Securities and Exchange Commission v. Nadel et al

Filing 1159

MOTION for Release of Funds Turnover of Sale Proceeds by Branch Banking & Trust Co. Successor to Colonial Bank NA. (Garbett, David)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
CASE NO.: 8:09-cv-0087-T-26TBM
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
vs.
ARTHUR NADEL, SCOOP CAPITAL,
LLC, SCOOP MANAGEMENT, INC.,
Defendants,
SCOOP REAL ESTATE, L.P.,
VALHALLA INVESTMENT PARTNERS, L.P.,
VALHALLA MANAGEMENT, INC.,
VICTORY FUND, LTD,
VIKING IRA FUND, LLC,
VIKING FUND, LLC, AND
VIKING MANAGEMENT, LLC,
Relief Defendants.
/
BB&T’S MOTION FOR TURNOVER OF SALE PROCEEDS OF FAIRVIEW
PROPERTY SUBJECT TO MORTGAGE INTEREST
AND SUPPORTING MEMORANDUM OF LAW 1
Secured Creditor, BB&T, moves the Court for entry of an order directing the Receiver to
turn over $267,720.59, the segregated net proceeds of the sale of the Fairview Property (as
defined below), even if Receiver did not timely receive BB&T’s formal secured proof of claim
on BB&T’s purchase-money mortgage loan to Arthur and Marguerite Nadel (“Nadels”). The
1

Unless otherwise indicated, all emphasis and brackets are added. “BB&T” is Branch Banking
and Trust Company. “Receiver” is Burton W. Wiand, as Receiver. “NOF” is BB&T’s notice of
filing in support of this motion. “GR Decl.” is the Declaration of David S. Hendrix, and “Miller
Decl.” is the Declaration of Richard Miller and “Dombovary Decl.” is the Declaration of
Elizabeth B. Dombovary. Other capitalized terms are defined herein.
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
Court recently granted the Receiver’s motion sell the Fairview Property with BB&T’s mortgage
lien attaching to the net proceeds, which the Receiver is holding in a segregated trust account
pending the Court’s ruling on BB&T’s entitlement to the funds. See DE 1150 and 1151. This
motion seeks that determination.
INTRODUCTION
As secured creditor, BB&T’s mortgage lien rides through the Receivership, even if the
Receiver did not receive the proof of claim on time. Moreover, BB&T’s lien should not be
forfeited because the Receiver became aware of BB&T’s secured claim in early 2009, well
before the September 2, 2010 claims deadline, and reported it to the Court and creditors. The
Receiver continued to report the secured claim for five years (from 2009-2014) in 15 Interim
Receiver Reports and website marketing of the Fairview Property, all disclosing the estate’s
liability to BB&T of “approximately $248,560.62” secured by the first lien.
BB&T intended to submit its proof of claim on time, and if the Receiver did not receive
it, the delivery failure was caused by excusable neglect. Before the claims deadline, BB&T
prepared and signed the proof of claim and intended timely delivery, just as BB&T was doing at
the same time on a secured proof of claim on a separate mortgage loan in default, which BB&T
timely delivered to the Receiver. From January 2011 to April 25, 2012, BB&T’s counsel,
unaware that the Receiver had not received the subject claim, consistently advised the Receiver’s
counsel of BB&T’s lien on the Fairview Property for the outstanding loan. During this period,
the Receiver’s counsel did not indicate that the Receiver had not received the proof of claim.
On April 26, 2012, the Receiver’s counsel advised BB&T’s counsel, for the first time,
that the Receiver had no evidence of receipt of the claim. BB&T’s counsel immediately emailed
the proof of claim and supporting documents. Thereafter, the Receiver never filed any motion
2
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
seeking review of any determination on the claim. To the contrary, from May 2012 through
November 2014, the Receiver filed six additional Interim Reports and advertised the sale of the
Fairview Property, continuing to report the estate’s liability on the BB&T loan “of approximately
$248,560.62” secured by the first lien.
BB&T acted in good faith at all times. The delivery failure, if it occurred, was not
calculated or strategic; it resulted from excusable inadvertence. Honoring the secured claim
would not prejudice the estate as the funds have been segregated since the November 2014 sale
and any remaining distributions to unsecured creditors do not include the funds. Relief should be
granted to BB&T under these unique circumstances.
FACTUAL BACKGROUND
A.

Fairview Loan and Laurel Preserve Loan

1.

The Fairview Loan

On June 14, 2004, BB&T made a purchase-money mortgage loan of $268,000 (“Fairview
Loan”) to enable the Nadels to buy a second residence and associated property at 131 Garren
Creek Road, Fairview, North Carolina 28730 (“Fairview Property”). The Nadels delivered a
note (“Note”) and first-priority Deed of Trust (“Mortgage”) as collateral. NOF at Exhibit 1,
Miller Decl. ¶¶ 5-6, Exhibits A and B. 2 In 2009, following the Nadels’ default, BB&T sent the
file to North Carolina counsel for foreclosure.

Id. at ¶ 7.

After BB&T learned of the

Receivership, it halted the foreclosure. Id. at ¶ 8.
2.

The Laurel Preserve Loan

2

As discussed below, the Receiver also filed the Fairview loan documents on March 27, 2009
with his motion to take title to and possession of the Fairview Property. DE 99.
3
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
BB&T also made a $394,000 commercial mortgage loan to Laurel Preserve LLC
(“Laurel Preserve Loan”), secured by a first mortgage on a cottage home located in Buncombe
County, North Carolina (“Laurel Preserve Property”). Id. at ¶ 9, Exhibits C and D. This loan is
not the subject of this motion, although facts concerning it are pertinent to show BB&T’s intent
to submit on a timely basis the proof of claim on the Fairview Loan.
3.

Gray Robinson’s Retention

In 2009, BB&T retained Gray Robinson, P.A. (“GR”) for the limited purpose of
conducting specific legal research regarding the Receivership and the two properties held by the
Receiver, to provide BB&T with information as to the filing of proofs of claim and then to
monitor the sales effort and ultimate sale of the two properties and to report the sales information
to BB&T. This limited representation included authority to communicate with Receiver’s
counsel regarding the marketing and sale of the two properties. NOF, Exhibit 2, GR Decl. at ¶ 4.
GR did not enter an appearance for BB&T in the Receivership.
B.

