KS StateBank Corporation v. Kathleen K. Peters, et al.

• Court: District Court, D. Arizona
• Decided: November 26, 2025
• Docket: 2:25-cv-02576
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 KS StateBank Corporation, No. CV-25-02576-PHX-ROS

10 Plaintiff, ORDER

11 v.

12 Kathleen K. Peters, et al.,

13 Defendants. 14 15 Pursuant to this Court’s order dated September 16, 2025, (Doc. 13), on October 1, 16 2025, Plaintiff KS StateBank Corporation filed a Renewed Application for the 17 Appointment of a Receiver (Doc. 15, “Application”). Defendants Kathleen K. Peters and 18 Gerald P. Peters III responded on October 8, 2025, (Doc. 16), joined by Defendants Joseph 19 Thompson and Donald A. Gonzales in their capacity as trustees1 (collectively, the 20 “Additional Pledgors”)2 (Doc. 17). Plaintiff replied on October 17, 2025. (Doc. 20.) 21 On November 17, 2025, the Court ordered Defendants to show cause why a receiver 22 should not be appointed in light of Defendants’ express authorization to such appointment. 23 (Doc. 21.) An evidentiary hearing was held on November 25, 2025, at the conclusion of 24 which the Court granted Plaintiff’s Application and directed the parties to file a proposed 25 order governing the receivership in one week. The reasons for the ruling follow. 26 1 Defendant Thompson acts as trustee for the Soren G. Peters 2012 Trust, the Devin B.A. 27 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.) 28 2 General references to “Defendants” include both the Additional Pledgors and Mr. and Mrs. Peters. 1 I. BACKGROUND 2 From 2019 to 2024, Plaintiff KS StateBank Corporation, a Kansas banking 3 corporation, executed a series of agreements (collectively, “Loan Documents”) extending 4 and securing two loans (collectively, “Loans”) totaling $37 million3 to Defendants. 5 Defendant Gerald Peters III is an alleged real estate investor, business entrepreneur, and 6 art dealer based in Sante Fe, New Mexico, and the controlling shareholder and former 7 chairman of Century Financial Services Corporation (“CFS”), a bank holding company 8 (“BHC”)4 headquartered in Santa Fe. (Doc. 16 at 1–2.) CFS controls Century Bank, an 9 FDIC-insured bank also headquartered in Santa Fe. (Id. at 1.) 10 On July 19, 2019, Plaintiff and Defendants signed a Loan Agreement (collectively 11 with subsequent modifications,5 “Loan Agreement”) detailing the terms for repayment of 12 the Loans alongside two Collateral Assignment, Equity Pledge and Security Agreements 13 (collectively, “Security Agreements”). (Doc. 1-1 at 3–4.) In the Security Agreements, 14 Defendants pledged their collective shares of stock in CFS (“Shares”)—the Peterses’ 44% 15 stake as collateral for both Loans, and the Additional Pledgors’ 27% stake as collateral for 16 only the larger loan of $24,280,000. (Doc. 16 at 4–5.) 17 On February 27, 2025, Plaintiff’s counsel sent a letter notifying Defendants of an 18 alleged missed interest payment on January 19, 2025, which would constitute an Event of

19 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 20 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 21 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 22 242, 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 23 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 24 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 25 or indirectly exercises a controlling influence over the management or policies of the bank or [BHC].” Id. § 1841(2). 26 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 27 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 28 cure a missed quarterly interest payment and a covenant breached by a reduction in the Shares’ value (id. at 121). 1 Default under the Loan Documents if not cured within 30 days.6 (Doc. 1-1 at 242–44.) The 2 Loans matured and were due in full on May 27, 2025. (Doc. 1-1 at 113.) Defendants failed 3 to repay the Loans by this date, and on June 3, 2025, Plaintiff’s counsel sent another letter 4 notifying Defendants of their maturity default and failure to cure the violations noted in the 5 February 27 letter. (Id. at 249.) 6 On June 18, 2025, Plaintiff filed a Verified Complaint in Maricopa County Superior 7 Court for breach of contract against Defendants, along with an Ex Parte Application 8 requesting a receiver be appointed to manage and take control of the Shares. (Id. at 11–16, 9 55–63.) The superior court scheduled an expedited hearing for June 24, 2025, ordering 10 Defendants to show cause why a receiver should not be appointed. (Id. at 6–8.) At the 11 hearing, the judge reassigned the case to commercial court, and another hearing was 12 scheduled for July 25, 2025. (Id. at 273.) But on July 21, 2025, Defendants filed a Notice 13 of Removal with this Court, (Doc. 1), and thereafter filed their Answers (Docs. 6, 8). 14 Plaintiff then filed its Renewed Application for the Appointment of a Receiver. (Doc. 15.) 15 In their Response, (Doc. 16), Defendants contest the appointment of a receiver; or 16 alternatively, if a receiver is appointed, Defendants object to Plaintiff’s proposed receiver, 17 the scope of the receiver’s proposed duties and rights, and request the Court to require a 18 bond be posted. 19 Prior to the November 25 evidentiary hearing, the parties filed a Joint Pre-Hearing 20 Statement in which Defendants alternatively propose, should the Court grant a receiver, 21 that Eric Corrigan of MJC Partners be appointed given his “extensive experience with 22 regulated bank transactions.” (Doc. 22 at 11.) Mr. Corrigan is currently retained by Mr. 23 and Mrs. Peters to “negotiate a loan on behalf of the Peters [sic] that is secured by the 24 Shares and is sufficient to resolve the Peters’ obligations to KS.” (Doc. 23 at 4.)7

