Securities and Exchange Commission v. Nadel et al
ORDER ATTACHED denying 1159 Motion for Release of Funds. Signed by Judge Richard A. Lazzara on 4/15/2015. (CCB)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
SECURITIES AND EXCHANGE
CASE NO: 8:09-cv-87-T-26TBM
ARTHUR NADEL; SCOOP CAPITAL, LLC;
and SCOOP MANAGEMENT, INC.,
SCOOP REAL ESTATE, L.P.;
VALHALLA INVESTMENT PARTNERS, L.P.;
VALHALLA MANAGEMENT, INC.;
VICTORY IRA FUND, LTD.; VICTORY FUND, LTD.;
VIKING IRA FUND, LLC; VIKING FUND, LLC;
and VIKING MANAGEMENT, LLC,
Before the Court is BB&T’s Motion for Turnover of Sale Proceeds of Fairview
Property Subject to Mortgage Interest (Dkt. 1159), the Receiver’s Opposition (Dkt. 1163),
BB&T’s Reply (Dkt. 1168), and the Receiver’s Sur-reply in Opposition (Dkt. 1169).
Afer careful consideration of the argument of counsel, the applicable law, and the entire
file, the Court concludes that the motion should be denied.
In this equitable receivership proceeding, this Court entered two key orders
pertaining to claims. On April 21, 2010, in granting the Receiver’s “Motion to (1)
Approve Procedure to Administer Claims and Proof of Claim Form, (2) Establish
Deadline for Filing Proofs of Claim, and (3) Permit Notice by Mail and Publication,”1 this
Court established the procedure for filing proofs of claim. The order reads in pertinent
2. Each person or entity that asserts a claim against the
Receivership arising out of or related in any way to the acts,
conduct, or activities of the Receivership Entities must submit
an original, written Proof of Claim, in the form attached to the
motion as Exhibit A, to the Receiver [c/o Maya M.
Lockwood, Esq.], to be received on or before the later of 120
days from the entry of this Order or 90 days from the mailing
of the Proof of Claim Form to known possible Claimants (the
“Claim Bar Date”). Any person or entity that fails to submit a
Proof of Claim to the Receiver on or before the Claim Bar
Date (i.e., fails to take the necessary steps to ensure that the
Proof of Claim is received by the Receiver on or before the
Claim Bar Date), shall be forever barred and precluded from
asserting any claim against the Receivership or Receivership
Entities (as that term is defined in the Motion).2
On March 2, 2012, in granting the Receiver’s “Motion to (1) Approve Determination and
Priority of Claims, (2) Pool Receivership Assets and Liabilities, (3) Approve Plan of
Distribution, and (4) Establish Objection Procedure,”3 this Court ordered in pertinent part:
See docket 390 (motion).
See docket 391 (order).
See docket 675 (motion).
7) The Proposed Objection Procedure . . . for objections to
the plan of distribution and the Receiver’s claim
determinations and claim priorities is . . . approved, and
any and all objections to claim determinations, claim
priorities, or the plan of distribution shall be presented to the
Receiver in accordance with the Proposed Objection
Procedure . . . ; and
8) To bring finality to these matters and to allow the
Receiver to proceed with distributions of Receivership assets,
any and all further claims against Receivership Entities,
Receivership Property, the Receivership estate, or the
Receiver by any Claimant taxing authority, or any other public
or private person or entity and any and all proceedings or
other efforts to enforce or otherwise collect on any lien, debt,
or other asserted interest in or against Receivership Entities,
Receivership Property, or the Receivership estate are barred
and enjoined absent further order from this Court.4
The claims determination motion did not specifically mention or separate from all claims
the loan on the Fairview Property.5 BB&T did not file an objection to the claim
determination after entry of the March 2012 order.
BB&T contends that it did not realize it had not submitted the proof of claim until
April 26, 2012, when the Receiver, in a letter, informed it that its claim for the Fairview
loan had been forfeited based on the non-receipt of the proof of claim. The letter
informed BB&T that the April 2010 order established the specific process for “all
creditors to submit claims to assets of this Receivership.”6 The letter stated that the
See docket 776 (order).
