UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

Transcription

1 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 DAVID R. ZARO (BAR NO. ) JOSHUA A. DEL CASTILLO (BAR NO. 0) PETER A. GRIFFIN (BAR NO. 00) ALLEN MATKINS LECK GAMBLE MALLORY & NATSIS LLP South Figueroa Street, Suite 00 Los Angeles, California 00- Phone: () - Fax: () 0- dzaro@allenmatkins.com jdelcastillo@allenmatkins.com pgriffin@allenmatkins.com Attorneys for Receiver DAVID P. STAPLETON SECURITIES AND EXCHANGE COMMISSION, v. Plaintiff, BIC REAL ESTATE DEVELOPMENT CORPORATION and DANIEL R. NASE, individually and d/b/a BAKERSFIELD INVESTMENT CLUB, Defendants, BIC SOLO 0K TRUST and MARGARITA NASE, UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA Relief Defendants. Case No. :-cv-00-ljo-jlt MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION OF RECEIVER, DAVID P. STAPLETON, FOR ORDER APPOINTING RECEIVER AS ELISOR FOR PURPOSES OF RESTORING REAL PROPERTY INTERESTS TO RECEIVERSHIP ENTITIES OR, IN THE ALTERNATIVE, FOR ORDER TO SHOW CAUSE RE: CIVIL CONTEMPT [Notice of Motion and Motion; Declaration of David P. Stapleton; Request for Judicial Notice; and [Proposed] Order submitted concurrently herewith] Date: June, 0 Time: :0 a.m. Ctrm: Judge: Hon. Lawrence J. O'Neill 0.0/LA

2 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 TABLE OF CONTENTS I. INTRODUCTION... II. RELEVANT FACTUAL BACKGROUND... III. ARGUMENT... A. Summary Procedures Are Appropriate Because The Noncompliant Investors Hold The Subject Property Interests In Constructive Trust For The Benefit Of The Receivership Entities... B. The Court Should Exercise Its Broad, Equitable Discretion To Appoint The Receiver As An Elisor For The Purposes Of Restoring The Subject Property Interests To The Receivership Entities... 0 C. In The Alternative, Noncompliant Investors May Be Sanctioned With A Contempt Citation For Willful Or Deliberate Violations Of The Appointment Order... D. Federal Rules Provide That The Same Contempt Procedures Apply To The Noncompliant Investors Even Though They Are Non-Parties... E. In The Event The Court Declines To Grant Any Form Of The Receiver's Requested Relief, It Should Authorize The Receiver To Commence Turnover Litigation Against The Noncompliant Investors... IV. CONCLUSION... Page 0.0/LA (ii)

3 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 Cases 0.0/LA TABLE OF AUTHORITIES (iii) Page(s) Bennett v. Williams, F.d (th Cir. )... Blueberry Properties, LLC v. Chow, 0 Cal.App.th 0 (0)..., CFTC. v. Topworth Int'l, Ltd., 0 F.d 0 (th Cir. )... 0 Ennels v. Alabama Inns Assoc., F.Supp. 0 (M.D. Ala )... In re Thinking Machines Corp., B.R. (D. Mass. )... In re Thinking Machines Corp., F.d 0 (st Cir. )... In re Twenty-First Century Resources, Inc., Fed. Appx. 0 (th Cir. Cal. 00)... Int'l Union, UMWA v. Bagwell, U.S. ()... Irwin v. Macott, 0 F.d, - (th Cir. 00)... John Roe, Inc. v. U.S. (In re Grand Jury Proceedings), F.d (th Cir. 000)... Rayan v. Dykeman, Cal.App.d (0)... SEC.v Ross, 0 F.d 0 (th Cir. 00)... SEC v. Basic Energy & Affiliated Resources, F.d (th Cir. 00)... 0 SEC v. Capital Consultants, LLC, F.d (th Cir. 00)... 0 SEC v. Cherif, F.d 0 (th Cir. )... SEC v. Forex Asset Mgmt., LLC, F.d (th Cir. 00)... 0 SEC v. Hardy, 0 F.d 0 (th Cir. )... 0,

4 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 Page(s) SEC v. Wang, F.d 0 (d Cir. )... 0 SEC v. Wencke, F.d (th Cir. )... Southwestern Media, Inc. v. Rau, 0 F.d (th Cir. )... U.S. v. City of Jackson, Miss., F.d (th Cir. 00)... Statutes California Code of Civil Procedure (a)()... California Code of Civil Procedure.... Rules Federal Rule of Civil Procedure /LA (iv)

