ROBB EVANS OF ROBB EVANS & ASSOCIATES LLC · 2018-09-03 · ROBB EVANS OF ROBB EVANS & ASSOCIATES...

ROBB EVANS OF

ROBB EVANS & ASSOCIATES LLC Receiver of I Works, Inc., et al. and

the Assets of Jeremy Johnson 11450 Sheldon Street

Sun Valley, California 91352-1121

Telephone No.: (818) 768-8100

Facsimile No.: (818) 768-8802

Federal Trade Commission v. Jeremy Johnson, I Works, Inc., et al.

CASE No. 2:10-CV-02203-RLH-GWF

Notice of Motion and Motion for Order:

(1) Approving and Confirming Sale of Real Property;

(2) Authorizing Receiver to Abandon PEPS I Houseboat; and

(3) Granting Relief from Local Rule 66-5 Pertaining to Notice to

Creditors;

Memorandum of Points and Authorities in Support Thereof;

Declaration of Kenton Johnson in Support Thereof;

Filed August 10, 2012

MCKEN NA LONG &ALDRIDGE LLP

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LA:17969676.4

RANDOLPH L. HOWARD (Nev. SBN 006688)[email protected]

KOLESAR & LEATHAM, CHTD.400 South Rampart Boulevard, Suite 400Las Vegas, NV 89145Telephone: (702) 362-7800Facsimile: (702) 362-9472

GARY OWEN CARIS (Cal. SBN 088918)[email protected]

LESLEY ANNE HAWES (Cal. SBN 117101)[email protected]

MCKENNA LONG & ALDRIDGE LLP300 South Grand Avenue, 14th FloorLos Angeles, CA 90071-3124Telephone: (213) 688-1000Facsimile: (213) 243-6330

Attorneys for ReceiverROBB EVANS OF ROBB EVANS & ASSOCIATESLLC

UNITED STATES DISTRICT COURT

DISTRICT OF NEVADA

FEDERAL TRADE COMMISSION,

Plaintiff,

v.

JEREMY JOHNSON, etc., et al.,

Defendants.

Case No. 2:10-CV-02203-MMD-GWF

NOTICE OF MOTION AND MOTIONFOR ORDER (1) APPROVING ANDCONFIRMING SALE OF REALPROPERTY AND FOR RELATEDRELIEF; (2) AUTHORIZINGRECEIVER TO ABANDON PEPS IHOUSEBOAT; AND (3) GRANTINGRELIEF FROM LOCAL RULE 66-5PERTAINING TO NOTICE TOCREDITORS; MEMORANDUM OFPOINTS AND AUTHORITIES; ANDDECLARATION OF KENTONJOHNSON IN SUPPORT THEREOF

Case 2:10-cv-02203-MMD -GWF Document 677 Filed 08/10/12 Page 1 of 26


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LA:17969676.4

PLEASE TAKE NOTICE that Robb Evans of Robb Evans & Associates LLC

(“Receiver”), the Receiver pursuant to the Court’s Preliminary Injunction Order issued February

10, 2011, hereby moves the Court for the following relief:

1. An order entered before September 14, 2012, approving and confirming the

Receiver’s proposed sale of the real property located at 147 N. 100 W. Mendon, Utah 84325

(“Mendon Property”) to Randall E. Plagmann and Debra W. Plagmann (“Mendon Buyers”) by

private sale for the sum of $250,000.00 cash pursuant to the terms of that certain Commercial

Real Estate Purchase Contract dated as of June 11, 2012, Addendum Nos. 1 through 8 to Real

Estate Purchase Contract with Addendum and Additional Terms, Addendum for 147 N. 100 W.

Mendon UT, and Seller’s Property Condition Disclosure (collectively the “Mendon Purchase

Agreement”), attached collectively as Exhibit 3 to the Declaration of Kenton Johnson, and

without further notice or order or overbidding, and in connection therewith:

(a) Authorizing the Receiver to execute all documents and instruments

necessary or convenient to complete, implement, effectuate and close the sale of the Mendon

Property to the Mendon Buyers, including but not limited to the deed conveying title to the

Mendon Property;

(b) Authorizing the Receiver to permit and/or cause to be paid from the

proceeds of sale of the Mendon Property all ordinary and customary closing costs, all costs and

expenses required to be paid under the terms of the Mendon Purchase Agreement by the seller

from the proceeds of sale, all commissions provided for in the Mendon Purchase Agreement and

the Receiver’s Exclusive Right to Sell Listing Agreement and Agency Disclosure for the property

attached as Exhibit 1 to the Declaration of Kenton Johnson in support of this Motion;

(c) Authorizing the Receiver to complete the sale of the Mendon Property

without further notice, order or overbidding under the circumstances and based on the fact that

the proposed sale is for fair market value and is a very favorable, all cash sale as to which few

other potential buyers have been located;



