Case 5:15-cv VAP-KK Document 85 Filed 01/22/16 Page 1 of 32 Page ID #:2478

Transcription

1 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 KATHY BAZOIAN PHELPS (State Bar No. ) kphelps@diamondmccarthy.com DIAMOND MCCARTHY LLP Avenue of the Stars, Suite 00 Los Angeles, California 00-0 Telephone: (0) - Counsel for Robert P. Mosier, Permanent Receiver SECURITIES AND EXCHANGE COMMISSION, UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Plaintiff, PAUL MATA, DAVID KAYATTA, MARIO PINCHEIRA, SECURED CAPITAL INVESTMENTS, LLC, LOGOS REAL ESTATE HOLDINGS, LLC, LOGOS WEALTH ADVISORS, LLC (dba LOGOS LIFETIME UNIVERSITY), Defendants. EASTERN DIVISION-RIVERSIDE Case No. CV-0 VAP (KKx) MOTION OF RECEIVER FOR ORDER AUTHORIZING: () SALE OF REAL AND PERSONAL PROPERTY BY PUBLIC AUCTION FREE AND CLEAR OF LIENS, CLAIMS, AND ENCUMBRANCES; OR () IN THE ALTERNATIVE, ABANDONMENT OF OVER- ENCUMBERED ASSETS MEMORANDUM OF POINTS AND AUTHORITIES [Notice, Declaration of Robert P. Mosier and Proposed Order Filed Concurrently Herewith] Date: February, 0 Time: :00 p.m. Dept.: Place: United States District Court Eastern District 0 Twelfth Street Courtroom No. Riverside, CA 0-0

2 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 TABLE OF CONTENTS I. SUMMARY OF RELIEF REQUESTED... A. Authority to Sell Real Properties and Personal Property Free and Clear of Liens, With Liens to Attach to Proceeds Held by Receiver in Segregated Accounts, and Approval of Sales Procedures... B. In the Alternative, Authority to Abandon Over-Encumbered Properties... II. STATEMENT OF FACTS... III. ENTRY OF ORDER AUTHORIZING THE RECEIVER TO SELL FREE AND CLEAR WITH LIENS TO ATTACH TO PROCEEDS IS APPROPRIATE FOR DISPUTED LIENS... A. Approval of Sales Free and Clear is Appropriate in Receivership... B. A Sale Free and Clear of Disputed Liens is Appropriate... () applicable non-bankruptcy law permits sale of such property free and clear of such interest;... () such entity consents;... () such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;... () such interest is in bona fide dispute; or... () such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.... C. Proposed Auction Procedures and Preappoval of Sales... IV. ALTERNATIVELY, THE RECEIVER REQUESTS AUTHORITY TO ABANDON OVER-ENCUMBERED PROPERTIES IN HIS DISCRETION... V. CONCLUSION... -i- TABLE OF CONTENTS

3 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #:0 0 0 CASES TABLE OF AUTHORITIES Helvey v. U.S. Bldg. & Loan Ass n, P.d, (Cal. Dist. Ct. App. )... In re Elliot, B.R., (Bankr. D.Pa. )... S.E.C. v. Hardy, 0 F.d 0, 0 (th Cir. )... Secs. & Exch. Comm n v. Capital Consultants, LLC, F.d, (th Cir. 00)... Secs. & Exch. Comm n v. Madison Real Estate Grp., F. Supp. d, (D. Utah 00)... Secs. & Exch. Comm n v. Wencke, F.d, 0 (th Cir. 0)... STATUTES U.S.C U.S.C RULES Bankruptcy Code Section (f)... Bankruptcy Code Section (b)()... OTHER AUTHORITIES Secs. & Exch. Comm n v. Billion Coupons, Inc., Nos JMS-LEK, JMS-LEG, 00 WL, at * (D. Haw. July, 00)... S.REP.NO., th Cong., d Sess. ().... Quilling v. Trade Partners, Inc., No. :0-CV-0, 0 WL 0, at * (W.D. Mich. Sept. 0, 0). Secs. & Exch. Comm n v. Secure Inv. Servs., Inc., No. :0-cv--GEB-CMK, 00 WL, at * (E.D. Calif. July, 00)... Secure Inv. Servs., 00 WL, at *... ii TABLE OF AUTHORITIES

4 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 Robert P. Mosier, the Court-appointed permanent receiver (the Receiver ), hereby files his Motion for Order Authorizing () Sale of Real and Personal Property By Public Auction Free and Clean of Liens, Claims, and Encumbrances; () In the Alternative, Abandonment of Over-Encumbered Assets (the Motion ). MEMORANDUM OF POINTS AND AUTHORITIES I. SUMMARY OF RELIEF REQUESTED The Receiver brings this Motion to approve the sale or, in the alternative, abandonment of real and personal property owned by the receivership estate. Many of the real properties are in poor physical condition and some are potentially overencumbered by liens. Similarly, the personal property consists primarily of used restaurant equipment for which the estate has no further need and must pay to relocate and store if not sold. For these reasons and the reasons set forth herein, the Receiver requests authority to either sell or abandon the estate s real properties and personal property. The Receiver is actively investigating the value of the real and personal property and the amount of the liens against each. Because the numbers are still in flux, the Receiver presently is unable to conclude whether sale or abandonment of each particular asset is appropriate. If he is able to obtain a sales price sufficient to pay the known liens, then a sale will generate value for the estate. If a sales price is insufficient to satisfy all encumbrances, the asset will have no value to the estate and, therefore, the Receiver would seek to abandon the asset. The Receiver has structured the procedures in this Motion to allow for the sale of the real and personal property by public auction to the extent he is able to generate a sufficient sales price to cover any allowed lien claims. However, in the event the sales price generated at auction is insufficient for a particular asset, then he seeks approval to abandon such asset.