5 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 MEMORANDUM OF POINTS AND AUTHORITIES David P. Stapleton (the "Receiver"), the Court-appointed permanent receiver in this matter, hereby moves this Court for an order appointing him as elisor for the purpose of executing and recording deeds sufficient to restore outstanding ownership interests in certain residential real properties to the Receivership Entities. In the alternative, the Receiver requests that the Court enter an order to show cause re: civil contempt, on the grounds that investors in the Receivership Entities, identified in the document attached hereto as Exhibit A (the "Noncompliant Investors"), who were fraudulently conveyed pre-receivership interests in residential real properties by the Defendants, have failed to comply with the turnover provisions of this Court's April 0 Stipulated Preliminary Injunction and Orders () Freezing Assets, and () Appointing a Permanent Receiver (Dkt. No. ) (the "Appointment Order") and the Receiver's subsequent real property interest recovery plan (the "Recovery Plan"), approved by the Court on June, 0 (Dkt. No. ). The Noncompliant Investors' failure to restore the real property interests in issue to the Receivership Entities has rendered it impossible for the Receiver to sell those properties (the "Properties") in accordance with the Court's prior orders, thereby depriving the Receivership Entities of an estimated $00,000 in net sales proceeds. The most cost-effective manner of restoring the Property interests in issue to the Entities is to appoint the Receiver as an elisor for the purposes of executing and recording deeds sufficient to restore the subject interests to the Receivership The Court appointed Mr. Stapleton as receiver for Defendant BIC Real Estate Development Corporation and its subsidiaries and affiliates, including but not limited to WM Petroleum; Target Oil & Gas Drilling, Inc.; Tier Solar Power Company; Tier Solar Power Company, LLC; and Home Sweet Holdings (collectively, the "Receivership Entities" or "Entities"). In keeping with this Court's prior orders, individual investors are identified only by first initial and last name. The courtesy copy of the Receiver's Motion will include a variant of Exhibit A hereto that identifies the investors in issue by their full names. 0.0/LA --

6 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 Entities. Alternatively, and in the event that the Court determines that equitable or due process considerations require an alternative approach, the Receiver requests that the Court enter an order to show cause re: civil contempt against the Noncompliant Investors. As the remedy for civil contempt, the Receiver requests that the Court appoint or authorize him to act as an elisor to execute and record deeds sufficient to restore the Property interests in issue to the Receivership Entities. I. INTRODUCTION. This Court's April, 0 Appointment Order vests exclusive authority and control over assets of the Receivership Entities with the Receiver and includes specific language compelling parties in possession of receivership assets to turn such assets over to the Receiver. As reflected in the materials on file in this action, the two principal assets of the Receivership Entities include a group of approximately 0 residential real properties and certain real and personal property assets comprising an oil company. With respect to the Properties, the Receiver previously confirmed, and principal Defendant Daniel Nase admitted that, in the pre-receivership period, the Receivership Entities and Mr. Nase conveyed fractionalized interests in most of the Properties to Entity investors as part of a so-called liquidation plan which purported to repay Entity investors. The Receiver has further confirmed, and the Court has accepted, that these conveyances were made in a manner inconsistent with the value of the investors' investments in or contributions to the Receivership Entities. Put another way, these conveyances were made without consideration, or the exchange of reasonably equivalent value, and appear to have been nothing but a sham intended to provide defrauded investors with the impression that they had either realized a profit on their investments in the Receivership Entities or had been partially or completely repaid. Neither is true. Accordingly, and consistent with the turnover provisions of the Appointment Order, the Receiver proposed and secured Court approval of a plan (the "Recovery 0.0/LA --

7 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 Plan") to restore these improperly conveyed interests to the Receivership Entities in order to enable the Receiver to market and sell the Properties for the benefit of all Receivership Entity investors and creditors. While most investors have complied with the terms of the Appointment Order or participated in the Receiver's Recovery Plan, and the Receiver has restored to the Entities complete recovery title ownership of more than % of all improperly conveyed Property interests, the Noncompliant Investors have failed to comply with either () the turnover provisions of the Appointment Order; or () the Recovery Plan. This failure has enabled the Noncompliant Investors to retain Property interests to which they are not actually entitled and to deprive the Receivership Entities of approximately $00,000 in net sales proceeds that would result from their sales. As of the date of this Motion, the Noncompliant Investors continue to hold the Property interests in issue, essentially in constructive trust for the benefit of the Receivership Entities, but have failed or refused to restore them to the Entities in accordance with the Appointment Order or the Recovery Plan. The Receiver now respectfully requests that this Court now appoint the Receiver to serve as an elisor for the purposes of executing and recording such instruments as are necessary and appropriate to restore the Property interests in issue to the Receivership Entities or, in the alternative, that the Court enter an order to show cause why the Noncompliant Investors should not be held in civil contempt for their violation of the Appointment Order, with the Receiver's appointment as an elisor as the remedy for such contempt. II. RELEVANT FACTUAL BACKGROUND. The Receiver was appointed as the permanent receiver for the Receivership Entities pursuant to this Court's April, 0 Stipulated Preliminary Injunction and Orders () Freezing Assets, and () Appointing a Permanent Receiver (the "Appointment Order") and, among other things, vested with exclusive authority and control over the assets of the Receivership Entities, including the Properties. (Dkt. 0.0/LA --