Receiver Takes Title to Fairview Property Shortly After Receivership
and Reports Fairview Loan and Collateral

Shortly after his appointment in early 2009, the Receiver discovered that the Nadels had
purchased the Fairview Property in part with proceeds of the fraud. See DE 1150 at 4. On
March 27, 2009, the Receiver moved for possession of and title to the Fairview Property
(“Motion for Title”), submitting a supporting declaration (“Receiver’s Declaration”) disclosing
BB&T’s purchase-money enabling loan and first lien on the Fairview Property. DE 98-99. The
Receiver filed the Note and Mortgage, indicating “the balance of the purchase price was paid [by
the Nadels] with [the Fairview Loan].” Receiver’s Declaration at ¶ 30 and Exhibits A-C; F-G;
DE 99-2, 99-3, 99-4, 99-7 and 99-8. The Receiver also disclosed the amount and date of
4
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
payments to BB&T under the Fairview Loan. Receiver’s Declaration at ¶ 32. On March 30,
2009, the Court granted the Motion for Title, vesting title to and possession of the Fairview
Property with the Receiver, subject to the Mortgage. DE 100. 3
C.

The Receiver Reports Estate’s Secured Liability on Fairview Loan
Well Before Claims Deadline

1.

Receiver’s Interim Reports Before Claims Deadline

In addition to reporting the Fairview Loan and BB&T’s lien on the Fairview Property in
the Motion for Title, from June 9, 2009 to August 18, 2010, the Receiver reported the estate’s
liability to BB&T on the Fairview Loan secured by a first lien on the Fairview Property through
five Interim Reports substantially as follows:
g. Fairview, North Carolina.
On March 30, 2009, the Court granted the Receiver’s motion (Doc. 98) for
possession of property located in Fairview, North Carolina (the “Fairview
Property”). (Doc. 100.) On June 14, 2004, Nadel and his wife purchased the
Fairview Property for $335,000.00. The Fairview Property was a secondary
residence of the Nadels that is located in the mountains of North Carolina near the
large property owned by Laurel Preserve, LLC (see Section V.B.3, above). The
Fairview Property has one known encumbrance: a loan with BB&T Bank on
which there is a remaining balance of approximately $248,560.62. Parties
interested in marketing or purchasing this property should contact the Receiver
directly.
See Second Interim Report dated June 9, 2009, DE 141 at 36; Third Interim Report dated August
14, 2009, DE 176 at 40; Fourth Interim Report dated November 25, 2009, DE 240 at 43; Fifth

3

The Receiver did not assert that BB&T knew of the Nadels’ wrongdoing when it made the
Fairview Loan. Motion for Title at 5-8; Receiver’s Declaration ¶ 30 and Exhibit C thereto. In
recommending allowance of the Laurel Preserve POC, the Receiver acknowledged that he “has
no information indicating that [BB&T] had any involvement in or notice of fraud.” See DE 675
at 49. There is similarly no evidence that BB&T knew of Nadel wrongdoing when it made the
Fairview Loan.
5
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
Interim Report dated March 10, 2010, DE 362 at 48; 4 and Sixth Interim Report dated August 18,
2010, DE 462 at 47-48. 5
2.

Receiver’s Website Advertising Before Claims Deadline

From 2009-2010, the Receiver also reported the estate’s liability on the Fairview Loan
and lien through advertising the property on his website, www.nadelreceivership.com, DE 1150
at 6-7 (describing advertising), as follows:
Location: Fairview, Buncombe County, North Carolina
Size: 3.62 acres
Dwellings: Two-story 200 year-old farm house with over 2,500 square foot of
living area; guest house
Other: Detached double garage with unfinished storage or living area on second
level; detached storage/tool shed
Liabilities: BB&T loan with a remaining balance of approximately
$248,000.00.
NOF, Exhibit 3, Dombovary Decl. at ¶ 2, Exhibits A-C. 6
D.

The Fairview and Laurel Preserve Proofs of Claim

Two separate BB&T departments were handling the defaulted mortgage loans—
residential loan recovery was handling the Fairview Loan and commercial loan recovery was
handling the Laurel Preserve Loan. BB&T’s employees, rather than counsel, were tasked with
submitting proofs of claims. Miller Decl. at ¶ 10; GR Decl. at ¶ 6.

4

This report also indicated that the Receiver had received two offers on the Fairview Property,
one of which was too low, and the Receiver was negotiating with the other offeror.
5

This report added that the offeror could not obtain financing.

6

After the Receiver sold the Fairview Property in November 2014 following court approval, he
removed the website advertisements, but we were able to obtain the historical website
information and have included those we were able to obtain. The Receiver summarized his
website advertising of the Fairview Property at DE 1150 at 6-7.
6
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
On August 24, 2010, a GR attorney emailed BB&T employees Kade Herrick (“Herrick”)
and Holly Decker (“Decker”), in residential and commercial loan recovery, respectively,
advising of the September 2, 2010 deadline, the procedure to submit claims, and attaching the
proof of claim form. GR Decl. at ¶¶ 7-8, Exhibits A-B.
On August 27, 2010, Herrick sent GR counsel two emails, the first attaching BB&T’s
proof of claim on the Fairview Loan (“Fairview POC”) completed and signed by BB&T Vice
President Michael Pocisk (“Pocisk”) on that date and supporting documents, and the second
indicating that Herrick was sending the Fairview POC to the Receiver via Maya M. Lockwood,
Esq. (“Lockwood”). Id. at ¶ 9, Composite Exhibit C. The Fairview POC contained the same
information already known to the Receiver, the Court and creditors, including the estate’s
liability to BB&T secured by the lien. 7 Id.
On September 2, 2010, Decker emailed to Lockwood, with a copy to GR counsel,
BB&T’s Proof of Claim on the Laurel Preserve Loan (“Laurel Preserve POC”), completed and
signed by Decker, and supporting documents.

