Securities and Exchange Commission v. Nadel et al

Filing 1374

Unopposed MOTION for miscellaneous relief, specifically to Approve the Sale of a Sunlake Living Systems Trailer by Burton W. Wiand. (Attachments: # 1 Exhibit 1 - Proposed Order, # 2 Exhibit 2 - Orders)(Perez, Jared)

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UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. ARTHUR NADEL, SCOOP CAPITAL, LLC, SCOOP MANAGEMENT, INC., Defendants. CASE NO.: 8:09-cv-0087-T-26TBM 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. Relief Defendants. / RECEIVER’S UNOPPOSED VERIFIED MOTION TO APPROVE THE SALE OF A SUNLAKE LIVING SYSTEMS TRAILER Burton W. Wiand, as Receiver (the “Receiver”), moves the Court for an order, in substantially the form attached as Exhibit 1, authorizing him to sell a single wide trailer made by SunLake Living Systems and relieving him from compliance with the provisions of 28 U.S.C. §§ 2001 and 2004. BACKGROUND On January 21, 2009, the Securities and Exchange Commission (“Commission”) initiated this action to prevent the defendants from further defrauding investors of hedge funds operated by them. That same day, the Court entered an order appointing Burton W. Wiand as Receiver for Defendants Scoop Capital, LLC and Scoop Management, Inc. and Relief Defendants Scoop Real Estate, L.P.; Valhalla Investment Partners, L.P.; Valhalla Management, Inc.; Victory Fund, Ltd.; Victory IRA Fund, Ltd.; Viking IRA Fund, LLC; Viking Fund, LLC; and Viking Management, LLC (the “Order Appointing Receiver”). (See generally Order Appointing Receiver (Doc. 8).) The Court subsequently granted several motions to expand the scope of the Receivership to include other entities owned or controlled by Arthur Nadel (“Nadel”). (See generally Docs. 17, 44, 68, 81, 153, 172, 454, 911, 916, 1024). All of the entities in receivership are hereinafter collectively referred to as the “Receivership Entities.” Pursuant to the Order Appointing Receiver, the Receiver has the duty and authority to: “administer and manage the business affairs, funds, assets, choses in action and any other property of the Defendants and Relief Defendants; marshal and safeguard all of the assets of the Defendants and Relief Defendants; and take whatever actions are necessary for the protection of the investors.” (Order Appointing Receiver at 1-2.) In particular, the Receiver was directed to: [t]ake immediate possession of all property, assets and estates of every kind of the [Receivership Entities], whatsoever and wheresoever located belonging to or in the possession of the [Receivership Entities], including but not limited to all offices maintained by the [Receivership Entities], rights of action, books, papers, data processing records, evidences of debt, bank accounts, savings accounts, certificates of deposit, stocks, bonds, debentures and other securities, 2 mortgages, furniture, fixtures, office supplies and equipment, and all real property of the [Receivership Entities] wherever situated, and to administer such assets as is required in order to comply with the directions contained in this Order, and to hold all other assets pending further order of this Court . . . . (Id. at 2.) The Receiver discovered that Nadel and his wife, Peg Nadel, owned a single wide trailer made by SunLake Living Systems (the “Trailer”) located in North Carolina. The Trailer was purchased by Peg Nadel on or about July 18, 2007 for $28,340.00 to use as an office for the Laurel Mountain Property. 1 The Trailer is currently located on Lot A of the Laurel Mountain Property. The Laurel Mountain Property was purchased by Nadel in 2003 through Laurel Mountain Preserve, LLC, and portions of it were subsequently transferred to Laurel Preserve, LLC; Laurel Preserve Homeowners Association, Inc.; and/or The Guy-Nadel Foundation, Inc. in 2006. Branch Banking & Trust (“BB&T”) is in the process of foreclosing on Lot A. See Doc. 1364. The Trailer is not involved in the foreclosure proceeding. As a result, the Receiver needs to either move the Trailer from Lot A and store it or sell it. Moving and storing the Trailer will incur costs to the Receivership. The Receiver has an offer from Cody and Gabriela Clark to pay $10,000.00 for the Trailer and to remove it from Lot A within 14 days of the Court’s order granting this motion. The purchasers have no known connection to Nadel or his associates. 