8 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 No..) At the time of the Receiver's appointment, approximately 0 Properties comprised the residential property portion of the receivership estate. (Declaration of David P. Stapleton ["Stapleton Decl."].) Upon his appointment, and among other things, the Receiver () promptly assumed authority, control, and management of the Properties; () began an investigation into and analysis of the business and financial activities of the Receivership Entities, including with respect to the Properties; and () began to formulate a plan for the disposition of the Properties which he believed, in his reasonable business judgment, was most likely to minimize costs and maximize returns to the receivership. (Id.) Section X of the Appointment Order vested the Receiver with exclusive authority and control over the assets of the Receivership Entities, "with full power to sue, foreclose, marshal, collect and take into possession all such property" (Dkt. No. at :-). Section XI of the Appointment Order required "any persons who are in custody, possession or control of any assets,. or other property of or managed by any of the [Receivership Entities]" to "forthwith give access to and control of such property to the [Receiver]" (Id. at :-0). The Appointment Order also included an express bar on interference with the Receiver's duties and his efforts to recover Entity assets (Id. at :-). In other words, the Appointment Order: () vested the Receiver with exclusive authority and control over assets of the Receivership Entities; () obligated all parties in possession or control of such assets to turn them over to the Receiver; and () barred all parties from interfering with, among other things, the Receiver's asset recovery efforts. Having completed an initial review and analysis of relevant books and records, the Receiver submitted his First Interim Report and Petition for Further Instructions (the "First Interim Report") (Dkt. No. ) to the Court on June, 0. Therein, he related his confirmation that, in the pre-receivership period, the Receivership Entities and Mr. Nase caused fractionalized interests in many of the Properties to be conveyed to Entity investors pursuant to a so-called liquidation 0.0/LA --

9 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 plan, purporting to be a means of repaying investors. The Receiver further confirmed that value of these conveyances to each investor bore little or no relationship to, or was not commensurate with, the amount of any given investor's investment or contribution to the Entities. (Id.) This conclusion was consistent with allegations made by the Plaintiff Securities and Exchange Commission (the "Commission") in its Complaint. (See, e.g., Dkt. No. at,,, 0.) On July, 0, this Court entered a Judgment as to Defendant Daniel R. Nase (Dkt. No. ) pursuant to which Mr. Nase admitted the allegations in the Commission's Complaint, including allegations regarding the so-called liquidation plan, to be true. As a consequence of his conclusion that the fractionalized Property interests conveyed to investors in the pre-receivership period were unrelated to investment amounts and, as alleged by the Commission, not given in exchange for any consideration, the Receiver proposed his Recovery Plan to the Court, believing it to be the lowest cost and most appropriate method for quickly restoring record title ownership of all Properties to the Receivership Entities in order to enable them to be marketed and sold. The Court approved the Recovery Plan on June, 0 (Dkt. No. ), and the Receiver thereafter commenced his outreach to investors in order to recover the interests in issue. (Stapleton Decl..) The Recovery Plan has largely been successful and the Receiver has successfully restored to the receivership approximately % of the real property interests improperly conveyed in the pre-receivership period. (Stapleton Decl..) This has enabled him to commence marketing and selling many of the Properties, in Practically speaking, the conveyances are, in their present forms, valueless. There is there is no market for fractionalized interests (as small as less than %, as addressed below) in individual residential real properties. Notwithstanding whatever value the Defendants arbitrarily assigned to these conveyances in the pre-receivership period, investors have essentially no forum for liquidating their interests, absent partition actions that would, in many cases, be more expensive than the cash value of their interests. Accordingly, the Receiver's Recovery Plan represents the only viable means of permitting investors to recover, by restoring the interests to the Entities and allowing the Receiver to sell the Properties, resulting in funds from which investor claims will ultimately be paid. 0.0/LA --

