Community First Bank, a Wisconsin banking corporation, Plaintiff,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2016).

STATE OF MINNESOTA
IN COURT OF APPEALS
A17-2076

Community First Bank, a Wisconsin banking corporation,
Plaintiff,

vs.

First United Funding, LLC,
Defendant, et al., Defendants,

Lighthouse Management Group, Inc.,
as Receiver for First United Funding, LLC,
Respondent,

Corey N. Johnston,
Appellant,

vs.

Community Financial Bank, a Wisconsin banking corporation, et al.,
Intervenors,

vs.

John Doe, et al.,
Additional Defendants,

and

Western National Bank,
Plaintiff,

vs.

First United Funding, LLC,
Defendant.

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Filed September 24, 2018
Affirmed
Hooten, Judge

Dakota County District Court
File No. 19-HA-CV-09-6282

Brett M. Larson, Daniel L. Lowin, Messerli & Kramer P.A., Minneapoli s, Minnesota (for
appellant Corey Johnston)

Ryan T. Murphy, Joseph J. Cassioppi, Jacob P. Harris, Fredrikson & Byron, P.A.,
Minneapolis, Minnesota (for respondent Lighthouse Management Gr oup Inc. , and
intervenors Bank Forward, Choice Financial Group, Community First Bank, First Southern
Bankcorp, Maple Bank, Minnwest Bank Luverne, Republic Bank of Chicago and Triumph
Community Bank)

Considered and decided by Hooten, Presiding Judge; Ross, Judge; and Schellhas,
Judge.
U N P U B L I S H E D O P I N I O N
HOOTEN, Judge
In this appeal from a final judgment in a receivership action , appellant Corey
Johnston, who had operated a Ponzi scheme through his company, First United Funding,
LLC, asserts that the district court erred in awarding post -judgment interest under Minn.
Stat. § 549.09 (2016) on the judgments obtained by the receiver on behalf of the victims of
the scheme. We affirm.
FACTS
Beginning in 2002, appellant Johnston, as the owner and principal of First United,
operated a Ponzi scheme in which he fraudulently sold loan participation interests to
respondent banks in counterfeit, unsecured, over -sold, and underfunded loans. In a loan
participation, loans are arranged for borrowers, who take the loans and give promissory

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notes and other assurances of payment , and then the lender enters into an agreement with
a bank for funding of the loans in return for a percentage interest in the promissory notes.
Johnston presented false documents to the banks and altered brokerage account statements
and other financial documents. Proceeds were the n utilized to further the scheme and
Johnston’s lavish lifestyle. In August 2010, Johnston was indicted, and then pleaded guilty,
to a charge of operating what was called a “Ponzi scheme with bank money” by the United
States Attorney’s Office.
In the fall of 2009, Community First Bank, a creditor of First United, sought a
temporary restraining order and appointment of a receiver. Additional creditors also filed
claims against Johnston for an amount totaling approximately $136 million. In October
2009, the district court appointed respondent Lighthouse Management Group, Inc. as the
receiver and granted the receiver “all of the powers and authority usually held by receivers
and reasonably necessary to accomplish the purposes stated in [the order].” The district
court expanded the receiver’s authority in December 2009 and again in February 2010.
The principal duties of the receiver included : tracking over $4.5 billion in cash transfers
made by First United and determining whe ther First United was insol vent; cooperating
with federal officials in the criminal investigation and prosecution of Johnston; identifying
the victims of the fraud; recovering or clawing back any amounts paid to non -victim
participants that had profited under the Ponzi scheme by rec eiving more than what they
had paid into the scheme; obtaining any other monies owed to First United; and distributing
the proceeds of the receiver’s recovery efforts among the victim participa nts as
compensation for losses under the scheme. All of the non-victim participants have reached