Id. at ¶ 2; Exhibit D. Decker also timely

delivered the original Laurel Preserve POC to Lockwood. Id. at Exhibit K.
E.

BB&T Believes in Good Faith that Fairview POC is Timely Submitted

Prior to April 26, 2012, BB&T’s management overseeing the Fairview Loan believed in
good faith that the Fairview POC had been timely submitted, its interests were perfected, and
BB&T would receive the net proceeds of the sale of the Fairview Property.

Miller Decl. at ¶

12. 8 On November 18, 2010, consistent with BB&T’s understanding, the Receiver filed his

7

The Fairview POC reflects the amount owing as about $271,000 whereas the Receiver had
reported about $268,000 as owing.
8

The Receiver has denied that Lockwood received the Fairview POC by September 2, 2010.
7
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
Seventh Interim Report, noting the estate’s liability to BB&T of “approximately $248,560.62”
secured by a first lien. DE 540 at 50-51.
F.

Receiver’s Counsel’s Communications Post-Claims Deadline with GR
Counsel Concerning Secured Debt on Fairview Property

On January 25, 2011, in response to GR counsel’s request for an update on the sale
efforts, Receiver’s counsel emailed GR counsel the links to the listings for the two properties.
GR Decl., Exhibit F. Shortly thereafter, on March 14, 2011, the Receiver filed his Eighth
Interim Report, with the same estate liability statement as the prior six Interim Reports—“The
Fairview Property has one known encumbrance: a loan with BB&T Bank on which there is a
remaining principal balance of approximately $248,941.73.” DE 609 at 48.
On May 23, 2011, GR counsel sent the Receiver’s counsel an email regarding sale
efforts. Receiver’s counsel responded the next day, indicating both properties continued to be
marketed. GR Decl., Exhibit F. In February and July 2011, the Receiver’s website reported the
estate’s liability to BB&T on the Fairview Loan secured by a first lien on the Fairview Property.
Dombovary Decl. at ¶ 2, Exhibits D-E.
On June 8, 2011, GR counsel requested an “update from the broker regarding the
properties encumbered by BB&T’s liens[.]” GR Decl., Exhibit G. Receiver’s counsel emailed
the same day a marketing update on the Fairview Property. Id. at Exhibit H. Shortly thereafter,
on July 21, 2011, the Receiver filed his Ninth Interim Report, with the same estate liability
statement on the Fairview Loan as the prior seven Interim Reports quoted above. See Ninth
Interim Report, DE 647 at 48-49.
On September 21, 2011, GR counsel requested an update from Receiver’s counsel on
“the two properties in which BB&T holds liens.” GR Decl. Exhibit I. During that month, the
8
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
Receiver’s website marketing the Fairview Property contained the same estate liability statement
on the Fairview Loan. Dombovary Decl. at ¶ 2, Exhibits E-F (showing no change in the
advertising from July 2011 to February 2012). This was consistent with the Receiver’s Tenth
Interim Report dated December 15, 2011, containing the same estate liability statement. See
Tenth Interim Report, DE 685 at 32.
On March 12, 2012, GR counsel requested an update from Receiver’s counsel “with
respect to the two properties in which BB&T holds liens.” GR counsel sent a follow-up email on
March 22, 2012. GR Decl., Composite Exhibit J.

During that month, the Receiver’s website

disclosed the same estate liability statement on the Fairview Loan. Dombovary Decl. at ¶ 2,
Exhibit G.
At no time from September 2, 2010 to April 25, 2012 did the Receiver’s counsel ever
advise GR or BB&T of non-receipt of the Fairview POC. GR Decl., Exhibits F-J. During this
period, the Receiver’s Interim Reports and website advertisements also reported the estate’s
liability on the Fairview Loan of “approximately $248,560.62” secured by a first lien.
Dombovary Decl. at ¶ 2, Exhibits A-G.
G.

Receiver’s Motion to Approve Claims Determinations and Priority of
Claims Omits Discussion of Fairview POC

Following the claims deadline, the Receiver conducted disallowance/allowance/priority
determinations. On December 7, 2011, about 15 months after the deadline, the Receiver moved
the Court to approve his determinations, to establish a procedure for creditors to object to claim
determinations and other relief (“Claims Determination Motion”). DE 675.
The Receiver reported that BB&T had made the Laurel Preserve Loan, secured by a first
mortgage, and recommended allowance of the Laurel Preserve POC (Claim No. 482) in part for
9
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
$360,157.37, the principal amount owing when the Receiver was appointed, to be paid solely
from the sale proceeds of the Laurel Preserve Property, minus fees and costs. See Claims
Determination Motion at 17-18, 38, 45-48, and Exhibit E, DE 675 at 22-23, 43, 50-53, and 6755. The Receiver recommended a Second Priority Class 2 status, id. at 34-35, DE 675 at 39-40,
with “priority over all other classes with respect to the proceeds of the sale of the asset securing
each of the respective secured claims.” Id. at 35, DE 675 at 40. The Receiver argued for
BB&T’s priority, noting all creditors need not be treated alike, but similarly-situated creditors
should be so treated. Id. at 35-36, DE 675 at 40-41 (and cases cited). According to the Receiver,
BB&T should not receive a deficiency because “secured creditors have an advantage as they
have an identifiable asset over which they enjoy priority in relation to other creditors, including
defrauded investors. Accordingly, [the Laurel Preserve POC] should be paid only out of the
proceeds of the sale of [BB&T’s] collateral.” Id. at 45; DE 675 at 50.
Although the Receiver knew of BB&T’s secured claim on the Fairview Loan in early
2009, and knew as of December 2011 that he had no evidence of receipt of the Fairview POC,
the Receiver did not refer to the Fairview Loan and did not ask the Court to approve any
determination as to the claim, in the Claims Determination Motion. On March 2, 2012, the Court
granted the Claims Determination Motion in part, reserving on whether Wells Fargo Bank, N.A.
(“WFB”) had forfeited its mortgage lien interest on three properties on which it had not timely
submitted proofs of claim. DE 776 at ¶ 9. The Court made no determinations on the Fairview
POC. Id. at DE 776.
H.