1 The Laurel Mountain Property is defined in the Receiver’s Interim Reports as the 420+/acres near Asheville, North Carolina intended for development as homesites. (See, e.g., Doc. 1289). 3 VALUE OF THE TRAILER AND RECEIVER’S MARKETING EFFORTS To determine the market price of the Trailer, the Receiver requested quotes from three local RV sales businesses. None of the businesses provided an offer to buy the Trailer nor were they able to provide a quote because the manufacturer of the Trailer, SunLake Living Systems, LLC, is out of business, and this particular Trailer is not frequently sold in the aftermarket. The Receiver obtained a quote on the Trailer’s value from NADA – an internet website routinely used as a benchmark in the valuation of automobiles, motorcycles, trailers, etc. NADA estimated the value of the Trailer at $6,427.84. Based on the valuation, the Receiver believes that accepting the offer of $10,000.00 is in the best interest of the Receivership Estate, as the offer is well above the only quote the Receiver could obtain, and it will eliminate the Receiver’s obligation to insure, maintain, transfer, and store the Trailer. Accordingly, the Receiver has entered into an agreement to sell the Trailer for $10,000.00, contingent upon this Court’s approval. The Receiver respectfully requests that this Court enter an order approving the transaction. MEMORANDUM OF LAW I. THE COURT HAS BROAD POWERS OVER THIS RECEIVERSHIP’S ADMINISTRATION, AND THE SALE OF THE TRAILER IS IN THE RECEIVERSHIP ESTATE’S BEST INTERESTS The Court’s power to supervise an equity receivership and to determine the appropriate actions to be taken in the administration of the receivership is extremely broad. S.E.C. v. Elliott, 953 F.2d 1560, 1566 (11th Cir. 1992); S.E.C. v. Hardy, 803 F.2d 1034, 1038 (9th Cir. 1986). The Court’s wide discretion derives from the inherent powers of an equity court to fashion relief. Elliott, 953 F.2d at 1566; S.E.C. v. Safety Finance Service, Inc., 674 F.2d 368, 4 372 (5th Cir. 1982). The relief sought by the Receiver falls squarely within those powers. The Receiver believes that the proposed sale of the Trailer is in the best interests of and represents the best possible realistic recovery for the Receivership Estate. The relief sought is in furtherance of the duties and authorities bestowed upon the Receiver by the Order Appointing Receiver. A court imposing a receivership assumes custody and control of all assets and property of the receivership, and it has broad equitable authority to issue all orders necessary for the proper administration of the receivership estate. See S.E.C. v. Credit Bancorp Ltd., 290 F.3d 80, 82-83 (2d Cir. 2002); S.E.C. v. Wencke, 622 F.2d 1363, 1370 (9th Cir. 1980). The court may enter such orders as may be appropriate and necessary for a receiver to fulfill his duty to preserve and maintain the property and funds within the receivership estate. See, e.g. Official Comm. Of Unsecured Creditors of Worldcom, Inc. v. S.E.C., 467 F.3d 73, 81 (2d Cir. 2006). The goal of a receiver charged with liquidating assets is to obtain the best value available under the circumstances. Fleet Nat’l Bank v. H & D Entertainment, Inc., 926 F. Supp. 226, 239-40 (D. Mass. 1996) (citations omitted). Further, the paramount goal in any proposed sale of property of the estate is to maximize the proceeds received by the estate. See e.g. Four B. Corp. v. Food Barn Stores, Inc., 107 F.3d 558, 564-65 (8th Cir. 1997). The relief sought by the Receiver falls squarely within those powers. In light of the considerations discussed above, sale of the Trailer is in the best interest of the Receivership Estate because it would result in the recovery of $10,000.00 and avoid other significant liabilities. As a result, the Receiver respectfully requests that the Court grant the relief requested in this motion and enter the proposed order attached as Exhibit 1. 