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Vegas Diamond Properties, LLC v. La Jolla Bank

October 4, 2010

VEGAS DIAMOND PROPERTIES, LLC, A NEVADA LIMITED LIABILITY COMPANY; AND JOHNSON ORDER INVESTMENTS, LLC, A NEVADA LIMITED LIABILITY COMPANY, PLAINTIFFS,
v.
LA JOLLA BANK, FSB, A CALIFORNIA CORPORATION; ACTION FORECLOSURE SERVICES, INC., A CALIFORNIA CORPORATION; AND DOES I-X, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Hayes, Judge

The matter before the Court is the Motion to Dismiss Complaint under F.R.C.P. 12(b)(6) and Motion to Strike under F.R.C.P. 12(f) ("Motion to Dismiss"), filed by Defendant Federal Deposit Insurance Corporation ("FDIC"), as Receiver for La Jolla Bank, FSB ("La Jolla Bank"). (ECF No. 29).

I. Background

On January 8, 2010, Plaintiffs Vegas Diamond Properties, LLC ("Vegas Diamond") and Johnson Investments, LLC ("Johnson Investments") initiated this action by filing a Complaint in Nevada state court. (Pet. Removal, Ex. A, ECF No. 1-2).

A. Allegations of the Complaint

In 2001 or 2002, Robert A. Dyson, Jr., an owner of various real estate businesses, began investing in a real estate development in Anza, California ("Anza Project"). Id. ¶ 39.

Doug Johnson, the "main principal" of Plaintiff Johnson Investments, "agreed to help Mr. Dyson obtain funds for the Anza Project using the Johnson Property." Id. ¶¶ 2, 40. In 2005, "Mr. Dyson arranged for Mr. Johnson to take a loan from Community National Bank ... in the amount of approximately $7.5 million, secured by the Johnson Properties." Id. ¶ 41. "The loan from Community Bank was for two years, with interest only payments at 7% interest, with the full balance due at the end of the two year period." Id. ¶ 42. "From the Community Bank Loan, Mr. Johnson gave the proceeds to Mr. Dyson at 12% interest for the two year term, with interest only payments and the full balance due at the end. There was no security for the loan made by Mr. Johnson to Mr. Dyson." Id. ¶ 43.

"At and prior to the time Mr. Dyson took the loan from Mr. Johnson, Mr. Dyson was encountering severe resistance and trouble in proceeding with the Anza Project." Id. ¶ 48. "La Jolla Bank was fully aware of the issues adverse to the Anza Project and the ultimate delays." Id. ¶ 49. "At one point in time, La Jolla Bank was going to co-locate one of its loan offices with one of Mr. Dyson's 'retail' real estate businesses in Las Vegas." Id. ¶ 24. Dyson attended "meetings and events" at La Jolla Bank on a weekly basis and Dyson went to "numerous dinners" with Rick Hall, a major principal of La Jolla Bank. Id. ¶¶ 26-27. "La Jolla Bank told Mr. Dyson that before they would venture another loan on the Anza Project, [Dyson] needed to find an investor or equity partner to meet certain so-called 'equity requirements' established by La Jolla Bank." Id. ¶ 34.

"At the end of the two year loan period from Mr. Johnson, Mr. Dyson was unable to pay off the balance of the loan." Id. ¶ 51. "Mr. Dyson never informed Mr. Johnson of the problems with the Anza Project." Id. ¶ 54. "Instead of paying off Mr. Johnson, Mr. Dyson brought La Jolla Bank into the transaction. A new loan was structured by La Jolla Bank for Mr. Johnson where the loan from Community Bank would be paid off and additional funds provided to Mr. Dyson." Id. ¶¶ 55-56.

Dyson met with Johnson and Danny Tarkanian, a principal in Plaintiff Vegas Diamond, and Dyson "provided [Johnson and Tarkanian] documents and oral representations ... painting a very strong financial picture for the Anza Project and high likelihood of return on [their] investment." Id. ¶ 57; see also id. ¶ 59. "Mr. Dyson represented to Mr. Johnson and Mr. Tarkanian that proceeds from the loans would be used to obtain more property ... and by mapping the project," which would "increase the value of the Anza Project." Id. ¶ 66. "After several meetings with Mr. Dyson, Mr. Johnson and Mr. Tarkanian agreed to take loans from La Jolla Bank secured against the Johnson Properties and Vegas Diamond Property and in turn, to loan the proceeds to Mr. Dyson." Id. ¶ 68. "Without ever meeting, discussing or negotiating with anyone affiliated with La Jolla Bank, Johnson Investments received a $10,933,125 loan secured by the Johnson Propert[ies] and Vegas Diamond received a $14,568,750 loan secured by the Vegas Diamond Property from La Jolla Bank." Id. ¶ 62. "Mr. Johnson and his wife were required to personally guarantee the Johnson Investment Loan and Mr. Tarkanian, his wife, and his extended family were required to personally guarantee the Vegas Diamond loan." Id. ¶ 63.

