Free Response to Motion - District Court of Arizona - Arizona

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Burton M. Bentley, Esq. (Bar No. 00980) THE BENTLEY LAW FIRM, P.C. 5343 North 16th Street, Suite 480 Phoenix, Arizona 85016 (602) 861-3055 (602) 861-3230 Attorney for Defendant Ronald Stephen Holt and Equitable Relief Defendants Annette Holt, Leonora Trust, Dover Trust, Clarendon Trust, Dublin Trust, Pacific Central and American Benefit IN THE UNITED STATES DISTRICT COURT IN AND FOR THE DISTRICT OF ARIZONA SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. RONALD STEPHEN HOLT; and INTERNATIONAL FUNDING ASSOCIATION, Defendants, and ANNETTE HOLT; et al., Defendants Solely for Purposes of Equitable Relief. The Bentley Law Firm, P.C. fka as Burton M. Bentley, P.C. ("Bentley/Respondent") hereby files its Response to Receiver's Petition No. 13 Petition for Order Directing Turnover of Receivership Assets Held by Burton M. Bentley, P.C. For the reasons stated in this Response including the Memorandum of Points and Authorities, and exhibits thereto, as well as the attached Affidavit of
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Case No. CV03-1825 PHX PGR BURTON M. BENTLEY'S RESPONSE TO PETITION NO. 13 FOR TURNOVER ORDER (Assigned to the Hon. Paul G. Rosenblatt)

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Burton M. Bentley, it is respectfully requested that the Court deny the Receiver's Petition for the following reasons: Reason No. 1: Arizona's Uniform Fraudulent Transfer Act offers definitive protection for a transferee who accepts property "in good faith and for a reasonably equivalent value" against a creditor that seeks to void the transfer as a "fraudulent transfer." Reason No. 2: Judge Rosenblatt's July 16, 2004 Order leaves open the question of whether

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the payment of $10,000 to Respondent was a fraudulent transfer, and whether there
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exists adequate defenses to the Receiver's claim. Reason No. 3: Despite the Order of this Court (July 16, 2004), practically inviting the SEC to bring this matter before the Court, neither the SEC nor the Receiver has filed any prior Petition to have Bentley/Respondent named as a party Defendant or relief Defendant. Reason No.4: Bentley/Respondent accepted two (2) Five Thousand Dollar checks drawn on Rose Holt's credit union account approximately ten (10) months prior to the Court's July 16, 2004 Order adjudging that funds emanating from Rose Holt's credit union account were receivership assets, except for payments to Holt's attorney, a matter yet to be decided by this Court that retained jurisdiction.

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Reason No. 5:
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Legal fees paid by a third party, Rose Holt, on behalf of Bentley/Respondent's client Ronald Holt, ought to have been carefully scrutinized by Bentley/Respondent in accordance with the Arizona Rules of Professional Conduct. Ambiguity initially existed about the nature of the check itself, as Rose Holt did not know to whom her
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two (2) Five Thousand Dollar checks were being paid, (Rose Holt Deposition 10-162003 , page 56, Lines 2-14). The checks were therefore made payable to "Law Office Re: Rose Holt," and not to Burton M. Bentley, P.C. Reason No. 6: Laches exists when a Receiver waits almost 4 years before enforcing a claim that would have been clearly outlawed by the 4-year Statute of Limitations incorporated into the Arizona Uniform Fraudulent Transfer Act. Reason No. 7:

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28 U.S.C. §2415(b) mandates a 3 year statute of limitations for the Receiver's
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claims as an agency of the USA. Reason No. 8: Rose Holt had maintained a high balance of $30,000 in her credit union account according to her deposition (10-16-2003, page 49, Line 19). The money came from "farming and..." That was prior in time to the infusion of money from the Leonora Street Property. MEMORANDUM OF POINTS AND AUTHORITIES I. Chronology Of Pertinent Events 1) September 18, 2003: Complaint filed specifically omitting Rose Holt as a Party Defendant or Equitable Relief Defendant. Judge Rosenblatt's Order Appointing Receiver was also lodged. Neither the Complaint nor the Order contained any reference to Rose Holt or her possession of receivership assets.