5 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 In summary, the Receiver requests: A. Authority to Sell Real Properties and Personal Property Free and Clear of Liens, With Liens to Attach to Proceeds Held by Receiver in Segregated Accounts, and Approval of Sales Procedures Pursuant to the Preliminary Order entered on October, 0 (the Receivership Order ), the Receiver is charged with administering and managing the business affairs and assets of Secured Capital Investments, LLC, Logos Real Estate Holdings, LLC, Logos Wealth Advisors, LLC and the other defendants and their subsidiaries and affiliates including, among others, Superior Park RCF, LLC and Justina Court, LLC (collectively, Receivership Entities ), including numerous parcels of real property the management of which would require significant cash flow, which does not exist. The receivership estate also holds the personal property assets of World Gardens Café in Rancho Cucamonga, a restaurant no longer in operation. Accordingly, in light of the goal of generating funds to be distributed to unsecured creditors and investors, the Receiver seeks permission to sell these real properties and restaurant assets at public auction, free and clear of all liens, claims, and encumbrances. The Receiver proposes to hold the proceeds of all sales in segregated accounts, by property, subject to all existing liens, claims, and encumbrances to the extent they are disputed, and to pay any undisputed amounts at the time of closing of the sales. The Receiver likewise brings this Motion to establish the procedures governing such sales and to obtain orders from the Court authorizing the sales by public auction, without further order of the Court. The following entities are all known Receivership Entities: Secured Capital Investments, LLC; Logos Real Estate Holdings, LLC; Logos Wealth Advisors, Inc.; Lifetime Enterprises, LLC (dba Logos Lifetime University); Indestructible Peak Management, Inc.; Renaissance Management, LLC; Fairway View Place, LLC; Logos Management Group, LLC; Logos Insurance Group, Inc.; World Gardens Café, LLC; Chef Ravi Recipes, LLC; Destiny With a Purpose, LLC; Superior Park RCF, LLC and Justina Court, LLC.

6 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 B. In the Alternative, Authority to Abandon Over-Encumbered Properties The Receiver s investigation into the Receivership Entities has revealed that many of the estate s properties are encumbered by liens. To the extent an asset is over-encumbered, the Receiver believes unsecured creditors will not benefit from the sale thereof because the proceeds will be insufficient to satisfy all outstanding liens. Further, the Receiver s expenditure of funds to facilitate the sale of these over-encumbered properties and assets will serve only to dilute the funds that ultimately will be available for distribution to investors and unsecured creditors. Accordingly, in the alternative to a sale, if the sales price generated at auction is not sufficient to pay the existing liens at that time, the Receiver seeks approval to abandon such over-encumbered real or personal property to the secured creditors so that they may exercise the remedies available pursuant to their security agreements. The Receiver has advised the SEC, through its counsel, Lynn M. Dean, of his intention to file this Motion, and the Receiver has advised the Defendants of his intention to file this Motion. The SEC and the Defendants have advised that they do not have any opposition. II. STATEMENT OF FACTS. Robert P. Mosier was appointed as the Receiver of Defendants and their affiliates and subsidiaries pursuant to this Court s October, 0, Preliminary Injunction [Docket No. 0].. The Receiver believes that the following companies are all affiliates of the Defendants and subject to this receivership: Indestructible Peak Management, Inc., Renaissance Management, LLC, Fairway View Place, LLC, Logos Management Group, LLC,

7 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 Logos Insurance Group, Inc., World Gardens Café, LLC, Chef Ravi Recipes, LLC, Destiny With a Purpose, LLC, Superior Park RCF, LLC, and Justina Court, LLC. See Declaration of Robert P. Mosier (the Mosier Declaration ) at.. The Receiver notes that Justina Court, LLC and Superior Park RCF, LLC were not specifically listed as named entities subject to the Receivership Order; however, each entity s bank accounts were included in Receivership Order section VIII (pp. -) and the Defendants own and control both entities making them subsidiaries and affiliates of the Defendants under Receivership Order Section XI (pp. -). See Mosier Decl. at. As a result, the Receivership Order expressly authorizes the Receiver s administration of Justina Court, LLC s and Superior Park RCF, LLC s assets. The Receiver seeks specific orders authorizing the Receiver to sell the properties held by Justina Court, LLC and Superior Park RCF, LLC as detailed below.. In his role as Permanent Receiver, the Receiver has diligently executed his duties, including managing the Receivership Entities properties and assets, with the aim of maximizing returns to the estate and Receivership Entities creditors and investors. See Mosier Decl. at. He continues the process of evaluating the Receivership Entities assets and liabilities to realize value for the estate.. The Receiver has identified real properties owned by the Receivership Entities. Many of the properties are subject to deeds of trust, tax liens and other encumbrances. If the Receiver were to retain the properties, provide maintenance, debt service, and make improvements, this would require a significant expenditure of capital that does not exist in the case. See Mosier Declaration at.

