Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_14-cv-02373/USCOURTS-cand-4_14-cv-02373-10/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Fraud

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

KRISTINE BARNES,

Plaintiff,

v.

RICK MORTELL, et al.,

Defendants.

Case No. 4:14-cv-02373-KAW 

ORDER GRANTING WELLS FARGO'S 

MOTION TO INTERVENE AND FILE 

MOTION TO EXPUNGE LIS PENDENS

Re: Dkt. No. 113

On May 22, 2014, Plaintiff Kristine Barnes recorded a notice of lis pendens on 

Defendants’ real property located at 110 South Veilwood Circle, The Woodlands, Texas (“Subject 

Property”), in connection with this lawsuit. (Req. for Judicial Not., “RJN,” Dkt. No. 114, Ex. A.)

Upon review of the moving papers, the Court finds this matter suitable for resolution 

without oral argument pursuant to Civil Local Rule 7-1(b), and, for the reasons set forth below, 

GRANTS Proposed Intervenor Wells Fargo’s motion to intervene.

I. BACKGROUND

On May 22, 2014, Plaintiff Kristine Barnes filed this action for fraud and to void her 

contract in connection with her attempted purchase of two condominiums in Honduras that she 

claims were never built and was instead a scheme to defraud buyers. (Compl., Dkt. No. 1.) 

Plaintiff named Defendants Rick Mortell (a.k.a. Eric Mortell), Darlene Mortell, Erika Mortell, Bay 

Islands Enterprises Inc., and Bay Islands Enterprises Investments S.A. DE C.V. (a.k.a. Viva 

Roatan Resort and Viva Wyndham Resort). Id. Plaintiff claims that she learned of the alleged 

fraud and breach of contract in the summer of 2012, when she discovered that the title company 

she used to facilitate the purchase was not a legitimate title company. (Compl. ¶ 16.)

On May 22, 2014, Plaintiff recorded a notice of lis pendens on Defendants’ real property 

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located at 110 South Veilwood Circle, The Woodlands, Texas (“Subject Property”). (Req. for 

Judicial Not., “RJN,” Dkt. No. 114, Ex. A.)

On September 28, 2015, Plaintiff filed a notice of settlement. On January 19, 2016, the 

parties filed a joint status report stating that they expected to file a dismissal within 120 days. 

(Dkt. No. 103.) No dismissal was filed. On September 27, 2016, Plaintiff filed a status report to 

notify the Court that the parties’ attempts to perform the conditions of settlement, which required 

the sale of the subject property, had not occurred due to the collapse of the housing market in 

Houston, Texas. (Pl.’s Status Report, Dkt. 110 at 1.) Plaintiff also informed the undersigned that 

Wells Fargo was initiating foreclosure proceedings in Texas because Defendants had defaulted on 

their first lien mortgage. Id.

On November 21, 2016, Proposed Intervenor Wells Fargo Bank, N.A. filed a motion to 

intervene and to file a motion to expunge the lis pendens, which it contends was improperly 

recorded. (Mot., Dkt. No. 113-1.) On December 5, 2016, Plaintiff filed an opposition. (Pl.’s 

Opp’n, Dkt. No. 116.) On December 12, 2016, Wells Fargo filed a reply. (Reply, Dkt. No. 118.)

II. LEGAL STANDARD

A. Motion to Intervene

Federal Rule of Civil Procedure 24(a)(2) provides for intervention as a matter of right 

where the potential intervenor “claims an interest relating to the property or transaction that is the 

subject of the action, and is so situated that disposing of the action may as a practical matter 

impair or impede the movant's ability to protect its interest, unless existing parties adequately 

represent that interest.” The Ninth Circuit has summarized the requirements for intervention as of 

right under Rule 24(a)(2) as follows:

(1) [T]he [applicant's] motion must be timely; (2) the applicant must 

have a “significantly protectable” interest relating to the property or 

transaction which is the subject of the action; (3) the applicant must 

be so situated that the disposition of the action may as a practical 

matter impair or impede its ability to protect that interest; and (4) the 

applicant's interest must be inadequately represented by the parties 

to the action.

Freedom from Religion Found., Inc. v. Geithner, 644 F.3d 836, 841 (9th Cir. 2011) (quoting 

California ex rel. Lockyer v. United States, 450 F.3d 436, 440 (9th Cir. 2006)). Proposed 

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intervenors must satisfy all four criteria, and the “[f]ailure to satisfy any one of the requirements is 

fatal to the application.” Perry v. Proposition 8 Official Proponents, 587 F.3d 947, 950 (9th Cir. 

