Free Response to Motion - District Court of Arizona - Arizona

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Guttilla Murphy Anderson, P.C.

Guttilla Murphy Anderson, PC
Firm No. 00133300 Patrick M. Murphy (No. 002964) 4150 West Northern Ave. Phoenix, Arizona 85051 (623) 937-2795 [email protected]

Attorneys for the Receiver UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Securities and Exchange Commission, 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. ) Cause No. CV 03-1825 PHX PGR ) ) ) ) ) RECEIVER'S RESPONSE TO ) ) MOTION FOR NEW TRIAL ) AND/OR ) TO ALTER OR AMEND JUDGMENT ) REGARDING PETITION NO. 24 ) ) AND ) ) MOTION TO STAY ) REGARDING PETITION NO. 24 ) ) ) ) ) )

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Lawrence J. Warfield, the court-appointed receiver, respectfully responds to the Motion for New Trial and/or to Alter or Amend Judgment Regarding Petition No. 24 ("Motion for New Trial"), Docket No. 337, and to the Motion to Stay Regarding Petition No. 24 ("Motion to Stay"), Docket No. 338, filed by Barry T. Jordan ("Jordan"), as follows:
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I. Summary 1. After extensive briefing and a hearing, this Court entered its Order re:

Petition No. 24 (the "Judgment") authorizing the Receiver to sell certain real property and distribute the sale proceeds. In his Motion for New Trial, Jordan argues the Judgment should be reconsidered because the Court erred in granting the Receiver such authority. More specifically, Jordan argues the Judgment contains manifest errors of law because (1) the Receiver lacks standing to pursue the rights of third-parties against the Property; and (2) the Receiver lacks substantive rights regarding the property. The Receiver, however, asserted no claims on behalf of third parties in Petition No. 24. Instead, the Receiver asserted claims arising from his rights and obligations as receiver for American Assets Limited Trust, the trustee of the trust holding the property. Accordingly, Jordan has failed to identify any manifest errors of law contained in the Judgment. Therefore, the Motion for New Trial should be denied. Additionally, in the Motion for New Trial, Jordan asks the Court to release the property to him because he is the manager of the beneficiary of the trust holding the property, but such position provides no basis for wresting the property from the Receiver, who is the trustee obligated to manage the property. 2. Finally, since the Motion for New Trial should be denied, the Motion to

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Stay, which seeks imposition of a stay pending disposition of the Motion for New Trial, should be denied as well. II. Underlying Facts 3. By warranty deed dated April 24, 2001, property located at 10620 North

84th Street, Scottsdale, Arizona (the "Property") was transferred to American Assets
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Limited Trust ("AALT"), a Receivership Entity, as trustee for East Maricopa Holding Trust ("EMHT"), for the benefit of AALT. See Stipulation No. 3 of the Stipulated Facts re: Petition No. 24,1 (cited hereinafter as "Stipulation No. __"). 4. Jordan subsequently testified to creating EMHT "to hold property and for--

you know, in case of a lawsuit or whatever; just for protection, basically." See Jordan Deposition 25:11-12, attached hereto as Exhibit A-1. 5. Now, Jordan maintains that the warranty deed contains a scrivener's error

regarding the beneficiary of EMHT. He argues that, pursuant to EMHT's trust agreement, the actual beneficiary of EMHT is the Robert Miller Trust ("RMT"). Stipulation No. 4; see East Maricopa Holding Trust Agreement, attached hereto as Exhibit A-2. He further maintains that the beneficiary of RMT is Crown Oil & Gas ("COG"), and the beneficiaries of COG are Jordan's minor children. Stipulation No. 5. Ultimately, Jordan claims, the beneficial owners of the Property are his minor children. Jordan Deposition 43:16-19. 6. The Receiver is unaware of any evidence indicating that the Property was

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purchased with Receivership Assets, Stipulation No. 10, or that EMHT or RMT hold any properties acquired with Receivership Assets, Stipulation No. 11. 7. On September 6, 2006, the Receiver, as holder of legal and equitable title to

the Property, filed Petition No. 24, Petition for Instructions Regarding Property Located at 10620 North 84th Street, Scottsdale, Arizona, ("Petition No. 24"), filed under Clerk's Docket No. 305, requesting the Court authorize him to sell the Property and distribute the proceeds to certain creditors; and distribute any remainder either to Jordan's minor
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The Receiver requests the Court take judicial notice of the pleadings on file in this case.