10 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page 0 of 0 0 accordance with Court-approved marketing and sales procedures. (See, e.g., Dkt. No..) However, as of the date of this Motion, Noncompliant Investors, improperly holding title to Properties as a result of pre-receivership, liquidation plan conveyances, have refused or failed to abide by the turnover requirements of the Appointment Order or cooperate with the Receiver's Recovery Plan. (Stapleton Decl..) The Noncompliant Investors now hold the subject interests in constructive trust for the Receivership Entities, but have failed to restore them upon the Receiver's request. The Properties implicated by their noncompliance are as follows: Property Address APN Property Interest Instrument Number Noncompliant Investor Shelly, an undivided.0% interest 000 H. Rogel 00 South I Street, -0- an undivided.% interest 000 L.M. Cole 00 South I Street, IRA Resources Inc. FBO -0- an undivided.% interest 000 L.M. Cole IRA XX-YYYYY 00 South I Street, -0- an undivided.0% interest 000 J. Craig 0 Canyon Court, --0 an undivided.% interest 0000 R. Lane Gardenia Avenue, -0-0 an undivided 0.% interest 000 J.E. Arteaga Meadows Street, --0 an undivided.0% interest 0000 D. Davis Meadows Street, --0 an undivided.% interest 0000 G. Ruiz 00 Quincy Street, -0- an undivided.% interest 0000 L.M. Cole 00 Castaic Avenue, -- an undivided.0% interest 000 G. M Lane-Owens Blade Avenue, -0-0 an undivided.% interest 000 O. Figures 0 Orange Blossom, -- an undivided.% interest 000 T. Canterberry Arvin Street, -0-0 an undivided.% interest 000 G. Wilson Arvin Street, -0-0 an undivided.% interest 000 B. Oscarson Arvin Street, -0-0 an undivided.% interest 000 R. Lane Arvin Street, -0-0 an undivided.% interest 000 E. Harris Arvin Street, -0-0 an undivided.0% interest 000 D. Kincey Arvin Street, -0-0 an undivided.% interest 000 E. Grider Arvin Street, -0-0 an undivided.% interest 000 C. Osagie-Amayo Arvin Street, -0-0 an undivided.% interest 000 B. Oscarson Arvin Street, -0-0 an undivided.% interest 000 A. Lopez 0.0/LA --

11 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 Arvin Street, Arvin Street, Arvin Street, Via Venezia, Via Venezia, Via Venezia, Via Venezia, Via Venezia, Via Venezia, Via Venezia, Via Venezia, Via Venezia, Via Venezia, Via Venezia, Via Venezia, Via Venezia, Via Venezia, Via Venezia, 0 Colonia De Las Rosas, 0 Colonia De Las Rosas, -0-0 an undivided.% interest 000 C. Decatur -0-0 an undivided.% interest 000 R. McDonald -0-0 an undivided.% interest 000 J.A. Ahern -- an undivided.% interest 000 H. Yu -- an undivided.0% interest 000 W. Brindley -- an undivided.0% interest 000 E. Matarazzzo Jr -- an undivided.% interest 000 J.Y. Vuong -- an undivided.% interest 000 B.C. Olson -- an undivided.0% interest 000 J.A. Rodriguez -- an undivided.% interest 000 J. Woodring -- an undivided.% interest 000 F. Lane -- an undivided.0% interest 000 G. Otten -- an undivided.0% interest 000 G. Jones -- an undivided.0% interest 000 N. Healy -- an undivided.0% interest 000 F.B. Sullivan -- an undivided.0% interest 000 W. Ashmore -- an undivided.0% interest 000 T. Brannon -- an undivided.00% interest 000 R. Perez -0- an undivided.0% interest 000 S.L. Pierce -0- an undivided.% interest 000 O. Cobian The Receiver has made multiple efforts to contact each of the Noncompliant Investors, to request cooperating with the Recovery Plan, and to attempt to address any valid concerns presented by the investors. (Stapleton Decl..) These efforts have taken the form of written correspondence, the provision of pre-prepared materials sufficient to enable the restoration of a specifically identified Property interest to the receivership while expressly enabling an investor to retain a claim against the Receivership Entities (including a form grant deed and an agreement formally preserving the investors' rights to submit claims against the Receivership Entities), telephone calls, and s. (Id.) As of the date of this Motion, the Receiver and his staff have been engaged in efforts to convince Noncompliant Investors to abide by the turnover requirements of the Appointment Order or 0.0/LA --

12 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 participate in the Recovery Plan for at least months. (Id.) Despite his best efforts, and while he has met with substantial success in restoring most Property interests to the Receivership Entities, the Noncompliant Investors have either outright refused to cooperate or simply ignored the Receiver's outreach efforts, hamstringing his disposition efforts with respect to Properties. (Id.) As noted above, the Noncompliant Investors hold fractionalized interests in Properties, making it impossible for the Receiver to restore complete record ownership of those Properties to the receivership and, accordingly, to sell those Properties for the benefit of all Receivership Entity investors and creditors. (Stapleton Decl..) Based on the information presently available to the Receiver, the net aggregate value of those Properties to the Receivership Entities is at least $00,000, meaning the Noncompliant Investors' refusal to comply with the turnover provisions of the Appointment Order or the Recovery Plan is presently costing the receivership (and its investors and creditors) at least $00,000 in equity, to say nothing of ongoing and otherwise unnecessary carrying costs. (Id. at.) The Receiver respectfully submits that, as a consequence of the above, all Noncompliant Investors are, intentionally or otherwise violating turnover requirements and interference bars in the Appointment Order, along with the Courtapproved Recovery Plan, and undermining one of the Receiver's key obligations in this matter: marshaling receivership assets for the benefit of all investors and creditors. Accordingly, the Receiver requests that the Court appoint the Receiver an elisor for the purposes of executing and recording instruments sufficient to restore the Property interests in issue to the Receivership Entities or, in the alternative, enter an order to show cause re: civil contempt against the Noncompliant Investors, and appoint the Receiver as an elisor, as discussed herein, as a remedy for such contempt. 0.0/LA --

