Case: 22-11226 Document: 29 Page: 1 Date Filed: 01/20/2023
`
`No. 22-11226
`
`In the
`United States Court of Appeals
`for the
`Fifth Circuit
`
`SECURITIES AND EXCHANGE COMMISSION,
`Plaintiff – Appellee,
`v.
`TIMOTHY BARTON,
`Defendant – Appellant.
`
`From the United States District Court
`for the Northern District of Texas
`Honorable Brantley Starr, U.S. District Judge
`Cause No. 3:22-cv-2118-X
`
`RECEIVER’S MOTION TO BE RECOGNIZED AS THE APPELLEE OR
`AS A PARTY IN INTEREST, MOTION TO INTERVENE OR
`ALTERNATIVELY, MOTION FOR LEAVE TO FILE AMICUS BRIEF
`
`BROWN FOX PLLC
`Charlene C. Koonce
`State Bar No.11672850
`8111 Preston Road, Suite 300
`Dallas, TX 75225
`T: (214) 327-5000
`F: (214) 327-5001
`charlene@brownfoxlaw.com
`Counsel for Receiver Cortney C. Thomas
`
`‒1‒
`
`

`

`Case: 22-11226 Document: 29 Page: 2 Date Filed: 01/20/2023
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`RECEIVER’S MOTION TO BE RECOGNIZED AS THE APPELLEE OR
`AS A PARTY IN INTEREST, MOTION TO INTERVENE OR
`ALTERNATIVELY, MOTION FOR LEAVE TO FILE AMICUS BRIEF
`Cortney C. Thomas, the Court-appointed Receiver (“Receiver”), as the only
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`movant that requested the relief at issue in the order on appeal and the only party
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`whose interests are prejudiced by this appeal, seeks amendment of the docket
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`recognizing the Receiver as Appellee, recognition as a Party in Interest, alternatively
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`requesting leave to intervene, or in the further alternative, leave to file an amicus
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`brief. The Receiver seeks dismissal of this appeal for lack of jurisdiction, or
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`alternatively, a judgment affirming the Order. The Receiver respectfully shows the
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`Court as follows:
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`1.
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`This appeal seeks the Court’s review of one order issued solely based
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`on a motion filed by the Receiver, Dkt. 104, Order Granting Motion to Approve
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`Sale. (the “Order”). See Notice of Appeal.
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`2.
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`The Order granted relief requested by the Receiver in his Motion for
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`Appointment of Appraisers, Approval of Appraisals of Rock Creek Property, and
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`Setting Hearing Regarding Approval of Sale (the “Motion”). (Dkt. 76). The Motion
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`was required to comply with 28 U.S.C. § 2001 (the “Statute”), which governs sales
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`of realty by receivers.
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`3.
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`The Court set a hearing on December 19, 2022 to consider the sale (Dkt.
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`78) and required expedited briefing regarding the Motion.
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`‒2‒
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`

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`Case: 22-11226 Document: 29 Page: 3 Date Filed: 01/20/2023
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`4.
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`Appellant Timothy Barton filed a Response and Objection to the
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`Motion, (Dkt. 91), and the Receiver filed a supporting reply. (Dkt. 93).
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`5.
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`Because the Receiver discovered Barton had interfered with the
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`proposed sale by filing a Lis Pendens on the subject property (the “Rock Creek
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`Property”) immediately before the Motion was filed and in violation of the
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`Receivership Order, the Receiver also filed a Verified Emergency Motion to Declare
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`Lis Pendens Void. (Dkt. 96).
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`6.
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`Shortly before the scheduled hearing, the Court granted the Motion in
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`part, by appointing the appraisers identified in the Motion and approving their
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`appraisals. (Dkt. 99).
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`7.
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`The SEC did not file anything related to the Motion because it was
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`neither the movant, nor procedurally “interested” in the outcome.
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`8.
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`On December 19, 2022, the Court conducted a lengthy hearing.
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`Although the Court requested an oral statement from the SEC regarding its position
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`on the Motion, the Receiver’s counsel argued the Motion, while Mr. Barton’s
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`counsel responded. See Transcript attached to this Motion.
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`9.
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`The Court orally granted the Motion at the hearing, and on December
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`20, 2022, entered a written order reflecting its ruling. (Dkt. 104). The Order also
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`granted the Receiver’s Verified Emergency Motion to Declare the Lis Pendens filed
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`by Barton void.
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`‒3‒
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`

