OKLAHOMA DEPARTMENT OF SECURITIES EX REL. IRVING L. FAUGHT, ADMINISTRATOR, Plaintiff/Appellee,
SEABROOKE INVESTMENTS, LLC, an Oklahoma limited liability company; SEABROOKE REALTY LLC, an Oklahoma limited liability company; OAKBROOKE HOMES LLC, an Oklahoma limited liability company; BRICKTOWN CAPITAL LLC, an Oklahoma limited liability company; KAT PROPERTIES LLC, an Oklahoma limited liability company; CHERRY HILL LLC, an Oklahoma limited liability company; CHERRY HILL APARTMENTS; TOM W. SEABROOKE, individually and as trustee of the TOM SEABROOKE 2007 REVOCABLE TRUST AND J. KARYN SEABROOKE 2007 REVOCABLE TRUST; JUDITH KARYN SEABROOKE, individually and as trustee of the TOM SEABROOKE 2007 REVOCABLE TRUST AND J. KARYN SEABROOKE 2007 REVOCABLE TRUST, Defendants, and RYAN LEONARD, Court Appointed Receiver/Appellee, and WAYNE DOYLE, Intervenor/Appellant.
Mandate Issued: 09/20/2017
FROM THE DISTRICT COURT OF OKLAHOMA COUNTY, OKLAHOMA
HONORABLE PATRICIA PARRISH, TRIAL JUDGE, AFFIRMED
Patricia A. Labarthe, Jennifer Shaw, OKLAHOMA DEPARTMENT OF
SECURITIES, Oklahoma City, Oklahoma, for Plaintiff
A. Robertson, Michael Paul Kirschner, ROBERTSON &
WILLIAMS, Oklahoma City, Oklahoma, and Jim W. Lee, LEE &
KISNER, Oklahoma City, Oklahoma, for Defendants
D. Edinger, ROBERT EDINGER PLLC, Oklahoma City, Oklahoma, for
O. Lee, William M. Lewis, LEE, GOODWIN, LEE, LEWIS &
DOBSON, Edmond, Oklahoma, for Intervenor
The trial court intervenor, Wayne Doyle (Doyle), appeals the
Order And Judgment Approving Receiver's Report On Claims
And Authorizing Receiver's Distribution To Creditors,
insofar as it denied his claim. The other parties to this
appeal, as appellees, are the plaintiff, State of Oklahoma
Department of Securities (DOS), ex rel. Irving L.
Faught, Administrator, and Ryan Leonard, Court Appointed
The history of this case begins with Doyle's investments
with another person, Tom Seabrooke (Seabrooke). Bricktown
Capital, LLC is the investment of interest here. This entity
owned the Bricktown Hotel (Hotel) as its principal asset.
Doyle and Seabrooke managed Bricktown Capital as if they were
the only owners; however, Seabrooke had taken investments in
Bricktown Capital from at least five other persons. Doyle was
aware of one of them.
Bricktown Capital had serious financial issues, including
mortgages, liens, cash flow, and operations losses. Doyle
agreed to be personally liable for a secured loan to the bank
and he contributed funds to pay bills, payroll, and the bank
loan. In 2012, Doyle received $228, 894.00, as a distribution
from Bricktown Capital. The hotel sustained substantial storm
damages. Partial insurance proceeds from an insurance payment
for the storm damages to the Hotel provided the source of the
money for the distribution. Repairs were not made, causing
portions of the hotel to be closed and thereby adversely
On April 9, 2014, Doyle caused Bricktown Capital to deliver a
note and mortgage to him to evidence a loan. He arrived at
the amount by summing the sundry investments he had made with
Seabrooke, both Bricktown Capital and others, plus payments
on the bank loan and other expenditures. As a result,
Doyle's ownership in Bricktown became 85%, a part of
which was a collateral ownership.
DOS investigated Seabrooke's activities and filed this
action.  The trial court appointed Receiver.
The trial court established a process for filing claims.
Among other actions, Receiver applied to the court for
permission to remove the Bricktown Hotel from the
receivership because it was a financial burden. The trial
court granted the request with the condition that any
proceeds of a sale of the Bricktown Hotel in excess of the
indebtedness against it would become a part of the
Receiver's assets. The Bricktown Hotel did sell for $187,
858.00 more than the indebtedness. Receiver took possession
of the funds remaining after payment of the Bricktown
A number of claims were filed with Receiver. The claims
totaled in excess of $15, 000, 000.00, and the assets
available to pay claims amounted to $1, 735, 929.00. Doyle
filed a claim for $3, 288, 489.38. He based his claim on the
April 2014 note and mortgage and the sum total of sundry
payments and expenditures relating to Bricktown Capital, but
he included payments made to Seabrooke individually and to
Doyle sought to have the $187, 858.00 excess sale proceeds
paid to him. After a hearing in August 2015, the trial court
reduced Doyle's claim to $2, 355, 200.00, and found that
$681, 577.00 had been paid.
The trial court also reclassified Doyle's entire claim as
expenditures constituting capital contributions to Bricktown
Capital. Doyle's appeal does not challenge this ruling
and it is, therefore, final. As a result, Doyle is not a
general creditor of Bricktown Capital and cannot claim, as a
creditor, any distribution from Receiver. Doyle claimed the
$1.67 million dollar balance as an owner.