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LA:17969676.4

2. An order authorizing the receiver to abandon and not further administer the

personal property consisting of a 1999 Skipperline Custom 76’ “Peps I” Houseboat

(“Houseboat”) and allowing the lienholder Town and Country Bank to exercise its contractual

rights to repossess and/or foreclose on the Houseboat pursuant to applicable state law. The

Receiver has investigated the potential for selling the Houseboat and has concluded that the

expenses of sale, the commissions of the broker, the loan payoff, and likely minimal net sales

proceeds would not justify the risk and expense of continuing to attempt to liquidate the

Houseboat. Despite the Houseboat’s prolonged exposure to the marketplace and extensive

marketing by the Receiver’s broker there has been limited interest in the Houseboat. Given the

severe recession and economic conditions in and around Lake Powell, Arizona, the liquidation of

the Houseboat will be expensive and risky to the receivership. In the Receiver’s business

judgment, the expense and risk to the estate of an unsuccessful liquidation is not warranted given

the minimal potential upside recovery. Therefore, the Receiver has concluded such property is

burdensome and of inconsequential value and benefit to the estate and should be abandoned; and

3. An order deeming notice of this Motion to be sufficient under Local Civil Rule 66-

5 based on the service of a notice of the filing of this Motion and the Motion on all parties and

service of a notice of the filing of the Motion on all known non-consumer creditors of the estate,

and on all known taxing authorities with a potential claim in the receivership estate concurrent

with the filing of this Motion with the Court, but not on the tens of thousands of potential

consumer creditors.

This Motion is made pursuant to 28 U.S.C. §§ 2001 and 2002 and Local Civil Rules 7-2

and 66-5 and other applicable law and is based upon this notice of motion and motion, the

separate notice of filing of the Motion served concurrently herewith, the accompanying

memorandum of points and authorities and the Declaration of Kenton Johnson filed in support

hereof, any reply, and upon all other pleadings and documentary evidence as may be presented to

the Court by the Receiver.



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LA:17969676.4

Dated: August 10, 2012 Respectfully submitted,

RANDOLPH L. HOWARDKOLESAR & LEATHAM, CHTD.

MCKENNA LONG & ALDRIDGE LLPGARY OWEN CARISLESLEY ANNE HAWES

By: /s/ Gary Owen CarisGary Owen CarisLesley Anne Hawes

Attorneys for ReceiverROBB EVANS OF ROBB EVANS &ASSOCIATES LLC



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MEMORANDUM OF POINTS AND AUTHORITIES

I. INTRODUCTION AND SUMMARY OF RELEVANT FACTS

On January 13, 2011, the Receiver was appointed Temporary Receiver over I Works, Inc.

(“I Works”), numerous other Corporate Defendants as defined in the Temporary Restraining

Order and over the assets of defendant Jeremy Johnson (collectively the “Receivership

Defendants”). Pursuant to the Preliminary Injunction Order entered February 10, 2011, the

Receiver has been appointed permanent Receiver over the Receivership Defendants.

Under the Preliminary Injunction Order, the Receiver is directed to maintain and preserve

assets of the receivership estate. The real and personal property assets subject to this Motion are

wasting assets, declining in value based on market forces and/or depreciation, or subject to

market volatility. It is in the best interests of the estate to liquidate the Mendon Property to

convert the asset into cash which can be held in the Receiver’s interest-bearing account for the

QSF1 for this receivership and to abandon the Houseboat to relieve the receivership estate of the

continued financial drain on the receivership estate’s resources.

A. Proposed Sale of Mendon Property

On May 27, 2011, the Receiver filed a motion seeking authority from the Court to sell

certain personal property and to list and market for sale various real property, aircraft and

houseboats. See Doc. Nos. 227, 227-1, 227-3 and 228. The Receiver specifically sought

authority to list and market the Mendon Property, title to which is held by SLI, LLC (“SLI”). SLI

is an affiliated entity of the Receivership Defendants. As set forth in greater detail on page 22 in

the first Receiver’s Report, SLI is owned 50% by Jeremy Johnson and 50% by defendant Duane

Fielding. The Court granted the Receiver’s motion and entered its order authorizing the listing

and marketing of the Mendon Property on August 26, 2011. See Doc. No. 288 (“Sale

Authorization Order”).2

1 The Receiver has established a Qualified Settlement Fund (“QSF”) for this receivership toreceive the proceeds of liquidated assets and minimize tax on the assets, for the benefit of thecreditors and other beneficiaries of the estate, designated as the I Works Inc. Receivership QSF.

2 Jeremy Johnson appealed the Sale Authorization Order and unsuccessfully sought to stay theSale Authorization Order on appeal.



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LA:17969676.4

The Mendon Property is 1.35 acres and zoned “single family” which was developed in

1968 into a small mobile home park with 6 mobile homes and 9 available mobile home sites. The

Mendon Property is considered a commercial property because of its use as a mobile home park.