5 II. TO THE EXTENT 28 U.S.C. §§ 2001 AND 2004 GOVERN, THE COURT HAS THE AUTHORITY TO WAIVE THOSE REQUIREMENTS, AND THE CIRCUMSTANCES HERE WARRANT SUCH WAIVER 28 U.S.C. §§ 2001 and 2004 govern the sale of property. However, these statutory requirements can be and are often waived by courts. 28 U.S.C. § 2004 (“Section 2004”) governs the sale of personal property (the Trailer constitutes personal property, not real estate) and provides as follows: Any personalty sold under any order or decree of any court of the United States shall be sold in accordance with Section 2001 of this Title, unless the court orders otherwise. 28 U.S.C. § 2004 (emphasis added). 28 U.S.C. § 2001(b) (“Section 2001(b)”) addresses private sales and provides as follows: (b) After a hearing, of which notice to all interested parties shall be given by publication or otherwise as the court directs, the court may order the sale of such realty or interest or any part thereof at private sale for cash or other consideration and upon such terms and conditions as the court approves, if it finds that the best interests of the estate will be conserved thereby. Before confirmation of any private sale, the court shall appoint three disinterested persons to appraise such property or different groups of three appraisers each to appraise properties of different classes or situated in different localities. No private sale shall be confirmed at a price less than two-thirds of the appraised value. Before confirmation of any private sale, the terms thereof shall be published in such newspaper or newspapers of general circulation as the court directs at least ten days before confirmation. The private sale shall not be confirmed if a bona fide offer is made, under conditions prescribed by the court, which guarantees at least a 10 per centum increase over the price offered in the private sale. 28 U.S.C. § 2001(b). Thus, “unless the Court orders otherwise” pursuant to Section 2004, Section 2001(b) requires a court to appoint three disinterested persons as appraisers and to direct in which newspaper a notice of proposed sale be published prior to confirmation of a sale. Here, using 6 the discretion afforded by Section 2004, the Court should “order otherwise” with regard to (i) the need for three appraisals and (ii) the publication in newspapers of notice of any sale. The Court’s authority to deviate from the requirements of Section 2004 is supported by caselaw and is in the best interests of the Receivership Estate. The Receiver believes he is in a position to adequately evaluate the value of the Trailer, and that full compliance with Section 2004 and Section 2001(b) would result in the unwarranted expenditure of funds and resources of the Receivership Estate. Indeed, compliance with the statutory requirements would likely entirely offset the expected net sale proceeds. Thus, the Receiver requests that the Court authorize deviation from the statutory appraisal and notice provisions associated with the proposed sale of the Trailer, which the Court has previously authorized under similar circumstances during this Receivership. See, e.g., Docs. 1043, 1044, 1075, 1110, 1151, 1177, 1301, 1356, 1370. Other courts have also recognized the discretion afforded to them by Section 2004 in approving a deviation from the requirements of Section 2001. See, e.g., Tanzer United States v. Stonehill, 83 F.3d 1156, 1160 (9th Cir. 1996) (emphasizing statutory language, “unless the court orders otherwise,” and concluding that “it is at the district court’s discretion whether to obtain appraisals [in sales of] personal property”); see also SEC v. Kirkland, 2008 WL 4264532, *2 (M.D. Fla. 2008) (approving sale of personalty without appraisals or publication where costs of compliance would significantly offset the purchase offer); United States v. Kerner, 2003 WL 22905202, *2 (E.D. Mich. 2003) (“Under…28 U.S.C. § 2004, which states that the requirements of section 2001 must be followed ‘unless the court orders otherwise,’ the 7 Court clearly has the discretionary authority to confirm the