2009). In evaluating motions to intervene, “courts are guided primarily by practical and equitable 

considerations, and the requirements for intervention are broadly interpreted in favor of 

intervention.” United States v. Alisal Water Corp., 370 F.3d 915, 919 (9th Cir. 2004). “Courts are 

to take all well-pleaded, nonconclusory allegations in the motion to intervene, the proposed 

complaint or answer in intervention, and declarations supporting the motion as true absent sham, 

frivolity or other objections.” Sw. Ctr. for Biological Diversity v. Berg, 268 F.3d 810, 820 (9th Cir. 

2001).

Alternatively, the court has discretion to grant an applicant’s request for permissive 

intervention. Under Federal Rule of Civil Procedure 24(b), “on a timely motion, the court may 

permit anyone to intervene who . . . has a claim or defense that shares with the main action a 

common question of law or fact.” Permissive intervention under Rule 24(b) requires an applicant 

to “prove that it meets three threshold requirements: (1) it shares a common question of law or fact 

with the main action; (2) its motion is timely; and (3) the court has an independent basis for 

jurisdiction.” Donnelly v. Glickman, 159 F.3d 405, 412 (9th Cir. 1998). If these threshold 

requirements are all met, the court has discretion to permit or deny intervention under Rule 24(b). 

“[I]n exercising its discretion, the court is to consider ‘whether the intervention will unduly delay 

or prejudice the adjudication of the rights of the original parties.’” Kootenai Tribe of Idaho v. 

Veneman, 313 F.3d 1094, 1128 n. 10 (9th Cir. 2002) (quoting Fed. R. Civ. P. 24(b)(2)).

B. Request for Judicial Notice

As a general rule, a district court may not consider any material beyond the pleadings in 

ruling on a motion. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). A district court 

may take notice of facts not subject to reasonable dispute that are “capable of accurate and ready 

determination by resort to sources whose accuracy cannot reasonably be questioned.” Fed. R. 

Evid. 201(b); United States v. Bernal–Obeso, 989 F.2d 331, 333 (9th Cir. 1993). “[A] court may 

take judicial notice of ‘matters of public record,’” Lee, 250 F.3d at 689 (citing Mack v. S. Bay Beer 

Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986)), and may also consider “documents whose contents 

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are alleged in a complaint and whose authenticity no party questions, but which are not physically 

attached to the pleading.” Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled on other 

grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002). The court need not 

accept as true allegations that contradict facts which may be judicially noticed. See Mullis v. 

United States Bankruptcy Ct., 828 F.2d 1385, 1388 (9th Cir. 1987).

III. DISCUSSION

A. Request for Judicial Notice

As a preliminary matter, Wells Fargo asks that the Court take judicial notice of five 

documents in support of its motion to intervene: A) Notice of Lis Pendens, dated May 22, 2014, 

and recorded in the County of Montgomery, Texas, as document number 2014048714; B) General 

Warranty deed with third party vendor’s lien, recorded on March 28, 2007, in the County of 

Montgomery, Texas, as document number 200741251; C) Deed of Trust in favor of World 

Savings Bank, recorded on April 23, 2007 in the County of Montgomery, Texas, as document 

number 2007041252; D) 2006 Federal Reserve order approving Wachovia’s acquisition of Golden 

West Financial; and E) 2008 Federal Reserve order approving Wells Fargo’s acquisition of 

Wachovia. (Req. for Judicial Notice, “RJN,” Dkt. No. 114.) 

Plaintiff does not oppose the request for judicial notice. 

Exhibits A through E are true and correct copies of official public records, whose 

authenticity is capable of accurate and ready determination by resort to sources whose accuracy 

cannot reasonably be questioned. See Fed. R. Evid. 201(b). 

Accordingly, the Court GRANTS Wells Fargo’s request for judicial notice.

B. Motion to Intervene

Wells Fargo seeks to intervene as a matter of right pursuant to Rule 24(a), so the Court 

need not address permissive intervention.

i. Timeliness

Plaintiff argues that Proposed Intervenor’s motion is untimely. (Pl.’s Opp’n at 3). 