Pursuant to the Sale Authorization Order, the Receiver entered into an Exclusive Right to Sell

Listing Agreement and Agency Disclosure (“Listing Agreement”) with ERA Advantage Realty as

broker (“Broker”), with Jay Harrison as agent (“Agent”)3, which provides for a sales commission

of 6% of the sale price upon sale of the asset. The Listing Agreement is attached as Exhibit 1 to

the Declaration of Kenton Johnson filed in support of this motion. The Broker and Agent are

experienced in the sale of real estate in Northern Utah.

The Mendon Property has been formally listed for sale since February 10, 2012. It has

been generally known in the real estate community that this property along with others owned

directly or indirectly by Johnson located in Utah would be sold by the Receiver based on the

Receiver’s prior sale motions. The Mendon Property has been listed on the Multiple Listing

Service and advertised on other internet sites, since February 2012. In listing the Mendon

Property for sale and marketing, the Receiver relied on the valuation of the Mendon Property

generated by the Receiver’s Broker. The Mendon Property is difficult to value as there are few

active comparable properties on the market or similar sales in Cache county (the county in which

Mendon is located) or the surrounding counties in Utah or Idaho. The initial listing Agent

provided a broker’s opinion of value using two different valuation calculations. The first

valuation used an estimated income approach and estimated the Mendon Property to have a value

between $225,000 and $258,000. The other valuation used an estimated cost approach and

estimated the Mendon Property to have a value of $261,000. In addition, independent appraisers,

Lenard Owens and Kimball Probst of Owens & Associates, Inc., valued the Mendon Property at

$250,000. The independent appraisal is based on the “as is” market value of the Mendon

Property using both a sales comparison approach and an income approach. Further, the Receiver

3 In April 2012, Kathleen Burnett, the owner of ERA Advantage Realty, assumed the role ofAgent from Jay Harrison. Ms. Burnett has approximately 20 years’ experience as a real estateagent and is assisting the Receiver in finalizing the sale of the Mendon Property.



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LA:17969676.4

obtained a broker’s opinion of value from an independent real estate broker, Zan Summers of

NAI West Commercial Real Estate Services, Worldwide, which estimated the value of the

Mendon Property to be between $230,000 for an immediate sale and $260,000 for a sale with a

marketing time of one to two years. All of these valuations are attached to the Declaration of

Kenton Johnson collectively as Exhibit 2.

The Receiver initially listed the Mendon Property at $250,000 based on the Receiver’s

early estimate of value from the Broker. On February 7, 2012, the Receiver received an offer to

purchase the Mendon Property for $190,000. On or about February 17, 2012, the prospective

buyer increased its offer to $239,000. On or about February 29, 2012, the Receiver proposed a

counteroffer of $250,000. The Receiver did not hear back from the prospective buyer until May

24, 2012 at which time the buyer again offered $239,000, with half payable in cash and the

Receiver to finance the balance. The Receiver rejected this offer. After the initial interest from

the prospective buyer in February 2012, the Mendon Property did not generate significant interest

over the four months that the property was listed for sale with only three telephone calls from

potential buyers. The Agent had two in-person showings of the property to potential buyers. By

June 2012, having received no other offers to purchase, the Receiver was preparing to lower the

listing price of the Mendon Property. However, on June 11, 2012, the offer to purchase for the

full price of $250,000 from the Mendon Buyers was received by the Agent.

Receiving only a total of two written offers to purchase the Mendon Property, subject to

Court approval, the Receiver accepted the highest of those offers by the Buyers at $250,000 and

entered into the Mendon Purchase Contract.

The Receiver seeks to sell the Mendon Property under the Mendon Purchase Agreement

to the Mendon Buyers, who are unaffiliated, arm’s length purchasers based on the Receiver’s

investigation. The sale is an “as is” sale which includes the five mobile home units currently on

site. There are six privately owned mobile homes on the property which are currently paying a

monthly rental fee to the Receiver to continue using the mobile home pad at the Mendon

Property. The purchase price of $250,000 under the Mendon Purchase Agreement is well within

the range of estimated sales prices for the property under the two broker’s opinions of value and



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appraisal obtained by the Receiver, and the sale is an all-cash purchase. The Mendon Purchase

Agreement is attached as Exhibit 3 to the Declaration of Kenton Johnson in support of this

Motion. The Mendon Buyers have released all contingencies and are ready to purchase the

Mendon Property. The Mendon Buyers have agreed to set the closing date to 20 days after this

Court approves the sale, but if the Court does not approve the sale by September 14, 2012,

the Receiver must refund the Mendon Buyers earnest money deposit in the amount of

$7,500.

The Receiver has obtained a title report for the Mendon Property, a copy of which is

attached as Exhibit 4 to the Kenton Johnson Declaration filed in support of this motion. The

Mendon Property is not subject to any liens.