25 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.) 26 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 27 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 28 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 1 II. LEGAL STANDARD 2 Under Rule 66 of the Federal Rules of Civil Procedure, federal law and federal 3 equitable principles govern the appointment of a receiver in diversity actions. Can. Life 4 Assurance Co. v. LaPeter, 563 F.3d 837, 843 (9th Cir. 2009); Aviation Supply Corp. v. 5 R.S.B.I. Aerospace, Inc., 999 F.2d 314, 316 (8th Cir. 1993). Appointing a receiver under 6 federal law “‘is an extraordinary equitable remedy,’ which should be applied with caution.” 7 Can. Life, 563 F.3d at 844 (quoting Aviation Supply, 999 F.2d at 316). Because Rule 66 8 provides “no precise formula for determining when a receiver may be appointed,” Aviation 9 Supply, 999 F.2d at 316, district courts have “broad discretion” and “may consider a host 10 of relevant factors” including: 11 (1) “whether [the party] seeking the appointment has a valid claim”; (2) “whether there is fraudulent conduct or the probability of fraudulent 12 conduct,” by the defendant; 13 (3) whether the property is in imminent danger of “being lost, concealed, 14 injured, diminished in value, or squandered”; (4) whether legal remedies are inadequate; 15 (5) whether the harm to plaintiff by denial of the appointment would 16 outweigh injury to the party opposing appointment; 17 (6) “the plaintiff’s probable success in the action and the possibility of irreparable injury to plaintiff’s interest in the property”; and, 18 (7) “whether [the] plaintiff’s interests sought to be protected will in fact be 19 well-served by receivership.” 20 Can. Life, 563 F.3d at 844–45 (first quoting 13 Moore’s Federal Practice, § 66.04[2][b] 21 (3d ed. 2008); and then quoting N.Y. Life Ins. Co. v. Watt West Inv. Corp., 755 F. Supp. 22 287, 292 (E.D. Cal. 1991)). No one factor under Canada Life is dispositive, and courts may 23 consider other circumstances beyond these enumerated factors. Id. at 845. One factor 24 entitled to “great weight” in favor of appointment is an agreement between parties 25 expressly authorizing the appointment of a receiver. E.g., N.Y. Life Ins., 755 F. Supp. at 26 292; HFC Acceptance, LLC v. AEZ Rent A Car LLC, No. CV 23-7744-GW-AGRX, 2023 27 mutually exclusive, as Mr. Peters cannot retain his stake if 100% of CFS is sold. And it 28 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. 1 WL 11950398, at *3 (C.D. Cal. Nov. 15, 2023); see also D.B. Zwirn Special Opportunities 2 Fund, L.P. v. Tama Broadcasting, Inc., 550 F. Supp. 2d 481, 491 (S.D.N.Y. 2008) (shifting 3 the burden to the opposing party to demonstrate why a receiver should not be appointed in 4 spite of their prior authorization). 5 III. ANALYSIS 6 A. Canada Life Factors 7 1. Valid Claim 8 It is undisputed that Plaintiff has a valid claim against Defendants for ownership of 9 the Shares.8 In their Answer, Defendants admit Plaintiff made two loans to Defendants for 10 $35,000,000, (Doc. 6 ¶ 13), Defendants promised to repay the Loans, (id. ¶ 14), Defendants 11 granted Plaintiff a security interest in the Shares as collateral, (id. ¶ 20), the loans matured 12 and were payable in full on or about May 27, 2025, (id. ¶ 26), and Defendants have not yet 13 repaid the loans (id. ¶¶ 15, 34). Because the Loans are in default, it appears undisputed 14 Plaintiff has a valid claim as a secured party with a legally recognized right in the Shares. 15 See Paradise v. USPLabs, LLC, No. SA CV 16-0200-DOC, 2016 WL 11505594 (C.D. Cal. 16 Apr. 11, 2016) (noting a party seeking appointment of a receiver must show some legally 17 recognized right in the property “amount[ing] to more than a mere claim against the 18 defendant” (quoting Manuel v. Gembala, No. 7:10-CV-4-FL, 2010 WL 3860407 (E.D.N.C. 19 Sept. 30, 2010))). 20 Nevertheless, Defendants argue this factor weighs against appointing a receiver 21 because “Plaintiff does not assert claims against non-parties CFS or Century Bank, the 22 entities that Plaintiff seeks to control through a general receivership.” (Doc. 16 at 11.) But 23 this factor concerns whether Plaintiff has a valid claim against Defendants for the Shares; 24 it is irrelevant whether Plaintiff also has a claim against the entities subject to the control 25 of Shares’ holder. What is more, CFS expressly consented to the relevant transactions. 26 8 The Court interprets Defendants’ assertion that “Plaintiff has a claim for money damages 27 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’ 28 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. 1 Thus, this factor weighs in favor of appointing a receiver. 2 2. Probability of Fraudulent Conduct 3 Plaintiff argues this factor weighs in favor of appointing a receiver because “Gerald 4 Peters is the subject of multiple lawsuits . . . related to the non-payment of debts, so the 5 likelihood of fraud is high.” (Doc. 15 at 10.) Defendants contend “Plaintiff’s allegation that 6 Peters faces additional claims for ‘non-payment of debts’ is not suggestive of fraudulent 7 conduct.” (Doc. 16 at 12.) 8 This factor does not require actual fraud be established, and non-fraudulent conduct 9 can give rise to an inference of fraud. See Morgan Stanley Smith Barney LLC v. Johnson, 10 952 F.3d 978, 981 (8th Cir. 2020) (finding receiver may be appropriate to protect judgment 11 creditor’s interest in debtor’s property when debtor has shown intention to frustrate 12 attempts to collect judgment). But Defendants’ alleged breach of other loan agreements, 13 unless seemingly fraudulent, does not alone risk fraudulent conduct here. See Signal Hill 14 Serv., Inc. v. Macquarie Bank Ltd., No. CV 11-01539 MMM, 2011 WL 13220305, at *26 15 (C.D. Cal. June 29, 2011) (“The fact that [a defendant] may have breached the contract, 16 however, does not prove it engaged in fraud. To conclude otherwise would convert all 17 contract claims into tort claims.”); see also id. (suggesting doubts over a defendant’s 18 financial standing are better considered under the third factor regarding imminent danger 19 to the property (citing Regions Bank v. R&D Development Corp., Civil No. 10-759-GPM, 20 2011 WL 2149086, at *4 (S.D. Ill. May 31, 2011))). In the absence of specific facts 21 supporting an inference of fraud, this factor is neutral. 22 3. Imminent Danger to Property 23 Plaintiff argues the Shares are in imminent danger because “Peters remains in voting 24 control” and “has the ability to diminish the value of the [Shares].” (Doc. 15 at 10.) 25 Defendants urge the Court to reject Plaintiff’s “unspoken inferences that Peters would in 26 fact attempt or is incentivized to diminish the value of the collateral,” (Doc. 16 at 13), 27 noting Plaintiff merely speculates about future value yet admits “[t]he anticipated value of 28 1 CFS is sufficient to pay of Plaintiff” (Doc. 1-1 at 61).9 Also, Defendants suggest a receiver 2 without experience in BHCs poses a greater danger to the Shares, and thus to CFS and 3 Century Bank, in contrast to Mr. Peters’s “longtime, expert guiding hand.” (Doc. 16 at 13.) 4 Without more, the Court cannot conclude there is imminent risk to the Shares and 5 CFS—whether by concealment, waste, or diminished value—merely because Mr. Peters 6 remains in voting control with capacity to diminish their value. However, the Court also 7 does not find Mr. Peters’s sole control of the Shares inherently poses less risk to their value 8 than control by a neutral officer of the court with the requisite expertise.10 See Fed. Home 9 Loan Mortg. Corp. v. Tsinos, 854 F. Supp. 113, 115 (E.D.N.Y. 1994) (noting a receiver is 10 an “arm of the court,” not the plaintiff’s agent). Given the unique nature of this collateral, 11 the value of the Shares could be affected not only by the controlling shareholder’s conduct 12 but by public perception of the controlling shareholder and his role at CFS. Public 13 knowledge of Mr. Peters’s recent outstanding or defaulted obligations11 belies Defendants’ 14 suggestion that a neutral receiver with expertise and subject to the Court’s oversight and 15 control would be perceived as riskier than Mr. Peters. See Signal Hill Serv., 2011 WL 16 13220305, at *26; Rio Verde Plantas, LLC v. O&S Holdings, LLC, No. 3:25-cv-00098-JR, 17 2025 WL 1368639, at *5 (D. Or. Mar. 21, 2025) (finding a defendant’s “fraught financial 18 state” was sufficient to show imminent danger).

