Federal Deposit Insurance Corporation v. Lamarsh Financial Inc et al

Filing 75

ORDER by Judge David O. Carter: GRANTING 68 Motion for Default Judgment. (See document for details.) (rla)

UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA

FEDERAL DEPOSIT INSURANCE
CORPORATION
Plaintiff(s),

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v.
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LAMARSH FINANCIAL INC, et al. )
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Defendant(s).
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_________________________________ )

O
JS-6

CASE NO. SACV 10-0872 DOC
(PJWx)

O R D E R GRANTING DEFAULT
JUDGMENT

Before the Court is a Motion for Default Judgment (“Motion”) filed by Federal
Deposit Insurance Corporation (“FDIC”) requesting that the Court enter default judgment
against Defendants Lamarsh Financial, Inc. (“Lamarsh Financial”); Linda Mate (“Mate”);
Eric Wexelman (“Wexelman”); Brisa Arenas (“Arenas”); Britten Kimbell (“Kimbell”);
Yacou Lazar (“Lazar”); Rashel Saralan (“Saralan”) (collectively, “Defendants”) in the
above-captioned case (Docket 68). After considering the moving papers and [oral
argument], and for the reasons described below, the Court hereby GRANTS the Motion.
I. Background
Plaintiff alleges that Lamarsh Financial, in conjunction with real estate
professionals and individual borrowers, fraudulently obtained loans from Downey

Savings and Loan Association, F.A. (“Downey”). The FDIC, as appointed receiver for
Downey, now seeks damages to recover on claims of (1) breach of written contract, (2)
professional negligence, (3) negligent misrepresentation, and (4). Complaint, ¶ 3.
Plaintiff first alleges that Arenas, Lamarsh Financial, Mate, and Zeny Lamarsh,
Lamarsh Financial’s alleged alter ego (“Z. Lamarsh”), submitted a fraudulent written
loan application to Downey. Complaint, ¶ 14, 20. Lamarsh Financial, Z. Lamarsh, and
Mate allegedly represented that Arenas earned a certain monthly income as a loan officer
at a mortgage company. Id. at ¶ 15. In reliance on these representations, Downey made a
refinance loan to Arenas for $318,000. Id. at ¶ 14. On July 10, 2008, Arenas allegedly
defaulted on the loan payments, which ultimately resulted in an alleged loss of $224,000.
Id. at ¶ 18, 21.
The facts are similar for the other loans at issue. Downey made a refinance loan in
the amount of $436,00 to Kimbell and Chris Wells (“Wells”), a previous defendant. Id. at
¶ 31. The Kimbell/Wells loan was allegedly induced by fraudulent statements from
Kimbell, Wells, Lamarsh Financial, Z. Lamarsh, and Wexelman. Id. at ¶ 32. On January
22, 2008, Kimbell and Wells allegedly defaulted on their loan payments, resulting in a
loss of $301,00. Id. at ¶ 35, 38.
Similarly, Downey allegedly made a refinance loan to Lazar in the amount of
$448,000 based on material misrepresentations by Lazar, Lamarsh Financial, Z. Lamarsh,
and Sam David (initially incorrectly named as Benis Lazar). Id. at ¶ 39. On June 16,
2008, Lazar allegedly defaulted on his loan payments, resulting in a loss of $239,000 to
Downey. Id. at ¶ 46.

Finally, Downey made a refinance loan to Saralan in the amount of $396,000
based on alleged fraudulent misrepresentations by Saralan, Lamarsh Financial, Z.
Lamarsh and Sam David (“David”). Id. at ¶ 47. On July 5, 2008, Saralan defaulted on
payments, allegedly resulting in a loss of $288,000. Id. at ¶ 53, 56.
II. Legal Standard
Federal Rule of Civil Procedure 55 provides that the Court may, in its discretion,
order default judgment following the entry of default by the Clerk. Fed. R. Civ. P. 55(b).
Local Rule 55 sets forth procedural requirements that must be satisfied by a party moving
for default judgment. Upon entry of default, the well-pleaded allegations of the complaint
are taken as true, with the exception of allegations concerning the amount of damages.
See, e.g., Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977). However,
“necessary facts not contained in the pleading, and claims which are legally insufficient,
are not established by default.” Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267
(9th Cir. 1992). Where the pleadings are insufficient, the Court may require the moving
party to produce evidence in support of the motion for default judgment. See TeleVideo
Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987).
III. Discussion
A. Procedural Requirements
The Court begins by determining whether Plaintiff has complied with the
applicable procedural requirements. The Court finds that Plaintiff has fulfilled its
obligations under Fed. R. Civ. P. 55(a) and Local Rules 55-1 and 55-2 with respect to the
entry of default judgment. Specifically, Plaintiff has identified the Defendants against
whom the default is sought and have established that the clerk of the court entered a