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`Case: 22-11226 Document: 29 Page: 4 Date Filed: 01/20/2023
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`10. On the next day, Barton filed his Notice of Interlocutory Appeal
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`regarding the Order.
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`11.
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`The Receiver should accordingly be designated as the Appellee and
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`heard regarding Appellant’s challenge to an Order granting relief requested by the
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`Receiver.
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`12. Additionally, the Receiver is the only party prejudiced by the appeal,
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`and therefore interested in challenging it. Because of the pending appeal, and
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`because Barton again violated the Receivership Order by interfering with the sale
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`and telling the buyer the Rock Creek Property was subject to flooding and
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`foundation problems, the sale has been postponed. Dkt. 132, ¶¶ 28-29. Nonetheless,
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`as discussed at the hearing and in the Receiver’s Reply in Support of the Motion,
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`(Dkt. 93), the loan on the Rock Creek Property continues to accrue interest—at 9.9%
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`(unless the lender is successful in obtaining the default rate which is 18%)—and
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`taxes. The Receiver cannot close the sale until and unless this appeal is resolved.
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`13. Adding insult to injury and reflected in the attached Motion, which the
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`Receiver seeks leave to file as an amicus if he is not recognized as the Appellee, no
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`interlocutory jurisdiction exists for this appeal. The Eleventh Circuit addressed the
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`jurisdictional issue succinctly when comparing the scope of 28 U.S.C. §§ 1292(a)(2)
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`and 1292(a)(1) which govern interlocutory appeals of temporary restraining orders
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`and orders related to receiverships:
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`‒4‒
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`

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`Case: 22-11226 Document: 29 Page: 5 Date Filed: 01/20/2023
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`“That provision [1292(a)(1)] more broadly confers jurisdiction over
`orders ‘granting, continuing, modifying, refusing or dissolving
`injunctions, or refusing to dissolve or modify injunctions.’ 28 U.S.C. §
`1292(a)(1). It thereby expressly authorizes immediate appeals not only
`of front- and back-end orders ‘granting,’ ‘refusing,’ or ‘dissolving’
`injunctions, but also of mid-stream orders ‘continuing,’ ‘modifying,’ or
`‘refusing to dissolve or modify’ them. The contrast is unmistakable.
`Had Congress wanted to authorize the same robust interlocutory
`appellate review of interim receivership-related orders, it could have
`included similar language in § 1292(a)(2). It didn’t, and its decision in
`that respect is ‘telling.’”
`SEC v. Complete Bus. Sols. Group, Inc., 44 F.4th 1326, 1331–32 (11th Cir. 2022);
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`see also, US v. Solco I, LLC, 962 F.3d 1244, 1250 (10th Cir. 2020) (“Courts narrowly
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`construe § 1292(a)(2) (“to permit appeals only from the three discrete categories of
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`receivership orders specified in the statute, namely [1] orders appointing a receiver,
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`[2] orders refusing to wind up a receivership, and [3] orders refusing to take steps to
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`accomplish the purposes of winding up a receivership.”) (internal quote omitted));
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`see also Netsphere, Inc. v. Baron, 799 F.3d 327, 331-32 (5th Cir. 2015) (every circuit
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`to address the meaning of § 1292(a)(2)’s ‘refusing orders’ interprets it to “permit[ ]
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`appeals only from orders ‘refusing ... to take steps to accomplish the purposes of
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`[winding up receiverships].’”).
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`14.
`
`This appeal does not fall within any of the three designated categories
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`of receivership orders for which interlocutory jurisdiction exists, and the Receiver
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`requests leave to fully brief the absence of this Court’s jurisdiction.
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`‒5‒
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`