13 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 III. ARGUMENT. A. Summary Procedures Are Appropriate Because The Noncompliant Investors Hold The Subject Property Interests In Constructive Trust For The Benefit Of The Receivership Entities. The use of summary procedures is appropriate where "the purpose is to obtain equitable relief from a non-party against whom no wrongdoing is alleged[.]" SEC v. Cherif, F.d 0, (th Cir. ) (internal quotation marks omitted); see also SEC v. Wencke, F.d, - (th Cir. ). It is especially proper where a receiver can plausibly establish that the subjects of the proposed summary proceedings are constructive trustees in possession of receivership property. SEC.v Ross, 0 F.d 0, (th Cir. 00). Here, the Receiver has more than "plausibly claimed" that the Noncompliant Investors are constructive trustees on behalf of the Entities. Indeed, he has conducted an extensive review of relevant books and records and confirmed the improper nature of the liquidation plan conveyances, along with the fact that the Property interests conveyed were unrelated to, or not commensurate with, the investors' actual investment amounts or contributions to the Entities. Likewise, Mr. Nase has admitted the Commission's allegations regarding liquidation plan, many of which directly track the facts as confirmed by the Receiver, and accepted by the Court. (Dkt. No..) In other words, there is no question that the Noncompliant Investors are presently holding Property interests subject to the The Court's acceptance of the Receiver's conclusions is entirely appropriate. In the estate administration context, courts are deferential to the business judgment of bankruptcy trustees, receivers, and similar estate custodians. See, e.g., Bennett v. Williams, F.d, (th Cir. ) ("[W]e are deferential to the business management decisions of a bankruptcy trustee."); Southwestern Media, Inc. v. Rau, 0 F.d, (th Cir. ) ("The decision concerning the form of [estate administration] rested with the business judgment of the trustee."); In re Thinking Machines Corp., B.R., (D. Mass. ) ("The application of the business judgment rule and the high degree of deference usually afforded purely economic decisions of trustees, makes court refusal unlikely.") (rev'd on other grounds, In re Thinking Machines Corp., F.d 0 (st Cir. ). 0.0/LA --

14 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 turnover and non-interference provisions of the Appointment Order, and to the Recovery Plan, and that, accordingly, the Court may employ summary proceedings to restore those interests to the Receivership Entities. B. The Court Should Exercise Its Broad, Equitable Discretion To Appoint The Receiver As An Elisor For The Purposes Of Restoring The Subject Property Interests To The Receivership Entities. This Court is vested with broad equitable discretion in matters of receivership estate administration. SEC v. Hardy, 0 F.d 0, 0 (th Cir. ); SEC v. Forex Asset Mgmt., LLC, F.d, (th Cir. 00); SEC v. Basic Energy & Affiliated Resources, F.d, (th Cir. 00); SEC v. Wang, F.d 0, (d Cir. ). Moreover, the "primary purpose of equity receiverships is to promote orderly and efficient administration of the estate by the district court for the benefit of creditors." Hardy, 0 F.d at 0 (emphasis added). The Ninth Circuit has emphasized a district court's broad discretion, finding that: A district court's power to determine the appropriate action to be taken in the administration of the receivership is extremely broad. The district court has broad powers and wide discretion to determine the appropriate relief in an equity receivership. SEC v. Capital Consultants, LLC, F.d, (th Cir. 00) (citations omitted) (emphasis added); see also CFTC. v. Topworth Int'l, Ltd., 0 F.d 0, (th Cir. ) ("This court affords 'broad deference' to the court's supervisory role, and 'we generally uphold reasonable procedures instituted by the district court that serve th[e] purpose' of orderly and efficient administration of the receivership for the benefit of creditors."). Here, an elisor should be appointed because permitting the Noncompliant Investors to retain Property interests unrelated to the nature and amount of their 0.0/LA -0-