See docket 675.
See docket 1164-4.
claims bar date expired on September 2, 2010, and that BB&T had not timely submitted a
claim related to the Fairview Property, despite its filing a claim for the Laurel Preserve
property.7 The Receiver recited the relevant part of the March 2012 order barring and
forever enjoining any further claims against the receivership, and specified that “BB&T is
currently precluded from asserting its claim with respect to the [Fairview Property] and
the mortgage loan relating to that property.” Upon receipt of this letter, BB&T emailed
the proof of claim for the Fairview Property.8
BB&T argues it believed in good faith that it had submitted its secured claim by
the September 2, 2010, claims deadline. The employee who allegedly electronically
submitted the proof of claim to the Receiver has not been found, and there is no ability to
confirm that the proof of claim was sent.9 BB&T contends that as a secured creditor it
was not required to submit a proof of claim to protect its lien. Furthermore, the Receiver
knew of the lien since 2009 and, therefore argues BB&T, there was no need to file a
proof of claim, the purpose of which was to impart knowledge of the lien on the Receiver.
Finally, BB&T submits that excusable neglect justifies relief for the untimely filing of the
proof of claim, and the receivership estate suffered no prejudice because the Receiver has
The Receiver had received a timely proof of claim from BB&T on another North
Carolina property, Laurel Preserve.
See docket 1164-5.
See docket 1160, Exh. 1, para. 14 & Exh. 3, paras. 3-7.
set aside funds from the sale of the Fairview Property with which to satisfy the lien.
Addressing each argument, the Receiver primarily contends that the relief sought is timebarred under Federal Rule of Civil Procedure 60(c)(1).
The issue before the Court is whether a secured creditor’s mortgage lien passes
through this equitable receivership unaffected, despite the Receiver’s failure to receive a
proof of claim before the claims deadline of September 2, 2010. The Receiver knew of
the mortgage lien from 2009 to date, as was evidenced by the interim reports noting the
the BB&T loan “of approximately $248,560.62” secured by a mortgage lien. On April
26, 2012, the Receiver informed BB&T that he had not received a proof of claim on the
mortgage encumbering the Fairview Property. While BB&T emailed a copy of the proof
of claim to the Receiver on that date, the issue of the validity of the proof of claim was
not brought before this Court until this motion, which was filed almost three years later.
Rule 60(c)(1) allows one year after the entry of an order for a party to seek to
reopen the order to obtain relief on the basis of mistake, inadvertence, surprise, or
excusable neglect articulated in Rule 60(b)(1). Pioneer Inv. Servs. Co. v. Brunswick
Associated Ltd. P’ship, 507 U.S. 380, 393, 113 S.Ct. 1489, 1497, 123 L.Ed.2d 74 (1993).
The order of March 2, 2012, grants the Receiver’s claims determination motion, which
did not reference the loan on the Fairview Property. The March 2012 order approves the
determination of claims, claim priorities, and the plan of distribution as set forth in the
claims determination motion. It further sets forth a claims objection procedure. To insure
finality to the plan, the order declares “all further claims . . . and all proceedings or other
effects to . . . otherwise collect on any lien . . . are hereby barred and enjoined. . .”
BB&T did not seek to set aside the March 2012 order within one year, and the Receiver
in a letter disclosed its position one month after the order was entered to the effect that
BB&T was then precluded from asserting its claim with respect to the Fairview Property.
Submissions of excusable neglect may not be considered here because one year elapsed
from the entry of the March 2012 order,10 long before this Court was requested to set
aside the order as to the Fairview Property.
BB&T argues vehemently that this equitable receivership is akin to a bankruptcy
proceeding, which excuses secured creditors from filing a proof of claim in the context of
Rule 60 “permits courts to reopen judgment for reasons of ‘mistake, inadvertence,
surprise, or excusable neglect,’ but only on motion made within one year of the judgment.”
