Wright v. Wellmon et al

Filing 7

ORDER granting 3 Motion for Preliminary Injunction. Signed by Senior Judge Graham Mullen on 6/16/2017. (eef)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
Case No. 3:17-CV-292
A. COTTEN WRIGHT, in her capacity as the
court-appointed Receiver for DCG Real Assets,
LLC, DCG Commercial Fund I, LLC, H20, LLC,
DCG PMG, LLC, DCG PMF, LLC, Finely
Limited, LLC, DCG Funds Underwriting, LLC,
DCG ABF Management, LLC, DCG Funds
Management, LLC, Davis Capital Group, Inc.,
Davis Financial, Inc., DCG Partners, LLC, DCG
Real Estate Development, LLC, Huntersville
Plaza Phase One, LLC, Huntersville Plaza Phase
Two, LLC, North Lake Business Park, LLC, and
Richard Davis Enterprises, LLC,

ORDER GRANTING PRELIMINARY
INJUNCTION

Plaintiff,
v.
JAMES D. WELLMON, DAVID C. COLVIN,
JR., KAREN COLVIN, CHRISTOPHER J.
TAYLOR, BARRY E. TAYLOR and CT
EXPLORATION, LLC,
Defendants.
THIS MATTER came on for hearing on June 16, 2017 on the Court’s Order (Doc. No. 5)
entered June 5, 2017 on Plaintiff’s Motion for Temporary Restraining Order and Preliminary
Injunction (Doc. No. 3) filed on June 2, 2017 by A. Cotten Wright, as the court-appointed receiver
for DCG Real Assets, LLC; DCG Commercial Fund I, LLC; H20, LLC; DCG PMG, LLC; DCG
PMF, LLC; Finely Limited, LLC; DCG Funds Underwriting, LLC; DCG ABF Management, LLC;
DCG Funds Management, LLC; Davis Capital Group, Inc.; Davis Financial, Inc.; DCG Partners,
LLC; DCG Real Estate Development, LLC; Huntersville Plaza Phase One, LLC; Huntersville
Plaza Phase Two, LLC; North Lake Business Park, LLC; and Richard Davis Enterprises, LLC
(each a “Receivership Entity,” and, collectively, the “Receivership Entities”) and the plaintiff
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herein (the “Plaintiff” or “Receiver”), through counsel (the “Motion”). The Plaintiff was present
at the hearing, appearing in her capacity as attorney for the Receiver.
The Order granted the Motion and enjoined the above-captioned defendants (the
“Defendants”), Defendants’ agents, servants, employees, family members, friends, and any and all
persons acting in aid of or conjunction with Defendants, from moving, using, transferring,
encumbering, distributing, dissipating, or otherwise disposing of certain gold mining and related
equipment in Pershing County, Nevada owned by certain of the Receivership Entities at the time
the Receivership Order was entered in the SEC Action (the “Remaining Equipment”). The Order
further provided that, in determining whether to enter a preliminary injunction, the Court would
consider whether the Defendants should surrender possession of the Remaining Equipment
pending a final resolution of this action. The Court, having reviewed the Motion and Order, having
considered the arguments of counsel, and having reviewed the record in this case, finds and
concludes as follows:
1.

This action is ancillary to the U.S. Securities and Exchange Commission’s civil

enforcement action current pending before the Court as case number 3:16-CV-285 (the “SEC
Action”), in which Plaintiff serves as the duly-appointed Receiver for the Receivership Entities.
2.

The Court has entered various orders in the SEC Action appointing Plaintiff as

Receiver for the assets of the Receivership Entities (collectively, the “Receivership Order”).
3.

The verified Complaint initiating the above-captioned action and the Memorandum

of Law, exhibits, and affidavits submitted in support of the Motion indicate that:
(a) Plaintiff’s agents have been trying to locate, and recover possession of, the
Remaining Equipment since the Fall of 2016;
(b) Since entry of the Receivership Order, the Remaining Equipment has been
moving around a rural and remote area of Pershing County, Nevada;

