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Securities and Exchange Commission v. Learn Waterhouse

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA


June 11, 2008

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF,
v.
LEARN WATERHOUSE, INC., RANDALL T. TREADWELL, RICK OLETA D. SLUDER, LARRY C. SATURDAY, AND ARNULFO M. ACOSTA, DEFENDANTS.

The opinion of the court was delivered by: Hon. Thomas J. Whelan United States District Judge

ORDER (1) APPROVING SETTLEMENT WITH OLETA MUNDIS AND (2) MODIFYING APPLICABLE STAYS TO ALLOW MUNDIS TO FORECLOSE ON HER SECURITY INTEREST IN CERTAIN REAL PROPERTY

Pending before the Court is the Receiver's motion for an order (1) approving the settlement agreement with Oleta Mundis, and (2) modifying applicable stays to allow Mundis to foreclose on her security interest in certain real property (the "Motion"). The Court decides the matter on the papers submitted and without oral argument. See Civil Local Rule 7.1(d.1). For the reasons stated below, the Court GRANTS the Motion (Doc. No. 479).

On October 12, 2004, the Securities and Exchange Commission filed this lawsuit for violation of the federal securities laws. The lawsuit involves an alleged ongoing "prime bank" Ponzi scheme perpetrated by Learn Waterhouse, Inc. ("LWI").

On the same day the lawsuit was filed, this Court issued a temporary restraining order freezing all assets related to, among others, LWI and defendant Randall T. Treadwell (the "Freeze Order"), and appointing Thomas F. Lennon as the temporary receiver for LWI and its subsidiaries and affiliates. On November 1, 2004, the Court issued a preliminary injunction order that continued in effect the terms of the TRO, and converted the Receiver's appointment to that of a permanent receiver.

Before this lawsuit was filed, Treadwell purchased certain real property commonly known as 47 Cardinal Road, Savannah, Chatham County, Georgia (the "Property") from Oleta Mundis. In connection with the purchase, Mundis holds a first priority deed of trust on the Property ("Security Deed") securing the purchase price owed by Treadwell (the "Treadwell Obligation"). Mundis planned to fund her retirement with the payments from Treadwell.

In September 2005, Treadwell stopped making payments to Mundis. Additionally, the Receiver learned that payments Mundis had received before and after the entry of the Freeze Order came from funds obtained from LWI investors. Accordingly, the Receiver asserted an interest in the Property and demanded the return of all payments Mundis received after entry of the Freeze Order.

On or about February 8, 2008, the Receiver and Mundis resolved their dispute and executed a settlement agreement (the "Settlement Agreement"). Under the terms of the agreement, Mundis will return to the Receiver all payments against the Treadwell Obligation received after entry of the Freeze Order, which total $17,388, and Mundis will pay an additional $5,000 to the Receiver to offset certain litigation expenses. The Settlement Agreement is contingent on this Court's approval and modification of all applicable stays to allow Mundis to foreclose on her security interest on the Property. Accordingly, on February 15, 2008, the Receiver filed the Motion.

On March 18, 2008, Treadwell filed a "Notice of Motion and Motion for Order

(A) Oppose Motion Disapproving Settlement with Oleta Mundis; (B) Against Foreclosure on Security Interest in Real Property." (Doc. No. 484.) In the document, Treadwell asserts that his family resides in the Property, and he requests appointment of civil counsel.*fn1

As a result of Treadwell's filing, the Receiver requested a continuance of the hearing on the Motion to allow the Receiver an opportunity to investigate Treadwell's claim that the Property is his family's primary residence. Accordingly, on April 10, 2008, this Court continued the hearing date to June 9, 2008. The order also set May 12, 2008 as the deadline for opposing the Motion, and specifically warned that failure to file an opposition "may result in the motion being granted." (Doc. No. 494.)

No opposition was filed.*fn2

On June 2, 2008, the Receiver filed a Notice of Non-Opposition, confirming that the Receiver had not received an opposition to the Motion. (See Doc. No. 505.) Additionally, the Receiver submitted the Declaration of B.K. Logan, Jr., who inspected and conducted an investigation into the Property. (See Doc. No. 504.) The declaration refutes Treadwell's claim that the Property is his family's primary residence. In light of the foregoing, and having considered the Settlement Agreement, as well as the Receiver's Motion and all papers submitted in support thereof, the Court finds that the settlement is in the best interests of the receivership estate, and is fair and reasonable. Accordingly, the Court GRANTS the Motion (Doc. No. 479) and ORDERS as follows:

1. The Settlement Agreement between the Receiver and Jillane M. Thomas, Attorney-in-Fact for Oleta Mundis, which is attached to the Receiver's Memorandum of Points and Authorities (Doc. 479-2) as Exhibit A, is approved.

2. The preliminary injunction order entered on November 1, 2004, the order granting Defendant Randall T. Treadwell's motion to stay entered on November 17, 2005, and any other applicable stays ordered in this case are hereby modified to allow Oleta Mundis to take all appropriate steps to foreclose on the Security Deed, and to pursue any other rights and remedies regarding the Property.

IT IS SO ORDERED.


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