United States District Court, S.D. California
REZA JAFARI, FIRST AMERICAN TITLE INSURANCE COMPANY, a California Corporation, Plaintiffs,
FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for La Jolla Bank; DOES 1 through 50, inclusive, Defendants.
ORDER DENYING MOTION TO DISMISS AND GRANTING MOTION FOR SUMMARY JUDGMENT
LARRY ALAN BURNS, District Judge.
Reza Jafari and First American Title Insurance Company brought this suit against the Federal Deposit Insurance Corporation (FDIC), in its capacity as receiver (FDIC-R), relating to Jafari's home purchase gone awry. The FDIC-R has filed a motion to dismiss for lack of jurisdiction or, in the alternative, summary judgment. (Docket no. 110.)
I. Factual Background
A. La Jolla Bank Loan
In December 2007 La Jolla Bank made a $2.45 million construction loan to ALB Properties, LLC for construction of a home located at 14747 Roxbury Terrace, Rancho Santa Fe, California. The loan was secured by a deed of trust and a personal guarantee from ALB's managing member, Birger Bacino. The deed of trust was a second lien on the property, behind a first deed of trust held by Chevy Chase Bank.
B. Default and Bankruptcy
In 2009 Bacino began defaulting on loans, including the La Jolla Bank loan. In December 2009, Bacino and ALB filed separate Chapter 7 bankruptcy petitions. On February 19, 2010, the Office of Thrift Supervision closed La Jolla Bank and appointed the FDIC as its receiver.
C. Proposed Short Sale of the Roxbury Terrace Property to Jafari
In September 2011, Jafari entered into an agreement with Bacino to purchase the Roxbury Terrace property for $4.475 million. The proposed purchase price would not pay off Chevy Chase Bank as the first lienholder (which was owed more than $7.7 million), the FDIC-R (which was owed $3.36 million), or several third parties that had filed mechanic's liens. Thus, it was a "short sale."
D. The FDIC-R's September 8, 2011 Letter
The FDIC-R sent a letter addressed to Bacino in connection with the proposed short sale. The letter confirmed that the FDIC-R would accept $135, 000 for the release of its lien on the Roxbury Terrace property, subject to several conditions. The conditions required:
Bacino and ALB to sign and return the letter, and thereby acknowledge that the FDIC-R was not waiving its rights against them;
Bacino and ALB to provide opinion letters from their bankruptcy counsel stating that the FDIC-R's release of the collateral didn't require approval of the bankruptcy court and that the loan agreement and guarantee would remain effective against them in subsequent litigation;
An October 1, 2011 deadline for the FDIC-R's release of the collateral;
That the opinion letters and signatures be provided to the FDIC-R prior to the October 1, 2011 deadline; and
All parties to sign the letter for it to be effective.
It explained "each of the representations, warranties, terms and conditions set forth in this letter are material inducements to the FDIC-R to enter into the agreement evidenced by this Letter."
E. September 23, 2011 Closing
While Bacino signed the letter, ALB didn't. Additionally, Bacino and ALB didn't provide the required opinion letters to the FDIC-R. Thus, the FDIC-R did not release its lien or reconvey its deed of trust for the Roxbury Terrace property. Nonetheless, on September 23, 2011, Bacino, Jafari, Heritage Escrow Company, and First American closed the sale, with Heritage serving as the escrow agent and First American issuing title insurance to Jafari. While First American had received the FDIC-R's letter before the September 23, 2011 closing, it didn't confirm that the letter's requirements had been met.
F. Jafari's Administrative Claim and Subsequent Litigation
On September 26, 2011, the FDIC-R's servicing agent received notice of a $135, 000 wire from First American. The FDIC-R rejected the proposed payment, and advised Heritage that the conditions required to release its security interest hadn't yet occurred and, therefore, it wouldn't release the security interest on the property. All of the other lenders, including Chevy Chase Bank, accepted the tendered funds and reconveyed their liens. Thus, the FDIC-R's lien was elevated to a first priority position. On April 2, 2012, the FDIC-R recorded a notice of default on the Roxbury Terrace property.
On May 21, 2012, Jafari submitted a Proof of Claim through the FDIC's administrative process alleging breach of contract, unjust enrichment, rescission, and equitable subrogation. The FDIC-R disallowed the claim. On August 1, 2012, the FDIC-R published a notice of sale as to the Roxbury Terrace Property, and Jafari sued to enjoin foreclosure. On August 27, 2012, after the Court denied Jafari's request for injunctive relief, First American paid the FDIC-R $3, 649, 067, representing the outstanding balance on ALB's note.
After First American paid off ALB's note, Jafari added First American as a plaintiff and Plaintiffs filed their First Amended Complaint (FAC). (Docket no. 46.) The FAC is premised on the FDIC-R's September 8, 2011 letter and contends Jafari is an intended third party beneficiary of the letter. The FDIC-R moved to dismiss the FAC, contending that the claims of First American must be dismissed because it hadn't gone through the FDIC's administrative claims process. (Docket no. 48.) The Court denied the motion, explaining that First American and Jafari stand in the same shoes because First American was the force behind Jafari's claims from the ...