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`Case: 22-11226 Document: 29 Page: 6 Date Filed: 01/20/2023
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`15.
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`The Receiver conferred with Appellant regarding this Motion, and
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`Appellant ignored the conferences.
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`16.
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`The SEC is unopposed.
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`17. A copy of the Receiver’s Motion to Dismiss, drafted solely by the
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`Receiver’s counsel, is attached to this Motion.
`
`ARGUMENT
`Based on the terms of the Receivership Order, Dkt. 29, the Receiver holds all
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`Receivership Property and is authorized, subject to further orders, to sell
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`receivership property. SEC v. Stanford Int’l Bank, Ltd., 927 F.3d 830, 840 (5th Cir.
`
`2019). His unique and sole interest is undisputed. Designating the Receiver as the
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`appellee or otherwise as an interested party is therefore appropriate, particularly
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`since the appeal addresses an Order issued solely on the Receiver’s Motion.
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`Nor would including the Receiver be novel or inappropriate. For instance,
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`Appeal No. 09-40641, Crawford v. Sillette, was docketed reflecting the Receiver as
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`an interested party, although the underlying case clearly reflected the CFTC as the
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`Plaintiff. An order obtained by the Receiver was at issue in the Crawford appeal.
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`Similarly, in Zacarias v. Stanford Int’l Bank, Ltd., Appeal No. 17-11073, and many
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`other Stanford-related appeals, the receiver was identified in the docket as a (“null”)
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`appellee and permitted to file responsive motions and briefs. See also Helt v. Sethi
`
`Petroleum, L.L.C., No. 20-40240, 2022 WL 127977, at *1 (5th Cir. Jan. 13, 2022)
`
`‒6‒
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`

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`Case: 22-11226 Document: 29 Page: 7 Date Filed: 01/20/2023
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`(Designating Receiver, Helt, as the Appellee in SEC enforcement case involving
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`interlocutory appeal of denial of motion to intervene by party who sought to
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`challenge Receiver’s authority over certain receivership entities as assets); SEC v.
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`Res. Dev. Intern., 291 Fed. Appx. 660, 661 (5th Cir. 2008) (case docketed reflecting
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`Receiver as “Counter-Defendant Appellee” where order at issue, finding appellant
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`in contempt, was issued based on receiver’s motion).
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`A similar docketing practice was followed by the Seventh Circuit in SEC v.
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`Ventus Holdings, Appeal No. 21-2664, where that Receiver was designated as
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`“Court-Appointed Receiver-Appellee,” while the SEC, the Plaintiff, was identified
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`as the “Plaintiff-Appellee.” In the Ventus appeal, the Receiver filed motions and
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`briefs.
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`In the alternative, to the extent joinder or intervention rather than a docket
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`correction is necessary,1 the Receiver satisfies the standards for either. Rule 19
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`requires joinder of persons who “claim an interest relating to the subject of the action
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`and is so situated that disposing of the action in the person’s absence may: (i) as a
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`practical matter impair or impede the person’s ability to protect the interest.” FED.
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`R. CIV. P. 19(a)(1)(B)(ii). The Receiver easily satisfies this standard. See Schutten
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`1 Correcting the docket to reflect the Receiver’s existing inclusion in this matter does
`not require joinder. In an abundance of caution, however, in the event the Court
`concludes Rule 19 or Rule 24 govern, the Receiver satisfies both rule’s standards.
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`‒7‒
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`

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`Case: 22-11226 Document: 29 Page: 8 Date Filed: 01/20/2023
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`v. Shell Oil Co., 421 F.2d 869, 874 (5th Cir. 1970) (considering prejudice, from a
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`pragmatic perspective, to interested person not joined). The SEC does not represent
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`the Receivership Estate’s interest and suffers no loss with respect to the Order at
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`issue.
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`Similarly, the Receiver satisfies the standards for intervention, which require
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`only (1) a timely application; (2) the applicant’s interest relating to the property or
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`transaction that is the subject of the action; (3) disposition of the action may, from a
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`practical perspective, impair or impede the applicant’s ability to protect his interest;
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`and (4) the applicant’s interest are not adequately represented by the existing parties.
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`Texas v. U.S., 805 F.3d 653, 657 (5th Cir. 2015). See FED. R. CIV. P. 24(a). Courts
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`liberally construe the four factors governing intervention, to “allow intervention
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`where no one would be hurt and the greater justice could be attained.” Id. at 656-67
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`(quotations omitted). Here, no one is harmed by the Receiver’s inclusion in this
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`appeal, but his absence potentially harms the investors whose interests he serves in
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`having obtained the order that is being appealed.
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`CONCLUSION
`The Receiver is the only proper Appellee based on the appeal of an order
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`granting a motion filed by the Receiver, in which the SEC did not participate.
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`Further, the pendency of the appeal is and will continue to cause prejudice to the
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`Receivership Estate by precluding sale of the property as authorized by the District
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`‒8‒
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`