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children, the parties for whom the Property is ultimately held, or to the Receivership Estate. On October 2, 2006, the Court entered its first Order re: Petition No. 24, Docket No. 312. 8. About October 12, 2006, Jordan filed his Response to Petition No. 24 and

Motion for Release of Property, Docket No. 317, arguing that the Property is not a Receivership Assets and the proper remedy is to release the Property from the Receivership. That day, Jordan also filed the Motion to Set Aside Order re: Petition No. 24, Docket No. 316. On November 11, 2006, Jordan filed a Reply in Support of Motion to Set Aside Order re: Petition No. 24, Docket No. 324, and the Reply in Support of Motion to Release Property Regarding Petition No. 24, Docket No. 325. And on November 22, 2006, Jordan filed the Amended Reply in Support of Motion to Release Property Regarding Petition No. 24, Docket No. 326. 9. On December 18, 2006, the Court entered an order vacating its first Order

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re: Petition No. 24, Docket No. 330, and setting the matter for hearing. 10. On January 9, 2007, the parties jointly filed the Stipulated Facts re:

Petition No. 24, Docket No. 333, identifying relevant facts to which the parties stipulate. 11. Also on January 9, 2007, this Court heard oral argument from counsel for

the parties regarding Petition No. 24, and, on February 8, 2007, the Court filed its second Order re: Petition No. 24, Docket No. 336 (the "Judgment"), which order (1) directed Jordan to within ten days of the entry of the order the 84th Street Property; (2) directed the Receiver sell the Property and apply the sale proceeds to certain creditors and then to Jordan's minor children; and (3) directed entry of the order as a final judgment.

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12.

On February 22, 2007, Jordan filed the Motion for New Trial and Motion to

Stay, renewing the arguments voiced in his previous pleadings on the matter. More specifically, in the Motion for New Trial, Jordan argues that this Court's Judgment contains manifest errors of law because it grants relief to the Receiver on claims that the Receiver has no standing or authority to assert. Jordan argues that the Court should, instead, release the Property to him. Through his Motion to Stay, Jordan requests the Court stay enforcement or execution of the Judgment pending the disposition of the Motion for New Trial. III. Receiver's Response to Motion for New Trial A. The Court should deny the Motion for New Trial because the Court committed no manifest errors of law in rendering judgment for the Receiver. 13. Jordan brings his Motion for New Trial pursuant to Rules 59(a) and 59(e) of

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the Federal Rules of Civil Procedure. Rule 59 allows the court to grant a new trial "for any of the reasons for which new trials have heretofore been granted." FED. R. CIV. PROC. 59. A new trial may be granted if the initial decision contains "clear error" or is "manifestly unjust." School Dist. No. 1J, Multnomah County v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993), cert. den. 512 U.S. 1236, 114 S.Ct. 2742, 129 L.Ed.2d 861 (1994). "A district court's denial of a motion for a new trial is reviewed for abuse of discretion." United States v. 99.66 Acres of Land, 970 F.2d 651, 658 (9th Cir. 1992) (citing Oltz v. St. Peter's Community Hosp., 861 F.2d 1440 (9th Cir. 1988)). 14. Jordan argues that this Court's Judgment contains "manifest errors of law"

because it finds for the Receiver on third-party claims that the Receiver lacks standing to assert. Motion for New Trial, § II(A). The Receiver, however, did not petition the Court
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on behalf any third party, though third-parties may benefit from the Receiver's action. The Receiver brought Petition No. 24 in his role as receiver for AALT. As such, the Receiver "steps into the shoes" of AALT and assumes the rights and obligations of AALT. See Sharpe v. FDIC, 126 F.3d 1147, 1152 (9th Cir. 1997) (holding FDIC as receiver of failed financial institution assumed rights and obligations of the institution). AALT, and the Receiver by extension, is the trustee of EMHT and, therefore, has standing to assert claims regarding the assets of EMHT, including the Property. For this reason, Jordan's lack-of-standing argument fails. 15. Jordan further argues that the Judgment contains "manifest errors of law"

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because it finds for the Receiver on claims that the Receiver has no substantive right to bring. Motion for New Trial, § II, (B). The Receiver has no personal substantive rights in the Property (nor does he claim any), but, standing the in the shoes of AALT, the trustee of EMHT, the Receiver may assert the substantive rights of the trust with regard to the Property. See Central States Pension Fund v. Central Transp., Inc., 472 U.S. 559, 570, 105 S.Ct. 2833, 2840, 86 L.Ed.2d 447 (1985) (holding "[u]nder the common law of trusts, ...trustees are understood to have all such powers as are necessary or appropriate for the carrying out of the purposes of the trust")(internal quotations omitted). Pursuant to EMHT's Trust Agreement, AALT may "sell any of the... property of the trust as the Trustee deems advisable" and "initiate or defend, at the discretion of the Trustee, any litigation affecting the trust." East Maricopa Holding Trust Agreement, p. 3. Moreover, the order appointing the Receiver grants the Receiver authority to "[c]onduct the business operations of [AALT], and the entities [it] control[s]." Order Appointing Receiver, § I, ¶

