Professional Documents
Culture Documents
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A Professional Corporation
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Plaintiff,
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vs.
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SUMMIT FINANCIAL GROUP;
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DANA CAPITAL CORP.; STEVE
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WEICH; ROD HOSILYK; DWIGHT
A. BENNETT; JUDITH A. ST. JOHN; )
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WILSHIRE CREDIT
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CORPORATION; EVANS
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APPRAISAL SERVICES, INC.; and
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DOES 110,
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Defenda
nts.
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NORMAN W. ALLEN,
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Plaintiff,
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vs.
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T.D. SERVICE COMPANY; WELLS )
FARGO BANK, N.A., as Trustee for
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the MLMI Trust Series 2005-HE3; and )
DOES 110,
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Defenda
nts.
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WELLS FARGO BANK, N.A., as
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NORMAN W. ALLEN,
Trial Date:
None set.
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Application for an Order Appointing Receiver
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A Professional Corporation
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Trustee for MLMI Trust Series 2005HE3; and BAC HOME LOANS
SERVICING, LP, a Texas limited
partnership, successor by merger to
Wilshire Credit Corporation,
erroneously sued as BAC Home Loan
Servicing, LLP,
Cross-Com
plainants,
vs.
NORMAN W. ALLEN; DWIGHT A.
BENNETT; JUDITH A. ST. JOHN;
EVANS APPRAISAL SERVICES;
INC.; and ROES 110,
Cross-Defenda
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N.A., as Trustee for MLMI Trust Series 2005-HE3 (Wells Fargo), hereby applies for
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an order appointing a receiver and authorizing her to take possession of the property
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located at 695-725 Highway 36, Susanville, California 96130 (and more fully described
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preserve it for later disposition, and collect all rents, including amounts past due and
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unpaid. This application is made on the grounds that the 40 Acre portion of the property
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must be preserved and maintained pending judgment in this action, and pending
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the grounds that Wells Fargo has absolute legal and equitable rights to take possession of
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the 14 Acre portion of the property and collect rents thereof by virtue of written
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the terms and provisions of the Note and Deed of Trust executed by Allen. Ex parte
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Application for an Order Appointing Receiver
currently has possession of and controls the 40 Acre portion of the property, failed and
continues to fail to insure the property, and there is a substantial risk that the property
parte relief is further warranted as Allen has failed to service the indebtedness under the
Note and Deed of Trust and Allen continues to collect rents from the 14 Acre portion of
the property, to which Wells Fargo is entitled as additional security, and that security will
A Professional Corporation
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this action, the attached memorandum of points and authorities, the request for judicial
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notice, and the declarations of Vicki Lozano, of Timothy M. Ryan, of Jennifer Fishman,
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By:
TIMOTHY M. RYAN
AUSTIN T. BEARDSLEY
Attorneys
for Defendants/CrossComplainants WELLS FARGO
BANK, N.A., as Trustee for MLMI
Trust
Series 2005-HE3; and BAC
HOME LOANS SERVICING, LP, a
Texas limited partnership, successor by
merger to Wilshire Credit Corporation,
erroneously sued as BAC Home Loan
Servicing,
LLP
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TABLE OF CONTENTS
TABLE OF CONTENTS ................................................................................................... I
TABLE OF AUTHORITIES............................................................................................II
MEMORANDUM OF POINTS AND AUTHORITIES ................................................ 1
1.
INTRODUCTION....................................................................................... 1
2.
3.
4.
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A Professional Corporation
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A.
B.
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5.
CONCLUSION.......................................................................................... 15
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Table of Contents
TABLE OF AUTHORITIES
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A Professional Corporation
State Cases
Barclays Bank of California v. Superior Court, (1977) 69 Cal.App.3d 593 .................... 13
OConnor v. Richmond Savings and Loan Association, (1968) 262 Cal.App.2d 523...... 14
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Santacroce Bros. v. Edgewater-Santa Clara Inc., (1966) 242 Cal.App.2d 584 ............... 13
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Snyder v. Western Loan and Building Company, (1934) 1 Cal.2d 697 ............................ 12
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State Statutes
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Table of Authorities
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A Professional Corporation
INTRODUCTION
The properties that are the subject of this action (described below) have thus far
and Dwight A. Bennett (Bennett), who at one point were romantically involved and
scheme: the partition of their property into two parcels (performed without the benefit of
any relevant expertise); and a collusive (and ultimately misrepresented) sale of one of the
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(Allen), who would take out a loan to purchase the parcel (which Bennett and St. John
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would use to pay off the prior encumbrance), and sell or rent back the parcel to St. John
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and Bennett. Unfortunately, this scheme included several examples of mortgage fraud by
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Bennett and Allen, including the utter fabrication of the required down payment.