The April 26, 2012 Letter

On April 26, 2012, about 45 days after the order on the Claims Determination Motion,
the Receiver’s counsel sent GR counsel a letter responding to GR’s counsel’s March 2012
10
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
inquiry for sale updates on the two properties (“April 26, 2012 Letter”). GR Decl., Exhibit K.
The April 26, 2012 Letter indicated for the first time that although BB&T had timely submitted
the Laurel Preserve POC, the Receiver had no evidence of receiving the Fairview POC. Id. That
afternoon, GR counsel emailed the Receiver’s counsel the Fairview POC and the Laurel Preserve
POC with supporting documents, previously sent to her by Herrick and Decker, respectively, in
August-September 2010. Id. at Exhibit L.
Despite contending in the April 26, 2012 Letter that BB&T had forfeited its claim on the
Fairview Loan, about one month later, on May 31, 2012, the Receiver filed his Eleventh Interim
Report, repeating that “[t]he Fairview Property has one known encumbrance: a loan with BB&T
Bank on which there is a remaining principal balance of approximately $248,941.73.” DE 863 at
28. During the same period, the Receiver’s website continued to indicate the estate’s liability on
the Fairview Loan to BB&T secured by its lien. Dombovary Decl. at ¶ 2, Exhibits F-G.
On October 23, 2012, the Receiver filed his Twelfth Interim Report, repeating the estate’s
liability on the Fairview Loan “of approximately $248,941.73” secured by a first lien. DE 929 at
29-30. On November 5, 2012, GR counsel emailed the Receiver’s counsel advising that she was
unable to send proof of transmittal as Herrick had left the bank. 9

GR Decl., Exhibit M.

Following this, the Receiver did not file any motion with the Court seeking a claims
determination on the Fairview POC.
I.

Post-November 2012 Interim Reports and Website Advertisements
Continue to Recognize Estate’s Liability on Fairview Loan

9

Herrick left BB&T on October 28, 2010. According to BB&T’s retention policy in effect,
BB&T would have purged his emails, both incoming and sent items, within 120 days of the date
he left the bank. Accordingly, by April 2012, when BB&T learned of the Fairview POC issue, it
would not have been able to obtain a copy of Herrick’s email transmittal to the Receiver. Miller
Decl. ¶ 14. Moreover, despite our diligent attempts, we have been unable to locate Herrick to
determine the facts concerning transmittal of the Fairview POC. See Dombovary Decl. at ¶¶ 3-7.
11
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM

From November 2012 to November 2014, the Receiver filed 4 additional Interim
Reports, all indicating the estate’s liability on the Fairview Loan of “approximately 248,941.73”
secured by a first lien on the Fairview Property. See Thirteenth Interim Report dated April 8,
2013, DE 1001 at 25-26; Fourteenth Interim Report dated October 17, 2013, DE 1077 at 28;
Fifteenth Interim Report dated March 7, 2014, DE 1106 at 21; and Sixteenth Interim Report
dated August 12, 2014, DE 1135 at 21 (all reporting that “[t]he Fairview Property has one known
encumbrance: a loan with BB&T Bank on which there is a remaining principal balance of
approximately $248,941.73.”). Similarly, during this period, the Receiver continued to report
substantially the same information in website advertisements for the sale of the Fairview
Property.

See NOF Exhibits Dombovary Decl. at ¶ 2, Exhibits J-M (Receiver’s website

advertisements dated April 2, 2013, May 16, 2013, June 16, 2013, and July 18, 2013, all
identifying estate’s liability as “BB&T loan with a remaining balance of approximately
$248,000.00.”).
J.

The November 17, 2014 Motion for Sale

On November 17, 2014, the Receiver sought leave to sell the Fairview Property on an
urgent basis (“Motion for Sale”). DE 1150. For the first time in a court filing, and contrary to
all of the prior Interim Reports and advertisements, the Receiver indicated that he was contesting
the validity of BB&T’s lien, but the Receiver did not ask the Court to rule on a recommended
claim denial on the Fairview POC. Instead, the Receiver sought immediate approve of the sale
without the Court’s determining the validity of BB&T’s lien for the balance owing,10

10

4.

The Motion for Sale incorrectly reported the balance owing as $101,710.77. See DE 1150 at
The Receiver later corrected this. See Receiver’s Seventeenth Interim Report dated
12
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
representing the lien would transfer to proceeds, which the Receiver would hold in a segregated
trust account to protect BB&T’s lien interest. Id. at 3-5, 9-10, 14. 11
The Motion for Sale did not inform the Court that (a) despite knowing as of December
2011 that the Receiver had no evidence of receipt of the Fairview POC, the Claims
Determination Motion did not contain any claim determination on the Fairview Loan, let alone a
recommended disallowance triggering a duty to object, and the Receiver had not filed any
document after December 2011 seeking approval of a claim denial on the Fairview POC; (b) the
Receiver had reported the estate’s liability for the principal balance on the Fairview Loan and
existence of the mortgage lien for over 5 years and well before and after the claims deadline as
evidenced by his Motion for Title on March 27, 2009, 15 Interim Receiver’s Reports from June
2009 to August 2014, and 2009-2014 website advertising of the Fairview Property; (c) the
Receiver had communicated with BB&T’s counsel on numerous occasions over a 14 month
period from January 2011 to March 2012, in which BB&T’s counsel had consistently referred to
the estate’s obligation on the Fairview Loan secured by a first lien, to which the Receiver’s
counsel never objected or indicated an issue on the Fairview POC; (d) as soon as BB&T’s
counsel became aware of the claimed non-receipt of the Fairview POC on April 26, 2012, she
forwarded the Fairview POC and supporting documents to the Receiver’s counsel; (e) thereafter,
the Receiver did not file any motion seeking a claims determination and instead continued to
report in 6 Interim Reports from May 2012 to August 2014 and website advertisements during
December 17, 2015, DE 1154 at 20 n. 6 (acknowledging inaccuracy as representing the amount
to reinstate the Fairview Loan, not the accelerated amount due and owing).
11

As the Receiver noted: “Importantly for BB&T, although the Court can order the Fairview
Property’s sale free and clear of all claims, liens, and encumbrances, those claims, liens, and
encumbrances do not evaporate. Rather, upon sale of the Fairview Property, BB&T’s
encumbrance will transfer to the sale’s proceeds.” DE 1150 at 9.
13
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
the same period the estate’s liability of “approximately $248,560.62” to BB&T secured by a first
lien on the Fairview Property. On November 18, 2014, the Court approved the sale, making no
determination on the validity of the Fairview POC or the lien. DE 1151.
ARGUMENT
A.