19 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 20 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 21 argument applicable to whether the property is at imminent risk. 10 Defendants’ concerns regarding the receiver’s expertise are readily addressed by Mr. 22 Corrigan’s apparent willingness to assist the receiver. 11 The Court notes referenced news reports detailing multiple recent lawsuits against Mr. 23 Peters for unpaid debts and threatened foreclosures on his properties. E.g., Phaedra Haywood, Another Creditor Files Suit Against Gerald Peters, Family, Businesses, Santa 24 Fe New Mexican (Feb. 22, 2025), https://www.pressreader.com/usa/santa-fe-new- mexican/20250222/281724095284864; Phaedra Haywood, Real Estate Mogul Peters, Wife 25 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- 26 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 27 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 28 Maria’s Restaurant, Santa Fe New Mexican (Apr. 11, 2024), https://www.yahoo.com/news/jury-awards-31-million-fall-033300381.html. 1 Because Plaintiff has not shown imminent risk to the Shares and it is undisputed the 2 value of the Shares is sufficient to pay off Defendants’ debt, this factor does not weigh 3 strongly in favor of granting a receivership. But Defendants’ assurances of CFS’s financial 4 health, (Doc. 16 at 15), are contradicted by Defendants’ 2024 admission to breaching the 5 Loan Agreement provision requiring the Shares maintain at least 60% of their value as 6 originally pledged (Doc. 1-1 at 121). And it is Defendants’ financial health, not CFS’s, that 7 is relevant.12 Further, it appears news outlets have not yet reported on this litigation in 8 which Defendants allegedly defaulted on the Loans for $37,000,000—significantly greater 9 than previously reported defaults—that was collateralized by the Shares.13 Any negative 10 news coverage may not affect the value of the Shares, but appointing a receiver while this 11 dispute is pending would mitigate any current or future devaluation related to public and 12 market perception of Mr. Peters as CFS’s controlling shareholder. Overall, this factor 13 weighs slightly in favor of granting a receivership. 14 4. Inadequacy of Legal Remedies 15 Plaintiff asserts “[n]o other legal remedies will work.” (Doc. 15 at 10.) Specifically, 16 Plaintiff believes “a UCC foreclosure sale . . . [is] the most appropriate alternative remedy, 17 but Peters objects.” (Id.) Defendants contend “Plaintiff’s breach of contract claim suggests 18 that compensatory damages provide an adequate remedy.”14 (Doc. 16 at 14.) 19 12 While not clearly relevant here, the Court notes the First Modification Agreement 20 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, 21 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 22 Haywood, Real Estate Mogul Peters, Wife Fight to Halt Auction of Pecos-Area Fly Fishing Ranch, Santa Fe New Mexican (Nov. 14, 2025), 23 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- 24 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 25 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 26 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 27 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 28 Shares. (Doc. 16 at 14 & n.8.) Because neither replevin nor attachment are legal remedies, this argument is irrelevant. 1 A nonrecourse loan limiting a lender’s recovery to the collateral generally renders 2 legal remedies inadequate. See U.S. Bank Nat’l Ass’n as Tr. for Registered Holders of Wells 3 Fargo Com. Mortg. Sec., Inc., Multifamily Mortg. Pass-Through Certificates, Series 2019- 4 SB63 v. 1078 Whillmore LLC, 740 F. Supp. 3d 157, 177–78 (E.D.N.Y. 2024). Here, Section 5 5.2(d) of the Security Agreements reserved Plaintiff’s right to alternatively recover 6 damages from Defendants, (Doc. 1-1 at 153, 200), and Plaintiff requests damages be 7 awarded for its breach of contract claim (id. at 6). But significantly, in the Loan Agreement 8 Defendants expressly agreed in the event of default “no remedy of law will provide 9 adequate relief” to Plaintiff. (Id. at 91.) The limited set of facts offered on this factor renders 10 it neutral.15 11 5. Balance of Harms 12 Plaintiffs argue “[n]o conceivable harm will befall Defendants” by appointing a 13 receiver. (Doc. 15 at 10.) Defendants object, suggesting they will be harmed because the 14 Shares’ value will likely diminish if CFS and Century Bank are placed under a receiver’s 15 control.16 (Doc. 16 at 15.) 16 If the Court appoints a receiver, Defendants will lose control over CFS and Century 17 Bank. Indeed, given his history with CFS and Century Bank, Mr. Peters is likely very 18 familiar with managing the companies’ operations. But Defendants’ “voluntary accession 19 to a receivership remedy in the bargaining process” suggests “a significant diminution of