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2) October 1, 2003: Order of Preliminary Injunction filed, also failing to name Rose Holt as an Equitable Relief Defendant, from having to restore receivership assets. 3) October 3, 2003: Bentley/Respondent received Two (2) Five Thousand Dollar checks from Rose Holt's Desert Schools Federal Credit Union account made
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payable to "Law Office Re: Rose Holt". The checks were given as initial retainer to Bentley/Respondent for and on behalf of Defendant Ronald Holt and his affiliates, including some of the Equitable Relief Defendants, specifically Annette Holt, his wife. 4) October 28, 2003: Amended Complaint filed for the first time naming Rose Holt as an Equitable Relief Defendant, referencing the Leonora Street Property to be a receivership asset and implicating Rose Holt. 5) Nov. 10, 2003: Amended Order Appointing Receiver, Lawrence J.

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Warfield and amending the former Order to include reference to Rose Holt as one of
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the Equitable Relief Defendants. TRO filed against Rose Holt, and imposing an asset freeze as to Rose Holt's assets, including the remaining funds in her credit union account. 6) October 6, 2003: Guttilla & Murphy, attorneys for the Receiver, sent its first letter to Respondent demanding return of the $10,000 paid to Bentley/Respondent by his client Ronald Holt from Rose Holt's credit union account. But Guttilla & Murphy did not file their Notice of Appearance in SEC v. Holt until January 5, 2004. Guttilla & Murphy ignored the fact that earnings belonging to Rose Holt had been previously deposited in that credit union account, funds previously derived from other activities, not related to the Leonora Street Property. 7) August 13, 2004: Guttilla & Murphy's letter to Bentley/Respondent,

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admits that the checks received from Rose Holt fall under the Arizona Uniform Fraudulent Transfer Act, and were therefore amenable to the defenses thereunder. The request by Receiver that Bentley/Respondent pay back the $10,000 by August 20, 2004 is just illustrative of Warfield's "laches," as Warfield just filed his Petition No. 13 to enforce his request. Bentley/Respondent was led to conclude that the
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Receiver had withdrawn its prior requests that continued on for almost 4 years. (Exhibit "C") 8) September 24, 2004: Letter from Bentley/Respondent to attorneys Guttilla & Murphy voluntarily contained a full and complete explanation of the transaction concerning the $10,000, and included exhibits of checks, cash received from Ron Holt, deposit slips, bank statements and a tabulated summary of all monetary transactions. In that letter Bentley/Respondent also offers to "negotiate" the Receiver's claims, but no reply has ever been received from the Receiver to

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negotiate the claims. (See copy attached as Exhibit "A").
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9) October 9, 2003: E-mail from Bentley/Respondent to Guttilla & Murphy, explaining why Bentley/Respondent required replacement of the two (2)-Five Thousand Dollar checks from Rose Holt as they were made payable to "Law Office Re: Rose Holt", though tendered for Bentley/Respondent's legal representation of Ronald Holt and not Rose Holt, even though the checks said "Re: Rose Holt" and were thus ambiguous on their respective faces. This created a problem for Bentley/Respondent related to E.R. 1.8 under the Arizona Rules of Professional Conduct, and precipitated the request by Bentley/Respondent for replacement checks. (See Exhibit "B"). From the facts of this case, there can be no doubt but that Bentley/Respondent was ignorant of the facts surrounding a fraudulent transfer from Rose Holt to Bentley/Respondent prior to the time that the SEC included Rose Holt in the

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Complaint and the Court's Amended Order was filed naming Rose Holt as a Equitable Relief Defendant. The retainer paid to Bentley/Respondent came long before Rose Holt's evidentiary hearings were held, and before the Court made its ruling respecting the Lenora Street Property to be a receivership asset. There is no evidence that Bentley/Respondent knew or should have known that Rose Holt had
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received $356,000 from a reverse mortgage respecting the Leonora Street Property, or that the property was a receivership asset, or that the property had even come into contention prior to receipt of Bentley/Respondent's $10,000 retainer. II. Receiver's Petition Willfully Misstates the Facts In an attempt to discredit Bentley/Respondent, the Receiver accuses Bentley/Respondent of "knowing disobedience of this Court's orders, as shown herein." The Receiver quotes an entirely inappropriate case holding in Waffenschmidt v. Mackay (Receiver's footnote #2), while ignoring entirely Judge

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Rosenblatt's July 16, 2004 Order.1 The clear meaning of Judge Rosenblatt's Order has had no impact on the Receiver who still insists that the Court has somehow mysteriously commanded Bentley/Respondent to pay back the money, but clearly that is not true. In contrast, Judge Rosenblatt's Order does in fact establish Bentley/Respondent's right to set up any defenses that are available to Bentley/Respondent. At pages 5 and 6, the Order reads in pertinent part:

Waffenschmidt v. Mackay, 763 F.2d 711 case where the District Court found the relationship with Mackay who took money TRO. The question before the Court was

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(5th Cir 1985). Waffenschmidt was a "Bank" was not in any agency in contravention of a Court ordered clearly and succinctly stated:

"We must determine whether knowing violation of a Court's Injunction Order by the agent of a party who aids and abets that party's violation of the Order permits jurisdiction when no other contacts exist with the forum." (at pages 715-716) The facts in Waffenschmidt are not even remotely related to the facts in this case as Bentley/Respondent was neither an "agent" of Holt, nor did he "aid(s) or abet(s)" Holt as did some of the Defendants other than the Bank. That being the case, the "Bank" was a depositary and not an agent of Mackay in active concert with Mackay, and was not within the scope of the TRO. Moreover, in Waffenschmidt, the only questions before the Court were whether any of the persons (including Bank) were to be held in contempt of Court (and the Bank was not as it was not an aider or abettor), and whether the Court had jurisdiction to have its Order enforced in another jurisdiction, (which it did have). In the instant case, no one has petitioned the Court to hold Bentley/Respondent in contempt of Court, nor is there a jurisdictional question.

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"Rose Holt is no longer a Relief Defendant in this action. No determination has been made as to whether assets transferred to third parties following the alleged fraudulent transfer are protected under various theories of law, including the limitations on liability of subsequent good faith transfers. The issue is not a matter for this Court to decide at this time because the SEC has not filed any action against such third parties, nor have they been named as Relief Defendants in this action. Such issues will be determined when the matter of disgorgement of funds held by parties not in this action is properly brought before the Court..." "...the Court has not rendered any decision on the disposition of the funds held by such third parties, nor is this Order a bar on any defenses or legitimate claims to entitlement those parties may have with respect to such funds." (emphasis added) Bentley/Respondent asks that the Receiver and his attorneys be censured for falsely accusing Bentley/Respondent of "knowing disobedience" as this is a willfully baseless accusation that can nevertheless give rise to the commencement of a formal inquiry by the Arizona State Bar as failure to obey a Court Order of course is an actionable offense. Bentley/Respondent asks that the Court's further Order indicate that Bentley/Respondent did not perpetrate a "knowing disobedience" to any prior Court Order. Bentley/Respondent asks that the words "knowing disobedience" be stricken from the Petition as a scurrilous untrue allegation on its face, highly

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prejudicial, and "scandalous" under Rule 12(f), Federal Rules of Civil Procedure.
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There are no allegations in the Petition that Bentley/Respondent in any way aided or abetted Ronald Holt or Rose Holt to hide assets from the Receiver, or that Bentley/Respondent accepted Rose Holt's checks other than in good faith. Nor is Bentley/Respondent alleged to have prior guilty knowledge that the $10,000 retainer accepted by him had been derived from the Leonora Street Property, a receivership asset. Nor is Bentley/Respondent alleged to have failed to render reasonable legal
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services as reasonably equivalent consideration for the retainer he received from Ronald Holt and/or his Mother, Rose Holt. The attached Affidavit of Burton M. Bentley attests to the fact that he took payment in good faith and rendered legal advice and consultation as fair and reasonable equivalent consideration for his legal fees. Unless this is controverted by other facts developed by the Receiver, then the defenses provided in ARS §44-1009 are clearly established as a defense to the Receiver's Petition as a matter of law, and is consistent with the Order of this Court filed July 16, 2004 as set forth in the

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portion of the Court's Order quoted above.
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III.