default against them (Docket 58 – Lamarsh Financial, Docket 28 – Arenas, Mate,
Saralan, Wexelman, Docket 62 – Kimbell, Docket 38 - Lazar). Plaintiff has attested that
none of the Defendants are infants or incompetent persons and that no Defendants are in
active military service. Decl. Wilcox, ¶ 3. Finally, Plaintiff has provided proof that
Defendants were served with the Notice of Motion for Default Judgment. Having
determined Plaintiff’s procedural compliance, the Court turns to the substance of
Plaintiff’s Motion.
B. Sufficiency of the Claim
1. Breach of Written Contract
The essential elements of a contract are: (1) the existence of a contract, (2) that
plaintiff performed or had an excuse for not performing the contract, (3) that defendants
breached the contract, and (4) that plaintiff was damaged. First Commercial Mortgage
Co., v. Reece, 89 Cal. App. 4th 731, 745 (2001). Here, Plaintiff sufficiently alleges each of
the four required elements for each of the Defendants.
2. Professional Negligence
A professional negligence claim requires: (1) the existence of a professional duty
to use such skill, prudence, and diligence as other members of the profession commonly
possess and exercise, (2) a breach of that duty, (3) a proximate causal connection between
the negligent conduct and resulting injury, and (4) actual loss or damage. Budd v. Nixen,
6 Cal. 3d. 195, 200 (1971). Here, Plaintiff has sufficiently alleged that Lamarsh
Financial, Mate, and Wexelman committed professional malpractice in their capacity as
mortgage professionals.
3. Negligent Misrepresentation

For a claim of negligent misrepresentation to succeed, a Plaintiff must allege: (1)
written misrepresentation of past or existing material fact, (2) without reasonable grounds
for believing the facts to be true, (3) with the intent to induce Plaintiff’s reliance, (4)
Plaintiff’s ignorance of the true facts and justifiable reliance on the misrepresentation,
and (5) resulting damages. Fox v. Pollack, 181 Cal. App. 3d 954, 962 (1986).
Here, the understated secured debt and/or overstated income were written
misrepresentations that Defendants had no grounds to believe were true and intended to
induce Downey’s reliance in regard to approving the loan applications. Downey had no
true knowledge of the facts and justifiably relied on such misrepresentations that
ultimately created financial losses that the FDIC is now seeking to recoup. These
allegations meet the heightened pleading requirements of Fed. R. Civ. P. 9(b).
4. Fraud
Under California law, claims of fraud require evidence of the following: (1) a
misrepresentation, (2) made with knowledge of the misrepresentation’s falsity, (3) and
with intent to defraud, (4) justifiable reliance by the Plaintiff, and (5) resulting damage.
Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal. App. 4th 226, 240
(2007). Plaintiff’s allegations meet the heightened pleading requirements of Fed. R. Civ.
P. 9(b) because it pleads with particularity the circumstances constituting the fraud and
why the fraudulent statements were, in fact, false.
C. The Court’s Discretion to Grant Default Judgment
Even where well-pleaded claims exist, the decision to enter a default judgment is
ultimately discretionary. Aldabe, 616 F.2d at 1092. In determining whether to exercise
their discretion to impose judgment by default, courts look to the following factors for

guidance: (1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff’s
substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake in
the action; (5) the possibility of a dispute concerning material facts; (6) whether the
default was due to excusable neglect; and (7) the strong policy underlying the Federal
Rules of Civil Procedure favoring decisions on the merits.” Eitel, 782 F.2d at 1471-72.
The Court considers these factors in turn.
1. The Possibility of Prejudice to Plaintiff
The first Eitel factor – possibility of prejudice to the plaintiff – strongly supports
the issuance of a default judgment. Without a default judgment, Plaintiff will not be able
to recoup the amounts owed to it by Defendants. The risk of harm posed by such a
scenario is obvious and weighs in favor of granting Plaintiff’s motion.
2. & 3. The Merits of Plaintiff’s Substantive Claims and the Sufficiency of the
Complaint
The second and third Eitel factors concern the merits of Plaintiff’s case and the
sufficiency of Plaintiff’s complaint. Courts commonly analyze these two factors
together. Pepsico, Inc. v. California Security Cans., 238 F. Supp. 2d 1172, 1175-76
(C.D. Cal. 2002). As discussed above, Plaintiff’s Complaint adequately demonstrates
the sufficiency of all four asserted claims: breach of written contract, professional
negligence, negligent misrepresentation, and fraud.
4. The Sum of Money at Stake
The fourth Eitel factor considers the amount of money at issue in the action. Here,
Plaintiff alleges that it lost approximately $1.4 million in principal as a result of
Defendants’ breaches. Plaintiff further requests prejudgment interest of $442,809.32.

