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Timothy M. Ryan, Bar No. 178059

Austin T. Beardsley, Bar No. 270046
THE RYAN FIRM
A Professional Corporation
1100 N. Tustin Avenue, Suite 200
Anaheim, California 92807
Telephone (714) 666-1362; Fax (714) 666-1443

Attorneys for Defendants/Cross-Complainants 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

IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LASSEN

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A Professional Corporation

THE RYAN FIRM

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)
)
)
Plaintiff,
)
)
vs.
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SUMMIT FINANCIAL GROUP;
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DANA CAPITAL CORP.; STEVE
)
WEICH; ROD HOSILYK; DWIGHT
A. BENNETT; JUDITH A. ST. JOHN; )
)
WILSHIRE CREDIT
)
CORPORATION; EVANS
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APPRAISAL SERVICES, INC.; and
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DOES 110,
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Defenda
nts.
)
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
)
the MLMI Trust Series 2005-HE3; and )
DOES 110,
)
)
Defenda
nts.
)
)
WELLS FARGO BANK, N.A., as
)
NORMAN W. ALLEN,

LEAD CASE NO.: 45679

(Consolidated with Case No. 50324)
Unlimited Jurisdiction
Date Action Filed: Unknown.
Assigned for All Purposes to
Hon. Raymond J. Girdano, Judge
Dept. 6
DEFENDANT/CROSS-COMPLAINANT
WELLS FARGO BANK, N.A.S EX
PARTE APPLICATION FOR AN
ORDER APPOINTING RECEIVER;
MEMORANDUM OF POINTS AND
AUTHORITIES
Date:
Time:
Dept.:

July 21, 2011

9:30 a.m.
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Trial Date:

None set.

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Application for an Order Appointing Receiver

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A Professional Corporation

THE RYAN FIRM

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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

nts.

AND ALL OTHER CROSSACTIONS

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TO THE COURT AND TO ALL INTERESTED PARTIES:

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PLEASE TAKE NOTICE that Defendant/Cross-Complainant Wells Fargo Bank,

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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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in the accompanying memorandum of points and authorities), manage the property,

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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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judgment on Cross-Complainants cross-complaint. This application is further made on

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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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agreements with Plaintiff/Cross-Defendant Norman W. Allen (Allen), and that Wells

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Fargo is entitled to ex parte appointment of a receiver as a provisional remedy to enforce

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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

relief is needed because Defendant/Cross-Defendant Dwight A. Bennett (Bennett), who

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

will be irreparably harmed, destroyed, devalued, or otherwise rendered worthless. Ex

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

otherwise be irreparably lost.

A Professional Corporation

THE RYAN FIRM

This application is based on the operative Complaint and Cross-Complaint filed in

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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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and of Tyler J. Kemp, filed concurrently herewith.

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DATED: July 20, 2011

THE RYAN FIRM

A Professional Corporation

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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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Application for an Order Appointing Receiver

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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.

RELEVANT FACTUAL HISTORY......................................................... 2

3.

AS A CREDITOR, WELLS FARGO IS ENTITLED TO

APPOINTMENT OF A RECEIVER UNDER CODE OF CIVIL
PROCEDURE SECTION 564 IN ORDER TO PRESERVE
THE 40 ACRE PORTION OF THE PROPERTY .................................. 9

4.

WELLS FARGOS DEED OF TRUST CONTAINS

PROVISIONS AUTHORIZING IT TO TAKE POSSESSION
OF THE 14.03 ACRE PORTION OF THE PROPERTY AND
TO COLLECT ITS RENTS UPON ALLENS DEFAULT.................. 11

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A Professional Corporation

THE RYAN FIRM

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A.

A Recital Contained in a Deed of Trust Authorizing the

Appointment of a Receiver is a Prima Facie Showing of
the Beneficiarys Entitlement to the Appointment of a
Receiver........................................................................................... 12

B.

Attorneys Fees and Costs Incurred in Seeking

Appointment of the Receiver are Provided for by the
Terms of the Note and Deed of Trust and are a Proper
Element of Costs and Expenses..................................................... 14

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5.