private sale [made without strict adherence to the requirements in Section 2001].”). Further, courts have specifically exercised their authority to deviate from the requirements of Section 2001 when faced with the proposed sale of personal property by a receiver under Section 2004. See Wells Fargo Capital Finance, Inc. v. North Pacific Group, No. CV10-65-KI, Order on Receiver’s Motion for Order Authorizing Sale of Accounts Receivable (D. Ore. Jan. 24, 2012) (excusing receiver from “compliance with 28 U.S.C. § 2004 concerning sales of personal property through federal court proceedings”); SEC v. Billion Coupons, Inc., 2009 WL 2143531, *4 (D. Hawaii 2009) (finding good cause to exercise discretion and permit receiver to sell personal and real property in manner other than as provided by federal statute, including 28 U.S.C. §§ 2001, 2004); Federal Trade Commission v. Jeremy Johnson et. al., No. 2:10-cv-02203-RLH-GWF, Order (D. Nev. August 25, 2011) (allowing receiver to liquidate private limited liability membership interest and authorizing deviation from sale and publication procedures of 28 U.S.C. §§ 2001 and 2004); SEC v. Lydia Capital, LLC, et al., No. 1:07-cv-10712-RGS, Order Granting Receiver’s Motion for Authorization to Sell Asset of the Receivership Estate (D. Mass. March 16, 2011) (“Given the Receiver’s efforts in marketing the portfolio of policies, including the Sale Policy, the thirdparty offers the Receiver obtained from disinterested bidders in the marketplace, and the notices provided to all interested parties, neither an independent appraisal or publication is necessary under 28 U.S.C. §§ 2001 and 2004”) (emphasis added). Copies of these orders are attached hereto as Exhibit 2. 8 III. THERE EXIST NO OTHER KNOWN CLAIMS OR INTERESTS IN THE TRAILER Deviation from the requirements of Section 2001(b) is not only warranted by the circumstances, but also by the absence of any known outstanding claims, liens, or encumbrances relating to the Trailer. While the Receiver is not aware of any other claims, liens, or encumbrances relating to the Trailer, nevertheless to eliminate any risk whatsoever, the Receiver seeks an order allowing him to transfer the Trailer free and clear of any and all liens, encumbrances, and claims. This Court’s broad authority over the Receivership Estate includes the equitable power to “sell property free of liens, transferring the liens to the proceeds.” Seaboard Nat’l Bank v. Rogers Milk Products Co., 21 F.2d 414, 416 (2d Cir. 1927); see also Quilling v. Trade Partners, Inc., 2007 WL 296211 (W.D. Mich. 2007) (approving receiver’s sale of property free and clear of all liens and en cumbrances and ordering that any liens or claims associated with the property would attach to the proceeds of the sale); Docs. 1043, 1044, 1075, 1110, 1151, 1177, 1301, 1356, 1370. CONCLUSION WHEREFORE, the Receiver moves the Court for entry of an order in substantially the form of the proposed order attached as Exhibit 1, approving the sale of the Trailer and, to the extent 28 U.S.C. §§ 2001 and 2004 govern the sale of the Trailer, waiving any appraisal and publication requirements and allowing the Receiver to transfer the Trailer free and clear of any and all claims, liens, and encumbrances. CERTIFICATE UNDER LOCAL RULE 3.01(g) Undersigned counsel has conferred with counsel for the SEC and is authorized to represent to the Court that this motion is unopposed. 9 VERIFICATION OF RECEIVER I, Burton W. Wiand, Court-appointed Receiver in the above-styled matter, hereby certify that the information contained in this motion is true and correct to the best of my knowledge and belief. s/Burton W. Wiand Burton W. Wiand, Court-Appointed Receiver CERTIFICATE OF SERVICE I HEREBY CERTIFY that on December 7, 2018, I electronically filed the foregoing with the Clerk of the Court by using the CM/ECF system. s/Jared J. Perez Jared J. Perez, FBN 0085192 Jordan D. Maglich, FBN 0086106 WIAND GUERRA KING P.A. 5505 W. Gray Street Tampa, FL 33609 Tel: 813-347-5100 Fax: 813-347-5199 Attorneys for the Receiver, Burton W. Wiand 10

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