15 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 investment, to the detriment of other investors and creditors (including the overwhelming percentage of investors who complied with the Appointment Order and Recovery Plan) would be manifestly inequitable. In effect, the Court would be ratifying pre-receivership transfers made with a fraudulent intent and effect and undermining the Receiver's ability to market and sell the Properties consistent with existing Court orders. Put simply, in order "to promote orderly and efficient administration of the estate" for the benefit of all investors and creditors, as contemplated by the Hardy court, the Property interests held improperly by the Noncompliant Investors must restored to the Receivership Entities so that the Receiver may market and sell those Properties for the benefit of all investors in and creditors of the Entities. The Receiver respectfully submits that the Court's equitable authority extents to the right to appoint the Receiver as an elisor for the purposes of executing and recording the conveyances that are necessary and appropriate to restore the subject Property interests to the receivership. While there is no direct federal analogue, the statutory concept of the elisor is set forth in Cal. Code Civ. P.., and originates with the concept that a court can appoint an independent entity to take an action where an otherwise necessary party is unwilling or unable to do so. California's statutory version of the elisor, as codified in Cal. Code Civ. P.., initially related simply to the execution of process or orders involving a sheriff or coroner. However, the concept has been expanded to include the appointment of independent actors to execute documents in other scenarios. For instance, in Blueberry Properties, LLC v. Chow, 0 Cal.App.th 0, 0 (0), the California Court of Appeal affirmed a trial court's order appointing an elisor to execute purchase and sale documents required by a settlement which a party subsequently refused to execute. In that instance, the trial court reasoned that Cal. Code. Civ. P. (a)(), which defines the scope of a superior court's powers, 0.0/LA --

16 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 granted the court inherent power "[t]o compel obedience to its judgments, order, and process, and to the orders of a judge out of court, in an action or proceeding therein" via the appointment of an independent third party an elisor charged with effectuating its orders. The California Court of Appeal agreed, finding that the appointment of an "elisor to sign documents on behalf of a recalcitrant party" is appropriate "in order to effectuate [the court's] judgments or orders, where the party refuses to execute such documents." Chow, 0 Cal.App.th at 00. By the time the Chow decision was published, the reasoning underlying the decision had already been applied to the concept of property disputes, with elisors being appointed to execute required real property conveyance instruments. See, e.g., Rayan v. Dykeman, Cal.App.d, (0) (affirming trial court order appointing elisor to execute quitclaim deed). Federal courts have applied the same analysis, to the same effect. See, e.g., In re Twenty-First Century Resources, Inc., Fed. Appx. 0, (th Cir. Cal. 00) (recognizing elisor as means of conveying real property interests in accordance with court orders in the face of noncompliance by a party). Here, the Court may appoint the Receiver to serve as an elisor and execute record deeds restoring each of the Noncompliant Investors' interests to the Receivership Entities, resulting in the restoration of complete record ownership of each of the subject Properties to the Receivership Entities, and enabling the Receiver to complete the Property sales previously approved by this Court, for the benefit of all Receivership Entity investors and creditors. C. In The Alternative, Noncompliant Investors May Be Sanctioned With A Contempt Citation For Willful Or Deliberate Violations Of The Appointment Order. In contrast with criminal contempt proceedings, civil contempt sanctions may be imposed in an ordinary civil proceeding upon notice and opportunity to be heard, and neither a jury trial nor proof beyond a reasonable doubt is required. Int'l Union, 0.0/LA --

17 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 UMWA v. Bagwell, U.S.,, - (). All that is required is a showing that there is clear and convincing evidence, as there is here, of a failure to comply with a court order requiring specific conduct. U.S. v. City of Jackson, Miss., F.d, (th Cir. 00). Direct contempt occurring in court may be immediately adjudged and sanctioned summarily. Int'l Union, U.S. at fn.. Where, as here, there is a claim relating to indirect contempt of the remedial civil variety, notice and an opportunity to be heard are appropriate, and the movant must cite the provisions of the injunction he wishes to be enforced, allege noncompliance, and ask the Court on the basis of these representations for the noncomplying person or entity to show cause why he or she should not be adjudged in contempt. John Roe, Inc. v. U.S. (In re Grand Jury Proceedings), F.d, (th Cir. 000). These requirements have been satisfied here. There is no dispute that: The Appointment Order contains both a turnover directive and a bar on interference with the Receiver's efforts to recover or marshal receivership assets; The Receiver has confirmed, and Mr. Nase has admitted, that the prereceivership, fractionalized Property interests conveyed pursuant to the liquidation plan are inconsistent with the Noncompliant Investor's investments in or contributions to the Entities; The Court has accepted the Receiver's conclusion regarding the prereceivership conveyances and approved his Recovery Plan; and The Noncompliant Investors have failed to comply with the turnover requirement of the Appointment Order or to cooperate in the Receiver's Recovery Plan, thereby depriving the Receivership Entities of complete ownership of and the right to liquidate assets that will yield at least 0.0/LA --