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settlement agreements with the receiver which released any claims they may have against
the receiver, Johnston, and First United as to any amounts recovered by the receiver. None
of the non-victim participants are parties to the current receivership action.
Before a distribution plan regarding the recoveries obtained by the receiver was
adopted, the receiver obtained a court order to make interim distributions to the victim
participants beginning in 2010. On November 17, 2011, the district court authorized a net
investment pro rata distribution plan to compensate victims that had sustained actual
principal losses on the loans in which they participated. The district court calculated the
claims of the victim participants under this method to equal $91,193,042.
The receiver succeeded in paying over 99 % of the victim participants’ original
principal claims. Throughout the receivership, the receiver consulted with the victim
participants and provided written reports regarding the proceedings. The receiver provided
the district court with 12 reports concerning the progress of distributions beginning on
April 8, 2010 and ending on September 21, 2017. The last report also contained a motion
for final distribution, discharge of the receiver, and an amended final judgment to in clude
post-judgment interest , as judgments had been entered on behalf of each of the victim
participants. Similar to other requests for relief throughout the case, the receiver obtained
support from all of the victim participants for the final distribution motion. Only Johnston
opposed the receiver’s motion, arguing that equity precluded application of Minn. Stat.
§ 549.09 and that the calculation of interest was incorrect. At the motion hearing, Johnston
also challenged the receiver’s standing and authority t o seek post-judgment interest. The

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district court granted the receiver’s motion and entered an order for final distribution and
judgment. Johnston appealed.
D E C I S I O N
I. The Issues are Properly Preserved for Appeal.
Johnston argues that the district court erred in applying post -judgment interest to
the judgments entered against Johnston and First United, claiming that the receiver did not
have standing or authority to seek post -judgment interest against him and his company.
The receiver argues that Johnston did not preserve the issues of the receiver’s standing and
authority for appeal from the district court’s final distribution order and judgment because
he failed to present these arguments to the district court and the district court did not address
them. But, it is well settled that “standing cannot be waived and may be raised at anytime.”
In re Horton , 668 N.W.2d 208, 212 (Minn. App. 2003); see Patzner v. Schaefer , 551
N.W.2d 736, 737 (Minn. App. 1996) (noting that appellate courts “are required to address
[standing] even if the courts below have not passed on it, and even if the parties fail to raise
the issue before us” (quotation omitted)).
Moreover, with regard to the question of our authority to consider these issues,
Minn. R. Civ. App. P. 103.04 provides that appellate courts “may review any order
involving the merits or affecting the judgment” or “any other matter as the interest of justice
may require.” Generally, appellate courts “will not consider questions which were not
presented to or decided by the court.” Holen v. Minneapolis -St. Paul Metro. Airports
Comm’n, 84 N.W.2d 282, 286 (Minn. 1957). However, the well-established exception to
Minn. R. Civ. App. P. 103.04 states:

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[A]n appellate court may base its decision upon a theory not
presented to or considered by the trial court where the question
raised for the first time o n appeal is plainly decisive of the
entire controversy on its merits , and where, as in [a case]
involving undisputed facts, there is no possible advantage or
disadvantage to either party in not having had a prior ruling by
the trial court on the question.

Id. (emphasis omitted).
Whether or not the receiver is authorized to move for post -judgment interest is
decisive of the entire controversy. Neither party disputes any underlying facts. The sole
dispute on appeal is the amount of power the October, Dece mber, and February orders
grant the receiver. Because there are no factual disputes and the entire controversy may be
resolved by the resolution of a legal issue, there is no advantage to either party in not having
a prior ruling by the district court. See Watson v. United Servs. Auto. Ass’n , 566 N.W.2d
683, 688 (Minn. 1997) (stating that “the parties in this case do not dispute the facts; thus,
there is no possible advantage or disadvantage to either party”). Therefore, we conclude
that the issue of the receiver’s standing and authority may be reviewed by this court.
II. The Receiver has Standing and Authority.
The first issue for our consideration is whether the receiver has standing to seek
post-judgment interest on behalf of the creditors against Johnston and First United.
“Standing is a legal requirement that a party have a sufficient stake in a justiciable
controversy to seek relief from a court.” Lorix v. Crompton Corp., 736 N.W.2d 619, 624
(Minn. 2007). While it is true that “the receiver of an insolvent corporation has no greater
rights than those possessed by the corporation itself . . . it is equally true that when an act
has been done in fraud of the rights of the creditors of the insolvent corporation the receiver