As Secured Creditor, BB&T Was Not Required to Submit Fairview
POC to Protect Its Lien Interest 12

The Court has the inherent power to grant relief in a securities receivership, see Bendall
v. Lancer Management Group, LLC, 523 Fed.Appx. 554, 557 (11th Cir. 2013) (citing S.E.C. v.
Elliott, 953 F.2d 1560, 1566 (11th Cir. 1992)), whose goal is to achieve a fair and just outcome
for affected creditors. SEC v. Wealth Mgmt. LLC, 628 F.3d 323, 334 (7th Cir. 2010). In
determining allowability and priority of claims, “the fundamental principle which emerges from
case law is that any distribution should be done equitably and fairly, with similarly situated
investors or customers treated alike.” S.E.C. v. Credit Bancorp, Ltd., 2000 WL 1752979, at *13
(S.D.N.Y. 2000), aff'd, 290 F.3d 80 (2d Cir. 2002). See also DE 675 at 34-36; 39-41 (Receiver’s
recommending priority for BB&T lien and right to proceeds on sale of Laurel Preserve
Property); DE 776 (approving BB&T’s priority). The Receiver also takes all estate property
subject to existing liens perfected under state law. See Marshall v. People of State of New York,
254 U.S. 380, 385 (1920).
In this Circuit, where there is no definitive precedent in a receivership case on the issue
presented, the Court is informed by cases interpreting the Bankruptcy Code. See Bendall, 523
Fed. Appx. at 557 (and cases cited) (“Given that a primary purpose of both receivership and

12

WFB has taken the same position with respect to the Receiver’s contention that WFB
forfeited its mortgage liens by failing timely to submit 3 proofs of claim. Following briefing, DE
740, 755, 762, the Court entered orders deferring ruling on the issue. DE 776 at ¶ 9; DE 955.
14
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
bankruptcy proceedings is to promote the efficient and orderly administration of estates for the
benefit of creditors, we will apply cases from the analogous context of bankruptcy law, where
instructive, due to limited case law in the receivership context.”); S.E.C. v. Elliott, 953 F.2d
1560, 1572-73 (11th Cir. 1992) (analyzing bankruptcy law to resolve issue in receivership
context). As the Eleventh Circuit has noted, other circuits have taken the same approach. See
Bendall, 523 Fed. Appx. at 557 (and cases cited).
In the analogous bankruptcy context, a secured creditor is not obligated to submit a proof
of claim to preserve its lien interest; the lien rides through the bankruptcy regardless whether the
creditor files a proof of claim or files it after the claims deadline. See In re Thomas, 883 F.2d
991 (11th Cir. 1989) (secured creditor’s lien on mobile home not affected by failure to file claim
in Chapter 13 proceeding; proof of claim only necessary to preserve deficiency claim, 13 quoting
from and adopting Judge Posner’s reasoning in Matter of Tarnow, 749 F.2d 464, 465 (7th Cir.
1984), that “‘[a] long line of cases, though none above the level of bankruptcy judges since the
Bankruptcy Code was overhauled in 1978, allows a creditor with a loan secured by a lien on the
assets of a debtor who becomes bankrupt before the loan is repaid to ignore the bankruptcy
proceedings and look to the lien for the satisfaction of the debt.’”); In re Bateman, 331 F.3d 821,
827 (11th Cir. 2003) (“An unsecured creditor is required to file a proof claim for its claim to be
allowed, but filing is not mandatory for a secured creditor. See Fed. R. Bankr.P. 3002(a). In
fact, a secured creditor need not do anything during the course of the bankruptcy proceeding
because it will always be able to look to the underlying collateral to satisfy its lien.”) (citing,
inter alia, In re Folendore); In re Folendore, 862 F.2d 1537, 1539 (11th Cir. 1989) (“Because an

13

BB&T is not pursing a deficiency claim in the action.
15
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
unchallenged lien survives the discharge of the debtor in bankruptcy, a lienholder need not file a
proof of claim under section 501.”); 14 accord In re Tarnow, 749 F.2d at 465 (secured creditor did
not forfeit lien because it failed to file proof of claim by deadline; secured creditor need only file
timely proof of claim to preserve deficiency claim against estate); SLW Capital, LLC v.
Mansaray-Ruffin (In re Mansaray-Ruffin), 530 F.3d 230 (3d Cir. 2008) (adversary proceeding
required to invalidate lien in Chapter 13 proceeding; lien remains intact despite failing to file
claim or objecting to confirmation of plan which provided claim was unsecured); In re Hamlett,
322 F.3d 342 (4th Cir. 2003) (affirming bankruptcy and district court’s ruling that secured
party’s failure timely to file proofs of claim does not extinguish mortgage liens in Chapter 7); In
re Alexander, 435 F. App'x 563, 565 (7th Cir. 2011) (“[A] secured creditor need not file a ‘proof
of claim’ unless the creditor wishes to take part in the distribution of estate assets; here the
creditors sought to separate the mortgaged property from the bankruptcy estate and vindicate
their claims in foreclosure proceedings in state court, as the bankruptcy code permits.”); Shelton
v. CitiMortgage, Inc. (In re Shelton), 477 B.R. 749, 752 (B.A.P. 8th Cir. 2012) (affirming
bankruptcy court’s ruling that mortgagee’s failure timely to file secured proof of claim by bar
date did not extinguish lien; "Liens pass through bankruptcy unless avoided on their merits. And
here, the Debtors have not asserted, let alone proved, that CitiMortgage's lien is avoidable on any
ground other than the untimeliness of CitiMortgage's proof of claim."); Newman v. First Sec.

