Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_19-cv-01628/USCOURTS-casd-3_19-cv-01628-8/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:0078m(a) Securities Exchange Act

---

1

3:19-cv-1628-LAB-AHG

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE 

COMMISSION,

Plaintiff,

v.

GINA CHAMPION-CAIN AND ANI 

DEVELOPMENT, LLC,

Defendants, and

AMERICAN NATIONAL 

INVESTMENTS, INC.,

Relief Defendant.

Case No.: 3:19-cv-1628-LAB-AHG

ORDER GRANTING JOINT 

MOTION FOR APPROVAL OF 

SALE OF PERSONAL PROPERTY 

INTEREST IN PULLMAN LOFTS 

PHASE I, LLC

[ECF No. 229]

Case 3:19-cv-01628-TWR-AHG Document 269 Filed 03/06/20 PageID.<pageID>

Page 1 of 6
2

3:19-cv-1628-LAB-AHG

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

I. BACKGROUND

Before the Court is the Joint Motion for Approval of Sale of Personal Property 

Interest in Pullman Lofts Phase I, LLC (the “Pullman Lofts Motion”), filed on January 

29, 2020 by Plaintiff Securities and Exchange Commission (“SEC”), Defendant Gina 

Champion-Cain, and Krista Freitag, Court-appointed permanent receiver for Defendant 

ANI Development, LLC and Relief Defendant American National Investments, Inc. 

(“Receiver”). ECF No. 229.

No opposition has been filed to the Pullman Lofts Motion. Additionally, the Court 

has reviewed the motion along with the Court-ordered Joint Supplement to Clarify the 

Pullman Lofts Motion (“Supplemental Clarification”) (ECF No. 258) and, being fully 

advised, finds good cause to GRANT the Motion, for the reasons explained in more 

detail below.

II. DISCUSSION

A. Proposed Sale of the Membership Interest

The parties to the Pullman Lofts Motion seek to sell receivership entity GCC 

Pullman Lofts Phase I, LLC’s (“Seller”) 40.5% membership interest in Pullman Lofts 

Phase I, LLC (“Project Owner”) to Pullman Lofts First Phase LLC (“Buyer”). ECF No. 

229. Project Owner holds an option to purchase the real property located at 701 Wilson 

Street, Santa Rosa, California, upon which the Project Owner intends to develop a 72-unit 

apartment building with retail space on the ground floor (the “Project”). ECF No. 229-1, 

Krista Freitag Decl. ¶ 3. In the Supplemental Clarification, the Receiver explains that 

Seller is an entity within the receivership because it is an affiliate of Defendant ANI 

Development, LLC and a single-member entity whose sole member is Defendant Gina 

Champion-Cain. ECF No. 258 at 2. The receivership entities also appear to have funded 

the purchase of Seller’s membership interest in Pullman Lofts Phase I, LLC. Id. at 3. The 

Receiver is thus currently in control of Seller’s membership interest in Project Owner 

pursuant to this Court’s September 3, 2019 Order appointing the Receiver (the 

“Appointment Order”) (ECF No. 6). 

Case 3:19-cv-01628-TWR-AHG Document 269 Filed 03/06/20 PageID.<pageID>

Page 2 of 6
3

3:19-cv-1628-LAB-AHG

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Subject to Court approval, the Receiver and Buyer have agreed on terms of a 

proposed sale of Seller’s membership interest, plus assignment of Seller’s claim against 

JB Resources, for a total price of $495,887.53, to be paid immediately in cash. ECF No. 

229 at 2. The Membership Interest Purchase and Sale Agreement (“Agreement”) is 

attached as Exhibit A to the Receiver’s Declaration. See ECF No. 229-1 at 6-33. 

Although the Receiver calculates that the receivership entities invested $783,273 in the 

membership interest prior to the Receiver’s appointment, and thus the purchase price 

represents a loss on the investment, the Receiver nonetheless believes that the proposed 

purchase price is in the best interest of the receivership entities and “likely is the best, 

most certain recovery the Receiver can hope to obtain from holding the Membership 

Interest or attempting to sell the Membership Interest on the open market[.]” ECF No. 

229 at 4. Specifically, the Receiver explains that she extensively researched the history of 

the proposed Project to evaluate the prospective value of Seller’s membership interest. 

ECF No. 229-1 ¶ 5. Through her research, the Receiver learned that development of the 

Project has languished for many years, and there have been at least 40 extensions of 

Project Owner’s original Option Term under the Option Agreement signed in December 

2013. Id. ¶ 6. Additionally, the real estate market in Sonoma County is uncertain 

following a spate of wildfires over the past several years, and at least one prospective 

lender has characterized the Project as “distressed.” Id. ¶¶ 7-8. If the membership interest 

is not sold, Seller will likely be obligated to make further capital contributions to 

maintain the interest in the future. Id. ¶ 9. Therefore, the Receiver concluded that the 

proposed sale, notwithstanding the loss on the investment, is fair and reasonable in light 

of the known data and risks, especially given her charge of preserving value and 

recovering principal on behalf of the investors. Id. ¶¶ 8, 11. The Receiver further testifies 

that selling the interest at a loss “is consistent with the discounted sale of non-traded, 

non-distributing membership interests.” Id. ¶ 10.

