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Securities and Exchange Commission v. Bryant

United States District Court, E.D. Texas, Sherman Division

August 19, 2019

SECURITIES AND EXCHANGE COMMISSION,
v.
THURMAN P. BRYANT III, BRYANT UNITED CAPITAL FUNDING, INC., ARTHUR F. WAMMEL, WAMMEL GROUP, LLC, THURMAN P. BRYANT JR., and CARLOS GOODSPEED.

          MEMORANDUM OPINION AND ORDER

          AMOS L. MAZZANT UNITED STATES DISTRICT JUDGE

         Pending before the Court is a Motion to Liquidate Property and Void or Clarify Contract for Deed (Dkt. #298) filed by Jennifer Ecklund, the Court-appointed receiver (the “Receiver”) for Defendants Arthur F. Wammel, Wammel Group, LLC, and Wammel Group Holdings Partnership receivership estates (collectively, the “Receivership”). The Receiver is seeking permission to liquidate the real property located at 8101 South Humble Road, Texas City 77591 (the “Property”). The Receiver contends that the Property belongs to, and should be liquidated for the benefit of, the Receivership because of alleged fraudulent transfers between Wammel and Ancillary Defendant Stephen Garrett. Garrett maintains that he is the owner of the Property and contests liquidation. The Court, having reviewed the motion, Parties' briefings, and relevant evidence, finds that the Receiver has not shown that she has the right to force the liquidation of the Property; however, the Court will allow the Parties to conduct limited discovery for the purpose of ascertaining the true nature of the parties' respective interests therein.

         BACKGROUND

         Garrett has known Wammel since he was a child. At some point, Wammel approached Garrett and urged him to invest in his business-an investment fund operating, in part, under Wammel Group LLC.[1] Garrett was hesitant to invest with Wammel and refrained from doing so for a few years. Garrett was initially hesitant to invest with Wammel and refrained from doing so for a number of years; however, in 2012, Garrett decided to go forward with Wammel's proposition. Although now interested, Garrett had issues with cash flow and did not have the liquid capital on hand to invest. Garrett attempted to pull equity from the Property, which he had purchased out-right on May 15, 2012, but was unsuccessful because traditional financial institutions declined to extend a collateralized loan on a home that had not been owned for at least twenty-four months.

         In February 2012, Garrett contacted Wammel for assistance in securing a loan. Thereafter, Garrett and Wammel entered into an agreement wherein Garrett would be able to pull equity from his home and use the proceeds, in part, to invest with Wammel. In early 2013, Garrett agreed to sell the Property to Wammel for $902, 000.00, with $180, 400.00 being seller financed and the remaining $811, 000.00 financed by a third-party.

         In February 2013, to finance the sale of the Property, Wammel obtained a mortgage loan through Associated Mortgage Investors (“AMI”). On the loan application, Wammel falsely certified that the Property would be used as his “Primary Residence.” On April 10, 2013, Wammel and AMI finalized the financing agreement. Later that month, Garrett sold the Property to Wammel through a General Warranty Deed.

         On May 3, 2013, Garrett entered into a Wammel Group General Partnership Agreement and used the proceeds from the sale of the Property to invest $226, 000.00 with Wammel Group. Garrett ultimately invested at least $600, 000.00 with the Wammel Group.

         On May 16, 2013, Wammel and Garrett executed a Contract for Deed, whereby Wammel agreed to sell and Garrett agreed to purchase back the Property for $902, 000.00 with interest.

         On May 15, 2017, the Securities and Exchange Commission (“SEC”) filed a complaint against Defendants alleging securities fraud in connection with a series of interrelated Ponzi schemes (Dkt. #1). On May 15, 2017, the Court entered an order appointing a receiver over Defendents Bryant and Bryant Capital (Dkt. #17). The Receivership Order gave Receiver exclusive jurisdiction to marshal, conserve, hold, and operate all of the Defendants' assets. Also on May 15, 2017, the Court entered a temporary restraining order enjoining the Bryant Defendants from violating the antifraud provisions of the federal securities laws and freezing their assets (“Asset Freeze Order”) (Dtk. #16).

         On July 19, 2017, the Court entered an Amended Order Appointing the Receiver (“Receivership Order”) (Dkt. #48) adding Defendants Wammel, Wammel Group, and WGHP to the jurisdiction of the Receiver. The Receivership Order directs the Receiver to “take custody, control, and possession of all Receivership Property and records relevant thereto from Receivership Defendants; to sue for and collect, recover, receive and take into possession from third parties all Receivership Property and records thereto.” The Receivership Order also authorizes the Receiver to “manage, control, operate, and maintain the Receivership Estates and hold in [her] possession, custody, and control all Receivership Property for the benefit of the Receivership Estates, making payments and disbursements, and incurring expenses as may be necessary or advisable . . . .”

         Upon her appointment, the Receiver leaned that Wammel Group was listed on the title to the Property. In July 2017 the Receiver's counsel traveled to the Property and served the Receivership Order on Garrett, who occupied the Property. Garrett explained to the Receiver that “he sold the Property to the Wammel Group in 2013 . . . Wammel applied for a loan and financed the Property . . . Wammel and Ancillary Defendant Garrett entered into a Contract for Deed, and . . . pursuant to the Contract for Deed, Ancillary Defendant Garrett has been paying monthly the amount due under the loan to the Wammel Group and continued occupying the Property.” (Dkt. #4).

         On January 24, 2019, Receiver filed the present motion to liquidate the Property and void the Contract for Deed or, in the alternative, allow for discovery to clarify the validity of the Contract for Deed (Dkt. #298). On March 1, 2019, Garrett filed a response (Dkt. # 307). On March 8, 2019, the Receiver filed a reply (Dkt. #309).

         LEGAL STANDARD

         28 U.S.C. § 754 (2018) provides that “a receiver appointed in any civil action or proceeding involving property, real, personal or mixed, situated in different districts shall, upon giving bond as required by the court, be vested with complete jurisdiction and control of all such property with the right to take possession thereof.”

         Federal Rule of Civil Procedure 66 explains that “the practice in administering an estate by a receiver or a similar court-appointed officer must accord with the historical practice in federal courts or with a local rule.”

         The Receivership Order (Dkt. #48) also authorizes the Receiver to “manage, control, operate, and maintain the Receivership Estates and hold in [her] possession, custody, and control all Receivership Property for the benefit of the Receivership Estates, making payments and disbursements, and incurring expenses as may be necessary or ...


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