14

This was also the rule under the prior Bankruptcy Code. See Long v. Bullard, 117 U.S. 617,
620-21 (1886) (“Here the creditor neither proved his debt in bankruptcy nor released his lien.
Consequently his security was preserved notwithstanding the bankruptcy of his debtor.”); Farrey
v. Sanderfoot, 500 U.S. 291, 297 (1991) ("Ordinarily, liens and other secured interests survive
bankruptcy"); Johnson v. Home State Bank, 501 U.S. 78, 84 (1991) ("Rather, a bankruptcy
discharge extinguishes only one mode of enforcing a claim -- namely, an action against the
debtor in personam -- while leaving intact another -- namely, an action against the debtor in
rem").
16
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
Bank of Bozeman, 887 F.2d 973 (9th Cir. 1989) (under prior Bankruptcy Code, mortgagee need
not file proof of claim in Chapter 7 proceeding to preserve lien, which rode through bankruptcy
unaffected by debtors’ discharge); Bisch v. United States (In re Bisch), 159 B.R. 546, 550 (9th
Cir. BAP 1993) (secured creditor, IRS, failed to file proof of claim for unpaid taxes on debtor’s
real property; lien not extinguished because “[f]ailure to file a secured proof of claim in a
bankruptcy case might mean that the lien holder will not receive a distribution from the estate.
This may mean forfeiting any right to a deficiency, but it does not waive the lien.”); In re
Simmons, 765 F.2d 547, 556-57 (5th Cir. 1985) (adopting In re Tarnow; secured creditor with
valid state statutory lien on estate property who failed to object to confirmation of Chapter 13
plan listing debt as unsecured did not forfeit perfected lien); Clem v. Johnson, 185 F.2d 1011,
1013 (8th Cir. 1950), cert. denied, 341 U.S. 909 (1951) (under prior Bankruptcy Code, secured
creditor holding mortgage on aircraft was entitled to enforce lien in Chapter 7 proceeding despite
failing to file proof of claim by claims bar deadline); In re Schwalb, 347 B.R. 726, 753 (Bankr.
D. Nev. 2006) (even if secured creditor does not file proof of claim, “a secured claim passes
through bankruptcy unaffected absent some affirmative action to set it aside.”); In re Prestige
Ltd. Partnership-Concord, 223 B.R. 203, 208 (Bankr. N.D. Cal. 1998) (secured creditor in
Chapter 11 proceeding not required to file proof of claim to preserve interest in collateral); In re
Penrod, 50 F.3d 459, 461 (7th Cir. 1995) (“A secured creditor can bypass his debtor's
bankruptcy proceeding and enforce his lien in the usual way, which would normally be by
bringing a foreclosure action in a state court. This is the principle that liens pass through the
bankruptcy unaffected.”); In re Pence, 905 F.2d 1107, 1110 (7th Cir. 1990).”); In re Brawders,
325 B.R. 405, 411 (B.A.P. 9th Cir. 2005) (“Absent some action by the representative of the
bankruptcy estate, liens ordinarily pass through bankruptcy unaffected, regardless whether the
17
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
creditor holding that lien ignores the bankruptcy case, or files an unsecured claim when it meant
to file a secured claim, or files an untimely claim after the bar date has passed.”), aff'd, 503 F.3d
856 (9th Cir. 2007). Accordingly, BB&T’s failure to submit the Fairview POC on time, if true,15
does not justify forfeiting its lien interest. 16
B.

The Receiver Knew of and Reported All Information in Fairview
POC Well Before Deadline

This is not a case where the Receiver and creditors were uniformed as to BB&T’s
secured claim; to the contrary, throughout the last 5 years, the Receiver knew of and reported
BB&T’s secured claim to the Court and creditors. Shortly after his appointment, the Receiver
discovered and reported the estate’s liability and BB&T’s lien on the Fairview Property and
submitted the loan documents to the Court. Thereafter, in 15 Interim Receiver Reports and
continuous website advertisements, from 2009 to 2014, the Receiver continually reported the
estate’s liability to BB&T of “approximately $248,560.62” secured by a first lien on the Fairview
Property. A formal proof of claim by September 10, 2010 was not necessary to inform the
Receiver and parties in interest of that which they already knew. As the district court reasoned in
Bankers Trust Co. v. Florida East Coast Ry. Co., 31 F.Supp. 961, 963 (S.D. Fla. 1940), in
permitting a late-filed preferred claim in a receivership seeking priority payment on account of a
state court judgment:
Those objecting to the petition also make the point that petitioner's claim was not
filed within the time fixed by the Court's former orders herein relating to claims
15

We have not taken discovery of the Receiver to verify his statement of non-receipt, but
assume its truth; as discussed, even if true, the facts and law do not support forfeiture of BB&T’s
lien and right to net proceeds.
16

Indeed, as WFB pointed out, the Receiver has not cited a single receivership case holding that
a secured creditor’s failure to submit a proof of claim on time justifies forfeiture of the lien or
proceeds on disposition. We have not found any such case either.
18
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
generally, and therefore that the claim is barred. The object of requiring the filing
of claims within a stated period is to give the Receivers timely notice of the
existence thereof. As counsel who specifically consented to the entry of this
judgment were also counsel for the Receivers, there was ample notice of its
existence. There is no substantial reason for requiring further proof of such a
claim.
This Court need go no further in ruling that BB&T should receive the net disposition proceeds.
The purpose of a proof of claim on Fairview Loan was satisfied as soon as the Receiver took title
to the Fairview Property subject to the mortgage and reported the estate’s liability on the
Fairview Loan.
C.