8 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0. The preliminary title reports for many of the Receivership Entities real properties also reflect recorded deeds of trust and other encumbrances that the Receiver s investigation has determined were previously satisfied or are otherwise no longer valid. The Receiver is working with title companies to clear these improper liens; however, at the time of this Motion not all of the liens have been released. The Receiver describes all of the known encumbrances on each property below and details those liens the Receiver concludes are no longer valid and should be released or otherwise challenged. See Mosier Declaration at.. The Receiver has also identified personal property owned by World Gardens Café restaurant in Rancho Cucamonga, California, including freezers, kitchen equipment and intellectual property. The restaurant is not operating and the personal property assets are generating no value to the estate. Further, the restaurant assets will lose value overtime and are subject to asserted liens for unpaid property taxes. See Mosier Declaration at.. For these reasons, the Receiver seeks permission to sell the estate s real and personal property pursuant to a Court-authorized auction procedure with the goal of generating funds that can ultimately be distributed to the Receivership Entities investors and creditors. The Receiver likewise seeks pre-approval of such sales by public auction without further order of the Court, provided that the price generated at the time of auction is sufficient to pay the liens then existing.. In the alternative, and in the event the price generated is insufficient, the Receiver seeks Court approval to abandon any assets for which a sale will not benefit unsecured creditors. For example, if the proceeds of an asset are unlikely to satisfy all outstanding liens, and unsecured creditors essentially will bear the cost of a sale that provides them no benefit. See Mosier Declaration at. Such a result would be inequitable; thus, in that instance, abandonment is in the best interest of the receivership estate and creditors.

9 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: The Receiver proposes to accomplish the abandonment of a given property by the filing of a Notice of Abandonment relative to a particular asset and by serving notice of such Notice of Abandonment on the secured lienholders against that property, if and when the Receiver determines that a sale is not feasible and abandonment is appropriate.. According to the Receiver s investigation thus far, the real properties and the known liens against the properties subject to this Motion are described as follows with an explanation for those liens the Receiver has determined are no longer valid: 0 N. Tuttle Ave., Tucson, AZ unit self-storage warehouse property consisting of ten buildings. Property held in name of: Secured Capital Investments, LLC Liens reflected on preliminary title report for 0 N Tuttle Ave, a copy of which is attached as Exhibit to the Mosier Declaration: () Deed of Trust to Jose Gloria Gutierrez securing loan in the original principal amount of $,000 for which BJN, Inc. was the original borrower (recorded November, 00, in the official records of Pima County, Arizona as Docket, Page 00). An Assumption Agreement and Modification of Note recorded as Docket 0, Page, provides that the obligation secured by the Deed of Trust was assumed by Secured Capital Investments LLC. The balance on this obligation was approximately $,0. as of November, 0. The Receiver is not aware of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds. () Deed of Trust to BJN Inc. securing an original indebtedness in the amount of $,.0 (recorded September, 00 in the

10 Case :-cv-0-vap-kk Document Filed 0// Page 0 of Page ID #: 0 0 official records of Pima County, Arizona as Docket 0, Page ). The balance on this obligation was approximately $,0. as of November, 0. The Receiver is not aware of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds. N. Tuttle, Ave., Tucson, AZ 0-0 Miniature self-storage warehouse consisting of three buildings. Property held in name of: Secured Capital Investments, LLC Liens reflected on preliminary title report for N Tuttle Ave, a copy of which is attached as Exhibit to the Mosier Declaration: residence. () Deed of Trust and Assignment of Rents to 00 Mitchel Family, L.L.C., LLB Enterprises, L.L.C., and Overson Enterprises, L.L.C., securing promissory note in the original principal amount of $,.0 (recorded September, 00 in the official records of Pima County, Arizona at Docket No. 0, pg. ). The balance on this obligation was approximately $,0. as of November, 0. The Receiver is not aware of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds. Center St., Owensboro, KY 0- Single-family townhome Property held in the name of: Secured Capital Investments, LLC The preliminary title report for Center St., a copy of which is attached as Exhibit to the Mosier Declaration reflects no current liens.

11 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: Industrial Dr., Richland, MS -0 Miniature self-storage warehouse consisting of five buildings and two parcels of vacant land. Property held in name of: Secured Capital Investments, LLC Liens reflected on three preliminary title reports for 00 Industrial Dr., one for each of the three referenced parcels of land, copies of which is attached as Exhibit to the Mosier Declaration: () Deed of Trust, Security Agreement, Fixture Filing, and Assignment of Rents in favor of CTC Investors, LLC securing an obligation in the original principal amount of $0, (recorded July, 00 in Book 00, Page 0) which is subject to the Collateral Assignment of Liens and Documents to Sterling Savings Bank (recorded in Book 00, Page ). The Receiver s investigation reveals that the obligations secured by this lien have been fully satisfied and that this lien should be released. The Receiver is working to obtain the release of this lien prior to closing on the sale of this property. If the Receiver is unable to obtain a release of this lien prior to closing on the sale, the Receiver requests authority through this Motion to close the sale of this property free and clear of this lien and to hold the sale proceeds pending resolution of the lien. () Deed of Trust, Security Agreement, Fixture Filing, and Assignment of Rents in favor of Family Property Solutions, LLC securing obligations in the original principal amount of $0, (recorded July, 00 in Book 00, Page 0). The Receiver s investigation reveals that the obligations secured by this lien have been fully satisfied and that this lien should be released. The Receiver is working to obtain the release of this lien prior to closing on the sale of this property. If the Receiver is unable to