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`Case: 22-11226 Document: 29 Page: 9 Date Filed: 01/20/2023
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`Court, particularly since no appellate jurisdiction exists to consider the Order.
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`Accordingly, the Receiver should be named as an Appellee, a Party in Interest, an
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`Intervenor, or alternatively, permitted to file the attached motion as an amicus.
`
`Respectfully submitted,
`
`By: /s/ Charlene C. Koonce
`Charlene C. Koonce
` State Bar No. 11672850
`charlene@brownfoxlaw.com
`BROWN FOX PLLC
`8111 Preston Road, Suite 300
`Dallas, Texas 75225
`T: (214) 327-5000
`F: (214) 327-5001
`
`Attorneys for Receiver Cortney C.
`Thomas
`
`CERTIFICATE OF CONFERENCE
`I certify that as counsel for the Receiver, I conferred with Appellant’s counsel
`regarding the relief requested in this Motion. First, on January 12, 2020, I emailed
`Appellant’s counsel and asked whether they would agree to a request that this Court
`revise the docket to reflect the Receiver as the Appellee in this, and another appeal,
`in which the only order on appeal was entered on a motion filed by the Receiver.
`Counsel ignored the email. Again, on January 20, 2023, following email exchanges
`with Appellant’s counsel on January 19, 2023 and earlier in the day on January 20,
`2023 regarding other receivership issues, I again emailed Defendant’s counsel to
`confer about this motion. No response was received.
`
`/s/ Charlene Koonce
`Charlene Koonce
`
`‒9‒
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`

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`Case: 22-11226 Document: 29 Page: 10 Date Filed: 01/20/2023
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`CERTIFICATE OF COMPLIANCE
`I certify that this Motion complies with the type-volume limit of FED.
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`1.
`
`R. APP. P. 21(d) because, excluding the words that need not be counted, it contains
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`1,633 words.
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`2.
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`This Motion complies with the typeface requirements of FED. R. APP.
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`P. 32(a)(5) and the type style requirements of FED. R. APP. P. 32(a)(6) because it has
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`been prepared in a proportionally-spaced typeface using Microsoft Word 365 in
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`Times New Roman 14-point font in text and Times New Roman 12-point font in
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`footnotes.
`
`/s/ Charlene Koonce
`Charlene Koonce
`
`CERTIFICATE UNDER ECF FILING STANDARDS
`Pursuant to paragraph A(6) of this Court’s ECF Filing Standards, I certify that
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`(1) required privacy redactions have been made (see Local Rule 25.2.13); (2) the
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`electronic submission is an exact copy of the paper document (see Local Rule
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`25.2.1); and (3) the document has been scanned for viruses with the most recent
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`version of a commercial virus scanning program and is free of viruses.
`
`/s/ Charlene Koonce
`Charlene Koonce
`
`‒10‒
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`

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`Case: 22-11226 Document: 29 Page: 11 Date Filed: 01/20/2023
`Case: 22-11226
`Document:29
`Page:11
`Date Filed: 01/20/2023
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`TRANSCRIPT
`TRANSCRIPT
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`

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`Case: 22-11226 Document: 29 Page: 12 Date Filed: 01/20/2023
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`·1· · · · · · ·UNITED STATES DISTRICT COURT
`· · · · · · · · ·NORTHERN DISTRICT OF TEXAS
`·2
`· · · · · · · · · ·CASE NO. 3:22-cv-2118-X
`·3
`
`·4
`
`·5· ----------------------------------------x
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`·6· SECURITIES & EXCHANGE COMMISSION,
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`·7· · · · · · · · · ·Plaintiffs,
`
`·8· v.
`
`·9· THOMAS LYNCH BARTON, et al.,
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`10· · · · · · · · · ·Defendants.
`
`11
`
`12· ----------------------------------------x
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`13
`
`14
`
`15· · · · · · · ·TRANSCRIPT OF THE HEARING
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`16· · · · · BEFORE THE HONORABLE BRANTLEY STARR
`
`17· · · · · · · UNITED STATES DISTRICT JUDGE
`
`18
`
`19
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`20· · · · · · · · · · · Dallas, Texas
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`21· · · · · · · · · · December 19, 2022
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`22· · · · · · · · · · · · 10:03 a.m.
`
`23
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`24
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`25
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`

