Free Reply in Support of Motion - District Court of Arizona - Arizona

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PLLC 1423 S. HIGLEY RD., SUITE 110 MESA, ARIZONA 85206 TELEPHONE: (480) 633-8100 FACSIMILE: (480) 633-8488 E-MAIL: [email protected] BRIAN A. HATCH, SBN 13864 ATTORNEY FOR BARRY T. JORDAN

BRIAN A. HATCH

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA ) ) ) Plaintiff, ) ) vs. ) ) ) Ronald Stephen Holt; and International Funding ) Association, ) Defendants, ) ) ) and ) ) Annette Holt; American Assets Limited Trust; ) Leonora Street Trust; Dover Childrens Trust; ) Clarendon Avenue Holding Trust; Dublin Holding ) Trust; Jeffery Williams (aka Jeffrey Williams); ) Mari Ann Alston; Pacific Central Asset ) ) Management; and American Benefit Card ) Services, Inc. ) ) Defendants Solely for ) Purposes of Equitable Relief ) _________________________________________ Securities and Exchange Commission,

Cause No.: CV 03-1825 PHX PGR

REPLY IN SUPPORT OF MOTION FOR NEW TRIAL AND/OR TO ALTER OR AMEND JUDGMENT REGARDING PETITION NO. 24 PETITION FOR INSTRUCTIONS REGARDING PROPERTY LOCATED AT 10620 NORTH 84TH STREET, SCOTTSDALE, ARIZONA

Comes now Respondent Barry T. Jordan, through his counsel undersigned, and files this Reply in Support of his Motion for New Trial and/or to Alter or Amend Judgment. This Reply is supported by the following Memorandum of Points and Authorities, the attached Exhibit, and all other matters of record.

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MEMORANDUM OF POINTS AND AUTHORITIES I. Rights as a Successor. In the Response, the Receiver has cited to general law holding that a receiver assumes the rights and obligations of the entity/party for which he is appointed. See, Sharpe v. FDIC, 126 F.3d 1147 (9th Cir 1997). This citation has little value in deciding the issues presented because it is an incomplete statement of the applicable law. A receiver may sue only to redress injuries to the entity in receivership. Scholes v. Lehmann, 56 F.3d 750, 753 (7th Cir.), cert. denied sub nom. African Entr. Inc. v. Scholes, 516 U.S. 1028 (1995). "An equity receiver, like a bankruptcy trustee, has standing for all claims that would belong to the entity in receivership, and which would thus benefit its creditors and investors, but no standing to represent the creditors and investors in their individual claims." Miller v. Harding, 248 F.3d 1127 (1st Cir. 2000). The Receiver makes the remarkable assertion that: "AALT [American Assets Limited Trust], and the Receiver by extension, is the Trustee of EMHT [East Maricopa Holding Trust], and, therefore, has standing to assert claims regarding the assets of EMHT, including the Property." This assertion actually runs far beyond the legal principle cited in Sharpe. At most, the Receiver has standing to pursue claims AALT may have, so long as those claims redress injuries to and benefit creditors of the receivership. Instead, the Receiver's argument is directed to his alleged right to deal with the trust Property standing in the shoes of the trustee and asserting substantive rights of the trust. In the instant case, those shoes don't fit. The Receiver completely ignores the interests of the receivership estate and the conflict with the duties of the Receiver as enumerated in the Order Appointing Receiver. The Receiver essentially argues that he, as a successor trustee, may bring claims against the beneficiary of the trust, or against the trust itself, claiming misconduct of the beneficiary, to vacate or terminate the trust and disperse its assets to third-parties. The Receiver cites no authority for this novel legal principle. Indeed, the law is exactly the