12 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 obtain a release of this lien prior to closing on the sale, the Receiver requests authority through this Motion to close the sale of this property free and clear of this lien and to hold the sale proceeds pending resolution of the lien. () Deed of Trust from Hi Security, Inc., in favor of OmniBank securing an obligation in the original principal amount of $,. (recorded December, in Book, Page ). The Receiver s investigation reveals that the obligations secured by this lien have been fully satisfied and that this lien should be released. The Receiver is working to obtain the release of this lien prior to closing on the sale of this property. If the Receiver is unable to obtain a release of this lien prior to closing on the sale, the Receiver requests authority through this Motion to close the sale of this property free and clear of this lien and to hold the sale proceeds pending resolution of the lien. () Amended and Restated Deed of Trust and Assignment of Rents from Hi Security, Inc., in favor of Wachovia Bank, National Association securing an obligation in the original principal amount of $,. (recorded January, 00 in Book 00, Page ). The Receiver s investigation reveals that the obligations secured by this lien have been fully satisfied and that this lien should be released. The Receiver is working to obtain the release of this lien prior to closing on the sale of this property. If the Receiver is unable to obtain a release of this lien prior to closing on the sale, the Receiver requests authority through this Motion to close the sale of this property free and clear of this lien and to hold the sale proceeds pending resolution of the lien. () Assignment of Rents and Leases from Hi Security U Store, Ltd., 0

13 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #:0 0 0 Inc. to Hi-Security Inc. (recorded March,, in Book, Page ). The Receiver s investigation reveals that the obligations secured by this lien have been fully satisfied and that this lien should be released. The Receiver is working to obtain the release of this lien prior to closing on the sale of this property. If the Receiver is unable to obtain a release of this lien prior to closing on the sale, the Receiver requests authority through this Motion to close the sale of this property free and clear of this lien and to hold the sale proceeds pending resolution of the lien. () Tax liens for 0 and 0 taxes to the Chancery Clerk of Rankin County. 0 Superior St., Excelsior Springs, MO 0 Four-unit residential apartment building. Property held in name of: Secured Capital Investments, LLC The preliminary title report for 0 Superior St., a copy of which is attached as Exhibit to the Mosier Declaration reflects no current liens. care facility. 0 Superior St., Excelsior Springs, MO 0 Sixty-two bed nursing Property held in name of: Superior Park RCF, LLC Liens reflected on preliminary title report for 0 Superior St., a copy of which is attached as Exhibit to the Mosier Declaration: () Tax lien for general, state, county and city taxes and assessments for the year 0 in the amount of $,., plus penalties and interest. The Receiver is not aware of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds.

14 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 Park St., Excelsior Springs, MO 0 Vacant land parcel. Property held in name of: Superior Park RCF, LLC Liens reflected on preliminary title report for Park St., a copy of which is attached as Exhibit to the Mosier Declaration: () Tax lien for general, state, county and city taxes and assessments for the year 0 in the amount of $0., plus penalties and interest. The Receiver is not aware of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds. Justina Court, Jacksonville, FL Residential apartment building with twenty units. Property held in name of: Justina Court, LLC Liens reflected on preliminary title report for Justin Court, a copy of which is attached as Exhibit to the Mosier Declaration: () Mortgage, Security Agreement and Fixture Filing to Ryzman Family Partnership securing promissory note in the original principal amount of $0, dated June, 0 (recorded June, 0 in the official records of Duval County, Florida as document number 0 in Book 0, Page ). The Receiver is not aware of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds. () Assignment of Rents, Leases and Contracts to Ryzman Family Partnership securing promissory note in the original principal amount of $0, dated June, 0 (recorded June, 0 in the official records of Duval County, Florida as document number 0 in Book 0, Page ). The Receiver is not aware

15 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 building. of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds. () UCC- Financing Statement Fixture Filing to Ryzman Family Partnership (recorded June, 0 in the official records of Duval County, Florida as document number 0 in Book 0, Page ). The Receiver is not aware of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds. () Cross-Collateralization and Cross-Default Agreement to Ryzman Family Partnership securing (i) promissory note in the original principal amount of $0, dated June, 0; and (ii) promissory note in the original principal amount of $00, dated June, 0 (recorded June, 0 in the official records of Duval County, Florida as document number 0 in Book 0, Page ). The Receiver is not aware of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds. -0 West th St., Jacksonville, FL 0 Residential apartment Property held in name of: Fairway View Place, LLC Liens reflected on preliminary title report for -0 West th St., a copy of which is attached as Exhibit to the Mosier Declaration: () Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents by and between Alfred H. Wolf, Jr. and Shirley K. Wolf (Mortgagors) and Warburg Dillon Read Swaps,