18 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 $00,000 in net proceeds for the benefit of the Entities and their investors and creditors. Accordingly, civil contempt sanctions are warranted against the Noncompliant Investors, and the Receiver respectfully requests that the Court issue an order to show cause should it determine that is the most procedurally appropriate means of compelling the Noncompliant Investors to return the Property interests in issue to the receivership. As noted above, the Receiver believes the appropriate remedy for civil contempt in this context would be to appoint him as an elisor to execute and record those instruments necessary and appropriate to restore the Noncompliant Investors' outstanding Property interests to the Receivership Entities. D. Federal Rules Provide That The Same Contempt Procedures Apply To The Noncompliant Investors Even Though They Are Non- Parties. Fed. R. Civ. P. provides in full that "[w]hen an order grants relief for a nonparty or may be enforced against a nonparty, the procedure for enforcing the order is the same as for a party." This rule, for example, allows a non-party who has standing to enforce a court order entered in his or her favor. Ennels v. Alabama Inns Assoc., F.Supp. 0, 0 (M.D. Ala ). As interpreted by the Ninth Circuit, the rule also allows enforcement of an injunction "addressed to a non-party" so long as he is "given notice of the injunction" and the rule permits the "district court to use 'the same processes for enforcing obedience to the order as if [he were] a party.'" Irwin v. Macott, 0 F.d, - (th Cir. 00). Here, as reflected in the Receiver's concurrently submitted declaration, all of the Noncompliant Investors have been apprised of and provided with access to the Appointment Order, and will be served with a copy of the instant Motion and all supporting papers. As such, should the Court elect to pursue contempt sanctions, the process proffered by the Receiver is entirely consistent with applicable law. 0.0/LA --

19 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 E. In The Event The Court Declines To Grant Any Form Of The Receiver's Requested Relief, It Should Authorize The Receiver To Commence Turnover Litigation Against The Noncompliant Investors. As noted above, the turnover and noninterference language of the Appointment Order are clear, and there is no reasonable dispute that the Noncompliant Investors have failed to conduct themselves in accordance with these provisions, or to participate in the Receiver's Recovery Plan, despite longstanding and concerted efforts by the Receiver. Likewise, there is no dispute that, but for the outstanding Property interests being restored to the Receivership Entities, the Receiver will be unable to sell the Properties affected by the improper prereceivership conveyances to the Noncompliant Investors, depriving the Receivership Entities of at least $00,000 in value. Accordingly, and in the event that the Court declines to exercise its broad discretion to afford the Receiver any version of the relief requested above, it should authorize the Receiver to commence litigation to recover the outstanding Property interests from the Noncompliant Investors. Based on the information presently available, the Receiver and his counsel of record, Mallory & Natsis, LLP ("Allen Matkins") presently estimate that the cost associated with such litigation would range between $,000 and $0,000, generally broken down as follows: Task Estimated Receiver and Allen Matkins Fees Prepare and serve Complaints $0,000 - $0,000 Written Discovery $,000 - $0,000 Depositions $,000 - $0,000 Prepare and prosecute Motions for Summary Judgment $0,000 - $0,000 Client and third party communications $,000 - $0,000 TOTAL: $,000 - $0, /LA --

20 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page 0 of 0 0 IV. CONCLUSION. For the foregoing reasons, the Receiver respectfully requests that the Court enter an order to show cause why the Noncompliant Investors should not be sanctioned for their violation of the Appointment Order and compelled to return the subject Property interests, or, in the alternative, that the Court enter an order appointing its clerk or the Receiver as an elisor for the purposes of executing and recording instruments sufficient to restore the Property interests in issue here to the Receivership Entities. Dated: May, 0 0.0/LA -- ALLEN MATKINS LECK GAMBLE MALLORY & NATSIS LLP DAVID R. ZARO JOSHUA A. DEL CASTILLO PETER A. GRIFFIN By: /s/ Joshua A. del Castillo JOSHUA A. DEL CASTILLO Attorneys for Receiver DAVID P. STAPLETON

21 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of EXHIBIT A Exhibit A - Page

22 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of Noncompliant Investor H. Rogel L. M. Cole IRA Resources Inc FBO L. M. Cole IRA XX-YYYYY J. Craig R, Lane J.E. Arteaga D. Davis G. Ruiz L.M. Cole G. M Lane-Owens O. Figures T. Canterberry G. Wilson B. Oscarson R. Lane E. Harris D. Kincey E. Grider C. Osagie-Amayo B. Oscarson A. Lopez C. Decatur R. McDonald J. A Ahern H. Yu W. Brindley E. Matarazzo Jr J. Y Vuong B.C. Olson J.A. Rodriguez J. Woodring F. Lane G. Otten G.Jones N. Healy F. B Sullivan W. Ashmore T. Brannon R. Perez S.L. Pierce O. Cobian Exhibit A - Page