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6. Clearly, the Receiver has authority to assert claims regarding the Property. Therefore, Jordan's lack-of-authority argument fails. 16. Because Jordan fails to identify manifest errors of law committed by the

Court in rendering judgment for the Receiver, the Motion for New Trial should be denied. B. The Court should deny Jordan's request for control of the Property because it is baseless. 17. Jordan would have the Court take the Property from the Receiver and turn

it over to him. Jordan argues that, "as Trust Manager for RMT, the beneficial title holder of the Property, he [is] the only party authorized to deal with the property." Motion for New Trial, p. III. This argument runs counter to the trust agreement, which grants the trustee, and not the beneficiary, authority to "invest and re-invest, lease, rent, mortgage, insure, repair, improve or sell any of the real and personal property of the trust as the Trustee deems advisable." East Maricopa Holding Trust Agreement, p. 3. For this reason, Jordan's request for control of the Property should be denied. 18. Even Jordan's argument--that the beneficiary has an interest in the

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property superior to that of the trustee and, therefore, should control the trust property-- does not lead to granting Jordan control of the Property. While RMT is the beneficiary of EMHT, COG is the beneficiary of RMT, and Jordan's children are the beneficiaries of COG. To extend Jordan's logic, then, the ultimate beneficiaries, Jordan's children, should control the property, not Jordan. 19. Jordan cannot be trusted to manage the Property for the ultimate benefit of

his children because it is evident from the shell game he is playing with the various entities involved that his goal is to frustrate creditors and reduce, if not outright avoid, his
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financial obligations. Jordan admits that the purpose of placing the Property in the name of EMHT is to hide the asset from creditors. Now, Jordan wants this Court to sanction his shell game and award him, personally, the property. Granting him the Property would complete Jordan's con. Therefore, the Court should deny Jordan's request for possession of the Property. IV. Receiver's Response to Motion for Stay 20. The Motion to Stay was filed to "stay all proceedings to enforce or execute upon the [Judgment] pending the disposition of [the Motion for New Trial]." Motion to Stay, p. 3. As detailed above, there being no bases for granting the Motion for New Trial, the Receiver requests the Court deny the Motion to Stay as well. V. Prayer WHEREFORE, the Receiver respectfully requests the Court enter an order that (a) denies all relief sought in the Motion for New Trial and/or to Alter or Amend Judgment Regarding Petition No. 24; (b) denies all relief sought in the Motion to Stay Regarding Petition No. 24; and (c) grants the Receiver such further relief to which he may be entitled. Respectfully submitted March 12, 2007. GUTTILLA, MURPHY ANDERSON, PC

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s/Patrick M. Murphy Patrick M. Murphy Attorneys for the Receiver

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PROOF OF SERVICE This is to certify that on March 12, 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 Service List who are not registered participants of the CM/ECF System and the additional persons listed below, have been served with a copy of the foregoing document by first class mail this date. Noily Cope 5128 E. Whitton Avenue Phoenix, AZ 85018 John Fries Ryley Carlock & Applewhite, P.A. 101 N. First Avenue Suite 2700 Phoenix, Arizona 85003 Attorney for Maureen Gaughan Brian A. Hatch Brian A. Hatch, PLLC 3904 East Fairbrook Mesa, Arizona 85205-001 Attorney for Barry T. Jordan

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Case 2:03-cv-01825-PGR
0835-007(60467)

s/Patrick M. Murphy Patrick M. Murphy

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MASTER SERVICE LIST
SEC v. Ronald Stephen Holt, et al. United States District Court for the District of Arizona CV 03-1825 PHX FJM
(Rev. August 11, 2005)

Lawrence J. Warfield International Funding 14555 North Scottsdale Road, #340 Scottsdale, AZ 85254 Receiver Patrick M. Murphy Guttilla & Murphy, PC 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, TX 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 Association, Leonora Street Trust, Dover Children's Trust, Clarendon Avenue Holding Trust Dublin Holding Trust, Pacific Central Asset Management, American Benefit Card Services, Inc. Ronald Stephen Holt Central Arizona Detention Center Detainee Ronald Holt 82642008 1155 N. Pinal Parkway Florence, Arizona 85232 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 Rd. #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 Rd. Suite 880 Phoenix, Arizona 85016-4208 Michael S. Reeves Attorney at Law 1212 E. Osborn Phoenix, AZ 85014-5533 Registered CM/ECF: [email protected] Attorney for Defendant Ronald S. Holt

0835-001(19488)

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