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U.S. Bank National Association, A National Banking Association, As Successor-In-Interest To the Federal Deposit v. Sandy K. Friedrichs

February 13, 2013

U.S. BANK NATIONAL ASSOCIATION, A NATIONAL BANKING ASSOCIATION, AS SUCCESSOR-IN-INTEREST TO THE FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER FOR PARK NATIONAL BANK,
PLAINTIFF,
v.
SANDY K. FRIEDRICHS, AN INDIVIDUAL; AND DOES 1 THROUGH 50, INCLUSIVE, DEFENDANT.



The opinion of the court was delivered by: Hon. Gonzalo P. Curiel United States District Judge

ORDER 1) GRANTING ALBERT ZAPPIA'S MOTION TO INTERVENE; 2) DENYING DEFENDANTS' MOTION TO DISQUALIFY PLAINTIFFS' ATTORNEY WAYSER AND TANADA; 3)DENYING DEFENDANTS' MOTION TO DISMISS; 4) GRANTING COUNTERDEFENDANT U.S. BANK'S MOTION TO DISMISS COUNTERCLAIM; 5) GRANTING COUNTERDEFENDANTS NYGARD AND BIGALL'S MOTION TO DISMISS; 6) GRANTING COUNTERDEFENDANT OCEPEK'S MOTION TO DISMISS; 7) DISMISSING COUNTERDEFENDANT

ITSKOVICH WITH PREJUDICE

[Dkt. Nos. 22, 24, 26, 42, 57, 65, 73, 79.]

On November 2, 2012, Defendant Sandy Friedrichs and non-party Albert Zappia filed a motion to dismiss the complaint; motion to intervene by Albert Zappia; and motion to disqualify Plaintiff's counsel Joshua Wayser. (Dkt. Nos. 22, 24, 26.) Plaintiff filed an opposition to all motions on November 30, 2012. (Dkt. Nos. 44, 45, 46.) Defendant filed a reply on December 17, 2012. (Dkt. Nos. 66, 67, 68.) On November 29, 2012, Plaintiff and Counterdefendant U.S. Bank filed a motion to dismiss counterclaim for damages. (Dkt. No. 42.) On December 21, 2012, Counterdefendant Erica Itskovich filed a notice of conditional joinder in U.S. Bank's motion to dismiss and Declaration of Non-Monetary status pursuant to California Civil Code § 2924l. (Dkt. Nos. 73, 74.) Counterdefendant Nicholas Ocepek also filed a notice of joinder in U.S. Bank's motion to dismiss. (Dkt. No. 57.) Counterclaimants filed an opposition on December 21, 2012. (Dkt. No. 76.) U.S. Bank filed a reply on January 4, 2013. (Dkt. No. 84.)

On December 14, 2012, Defendant Sandy Friedrichs and non-party Albert Zappia filed a motion to disqualify Plaintiff's counsel Brian Tanada. (Dkt. No. 65.) Plaintiff filed an opposition on January 4, 2013. (Dkt. No. 85.) Defendant filed a reply on January 18, 2013. (Dkt. No. 94.)

On December 28, 2012, Counterdefendants Patrick Nygard and Jocelyn Bigall filed a motion to dismiss counterclaims. (Dkt. No. 79.) Counterclaimants filed an opposition on January 23, 2013. (Dkt. No. 98.) Counterdefendants filed a reply on February 1, 2013. (Dkt. No. 100.)

The motions are submitted on the papers without oral argument, pursuant to Civil Local Rule 7.1(d)(1). After a review of the briefs, supporting documentation, and applicable law, the Court GRANTS Albert Zappia's motion to intervene; DENIES Defendants' motion to disqualify Plaintiffs' attorney Wayser and Tanada; DENIES Defendants' motion to dismiss. As to the counterclaim, the Court DISMISSES Counterdefendant Itskovich with prejudice and GRANTS remaining counterdefendants' motion to dismiss.

Procedural Background

On July 13, 2012, Plaintiff U.S. Bank National Association ("U.S. Bank"), as successor to the Federal Deposit Insurance Corporation ("FDIC"), as Receiver for Park National Bank ("Park National") filed a complaint in the Superior Court of San Diego against Defendant Sandy Friedrichs, also known as Sandy Zappia, for appointment of receiver and judicial foreclosure. On September 28, 2012, Defendant Sandy Zappia and non-party Albert Zappia, Defendant's husband, proceeding pro se, removed the case to this Court. (Dkt. No. 1.) On October 12, 2012, the case was transferred to the undersigned judge. (Dkt. No. 2.) On October 15, 2012, Defendant filed an ex parte motion for temporary restraining order and preliminary injunction seeking to restrain Plaintiff from foreclosing Defendant's business property located at 1340 La Mirada Drive, San Marcos, California 92078. (Dkt. No. 3.) On October 18, 2012, the Court denied Defendant's ex parte motion for a temporary restraining order because the Court concluded that Defendant had not shown irreparable harm since Plaintiff had moved the sale of the property to November 15, 2012. (Dkt. No. 6.) After further briefing and hearing oral argument on the motion for preliminary injunction, on November 9, 2012, the Court granted Defendant's motion for preliminary injunction pending further briefing. (Dkt. Nos. 30, 33.) On November 1, 2012, Counterclaimants Sandy Zappia and Albert Zappia filed a Counterclaim against Counterdefendants U.S. Bank, Nicholas Ocepek, Erica Itskovich, Jocelyn Bigall and Patrick Nygard. (Dkt. No. 19-1.)