23 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 PROOF OF SERVICE Securities and Exchange Commission v. BIC Real Estate Development Corporation and Daniel R. Nase, et al. USDC, Eastern District of California Case No. :-cv-00 (LJO) JLT I am employed in the County of Los Angeles, State of California. I am over the age of and not a party to the within action. My business address is S. Figueroa Street, Suite 00, Los Angeles, California 00-. A true and correct copy of the foregoing document(s) described as: MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION OF RECEIVER, DAVID P. STAPLETON, FOR ORDER APPOINTING RECEIVER, DAVID P. STAPLETON, AS ELISOR FOR PURPOSES OF RESTORING REAL PROPERTY INTERESTS TO RECEIVERSHIP ENTITIES OR, IN THE ALTERNATIVE, FOR ORDER TO SHOW CAUSE RE: CIVIL CONTEMPT will be served in the manner indicated below:. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING ("NEF") the above-described document will be served by the Court via NEF. On May, 0, I reviewed the CM/ECF Mailing Info For A Case for this case and determined that the following person(s) are on the Electronic Mail Notice List to receive NEF transmission at the address(es) indicated below: John Brian Bulgozdy bulgozdyj@sec.gov,larofiling@sec.gov,berryj@sec.gov James M. Duncan jduncan@kleinlaw.com,kratekin@kleinlaw.com Barry L Goldner BGOLDNER@KLEINLAW.COM,mbrown@kleinlaw.com,shayes@kleinlaw.c om Peter Allen Griffin pgriffin@allenmatkins.com James Robert Harvey jharvey@kleinlaw.com Matthew C. McCartney matt@eastmanmccartney.com Noel Thomas McCartney tom@mccartneylaw.net,lacy@mccartneylaw.net,matt@mccartneylaw.net Matthew Thomas Montgomery montgomerym@sec.gov,larofiling@sec.gov,irwinma@sec.gov David P. Stapleton david@stapletoninc.com Manuel Vazquez vazquezm@sec.gov 0./LA - -

24 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 Scott Vick scott@vicklawgroup.com,april@vicklawgroup.com David Robert Zaro dzaro@allenmatkins.com,mdiaz@allenmatkins.com Joshua A. del Castillo jdelcastillo@allenmatkins.com. SERVED BY U.S. MAIL: On May, 0, I served the person(s) and/or entity(ies) on the attached service list, in this case by placing a true and correct copy thereof in a sealed envelope, U.S. Mail first class addressed as stated on the service list. I am readily familiar with this firm's practice of collection and processing correspondence for mailing. It is deposited with the U.S. postal service on that same day in the ordinary course of business. I declare that I am employed in the office of a member of the Bar of this Court at whose direction the service was made. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on May, 0 at Los Angeles, California. /s/ Martha Diaz Martha Diaz 0 0./LA - -

25 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 Franchise Tax Board (FTB) PO Box Sacramento, CA - H. Rogel Hahn Avenue ;0 J. Craig Diamond Oak Avenue 0 J.E. Artega 0 Blue Devils Avenue G. Ruiz 0 Rondeau # Westminster, CA G.M. Lane-Owens 0 Leighton Avenue Los Angeles, CA 00 T. Canterberry 0 Julie Street B. Oscarson 00 Birkenfeld Avenue D. Kincey 0 W. Poppyfields Drive Altadena, CA 00 C. Osagie-Amayo PO Box 0 0 C. Decatur Schwarzkopf Drive El Paso, TX J.A. Ahern Charlotte Avenue Oak Hill, OH W. Brindley 0 Northshore Drive SERVICE LIST Internal Revenue Service 0 Front Street San Diego, CA 0- IRA Resources Inc. FBO L.M. Cole 00 Hidden Oaks Drive 0 R. Lane Parker Avenue, Apt. B 0 D. Davis Sidney Drive 0 L.M. Cole 00 Hidden Oaks Drive 0 O. Figures 00 Stockdale Hwy #0 0 G. Wilson PO Box Oakland, CA 0 Eblon Harris Poindexter Street Los Angeles, CA 00 E. Grider Dorian Drive 0 A. Lopez Rush Drive # San Marcos, CA 0 R. McDonald Berryman Avenue # Los Angeles, CA 00 H. Yu Fulton Avenue Monterey Park, CA E. Matarazzo, Jr. Weiner Street Staten Island, NY 00 0./LA - -

26 Case :-cv-00-ljo-jlt Document Filed 0/0/ Page of 0 0 J.Y. Vuong 0 Hageman Road, Suite B J.A. Rodriguez 0 Finley Drive, Apt. Taft, CA F. Lane PO Box 0 G. Jones Brookpark Drive Amherst, NY F.B. Sullivan Saint Andrews Drive Chino Hills, CA 0 T. Brannon 00 Ming #0 Bakesfield, CA 0 S.L. Lewis 0 McKinley Avenue 0 B. Olson Tuttle Lane Lummi Island, WA J. Woodring FM E. Tyler, TX 0 G. Otten Emerald Isle Way N. Healy Wilmington Road San Diego, CA W. Ashmore, Jr. 0 Great River Road Guttenberg, IA 0 R. Perez 0 Voth Lane Shafter, CA O. Cobian 00 USAA Boulevard #0 San Antonio, TX 0 0./LA - -