matthew n. evans (7051) gregory s. roberts (9092) ray...

Matthew N. Evans (7051) Gregory S. Roberts (9092) RAY QUINNEY & NEBEKER P.C. 36 South State Street, Suite 1400 Salt Lake City, UT 84111 Telephone: (801) 532-1500 Facsimile: (801) 532-7543 Attorneys for Nevada State Bank _____________________________________________________________________________

IN THE UNITED STATES DISTRICT COURT DISTRICT OF UTAH, CENTRAL DIVISION

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, v. MANAGEMENT SOLUTIONS, INC; WENDELL A. JACOBSON; AND ALLEN R. JACOBSON,

Defendants.

MEMORANDUM IN SUPPORT OF NEVADA STATE BANK’S MOTION TO INTERVENE Case No.: 2:11-cv-1165 Judge: Bruce S. Jenkins

Pursuant to D.U.Civ.R. 7-1, Nevada State Bank, by and through its respective counsel,

hereby submits this Memorandum in Support of its Motion to Intervene.

STATEMENT OF FACTS

1. Plaintiff Securities and Exchange Commission (the “SEC”) began this action by

filing a Complaint on December 15, 2011.

Case 2:11-cv-01165-BSJ Document 581 Filed 10/16/12 of 9

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2. On the same date, the Court entered an Order Appointing Receiver,

Freezing Assets and Other Relief which froze all assets held in the name of the

Defendants, including Defendants Management Solutions, Inc. and Wendell Jacobson.

3. On or about March 15, 2007, Summerwind, LLC (“Summerwind”), by its

President Wendell Jacobson executed, and delivered to Nevada State Bank a Promissory Note

(the “Note”) whereby Summerwind agreed and promised to pay to Nevada State Bank the

principal sum of $8,440,000.00, plus interest thereon.

4. In connection with the Note, Defendants Management Solutions, Inc. and

Wendell Jacobson executed a Guaranty and thereby guaranteed payment of the Note.

5. The underlying collateral for the Note consists of 104 units in the Summer Wind

Apartment/Condominium Complex located at 280 Riverside Drive, Mesquite, Nevada 89027

(the “Property”)

6. Summerwind has defaulted under the terms of the Note.

7. With the entry of the Court’s Order referenced above, a stay was entered which

prevented Nevada State Bank from pursuing its remedies against Summerwind, Defendants

Management Solutions, Inc. and Wendell Jacobson, and the Property.

ARGUMENT

I. NEVADA STATE BANK IS ENTITLED TO INTERVENE AS A MATTER OF RIGHT PURSUANT TO FED. R. CIV. P. 24(a).

Rule 24(a)(2) of the Federal Rules of Civil Procedure allows a party to intervene as a

matter of right “when the applicant claims an interest relating to the property or transaction


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which is the subject of the action and the applicant is so situated that the disposition of the action

may as a practical matter impair or impede the applicant’s ability to protect that interest, unless

the applicant’s interest is adequately represented by existing parties.” Fed. R. Civ. P. 24(a)(2).

An applicant must be allowed to intervene if (1) the application is timely; (2) the applicant has an

interest in the subject matter of the dispute; (3) that interest is or may be impaired or impeded;

and (4) the applicant’s interest is not represented adequately by the existing parties. Coalition of

Arizona/New Mexico Counties for Stable Economic Growth, 100 F.3d 837, 840 (l0th Cir. 1996).

Generally, the Tenth Circuit follows a liberal view in allowing intervention under Rule 24(a).

Elliot Industries Limited Partnership v. BP America Production Co., 407 F3d 1091, 1103 (l0th

Cir. 2005).

Nevada State Bank’ Motion satisfies the requirements to intervene as a matter of right in

this action. The timeliness of a motion to intervene is viewed in light of the circumstances,

“including the length of time since the applicant knew of his interest of the case, prejudice to the

existing parties, prejudice to the applicant, and the existence of any unusual circumstances.” Id.

Nevada State Bank has communicated with the Receiver about its interests in the Property.

Moreover, there has been no adjudication of the issues raised in the SEC’s Complaint and no

party would be prejudiced by Nevada State Bank’ intervention as a party. Thus, the Motion to

intervene is timely.