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Unsurprisingly, St. John and Bennetts foreclosure avoidance subterfuge (in which
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Allen was a fully cognizant and willing participant) did not go as plannedthe
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improvements (described below) were not included in the sham sale, and discord quickly
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fostered amongst the co-conspirators. Allen initiated the instant action against his former
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friends, and St. John and Bennett embarked on a bitter legal campaign involving alleged
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domestic violence, much of which unfortunately spilled over into discovery proceedings
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in this action.
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Amongst the noise resulting from St. John, Bennett and Allens willingness to
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degrade the discovery process, a critical consideration lurks: the loan Allen obtained to
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purchase the malformed parcel is now obscenely under-secured, and Allen chose to
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abdicate his responsibility to make payments under that loan despite collecting rental
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income from the parcel. Thus, faced with the prospect of foreclosing on property that is
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worth less than one fourth of the loan balance, Defendant/Cross-Complainant Wells
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Fargo Bank, as Trustee for MLMI Trust Series 2005-HE3 (Wells Fargo), filed its
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improvements that St. John and Bennett intended to convey to Allen. Wells Fargo also
filed a motion for summary adjudication on its claims for equitable mortgage and
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their real estate escapades apparently left little energy or attention for actually
maintaining or protecting the 40 Acres with insurance coverage. The 40 Acres now stand
uninsured despite the fact that we are in the midst of fire season and despite a crime spree
described by Bennett as specifically targeting the 40 Acres. Should the 40 Acres (and the
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are likely to be and remain significantly devalued. In addition, Allen has failed to make a
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loan payment in over two years, despite collecting rents from the 14.03 Acres during that
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period. The Court must therefore appoint a receiver over the 40 Acres to manage and
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control that portion of the property pending disposition of the property, and appoint a
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2.
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real property located at 695-725 Highway 36, Susanville, California 96130 (the Subject
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Property). (Request for Judicial Notice (RFJN), Ex. 1 [Request for Judicial Notice in
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Support of Motion for Summary Adjudication, Ex. 1 at pp. 56]; RFJN, Ex. 2
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2:14 to 3:2, 3:1928, Ex. 5 at pp. 101:22 to 102:19, Ex. 7 at p. 166:1518.]) At that time,
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the Subject Property was comprised of 54.03 acres of land, with improvements, including
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PARCEL NO. 1:
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POINT OF BEGINNING.
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PARCEL NO. 2:
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(RFJN, Ex. 1 [Request for Judicial Notice in Support of Motion for Summary
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Support of Motion for Summary Adjudication, pp. 2:14 to 3:2, 3:1928, Ex. 5 at p.
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104:1620.])
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At the time Bennett, St. John and Krietler obtained title to the 54.03 Acres, the
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property was encumbered by a security interest for a loan in favor of Ocwen, which was
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then in arrears. (RFJN, Ex. 2 [Declaration of Timothy M. Ryan in Support of Motion for
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Summary Adjudication, pp. 2:14 to 3:2, 3:1928, Ex. 5 at pp. 102:20 to 103:25], Ex. 7 at
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pp. 167:16 to 169:24, 170:79.]) As part of their investment plan, Bennett, St. John and
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Krietler agreed to eliminate the arrears on the Ocwen loan, and assume the monthly
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payments thereafter in exchange for title to the property. (RFJN, Ex. 2 [Declaration of
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Timothy M. Ryan in Support of Motion for Summary Adjudication, pp. 2:14 to 3:2,
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A Professional Corporation
3:1928, Ex. 7 at pp. 167:16 to 169:24.]) Bennett, St. John and Krietler obtained title to
the 54.03 Acres by virtue of a Grant Deed from Douglas E. Bowman and Jimmie S.
