Securities and Exchange Commission v. BIC Real Estate Development Corporation et al

Filing 154


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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 SECURITIES AND EXCHANGE COMMISSION, 12 Plaintiff, 13 v. 14 BIC REAL ESTATE DEVELOPMENT 15 CORP., et al., 16 Case No. 1:16-cv-00344-LJO-JLT STIPULATION RE: VALLEY MORTGAGE INVESTMENTS, INC.'S CLAIM FOR ATTORNEYS' FEES AND COSTS; [PROPOSED] ORDER THEREON Defendants. 17 18 19 STIPULATION The following Stipulation re: Valley Mortgage Investments, Inc.'s Claim for 20 Attorneys' Fees and Costs (the "Stipulation") is made by and between (1) David P. 21 Stapleton (the "Receiver"), the Court-appointed receiver for Defendants BIC Real 22 Estate Development Corporation and its subsidiaries and affiliates, including but not 23 limited to, WM Petroleum; Target Oil & Gas Drilling, Inc.; Tier 1 Solar Power 24 Company; Tier 1 Solar Power Company, LLC; and Home Sweet Holdings 25 (collectively, the "Receivership Entities"); (2) Plaintiff Securities and Exchange 26 Commission (the "SEC"); and (3) proposed intervenor Valley Mortgage 27 Investments, Inc. ("VMI") (collectively, with the Receiver and the SEC, the 28 1 "Parties") by and through their respective counsel of record, and in reliance on and 2 with respect to the following facts: 3 A. Pursuant to this Court's April 8, 2016 Stipulated Preliminary Injunction 4 and Orders (1) Freezing Assets, and (2) Appointing a Permanent Receiver (Dkt. No. 5 42), the Receiver is vested with exclusive authority and control over the property of 6 the Receivership Entities, including more than sixty (60) residential real properties 7 (the "Properties") which comprise a substantial portion of the receivership estate 8 (the "Estate") in the above-entitled action. 9 B. The Court has authorized the Receiver to restore complete record 10 ownership of the Properties to the Receivership Entities, and thereafter to market 11 and sell the Properties for the benefit of the Receivership Entities, their Estate, and 12 their investors and creditors, in accordance with specific procedures (the "Sales 13 Procedures") established by the Court (Dkt. Nos. 76, 93). 14 C. VMI maintains that, at the time of the Receiver's appointment, thirty- 15 six (36) of the Properties were subject to senior security interests in its favor, arising 16 in connection with pre-receivership loans (the "Loans") made by VMI and secured 17 by certain Properties. On September 14, 2016, and ostensibly in connection with its 18 claimed interests in certain Properties, VMI filed a Motion for Leave to Intervene 19 (the "Motion to Intervene") in the above-entitled action (Dkt. No. 91), which 20 remains pending as of the date of this Stipulation. 21 D. In December 2016, the Receiver and VMI conferred extensively 22 regarding the issues raised by VMI in its Motion to Intervene, and the Receiver has 23 agreed to, and has commenced, providing VMI with regular updates regarding his 24 Property administration and disposition efforts, as well as making monthly 25 payments on certain Loans, as directed by VMI, along with property tax payments 26 on all Properties subject to a VMI security interest. 27 E. While the bulk of the substantive issues in VMI's Motion to Intervene 28 have been or are in the process of being addressed, VMI has maintained a right to 1 recover attorneys' fees and costs associated with its Motion to Intervene, and 2 otherwise, citing language in the deeds of trust memorializing the security interests 3 arising in connection with its Loans to the effect that "if any action or proceeding is 4 commenced which affects Lender's interest in the Property … then Lender may … 5 disburse sums, including reasonable attorney's fees … to protect Lender's interest." 6 The SEC and the Receiver have disputed VMI's claim for attorneys' fees and costs. 7 F. On January 10, 2017, VMI filed an Ex Parte Application for Order 8 Shortening Time to be Heard on Motion for Order Requiring that Sales of Real 9 Property by Receiver Include VMI's Beneficiary Demands Having an Attorney's Fee 10 Component Which Fees Shall Be Held In Trust (collectively, the "VMI Ex Parte") 11 (Dkt. No. 146). In the VMI Ex Parte, VMI requested the implementation of a 12 mechanism for the reimbursement of its accrued attorneys' fees and costs from the 13 proceeds of the Receiver's sales of any Properties against which it claims a security 14 interest, and proposed that it be paid up to $3,000, per Property, on a Property-by15 Property basis and dependent upon the available equity in any given Property, as the 16 Receiver's Court-approved sales of the Properties are concluded. The SEC and the 17 Receiver opposed the VMI Ex Parte (Dkt. Nos. 147, 148) and have disputed VMI's 18 right to fees and costs, maintaining, among other things, that VMI is not entitled to 19 any claimed attorneys' fees and costs not directly attributable to any specific 20 Property, Loan, or deed of trust. 