Delay in Submitting Fairview POC was Excusable Neglect

The Court has broad discretion to permit a tardy proof of claim. See, e.g., Callahan v.
Moneta Capital Corp., 415 F.3d 114, 120 (1st Cir. 2005).

As the Court has recognized,

excusable neglect will justify relief for untimely submission of a proof of claim. See DE 1002 at
7 (involving unsecured creditor and citing Pioneer Investment Services Co. v. Brunswick
Associates Limited Partnership, 507 U.S. 380 (1993)). Four factors inform the inquiry: “(1) the
danger of prejudice to the receivership, in this case; (2) the length of delay and its potential
impact on the judicial proceedings; (3) the reasons for the delay; and (4) the good faith of the
movant.” DE 1002 at 7 (citing Pioneer).
By definition, excusable neglect includes negligence.

See Cheney v. Anchor Glass

Container Corp., 71 F.3d 848, 850 (11th Cir. 1996) (applying Pioneer factors to relieve party for
counsel’s failure to timely move for de novo review of non-binding arbitration award; negligence
will support relief); Yang v. Bullock Financial Group, Inc., 435 Fed.Appx. 842, 843-44 (11th
Cir. 2011) (reversing district court for failing to consider Pioneer factors; “With respect to
Pioneer's inquiry into the ‘reason for the delay,’ we recognize that untimely filing caused by
19
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
inadvertence, mistake, or carelessness may still constitute ‘excusable neglect.’”) (citing
Advanced Estimating Sys., Inc. v. Riney, 77 F.3d 1322, 1323 (11th Cir.1996), and Cheney).
An inadvertent delay may constitute excusable neglect, which does not require that the
delay result from uncontrollable events. Pioneer, 507 U.S. at 391-92. Rather, the determination
is an equitable one, and the primary factor is whether there is prejudice to the opposing party.
See Cheney, 71 F.3d at 850 (“In Pioneer, the Supreme Court accorded primary importance to the
absence of prejudice to the nonmoving party and to the interest of efficient judicial
administration in determining whether the district court had abused its discretion.”); accord In re
Eagle Bus Mfg. Co., Inc., 62 F.3d 730, 737-38 (5th Cir. 1995) (“Under Pioneer, the central
inquiry is whether the debtor will be prejudiced.”).
If the Receiver did not receive the Fairview POC on time, the failed delivery was
excusable.

BB&T employee Pocisk prepared the Fairview POC before the deadline and

delivered it to Herrick, who was tasked with transmitting it to Lockwood by September 2, 2010.
Herrick certainly intended to do so, as reflected by his email to GR counsel on August 27, 2010
expressing that intent. Because his sent items were not available when BB&T learned of the
claimed non-receipt, we cannot say whether Herrick sent the Fairview POC via email to the
wrong address or omitted to send it, but either way the failed delivery was, at worse, the result of
carelessness, oversight or inadvertence, any of which is sufficient to establish excusable neglect
under Pioneer. See Pioneer, 507 U.S. at 388, 392 (excusable neglect for untimely filings
“encompasses both simple, faultless omissions to act and, more commonly, omissions caused by
carelessness …. Congress plainly contemplated that the courts would be permitted, where
appropriate, to accept late filings caused by inadvertence, mistake, or carelessness, as well as by
intervening circumstances beyond the party's control. [Moreover], “it is clear that ‘excusable
20
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
neglect’ under Rule 6(b) is a somewhat “elastic concept” and is not limited strictly to omissions
caused by circumstances beyond the control of the movant.”) (footnote omitted); Cheney, 71
F.3d at 850 (attorney’s failure timely to file motion for de novo review of arbitration award
constituted excusable neglect resulting from failure in communication between associate and
lead attorney; although error was within their control, “their noncommunication and resulting
inaction amounts only to an ‘omission[ ] caused by carelessness[,]’ [i]n other words, their failure
to comply with the filing deadline is attributable to negligence.”); Avon Contractors, Inc. v.
Secretary of Labor, 372 F.3d 171 (3d Cir. 2004) (receptionist’s failure properly to route mail
causing movant’s failure to provide timely notice of contest to OSHA’s Citations and a Notice of
Penalty, constituted excusable neglect warranting relief under Pioneer).
1.

No Prejudice to Receivership Estate

In considering prejudice, the Court inquiries: (1) whether the Receiver was aware of the
claim; (2) whether honoring the claim would force return of payments or affect distributions; (3)
whether honoring the claim would adversely affect the estate or success of a reorganization; and
(4) whether honoring the claim would open the floodgates to future claims. In re Cable &
Wireless USA, Inc., 338 B.R. 609, 614 (Bankr. D. Del. 2006) (citing In re Inacom Corp., 2004
WL 2283599, at *4 (D. Del. 2004) and In re O'Brien, 188 F.3d 116 at 125–26 (3d Cir. 1999)).
These factors show no prejudice here.
From early 2009-2014, the Receiver reported to the Court and parties in interest BB&T’s
secured claim. The estate sold the Fairview Property, and the lien attached to the net proceeds,
held by the Receiver in a segregated trust account: “On November 21, 2014, the Receiver
received the net amount of $267,720.59 from the sale of the property after payment of
commission and normal closing costs. This amount is being held until a potential dispute with
21
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
BB&T is resolved.” Receiver’s Seventeenth Interim Report dated December 17, 2014, DE 1154
at 20. The Receiver’s knowledge of the secured claim before the deadline precludes a finding of
prejudice. See In re Leisure, Inc., 400 B.R. 837, 840 (Bankr. M.D. Fla. 2008) (no prejudice to
debtor from late-filed claim because debtor was aware of potential claim prior to and during
case); In re Smith, 200 B.R. 135, 137 (Bankr. S.D. Miss. 1996) (debtors’ knowledge of claim,
including correspondence with claimant concerning claim, precluded prejudice even if formal
proof of claim was not filed by deadline).
The Receiver has not proposed any distribution plan that includes the net proceeds. No
party in interest has relied on the proceeds being part of any distribution. 17 The Receiver will not
have to seek return of any prior distributions, and there will be no impairment to a reorganization
as this is a liquidation. Honoring the claim will not lead to a floodgate of like claims. 18 See In re
Pappalardo, 210 B.R. 634, 645-46 (no prejudice inured to estate on permitting late-filed claim
because no one had voted on plan and estate’s potential liability to claimant was known to parties
in interest); In re Majorca Isles Master Association, Inc., 2014 WL 1323180, at *3 (Bankr. S.D.
Fla. 2014) (granting relief for late filing; no reorganization plan before court).
BB&T is aware that the Court found estate prejudice in denying the unsecured creditor’s
motion to allow a tardy $700,000 claim. DE 1002 at 8. But the Court reasoned that the Receiver
had already made two distributions to unsecured creditors and had not reserved any funds for the
unsecured claimant with a significant claim amount, and even after the Receiver had