CONCLUSION.......................................................................................... 15

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Table of Contents

TABLE OF AUTHORITIES

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A Professional Corporation

THE RYAN FIRM

State Cases
Barclays Bank of California v. Superior Court, (1977) 69 Cal.App.3d 593 .................... 13

Farmers Loan and Trust Company v. Green, 79 F. 22 ..................................................... 14

Leiter v. Handlesman, (1954) 125 Cal.App.2d 243 .......................................................... 13

Mines v. Superior Court, (1932) 216 Cal. 776.................................................................. 13

Moss v. Minor Properties Inc., (1968) 262 Cal.App.2d 847............................................. 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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Civ. Code 2927............................................................................................................... 12

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Code Civ. Proc. 564.......................................................................................................... 9

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Code Civ. Proc. 564(b)(8) .............................................................................................. 13

Other Authorities
4 Miller & Starr, California Real Estate (2d ed.) 9:45 .................................................. 13
CEB, California Mortgage and Deed of Trust Practice (1979) 7.11............................. 13

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Table of Authorities

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A Professional Corporation

THE RYAN FIRM

MEMORANDUM OF POINTS AND AUTHORITIES

1.

INTRODUCTION
The properties that are the subject of this action (described below) have thus far

enjoyed a colorful history. Defendants/Cross-Defendant Judith A. St. John (St. John)

and Dwight A. Bennett (Bennett), who at one point were romantically involved and

lived together, devised a complicated, and ultimately ill-advised, foreclosure avoidance

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

parcels to a straw buyer, Bennetts friend, Plaintiff/Cross-Defendant Norman W. Allen

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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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cross-complaint seeking an equitable lien and an equitable mortgage against the

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Memorandum of Points and Authorities

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

equitable lien, which is set to be heard concurrently with this application.

Unfortunately, the efforts Bennett, St. John and Allen expended in furtherance of

A Professional Corporation

THE RYAN FIRM

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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

improvements thereon) be damaged in the absence of insurance coverage, the 40 Acres

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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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receiver over the 14.03 Acres to collect the rents therefrom.

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2.

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RELEVANT FACTUAL HISTORY

In 2002, Bennett, St. John, and Carma Krietler (Krietler) obtained title to the

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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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[Declaration of Timothy M. Ryan in Support of Motion for Summary Adjudication, pp.

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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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a residence, barn and outbuildings (hereafter the Improvements), encompassing

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Assessors Parcel Numbers 099-260-70 and 099-260-69 (hereafter referred to as the

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54.03 Acres), and legally described as:

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PARCEL NO. 1:

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BEGINNING AT THE NORTHEAST CORNER OF THE NORTHEAST

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1/4 OF THE NORTHWEST 1/4 OF SECTION 36, IN TOWNSHIP 30

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Memorandum of Points and Authorities

A Professional Corporation

THE RYAN FIRM

NORTH, RANGE 11 EAST, MOUNT DIABLO MERIDIAN; THENCE

DUE WEST 1325 FEET TO THE WEST LINE OF SAID NORTHEAST

1/4 OF THE NORTHWEST 1/4 OF SAID SECTION; THENCE DUE

SOUTH 550.50 FEET TO THE INTERSECTION THEREOF WITH THE

NORTHERN LINE OF CALIFORNIA STATE HIGHWAY; THENCE

NORTH 77 DEGREES 57; EAST ALONG SAID LINE OF SAID

HIGHWAY 38.90 FEET; THENCE ALONG A CURVE TO THE RIGHT

WITH A RADIUS OF 4850 FEET, PARALLEL AND DISTANT

NORTHERLY 50 FEET FROM THE CENTER LINE OF SAID

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HIGHWAY, 1285.78 FEET TO A POINT ON THE NORTHERLY LINE

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OF SAID HIGHWAY; AND THENCE NORTH 434 FEET TO THE

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POINT OF BEGINNING.

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PARCEL NO. 2:

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IN TOWNSHIP 30 NORTH, RANGE 11 EAST, MOUNT DIABLO

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MERIDIAN, ACCORDING TO THE OFFICIAL PLAT THEREOF.

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SECTION 25: THE SE 1/4 OF THE SW 1/4.

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(RFJN, Ex. 1 [Request for Judicial Notice in Support of Motion for Summary

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Adjudication, Ex. 1 at pp. 56]; RFJN, Ex. 2 [Declaration of Timothy M. Ryan in

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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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Memorandum of Points and Authorities

A Professional Corporation

THE RYAN FIRM

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

Support of Motion for Summary Adjudication, Ex. 1 at pp.56]; RFJN, Ex. 2

[Declaration of Timothy M. Ryan in Support of Motion for Summary Adjudication, pp.

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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Adjudication, Ex. 2 at pp. 89]; RFJN, Ex. 2 [Declaration of Timothy M. Ryan in

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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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131:7 to 132:2, 145146, Ex. 7 at pp. 173:22 to 175:22, 176:1524, 196197.])