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opposite: The trustee owes fiduciary duties running to the trust and the beneficiary. In the instant case, the Order did not make the Receiver a successor trustee of AALT, trustee of the Property owner, the EMHT, but only authorized certain actions to deal with IFA funds. See e.g., City of Dubuque v. Iowa Trust, 519 N.W.2d 786 (Iowa 1994). These legal principles are illuminated by application to the facts of the instant case. It is undisputed that the Receiver has been appointed to pursue and marshal investor funds. Some investor funds may have been used to acquire assets under the name of the AALT. In the set of facts here presented, however, no investor funds were used to acquire or maintain the property, and neither Mr. Jordan nor any of the trust entities he has created has been has any other connection to the Defendants in the underlying receivership/SEC matter. So the question must be posed: how do the receivership and defrauded investors benefit from the action and relief brought by the Receiver in Petition No. 24? The clear answer is that they do not benefit in any way. Indeed, the receivership estate suffers a detriment, in that the Receiver and his counsel are accruing fees against the receivership estate. In his Response, the Receiver alleges he did not petition the court on behalf of any third-party, although admitting that third-parties may benefit. This allegation is both misleading and a significant understatement. In order to determine whose claims have been pursued, one need only look at the relief granted in the Judgment. The Court has ordered that Mr. Jordan vacate the 84th Street Property; that the Receiver prepare the Property for sale; sell the Property; and thereafter distribute the proceeds of the sale to the existing mortgage encumbrance, the Receiver's costs of preparation and sale, including legal fees, then to a creditor of Mr. Jordan, with the remainder to Mr. Jordan's two children. In this case, the Receiver has acted without standing to pursue the unasserted claims of third-parties, against Mr. Jordan and the EMHT he represents, rather than against a holder of investor funds. The claims of the Receiver make no attempt whatsoever to redress any

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injury to the receivership entities or build up the receivership assets. See, Troelstrup v. Index Futures Group, Inc., 130 F.3d 1274, 1277 (7th Cir. 1997). The Receiver makes clear for whose injury redress is sought when he continues to present this court with negative allegations regarding Mr. Jordan, calling his dealings with the Property and the Trusts a "shell game" and a "con". Again, the question must be posed: an alleged "con" or "shell game" against whom? Not the receivership estate or its defrauded investors, who the Receiver has acknowledged have no connection to the East Maricopa Holding Trust or its beneficiary. Not American Assets Limited Trust, which has no rights to make such claims against the East Maricopa Holding Trust or its beneficiary. In the Response, the Receiver answers by alleging that Mr. Jordan's children should be in control of the Property (apparently the victims of a con). Yet these children and the other third-parties who benefit by the Judgment have made no claim against the receivership, against Mr. Jordan, against the East Maricopa Holding Trust, or against the Property. The evidence presented in this matter and at the Hearing clearly demonstrate that the Receiver lacks standing to assert the claims in Petition No. 24. See, Scholes v. Lehmann, Miller v. Harding, and Troelstrup v. Index Futures Group, Inc.

II.

Factual Assertions. Of significant concern is the Receiver's continued efforts to paint Mr. Jordan in a

bad light, even misstating the facts of record. For example, Mr. Jordan's statement to the Receiver, cited in the Petition, that the Ease Maricopa Holding Trust was created "just for protection, basically", has now in the Response morphed into the false assertion that: "Jordan admits that the purpose of placing the Property in the name of East Maricopa Holding Trust is to hide the asset from creditors." This overreaching by the Receiver is a pattern continuing from a time when Mr. Jordan was not represented by counsel.

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A meeting with the Receiver and his counsel scheduled by Mr. Jordan for February 18, 2005 was conducted as a deposition without any prior notice to Mr. Jordan. During the surprise deposition, the Receiver's counsel asked a number of questions calling for a legal conclusion, knowing Mr. Jordan was unrepresented. Following the deposition, and off the record, the Receiver's counsel showed Mr. Jordan a copy of a default judgment against Jordan and asked him questions about it. Upon Mr. Jordan's answers, which included the fact that he was unaware of the case or the judgment, and a discussion of Mr. Jordan's involvement with the various Trusts, the Receiver's counsel, Mr. Murphy, stated that he was satisfied that Mr. Jordan's motives were good and that Mr. Jordan could get on with his life. Yet the Receiver has continued to wield the Lis Pendens and the receivership like a club over Mr. Jordan's head, during at least the last three years while the Receiver has had full knowledge of the pertinent facts. At the Hearing in this matter Mr. Jordan presented uncontroverted testimony establishing no intent on his part to hide assets or avoid obligations through the Trusts, and indeed that the Trusts were established long before the Property was purchased (April of 2001) and long before Mr. Jordan learned of any creditor claims (Crown Oil and Gas Trust in May of 1995, Roger Mills Trust in July of 1997, and East Maricopa Holding Trust in September of 1999). Mr. Jordan testified as to his testamentary intent in setting up the Crown Oil and Gas Trust, with his children as beneficiaries, that the Mortgage obligation was being paid and child support obligations were reduced to an alternative payment schedule, and that such payments were being made. In short, and aside from the legal arguments on standing and authority raised herein, there is no factual support for a finding that Mr. Jordan has acted to defraud creditors. The Receiver has established no basis which would allow the Court to set aside the Trusts and distribute proceeds as indicated in the Judgment. Mr. Jordan is a proper party to act on behalf