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`Case: 22-11226 Document: 29 Page: 13 Date Filed: 01/20/2023
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`·1· A P P E A R A N C E S:
`·2
`· · FOR THE PLAINTIFF:
`·3
`· · · · ·SECURITIES & EXCHANGE COMMISSION
`·4· · · · · · 801 Cherry Street
`· · · · · · · Suite 1900
`·5· · · · · · Fort Worth, Texas 76102
`· · · · ·BY:· KEEFE M. BERNSTEIN, ESQ.
`·6· · · · · · bernsteink@sec.gov
`· · · · · · · (817) 900-2607
`·7
`·8· FOR THE DEFENDANT BARTON:
`·9· · · ·HUNTON ANDREWS KURTH, LLP
`· · · · · · · 2200 Pennsylvania Avenue NW
`10· · · · · · Suite 905
`· · · · · · · Washington, DC· 20037
`11· · · ·BY:· MICHAEL J. EDNEY, ESQ.
`· · · · · · · TED HUFFMAN, ESQ.
`12· · · · · · medney@HuntonAK.com
`· · · · · · · (202) 778-2204
`13
`14· FOR THE RECEIVER:
`15· · · ·BROWN FOX, LLP
`· · · · · · · 8111 Preston Road
`16· · · · · · Suite 300
`· · · · · · · Dallas, Texas· 75225
`17· · · ·BY:· CHARLENE KOONCE, ESQ.
`· · · · · · · charlene@brownfoxlaw.com
`18· · · · · · (214) 327-5000
`19
`20
`21
`22
`23
`24
`25
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`Page 2
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`Page 3
`·1· COURT REPORTER:· MS. KELLI ANN WILLIS, RPR, CRR, CSR
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`· · · · · · · · · · ·United States Court Reporter
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`·2· · · · · · · · · ·1100 Commerce Street
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`· · · · · · · · · · ·Room 1528
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`·3· · · · · · · · · ·Dallas, Texas· 75242
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`· · · · · · · · · · ·livenotecrr@gmail.com
`
`·4
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`·5· · · · · ·Proceedings reported by mechanical
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`·6· stenography and transcript produced by computer.
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`·7
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`·8· · · · · · · · · · · · ·* * * *
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`·9
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`Page 4
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`·1· · · · · · · ·- P R O C E E D I N G S -
`·2· · · · · · · · · · · · · ·-o-
`·3· · · · · · THE COURT SECURITY OFFICER:· All rise.
`·4· · · · · · THE COURT:· Thank you.
`·5· · · · · · You can be seated.
`·6· · · · · · Okay.· We are on the record in Case No.
`·7· 3:22-cv-2118.· That is SEC versus Barton, et al.
`·8· · · · · · Let's do appearances first, for the SEC.
`·9· · · · · · MR. BERNSTEIN:· Your Honor, Keefe
`10· Bernstein here on behalf of the SEC.
`11· · · · · · THE COURT:· Thank you.· Thanks for
`12· speaking up since we don't have a microphone for
`13· you.
`14· · · · · · Okay.· Who is here for Barton?
`15· · · · · · MR. EDNEY:· Good morning, your Honor.
`16· · · · · · Michael Edney and Ted Huffman from the
`17· Hunton Andrews Kurth law firm for Mr. Barton.
`18· · · · · · THE COURT:· All right.· Thank you, Mr.
`19· Edney.
`20· · · · · · And who is here -- so I understand, do we
`21· anyone here for Wall?
`22· · · · · · No one here today for Wall.
`23· · · · · · Okay.· How about for the Receiver?
`24· · · · · · MS. KOONCE:· Good morning, your Honor.
`25· · · · · · Charlene Koonce on behalf of Cort Thomas,
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`Page 5
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`·1· the Receiver.
`·2· · · · · · THE COURT:· Okay.· Thank you, Ms. Koonce.
`·3· · · · · · All righty.· So we are here on the pending
`·4· motion for the sale of property.· So what I need to
`·5· do is talk through with Receiver's counsel if we've
`·6· got any other competing offers.· I see that you
`·7· filed your notice yesterday of no further competing
`·8· offers.
`·9· · · · · · But tell me the update on that.· Any new
`10· ones in, and then talk me through best interests,
`11· and why you think it is in the best interest of the
`12· estate.
`13· · · · · · MS. KOONCE:· Thank you, Judge.
`14· · · · · · Would you prefer that I approach at the
`15· lecturn or stand here?
`16· · · · · · THE COURT:· So you can go either place.
`17· · · · · · I will say for everybody who's speaking,
`18· if you are going to sit at counsel table, just stay
`19· seated because once you stand up, you are far away
`20· from the microphone.
`21· · · · · · So wherever you want to go is fine by me,
`22· sitting at counsel table or standing at the podium.
`23· · · · · · MS. KOONCE:· I'm actually just more
`24· comfortable standing, if it's okay.· So I'll --
`25· · · · · · THE COURT:· Fine by me.· Go for it.
`
`