Bennett and St. John continued to make payments on the Bowman/Ocwen loan for

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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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[Declaration of Timothy M. Ryan in Support of Motion for Summary Adjudication, pp.

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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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obtaining refinancing of the Bowman/Ocwen loan. (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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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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///

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///

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Memorandum of Points and Authorities

A Professional Corporation

THE RYAN FIRM

BEGINNING AT THE NORTHEAST CORNER OF THE NORTHEAST

1/4 OF THE NORTHWEST 1/4 OF SECTION 36, IN TOWNSHIP 30

NORTH, RANGE 11 EAST, MOUNT DIABLO MERIDIAN; THENCE

DUE WEST 1325 FEET TO THE WEST LINE OF SAID NORTHEAST

1/4 OF THE NORTHWEST 1/4 OF SAID SECTION; THENCE DUE

SOUTH 550.50 FEET TO THE INTERSECTION THEREOF WITH THE

NORTHERN LINE OF CALIFORNIA STATE HIGHWAY; THENCE

NORTH 77 57 EAST ALONG SAID LINE OF SAID HIGHWAY 38.90

FEET; THENCE ALONG A CURVE TO THE RIGHT WITH A RADIUS

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OF 4850 FEET, PARALLEL AND DISTANT NORTHERLY 50 FEET

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FROM THE CENTER LINE OF SAID HIGHWAY, 1285.78 FEET TO A

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POINT ON THE NORTHERLY LINE OF SAID HIGHWAY; AND

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THENCE NORTH 434 FEET TO THE POINT OF BEGINNING.

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RESERVING THEREFROM A NON-EXCLUSIVE EASEMENT FOR

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ACCESS AND PUBLIC UTILITY PURPOSES OVER, UNDER AND

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ACROSS THE EASTERLY 60 FEET OF THE HEREINABOVE

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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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Improvements in order to improve its value. (RFJN, Ex. 2 [Declaration of Timothy M.

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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

[Declaration of Timothy M. Ryan in Support of Motion for Summary Adjudication, pp.

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,

219:3 to 220:23, 221:213, 222:22 to 226:22.])

Bennett and St. John partitioned the 54.03 Acres as described, with one critical

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THE RYAN FIRM

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error: the Improvements remained on the 40 Acres, instead of the 14.03 Acres. (RFJN,

Ex. 2 [Declaration of Timothy M. Ryan in Support of Motion for Summary Adjudication,

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pp. 2:14 to 3:2, 3:1928, Ex. 5 at p. 116:1519], Ex. 7 at p. 185:1625.]) However,

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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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1728; 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. 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

THE RYAN FIRM

now hold title to the 40 Acres free and clear of the Ocwen loan.2 (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 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

Allen willingly participated in mortgage fraud by completely fabricating the down

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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(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. 5 at pp. 127:19 to 130:3.])

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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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aforementioned improvements, in addition to Allens representation (made under penalty

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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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presence of an actual down payment.

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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

THE RYAN FIRM

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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[Declaration of Timothy M. Ryan in Support of Motion for Summary Adjudication, pp.

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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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at p. 77:1727], Ex. 7 at p. 195:511], Ex. 9 at pp. 246:49, 246:1520.]) Wells Fargo,

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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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is set to be heard concurrently with this ex parte application.

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3.

AS A CREDITOR, WELLS FARGO IS ENTITLED TO APPOINTMENT

OF A RECEIVER UNDER CODE OF CIVIL PROCEDURE SECTION 564

IN ORDER TO PRESERVE THE 40 ACRE PORTION OF THE

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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(b) A receiver may be appointed by the court in which an action or

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proceeding is pending, or by a judge thereof, in the following cases:

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(1) In an action by a vendor to vacate a fraudulent purchase of property, or

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by a creditor to subject any property or fund to the creditors claim, or

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between partners or others jointly owning or interested in any property or

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fund, on the application of the plaintiff, or of any party whose right to or

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interest in the property or fund, or the proceeds thereof, is probable, and

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where it is shown that the property or fund is in danger of being lost,

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removed, or materially injured.

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(Code Civ. Proc. 564.)

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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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insured for nearly four years:

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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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Memorandum of Points and Authorities

A: Yes.

Q:

Do you recall when it lapsed?

A:

Yes, I believe This will be an estimate, but I believe it lapsed in

2007, perhaps midyear.

(Declaration of Timothy M. Ryan in Support of Ex Parte Application, Ex. 1 [pp. 17:23 to

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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I would imagine that these Mustangs have branding; is that correct?

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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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have died in the last year.