16 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 Inc., (Mortgagee) securing $,00, loan dated August, as assigned to LaSalle Bank, N.A., as trustee for the registered holders of LB-UBS Commercial Mortgage Trust 000-C Commercial Mortgage Pass-Trough Certificates, Series 000-C (recorded August,, in the official records of Duval County, Florida as document number in Book, Page, as assigned in Book, Page 0; Book 0, Page and Book, Page ). The Receiver s investigation reveals that the obligations secured by this lien have been fully satisfied and that this lien should be released. The Receiver is working to obtain the release of this lien prior to closing on the sale of this property. If the Receiver is unable to obtain a release of this lien prior to closing on the sale, the Receiver requests authority through this Motion to close the sale of this property free and clear of this lien and to hold the sale proceeds pending resolution of the lien. () Mortgage, Security Agreement and Fixture Filing to Ryzman Family Partnership securing promissory note in the original principal amount of $00, dated June, 0 (recorded June, 0 in the official records of Duval County, Florida as document number 0 in Book 0, Page 0). The Receiver is not aware of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds. () Assignment of Rents, Leases and Contracts to Ryzman Family Partnership securing promissory note in the original principal amount of $00, dated June, 0 (recorded June, 0 in the official records of Duval County, Florida at document number 0 in Book 0, Page ). The Receiver is not aware

17 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds. () Cross-Collateralization and Cross-Default Agreement to Ryzman Family Partnership securing (i) promissory note in the original principal amount of $0, dated June, 0; and (ii) promissory note in the original principal amount of $00, dated June, 0 (recorded June, 0 in the official records of Duval County, Florida as document number 0 in Book 0, Page ). The Receiver is not aware of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds. () UCC- Financing Statement Fixture Filing to Ryzman Family Partnership (recorded June, 0 in the official records of Duval County, Florida in Book 0, Page ). The Receiver is not aware of any dispute as to this lien and seeks permission through this Motion to pay the obligations secured by this lien through escrow at the closing on the sale of this property from the sales proceeds. 0 Clark ST, Paducah, KY 00 Single-family residence. Property held in the name of: Secured Capital Investments, LLC The preliminary title report for 0 Clark St., a copy of which is attached as Exhibit 0 to the Mosier Declaration reflects no current liens.. The foregoing receivership estate properties (collectively, the Sale Properties ) are those that the Receiver seeks permission to sell through auction or, in the alternative, abandon by this Motion.. In addition, the Receiver proposes to sell the personal property of

18 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 World Gardens Café in Rancho Cucamonga, California, consisting of the following assets (collectively, the WGC Assets ): One three-door commercial freezer One two-door commercial refrigerator One single-door freezer One Hobart mixer One professional steamer Three vacuum packers One 00 Ford Van Miscellaneous small kitchen tools Intellectual property (business name, web site, recipes, trademarks and customer list) Mobile application software rights. The Receiver has conducted a UCC- search which revealed the following liens filed against the WGC Assets: () Notice of State Tax Lien filed by the State of California Employment Development Department in the amount of $,. for the August 0 through December 0 tax periods (filed August, 0, as document number -). () Notice of State Tax Lien filed by the State of California Employment Development Department in the amount of $,. for the 0 tax period (filed August, 0, as document number - 0).. The Receiver seeks permission to sell the WGC Assets through auction and pay the above tax liens from the proceeds or, in the alternative, if the proceeds are insufficient to pay the tax liens and provide a recovery to the estate, then abandon the WGC Assets by the procedures outlined in this Motion.

19 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 III. ENTRY OF ORDER AUTHORIZING THE RECEIVER TO SELL FREE AND CLEAR WITH LIENS TO ATTACH TO PROCEEDS IS APPROPRIATE FOR DISPUTED LIENS A. Approval of Sales Free and Clear is Appropriate in Receivership By this Motion, the Receiver proposes to sell the Sale Properties and the WGC Assets, set forth above, for the highest and best price at public auction in accordance with U.S.C. 00 and the procedures described herein. Because uncertainty exists as to the validity of certain of the liens on the Sale Properties, as detailed above, the Receiver seeks permission to auction the Sale Properties and WGC Assets free and clear of the disputed liens, claims, and encumbrances, but to hold all sale proceeds in segregated accounts, with all interests attaching to such proceeds, pending further Court order or written agreement between the parties. Permitting the Receiver to hold the segregated sales proceeds pending further Court order or agreement of the parties as to disputed will not alter any of the lienholders rights at this time but will enable the Receiver to move forward in his efforts to obtain a maximum recovery for investors. The Receiver intends, however, to pay the undisputed liens, including those detailed above, through escrow at the time of closing in his discretion. It is well within the Court s broad authority to approve the sales and sales procedures set forth herein. See Secs. & Exch. Comm n v. Capital Consultants, LLC, F.d, (th Cir. 00) (citing the district court s broad power to supervise a receivership and determine the appropriate action to be taken therein); see also Secs. & Exch. Comm n v. Billion Coupons, Inc., Nos JMS-LEK, JMS-LEG, 00 WL, at * (D. Haw. July, 00) (approving sales procedures that differed from statutory requirements where it was in the best interest of the receivership to do so). These procedures will help to achieve the primary purpose of [an] equity receivership; that is, to promote orderly and