17

In any event, prejudice, if any, to unsecured creditors is not the relevant test under Pioneer.
See In re Eagle Bus Mfg., 62 F.3d 730, 737–39 (5th Cir. 1995); In re Pappalardo, 210 B.R. at
645.
18

We are not aware of any secured creditors in a like position other than WFB.
22
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
recommended denial of the claim in the Claims Determination Motion, the claimant did not
promptly seek relief. Id. at 7-8. By contrast, this is a secured claim, the Receiver has set aside
the funds on which BB&T’s lien remains, and the funds have never been earmarked for
unsecured creditors or general estate expenses. The Claims Determination Motion and order
granting it in part did not include any disposition of the Fairview POC, triggering a duty to
object. BB&T filed this motion promptly as invited by the Receiver in its Motion for Sale and
following our investigation of the issues.
2.

No Impact to Administration of Case

For the same reasons, allowing the Fairview POC poses no threat to the case
administration. From inception, the Receiver reported the estate’s liability to BB&T and lien to
the Court and parties in interest. No one could have reasonably relied on the disposition of funds
being part of general estate assets. As noted, the Receiver is holding the subject funds in trust
and segregated pending the Court’s ruling. This issue will not delay completion of this case;
indeed, the Court has the same issue pending on WFB’s application to submit late secured POCs.
3.

BB&T’s Belief That Fairview POC Was Submitted

BB&T and its counsel believed that the Fairview POC had been timely submitted. From
September 2, 2010 to April 2012, based on information provided to it, BB&T’s management
responsible for the Fairview Loan believed that the Fairview POC had been timely submitted,
BB&T’s rights were perfected, and it would receive the sale proceeds. From January 2011 to
March 2012, GR counsel consistently referred to BB&T’s secured claim in communicating with
the Receiver’s counsel, who never indicated that the Fairview POC had not been timely received.
After the claims bar date, the Receiver reported the estate’s liability to BB&T and its lien interest
in numerous Interim Reports and website advertisements. The Claims Determination Motion did
23
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
not mention or seek any determination on allowability of claim on the Fairview Loan. As soon
as the Receiver’s counsel advised on April 26, 2012 of non-receipt of the Fairview POC, GR
counsel emailed it with supporting documents. There was no delay in curing the non-receipt—
information of which the Receiver was then already long aware.
4.

BB&T Has Always Acted in Good Faith

Pioneer’s “good faith” factor is assessed by “whether the movant intentionally sought
advantage by untimely filing.” Yang, 435 Fed.Appx. at 844 (citing Cheney, 71 F.3d at 850).
There is no such evidence. BB&T intended to comply, timely prepared the Fairview POC, and
the employee tasked with submitting it expressed his intent to do so. In re Pappalardo, 210 B.R.
at 647 (no evidence that creditor acted in bad faith by making strategic decision to delay filing
proof of claim; mere mistake does not amount to bad faith) (and cases cited). BB&T’s failure to
deliver the Fairview POC by September 2, 2010, if true, was inadvertent, unintended and caused
by human error.
CONCLUSION
The Court should allow the Fairview POC and direct the Receiver to turn over the
$267,720.59 net proceeds to BB&T.
LOCAL RULE 3.01(g) CERTIFICATION
Counsel to BB&T has conferred with counsel to Receiver. The Receiver’s counsel
objects to the requested relief.
GARBETT, STIPHANY, ALLEN & ROZA, P.A.
Counsel to BB&T
80 S.W. 8th Street – Suite 3100
Miami, Florida 33130
Telephone: [phone]
Fax: [phone]
David S. Garbett, FBN 356425
24
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]

CASE NO.: 8:09-cv-0087-T-26TBM
Elizabeth B. Dombovary, FBN 891711
Email: [e-mail]
Email: [e-mail]
By: /s/ David S. Garbett_____
David S. Garbett

CERTIFICATE OF SERVICE
I certify that on March 5, 2015 , I electronically filed the foregoing with the Clerk of the
Court using CM/ECF. I also certify that the foregoing document is being served this day on all
counsel of record identified on the below Service List authorized to receive electronic notice via
transmission of Notices of Electronic Filing generated by CM/ECF.
By: /s/ David S. Garbett
SERVICE LIST
Arthur G. Nadel
FCI BUTNER LOW
Federal Correctional Institution
P.O. Box 999
Butner, NC 27509

Terry A. Smiljanich, Esq.
James, Hoyer, Newcomer & Smiljanich,
P.A.
One Urban Centre, Suite 550
4830 W. Kennedy Blvd.
Tampa, FL 33609
Counsel to Receiver, Burton W. Wiand

Gianluca Morello, Esq.
Wiand Guerra King, P.L.
3000 Bayport Drive
Suite 600
Tampa, FL 33607
Counsel for Receiver, Burton W. Wiand

Scott A. Masel, Esq.
Andre J. Zamorano, Esq.
Securities & Exchange Commission
Miami Branch Office, SERO
801 Brickell Ave., Suite 1800
Miami, FL 33131

25
G A R B E T T, S T I P H A N Y, A L L E N & R O Z A , P. A . , AT T O R N E Y S AT L A W
80 SOUTHWEST EIGHTH STREET, SUITE 3100, MIAMI, FLORIDA 33130 • TELEPHONE [phone]