Specifically, Plaintiff argues that the case is settled, and the parties would be prejudiced because 

“the plaintiff[,] in any further negotiation[,] would demand greater security from the defendants if 

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there was a perception that Wells Fargo Bank could be successful in attacking the plaintiff’s claim 

of ownership and interest in the property.” (Pl.’s Opp’n at 4.) Plaintiff argues that Wells Fargo’s 

intervention, and presumably the expunging of the lis pendens, would force the case to be tried. Id. 

These arguments are unavailing.

The determination as to whether a motion to intervene is timely is left to the court’s 

discretion. Dilks v. Aloha Airlines, 642 F.2d 1155, 1156 (9th Cir. 1981); Alisal, 370 F.3d at 921.

Courts weigh three factors in determining whether a motion to intervene is timely: “(1) the stage 

of the proceeding at which an applicant seeks to intervene; (2) the prejudice to other parties; and 

(3) the reason for and length of the delay.” Cal. Dep't of Toxic Substances Control v. Commercial 

Realty Projects, Inc., 309 F.3d 1113, 1119 (9th Cir. 2002).

First, while there is a pending settlement, more than a year has passed since the notice of 

settlement was filed. This discounts Plaintiff’s argument that the proceedings are advanced, and, 

therefore, the Court assigns little weight to the existence of a settlement agreement. (See Pl.’s 

Opp’n at 4.) Indeed, Defendants have spent over a year attempting to sell the subject property to 

obtain the proceeds to pay the settlement, but have been unsuccessful. Plaintiff’s previously 

reported that “[i]t [did] not appear possible to file a settlement without resulting in the discharge of 

the Lis Pendens,” which would enable Wells Fargo to sell the home. (Pl.’s Status Report, Dkt. 110 

at 1-2.)

Second, any claim of prejudice to the parties based on Plaintiff’s demand for “greater 

security” from Defendants is not persuasive. While the settlement may not be finalized and the 

case disposed of due to the unavailability of sale proceeds or other guarantees is a function of 

Defendant’s actions. The proposed intervention itself did not cause this situation nor did the 

timing thereof. Rather, the Mortells’ decision to default on their mortgage is the source of any 

potential prejudice. Thus, the Court assigns little weight to this factor. 

Third, Wells Fargo argues that the length of delay was reasonable under the circumstances. 

(Mot. at 8.) Wells Fargo discovered this lawsuit in May 2015 when it ran a title search in 

preparation for its foreclosure proceedings on the Subject Property. (Mot. at 8.) Wells Fargo 

retained counsel to intervene and discovered that the parties had entered into a settlement 

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agreement wherein the property would be marketed and sold. Id. Wells Fargo expected the lien to 

be paid off in full from the sale, but the property did not sell and the mortgage continued to be in 

arrears. Id. In its reply, Wells Fargo contends that it is now clear that the parties will be unable to 

sell the property and that it can no longer rely on the purported terms of a settlement that it was 

never a party to. (Reply at 3.) The Court agrees that the delay was reasonable under the 

circumstances. Wells Fargo relied on the pending settlement, because the parties recognized it as 

priority lienholder, and it expected the lien to be satisfied upon the sale of the property. Since the 

property remains unsold and in the possession of the Mortells, who have defaulted on their 

mortgage loan, the Court finds that Wells Fargo’s reliance on the settlement terms as a reason for 

delay was reasonable.

In light of the foregoing, the Court concludes that Proposed Intervenor’s motion is timely

under the circumstances.

ii. Protectable Interest

“Rule 24(a)(2) does not require a specific legal or equitable interest,” and it is “generally 

enough that the interest is protectable under some law, and that there is a relationship between the 

legally protected interest and the claims at issue.” Wilderness Soc'y v. U.S. Forest Serv., 630 F.3d 

1173, 1179 (9th Cir. 2011) (citations omitted). The relationship requirement is met “if the 

resolution of the plaintiff’s claims actually will affect the applicant.” Donnelly, 159 F.3d at 410. 

The “interest” test is not a clear-cut or bright-line rule, because “[n]o specific legal or equitable 

interest need be established.” Greene v. United States, 996 F.2d 973, 976 (9th Cir. 1993). Instead, 

the “interest” test directs courts to make a “practical, threshold inquiry,” and “is primarily a 

practical guide to disposing of lawsuits by involving as many apparently concerned persons as is 

compatible with efficiency and due process.” Id.; County of Fresno v. Andrus, 622 F.2d 436, 438 

(9th Cir. 1980) (internal quotation marks and citation omitted). 