20 Case :-cv-0-vap-kk Document Filed 0// Page 0 of Page ID #: 0 0 efficient administration of the estate... for the benefit of creditors. S.E.C. v. Hardy, 0 F.d 0, 0 (th Cir. ). B. A Sale Free and Clear of Disputed Liens is Appropriate The Bankruptcy Code provides ample authority for sales free and clear of liens where the liens are the subject of a bona fide dispute or where the sales proceeds are sufficient to cover the liens. The Local Rules direct the Receiver to follow the guidance of the Bankruptcy Code. Local Rule - provides: Except as otherwise ordered by the Court, a receiver shall administer the estate as nearly as possible in accordance with the practice in the administration of estates in bankruptcy. Section (b)() of the Bankruptcy Code provides that, after notice and a hearing, the trustee may sell property of the estate other than in the ordinary course of business. Section (f) empowers the trustee to sell property out of the ordinary course of business free and clear of any interest in such property of any entity if one of the following five conditions is present: () applicable non-bankruptcy law permits sale of such property free and clear of such interest; () such entity consents; () such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property; () such interest is in bona fide dispute; or () such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest. Section (f) is written in the disjunctive satisfaction of one of the five conditions is sufficient to sell property free clear of liens. In re Elliot, B.R., (Bankr. D.Pa. ). A sale under section (f) is subject to the adequate protection requirement. S.REP.NO., th Cong., d Sess. (). Most often, adequate protection in

21 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 connection with a sale free and clear of other interests will be to have those interests attach to the proceeds of the sale. Id. The sale of the receivership estate s properties free and clear of liens and interests is proper under section (f)() since the Receiver intends to sell those properties where the price obtained at auction is greater than the aggregate value of all liens on such property. In a few instances, however, because the liens against some of the Properties are disputed as discussed herein, the Receiver may sell a property for a price that assumes the disputed lien will be avoided pursuant to section (f)(), even though the aggregate value of the liens, including the disputed lien, may exceed the sale price. The sale of the receivership estate s properties free and clear of liens and interests is proper under section (f)() and (f)(). C. Proposed Auction Procedures and Preappoval of Sales The Receiver proposes Tranzon Asset Strategies ( Tranzon ) to conduct the sales by a live and online auction. Tranzon will be paid a commission for its services derived from a 0% buyer s premium based on the high bid amount and charged to the highest bidder, subject to the following terms: For the commercial and multifamily properties in Arizona, Florida and Mississippi, Tranzon has agreed to rebate to the Receiver % of the buyer s premium, which will become property of the receivership estate. The buyer s broker will receive % of the buyer s premium or, if the buyer does not have a broker, the amount will be rebated to the Receiver. For the commercial, multifamily and vacant lot properties in Missouri, Tranzon will receive % of the buyer s premium. The buyer s broker will receive the remaining % of the buyer s premium or, if the buyer does not have a broker, the amount will be rebated to the Receiver. For the single family residential properties in Kentucky, Tranzon will

22 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: 0 0 receive % of the buyer s premium. The buyer s broker will receive the remaining % of the buyer s premium or, if the buyer does not have a broker, the amount will be paid to Tranzon. For the WGC Assets, Tranzon will receive the 0% buyer s premium as its commission. Pursuant to its strategy, Tranzon s total marketing expenses will not exceed $,.00, which will be paid from the sale proceeds out of escrow as each sale closes. Tranzon s Auction Marketing Strategy setting forth the terms of its engagement is attached as Exhibit to the Mosier Declaration. The public auction will be conducted by Tranzon at centrally located meeting rooms, with online bidding also available. The specific Terms and Conditions of Sale for the real property sales are set forth in the attachment to Tranzon s Auction Marketing Strategy, which is attached as Exhibit to the Mosier Declaration. In summary, all bidders must register and provide a deposit via cashier s check payable to Robert P. Mosier, Receiver per real property if in person or via credit card authorization for online bidders. The deposit amount will be determined on a property-by-property basis, generally based on property values. A successful bidder will be required to increase his or her deposit to 0% of the purchase price and sign a purchase and sale agreement. All Sale Properties will have a suggested opening bid amount, but all sales are subject to the Receiver s confirmation at the conclusion of the sale. Successful bidders whose bids are confirmed by the Receiver shall be required to close within 0 days from the date of the auction. The Terms and Conditions of Sale for the personal property auctions are set for the in Exhibit to the Mosier Declaration. Prior to the auction, and in accordance with U.S.C. 00, Tranzon will publish notice of the sale once a week for at least four weeks in the following general circulation newspapers in the counties where the Sale Properties and the WGC Assets are located: 0

23 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #: Publication The Wall Street Journal Florida Times Union The Clarion Ledger Arizona Daily Star Arizona Republic Kansas City Star Owensboro Messenger Enquirer Paducah Sun The Los Angeles Times Location National Jacksonville, FL Jackson, MS Tucson, AZ Phoenix, AZ Kansas City, MO Owensboro, KY Paducah, KY Los Angeles, CA Tranzon also will prepare display advertisements to run in the appropriate real estate or sale sections of these publications. Additionally, the sale will be advertised through Tranzon s website, which automatically links to an additional seventy-three other websites, and via its distribution lists. Finally, Tranzon shall make all Sale Properties available for one inspection over the two weeks prior to the auction. Because sales by receivers are not absolute until confirmed by the Court, the Receiver asks that the Court pre-approve any successful auction sale of the Sale Properties and the WGC Assets, provided the Receiver confirms the sale in his discretion because he has determined that the sales price is sufficient to pay existing liens and the sale will result in a net benefit to the receivership estate. In other words, the Receiver requests entries of orders approving the sale of the Sale Properties and WGC Assets by public auction, free and clear of liens, claims, and encumbrances without the need for additional motions or orders. Obtaining court approval of a sale after the fact may lead to suboptimal sales results in that delays enable buyers to back out of purchase commitments and/or buyers may be discouraged from purchasing real property due to the requirement for approval. See Mosier Declaration at. Accordingly, pre-approval is in the best interest of the receivership estate, as it will conserve resources of the estate, as well as the Court and, thus, maximize the