The high value of the controversy counsels the Court to proceed with caution in
exercising its discretion to grant default judgment. However, in light of the significant
evidence of wrongdoing that Plaintiff presents, the significance of the amount in
controversy does not militate against granting default judgment on Plaintiff’s claims.
5. The Possibility of a Dispute Concerning Material Fact
With respect to the fifth factor, in light of Defendants’ wholesale failure to
respond to Plaintiff’s complaint, the likelihood of a dispute concerning material facts
developing appears to be minimal. Although former defendant Z. Lamarsh attempted to
file an answer on behalf of Lamarsh Financial in pro se, the Court entered an order
striking that First Amended Answer for failure to comply with Local Rule 83-2.10.1.
Since then, Lamarsh Financial has not responded to Plaintiff’s Complaint (Docket 56). In
any event, Plaintiff has provided substantial evidence in support of their allegations,
indicating that a true dispute on the facts would have been unlikely even if Defendants
had chosen to contest Plaintiff’s claims. This factor weighs in favor of default judgment.
6. Whether the Default Was Due to Excusable Neglect
No evidence exists to suggest that Defendants’ failure to respond resulted from
excusable neglect. This sixth Eitel factor thus supports the issuance of default judgment
7. The Strong Public Policy Favoring Decisions on the Merits
The final Eitel factor asks the Court to consider the strong public policy interest in
favor of determining cases on the merits. As always, evaluation of this factor militates
against default judgment. However, this general policy interest, standing alone, is not
enough to tip the balance in favor of denying Plaintiff’s Motion. Default judgment
remains appropriate.

D. Damages
Plaintiff seeks a total award of $1,458,312.00 in principal plus prejudgment
interest of $442,809.32. Cal. Civ. Code § 3300 provides that “[f]or the breach of an
obligation arising from contract, the measure of damages, except where otherwise
expressly provided by this Code, is the amount which will compensate the party
aggrieved for all the detriment proximately caused thereby, or which, in the ordinary
course of things, would be likely to result therefrom.” In addition, breach of contract
damages must be “clearly ascertainable in both their nature and origin.” Cal. Civ. Code §
3301. Plaintiff has plausibly alleged that Downey would not have entered into the
Arenas loan, the Kimbell loan, the Lazar loan, or the Saralan loan had the Defendants not
misrepresented the facts described above. Accordingly, Plaintiff is entitled to damages
equal to the amount of money that Downey lost as a result of these loans, which is a total
of $1,458,312.00. Pursuant to Cal. Civ. Code § 3287, Plaintiff is also entitled to
prejudgment interest. Plaintiff accordingly requests that prejudgment interest be charged
in the amount of $428,894.84. The requested total of prejudgment interest reflects an
interest rate of 10% per annum, which is the default rate under Cal. Civ. Code § 3289.
Plaintiff’s damages request against Defendants shall be GRANTED for the amounts
stated below:
First, Lamarsh Financial Inc. is liable for the following amounts:
Principal of $1,458,312
Prejudgment interest of $442,809.32

Second, Linda Mate is jointly and severally liable with Lamarsh Financial for the
following amounts, which are already included as part of the judgment against Lamarsh
Financial, Inc. hereinabove:
Principal of $224,818.00
Prejudgment interest of $62,025.13
Third, Eric Wexelman is jointly and severally liable with Lamarsh Financial for
the following amounts, which are already included as part of the judgment against
Lamarsh Financial, Inc. hereinabove:
Principal of $301,871.00
Prejudgment interest of $97,756.58
Fourth, Brisa Arenas is jointly and severally liable with Lamarsh Financial for the
following amounts, which are already included as part of the judgment against Lamarsh
Financial, Inc. hereinabove:
Principal of $224,818.00
Prejudgment interest of $62,025.13
Fifth, Britten Kimbell is jointly and severally liable with Lamarsh Financial for the
following amounts, which are already included as part of the judgment against Lamarsh
Financial, Inc. hereinabove:
Principal of $301,871.00
Prejudgment interest of $97,756.58
Sixth, Yacou Lazar is jointly and severally liable with Lamarsh Financial for the
following amounts, which are already included as part of the judgment against Lamarsh
Financial, Inc. hereinabove:

Principal of $216,865.00
Prejudgment interest of $61,375.76
Seventh, Rashel Saralan is jointly and severally liable with Lamarsh Financial for
the following amounts, which are already included as part of the judgment against
Lamarsh Financial, Inc. hereinabove:
Principal of $288,092.00
Prejudgment interest of $78,455.73
E. Attorneys’ Fees and Costs
Local Rule 55-4 establishes a schedule of attorneys’ fees for default judgments.
Pursuant to the Brokerage Agreement, the FDIC, as Receiver for Downey, is entitled to
reasonable attorneys’ fees. Plaintiff’s request for attorneys’ fees in the amount of $41,622
is hereby GRANTED.
IV. Disposition
For the foregoing reasons, Plaintiff’s Motion is hereby GRANTED.

IT IS SO ORDERED.
DATED: September 26, 2011

_______________________________
DAVID O. CARTER
United States District Judge