not entitled to appointment of a receiver “merely because the loan agreements
provide for one.” (Doc. 16 at 10) (quoting Compass Bank v. Baraka Holdings, LLC, No.
CV 17-06563-AB, 2017 WL 10378348, at *3 (C.D. Cal. Oct. 26, 2017)). Though not
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law and regulations requiring a party provide notice to or seek approval from the Board of
Governors of the Federal Reserve System before acquiring a controlling share of a bank
holding company, arguing that, “[a]t the very least, [this] should weigh heavily against the
appointment of a receiver.” (Doc. 16 at 8–9.)
1. Arizona Law
Plaintiff argues the Court should consider that Arizona law, which the parties agreed
to be governed by in the Loan Documents, would likely permit the appointment of a
receiver. (Doc. 15 at 6–7.) Additionally, Plaintiff suggests the Court should weigh this
factor “heavily in favor of granting a receivership in light of Defendants’ decision to
remove this case to federal court, which seems to be a clear case of forum shopping.” (Id.
at 7.) Defendants argue Plaintiff’s allegation of forum shopping is groundless and that
“[t]he Court should reject Plaintiff’s suggestion that [the Court] ignore applicable federal
law” for appointing receivers.20 (Doc. 16 at 10.)
The Court must comply with Rule 66 “even in the face of differing state law.”
Canada Life, 563 F.3d at 843 (quoting Nat’l Partnership Inv. Corp. v. Nat’l Hous. Dev.
Corp., 153 F.3d 1289, 1291 (11th Cir. 1998)). But the Court also has broad discretion to
consider other relevant factors beyond those specifically enumerated by the Ninth Circuit
in Canada Life. Id. at 845. Under Arizona law, before appointing a receiver a court need
only find that a party’s property or rights therein need protection. A.R.S. § 12-1241; see,
e.g., Gravel Res. of Ariz. v. Hills, 170 P.3d 282, 285 ¶ 11 (Ariz. Ct. App. 2007).
Here, Section 13.5 of the Loan Agreement contains a forum selection clause in
which the parties agreed that Arizona law governs their agreement. (Doc. 1-1 at 92.) The
Court agrees that Plaintiff’s allegation of forum shopping may be groundless, but it is
dispositive, the Court considers the parties’ consent to appointing a receiver as a relevant
factor. E.g., Compass Bank, 2017 WL 10378348, at *3; N.Y. Life Ins., 755 F. Supp. at 292
(“[S]urely the fact that the parties agreed to the appointment of a receiver in the deed of
trust is entitled to great weight as the court exercises its discretion[.]”). This is especially
relevant here because Defendants—and in particular Mr. Peters, an established and
successful businessman—are sophisticated parties who indisputably knew or should have
known what they were agreeing to in the Loan Documents.
20 Nowhere does Plaintiff argue the Court should disregard the federal law governing the
appointment of receivers as Defendants suggest.
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significant Defendants voluntarily consented to the application of Arizona law. In a
contract providing for the appointment of a receiver, specifying Arizona law reflects a
conscious recognition by the contracting parties of Arizona’s standards for appointing
receivers. The parties’ agreement to be governed by Arizona’s more permissive standard
for appointing receivers weighs in favor of appointment.
2. UCC
Plaintiff correctly notes under Arizona’s version of the UCC, creditors like Plaintiff
are “entitled to aid from a court of competent jurisdiction . . . in reaching [a debtor’s]
certificated security . . . by means allowed at law or in equity in regard to property that
cannot readily be reached by other legal process.” A.R.S. § 47-8112(E). Because
“exercising rights in Shares of stock is inherently difficult,” Plaintiff argues “the Court in
a diversity action can and should look to Arizona law to assist in the Plaintiff’s exercise of
its rights in and to the Shares.” (Doc. 15 at 7.) This argument provides some support in
favor of appointing a receiver.
3. Loan Documents
Defendants admit they voluntarily21 agreed to the appointment of a receiver upon
default. Section 5.2(g) of the Security Agreements permits Plaintiff, as one of its available
remedies, to “apply to any court having jurisdiction for the appointment of a receiver for
the [Shares].” (Doc. 1-1 at 153, 200.) Defendants “expressly consent[ed] to the
appointment of such receiver” and, upon appointment, agreed to “immediately . . .
surrender possession of the [Shares] to the receiver.” (Id. at 153–54, 200.)
Though not dispositive, an agreement between parties expressly authorizing the
appointment of a receiver is a factor entitled to “great weight” in favor of appointment.
E.g., N.Y. Life Ins., 755 F. Supp. at 292; LPP Mortg. Ltd., 2014 WL 3568577, at *3; HFC
Acceptance, LLC v. AEZ Rent A Car LLC, No. CV 23-7744-GW-AGRX, 2023 WL
11950398, at *3 (C.D. Cal. Nov. 15, 2023); see Citibank v. Nyland (CF8) Ltd., 839 F.2d
93, 97 (2d Cir. 1988) (“It is entirely appropriate for a mortgage holder to seek the
21 At the evidentiary hearing, counsel for Defendants affirmed Defendants are not arguing
the receivership provision in the Security Agreements is unconscionable.
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appointment of a receiver where the mortgage authorizes such appointment, and the
mortgagee has repeatedly defaulted on conditions of the mortgage which constitute one or
more events of default.”). The Court finds the parties’ express consent to the extraordinary
remedy of appointing a receiver and immediately surrendering the Shares weighs greatly
in favor of appointment.22
4. Restrictions on Acquiring Control of BHCs
Because CFS is a federally regulated BHC, Defendants note “[t]ransfers of shares
in CFS are restricted by 12 U.S.C. § 1842 and, inter alia, 12 C.F.R. §§ 225.2, 225.11, and
225.41.” Specifically, 12 C.F.R. § 225.41(a) requires 60 days’ advance notice to the Board
of Governors of the Federal Reserve System (“Board”) before acquiring control of a BHC.