Receiver filed a final report. In that report, Receiver
denied Doyle's entire claim. Doyle objected. After a
hearing, the trial court entered extensive findings of fact
and conclusions of law. The trial court confirmed the
previous ruling that Doyle's claim constituted
contributions to capital. Along with nine other claimants,
this placed him in the class of claimants whose claim was
deemed to be contributions to capital and their claims became
secondary to the payment of Bricktown Capital's
Next, the trial court reviewed and applied the doctrine of
equitable subordination. The trial court found that Doyle was
an "insider" as to Bricktown Capital. In its
ruling, the trial court specified actions by Doyle and found
that these actions constituted inequitable conduct. The trial
court concluded that "Doyle's conduct was
sufficiently inequitable and unfair to justify subordinating
his claims to all other general creditors." Continuing,
the trial court found that Doyle's "conduct resulted
in substantial harm to other investors."  The trial
court denied Doyle's entire claim.
Doyle appeals. Here, "Doyle requests that this Court
determine he is entitled to share pro-rata with other members
of the same class i.e., capital contributors."
He maintains that the trial court's ruling is not
supported by the evidence in general, or, alternatively, that
the decision failed to determine the amount of harm to other
Doyle also contends that a portion of his claim represented
funds expended before he could be considered an
"insider."  He listed three expenditures totaling
$1.1 million dollars made to entities other than Bricktown
Capital and to Seabrooke, individually.
Receiver and DOS dispute Doyle's characterization of the
evidence. They argue it is sufficient to merit the trial
court's decision, including equitably subrogating his
claim and denying it.
This receivership is an equitable proceeding. Morris v.
Pierce, 1940 OK 405, Syl. 2, 110 P.2d 294, Syl. 2
("A hearing of exceptions filed to the report of a
receiver of the sale of receivership property is of equitable
cognizance, and a judgment therein will not be reversed on
appeal unless it is against the clear weight of the
evidence."). In actions of equitable cognizance, the
judgment made by the trial court will be reversed if it is
clearly contrary to the weight of the evidence or contrary to
accepted principles of equity or rules of law. In re
Estate of Eversole, 1994 OK 114, ¶ 7, 885 P.2d 657,
661. The case of Hitt v. Hitt, 1953 OK 391, 258 P.2d
599, held that it is for the trial court in a case of
equitable cognizance to determine the credibility of the
witnesses and the weight and value to be given to the
testimony. Where the evidence is in conflict, the trial
court's determination will not be set aside unless the
determination is clearly against the weight of the evidence.
The Appellate Court reviews rulings on issues of law by a
de novo standard without deference to the trial
court. Glasco v. State ex rel. Oklahoma Dept. of
Corrections, 2008 OK 65, 188 P.3d 177.
In order to ultimately deny Doyle's claim, the trial
court first reclassified his claim from creditor to
contribution to capital. This ruling is now final and it
placed Doyle in a subordinate category regarding
distributions from Receiver. 
Next, the trial court utilized the doctrine of equitable
subordination as a remedy to subordinate Doyle's entire
claim to the claims of all other creditors, including the
other claims who were capital contributors. It appears that
the available assets were exhausted in payment of the
priority claims and Receiver's report was approved. Thus,
the trial court denied Doyle's entire claim.
Here, Doyle seeks to have his claim, or at least a portion of
the claim, treated in the category of all capital
contributors and share, pro rata, with that class of
claimants. In order to reach this result, one or both, of two
results must be reached; the doctrine of equitable
subrogation is not applicable to these facts, or, if it is a
part of Oklahoma jurisprudence as an equitable remedy under
the Oklahoma Uniform Securities Act of 2004, 71 O.S.2011,
§ 1-101, and following, the evidence does not support
the application of the doctrine here. 
Equitable Subrogation: Origin and Definition
Reclassification of a debt as a capital contribution is
distinct from application of equitable subrogation.
Reclassification examines the transaction for its true nature
to conclude that what is called a "debt" is truly a
capital contribution under the facts. Equitable subrogation
examines the creditor's conduct and, where the creditor
is guilty of inequitable conduct, that creditor's claim
will be subordinated to the other claims in the matter under
consideration. Hedged-Investments Associates, Inc.,
380 F.3d at 1297 [citing In re Autoplastics, Inc.,
269 F.3d 726 (6th Cir. 2001)].
Equitable subrogation has its origin in bankruptcy and the
general bankruptcy principle of fairness and equity among
creditors.  The United States Supreme Court set
out the principles of equitable subrogation in Pepper v.
Litton, 308 U.S. 295, 60 S.Ct. 238 (1939). Describing
bankruptcy courts as courts of equity, the Court ruled that
the bankruptcy court has the equitable power to subordinate a
creditor's claim when the facts and circumstances reflect
inequitable conduct on the part of the creditor.
The generally accepted rule is that there are three
constituents to the standard for establishing equitable
subordination in the bankruptcy setting.
(1) the claimant must have engaged in some type of
(2) the misconduct must have resulted in injury to the
creditors of the bankrupt or conferred an unfair advantage on
the claimant; and
(3) equitable subordination of the claim must not be
inconsistent with the provisions ...