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Reza Jafari v. Federal Deposit Insurance Corporation

August 20, 2012

REZA JAFARI,
PLAINTIFF,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR LA JOLLA BANK; ET AL., DEFENDANTS.



The opinion of the court was delivered by: Honorable Larry Alan Burns United States District Judge

ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER OR PRELIMINARY INJUNCTION

General Background

In September 2011, Plaintiff Reza Jafari bought a single family home in Rancho Santa Fe, California from Birger Greg Bacino. To be precise, the home was originally owned by ALB Properties, LLC, whose managing partner was Bacino, and it had conveyed the home to a trust created by him. ALB and Bacino, however, had been in Chapter 7 bankruptcy since December 31, 2009, and the home was encumbered by liens. One of them was a $2,540,000 construction loan from La Jolla Bank, which was personally guaranteed by Bacino. This lien was held by the FDIC, which was appointed receiver of La Jolla Bank after it was closed by the Office of Thrift Supervision on February 19, 2010.

The other liens were: (1) delinquent property taxes for $68,198.51; (2) a Chevy Chase Bank loan with an amount due of more than $7.7 million; (3) twelve mechanics' liens totaling $433,343; and (4) a homeowners' association lien of $12,208. According to Jafari, these liens were all senior to the La Jolla Bank lien, and the Chevy Chase lien was most senior. In fact, on July 27, 2011 the judge presiding over ALB and Bacino's bankruptcy granted Chevy Chase relief from the automatic stay and it was poised to foreclose. If it had followed through, the other lienholders would have received nothing because the fair market value of the home was less than the $7.7 million Chevy Chase was owed.

With the outstanding liens exceeding the value of the home, Jafari and Bacino entered into a short sale agreement for $4,475,000, which the existing lienholders allegedly blessed. Jafari would put up the money---$3,132,500 with a loan from Union Bank and the remainder by himself---and he would receive title to the home free and clear of all existing liens. The FDIC, in particular, agreed to accept $135,000 in a release agreement, although this was contingent on ALB and Bacino satisfying certain non-monetary conditions. Jafari alleges that he didn't see this release agreement before he opened escrow to purchase the home.

Escrow closed on September 23, 2011, leaving Jafari confident that all pre-existing liens would be released and that the home would be encumbered only by his Union Bank loan. On September 26, 2011, escrow wired or mailed checks to all lienholders. This included a wire transfer of $135,000 to the FDIC, with the request that it reconvey the La Jolla Bank deed of trust to Jafari. The next day, the FDIC returned the $135,000 to escrow and refused to reconvey the deed, however, claiming that ALB and Bacino had failed to satisfy the non-monetary conditions of the release agreement. This is what the FDIC's lawyer said, in a letter to the escrow company:

The FDIC-R received a wire in the amount of $135,000 yesterday. Please see the enclosed wire transmittal information received by the FDIC-R.

Based upon my review of the document accompanying the wire, it appears that the wire may have been originated in connection with a potential sale of the property located at 14747 Roxbury Terrace. Correspondence received by the FDIC-R indicates that The Heritage Escrow Company may be acting as an escrow agent in connection with the sale of the Property.

The FDIC-R has previously been approached by a guarantor of the loan encumbering the Property with a request to release the deed of trust which encumbers the Property. Certain specific conditions were clearly established as a prerequisite to considering the release that deed of trust.

Please be advised that the conditions which were established by the FDIC-R related to the release of the deed of trust have not yet occurred. Accordingly, the FDIC-R will not be releasing the security interest which encumbers the Property.

Please be further advised that the FDIC-R will be returning the wire to the sender and seeking authorization within the FDIC-R to enforce all of the rights and remedies which the FDIC-R has under the deed of trust encumbering the Property. (Doc. No. 3-18.) Jafari alleges that he didn't learn about this until months later.

On January 10, 2012, the FDIC's attorney contacted Jafari, confirming that the La Jolla Bank loan hadn't been repaid, that the deed of trust hadn't been reconveyed, and that as a secured creditor the FDIC would foreclose on the home. It subsequently served a payoff demand stating the amount due was $3,428,937.44 and on April 2, 2012, the FDIC recorded a notice of default. Jafari and Union Bank filed a proof of claim with the FDIC on May 21, 2012, and it has until November 17, 2012 to respond. However, through the present the FDIC has refused to address the proof of claim (or a July 6, 2012 letter from Jafari's counsel setting forth his legal and equitable claims) and on August 1, 2012 it filed a notice of sale for August 28, 2012. It's that sale that Jafari wants the Court to put on hold. The Release Agreement

At the heart of the parties' dispute is the release agreement executed by Bacino and the FDIC on September 8, 2011. According to Jafari, it is a valid contract and Bacino "has performed those provisions that are material, lawful, and enforceable." (Compl. at 28.) Any provisions he hasn't performed, on the other hand, "are unlawful . . . and do not excuse the FDIC's obligation to perform." That brings the dispute into even sharper focus. The issue isn't whether Bacino satisfied all conditions of the release agreement, but whether those he didn't satisfy, and that are the basis for the FDIC's rejection of the $135,000, were legitimate conditions in the first instance. Those conditions appear chiefly in one paragraph of the release agreement.

The FDIC-R is willing to consent to the release of collateral as outlined in this Letter so long as the Guarantor(s) acknowledge and agree that by consenting to the release of collateral, the FDIC-R is not forbearing in any way with respect to its remedies under the Loan Documents, and is not waiving or releasing any of its claims with respect to the Borrower or the Guarantor(s) under the Loan Documents. Borrower and Guarantor(s) are willing to sign this Letter to assure the FDIC-R that they acknowledge and agree that the FDIC-R is not forbearing in any way with respect to its remedies under the Loan Documents, and not waiving or releasing any of its claims with respect to the Borrower or the Guarantor(s) under the Loan Documents. Prior to effectuating the release of collateral referenced herein, Mr. Bacino acknowledges that he will be required to provide an opinion from his bankruptcy counsel, in a form satisfactory to the FDIC-R in its sole and absolute discretion, that the release of collateral contemplated by this letter and the continuing obligation of Mr. Bacino under his Guarantee do not require approval of the Bankruptcy Court and that the guarantee executed by Mr. Bacino will continue to be effective against him in the current bankruptcy court litigation and in any subsequent litigation derived therefrom. ALB shall also provide an opinion from bankruptcy counsel, in a form ...


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