20 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 21 provision that no legal remedies are adequate, may suggest less weight should be afforded to this factor overall. 22 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 23 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 24 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 25 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. 26 The Court finds this opinion sincere but speculative, hypothetical, and not supported by admissible evidence. Also, Defendants and Mr. Corrigan have not established any 27 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 28 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.) 1 [Defendants’] interest.” Kairos Credit Strategies Operating P’ship v. Friars Nat’l Ass’n, 2 No. 23-CV-2960 (JPO), 2023 WL 3675921, at *3 (S.D.N.Y. May 26, 2023); see N.Y. Life 3 Ins., 755 F. Supp. at 293 (“There is little hardship in enforcing the terms of the parties’ 4 bargain.”). And as noted, it is speculative whether the Shares would retain more value 5 under Mr. Peters than under an experienced receiver, particularly in light of Mr. Peters’s 6 recent financial troubles and Defendants’ alleged failure to maintain the loan-to-value ratio 7 above 60%. (Doc. 1-1 at 121.) 8 Finally, a receiver may enhance Defendants’ position compared to Plaintiff’s 9 proposed UCC sale. Defendants admit a UCC sale is an option available to Plaintiff, but 10 Defendants have specifically objected to the sale based on the approximately $40 million 11 credit bid Plaintiff intended to offer for the Shares that Defendants believe are “worth no 12 less than $94,000,000 and as much as $134,616,000.” (Doc. 16 at 7.) Assuming arguendo 13 that Plaintiff’s credit bid would prevail, Defendants’ only recourse would be to challenge 14 the sale in court, where Defendants would bear the burden of showing the sale price 15 rendered the sale commercially unreasonable. In the absence of other commercially 16 unreasonable circumstances, this sale price alone may be insufficient to set aside the sale. 17 See A.R.S. § 47-9627(A) (“The fact that a greater amount could have been obtained by a 18 collection, enforcement, disposition or acceptance at a different time or in a different 19 method from that selected by the secured party is not of itself sufficient to preclude the 20 secured party from establishing that the collection, enforcement, disposition or acceptance 21 was made in a commercially reasonable manner.”). But in any event, “commercial 22 reasonableness” is not a particularly high bar to meet; if a receiver is appointed, the Court’s 23 control over any sale of the Shares will better protect Defendants’ interests. Any harm 24 posed to Defendants’ interests by a receiver is thus offset by Defendants’ voluntary 25 accession and the benefits relative to Plaintiff’s alternative recourse. This factor weighs in 26 favor of appointing a receiver. 27 6. Plaintiff’s Probability of Success and Possibility of Irreparable Injury 28 Plaintiff argues it “is guaranteed success on the merits given the maturity of 1 Defendants’ defaults on the Loans.” (Doc. 15 at 10.) Defendants do not dispute Plaintiff’s 2 probability of success but assert there is no risk of irreparable injury as “CFS and Century 3 Bank are going concerns with stable finances” and the Shares “cannot be sold absent sixty- 4 day notice and regulatory approval.” (Doc. 16 at 15.) 5 Even at this early stage, Plaintiff’s success on the merits appears all but guaranteed. 6 Significantly, it is undisputed Defendants defaulted on the Loans collateralized by the 7 Shares; and Defendants’ have not offered a conceivable legal theory to overcome Plaintiff 8 prevailing on its claim. 9 The possibility of irreparable injury to Plaintiff’s interest in the Shares is again 10 hypothetical. Perhaps, as Defendants argue, any disposition of the Shares by Defendants 11 requires notice and approval,17 but the regulatory framework would conceivably reduce the 12 risk that Defendants will sell the Shares while Plaintiff’s suit is pending. And even if the 13 Shares lose value under Defendants’ control and are no longer sufficient to repay the Loans, 14 Plaintiff might still pursue a deficiency judgment to satisfy any outstanding debt. See 15 Concorde Equity II, LLC v. Miller, No. 10-1041 SC, 2010 WL 2354189, at *3 (N.D. Cal. 16 June 9, 2010) (noting that “monetary injury is not normally considered irreparable” 17 (quoting L.A. Mem’l Coliseum Comm’n v. Nat’l Football League, 634 F.2d 1197, 1202 18 (9th Cir. 1980))). 19 Thus, Plaintiff has a high probability of success, but the possibility of irreparable 20 injury to Plaintiff’s interest in the Shares is unclear. And because the Court will oversee 21 the receivership, on balance, this factor favors appointing a receiver. 22 7. Receivership’s Protection of Plaintiff’s Interests 23 Plaintiff generally asserts its interests “will be greatly served by the appointment of 24 a receiver.” (Doc. 15 at 10.) Defendants note the lack of clarity over what interests Plaintiff 25 seeks to protect—whether it be “disposing of the collateral through the receivership, 26 preservation of the collateral, or some other unspecified interest”—and how a receiver 27 would protect those interests. (Doc. 16 at 16.) Rather, Defendant argues the only interest