Proposed Intervenor contends that it has a “legally protectable interests” as the successor in 

interest to a deed of trust on the Subject Property. (Mot. at 9.) Wells Fargo cites Sullivan v. 

Quality Loan Serv. Corp., which held that the bank, which had directed that the property be sold at 

a non-judicial foreclosure sale, had a significant protectable interest in the property that was 

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protected by law and related to the plaintiff’s claim. See Sullivan v. Quality Loan Serv. Corp., 

2011 WL 124280, at *4 (D. Idaho Jan. 11, 2011)(citing United States v. City of Los Angeles, 288 

F.3d 391, 398 (9th Cir. 2002)). Here, while Sullivan involved a borrower plaintiff seeking to 

dissolve of a lien by quitclaim, the resolution of Plaintiff’s claims by settlement would affect 

Wells Fargo’s interest in the property, as it would impedes the non-judicial foreclosure action 

pending in Texas.

Thus, Wells Fargo has a sufficient legally protectable interest to support intervention.

iii. Impairment of Interests 

Rule 24(a)(2) requires that the party seeking intervention is “so situated that disposing of 

the action may as a practical matter impair or impede the movant’s ability to protect its interest.” 

The Ninth Circuit has followed the guidance of Rule 24 advisory committee notes in holding that 

“[i]f an absentee would be substantially affected in a practical sense by the determination made in 

an action, he should, as a general rule, be entitled to intervene.” Berg, 268 F.3d at 822.

Proposed Intervenor contends that the allegedly improper lis pendens clouds title to the 

subject property, which impedes its right and ability to sell the property at a rate that will satisfy 

the amount of Defendant’s default. (Mot. at 9; Reply at 4.) In opposition, Plaintiff argues that 

Wells Fargo is not prejudiced, because there is sufficient equity in the property to pay off the 

mortgage. (Pl.’s Opp’n at 4.) Plaintiff’s claim, however, that there is sufficient equity to satisfy 

the mortgage and the arrearage is merely speculative given that the property has been listed for 

sale for more than one year, and has had several price reductions.

Accordingly, the Court is persuaded that the disposition of this action may impair or 

impede Wells Fargo’s ability to protect its rights, and finds that this requirement for intervention is 

satisfied.

iv. Interests Inadequately Represented by the Parties

“The burden of showing inadequacy of representation is ‘minimal’ and satisfied if the 

applicant can demonstrate that representation of its interests ‘may be’ inadequate.” Citizens for 

Balanced Use v. Mont. Wilderness Ass’n, 647 F.3d 893, 898 (9th Cir. 2011) (quoting Arakaki v. 

Cayetano, 324 F.3d 1078, 1086 (9th Cir. 2003)). Three factors are examined to evaluate adequacy 

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of representation: (1) whether the interest of a present party is such that it will “undoubtedly” 

make all of a proposed intervenor’s arguments; (2) whether the present party is “capable and 

willing” to make such arguments; and (3) whether a proposed intervenor would offer any 

“necessary elements” to the proceeding that other parties would neglect. Id.

Wells Fargo contends that none of the existing parties will protect its lien rights. (Mot. at 

11.) Specifically, Plaintiff has no interest in upholding Wells Fargo’s liens on the Property, and 

Defendants are “purported fraudsters,” who have no stake in protecting Wells Fargo’s rights and 

have defaulted on their mortgage, and continue to live rent free on the Subject Property. Id.

Indeed, Wells Fargo’s lien is ever increasing due to the Mortells’ default, and the parties’

actions, which included Plaintiff asking the Court to assist in finding “a way to file a settlement 

but retain the lis pendens” to prevent Wells Fargo from exercising their lien right to sell the home 

at foreclosure (Dkt. No. 110), make it clear that Wells Fargo’s interests are not adequately 

represented by the parties.

Accordingly, the Court finds that the fourth element for intervention as of right is satisfied.

IV. CONCLUSION

In light of the foregoing, the Court finds that Wells Fargo has met the requirements for 

intervention as a matter of right, and GRANTS the motion to intervene, such that Wells Fargo 

may participate as an interested party. Wells Fargo is granted leave to file its motion to expunge 

lis pendens, and shall do so within 14 days of this order.

In light of the above, the Court recommends that the parties meet and confer regarding a 

possible informal resolution to this matter. The Court will set a case management conference after 

the forthcoming motion to expunge is resolved.

IT IS SO ORDERED.

Dated: January 10, 2017

__________________________________

KANDIS A. WESTMORE

United States Magistrate Judge

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