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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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at least one of the perpetrators of that is in this room.

ay.
By human beings, poison and violent acts. Now you're asking me to

According to the domestic violence retraining order that was sought,

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(Declaration of Timothy M. Ryan in Support of Ex Parte Application, Ex. 1 [pp. 24:12 to

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25:1.])

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According to Bennett, the animals on the 40 Acres are in grave danger:

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I individually own or that are horses that are boarded at my facility or

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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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Memorandum of Points and Authorities

substantial amount of evidence with the sheriff's department, with animal

control, and before the Court indicating that to be true.

Is that your wish to put these animals in danger?

(Declaration of Timothy M. Ryan in Support of Ex Parte Application, Ex. 1 [p. 48:11

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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insurance thereon) is necessary and must be ordered by the Court.

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4.

WELLS FARGOS DEED OF TRUST CONTAINS PROVISIONS

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AUTHORIZING IT TO TAKE POSSESSION OF THE 14.03 ACRE

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PORTION OF THE PROPERTY AND TO COLLECT ITS RENTS UPON

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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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and unpaid, of the 14.03 Acres. Paragraph 35 states, in pertinent part:

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Assignment of Rents. As additional security hereunder, Borrower hereby

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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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not abandoned the Property.

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(Declaration of Jennifer Fishman in Support of Ex Parte Application, Ex. 2 [Deed

26

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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seeking the appointment of a receiver:

Protection of Lenders Rights in the Property. If Borrower fails to

perform the covenants and agreements contained in this Security

Instrument, or there is a legal proceeding that may significantly affect

lenders rights in the Property (such as a proceeding in bankruptcy, probate,

for condemnation or forfeiture or to enforce laws of regulations), then

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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Instrument, appearing in court, paying reasonable attorneys fees and

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entering on the Property to make repairs. Although Lender may take action

12

under this paragraph 7, Lender does not have to do so.

13

(Declaration of Jennifer Fishman in Support of Ex Parte Application, Ex. 2 [Deed of

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Trust, 7.])

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It is well settled that a beneficiary or mortgagee is entitled to possession of the

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encumbered property if the express terms of the mortgage or deed of trust so provide.

17

(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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the 14.03 Acres.

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A.

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of a Receiver is a Prima Facie Showing of the Beneficiarys Entitlement to the

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Appointment of a Receiver

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A recital contained in a deed of trust entitling the beneficiary to collection of rents

A Recital Contained in a Deed of Trust Authorizing the Appointment

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and maintenance of certain property by any legal means, including the appointment of a

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receiver, presents a prima facie showing of the beneficiarys entitlement to employment

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Memorandum of Points and Authorities

of a receiver and the burden is on the defendant to rebut that evidentiary presumption.

(Barclays Bank of California v. Superior Court, (1977) 69 Cal.App.3d 593.) As

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

express terms of the contract should be enforced.

Further, it is important that the Court keep in mind that the assignment of rents is

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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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(1979) 7.11, Assignment of Rents as Additional Security, pp. 334335.) Absent

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cooperation of the trustor, the only legal means by which the beneficiary may enforce this

18

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

24

circumstances is appropriate. (Santacroce Bros. v. Edgewater-Santa Clara Inc., (1966)

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242 Cal.App.2d 584; Code Civ. Proc. 564(b)(8); Mines v. Superior Court, (1932) 216

26

Cal. 776.)

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///

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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

are a Proper Element of Costs and Expenses

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:

Reimbursement. [B]orrower shall reimburse Trustee and Lender for any

and all costs, fees and expenses which either may incur, expend or sustain

in the execution of the trust created hereunder or in the performance of any

act required or permitted hereunder.

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Attorneys Fees and Costs Incurred in Seeking Appointment of the

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(Declaration of Jennifer Fishman in Support of Ex Parte Application, Ex. 2 [Deed of

12

Trust, 32.])
Such provision is enforceable, and justifies recovery of attorneys fees and costs.

13
14

(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

16

receiver is as much an expense of administration as the charge of the receivers counsel

17

and should have priority to the same extent. (Farmers Loan and Trust Company v.

18

Green, 79 F. 22; See also: In re Estate of Marre, (1941) 18 Cal.2d 191.) Accordingly,

19

before any sums collected from the 14.03 Acres as rent are applied against the

20

outstanding indebtedness, the reasonable attorneys fees and costs incurred in the

21

bringing of this action should be deducted by the receiver.

22

///

23

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24

///

25

///

26

///

27

///

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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

receiver over the 40 Acres and the 14.03 Acres as requested.

DATED: July 20, 2011

THE RYAN FIRM

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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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