28 17 Notably, transfers by inheritance or gift are not subject to the notice requirements. See 12 C.F.R. § 225.42(b)(i)–(ii). 1 advanced by Plaintiff is “the right to ask the court for ‘guidance on the best way to dispose 2 of the Shares.’”18 (Id.) 3 When assessing this factor, courts have found it weighs against appointment of a 4 receiver if denying the plaintiff’s request would not impede the plaintiff’s ability to 5 continue prosecuting the action. LPP Mortg. Ltd. v. Ondyn Herschelle, No. 13-cv-04330- 6 JSC, 2014 WL 3568577, at *4 (N.D. Cal. July 17, 2014); Avalanche Funding, LLC v. Arif, 7 No. 2:16-cv-02555-TLN-KJN, 2018 WL 1470597, at *3 (E.D. Cal. Mar. 26, 2018). But 8 see 8th Wonder Pictures, LLC v. Clear Distrib., LLC, No. CV 21-726 DSF, 2021 WL 9 6882316, at *4 (C.D. Cal. Feb. 4, 2021) (finding a plaintiff’s interest “would be well-served 10 by a receiver as a receiver would ensure it has the opportunity to recover any collateral for 11 which it contracted”). Here, denying Plaintiff’s request would not impede its ability to 12 further prosecute the action or to be awarded the monetary relief it requests. This factor 13 does not weigh in favor of appointing a receiver. 14 B. Other Factors 15 Although the Canada Life factors alone may not clearly favor the appointment of a 16 receiver, Plaintiff urges the Court to consider other circumstances: namely, that Plaintiff is 17 entitled to the appointment of a receiver under (1) Arizona law, (2) the Uniform 18 Commercial Code (“UCC”), and (3) the Loan Documents. (Doc. 15 at 6–9.) Defendants 19 do not contest the Court’s consideration of these factors.19 Instead, Defendants cite federal