“The power of a district court to impose a receivership or grant other forms of 

ancillary relief does not in the first instance depend on a statutory grant of power from the 

Case 3:19-cv-01628-TWR-AHG Document 269 Filed 03/06/20 PageID.<pageID>

Page 3 of 6
4

3:19-cv-1628-LAB-AHG

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

securities laws. Rather, the authority derives from the inherent power of a court of equity 

to fashion effective relief.” SEC v. Wencke, 622 F.2d 1363, 1369 (9th Cir. 1980). 

Nonetheless, federal statutes do provide some authority and guidance for courts overseeing 

equity receiverships. In particular, 28 U.S.C. §§ 2001 and 2002 set forth procedural and 

notice requirements for the sale of real property in the possession of a court-appointed 

receiver, while § 2004 governs the sale of personal property.

On January 22, 2020, the Court issued an Order Establishing Uniform Property Sale 

Procedures (ECF No. 219), which explained that § 2004 “lends the Court great discretion 

in directing sales of personalty, requiring such sales to comply with [public sale process 

requirement of] § 2001 ‘unless the court orders otherwise.’ The notice requirement of § 

2002 governing realty sales by the receiver does not apply to sales of personalty.” Id. at 4. 

The Court proceeded to waive the requirements of 28 U.S.C. § 2001 with respect to all 

sales of personal property within the receivership estate, and affirmed that the Receiver is 

not required to file a noticed motion seeking approval of any such personalty sales. Id. at 

9. However, the Receiver was required to follow standard auction procedures through one 

or more licensed auctioneers for sales of personal property that were not required to be 

approved through a noticed motion. Id. at 10. Therefore, although a noticed motion is 

ordinarily not required under the Court’s sale procedures, the parties request that all 

procedural steps under 28 U.S.C. §§ 2001-2004 be waived in connection with the sale of 

the membership interest, in the Court’s broad discretion.

Here, the parties’ Pullman Lofts Motion thoroughly explains why the proposed sale 

of Seller’s membership interest is in the best interest of the receivership. The Receiver’s 

proffered justification for selling the membership interest at a loss for an immediate cash 

payment representing “a certain return of approximately 63% of . . . the amount invested 

by the Receivership Entities[,]” given the risks of the investment and possibility of ongoing 

future financial obligations if the interest is not sold, is consistent with the principle that “a 

primary purpose of equity receiverships is to promote orderly and efficient administration 

of the estate by the district court for the benefit of creditors.” SEC v. Hardy, 803 F.2d 1034, 

Case 3:19-cv-01628-TWR-AHG Document 269 Filed 03/06/20 PageID.<pageID>

Page 4 of 6
5

3:19-cv-1628-LAB-AHG

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1038 (9th Cir. 1986). Therefore, because of the nature of the membership interest and the 

considerations outlined by the Receiver in her Declaration, the Court agrees that the 

receivership estate would not benefit from requiring the Receiver to hold a public auction 

to sell the interest. Finding the parties’ reasoning persuasive and noting the lack of 

opposition, the Court GRANTS the Pullman Lofts Motion (ECF No. 229).

B. Request to Release Project Owner from the Receivership

As the Court previously noted in its order requiring the parties to clarify the 

Pullman Lofts Motion, Project Owner Pullman Lofts Phase I, LLC is an enumerated 

receivership entity in the Appointment Order. See ECF No. 253 n.1 (citing ECF No. 6 at 

5). In the Supplemental Clarification, the Receiver requests that any order approving the 

sale of Seller’s membership interest in Project Owner also include a provision that upon 

closing of the sale, Pullman Lofts Phase I, LLC be released in its entirety from the 

receivership since the transfer of Seller’s membership interest will leave the receivership 

entities with no further interest in the project, and remaining subject to the receivership 

would greatly hamper Project Owner’s further development of the project. See ECF No. 

258 at 3. However, that request goes beyond the scope of the undersigned’s authority in 

this matter. Instead, the request will be addressed by Chief Judge Larry A. Burns in 

accordance with the Court’s Order Authorizing Briefing on Release of Pullman Lofts 

Phase I, LLC. See ECF No. 259.

III. CONCLUSION

Based on the foregoing, it is ORDERED as follows:

(1)The sale of Seller GCC Pullman Lofts Phase I, LLC’s 40.5% membership interest 

in Pullman Lofts Phase I, LLC to Buyer Pullman Lofts First Phase LLC (or its 

designee) pursuant to the Agreement (ECF No. 229-1 at 6-33) for the purchase 

price of $495,887.53 is APPROVED. The purchase price shall be paid on the 

closing date to the Receiver in accordance with Sections 2.1 and 2.2 of the 

Agreement. See id. at 7.

Case 3:19-cv-01628-TWR-AHG Document 269 Filed 03/06/20 PageID.<pageID>

Page 5 of 6
6

3:19-cv-1628-LAB-AHG

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(2)The Receiver is authorized to take all steps necessary to complete the sale in 

accordance with the terms of the Agreement, including executing such 

documents as may be necessary to close the sale transaction.

The parties’ request to release Project Owner Pullman Lofts Phase I, LLC from the 

receivership is DEFERRED in accordance with the Court’s Order Authorizing Briefing 

on Release of Pullman Lofts Phase I, LLC. ECF No. 259.

IT IS SO ORDERED.

Dated: March 6, 2020

Case 3:19-cv-01628-TWR-AHG Document 269 Filed 03/06/20 PageID.<pageID>

Page 6 of 6