B. Proposed Abandonment of the Peps I Houseboat

As discussed above in subsection A, the Receiver filed a motion on May 27, 2011 seeking

authority from the Court to sell certain personal property and to list and market for sale various

real property, aircraft and houseboats. See Doc. Nos. 227, 227-1, 227-3 and 228. The Receiver

specifically sought authority to list and market the Houseboat, title to which is held by Orange

Cat Investments, LLC (“Orange Cat”). As detailed in the first Receiver’s Report, Orange Cat is a

Receivership Defendant in that it is an affiliate of the Receivership Defendants and is owned

equally by Jeremy Johnson and Sharla Johnson. The Court authorized the Receiver to list and

market the Houseboat as part of its Sale Authorization Order. See Doc. No. 288.

The Houseboat is subject to a lien in favor of Town and Country Bank (“Lender”) with a

balance due of $753,000 based upon a loan entered into on or about June 19, 2008 by Jeremy and

Sharla Johnson with the Lender for indebtedness in the principal amount of $875,000 (Promissory

Note, dated June 19, 2008 (hereinafter the “Note”)). As of May 2011, the Note was in default

and as a result, the Receiver entered into an agreement with the Lender whereby the Receiver

agreed to cure the default on the Note and pay regular monthly payments of accrued unpaid

interest in exchange for the Lender waiving all late fees, attorney fees, costs, penalties, and

default-rate interest under the Note and extending the maturity date of the Note to the earlier of a)



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June 20, 2012; or b) 30 days following a Court order discharging the Receiver. The Note has

now matured.

The Houseboat was listed for sale on August 31, 2011 for $1.2 million. The selling price

was determined based upon a marine survey from June 2011 which valued the Houseboat at $1.2

million. For almost one year the Receiver, through its marine broker, Aramark Sports and

Entertainment Services, Inc. d/b/a Lake Powell Resorts and Marinas (“Aramark”), extensively

marketed the Houseboat on the internet and with onsite marketing materials, including brochures

and pictures of the Houseboat, at Aramark’s marina office in Lake Powell where the Houseboat is

docked. Despite the marketing efforts and the prolonged exposure to the marketplace, the

Houseboat listing has generated limited interest.

On March 2, 2012, the Receiver received a verbal offer to purchase the Houseboat for

$675,000. The Receiver responded that the offer must be in writing for the Receiver to consider.

On March 7, 2012, the interested party provided an offer in writing for $730,000. The Receiver

countered the offer with $975,000 and reduced the listing price of the Houseboat to $975,000.

The interested party informed Aramark that they were only interested if they could purchase the

Houseboat in the range of $700,000 to $750,000. However, selling at that price would not have

covered the expenses of the receivership estate in finalizing the sale and paying off the lien on the

Houseboat. The Receiver had no further discussions with this prospective buyer.

Almost three months passed before the Receiver had another interested party in the

Houseboat. On May 27, 2012, a written offer was received offering $449,000 to purchase the

Houseboat. The Receiver countered with $975,000 and did not receive any further counteroffers

from the prospective buyer. Since no other offers to purchase the Houseboat have been

forthcoming and there has been no recent interest in the listing, on July 14, 2012, the Receiver

again had the Houseboat surveyed by a marine surveyor. The July 2012 marine survey valued the

Houseboat at $860,000 using a fair market value approach. Therefore, in an attempt to generate

interest in the listing, the Receiver reduced the list price for the Houseboat to $825,000 and

instructed Aramark to contact those parties who had previously expressed interest in the

Houseboat to offer the sale of the Houseboat for $825,000. None of the parties were interested in



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purchasing the Houseboat at that price. The Receiver continues to incur slip charges, insurance

and other fees related to the maintenance of the Houseboat, thereby creating a significant

financial drain on the receivership estate’s resources.

The severe recession and current economic conditions in the Lake Powell area have

resulted in a limited market for Houseboat sales. In the Receiver’s business judgment, the

Receiver has concluded that the limited potential net recovery from a sale of the Houseboat is

outweighed by the risks and expenses of attempting to sell the Houseboat, given the cost to

maintain, secure and insure the personal property. Given the lien on the Houseboat and the

expenses to close a sale, including closing fees and sales commission, the Receiver believes that

the property is burdensome and of inconsequential value and benefit to the estate and that the

property should be abandoned and the Lender should be allowed to repossess and foreclose on the

Houseboat.

II. SALE OF THE MENDON PROPERTY SHOULD BE APPROVED UNDER 28

U.S.C. §§ 2001 AND 2002 AND RECEIVERSHIP LAW

Section § 2001(b) of title 28 pertains to the sale of real property at private sale. That

statute provides in part:

After a hearing, of which notice to all interested parties shall be

given by publication or otherwise as the court directs, the court may

order the sale of such realty or interest therein by private sale for

cash or other consideration and upon such terms and conditions as

the court approves, if it finds that the best interests of the estate will

be served thereby.