Second, Nevada State Bank has also demonstrated an interest in the Property. For

intervention, an applicant’s interests in the proceeding must be “direct, substantial, and legally

protectable.” Utahns for Better Transportation v. United States Dept. of Transportation, 295


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F.3d 1111, 1115 (l0th Cir. 2002) (quoting Coalition 100 F.3d at 840). Sufficiency of interest is a

fact-specific determination. Id. The Tenth Circuit has described the interest test as “primarily a

practical guide to disposing of lawsuits by involving as many apparently concerned persons as is

compatible with efficiency and due process.” Id. (quoting Utah Association of Counties, et al. v.

Clinton, et al., 255 F.3d 1246, 1251-52 (10th Cir. 2001)). Threat of harm to an applicant’s

economic interest is sufficient to support the requisite interest. Id.

Nevada State Bank’ interest in the Property entitles it to a voice in this receivership

proceeding. It is a real and present interest as demonstrated by the documentation summarized

above. Therefore, Nevada State Bank has the requisite interest in this action to intervene as a

matter of right.

To satisfy the third element under Rule 24(a)(2), an applicant must demonstrate that the

disposition of the lawsuit “may as a practical matter impair or impede [its] ability to protect [its]

interest.” Fed. R. Civ. P. 24(a)(2). The Tenth Circuit has stated that impairment is not separate

from the existence of an interest. Id. at 1116. An intervenor “must show only that impairment of

its substantial legal interest is possible if intervention is denied. The burden is minimal.”

Clinton, 255 F.3d at 1253. The Court’s Order entered December 15, 2011 impairs Nevada State

Bank’ right to pursue foreclosure of the Property, and otherwise impairs or potentially impairs

Nevada State Bank’ security interest. The divergence between the interests of the applicant and

the parties need not be great in order to satisfy this minimal burden. Id. at 1254. Nevada State

Bank faces the requisite impairment of interests to intervene as a matter of right.


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Finally, under Rule 24(a)(2), an applicant for intervention bears the burden of showing

that its rights are not adequately represented by the existing parties. Fed. R. Civ. P. 24(a)(2).

Nevada State Bank can certainly meet the minimal burden of proving inadequate representation

by the existing parties, because its interests and the interests of the parties are sufficiently

divergent. The Receiver appointed by the Court stands in the shoes of Defendants, and cannot

adequately represent the interests of Nevada State Bank. Thus, Nevada State Bank faces the

threat of economic injury from the outcome of this litigation while Defendants face their own

distinct economic injury. Nevada State Bank has met the minimal burden of showing that its

interests may not be adequately represented by the existing parties and it should be allowed to

intervene. Based on the foregoing, Nevada State Bank is entitled to intervene as a matter of

right.

I. NEVADA STATE BANK SHOULD ALSO BE ALLOWED TO INTERVENE PURSUANT TO FED. R. CIV. P. 24(b).

Under Rule 24(b) a Court may permit anyone to intervene who “has a claim or defense

that shares with the main action a common question of law or fact.” Fed. R. Civ. P. 24(b)(l)(B).

Nevada State Bank also qualifies for permissive intervention under Rule 24(b) because it has a

claim that shares a common question of law or fact with the main action. Nevada State Bank’

claim is based on its interest in the Property. This claim shares a common question of law or fact

with the main action because the Receiver, standing in the shoes of Defendants, also claims an

interest in the same Property. Thus, the Court should exercise its discretion to permit Nevada

State Bank to intervene in this action under Rule 24(b).


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CONCLUSION

Because Nevada State Bank claims an interest in the Property that is the subject of this

action, and because disposition of the action without Nevada State Bank’ involvement may

impair or impede its ability to protect its interests, Nevada State Bank respectfully requests that

this Court grant its Motion to Intervene.

DATED this 16th day of October, 2012.

RAY QUINNEY & NEBEKER

/s/ Matthew N. Evans__________ Matthew N. Evans Gregory S. Roberts Attorneys for Nevada State Bank


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CERTIFICATE OF SERVICE

I hereby certify that on the 16th day of October, 2012, I caused a true and correct copy of

the foregoing MEMORANDUM IN SUPPORT OF NEVADA STATE BANK’S MOTION

TO INTERVENE to be filed with the Clerk of Court using the CM/ECF system, which will

send notification of such filing to the following:

Daniel J. Wadley ([email protected]) Alison J. Okinaka ([email protected]) Paul N. Feindt ([email protected]) Thomas M. Melton ([email protected]) SECURITIES & EXCHANGE COMMISSION 15 West South Temple, Suite 1800 Salt Lake City, UT 84101 Attorneys for Plaintiff James B. Quesenberry ([email protected]) Stephen E. Quesenberry ([email protected]) Christopher R. Infanger ([email protected]) HILL JOHNSON & SCHMUTZ, L.C. RIVERVIEW PLAZA, SUITE 300 4844 NORTH 300 WEST PROVO UTAH 84604 Attorneys for Wendall A. Jacobson and Allen R. Jacobson Gregory N. Hoole ([email protected] HOOLE & KING, LC. 4276 HIGHLAND DRIVE SALT LAKE CITY, UTAH 84124 Attorneys for Amicus MSI Intervenors


mailto:[email protected]







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Greg B. Bailey P.O. Box 298 Fountain Green, Utah 84632 Movant Greg Bailey, Pro Se (Via U.S. Mail, documents provided on CD) Ian Hiatt ([email protected]) Jefferson W. Gross ([email protected] Richard D. Burbidge ([email protected]) BURBIDGE MITCHELL & GROSS 215 S. State, Suite 920 Salt Lake City, Utah 84111 Attorneys for Intervenor Defendant CRVII Escena Lend, LLC Cory A. Talbot ([email protected]) David K. Broadbent ([email protected]) J. Andrew Sjoblom ([email protected]) Matthew T. Wirthlin ([email protected]) Romaine C. Marshall ([email protected] Doyle S. Byers ([email protected]) HOLLAND & HART (UT) 222 S. Main Street, Suite 2200 Salt Lake City, Utah 84101 Attorney for Receive John A. Beckstead Kim R. Wilson ([email protected]) Tammy B. Georgelas ([email protected] SNOW CHRISTENSEN & MARTINEAU 10 Exchange Place, 11th Floor P.O. Box 45000 Salt Lake City, Utah 84145 Attorneys for Intervening Party Bank Midwest, N.A.













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Sam M. Stricklin ([email protected]) Brian C. Mitchell ([email protected]) BRACEWELL & GUILIANI, LLP 1445 Ross Avenue, Suite 3800 Dallas, Texas 75202

Attorneys for Intervening Party Bank Midwest, N.A., as successor-by-merger with Hillcrest Bank, N.A. Adelaide Maudsley (maudsley&chapman.com) CHAPMAN AND CUTLER, LLP 201 S. Main Street, Suite 2000 Salt Lake City, Utah 84111 Attorneys for Mutual Omaha Bank John Kincade ([email protected]) Deanna E. Caldwell ([email protected]) WINSTEAD, P.C. 1201 Elm Street, Suite 5400 Dallas, TX 75270

Attorneys for Mutual of Omaha Bank George W. Pratt ([email protected] Jessica P. Wilde JONES WALDO 170 S. Main Street, Suite 1500 Salt Lake City, Utah 84101 Attorneys for Barlow Corporation

/s/ Shauna L. Beckstead_______

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Defendants.

NEVADA STATE BANK’S COMPLAINT IN INTERVENTION Case No.: 2:11-cv-1165 Judge: Bruce S. Jenkins

Pursuant to Fed. R. Civ. P. 24(a), Nevada State Bank, by and through its undersigned

counsel, hereby submits this Complaint in Intervention.

BASIS OF INTERVENTION

Nevada State Bank is a secured creditor of entities whose assets are subject to this

receivership proceeding. Nevada State Bank seeks relief from the Order Appointing Receiver,

Freezing Assets, and Other Relief (the “Receivership Order”) entered by the Court on December

Case 2:11-cv-01165-BSJ Document 581-1 Filed 10/16/12 Page 1 of 8

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15, 2011, which froze the assets of the receivership estate, including those securing the debt held

by Nevada State Bank.

JURISDICTION AND VENUE

Consistent with Rule 8(a)(1) of the Federal Rules of Civil Procedure, this Court has

already exercised jurisdiction over this matter, and this Complaint in Intervention needs no

additional jurisdictional support.

Nevada State Bank does not contest that this Court is the proper venue for this

receivership proceeding.

FACTS

On or about March 15, 2007, Summerwind, LLC (“Summerwind”), by its

President Wendell A. Jacobson, made, executed, and delivered to Nevada State Bank, for

valuable consideration, a Promissory Note (the “Note”), a copy of which is attached hereto as

Exhibit 1 and by this reference is incorporated herein. Under the terms of the Note,

Summerwind agreed and promised to pay to Nevada State Bank the principal sum of

$8,440,000.00, plus interest thereon.