Three Year Statute of Limitations for Torts The right to obtain funds alleged to have been fraudulently transferred is in

the nature of a tort claim under Arizona's Uniform Fraudulent Transfer Act. The statute of limitations in that statute (ARS §44-1009) is 4 years, and is a statute of repose. In Hashim v. JHH Canadian Capital Corp., 356 Bkr.Rptr. (D.Arizona Jan. 3, 2007) the Court held that a conspiracy to commit a fraudulent transfer was a "tort" within the meaning of the common law of Arizona referable to fraud. Aside from the Arizona statute of limitations, 28 USC §2425(b) is also a statute of repose that provides for a 3-year statute of limitations for tort claims commenced by the United States, or its agencies, such as the SEC. In pertinent part, that statute states:

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"...every action for money damages brought by the United States or any officer or agency thereof upon a tort shall be barred unless the Complaint is filed within three years after the right of action first accrues." "...all actions brought by the United States for money damages which are "founded upon a tort" are to be barred unless brought within three years of the accrual of the cause of action. The express purpose of this
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statute was to "provide a more balanced and fair treatment of litigants in civil actions involving the Government." See also, United States v. Central Soya, Inc., 697 F.2d 165 (7th Cir 1982) where the Court held the 3-year Statute of Limitations applied unless the Government sought damages to its lock and dam. Accordingly, the Petition should fail for failure to file the Complaint within 3 years. The claim arose on or about October 2, 2003. The Complaint was filed on or

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about July 19, 2007, approximately 9 months too late.
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IV.

Conclusion Bentley/Respondent has established: (i) Bentley/Respondent's good faith in

accepting the retainer of $10,000; (ii) Bentley/Respondent's rendition of legal services as reasonable consideration for the retainer paid and the additional funds later paid as established by the attached Exhibit "D", (Bentley/Respondent's billing statements for the entire period of representation); (iii) Receiver's laches and failure to proceed with due diligence; (iv) the applicable statute of limitations pursuant to 28 USC §2415(b) bars the Receiver's claims; and, (v) the unwillingness of the Receiver to negotiate this matter back in the year 2004 as requested by Bentley/Respondent. Pursuant to these reasons, Bentley/Respondent respectfully requests that the Receiver's Petition No. 13 be denied and that the Receiver and his attorneys be

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censured by this Court for its shameless attempt to vilify Bentley/Respondent. RESPECTFULLY SUBMITTED this 3rd day of August, 2007. THE BENTLEY LAW FIRM, P.C.

/S/ BURTON M. BENTLEY Burton M. Bentley "Bentley/Respondent"
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PROOF OF SERVICE This is to certify that on the 3rd day of August, 2007, I electronically transmitted the foregoing document to the clerk's office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the CM/ECF registrants on the attached Master Service List; and that the persons on the attached Master

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Service List who are not registered participants of the CM/ECF System have been served with a copy of the foregoing document by first class mail this date. This is to also certify that a copy of the foregoing document has been mailed first class mail this date to the following: Ryan W. Anderson, Esq. Guttilla & Murphy, P.C. 4150 W. Northern Avenue Phoenix, AZ 85051 /s/Burton M. Bentley Burton M. Bentley

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MASTER SERVICE LIST SEC v. Ronald Stephen Holt, et al., United States District Court for the District of Arizona CV 03-1835 PHX FJM

Marshall M. Gandy, Esq. Securities and Exchange Commission Burnett Plaza, Suite 1900 6 801 Cherry St., Unit #18 7 Fort Worth, TX 76102-6464 [email protected] 8 Counsel for SEC
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Patrick M. Murphy, Esq. Guttilla Murphy Anderson, P.C. 10 4150 W. Northern Avenue 11 Phoenix, AZ 85051 [email protected] 12 Counsel for Receiver
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Lawrence J. Warfield 14 International Funding 14555 N. Scottsdale Rd., #340 15 Scottsdale, AZ 85254 Receiver
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Merwin D. Grant, Esq. Grant & Vaughn, P.C. th 18 6225 N. 24 St., Suite 125 Phoenix, AZ 85016 19 [email protected] Counsel for Relief Defendant Annette Holt
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Ronald Stephen Holt and International Funding Association, Leonora Street Trust, Dover Children's Trust, Clarendon Avenue Holding Trust, Dublin Holding Trust, 22 Pacific Central Asset Management and American Benefit Card Services, Inc. Detainee Ronald Holt, 82642008 23 Central Arizona Detention Center 1155 N. Pinal Parkway 24 Florence, AZ 85232
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Robert L. Stanford Jeffrey Williams aka Jeffery Williams 8415 W. Alex Avenue 3 Peoria, AZ 85382 4 Relief Defendant
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American Assets Limited Trust c/o Registered Agent 6 Michael Bloomquist 7 4410 W. Union Hills, #7-233 Glendale, AZ 85308 8 Relief Defendant Mari Ann Alston 305 Nordina Street 10 Redlands, CA 92373 11 Relief Defendant
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/s/ Burton M. Bentley

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