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may sue for their benefit.” Magnusson v. Am . Allied Ins. Co. , 189 N.W.2d 28, 33 –34
(Minn. 1971). Additionally, “ [t]he role of a receiver is to act as a fiduciary representing
the court and all parties in intere st, and the purpose and scope of a receivership is defined
by court order.” Equity Tr. Co. Custodian ex rel. Eisenmenger IRA v. Cole , 766 N.W.2d
334, 341 (Minn. App. 2009). The receiver represents not only First United, but also the
court and all interested parties.
When considering whether a receiver had standing, this court has previously
discussed the bounds of a receiver’s authority within its analysis. Id. “A receiver’s powers
are defined by the orders of the court and include authority as may reas onably or
necessarily be implied for such orders.” Hancock-Nelson Mercantile Co. v. Weisman, 340
N.W.2d 866, 869 (Minn. App. 1983). If an order gives authority for a receiver to act, then
the receiver has standing. See Equity Tr. Co., 766 N.W.2d at 341.
In this case, the receiver was appointed in October 2009. The district court ordered,
among other things, that the “Receiver shall have all of the powers and authority usually
held by receivers and reasonably necessary to accomplish the p urposes stated in this
Order.” The order was expanded in December 2009 to authorize the receiver “to gather
information regarding the other similar participation agreements with [First United] and to
share that information among the holders of such participation agreements as needed to be
able to report to the Court and to make re commendations as appropriate.” And, in the
February 2010 order, the receiver’s authority was expanded to include “the management
and operations of the assets and debts of Fir st United” and the receiver was authorized to
“[i]nvestigate and pursue any and all claims that First United or the Receiver may have

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against any third party, including but not limited to, fraudulent transfer and illegal
distribution claims.” The grant of these broad powers by the district court allowed the
receiver to do what was reasonably necessary to accomplish its purp ose in resolving the
claims of the victim participants, which would necessarily include obtaining judgments,
including post-judgment interest on the judgments, against Johnston, who orchestrated the
elaborate Ponzi scheme, and First United.
III. The Receiver has Statutory Authority under Minn. Stat. § 549.09.
Johnston argues that the receiver does not have statutory authority to seek post-
judgment interest under Minn. Stat. § 549.09. Statutory interpretation is a question of law,
which this court reviews de novo. Cocchiarella v. Driggs, 884 N.W.2d 621, 624 (Minn .
2016). “If the Legislature’s intent is discernible from the statute’s plain and unambiguous
language, the letter of the law shall not be disregarded under the pretext of pursuing its
spirit.” State v. Riggs, 865 N.W.2d 679, 682 (Minn. 2015).
Minn. Stat. § 549.09, subd. 1(a) states, “[ w]hen a judgment or award is for the
recovery of money . . . interest from the time of the verdict, award, or report until judgment
is finally entered shall be computed by the court administrator or arbitrator as provided in
paragraph (c) and added to the judgment or award.” Subdivision 1(c)(2) further states that
“[f]or a judgment or award over $50,000 . . . the interest rate shall be ten percent per year
until paid.” The statutory provisions requiring that post -judgment interest of ten percent
per year be paid on judgments are unambiguous. Redleaf v. Redleaf, 807 N.W.2d 731, 733
(Minn. App. 2011). “By using the term ‘shall’ in setting the rate of interest, the legislature
mandated that the district court set a rate of ten percent when a judgment amount exceeds