The time, manner, terms of sale and notice thereof are regulated by the court appointing

the receiver. As noted above, courts are granted discretion in setting the terms and conditions for

judicial sales and the Court's discretion will not be disturbed on appeal except where abuse of

discretion is shown. United States v. Branch Coal Corp., 390 F. 2d 7. The terms and conditions

of the judicial sale that the Court may adopt are based on the facts and circumstances of each

case. The discretion granted in connection with sales of assets is consistent with the broad



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discretion accorded to the Court sitting in equity in receivership proceedings to make orders

concerning the administration and supervision of the estate that will promote equity, efficiency

and cost-effectiveness in the estate’s administration. See generally Securities and Exchange

Commission v. Hardy, 803 F.2d 1034; Securities and Exchange Commission v. Black, 163 F.3d at

199; Securities and Exchange Commission v. Elliot, 953 F.2d 1560.

There are four general components for the approval of a private sale under § 2001(b),

including (1) three appraisals to value the property, (2) a minimum sale price of two-thirds of the

average value of the three appraisals, (3) publication of notice ten days prior to confirmation, and

(4) a provision that a private sale cannot be confirmed if there is an overbid at least 10 percent

higher than the proposed sale price under the private sale.

The proposed sale is in the range of the market value of the Mendon Property based on the

three valuations obtained for the property, including two broker’s opinions of value and one

formal appraisal of the property. The sale to the Mendon Buyers at $250,000 exceeds the

minimum two-thirds of the average of the valuations that is the threshold price that must be

achieved for confirmation of a private sale and is in fact exactly the amount set forth in the formal

appraisal. Other than the Mendon Buyers and the prospective buyer offering $239,000 on or

about May 24, 2012, no other persons have expressed serious interest in the Mendon Property,

making it unlikely that an overbid would be received. The Receiver has caused a copy of this

Motion to be posted to the Receiver’s website, and notice of this Motion with the proposed sale

terms has been served on all defendants. The Receiver contends that a sale of the Mendon

Property without publication and overbids is warranted under the circumstances, including the

expense associated with publishing notice of the sale or conducting an overbid session, which

would cause additional administrative and other expense and delay without any reasonable

chance that a higher net recovery would be achieved for the estate given the fact that the Receiver

is obtaining fair market value for the Mendon Property and the need to close by September 14,

2012. If the sale to the Mendon Buyers is not approved forthwith, there is little chance another

sale could be obtained that would produce a recovery for the estate.



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The Receiver therefore requests that the proposed sale be approved without further notice

or overbidding. As the Ninth Circuit noted in Securities and Exchange Commission v. Hardy,

803 F. 2d at 1037: “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”

and subject to review under an abuse of discretion standard. See also United States v. Branch

Coal Corp., 390 F. 2d 7 (3rd Cir. 1968).

III. ABANDONMENT OF THE PERSONAL PROPERTY IS APPROPRIATE

UNDER THE CIRCUMSTANCES AND IN THE BEST INTERESTS OF THE

ESTATE

The Receiver’s proposed abandonment of the Houseboat is consistent with federal

receivership practice as required by Federal Rules of Civil Procedure, Rule 66. See 2 Clark on

Receivers, § 355(h), p. 614 (3d ed. 1992) (receiver’s surrender of receivership property in its

possession subject to court order). Further support for the Receiver’s abandonment of the

Houseboat is found by analogy to section 554 of the Bankruptcy Code, 11 U.S.C. § 554, which

provides that a trustee in bankruptcy may abandon burdensome assets of inconsequential value to

the estate with court approval.

The court has wide latitude in supervising the receiver and may issue orders for the

administration of the receivership that the court deems appropriate under the circumstances of the

case. 13 Moore’s Federal Practice, § 66.06[4][a] (Matthew Bender 3d ed. Rev. 2011). The

“general equity power” of the district court in issuing orders addressing the administration of a

receivership estate was discussed at length by the Ninth Circuit in Securities and Exchange

Commission v. Hardy, 803 F.2d 1034 (9th Cir. 1986). Recognizing the limited body of reported

decisions in federal receiverships, the court nevertheless articulated two overriding principals

gleaned from the case law:

First, a district court’s power to supervise an equity receivershipand to determine the appropriate action to be taken in theadministration of the receivership is extremely broad. . . . The basisfor broad deference to the district court’s supervisory role in equityreceiverships arises out of the fact that most receiverships involvemultiple parties and complex transactions.



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. . .

Secondly, we have acknowledged that a primary purpose of equityreceiverships is to promote orderly and efficient administration ofthe estate by the district court for the benefit of creditors. [Citationsomitted.] Accordingly, we generally uphold reasonable proceduresinstituted by the district court that serve this purpose. [Citationsomitted.]

Securities and Exchange Commission v. Hardy, 803 F.2d at 1037-1038.

The Receiver submits that an order authorizing the Receiver’s abandonment of the

Houseboat is necessary and appropriate given the absence of any equity in the property for the

receivership estate.