20 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. 21 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. 22 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.) 23 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.) 24 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 25 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 26 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 27 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 28 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 1 law and regulations requiring a party provide notice to or seek approval from the Board of 2 Governors of the Federal Reserve System before acquiring a controlling share of a bank 3 holding company, arguing that, “[a]t the very least, [this] should weigh heavily against the 4 appointment of a receiver.” (Doc. 16 at 8–9.) 5 1. Arizona Law 6 Plaintiff argues the Court should consider that Arizona law, which the parties agreed 7 to be governed by in the Loan Documents, would likely permit the appointment of a 8 receiver. (Doc. 15 at 6–7.) Additionally, Plaintiff suggests the Court should weigh this 9 factor “heavily in favor of granting a receivership in light of Defendants’ decision to 10 remove this case to federal court, which seems to be a clear case of forum shopping.” (Id. 11 at 7.) Defendants argue Plaintiff’s allegation of forum shopping is groundless and that 12 “[t]he Court should reject Plaintiff’s suggestion that [the Court] ignore applicable federal 13 law” for appointing receivers.20 (Doc. 16 at 10.) 14 The Court must comply with Rule 66 “even in the face of differing state law.” 15 Canada Life, 563 F.3d at 843 (quoting Nat’l Partnership Inv. Corp. v. Nat’l Hous. Dev. 16 Corp., 153 F.3d 1289, 1291 (11th Cir. 1998)). But the Court also has broad discretion to 17 consider other relevant factors beyond those specifically enumerated by the Ninth Circuit 18 in Canada Life. Id. at 845. Under Arizona law, before appointing a receiver a court need 19 only find that a party’s property or rights therein need protection. A.R.S. § 12-1241; see, 20 e.g., Gravel Res. of Ariz. v. Hills, 170 P.3d 282, 285 ¶ 11 (Ariz. Ct. App. 2007). 21 Here, Section 13.5 of the Loan Agreement contains a forum selection clause in 22 which the parties agreed that Arizona law governs their agreement. (Doc. 1-1 at 92.) The 23 Court agrees that Plaintiff’s allegation of forum shopping may be groundless, but it is 24 dispositive, the Court considers the parties’ consent to appointing a receiver as a relevant 25 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 26 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 27 successful businessman—are sophisticated parties who indisputably knew or should have known what they were agreeing to in the Loan Documents. 28 20 Nowhere does Plaintiff argue the Court should disregard the federal law governing the appointment of receivers as Defendants suggest. 1 significant Defendants voluntarily consented to the application of Arizona law. In a 2 contract providing for the appointment of a receiver, specifying Arizona law reflects a 3 conscious recognition by the contracting parties of Arizona’s standards for appointing 4 receivers. The parties’ agreement to be governed by Arizona’s more permissive standard 5 for appointing receivers weighs in favor of appointment. 6 2. UCC 7 Plaintiff correctly notes under Arizona’s version of the UCC, creditors like Plaintiff 8 are “entitled to aid from a court of competent jurisdiction . . . in reaching [a debtor’s] 9 certificated security . . . by means allowed at law or in equity in regard to property that 10 cannot readily be reached by other legal process.” A.R.S. § 47-8112(E). Because 11 “exercising rights in Shares of stock is inherently difficult,” Plaintiff argues “the Court in 12 a diversity action can and should look to Arizona law to assist in the Plaintiff’s exercise of 13 its rights in and to the Shares.” (Doc. 15 at 7.) This argument provides some support in 14 favor of appointing a receiver. 15 3. Loan Documents 16 Defendants admit they voluntarily21 agreed to the appointment of a receiver upon 17 default. Section 5.2(g) of the Security Agreements permits Plaintiff, as one of its available 18 remedies, to “apply to any court having jurisdiction for the appointment of a receiver for 19 the [Shares].” (Doc. 1-1 at 153, 200.) Defendants “expressly consent[ed] to the 20 appointment of such receiver” and, upon appointment, agreed to “immediately . . . 21 surrender possession of the [Shares] to the receiver.” (Id. at 153–54, 200.) 22 Though not dispositive, an agreement between parties expressly authorizing the 23 appointment of a receiver is a factor entitled to “great weight” in favor of appointment. 24 E.g., N.Y. Life Ins., 755 F. Supp. at 292; LPP Mortg. Ltd., 2014 WL 3568577, at *3; HFC 25 Acceptance, LLC v. AEZ Rent A Car LLC, No. CV 23-7744-GW-AGRX, 2023 WL 26 11950398, at *3 (C.D. Cal. Nov. 15, 2023); see Citibank v. Nyland (CF8) Ltd., 839 F.2d 27 93, 97 (2d Cir. 1988) (“It is entirely appropriate for a mortgage holder to seek the