"Under the terms of the various loan documents, both Johnson Investments and Vegas Diamond were to pay approximately 5% on the loan to La Jolla Bank. The terms of the two loans were for two years with interest only payments, with the full balances due at the end of the two year term." Id. ¶ 67. "Under the deal with Mr. Dyson, Mr. Dyson became obligated to Johnson Investments and Vegas Diamond for the full amount of the loans and in addition, [Dyson] agreed to pay approximately 11% interest." Id. ¶ 68. "As security for the loans made by Johnson Investments and Vegas Diamond to Mr. Dyson, Johnson Investments and Vegas Diamond a second [mortgage] on the Anza Project." Id. ¶ 76.

"Commensurate with the Vegas Diamond and Johnson Investments transactions with La Jolla Bank, Mr. Dyson was taking a $7.5 million loan from La Jolla Bank secured with a first deed of trust against the Anza Project. This loan from La Jolla Bank to Mr. Dyson was unknown to Johnson Investments and Vegas Diamond." Id. ¶¶ 73-74. "Unbeknownst to Mr. Johnson and Mr. Tarkanian, money from the loans made by La Jolla Bank to Johnson Investments and Vegas Diamond was used to pay off other loans Mr. Dyson had with La Jolla Bank." Id. ¶ 77. "As it turns out, the Anza Project which was only worth around $15 million, was securing loans in the amount of $32.5 million--the loan from La Jolla Bank to Mr. Dyson secured by a first on the Anza Project and the loans made by ... La Jolla Bank to Johnson Investments and Vegas Diamond secured by a second on the Anza Project." Id. ¶ 80.

"There were many irregularities with the loans from La Jolla Bank to Johnson Investments and Vegas Diamond; all communications, document[] preparation, signatures and other activities were done exclusively with Mr. Dyson and his accountant, Ben Wiggins." Id. ¶ 88. "Neither Mr. Johnson nor Mr. Tarkanian were ever in any communication with or ever contacted by La Jolla Bank; Mr. Dyson and Mr. Wiggins negotiated the terms of the loan from La Jolla Bank to Johnson Investments and Vegas Diamond, provided and assisted in the preparation of the loan applications, arranged for the appraisal, and took each loan document to the home of the individual borrowers." Id. ¶ 89.

"Less than one month after the loans from La Jolla Bank to Johnson Investments and Vegas Diamond closed, Mr. Dyson defaulted on the first interest payment." Id. ¶ 85. "[S]ix months after the loan was funded, Mr. Dyson received water approval to map the Anza Project; however, two weeks later, Mr. Dyson advised Johnson Investments and Vegas Diamond that he was not going to map the project because he had run out of money." Id. ¶ 87.

As of September 9, 2009, "La Jolla Bank [was] subject to an 'Order to Cease and Desist' issued [by] the Office of Thrift Supervision ('OTS'), United States of America. ...

[T]he OTS found that La Jolla Bank has engaged in unsafe and unsound banking practices which have resulted in inadequate asset quality, earnings, liquidity planning, and capital levels at ... La Jolla Bank." Id. ¶¶ 90, 92.

Dyson "cannot be sued in this matter at this time because he filed for bankruptcy on ... October 31, 2009, and is still presently in bankruptcy." Id. ¶ 15.

"The Vegas Diamond Property and the Johnson Property are presently in foreclosure" and a "Trustee's Sale is presently scheduled for both properties." Id. ¶¶ 10-11.

The Complaint alleges six causes of action: (1) fraudulent concealment against La Jolla Bank; (2) negligence against La Jolla Bank; (3) civil conspiracy against La Jolla Bank; (4) breach of the covenant of good faith and fair dealing against La Jolla Bank; (5) aiding and abetting deceit ...


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