As Plaintiff seeks to give the receiver custody over approximately 71% of CFS’s shares,
Defendants argue “[s]uch a transfer or power absent prior approval violates 12 C.F.R.
§ 225.41”23 or “at the very least, it should weigh heavily against the appointment of a
receiver.” (Doc. 16 at 9.)
Under 12 U.S.C. § 1842(a) and 12 C.F.R. § 225.12(b), restrictions requiring prior
approval from the Board do not apply to shares acquired by a bank “in the regular course
of securing or collecting a debt previously contracted in good faith” so long as the acquiring
bank divests the shares within two years. Similarly, 12 C.F.R. § 225.42(b)(1)(iii) exempts
from the prior notice requirements any “[a]cquisition of voting securities in satisfaction of
a debt previously contracted (DPC) in good faith” so long as the acquirer notifies the
appropriate Reserve Bank within 90 days after the acquisition. Defendants do not address
these exceptions, offering no explanation why the prior approval and prior notice
restrictions should apply to a receiver when Plaintiff’s direct acquisition of the Shares
22 Defendants cite LPP Mortgage Ltd. as “an analogous case” where the court denied
appointment of a receiver despite the parties’ consent. (Doc. 22 at 9.) But LPP Mortgage
is clearly distinguishable, as the agreement there simply “recite[d] that a court may appoint
a receiver,” rather than “expressly state that the Trustor ‘consents’ to appointment upon
default and without consideration of any other factors.” 2014 WL 3568577, at *3. Here,
Defendants’ consent was express and in no uncertain terms—they agreed to the
appointment of a receiver upon default and to immediately surrender the Shares to the
receiver.
23 Defendants appear to conflate the prior notice requirements under 12 C.F.R. § 225.41
with the prior approval requirements under 12 C.F.R. § 225.11.
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would be clearly exempted. Thus, the Court gives this factor no weight in its determination.
Overall, the Court finds the Canada Life and other equitable factors—particularly
the parties’ express consent—weigh in favor of the appointment of a receiver.
IV. PROPOSED RECEIVERSHIP ORDER
The Court finds appointment of a receiver is appropriate as an expeditious and
equitable means to resolve the sole issue in this case—selling the collateral (i.e., the Shares)
subject to the Court’s oversight and approval.24 Turning to Plaintiff’s proposed order
governing the receivership, Defendants strongly contest the terms of Plaintiff’s proposed
order, including concerns regarding the receiver’s right to sell the Shares and wield
managerial authority over CFS, as well as an alleged lack of relevant expertise of Plaintiff’s
proposed receiver. (Doc. 16 at 10–11, 12–13, 15–17.) However, Defendants concerns on
both points are misplaced and perhaps moot. Defendants have since engaged in efforts to
sell CFS and offered a purported expert in BHCs to assist the receiver.
Mr. Corrigan testified he is currently engaged by CFS and is soliciting buyers to
negotiate a sale of the entire company. If so, CFS’s shareholders—Defendants as well as
any nonparty minority shareholders—have seemingly voted or agreed to vote to sell 100%
of the company’s stock, including the disputed Shares.25 Plaintiff did not question Mr.
Corrigan’s expertise in such sales, and Mr. Corrigan is apparently willing to lend his
expertise in BHCs to assist Plaintiff’s proposed receiver.
Significantly, the parties are to agree on deadlines by which the Shares must be sold
and Plaintiff repaid, taking into account all the regulatory notice and approval
requirements. If not sold by the deadline, the receiver will proceed with an independent
sale of the Shares subject to the Court’s oversight and approval.26
24 In the hearing, Plaintiffs suggested appointment of a receiver was preferable over a
nonjudicial UCC sale. Defendants have already objected to Plaintiff’s prior sale attempts
over the reasonableness of the proposed bid and the sufficiency of the sale notice. (Doc. 16
at 7–8.)
25 If true, it appears at odds with Plaintiff’s undisputed rights to exercise an approximate
71% interest in CFS’s corporate management.
26 It appears Mr. Corrigan is also retained by Mr. Peters to obtain a separate loan
collateralized by the Shares in order to repay Plaintiff. (Doc. 23 at 4.) If so, this may conflict
with Mr. Corrigan’s duties to CFS to sell 100% of the company.
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Plaintiff’s Renewed Application for the Appointment of a Receiver, (Doc. 15), will
be granted. The parties are ordered to confer and submit a joint proposed order specifying
the receiver’s powers and duties, as well as deadlines by which the receiver may initiate
sale proceedings for the Shares.
Accordingly,
IT IS ORDERED Plaintiff’s Renewed Application for the Appointment of a
Receiver (Doc. 15) is GRANTED. MCA Financial Group Ltd., by and through Mr. Morris
“Morrie” Aaron, will be appointed as a receiver in this action.
IT IS FURTHER ORDERED the parties are to agree upon the receiver’s powers
and duties with respect to the Shares, as well as to CFS and Century Bank. By December
2, 2025, the parties are to file a joint proposed order appointing the receiver and including
the governing duties and responsibilities.
Dated this 26th day of November, 2025.
Honorable Roslyn O. Silver
Senior United States District Judge
Case 2:25-cv-02576-ROS Document 29 Filed 11/26/25 Page 17 of 17