21 G. The Court held a hearing on the VMI Ex Parte on January 11, 2017. At 22 the hearing, the Parties agreed to stipulate to a resolution of the remaining issues 23 relating to the VMI Ex Parte, and have agreed as follows: 24 25 STIPULATION AND AGREEMENT Accordingly, and in consideration of the foregoing, the Parties hereby 26 STIPULATE and AGREE as follows: 27 1. VMI shall transmit a payoff and beneficiary demand (a "Beneficiary 28 Demand") to the Receiver's escrow agent in connection with the Court-approved 1 sale of each Property in which it claims a secured interest and right to repayment of 2 attorneys' fees, which Beneficiary Demand may include an attorneys' fees and costs 3 component payable to VMI, not to exceed $3,000; 4 2. At the closing of any Court-approved sale of any Property in which 5 VMI claims an interest, and absent further order of this Court, the net proceeds from 6 the sale, after the payment of all outstanding, principal, interest, fees, taxes, and 7 other liabilities, shall be apportioned, through escrow, as follows: a. 8 In accordance with the content of VMI's Beneficiary Demand, up 9 to $3,000 of the net proceeds from the sale shall be directed by VMI to be 10 transferred, through escrow, to an account maintained by the Receiver, separate and 11 apart from any other Receivership Entity accounts (the "Separate Account"), which 12 account may not be drawn upon absent a further order of this Court, except as 13 provided in Paragraph 6, below; and b. 14 All remaining net proceeds from the sale shall be released to any 15 other account identified by the Receiver and maintained for the benefit and 16 administration of the Receivership Entities and their Estate; 17 3. Concurrently with the closing of any Court-approved sale of any 18 Property in which VMI claims an interest, and the delivery of the associated 19 Demand, VMI shall provide the Receiver, or his designated agent, with an 20 appropriate reconveyance or other instrument necessary to release VMI's security 21 interest and confer title to such Property clear of VMI's security interest to the 22 Receiver's buyer; 23 4. VMI shall be entitled to submit a claim to the Receiver pursuant to its 24 rights in the notes and deeds of trust underlying its Loans, against the funds in the 25 Separate Account, for the attorneys' fees and costs it has incurred in connection with 26 its Motion to Intervene, or otherwise, in the above-entitled action (the "VMI Fee 27 Claim"); 28 1 5. The Receiver and the SEC shall retain the right to object to the VMI 2 Fee Claim, on any basis, except that the Receiver and the SEC may not object to the 3 VMI Fee Claim on the grounds that VMI is not a secured creditor with respect to the 4 Properties on which VMI had a secured Loan, nor shall any objection be made 5 based on the cancellation of VMI's notes or reconveyance of its deeds of trust; 6 6. In the event that, in adjudicating the VMI Fee Claim, the Court 7 determines that VMI is not entitled to any attorneys' fees and costs, or is entitled to 8 attorneys' fees and costs in an amount less than requested in the VMI Fee Claim, 9 any funds remaining in the Separate Account after the payment of the VMI Fee 10 Claim, if at all, shall be immediately released to the Receiver, without further order 11 of this Court; and 12 7. The Receiver's agreement to hold up to $3,000, per Property, in sales 13 proceeds in the Separate Account as described in Paragraph 2.a, above, shall not be 14 evidence for or reflect any admission on the part of the Receiver or the SEC as to 15 VMI's right to attorneys' fees and costs from the proceeds of any closed sales. Each 16 of the Parties shall also retain and reserve any and all other of their respective rights 17 arising in connection with the above-entitled action. 18 19 SO STIPULATED. 20 Dated: January 18, 2017 21 22 23 24 25 26 27 28 ALLEN MATKINS LECK GAMBLE MALLORY & NATSIS LLP DAVID R. ZARO JOSHUA A. DEL CASTILLO PETER A. GRIFFIN By: /s/ Joshua A. del Castillo JOSHUA A. DEL CASTILLO Attorneys for Receiver DAVID P. STAPLETON 1 Dated: January 18, 2017 U.S. SECURITIES AND EXCHANGE COMMISSION 2 By: 3 4 5 6 Dated: January 18, 2017 7 /s/ John B. Bulgozdy JOHN B. BULGOZDY Attorneys for Plaintiff SECURITIES AND EXCHANGE COMMISSION KLEIN, DeNATALE, GOLDNER, COOPER, ROSENLIEB & KIMBALL, LLP 8 By: 9 10 11 12 /s/ Barry Goldner BARRY GOLDNER Attorneys for Proposed Plaintiff-in-Intervention VALLEY MORTGAGE INVESTMENTS, INC. 13 14 IT IS SO ORDERED. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dated: January 23, 2017 /s/ Lawrence J. O’Neill _____ UNITED STATES CHIEF DISTRICT JUDGE

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