Bowman to Bennett, St. John, and Krietler. (RFJN, Ex. 1 [Request for Judicial Notice in
2:14 to 3:2, 3:1928, Ex. 7 at pp. 171:21 to 172:3.]) Thereafter, Krietler failed to
participate in the investment plan to Bennett and St. Johns satisfaction, and she therefore
quitclaimed her interest in the 54.03 Acres to Bennett and St. John, as joint tenants.
(RFJN, Ex. 1 [Request for Judicial Notice in Support of Motion for Summary
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Support of Motion for Summary Adjudication, pp. 2:14 to 3:2, 3:1928, Ex. 5 at pp.
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a period of time subsequent to their acquisition of title to the 54.03 Acres. (RFJN, Ex. 2
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2:14 to 3:2, 3:1928, Ex. 7 at p. 178:918.]) However, Bennett and St. John began
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experiencing difficultly with those payments and began exploring alternatives, including
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Timothy M. Ryan in Support of Motion for Summary Adjudication, pp. 2:14 to 3:2,
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3:1928, Ex. 5 at pp. 105:24 to 106:5, Ex. 7 at pp. 177:225, 178:918, 182:1627.])
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Ultimately, Bennett, his friend, Norman W. Allen (Allen), and St. John agreed on a
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scheme whereby Bennett and St. John would split the 54.03 Acres into two parcels of
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land. The first parcel was to comprise 14.03 acres of the original 54.03, bear the
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Assessors Parcel Number of 099-260-70 (hereafter the 14.03 Acres), and be legally
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described as:
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Memorandum of Points and Authorities
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DESCRIBED PROPERTY.
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Bennett and St. John planned and intended for the 14.03 Acres to include the
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Ryan in Support of Motion for Summary Adjudication, pp. 2:14 to 3:2, 3:1928, Ex. 5 at
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pp. 105:7 to 108:17, 109:12 to 110:17, 111:8 to 113:19, 114:17 to 116:19, Ex. 6 at pp.
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157:21 to 158:23, Ex. 7 at pp. 179:7 to 180:19, 180:26 to 181:15, 183:9 to 185:12, 188:16
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to 194:21, 198204, Ex. 8 at pp. 215:11: to 218:18, 219:3 to 220:23, 221:213, 222:22 to
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226:22.]) The remainder of the original 54.03 Acres would bear Assessors Parcel
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Number APN 099-260-69 (hereafter the 40 Acres). Thereafter, Bennett would sell the
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14.03 Acres back to St. John and a co-buyer, Allen, at a price sufficient to satisfy the
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Memorandum of Points and Authorities
Bowman/Ocwen loan that encumbered the original 54.03 Acres.1 (RFJN, Ex. 2
2:14 to 3:2, 3:1928, Ex. 5 at pp. 105:7 to 108:17, 109:12 to 110:17, 111:8 to 113:19,
114:17 to 116:19, Ex. 6 at pp. 157:21 to 158:23, Ex. 7 at pp. 179:7 to 180:19, 180:26 to
181:15, 183:9 to 185:12, 188:16 to 194:21, 198204, Ex. 8 at pp. 215:11: to 218:18,
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error: the Improvements remained on the 40 Acres, instead of the 14.03 Acres. (RFJN,
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under the professed belief that the 14.03 Acres included the improvements, Bennett, St.
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John, and Allen executed substantial portions of their planSt. John quitclaimed the
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14.03 Acres to Bennett, and Allen purchased the 14.03 Acres with a loan obtained from
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Option One Mortgage Corporation (Option One). (RFJN, Ex. 1 [Request for Judicial
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Notice in Support of Motion for Summary Adjudication, Exs. 35 at pp. 1112, 1415,
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Summary Adjudication, pp. 2:14 to 3:2, 3:1928, Ex. 5 at pp. 116:1519, 117:924,
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135:26 to 136:4, 137144, Ex. 7 at pp. 181:28 to 182:1, 187:28, 195:511, 205206.])