Pioneer, 507 U.S. at 393. If this Court were to reach the issue of excusable neglect, however,
BB&T’s burden of proof has not been met. Although there is no indication that BB&T did not
act in good faith, it is evident that prejudice exists to both the victims of the fraud and the
judicial administration of this receivership. See In re Intelligent Med. Imaging, Inc., 262 B.R.
142, 146 (Bankr. S.D.Fla. 2001). Unlike the order in Pioneer, the Court’s order is clear and
unambiguous in the instant case. See In re Bautista, 235 B.R. 678, 683 (Bankr. M.D.Fla.
1999) (distinguishing Pioneer and finding no excusable neglect based on the unambiguous
court orders); In re Norris, 228 B.R. 27, 32 (Bankr. M.D. Fla. 1998) (same). This Court’s
citation to bankruptcy cases does not express an adoption of bankruptcy law to this equitable
receivership, but merely points out that even under bankruptcy principles, there is no excusable
neglect. See this Court’s prior order entered April 25, 2012, at docket 822 at pp. 12-13 and
cases cited therein (“[A]lthough federal district courts presiding over federal equity
receiverships, such as this SEC case, may look for guidance from bankruptcy law, [footnote
omitted] they are not restricted by the dictates of bankruptcy law.”); and this Court’s order
entered on August 29, 2013, at docket 1061 at pp. 7-8, reiterating its ruling at docket 822
(“Any attempted analogy between the significance of a proof of claim under bankruptcy law
with respect to any presumption of its validity and one submitted in the course of this equity
receivership is unavailing.”).
the Bankruptcy Code and rules promulgated thereunder. See, e.g., In re Bateman, 331
F.3d 821, 827 (11th Cir. 2003); In re Thomas, 883 F.2d 991 (11th Cir. 1989), cert. denied,
497 U.S. 1007, 110 S.Ct. 3245, 111 L.Ed.2d 756 (1990). This Court cannot begin to list,
or even fathom, the intricacies, nuances and differences under the many specific
provisions of the Bankruptcy Code and its rules, in trying to analogize any lack of
requirement that a secured creditor file a proof of claim in any particular bankruptcy case
to the unambiguous order in the present federal equity receivership requiring that
claimants follow a particular procedure or suffer their claims forever barred. The burden
rested on BB&T as a secured creditor to protect its rights pursuant to the framework
clearly set forth in the conduct of this receivership. The claims process procedure did not
contain any language exempting secured creditors from filing a proof of claim.
Consequently, the failure to file a timely proof of claim, or timely submit evidence of
excusable neglect, barred BB&T from enforcing the lien against the sale proceeds by
asserting a claim against the receivership estate.
Finally, BB&T relies on Bankers Trust Co. v. Florida East Coast Ry. Co., 31
F.Supp. 961, 963 (S.D. Fla. 1940), as dispositive of this motion. Because the Bankers
Trust court reasoned that the object of filing a proof of claim was to give a receiver notice
of the existence of a claim, and because the Receiver in this case had notice that the claim
existed since its initial interim reports, BB&T contends that it was exempt from filing a
proof of claim. Bankers Trust is distinguishable on the law and its facts. This Court did
not act to alter the terms of a statute, as the court did in Bankers Trust. The orders in this
equitable receivership are clear that the claim bar date and subsequent bar and injunction
serve to impose finality, regardless of whether the Receiver had notice that a lien existed.
It is therefore ORDERED AND ADJUDGED that BB&T’s Motion for Turnover
of Sale Proceeds of Fairview Property Subject to Mortgage Interest (Dkt. 1159) is
DENIED. The proceeds from the sale of the Fairview Property may be released to the
DONE AND ORDERED at Tampa, Florida, on April 15, 2015.
s/Richard A. Lazzara
RICHARD A. LAZZARA
UNITED STATES DISTRICT JUDGE
COPIES FURNISHED TO:
Counsel of Record
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