28 21 At the evidentiary hearing, counsel for Defendants affirmed Defendants are not arguing the receivership provision in the Security Agreements is unconscionable. 1 appointment of a receiver where the mortgage authorizes such appointment, and the 2 mortgagee has repeatedly defaulted on conditions of the mortgage which constitute one or 3 more events of default.”). The Court finds the parties’ express consent to the extraordinary 4 remedy of appointing a receiver and immediately surrendering the Shares weighs greatly 5 in favor of appointment.22 6 4. Restrictions on Acquiring Control of BHCs 7 Because CFS is a federally regulated BHC, Defendants note “[t]ransfers of shares 8 in CFS are restricted by 12 U.S.C. § 1842 and, inter alia, 12 C.F.R. §§ 225.2, 225.11, and 9 225.41.” Specifically, 12 C.F.R. § 225.41(a) requires 60 days’ advance notice to the Board 10 of Governors of the Federal Reserve System (“Board”) before acquiring control of a BHC. 11 As Plaintiff seeks to give the receiver custody over approximately 71% of CFS’s shares, 12 Defendants argue “[s]uch a transfer or power absent prior approval violates 12 C.F.R. 13 § 225.41”23 or “at the very least, it should weigh heavily against the appointment of a 14 receiver.” (Doc. 16 at 9.) 15 Under 12 U.S.C. § 1842(a) and 12 C.F.R. § 225.12(b), restrictions requiring prior 16 approval from the Board do not apply to shares acquired by a bank “in the regular course 17 of securing or collecting a debt previously contracted in good faith” so long as the acquiring 18 bank divests the shares within two years. Similarly, 12 C.F.R. § 225.42(b)(1)(iii) exempts 19 from the prior notice requirements any “[a]cquisition of voting securities in satisfaction of 20 a debt previously contracted (DPC) in good faith” so long as the acquirer notifies the 21 appropriate Reserve Bank within 90 days after the acquisition. Defendants do not address 22 these exceptions, offering no explanation why the prior approval and prior notice 23 restrictions should apply to a receiver when Plaintiff’s direct acquisition of the Shares