IV. NOTICE OF THIS MOTION IS SUFFICIENT UNDER THE

CIRCUMSTANCES AND SHOULD BE APPROVED

Local Civil Rule 66-5 provides for service of notice of the hearing on various motions by

a Receiver concerning the administration of the estate. That rule provides for service of the

notice of hearing on such motions on all creditors of the receivership estate. No hearing has been

set on this Motion and the provisions of Local Civil Rule 66-5 do not specifically apply.

Nevertheless, the Receiver has served a notice of filing of the Motion on the parties and on all

known non-consumer creditors of the estate and on known taxing authorities with a potential

claim in the receivership estate (“Notice Parties”), to provide them notice and an opportunity to

be heard concerning the Motion. This notice is consistent with notice previously approved by the

Court in this case.

There are believed to be an extremely large number of potential consumer creditors who

may have claims against the Receivership Defendants arising out of the business operations of the

Receivership Defendants prior to the Receiver’s appointment, although the precise number,

identity and location of such consumer creditors have not been determined by the Receiver at this

time. Given the Receiver’s determination that more than $332.5 million4 in sales revenues were

generated by I Works and the related and affiliated entities, the number of consumer creditors is

4 This figure does not include tens of millions of dollars in additional sales revenues addressed bythe Receiver in the Report of Receiver’s Financial Reconstruction filed on February 3, 2012.



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likely in the tens of thousands. It is not realistically possible or beneficial to the estate and its

creditors for the Receiver to attempt to identify and serve the potential consumer creditors with

notice of this and other similar administrative motions, and the expense and burden on the estate

of attempting to effectuate such service would drain the estate’s resources and cause undue

administrative expense.

To the extent that Local Rule 66-5 applies to this Motion, the Receiver seeks an order that

notice of this Motion is sufficient if notice of the filing of the Motion is given by serving copies

of all motion papers on the parties to the action and by serving copies of the notice of filing of the

motion on the Notice Parties identified above. The Receiver submits that such service provides

sufficient notice and an opportunity for hearing to the interested parties and should be approved

as adequate.

There is ample authority for approval of the scope and method of notice as set forth above.

This Court, as a court of equity supervising the receivership estate, may make appropriate

administrative orders governing the receivership, including limitations on and changes in notice

and other procedures. See F.R.Civ.P. 5(a) and (c) (authorizing the court to modify service

procedures when numerous defendants are involved in litigation). In addition, pursuant to Local

Rule 66-10, a receiver is directed to administer receivership estates “as nearly as may be in

accordance with the practice in the administration of estates in Chapter 11 bankruptcy cases.”

Orders limiting notice when the Bankruptcy Code or Rules would otherwise require notice to all

creditors are routinely granted in bankruptcy cases to promote the expeditious and economical

administration of bankruptcy estates. See In re First Alliance Mortgage Co., 269 B.R. 428, 442

(C.D. Cal. 2001) (referencing in dicta in the court's recitation of facts the bankruptcy court's order

limiting notice issued in that case); 11 U.S.C. section 102(1)(A) (defining the phrase "after notice

and a hearing" to mean "after such notice as is appropriate in the particular circumstances, and

such opportunity for hearing as is appropriate in the particular circumstances"); 11 U.S.C. section

105(a) and (d) (granting broad equitable powers to the court to issue orders "necessary or

appropriate to carry out the provisions" of title 11 including "prescribing such limitations and

conditions as the court deems appropriate to ensure the case is handled expeditiously and



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economically"); and F.R. Bankr. P. 2002(m) (authorizing the court to enter "orders designating

the matters in respect to which, the entity to whom, and the form and manner in which notices

shall be sent except as otherwise provided by these rules").

V. CONCLUSION

For the foregoing reasons, it is respectfully requested that the Court grant relief as

requested in the Motion.

Dated: August 10, 2012 RANDOLPH L. HOWARDKOLESAR & LEATHAM, CHTD.

MCKENNA LONG & ALDRIDGE LLPGARY OWEN CARISLESLEY ANNE HAWES

By: /s/ Gary Owen CarisGary Owen Caris

Attorneys for ReceiverROBB EVANS OF ROBB EVANS &ASSOCIATES LLC



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DECLARATION OF KENTON JOHNSON

I, Kenton Johnson, declare:

1. I am a member of Robb Evans & Associates LLC and am a deputy to Robb Evans

of Robb Evans & Associates LLC, appointed as Receiver in this case. I am one of the deputies to

the Receiver responsible for the day-to-day supervision of the receivership estate. If called upon

to testify as to the facts set forth in this declaration, I could and would testify competently thereto

as the facts are true and within my personal knowledge or I have gained knowledge of such facts

from the books and records of the receivership proceeding, including the books and records of the

entities subject to the receivership.