24 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #:0 0 0 recovery for unsecured creditors. The Receiver proposes to first lodge an order approving this Motion and the auction and abandonment terms detailed herein (the Procedures Order ). Pursuant the Procedures Order, the Receiver and Tranzon with conduct the auctions and upon conclusion of the auctions, the Receiver will then lodge separate individual orders for each property to be sold in the form substantially similar to Exhibit attached to the Mosier Declaration (the Form Sale Order ). A Successful Bidder only becomes the purchaser upon confirmation by the Receiver of that bidder s bid. Further, if there is a second highest bidder at the auction on any Sale Property willing to serves as a Back-up Bidder and purchase the Sale Property in the event the Successful Bidder fails to close, the Form Sale Order provides for the identification of a Back-up Bidder and authority for the Receiver to close the sale to the Back-up Bidder as an alternative to the failed closing with the Successful Bidder. As set forth below, if the Receiver declines to confirm a sale at auction due to an insufficient sales price, he may then file a Notice of Abandonment in the form attached to the Mosier Declaration as Exhibit. IV. ALTERNATIVELY, THE RECEIVER REQUESTS AUTHORITY TO ABANDON OVER-ENCUMBERED PROPERTIES IN HIS DISCRETION If the price generated at the time of auction is insufficient to pay the remaining liens at that time and to provide a net benefit to the receivership estate, the Receiver requests authority to abandon those properties by filing a Notice of Abandonment with the Court. After diligent investigation, the Receiver has determined that certain of the Sale Properties are encumbered, as detailed above. To the extent certain of the Sale Properties will be over-encumbered such that the receivership estate has no equity in the property and unsecured creditors will not benefit from the Receiver s sale of these properties, the Receiver seeks Court approval to abandon these Sale

25 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #:0 0 0 Properties to the secured creditors so that they may exercise their rights to foreclose consistent with their security agreements. See Secs. & Exch. Comm n v. Madison Real Estate Grp., F. Supp. d, (D. Utah 00) (noting court authorized receiver to abandon certain properties lacking equity so that lienholders could foreclose thereon). Further, it is possible that certain of the WGC Assets may not sell at auction or may sell for a price insufficient to pay all asserted tax liens. In such event, abandonment of the unsold assets is appropriate to remove the cost and burden of administering these assets from the estate. Because it is presently unclear exactly which, if any, of the Sale Properties or WGC Assets will need to be abandoned, the Receiver proposes that abandonments become effective upon the filing of a Notice of Abandonment, served on all secured creditors and interested parties affected by a particular property, after he has confirmed that a sale will not benefit unsecured creditors due to the amount of outstanding liens. It is well settled that a court imposing a receivership assumes custody and control of all assets and property of the receivership entity and may issue all orders necessary for the proper administration thereof. See Secs. & Exch. Comm n v. Wencke, F.d, 0 (th Cir. 0). To that end, a court may authorize a receiver to abandon property pursuant to its broad, equitable powers. See Quilling v. Trade Partners, Inc., No. :0-CV-0, 0 WL 0, at * (W.D. Mich. Sept. 0, 0) (authorizing receiver to abandon certain insurance policies in receivership). Here, to the extent a Sale Property is over-encumbered such that unsecured creditors will not benefit from its sale, it would be inequitable to further dilute the funds available for distribution to unsecured creditors by causing the receivership estate to incur the costs associated with continuing to maintain the properties and, ultimately, sell the properties at auction. See Secs. & Exch. Comm n v. Secure Inv.

26 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #:0 0 0 Servs., Inc., No. :0-cv--GEB-CMK, 00 WL, at * (E.D. Calif. July, 00) (permitting equity receiver to abandon insurance policies because equity [did] not favor... investors who have a minimal chance of receiving any benefit from paying the [policy] premiums to continue paying them ). Indeed, courts recognize that abandonment is appropriate where, as here, the receiver determines assets are so burdensome or of such little value as to render administration of the same unprofitable. Quilling, 0 WL 0, at * (quoting Helvey v. U.S. Bldg. & Loan Ass n, P.d, (Cal. Dist. Ct. App. )); see also Secure Inv. Servs., 00 WL, at *. Accordingly, the Receiver requests that the Court authorize him to abandon over-encumbered properties for which a sale will not benefit unsecured creditors, with abandonment to become effective upon the filing of a Notice of Abandonment, with service to all secured lienholders. See Madison Real Estate Grp., F. Supp. d at (explaining receiver was permitted to abandon real property that had no benefit to receivership). V. CONCLUSION WHEREFORE, the Receiver respectfully requests authorization () to sell real and personal property by public auction, free and clear of disputed liens, claims and encumbrances; () in the alternative, to abandon over-encumbered assets, effective on the filing of a notice of abandonment; and () for all other appropriate relief. DATED: January, 0 DIAMOND McCARTHY LLP By: /s/ Kathy Bazoian Phelps Kathy Bazoian Phelps Counsel for Robert P. Mosier, Permanent Receiver