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$50,000.” Id. As set forth in the unambiguous language in subdivisions 1(a) and (c)(2) of
the statute, post-judgment interest of ten percent per year is mandatory for any judgment
or award over $50,000.
In support of his argument that the receiver does not have statutory authority to seek
post-judgment interest, Johnston points to subdivision 3 of the statute, which controls the
process for “ a judgment creditor , or the judgment creditor’s attorney or agent” to follow
when seeking execution of a judgment after receiving partial payment. Johnston claims
that the reference to “a judgment creditor, or the judgment creditor’s attorney or agent” in
subdivision 3 is indicative of the legislature’s intent that the entire statute only pertains to
judgment creditors and their attorneys or agents, but not receivers in a receivership action.
But the unambiguous language of subdivisions 1(a) and 1(c)(2) indicates that the statute
applies more broadly. There is no language in subdivisions 1(a) and 1(c)(2) that indicates
that judgments obtai ned in a receivership are excluded from these mandatory post -
judgment interest provisions. Subdivision 3, which only pertains to the execution of a
judgment, is inapplicable relative to the issue of post -judgment interest. In the event that
these victim participants decide to execute the judgments against Johnston and First United,
they certainly qualify as “judgment creditors” under subdivision 3.
IV. Principles of Equity Do Not Apply.
Finally, Johnston argues that the district court abused its discretion in awarding post-
judgment interest. An abuse of discretion occurs when “the district court disregards facts
on the applicable principles of equity.” Cmty. First Bank v. First United Funding, LLC ,
822 N.W.2d 306, 310 (Minn. App. 2012). Johnston asserts that the net-investment method

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forecloses the victim participants from recovering post-judgment interest. The net -
investment method allow ed the receiver to claw back amounts paid to non-victim
participants that exceeded their initial investment and u se those proceeds to compensate
victim participants who had received less than their investments. See id. at 309. In his
briefing in this appeal, Johnston stated:
The Victim Participants recovered nearly 100% of their
investment, just like the Non -Victim Participants. However,
when the trial court granted post -judgment interest to the
Victim Participants, it gave them a 10% return on their
principal investments using returns First United paid to the
Non-Victim Participants. . . . This treated the Victim
Participants materially better than the Non-Victim Participants
and contravened the pro rata distribution goal . . . .

There are three flaws with this argument. First, Minn. Stat. § 549.09 is a statutory
mandate. See Redleaf , 807 N.W.2d at 733 . Principles of equity do not factor in to
interpreting unambiguous statutory language. Id. at 734 –35. Because post -judgment
interest is statutorily required under Minn. Stat. § 549.09, subd. 1(a), and the amount of
interest is controlled by subdivision 1(c), the equitable power of the distri ct court is not
implicated.
Second, interest is the payment for the lost use of money. See Thompson v.
Gasparro, 257 N.W.2d 355, 356 (Minn. 1977). The non-victim participants gained more
from the Ponzi scheme than what they had initially paid into it. The district court allowed
the receiver to claw back only the funds in excess of their initial investment to compensate
the victim participants. The non-victim participants had the use of their initial investment
money during the entire duration of this case. It was only the victim participants who lost

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their use of the ir principal investment during the period of time they were waiting to be
reimbursed by the receiver. Even if equitable principles controlled the payment of post -
judgment interest, Johnsto n has failed to show such payment of interest to the victim
participants is inequitable to the non-victim participants.
Third, even if the payment of post -judgment interest to the victim participants was
inequitable to the non-victim participants, the non-victim participants are not parties to the
receivership. In fact, all of the non-victim participants have reached settlement agreements
with the receiver which released any claims against the recoveries of the receivership,
Johnston, and First United. As the person who orchestrated the Ponzi scheme through his
company, First United, Johns ton is unable to cite to any case law or statutes that would
provide him with standing to make an equitable argument on behalf of non -party non-
victim participants in the scheme which only benefits him. See State by Cooper v. Sports
& Health Club, Inc., 438 N.W.2d 385, 390 (Minn. App. 1989).
Arguing equitable principles, Johnston also claims that Minn. Stat. § 549.09 should
not apply because “the Receiver controlled both the timing of principal distributions and
the demand for interest arising from those distributions.” However, there is nothing in the
record to show that the receiver acted improperly in the timing of the distributions. Over
the course of the receiv ership, the receiver provided the district court with 12 reports
regarding the distribution of funds . There is no record that Johnston or First United
objected to the timeliness of the distributions or that the district court questioned the
timeliness of the distributions.

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Because an award of post -judgment interest is mandatory under Minn. Stat.
§ 549.09, and principles of equity do not apply when a legal determination is dispositive
of an issue, the district court did not err in awarding post -judgment interest on the
judgments in favor of the victim participants against Johnston and First United.
Affirmed.