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of the East Maricopa Holding Trust and its beneficiary. This Court may grant the relief requested herein in accord with the legal principles enumerated here and in the Motion. Indeed, to the extent the Court believes the relief request works a termination of the trust, such would be clearly authorized under the principle that a trust beneficiary may compel termination of the trust. See, A. SCOTT, LAW OF TRUSTS § 339 (3d ed. 1967). IV. Conclusion. Respondent Barry Jordan has established that the Receiver had no standing or legal right to the relief requested in Petition No. 24, and has pursued the claims under the Petition in bad faith, that the Court lacked jurisdiction to consider the claims presented, and erred in granting the Petition on the facts and law presented. WHEREFORE, Respondent Barry T. Jordan respectfully requests this Court enter an order altering or amending the Judgment and/or granting a new trial; and that the Court vacate the Judgment and enter an Order releasing the 84th Street Property from the receivership, removing the Notice of Lis Pendens, and approving Barry Jordan or his nominee as substitute trustee for the East Maricopa Holding Trust, or otherwise releasing the Property and granting its disposition to the care and discretion of Barry Jordan as Trust Manager for the Roger Mills Trust; and that the Court grant Respondent Barry Jordan his costs and reasonable attorneys fees incurred in this matter pursuant to A.R.S. § 12-341.01(C) or A.R.S. § 12-349.

Respectfully submitted this 22nd day of March, 2007.

BRIAN A. HATCH PLLC s/Brian A. Hatch By: Brian A. Hatch, Attorney for Respondent Barry T. Jordan

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PROOF OF SERVICE This is to certify that on this 22nd day of March, 2007, the foregoing document was electronically transmitted to the Clerk's Office using the CM/ECF System for filing, and that

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a Notice of Electronic Filing was transmitted to the CM/ECF registrants on the attached Master Service List; and that a copy of the foregoing document was served by first class mail on the 23rd day of March, 2007 on those persons listed below, and on those persons listed on the attached Master Service List who are not registered participants of the CM/ECF System.

Noily Cope 5128 E. Whitton Avenue Phoenix, AZ 85018

s/Brian A. Hatch Brian A. Hatch

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MASTER SERVICE LIST SEC vs. Ronald Stephen Holt, et al. United States District Court for the District of Arizona CV 03-1825 PHX PGR

Lawrence J. Warfield International Funding 14555 North Scottsdale Road, #340 Scottsdale, AZ 85254 Receiver Patrick M. Murphy Guittilla & Murphy, P.C. 4150 West Northern Avenue Phoenix, Arizona 85051 Registered CM/ECF: [email protected] Counsel for Receiver Marshall M. Gandy Securities and Exchange Commission 801 Cherry Street, Suite 1900 Fort Worth, Texas 76102 Registered CM/ECF: [email protected] Counsel for SEC Merwin D. Grant Grant & Vaughn, P.C. 6225 North 24th Street Suite 125 Phoenix, Arizona 85016 Registered CM/ECF: [email protected] Attorney for Relief Defendant Annette Holt

Ronald Stephen Holt and International Funding, Leonora Street Trust, Dover Children's Trust, Clarendon Avenue Holding Trust, Dublin Holding Trust, Pacific Central Asset Management, American Benefit Card Services, Inc.,

Robert L. Stanford Jeffery Williams aka Jeffrey Williams 8415 W. Alex Avenue Peoria, Arizona 85382 Relief Defendant American Assets Limited Trust c/o Registered Agent Michael Bloomquist 4410 W. Union Hills #7-233 Glendale, Arizona 85308 Relief Defendant Mari Ann Alston 305 Nordina Street Redlands, California 92373 Relief Defendant

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James Vaughn 100 South Antietam Place Tucson, Arizona 85710 Suzanne Ingold Burch & Cracchiolo, P.A. 702 E. Osborn Road #200 P.O. Box 16882 Phoenix, Arizona 85014-5281 Timothy J. Mulreany Commodity Futures Trading Commission Division of Enforcement 1155 21st Street, N.W. Washington, D.C. 20581 Thomas M. Connelly 2425 East Camelback Road Suite 880 Phoenix, Arizona 85016-4208 Michael S. Reeves Attorney at Law 1212 E. Osborn Phoenix, Arizona 85014-5533 Registered CM/ECF: [email protected] Attorney for Defendant Ronald S. Holt

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