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Option One funded the loan in the amount of $436,500.00, based in part on the purported
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value of the 14 Acres with the Improvements. (RFJN, Ex. 3 [Declaration of Barbara
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Smith in Support of Motion for Summary Adjudication, pp. 2:14 to 4:2, Ex. 3 at pp. 13
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34.]) The proceeds from the Option One loan and sale of the 14.03 Acres to Allen were
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used to satisfy the Ocwen loan that encumbered both parcels, and St. John and Bennett
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St. John, Bennett and Allen all disagree on who cooked up this fraudulent venture,
and they all stridently proclaim that their participation therein was reluctant. However, it
is undisputed that they did in fact participate and their actions are the sole cause of the
fiasco now before the Court.
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Memorandum of Points and Authorities
A Professional Corporation
now hold title to the 40 Acres free and clear of the Ocwen loan.2 (RFJN, Ex. 2
2:14 to 3:2, 3:1928, Ex. 5 at pp. 118:1013, 118:1820, 133:20 to 134:5, 147148, Ex. 7
at p. 186:1625.])
Unfortunately, the parcel split scheme was not the only example of St. John,
Bennett, and Allens guile in obtaining the Option One loan. Astonishingly, Bennett and
payment required in order to qualify for the Option One loan. Initially, Allen deposited a
nominal sum into escrow towards the required down payment of $48,500.00. Allen then
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signed a release allowing Bennett to withdraw those funds while crediting the amount
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towards the down payments, and Bennett handed the funds over to Allen. Allen then re-
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deposited the money, and repeated the withdrawal/deposit cycle until the down payment
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amount was met.3 (RFJN, Ex. 2 [Declaration of Timothy M. Ryan in Support of Motion
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for Summary Adjudication, pp. 2:14 to 3:2, 3:1928, Ex. 5 at pp. 118:10 to 121:2, 123:15
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to 126:9, Ex. 8 at pp. 227:16 to 228:15, 233:21 to 237:8.]) Subsequent to the transaction
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being consummated, Bennett began paying portions of the sale proceeds to Allen.
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The amount of the Option One loan, and the decision to even fund the loan, was
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based on the belief and an erroneous appraisal report that the 14.03 Acres included the
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of perjury) that he intended to occupy the 14.03 Acres as his primary residence, and the
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The proceeds were also used to eliminate a small second priority security interest on
the Subject Property held by Plumas Bank. (RFJN, Ex. 2 [Declaration of Timothy M.
Ryan in Support of Motion for Summary Adjudication, pp. 2:14 to 3:2, 3:1928, Ex. 5 at
p. 122:28.])
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Even more astonishingly, the initial down payment specified by the purchase
agreement was entirely fictional. (RFJN, Ex. 2 [Declaration of Timothy M. Ryan in
Support of Motion for Summary Adjudication, pp. 2:14 to 3:2, 3:1928, Ex. 8 at pp.
229:1 to 232:25.])
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Memorandum of Points and Authorities
A Professional Corporation
However, Allen later discovered that the 14.03 Acres did not include the
Improvements and initiated this action seeking reformation of the purchase contract and
of the Deed of Trust that secures the Option One loan. (RFJN, Ex. 2 [Declaration of
Timothy M. Ryan in Support of Motion for Summary Adjudication, pp. 2:14 to 3:2, 3:8
10, Ex. 2 at p. 56:1318.]) Shortly thereafter, Allen stopped making payments on the
loan, despite collecting rental income from a cell tower lease on the 14 Acres. (RFJN,
Ex. 3 [Declaration of Barbara Smith in Support of Motion for Summary Adjudication, pp.
2:14 to 3:25, Ex. 2 at pp. 811]; RFJN, Ex. 4, [Declaration of a Custodian of Records for
BAC Home Loans Servicing, LP in Support of Motion for Summary Adjudication, pp.