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`Case: 22-11226 Document: 29 Page: 14 Date Filed: 01/20/2023
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`Page 6
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`·1· · · · · · MS. KOONCE:· As you are aware, by your
`·2· reference to the Receiver's notice, that we did
`·3· publish notice of the sale and notice of the
`·4· hearing, which is required by the statute that
`·5· governs this sale.· We did not receive any competing
`·6· offers.
`·7· · · · · · As we stated in the motion to approve the
`·8· sale, the motion to appoint the appraisers, there
`·9· were negotiations on the contract that is before the
`10· Court.· This was the highest offer received out of
`11· four offers.
`12· · · · · · As the Court is aware, this sale does
`13· comply and exceed what the statute requires.· It is
`14· more than the two-thirds minimum.· In fact, it is
`15· higher than the appraised value that was submitted.
`16· · · · · · As the Court requested, I would like to
`17· provide some information about why this is in the
`18· best interest of the estate.
`19· · · · · · As the Court is aware, from numerous
`20· filings, we have very limited cash and at the same
`21· time, we have competing requirements for the cash on
`22· hand.· For instance, we need to pay insurance on
`23· this property and multiple other properties.
`24· · · · · · We have one property that is subject to
`25· HUD loans and those HUD loans require continuing
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`Page 8
`·1· being paid, because we don't have access to pay it,
`·2· will erode all equity in the property.
`·3· · · · · · THE COURT:· When are property taxes due?
`·4· January 31st?
`·5· · · · · · MS. KOONCE:· I'm not confident that is
`·6· correct but I think so.
`·7· · · · · · THE COURT:· Okay.· Generally speaking, all
`·8· property taxes are due January 31st.
`·9· · · · · · MS. KOONCE:· I believe that's correct.
`10· · · · · · THE COURT:· Some people pay them the year
`11· of --
`12· · · · · · MS. KOONCE:· Yes.
`13· · · · · · THE COURT:· -- December 31st, so that they
`14· get the tax deduction for them but --
`15· · · · · · MS. KOONCE:· That is correct.· And there's
`16· a -- there's a higher assessment -- yes, if you pay
`17· late, it increases.· That's absolutely true.
`18· · · · · · THE COURT:· Understood.
`19· · · · · · Okay.· So I understand from Barton's
`20· filings that Barton would like to rent the house.
`21· · · · · · Talk me through that scenario and why -- I
`22· know you have already talked me through, you need
`23· the cash in order to maintain the other properties.
`24· Talk me through why it's not --
`25· · · · · · MS. KOONCE:· Right.· That would have been
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`Page 7
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`·1· certifications from accountants.· Those are very
`·2· expensive.· And if we don't pay those
`·3· certifications, the HUD loan could go into default
`·4· and it could then forfeit the interest, the
`·5· receivership estate's interest in that property.
`·6· · · · · · Those are just some of the competing
`·7· obligations that we have for very limited cash.
`·8· · · · · · I know there is a motion to stay the sale.
`·9· There is a motion that is -- there's an objection to
`10· this sale that contends that this sale should not go
`11· forward now, that there could be the possibility of
`12· irreparable harm.· And Judge, the sale has to go
`13· forward immediately.
`14· · · · · · This sale, this property, like every other
`15· receivership property that we have encountered so
`16· far is heavily encumbered.· And it is not encumbered
`17· by a traditional loan.· It's encumbered by a loan
`18· that's incurring interest at 9.9 percent.· It's
`19· interest only.· The lender claims that there is
`20· default interest accruing at 18 percent.
`21· · · · · · We also have to continue to pay taxes.· We
`22· have to pay the utilities, so that the pipes don't
`23· freeze during this weather.
`24· · · · · · If we don't sell the property very
`25· quickly, that interest that is accruing and not
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`·1· an excellent offer, possibly.
`·2· · · · · · First of all, it was never made.· It was
`·3· suggested in a filing as an alternative as opposed
`·4· to any communication in response to any conference.
`·5· It was never offered.
`·6· · · · · · Additionally, the monthly interest on this
`·7· loan is about $11,000.
`·8· · · · · · We did a little bit of research.· The
`·9· highest monthly rental for any property in the
`10· location is about $9,000.
`11· · · · · · So if Mr. Barton would like to offer and
`12· put in place today -- we've had a lot of delay in
`13· our communications -- but a contract in which he
`14· rents the property, pays all of the accruing
`15· mortgage expenses, the insurance, the property
`16· taxes, and he's going to warrant that he's not going
`17· to remove any more of the property from the
`18· premises.
`19· · · · · · We took possession of it on a day after we
`20· had received notice that he was moving art, not just
`21· personal belongings, but art and valuable items out
`22· of the house.
`23· · · · · · If that was something that could be put in
`24· place immediately, we would consider it.· The offer
`25· was never made.· It was an argument raised in a
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`