2. On January 13, 2011, the Receiver was appointed Temporary Receiver over I

Works, Inc. (“I Works”), numerous other Corporate Defendants as defined in the Temporary

Restraining Order and over the assets of defendant Jeremy Johnson (collectively the

“Receivership Defendants”). Pursuant to the Preliminary Injunction Order entered February 10,

2011, the Receiver has been appointed permanent receiver over the Receivership Defendants. I

am one of the deputies to the Receiver responsible for the administration of the receivership

estate, including the investigation of assets and potential assets of the receivership estate, review

of the books and records of the receivership estate and the analysis of receivership assets,

including the status of loans encumbering those assets. I have been one of the Receiver’s

deputies primarily responsible for the marketing and sale of the aircraft of the estate.

3. The receivership estate included multiple properties, including the Mendon

Property which is the subject of this Motion. On May 27, 2011, the Receiver filed a motion

seeking authority from the Court to sell certain personal property and to list and market for sale

various real property, aircraft and houseboats. The Receiver specifically sought authority to list

and market the Mendon Property, title to which is held by SLI, LLC (“SLI”). SLI is an affiliated

entity of the Receivership Defendants. As set forth in greater detail on page 22 in the first

Receiver’s Report, SLI is owned 50% by Jeremy Johnson and 50% by defendant Duane Fielding.

The Court granted the Receiver’s motion and entered its order authorizing the listing and

marketing of the Mendon Property on August 26, 2011 (“Sale Authorization Order”).



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4. The Mendon Property is 1.35 acres and zoned “single family” which was

developed in 1968 into a small mobile home park with 6 mobile homes and 9 available mobile

home sites. The Mendon Property is considered a commercial property because of its use as a

mobile home park. Pursuant to the Sale Authorization Order, the Receiver entered into an

Exclusive Right to Sell Listing Agreement and Agency Disclosure (“Listing Agreement”) with

ERA Advantage Realty as broker (“Broker”), with Jay Harrison as agent (“Agent”), which

provides for a sales commission of 6% of the sale price upon sale of the asset. A copy of the

Listing Agreement is attached hereto as Exhibit 1. The Broker and Agent are experienced in the

sale of real estate in Northern Utah.

5. In April 2012, Kathleen Burnett, the owner of ERA Advantage Realty, assumed

the role of Agent from Jay Harrison. Ms. Burnett has approximately 20 years’ experience as a

real estate agent and is assisting the Receiver in finalizing the sale of the Mendon Property.

6. The Mendon Property has been formally listed for sale since February 10, 2012. It

has been generally known in the real estate community that this property along with others owned

directly or indirectly by Johnson located in Utah would be sold by the Receiver based on the

Receiver’s prior sale motions. The Mendon Property has been listed on the Multiple Listing

Service and advertised on other internet sites, since February 2012. In listing the Mendon

Property for sale and marketing, the Receiver relied on the valuation of the Mendon Property

generated by the Receiver’s Broker. The Mendon Property is difficult to value as there are few

active comparable properties on the market or similar sales in Cache county (the county in which

Mendon is located) or the surrounding counties in Utah or Idaho. The initial listing Agent

provided a broker’s opinion of value using two different valuation calculations. The first

valuation used an estimated income approach and estimated the Mendon Property to have a value

between $225,000 and $258,000. The other valuation used an estimated cost approach and

estimated the Mendon Property to have a value of $261,000. In addition, independent appraisers,

Lenard Owens and Kimball Probst of Owens & Associates, Inc., valued the Mendon Property at

$250,000. The independent appraisal is based on the “as is” market value of the Mendon

Property using both a sales comparison approach and an income approach. Further, the Receiver



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obtained a broker’s opinion of value from an independent real estate broker, Zan Summers of

NAI West Commercial Real Estate Services, Worldwide, which estimated the value of the

Mendon Property to be between $230,000 for an immediate sale and $260,000 for a sale with a

marketing time of one to two years. Copies of these valuations are attached hereto collectively as

Exhibit 2.

7. The Receiver initially listed the Mendon Property at $250,000 based on the

Receiver’s early estimate of value from the Broker. On February 7, 2012, the Receiver received

an offer to purchase the Mendon Property for $190,000. On or about February 17, 2012, the

prospective buyer increased its offer to $239,000. On or about February 29, 2012, the Receiver

proposed a counteroffer of $250,000. The Receiver did not hear back from the prospective buyer

until May 24, 2012 at which time the buyer again offered $239,000, with half payable in cash and

the Receiver to finance the balance. The Receiver rejected this offer. After the initial interest

from the prospective buyer in February 2012, the Mendon Property did not generate significant

interest over the four months that the property was listed for sale with only three telephone calls

from potential buyers. The Agent had two in-person showings of the property to potential buyers.

By June 2012, having received no other offers to purchase, the Receiver was preparing to lower

the listing price of the Mendon Property. However, on June 11, 2012, the offer to purchase for

the full price of $250,000 from the Mendon Buyers was received by the Agent.

8. Receiving only a total of two written offers to purchase the Mendon Property,

subject to Court approval, the Receiver accepted the highest of those offers by the Buyers at

$250,000 and entered into the Mendon Purchase Contract.