As security for the Note, Summerwind executed a Deed of Trust and Security

Agreement with Assignment of Rents and Fixture Filing dated March 20, 2007 (the “Trust

Deed”), with Fidelity National Title Insurance Company as trustee, and Nevada State Bank as

beneficiary, encumbering 104 units in the Summer Wind Apartment/Condominium Complex

located at 280 Riverside Drive, Mesquite, Nevada 89027 (the “Property”), and more particularly


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described in the Trust Deed, a copy of which is attached hereto as Exhibit 2 and by this reference

is incorporated herein.

The Trust Deed was recorded with the Clark County Recorder on March 22, 2007

as 20070322-0005100.

In connection with the Note and as a necessary inducement to Nevada State Bank

to make the subject loan, Management Solutions, Inc. and Wendell Jacobson executed a

Guaranty and thereby guaranteed payment of all of the indebtedness, liabilities, obligations and

duties owing to Nevada State Bank in connection with the Note.

Summerwind has defaulted under the terms of the Note in that it failed to make monthly

payments and to pay the entire principal and interest owing under the Note when the Note

matured and became due and payable in full.

As of October 2, 2012, the principal amount due and owing under the Note was

$6,077,438.89, plus accrued interest in the amount of $310,002.25, with interest accruing

thereafter at $1,012.90 per day.

The Court-Appointed Receiver obtained an appraisal of the Property on

September 10, 2012 which indicates that the Property is worth no more than $2,060,000. A copy

of the appraisal is attached hereto as Exhibit 3 and by this reference is incorporated herein.

On or about December 15, 2011, the Court entered an Order Appointing Receiver,

Freezing Assets and Other Relief (“Order Freezing Assets”). Pursuant to this Order, assets of

several companies were frozen, including assets owned by Summerwind, which assets include

the Property.


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FIRST CLAIM FOR RELIEF (Declaratory Relief)

Nevada State Bank incorporates by reference the foregoing paragraphs as if set forth fully

herein.

Nevada State Bank is the payee and holder of the Note.

Nevada State Bank is currently owed in excess of six million dollars under the Note.

The Note is secured by the Property that is currently worth no more than $2,060,000.00.

Thus, there is no potential equity in the Property that could inure to the benefit of the

subject investors and, consequently, the objective and grounds for the Order Freezing Assets do

not apply to the Property.

Accordingly, Nevada State Bank is entitled to a declaration by the Court that: (a) Nevada

State Bank has a valid, first priority security interest in the Property; (b) Nevada State Bank is

currently owed on the Note amounts well in excess of the Property’s value; and (c) the Property

should be released from the Order Freezing Assets to enable Nevada State Bank to foreclose its

interests in the Property.

PRAYER FOR RELIEF

WHEREFORE, Intervenor Nevada State Bank prays for the following:

An Order permitting Nevada State Bank to intervene in this case;

An Order declaring that: (i) Nevada State Bank has a valid, first priority security interest

in the Property; (ii) Nevada State Bank is currently owed on the Note amounts well in excess of


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the Property’s value; and (iii) the Property should be released from the Order Freezing Assets to

enable Nevada State Bank to foreclose its interests in the Property, and

Such other and further relief as the Court deems proper.





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the foregoing NEVADA STATE BANK’S COMPLAINT IN INTERVENTION to be filed

with the Clerk of Court using the CM/ECF system, which will send notification of such filing to

the following:










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1204380











Defendants.

ORDER GRANTING NEVADA STATE BANK’S MOTION TO INTERVENE Case No.: 2:11-cv-1165 Judge: Bruce S. Jenkins

Pursuant to Rule 24 of the Federal Rules of Civil Procedure, based on the Motion to

Intervene filed by Nevada State Bank and no opposition thereto, and for good cause appearing, it

is hereby ORDERED that:

1. Nevada State Bank’s Motion to Intervene is Granted;

2. Nevada State Bank may file its Complaint in Intervention.


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the foregoing ORDER GRANTING NEVADA STATE BANK’S MOTION TO

INTERVENE to be filed with the Clerk of Court using the CM/ECF system, which will send

notification of such filing to the following:










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matthew n. evans (7051) gregory s. roberts (9092) ray...

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