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The Richard and Sheila J. Mcknight 2000 Family Trust et al v. William J. Barkett et al

April 24, 2013

THE RICHARD AND SHEILA J. MCKNIGHT 2000 FAMILY TRUST ET AL., PLAINTIFFS,
v.
WILLIAM J. BARKETT ET AL., DEFENDANTS.



The opinion of the court was delivered by: Robert C. Jones United States District Judge

ORDER

This case arises out of the same facts as the USA Commercial case. Pending before the Court is an Objection to Magistrate Judge's Order (ECF No. 240) and a Motion for Attorney's Fees and Costs (ECF No. 235). For the reasons given herein, the Court denies the objection and grants the motion for fees and costs in part.

FACTS AND PROCEDURAL HISTORY

A. Background

Plaintiff Richard McKnight,*fn1 as trustee for The Richard & Sheila J. McKnight 2000 Trust ("the McKnight Trust") provided $100,000 out of the total of $4.5 million that various direct lenders loaned to Defendant Castaic III Partners, LLC ("Castaic III") through USA Commercial Mortgage Co. ("USA Commercial"). (Compl. ¶ 5, Sept. 21, 2010, ECF No. 1). The McKnight Trust has received no interest payments on the loan since August 2006. (Id. ¶ 9).

Plaintiff sued Defendants Castaic III and William J. Barkett in this Court on two claims:

(1) Breach of Guaranty (Barkett only); and (2) Declaratory Judgment. The Court denied a motion to reconsider transfer of the case from the Hon. Gloria M. Navarro to this Court, dismissed the second cause of action for declaratory judgment, granted offensive summary judgment on the first cause of action for breach of guaranty, and permitted 260 other direct lenders to intervene as Plaintiffs and to add claims against Castaic Partners, LLC ("Castaic" or "Tapia Ranch") and Castaic II Partners, LLC ("Castaic II"). Defendants appealed the judgment against them as to the breach of guaranty claim, but the Court of Appeals dismissed the appeal for lack of finality.

Each group of intervenors has filed its own complaint in intervention. Intervenor Plaintiffs Thomas J. Kapp and Cynthia S. Roher, as trustees of the T&C Kapp Family Trust (the "Kapp Intervenors") filed a Complaint in Intervention (the "Kapp CI") against Barkett and for breach of contract, breach of guaranty, and declaratory judgment. (See Kapp CI, 12, 2011, ECF No. 34). A second group of intervenors (the "Rasmussen Intervenors") have filed a complaint in intervention (the "Rasmussen CI") against Barkett, Castaic, Castaic II, and for breach of contract, breach of guaranty, and declaratory judgment. (See Rasmussen CI, Aug. 8, 2011, ECF No. 61). The Rasmussen CI alleges the amount each Rasmussen Intervenor loaned each Castaic entity. (See id. ¶¶ 5, 67--69). DACA also filed a motion to but later withdrew it.

The Court granted a motion to dismiss the Kapp CI in part, dismissing the declaratory judgment claim but refusing to dismiss the breach of contract and breach of guaranty claims for standing. Defendants argued that Kapp Intervenors had transferred their interests in the relevant loans to DACA-Castaic, LLC and thus no longer had standing to sue for breach of contract or breach of guaranty. The Kapp Intervenors responded that they had only transferred the deeds of trust, not the beneficial interests. The Court invited summary judgment motions on the issue but refused to dismiss because the Kapp CI was sufficiently pled. The Court

denied a motion to dismiss the Rasmussen CI, noting that the claim for declaratory thereunder was different from the declaratory relief claims in the Complaint and the Kapp that the Court had dismissed. The Court struck Defendants' "cross-claim," which was in

a third-party complaint and/or a counterclaim, directing Defendants to refile the pleading properly, which they did. (See Countercl. and Third-Party Compl., ECF Nos. 156, 157). Defendants brought counter- and third-party claims against several Compass entities, DACA, and direct lenders for: (1) breach of contract; (2) declaratory judgment; (3) interference with prospective economic advantage; (4) usury; (5) breach of fiduciary duty (two Compass entities only); (6) unjust enrichment; and (7) slander of title.

The Court refused to stay Plaintiff's judgment against Defendants but noted that it would await summary judgment motions as to whether certain Intervenors still owned the beneficial interest in the loans or had transferred them to DACA-Castaic, LLC or other parties. DACA

Court to grant it summary judgment on thirteen issues under its Third-Party Counterclaim for declaratory relief. The Court granted the motion in part, ruling that any direct

who had transferred his or her beneficial interest in a Castaic loan to DACA had also transferred his or her interest in the respective deed of trust or guaranty and could no longer sue on the note or Barkett's guaranty thereof, because any interest in a deed of trust or a guaranty follows the interest in the note as a matter of law in California. The Court noted that there remained questions of fact concerning which direct lenders had effected such transfers. The evidence adduced at the time showed only a transfer of Castaic Partners, LLC's beneficial interest in the Castaic loans to DACA-Castaic, LLC, but the evidence did not indicate any previous transfer from any direct lenders to Castaic Partners, LLC. The Court also noted that no disputed that the Castaic loans were in default but that it would not attempt to calculate the total amount due on each loan at the pre-trial stage. The Court also ruled that the notes were neither usurious nor subject to offset. The Court ruled that the Castaic deeds of trust were enforceable under their terms and that the pending foreclosures in California under the respective 2007 notices of default were proper. The Court also noted that an action against Barkett for breach of guaranty would not violate the one-action rule even after foreclosure, because Barkett was not the target of any foreclosure, though Plaintiffs could only collect on a guaranty to the deficiency remaining after a foreclosure sale. The Court also ruled that the Agreement, under which ...


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