S.E.C. v. Hardy
| Decision Date | 31 October 1986 |
| Docket Number | No. 85-6474,85-6474 |
| Citation | 803 F.2d 1034 |
| Parties | Fed. Sec. L. Rep. P 92,986 SECURITIES AND EXCHANGE COMMISSION, Plaintiff, Universal Financial, Wayne Burton, Western Sierra Financial Corporation, California Equities Home Loan, Defendants/Appellees, v. Robert HARDY, Nell Agapoff, Richard & Wanda Andersen, Evan G. Beach, Marilyn Benefiel, Paul & Lillian Blazek, Brian Call, Anthony Ciccone, William & Alice Cockell, Karen Costello, et al., Parties in Interest/Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Steven Miller, Wyman, Bautzer, Rothman, Kuchel & Silbert, Los Angeles, Cal., for defendants/appellees.
Paul M. Reitler, Timothy B. Taylor, Sheppard, Mullin, Richter & Hampton, Los Angeles, Cal., for parties in interest/appellants.
Appeal from the United States District Court for the Central District of California.
Before ANDERSON, PREGERSON and REINHARDT, Circuit Judges.
Appellants ("the Intervenors") appeal from the district court's denial of their motions to file late claims to the assets of an equitable receivership, and their motions to file late objections to the Receiver's categorization of their claims. On appeal, the appellants contend that the district court abused its discretion in denying their motions and entering judgment against them. We affirm.
This case involves a receivership resulting from an action brought by the Securities and Exchange Commission (SEC) against Wayne Burton and various entities he controlled ("the Burton entities"). The SEC asserted that the Burton entities had conducted an elaborate scheme to defraud persons who invested with the Burton entities ("Investors"). The district court appointed an equity receiver, appellee Robert A. Baker ("Receiver"), to take ownership and liquidate the assets of the Burton entities to satisfy the claims of the Investors. Among the properties in possession of the Burton entities when the Receiver was appointed were various promissory notes ("Borrower Notes") secured by trust deeds on real property which represented loans to third parties. Many of the Borrower Notes and trust deeds had been assigned to certain Investors. See generally SEC v. Universal Financial, 760 F.2d 1034, 1035-36 (9th Cir.1985) (per curiam).
After his appointment, the Receiver took possession of the Borrower Notes and trust deeds. The district court subsequently adopted a procedure for distributing the assets of the Burton entities. Investors would file claims against the receivership The procedure for claim filing and categorization was negotiated by counsel for the Receiver and counsel for various Investors. The scheme was approved by the district court, as were all actions taken by the Receiver relevant to this case, after a full hearing with notice to interested parties.
and would be placed into one of four categories, which would ultimately determine the extent of the recovery of a particular Investor. This procedure was intended to promote both accurate accounting of the receivership assets and orderly administration of the various claims to the receivership estate.
Early in December 1981, pursuant to this procedure, the Receiver sent out a First Notice to Investors ("First Notice") and an Investor's Claim Form ("Claim Form") to all known Investors, including the Intervenors. A separate notice was published in four newspapers in Southern California. These notices provided that any Investors asserting a claim against the receivership had to file a completed Claim Form with the Receiver by March 1, 1982, or the claim would be barred. Additionally, the Receiver sent along with the First Notice a categorization statement ("First Categorization Statement") explaining into which of the four categories the Receiver had tentatively placed a particular Investor. The Claim Form included a section in which an Investor could object to this tentative categorization. The First Notice advised the Investors that, if they did not object, the court could adopt the tentative categorization as final. Finally, the First Notice stated that if an Investor disagreed with the Receiver's tentative categorization, the Investor had to file a properly completed Claim Form stating such objection with the Receiver by March 1, 1982.
After the First Notice, the Intervenors moved the court to extend the deadline for filing Claim Forms from March 1, 1982 to June 1, 1982. The court extended the deadline to March 22, 1982.
In February 1982, the district court approved the Second Notice to Investors ("Second Notice"). The Second Notice was mailed by the Receiver to all known Investors, including the Intervenors, in March 1982. The Second Notice again explained that if an Investor did not object to the tentative categorization by the Receiver, that Investor would be deemed to have accepted such categorization. The Second Notice further stated that if the Investor had objected to the categorization, the categorization would not be considered final. The Second Notice also explained the procedures proposed by the Receiver to resolve disputes concerning the Investor's claims.
In December 1982, the Receiver sent a court-approved Third Notice to all Investors ("Third Notice") and an accompanying "Objection to Categorization" form to all Investors who filed Claim Forms. This Notice included a second tentative categorization of the Investor's claim. The Third Notice stated, inter alia, that (1) the district court had approved the categorization procedure, and (2) the court had ruled that any Investors who had not filed the claim by March 22, 1982 had no claim against the receivership estate unless they filed a declaration explaining their failure. The Objection to Categorization form notified each Investor of his or her tentative categorization, and whether the Investor had objected to such categorization. The notice stated that if an Investor objected to the tentative categorization, that Investor had to return a completed Objection to Categorization form to the Receiver by February 1, 1983, or the categorization would become final. Finally, the Third Notice stated that if an Investor had previously objected to the categorization and wished to withdraw the objection, the Investor must notify the Receiver in writing by February 1, 1983.
We review for abuse of discretion a district court's decisions involving its supervision of an equitable receivership. See SEC v. Lincoln Thrift Association, 577 F.2d 600, 606, 608-09 (9th Cir.1978); accord SEC v. Safety Finance Service, Inc., 674 F.2d 368, 372-73 (5th Cir.1982); SEC v. An-Car Oil Co., 604 F.2d 114, 119 (1st Cir.1979).
As we have recognized, case law involving district court administration of an equity receivership (once the receivership is underway) is sparse and is usually limited to the facts of the particular case. See Lincoln Thrift, 577 F.2d at 607 & n. 11, 608. Two basic principles emerge, however, from cases involving equitable receiverships, many of which involve SEC-initiated receiverships.
First, a district court's power to supervise an equity receivership and to determine the appropriate action to be taken in the administration of the receivership is extremely broad. "[I]t is a recognized principle of law that the district court has broad powers and wide discretion to determine the appropriate relief in an equity receivership." Lincoln Thrift, 577 F.2d at 606; see Safety Finance, 674 F.2d at 373 (). The basis for broad deference to the district court's supervisory role in equity receiverships arises out of the fact that most receiverships involve multiple parties and complex transactions. In Lincoln Thrift, we reviewed a district court's denial of a creditor's motion to appoint additional trustee-receivers or, in the alternative, to appoint a creditor's committee to elect new trustee-receivers. We observed:
Neither party to this action cites any case which discusses whether this Court has the authority to actively enter the district court proceeding and give specific orders to the district court as to the method of conducting the equity receivership. We have not been any more successful than either of the parties in finding a case in point. It does, however, seem that it would be a cumbersome situation at best were this Court to actively intervene in the operation of the receivership, a position which should be avoided.
Lincoln Thrift, 577 F.2d at 608-09. We then concluded:
[T]his court should not place itself in the position of second guessing a district court judge who had an opportunity to acquire substantial knowledge of the facts and to evaluate the various legal positions after hearing their merits put forth by the various parties, particularly when there appears to be no clear abuse of discretion.
Id. at 609; see An-Car Oil 604 F.2d at 119 ("W...
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