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2:14 to 3:20, pp. 3:26 to 4:7, Ex. 2 at pp. 811, Ex. 3 at pp. 1319]; RFJN, Ex. 2
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2:14 to 2:7, Ex. 1 at p. 9.]) Remarkably, the parties all agree that the Improvements were
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meant to be conveyed to Allen as part of the transaction at issue. (RFJN, Ex. 1 [Request
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for Judicial Notice in Support of Motion for Summary Adjudication, Ex. 8 at pp. 230:24
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26]; RFJN, Ex. 2 [Declaration of Timothy M. Ryan in Support of Motion for Summary
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Adjudication, pp. 2:14 to 3:2, 3:1928, Ex. 2 at p. 59:1018, Ex. 3 at p. 69:1528, Ex. 4
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as the currently assigned beneficiary of the Option One loan, filed a cross-complaint in
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this case also seeking, in part, an equitable lien and an equitable mortgage on the
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Improvements in order to comport with the parties intent. (RFJN, Ex. 1 [Request for
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Judicial Notice in Support of Motion for Summary Adjudication, Ex. 8 at pp. 228:1922,
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230:1617, 233:20 to 235:14, 237:2124]; RFJN, Ex. 1 [Request for Judicial Notice in
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Support of Motion for Summary Adjudication, Ex. 6 at p. 30]; RFJN, Ex. 3 [Declaration
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of Barbara Smith in Support of Motion for Summary Adjudication, pp. 2:14 to 3:19, Ex.
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1 at p. 6]; RFJN, Ex. 4, [Declaration of a Custodian of Records for BAC Home Loans
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Servicing, LP in Support of Motion for Summary Adjudication, pp. 2:14 to 3:25, Ex. 1 at
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p. 6.]) Wells Fargo also filed a motion for summary adjudication of these issues, which
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A Professional Corporation
3.
PROPERTY
As described above, and in Wells Fargos motion for summary adjudication set to
be heard concurrently with this application, Wells Fargo is entitled to an equitable lien
and an equitable mortgage on the 40 Acres. As a creditor with a claim on the 40 Acres,
Wells Fargo is entitled to seek the appointment of a receiver to preserve that portion of
the property:
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Thus, Wells Fargo has standing to apply for appointment of a receiver under Code
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of Civil Procedure section 564. Further, a receiver is necessary in order to prevent the 40
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Acres from being lost or materially injured. Specifically, Bennett (the individual residing
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at and in control of the 40 Acres) plainly admits that he failed to keep the 40 Acres
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Q: Understood.
Do you have any insurance for any of the subject property?
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A:
No, I do not.
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Q:
Have you ever had any insurance for any of the subject property?
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A: Yes.
Q:
A:
18:7.])
Bennetts failure to maintain insurance for any portion of the 40 Acres places the
property at risk from irreparable damage, particularly during fire season. This danger is
aptly illustrated by Bennetts own testimony at his deposition, where he described several
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attempts by others to damage the property and kill the livestock thereon:
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A Yes.
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You know, I'm going to step in here. I don't know how familiar you
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are with this other case, but I have lost -- There are twenty-four horses that
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Q Ok
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break each horse down, who owns it, what its description is.
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Q Yes.
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ay.
By human beings, poison and violent acts. Now you're asking me to
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belong to people that are not present in this room you are putting their lives
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in grave danger. I want that on the record. Grave danger, sir, and there is a
I believe, sir, that in asking me for the exacting details of horses that
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21.])
Despite such danger, Bennett failed and continued to fail to insure the 40 Acres in
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any fashion. In the absence of insurance, any damage to the 40 Acres will significantly
reduce the value of the property which will impair the Courts ability to dispose of it at
the conclusion of this litigation. For this reason alone, appointment of a receiver to take
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possession of the 40 Acres and to manage this portion of the property (including placing
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ALLENS DEFAULT
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The recorded Deed of Trust executed by Allen expressly grants Wells Fargo, as
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the loan beneficiary, the right to collect the rents and profits, including amounts past due
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assigns to Lender the rents of the Property. Borrower shall have the right to
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collect and retain the rents of the Property as they become due and payable
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provided Lender has not exercised its rights to require immediate payment
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in full of the sums secured by this Security Instrument and Borrower has
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of Trust, 35.])
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Furthermore, the Deed of Trust authorizes Wells Fargo to take whatever steps it
deems necessary in order to protect its security interest in the 14.03 Acres, including
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Memorandum of Points and Authorities
A Professional Corporation
Lender may do and pay for whatever is necessary to protect the value of the
Property and Lenders rights in the Property. Lenders action may include
paying any sums secured by a lien which has priority over this Security
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entering on the Property to make repairs. Although Lender may take action
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Trust, 7.])
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encumbered property if the express terms of the mortgage or deed of trust so provide.