9. The Receiver seeks to sell the Mendon Property under the Mendon Purchase

Agreement to the Mendon Buyers, who are unaffiliated, arm’s length purchasers based on the

Receiver’s investigation. The sale is an “as is” sale which includes the five mobile home units

currently on site. There are six privately owned mobile homes on the property which are

currently paying a monthly rental fee to the Receiver to continue using the mobile home pad at

the Mendon Property. The purchase price of $250,000 under the Mendon Purchase Agreement is

well within the range of estimated sales prices for the property under the two broker’s opinions of



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value and appraisal obtained by the Receiver, and the sale is an all-cash purchase. A copy of the

Mendon Purchase Agreement is attached hereto as Exhibit 3. The Mendon Buyers have released

all contingencies and are ready to purchase the Mendon Property. The Mendon Buyers have

agreed to set the closing date to 20 days after this Court approves the sale, but if the Court does

not approve the sale by September 14, 2012, the Receiver must refund the Mendon Buyers

earnest money deposit in the amount of $7,500.

10. The Receiver has obtained a title report for the Mendon Property, a copy of which

is attached hereto as Exhibit 4. The Mendon Property is not subject to any liens.

11. The sale to the Mendon Buyers at $250,000 far exceeds the minimum two-thirds

of the average of the valuations that is the threshold price that must be achieved for confirmation

of a private sale and is in fact exactly the amount set forth in the formal appraisal. Other than the

Mendon Buyers and prospective buyer who offered $239,000 on or about May 24, 2012, no other

persons have expressed serious interest in the Mendon Property, making it unlikely that an

overbid would be received.

12. The Receiver’s May 27, 2011 sale motion discussed above in paragraph 3 also

sought authority from the Court to list and market for sale various houseboats. The Receiver

specifically sought authority to list and market the Houseboat, title to which is held by Orange

Cat Investments, LLC (“Orange Cat”). As detailed in the first Receiver’s Report, Orange Cat is a

Receivership Defendant in that it is an affiliate of the Receivership Defendants and is owned

equally by Jeremy Johnson and Sharla Johnson. The Court authorized the Receiver to list and

market the Houseboat as part of its Sale Authorization Order.

13. The Houseboat is subject to a lien in favor of Town and Country Bank (“Lender”)

with an approximate balance due of $753,000 based upon a loan entered into on or about June 19,

2008 by Jeremy and Sharla Johnson with the Lender for indebtedness in the principal amount of

$875,000 (Promissory Note, dated June 19, 2008 (hereinafter the “Note”)). As of May 2011, the

Note was in default and as a result, the Receiver entered into an agreement with the Lender

whereby the Receiver agreed to cure the default on the Note and pay regular monthly payments of

accrued unpaid interest in exchange for the Lender waiving all late fees, attorney fees, costs,



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penalties, and default-rate interest under the Note and extending the maturity date of the Note to

the earlier of a) June 20, 2012; or b) 30 days following a Court order discharging the Receiver.

The Note has now matured.

14. The Houseboat was listed for sale on August 31, 2011 for $1.2 million. The

selling price was determined based upon a marine survey from June 2011 which valued the

Houseboat at $1.2 million. For almost one year the Receiver, through its marine broker, Aramark

Sports and Entertainment Services, Inc. d/b/a Lake Powell Resorts and Marinas (“Aramark”),

extensively marketed the Houseboat on the internet and with onsite marketing materials,

including brochures and pictures of the Houseboat, at Aramark’s marina office where the

Houseboat is docked. Despite the marketing efforts and the prolonged exposure to the

marketplace, the Houseboat listing has generated limited interest.

15. On March 2, 2012, the Receiver received a verbal offer to purchase the Houseboat

for $675,000. The Receiver responded that the offer must be in writing for the Receiver to

consider. On March 7, 2012, the interested party provided an offer in writing for $730,000. The

Receiver countered the offer with $975,000 and reduced the listing price of the Houseboat to

$975,000. The interested party informed Aramark that they were only interested if they could

purchase the Houseboat in the range of $700,000 to $750,000. However, selling at that price

would not have covered the expenses of the receivership estate in finalizing the sale and paying

off the lien on the Houseboat. The Receiver had no further discussions with this prospective

buyer.

16. Almost three months passed before the Receiver had another interested party in the

Houseboat. On May 27, 2012, a written offer was received offering $449,000 to purchase the

Houseboat. The Receiver countered with $975,000 and did not receive any further counteroffers

from the prospective buyer. Since no other offers to purchase the Houseboat have been

forthcoming and there has been no recent interest in the listing, on July 14, 2012, the Receiver

again had the Houseboat surveyed by a marine surveyor. The July 2012 marine survey valued the

Houseboat at $860,000 using a fair market value approach. Therefore, in an attempt to generate

interest in the listing, the Receiver reduced the list price for the Houseboat to $825,000 and


Case 2:10-cv-02203-MMD -GWF Document 677-1 Filed 08/10/12 Page 1 of 136

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