Factual Background

Around April 9, 2007, GreenPoint Mortgage Funding lent Defendant Sandy Friedrichs, on a recourse basis, the principal sum of $340,000, secured by the property located at 1340 La Mirada Drive, San Marcos, CA 92078. (Dkt. No. 1-1, Compl. ¶ 5.) The loan was memorialized in a written Promissory Note. (Id. ¶ 6; Ex. 2.) On April 18, 2007, GreenPoint recorded a "Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing" ("Deed of Trust") with the San Diego County Recorder's Office. (Id. ¶ 7; Ex. 3.) Defendant executed the Deed of Trust as trustor, to GreenPoint, as beneficiary, and to Marin Conveyancing Corp., as trustee. (Id.) On August 1, 2008, Park National recorded an "Assignment of Deed of Trust" whereby GreenPoint assigned all of its right, title, and interest in, to and under the Note, Deed of Trust and Assignment to Park National. (Id. ¶ 10; Ex. 4.) On October 30, 2009, the FDIC placed Park National into receivership and assigned the assets of Park National, including the Loan, to U.S. Bank. (Id. ¶ 10; Ex. 5.)

Section 3 of the Deed of Trust contains a provision entitled, Assignment of Rents; Appointment of Receiver; Lender in Possession which assigns to Lender rents, issues, and profits from the property. (Id. ¶ 8.) It also allows Lender to collect, sue for and compromise rents and to direct tenants of the Property to pay all rent to, or as directed by Lender upon the occurrence of an event of default; and also allows the Lender to seek an appointment of receiver through the courts. (Id.)

Defendant failed to make her monthly payments starting in March 2012. (Id. ¶ 11.) Defendant's failure to pay the loan is a default on the obligations for which the deed of trust is security. (Id. ¶ 12.) As of June 18, 2012, the principal amount due and owing was $282,834.66, plus accrued default interest, late charges, and other fees. (Id.) Plaintiff seeks specific performance for appointment of receiver and judicial foreclosure against Defendant Sandy Friedrichs.

Discussion

I. The Complaint

A. Albert Zappia's Motion to Intervene

Albert Zappia moves to intervene pursuant to Federal Rule of Civil Procedure 24. Plaintiff does not oppose the motion to intervene stating that while "Mr. Zappia is not a party to any of the Loan documents, he claims an ownership interest in the Property." (Dkt. No. 44.) Accordingly, since Plaintiff does not oppose the motion to intervene and Albert Zappia claims an ownership interest in the property, the Court GRANTS Albert Zappia's Motion to Intervene as a defendant.

B. Defendants' Motion to Disqualify Counsel

Defendants filed two motions to disqualify Plaintiffs' counsel Joshua Wayser and Brian Tanada. They argue that an attorney cannot submit evidence to the Court and also be called upon as a witness in a case. Defendants maintain that Wayser and Tanada filed declarations in this case stating they have "personal knowledge of the fact set forth below, which I could and would testify to if called upon to do so." (Dkt. No. 26-1, Ds' Mot. at 3; Dkt. NO. 65-1, Ds' Mot. at 4.) Since both counsel may testify at trial, Defendants assert both counsel should be disqualified.

In addition, Defendants claim that Wayser violated the California Rules of Professional Code by trying to intimidate them. Plaintiff opposes.

A motion to disqualify based on the attorney being called as a witness "must be supported by a showing that an attorney will give evidence material to the determination of the issues being litigated and that the evidence is unobtainable elsewhere." Janda v. City of Henderson, 05-cv-841-LDG-LRL, 2007 WL 539737, *2 (D. Nev. Feb. 14, 2007); Feingold v. Liberty Mut. Group, 11-5364, 2011 WL 6085829, *3 (E.D. Pa. 2011) (party seeking disqualification must demonstrate testimony is material; cannot be obtained elsewhere; and would be prejudicial to the testifying attorney's client).

As to Wayser, besides stating that Defendants intend to call Wayser as a witness concerning his knowledge about the "check tendered as payoff," Defendants have not shown that Wayser's testimony is material and that the evidence cannot be obtained elsewhere. It is unclear why facts surrounding the check tendered as payoff cannot be obtained through documents or other employees of U.S. Bank.

As to Tanada, Defendants state they seek to cross-examine him on the information relied on forming his valuation of properties for purposes of the bond. However, counsel's declaration does not provide his opinion on the valuation of the property but is based on documents from websites concerning valuation. Moreover, the valuation of properties for the bond have nothing to do with the merits of the case. The Court concludes that Defendants have not shown that Wayser or Tanada is a necessary witness in this case.

Defendants also claim that Wayser violated California Rules of Professional Conduct Rule 5-100 which states that a "member shall not threaten to present criminal, administrative, or disciplinary charges to obtain an advantage in a civil dispute." Cal. R. Prof. Conduct R. 5-100. They allege that in a letter dated September 7, 2012, Wayser wrote to Defendant Sandy Friedrichs and threatened "monetary sanctions" if Defendant ...


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