`

`Case: 22-11226 Document: 29 Page: 15 Date Filed: 01/20/2023
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`Page 10
`·1· motion.· There was no conference, there was no
`·2· request that that happen.· So our contention, Judge,
`·3· is that the time to consider that offer has long
`·4· since passed.
`·5· · · · · · In addition, as you have observed, paying
`·6· the expenses to maintain the equity in this property
`·7· would not help the receivership with our cash
`·8· issues.
`·9· · · · · · Now, I know the Court is aware, we've also
`10· filed a motion to ratify approval of a settlement
`11· with another entity.· And that potentially could
`12· bring in sufficient assets to maintain some of these
`13· other properties for some limited period of time.
`14· · · · · · We didn't receive a conference as to
`15· what -- there was no response to our conference as
`16· to whether that is going to be opposed.· We don't
`17· know if the Court is going to approve it.· We don't
`18· know when that will happen, if it will happen at
`19· all.
`20· · · · · · But the receivership cannot maintain the
`21· other properties that we have an obligation to
`22· manage without cash.· It is just not possible.
`23· · · · · · With respect to the contents -- I don't
`24· know if you want to take that up now.
`25· · · · · · THE COURT:· Sure.· I would like to hear
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`Page 12
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`·1· last two years by receivership entities.
`·2· · · · · · We have had absolutely no response to
`·3· that, that, hey, we need some time to look at credit
`·4· card statements, we need some time to gather
`·5· information to demonstrate that these assets were
`·6· actually purchased by Mr. Barton, none of that.
`·7· · · · · · Instead, Judge, what we have is a
`·8· continuing disregard for the Court's authority and
`·9· the receivership order.
`10· · · · · · For instance, in filing a lis pendens that
`11· we discovered was filed the day we conferred on the
`12· motion to sell the property.· It was filed on
`13· December 1st.
`14· · · · · · Now, the response to that was filed very
`15· early this morning was that the Court does not have
`16· the authority to declare that lis pendens void. I
`17· think that is absolutely incorrect, your Honor.
`18· · · · · · We relied on Property Code Section 12.008,
`19· not 12.007.· It is a different procedure.· I think
`20· the bankruptcy cases that we cited absolutely
`21· provide the Court authority.
`22· · · · · · The Duval case was an instance in which
`23· the debtor filed a lis pendens on property that he
`24· did not want to be transferred subject to a planned
`25· confirmation.· The bankruptcy judge said, you cannot
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`Page 11
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`·1· from you.
`·2· · · · · · MS. KOONCE:· So there is a motion, as you
`·3· know, to sell the contents of the property as well.
`·4· Mr. Barton has also objected to that proposal.
`·5· · · · · · As you are aware from multiple filings and
`·6· email communications between counsel, we offered to
`·7· store and hold that -- those contents, at Mr.
`·8· Barton's cost because, again, the receivership does
`·9· not have the funds to pay to move those contents out
`10· and store them.· And we got no response.
`11· · · · · · In addition, we have asked for
`12· confirmation that the furnishings in this property
`13· were actually purchased by Mr. Barton.· We have
`14· received no response to that either.
`15· · · · · · The response has been, Mr. Barton lived in
`16· this property, it was owned by a single purpose
`17· entity, therefore, it is his.
`18· · · · · · Well, the receivership order says that all
`19· of the assets of all of these entities now are in
`20· the Court's possession and, therefore, the
`21· Receiver's possession.
`22· · · · · · We know, from looking at the bank records,
`23· that there was extensive commingling.· The Receiver,
`24· also, in his investigation, learned that most of the
`25· contents of this property were purchased within the
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`Page 13
`·1· accomplish a stay through a lis pendens which has
`·2· already been denied in the litigation.
`·3· · · · · · But if the Court is uncomfortable with
`·4· that procedure, you have a much more simple and
`·5· direct route as well.
`·6· · · · · · Because the Defendant here has violated
`·7· your receivership order, you can compel him to sign
`·8· a release of lien, which we brought with us today.
`·9· That's absolutely permissible, Judge, that you
`10· require the obedience and observance of your court
`11· order to allow the sale to proceed in the manner
`12· that is contemplated by the receivership order.
`13· · · · · · In short, the sale is in the best -- in
`14· the best interest of the receivership estate.· It is
`15· absolutely essential to maintaining the value of the
`16· other properties that are in the Receiver's
`17· possession and control.
`18· · · · · · We have had no other competing offers.· We
`19· have satisfied the statute.· Everything that is
`20· necessary for the Court to consider the sale, I
`21· think, has been presented today.· But we are, of
`22· course, happy to provide any additional information
`23· that you need.
`24· · · · · · THE COURT:· Thank you, Ms. Koonce.
`25· · · · · · MS. KOONCE:· Thank you.
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`