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(Civ. Code 2927; Snyder v. Western Loan and Building Company, (1934) 1 Cal.2d
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697.) Here, Allen breached the terms of the Note and Deed of Trust by failing to make
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payments on the obligation for over two years despite collecting rental income from the
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14.03 Acres during that period without servicing the indebtedness. Under the express
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terms of the Deed of Trust, Wells Fargo is entitled to an order appointing a receiver over
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A.
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Appointment of a Receiver
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and maintenance of certain property by any legal means, including the appointment of a
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of a receiver and the burden is on the defendant to rebut that evidentiary presumption.
demonstrated above, the Deed of Trust before this Court clearly and unambiguously
entitles Wells Fargo to collect all the rents of the 14 Acres upon default by Allen.
Neither a trial nor appellate court has the power to rewrite a contract. (Moss v. Minor
Properties Inc., (1968) 262 Cal.App.2d 847, 853; Leiter v. Handlesman, (1954) 125
Cal.App.2d 243, 251.) Absent significant reasons to the contrary, or Allens rebuttal, the
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itself a separate and fully enforceable element of additional security for the loan. The
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assignment of rents language in the subject deed of trust represents additional security
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for the loan, and the court should not ignore the express language of the contract
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between the parties whereby that additional security was pledged. (See: 4 Miller &
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Starr, California Real Estate (2d ed.) 9:45, Conditional Assignment of Rents as
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Additional Security, p. 118; CEB, California Mortgage and Deed of Trust Practice
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cooperation of the trustor, the only legal means by which the beneficiary may enforce this
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additional security is by the appointment of a receiver. (4 Miller & Starr, California Real
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Estate (2d ed.) 9:45, p. 119.) In this case, Allen is in default because he failed to make
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the monthly payments under the Note. A receiver is needed to protect Wells Fargos
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rights in the 14 Acres and to collect rents since Allen is operating the Subject Property,
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but is not paying those monies to Wells Fargo as required by the terms of the Note and
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Deed of Trust. The appointment of a receiver to protect Wells Fargos rights under such
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242 Cal.App.2d 584; Code Civ. Proc. 564(b)(8); Mines v. Superior Court, (1932) 216
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Cal. 776.)
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Memorandum of Points and Authorities
B.
Receiver are Provided for by the Terms of the Note and Deed of Trust and
The Note and Deed of Trust executed by Allen provides for the recovery of
attorneys fees in enforcing its terms. Paragraph 32 of the Deed of Trust provides, in
pertinent part:
and all costs, fees and expenses which either may incur, expend or sustain
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Trust, 32.])
Such provision is enforceable, and justifies recovery of attorneys fees and costs.
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(OConnor v. Richmond Savings and Loan Association, (1968) 262 Cal.App.2d 523.)
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The expense incurred by a litigant for legal services in causing the employment of a
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and should have priority to the same extent. (Farmers Loan and Trust Company v.
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Green, 79 F. 22; See also: In re Estate of Marre, (1941) 18 Cal.2d 191.) Accordingly,
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before any sums collected from the 14.03 Acres as rent are applied against the
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outstanding indebtedness, the reasonable attorneys fees and costs incurred in the
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Memorandum of Points and Authorities
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5.
CONCLUSION
Wells Fargo is entitled to appointment of a receiver over the 40 Acres in order to
preserve the property for disposition by the Court in this case, particularly in light of
Bennetts failure to insure that portion of the property. Further, Wells Fargo is entitled to
appointment of a receiver over the 14.03 Acre portion of the property in order to address
Allens continuing default under the loan. Accordingly, the Court should appoint the
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By:
TIMOTHY M. RYAN
AUSTIN T. BEARDSLEY
Attorneys
for Defendants/CrossComplainants WELLS FARGO
BANK, N.A., as Trustee for MLMI
Trust
Series 2005-HE3; and BAC
HOME LOANS SERVICING, LP, a
Texas limited partnership, successor by
merger to Wilshire Credit Corporation,
erroneously sued as BAC Home Loan
Servicing,
LLP
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r:\8045-1267 norman allen v. wilshire\case no. 45679\law & motion\application for receivership on 40 acres\application for
receiver.doc
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Memorandum of Points and Authorities