27 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #:0 0 0 PROOF OF SERVICE I am a citizen of the United States and employed in Los Angeles County, California. I am over the age of eighteen years and not a party to the within-entitled action. My business address is Avenue of the Stars, Suite 00, Los Angeles, California 00. On January, 0, I served a copy of the within document(s): MOTION OF RECEIVER FOR ORDER AUTHORIZING: () SALE OF REAL AND PERSONAL PROPERTY BY PUBLIC AUCTION FREE AND CLEAR OF LIENS, CLAIMS, AND ENCUMBRANCES; OR () IN THE ALTERNATIVE, ABANDONMENT OF OVER-ENCUMBERED ASSETS MEMORANDUM OF POINTS AND AUTHORITIES X X SERVED BY UNITED STATES MAIL: On January, 0, I served the following persons and/or entities at the last known addresses by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows: SEE ATTACHED SERVICE LIST SERVED VIA ELECTRONIC TRANSMISSION/ On January, 0, I served the following persons and/or entities at the by transmitting via electronic mail the document(s) listed above to the addresses set forth below: Brent Walter Wilner wilnerb@sec.gov Lynn M Dean deanl@sec.gov, berryj@sec.gov, irwinma@sec.gov, LAROFiling@sec.gov Helen B Kim hkim@thompsoncoburn.com, Kathy Bazoian Phelps kphelps@diamondmccarthy.com, jrudd@diamondmccarthy.com, mshabpareh@diamondmccarthy.com, rmosier@mosierco.com Mario Pincheira walden@gmail.com Natalie Ikhlassi nikhlassi@thompsoncoburn.com

28 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #:0 0 0 X SERVED BY OVERNIGHT DELIVERY: On January, 0, I served the following persons and/or entities at the last known addresses by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Virginia A. Phillips United States District Court Eastern District 0 Twelfth Street Courtroom No. Riverside, CA 0-0 SERVED VIA ELECTRONIC TRANSMISSION/ On January, 0, I served the following persons and/or entities at the by transmitting via electronic mail the document(s) listed above to the addresses set forth below: dkayatta@gmail.com paulrmata00@gmail.com I am readily familiar with the firm's practice of collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. Postal Service on that same day with postage thereon fully prepaid in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. I declare under penalty of perjury under the laws of United States of America that the above is true and correct. Executed on January, 0, at Los Angeles, California. /s/ Melody Shabpareh Melody Shabpareh

29 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #:0 0 0 SERVICE LIST SEC V. SECURED CAPITAL INVESTMENTS, LLC, ET AL. CASE NO. CV-0 VAP (KKx) David F Kayatta 0 N Mills Ave., No. 0 Claremont, CA Paul Mata North First Avenue Upland, CA Jose Gloria Gutierrez Title Security Agency, LLC Attn. Loan Servicing Department 0 E Tanque Verde Suite #0 Tucson, AZ Jose Gloria Gutierrez c/o Adam Weisman Hinderaker Rauh & Weisman 0 East Speedway Blvd. Tucson, Arizona BJN, Inc. Title Security Agency, LLC Attn. Loan Servicing Department 0 E Tanque Verde Suite #0 Tucson, AZ 00 Mitchel Family, L.L.C. 0 th Place South Des Moines, WA Mitchel Family, L.L.C. Title Security Agency, LLC Attn. Loan Servicing Department 0 E Tanque Verde Suite #0 Tucson, AZ

30 Case :-cv-0-vap-kk Document Filed 0// Page 0 of Page ID #:0 0 0 LLB Enterprises, L.L.C. 0 th Place South Des Moines, WA -0 LLB Enterprises, L.L.C. Title Security Agency, LLC Attn. Loan Servicing Department 0 E Tanque Verde Suite #0 Tucson, AZ Overson Enterprises, L.L.C. 0 th Place South Des Moines, WA -0 Overson Enterprises, L.L.C. Title Security Agency, LLC Attn. Loan Servicing Department 0 E Tanque Verde Suite #0 Tucson, AZ CTC Investors, LLC c/o Copper Creek Real Estate P. O. Box Jamestown, CA CTC Investors, LLC c/o James R Corn, Registered Agent N California Ave Oakdale, CA Family Property Solutions, LLC c/o David T. Ash, Esq. Watkins Ludlam Winter & Stennis, P.A. P.O. Box Jackson, MS 0-0 Family Property Solutions, LLC East Avenue, Suite E Fontana, CA

31 Case :-cv-0-vap-kk Document Filed 0// Page of Page ID #:0 0 0 Family Property Solutions, LLC c/o Randle J. Bowling, Registered Agent W Liberty Pkwy, # Fontana, CA Omni Bank of Mantee Attn.: William C. Harrington, Jr., V.P. PO Box Jackson, MS Omni Bank Third Street Bay Springs, MS Omni Bank First Street Mantee, MS Wells Fargo Bank (as successor by merger to) Wachovia Bank, N.A. One West Fourth Street rd Floor, NC Winston-Salem, NC 0-0 Wells Fargo Bank (as successor by merger to) Wachovia Bank, N.A. Mail Code VA 0 South Jefferson St. Roanoke, VA 0 TRSTE, Inc. (Virginia Corporation) 0 S. S. Jefferson St. Roanoke, VA 0 Chancery Clerk of Rankin County, FL Larry Swales, Chancery Clerk Rankin County Chancery Clerk East Government Street, Suite D Brandon, MS 0