24 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 25 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 26 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 27 appointment of a receiver upon default and to immediately surrender the Shares to the receiver. 28 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. 1 would be clearly exempted. Thus, the Court gives this factor no weight in its determination. 2 Overall, the Court finds the Canada Life and other equitable factors—particularly 3 the parties’ express consent—weigh in favor of the appointment of a receiver. 4 IV. PROPOSED RECEIVERSHIP ORDER 5 The Court finds appointment of a receiver is appropriate as an expeditious and 6 equitable means to resolve the sole issue in this case—selling the collateral (i.e., the Shares) 7 subject to the Court’s oversight and approval.24 Turning to Plaintiff’s proposed order 8 governing the receivership, Defendants strongly contest the terms of Plaintiff’s proposed 9 order, including concerns regarding the receiver’s right to sell the Shares and wield 10 managerial authority over CFS, as well as an alleged lack of relevant expertise of Plaintiff’s 11 proposed receiver. (Doc. 16 at 10–11, 12–13, 15–17.) However, Defendants concerns on 12 both points are misplaced and perhaps moot. Defendants have since engaged in efforts to 13 sell CFS and offered a purported expert in BHCs to assist the receiver. 14 Mr. Corrigan testified he is currently engaged by CFS and is soliciting buyers to 15 negotiate a sale of the entire company. If so, CFS’s shareholders—Defendants as well as 16 any nonparty minority shareholders—have seemingly voted or agreed to vote to sell 100% 17 of the company’s stock, including the disputed Shares.25 Plaintiff did not question Mr. 18 Corrigan’s expertise in such sales, and Mr. Corrigan is apparently willing to lend his 19 expertise in BHCs to assist Plaintiff’s proposed receiver. 20 Significantly, the parties are to agree on deadlines by which the Shares must be sold 21 and Plaintiff repaid, taking into account all the regulatory notice and approval 22 requirements. If not sold by the deadline, the receiver will proceed with an independent 23 sale of the Shares subject to the Court’s oversight and approval.26 24 24 In the hearing, Plaintiffs suggested appointment of a receiver was preferable over a 25 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 26 at 7–8.) 25 If true, it appears at odds with Plaintiff’s undisputed rights to exercise an approximate 27 71% interest in CFS’s corporate management. 26 It appears Mr. Corrigan is also retained by Mr. Peters to obtain a separate loan 28 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. 1 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 4|| sale proceedings for the Shares. 5 Accordingly, 6 IT IS ORDERED Plaintiff's Renewed Application for the Appointment of a 7\| Receiver (Doc. 15) is GRANTED. MCA Financial Group Ltd., by and through Mr. Morris 8 || “Morrie” Aaron, will be appointed as a receiver in this action. 9 IT IS FURTHER ORDERED the parties are to agree upon the receiver’s powers 10 || and duties with respect to the Shares, as well as to CFS and Century Bank. By December 11 || 2, 2025, the parties are to file a joint proposed order appointing the receiver and including the governing duties and responsibilities. 13 Dated this 26th day of November, 2025. 14 fo -

16 Honorable slyn ©. Silver 17 Senior United States District Judge 18 19 20 21 22 23 24 25 26 27 28

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