`

`Case: 22-11226 Document: 29 Page: 16 Date Filed: 01/20/2023
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`Page 14
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`·1· · · · · · THE COURT:· All righty.
`·2· · · · · · And let's hear from counsel for Barton,
`·3· Mr. Edney.
`·4· · · · · · MR. EDNEY:· Thank you, your Honor.
`·5· · · · · · Before the Court today is a request to
`·6· authorize the sale of Mr. Barton's only home.
`·7· · · · · · Since the Receiver kicked Mr. Barton out
`·8· of his home on October 20th, he's been sleeping on
`·9· his daughter's couch.
`10· · · · · · At this stage of the case, the Government
`11· has alleged violations of the securities laws but
`12· the Government has not produced the documents
`13· underlying those claims to us; the Government has
`14· not attempted to prove those allegations before a
`15· trier of fact.
`16· · · · · · At the same time, we are challenging the
`17· existence of this Receiver and certainly his
`18· authority to undertake liquidation.
`19· · · · · · This sale, your Honor, is permanent.· It
`20· is a permanent action that would cause irreparable
`21· harm and be almost impossible to reverse.
`22· · · · · · The Court should deny this request to
`23· undertake the Receiver's action at this time.
`24· · · · · · Your Honor, respectfully, selling the --
`25· selling Mr. Barton's home is beyond any legitimate
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`Page 16
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`·1· his home.
`·2· · · · · · It was listed for sale roughly two weeks
`·3· earlier, and not after some kind of sober appraisal
`·4· of the financial condition of these entities.· And
`·5· it's not a matter of last resort; it is a matter of
`·6· first resort.
`·7· · · · · · In our view, respectfully, the Receiver's
`·8· focus needs to be on the management of the high
`·9· value commercial real estate assets that are under
`10· the control of the business entities, the business
`11· entities.
`12· · · · · · And for cash needs, for some of those
`13· assets, Mr. Barton has facilitated offers for those
`14· assets from third parties and will consent to their
`15· sale pursuant to a well thought out process.· And
`16· there is many examples of that in the record before
`17· the Court at this point.
`18· · · · · · And let me just mention just a few.
`19· · · · · · Right now, there is a -- there is a
`20· pending, before the receivership order sale, 54 lots
`21· at the Venus complex for $3 million that is designed
`22· to net $600,000 in net equity.
`23· · · · · · At the Frisco complex, there is a proposed
`24· sale of $9 million in property that would net
`25· $3 million in net equity.
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`Page 15
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`·1· purpose for this Receiver at this point of the
`·2· proceedings, prior to any proof, much less finding
`·3· of liability on the underlying charges.
`·4· · · · · · THE COURT:· So receivers can't sell any
`·5· property until there's a liability finding, in your
`·6· view?
`·7· · · · · · MR. EDNEY:· No, no.· I think a receiver
`·8· could sell property under certain circumstances
`·9· before there is a liability finding, but that is the
`10· extraordinary circumstance.
`11· · · · · · Then in the general course of events, a
`12· receiver is supposed to conserve and identify assets
`13· for use, if there is an ultimate finding of
`14· liability, or for return to the Defendant in the
`15· event that there is not a finding of liability.· It
`16· is to conserve the status quo.· And this sale would
`17· alter the statute quo in a way that is almost
`18· impossible to reverse, not conserve it.
`19· · · · · · There are cases that find an extraordinary
`20· need to sell certain forms of property to raise cash
`21· to keep operations goi