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(c) Plaintiff’s agents located all or nearly all of the Remaining Equipment in
November of 2016 upon land known as the “Willow Creek Mine”;
(d) Plaintiff’s agents traveled to the Willow Creek Mine on May 11, 2017 to
recover the Remaining Equipment, but were met by Defendants Christopher J.
Taylor and David C. Colvin, Jr., who refused to forfeit possession of the
Remaining Equipment;
(e) Defendants have contended to Plaintiff’s counsel that they obtained valid and
enforceable rights to the Remaining Equipment through a repossession or
foreclosure of a security interest;
(f) Plaintiff’s counsel has not been provided with and has been unable to locate a
UCC-1 financing statement or other document perfecting a security interest in
the Remaining Equipment;
(g) The Remaining Equipment includes: (i) a sluicing machine and other
components of a gold mining plant purchased from Goldfield International Inc.;
(ii) a FiatAllis 20-B Bulldozer purchased from Piper-Valenti a/k/a Valenti
Equipment having the serial number 20BC1T007906 or 0070906; (iii) a 2000
New Holland 655E Back Hoe purchased from AG-CON Equipment Company
having the serial number 031018792; (iv) a Caterpillar 100KW mounted
generator; (v) a Big Tex equipment trailer having the vehicle identification
number 16VHX202552771386; (vi) a second equipment trailer having the
vehicle
identification
number
4YMUL0816BN011898
or
5PKUEHZ225W050602; and (vii) a Ford dump truck.
4.

In considering motions for preliminary injunctions pursuant to FED. R. CIV. P. 65,

courts in the Fourth Circuit consider application of the following factors: (1) a likelihood of
success on the merits; (2) that plaintiff is likely to suffer irreparable harm without the issuance of
a preliminary injunction; (3) that the balance of the equities are in plaintiff’s favor; and (4) that the
injunction is in the public interest. West Virginia Association of Club Owners and Fraternal
Services, Inc. v. Musgrave, 553 F.3d 292, 298 (4th Cir. 2009) (citing Winter v. Natural Resource
Defense Council, Inc., 555 U.S. 7, 20 (2008)).
5.

As for the likelihood of success on the merits, the Court has reviewed the document

entitled “Secured Income Note” attached as Exhibit A to both the Complaint and the Memorandum
of Law and determined that that agreement is insufficient to establish a security interest in the

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Remaining Equipment.

Further, given Defendants’ failure to provide—and the failure of

Plaintiff’s counsel to independently locate—any documentation evidencing a perfected security
interest encumbering the Remaining Equipment, there is a strong likelihood that the facts will
ultimately support Plaintiff’s conclusions that:

(a) any security interest encumbering the

Remaining Equipment is subordinate to Plaintiff’s rights as an equity receiver; (b) Defendants
must turn over possession of the Remaining Equipment to Plaintiff; and (c) Defendants’ exercise
of dominion and control over the Remaining Equipment without the consent of Plaintiff, or
advance Court approval, violates the Receivership Order.
6.

Plaintiff and the other investor-creditors of the Receivership Entities would be

irreparably injured by Plaintiff continuing to expend a limited set of resources of the receivership
estate in chasing after the Remaining Equipment, which assets Defendants should have disclosed
and turned over to Plaintiff upon Defendants’ notice of the Receivership Order.
7.

Based on Plaintiff’s allegations and supporting documentation currently available

to the Court, a balancing of the equities lies in Plaintiff’s favor under these circumstances because
even in the event Defendants are ultimately successful on the merits, Plaintiff, as a receiver
appointed by this Court, will remit the Remaining Equipment or the value thereof to Defendants
without hesitation and with very little injury to Defendants, if any.
8.

The entry of the injunction sought by Plaintiff would reinforce the policies

underlying the Court’s prior entry of the Receivership Order: (a) avoiding races to the courthouse
to collect against the insolvent Receivership Entities; and (b) treating similarly-situated
constituencies of the insolvent Receivership Entities equally and equitably pursuant to a
comprehensive claim and distribution scheme. Accordingly, the public interest would be served
by the entry of a temporary restraining order.

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IT IS, THEREFORE, ORDERED that:
(a)

the Motion is GRANTED;

(b)

Defendants and Defendants’ agents, servants, employees, family members, friends,

and any and all persons acting in aid of or conjunction with Defendants are hereby enjoined
from moving, using, transferring, encumbering, distributing, dissipating, or otherwise
disposing of the Remaining Equipment without the express consent of Plaintiff;
(c)

Defendants and Defendants’ agents, servants, employees, family members, friends,

and any and all persons acting in aid of or conjunction with Defendants are hereby directed
to immediately surrender possession of the Remaining Equipment to Plaintiff; and
(d)

Copies of this Order shall be served on Defendants and Defendants’ counsel at the

addresses, including any email addresses, reasonably available to Plaintiff.
SO ORDERED.

Signed: June 16, 2017

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