Grace Foundation lawsuit details

The Grace Foundation, an El Dorado Hills animal rescue non-profit, is seeking up to $20 million from the Bank of America and Wells Fargo Bank, Orange County attorney Tim Ryan, who represents the banks and the owner of a Susanville ranch in a lawsuit filed on July 6.

In November, 2011, the Mountain Democrat reported Grace Foundation Director Beth DeCaprio lamenting “Peanut,” a three-year-old filly who died of liver damage with a belly full of dirt, likely from scavenging toxic plants while battling starvation at the Whispering Pines ranch in Susanville.

She wondered how many more of the Susanville horses would come down with liver problems, and if the 19 confirmed pregnancies, many too small, or too young to breed safely, would be impacted.

She also wondered how the organization would cover the cost of caring for the fillies, many too young to safely breed, plus their soon-to-be born and likely-to-struggle offspring.

Despite the addition of birthing stalls and cameras that allowed volunteers to monitor the foals from the comfort of an RV parked nearby, the normally joyous foaling season at the foundation ranch became a sleep-deprived deathwatch, said DeCaprio.

The emotional cost to the volunteers of seeing their charges die in their care, many of birth complications, has been agonizing to the animal-loving organization, she added.

The financial burden, coupled with the banks’ unwillingness to meet her settlement terms left DeCaprio no choice, she said, but to file the lawsuit seeking up to $20 million from those she claims asked the foundation to take the horses, despite a bankruptcy filing that prevented the foundation from legal ownership of the horses, a requirement for terminating high-risk pregnancies in mares, gelding stallions, and ultimately, adoption.

Orange County attorney Tim Ryan, who represents Well Fargo and Bank of America, earned DeCaprio’s trust early on, sharing her outrage over conditions at Whispering Pines, and attending legal proceedings in distant Lassen County, acting on what she assumed was the foundation’s behalf and, gradually, assuming the role of Grace Foundation legal counsel, she said.

But no such agreement was ever signed, said DeCaprio, adding that Ryan never informed her of any potential conflict of interest. She now contends that he was serving his bank clients at the foundation’s expense.

Her most powerful allegations are that Ryan failed to disclose the federal bankruptcy stay on Bennett’s property, which trumped a subsequent superior court order releasing the horses, and later failed to notify the bankruptcy court of the transfer.

In e-mails to the Mountain Democrat, Ryan, who’s facing fraud and malpractice charges in the foundation lawsuit, denied the conflict of interest allegation, but reserved any further response for his legal defense.

The bankruptcy court appointed Susanville real estate agent Vicki Lozano as receiver in July, charged with overseeing the disposition of the ranch assets. DeCaprio alleges that Ryan manipulated Lozano into releasing the horses illegally.

DeCaprio said she’s asked the Attorney General to investigate, and expects charges to be filed. She worried that Lozano and former Ryan associate Austin Beardsley, “both of whom got caught in his lies,” will be implicated.

In what may be a key legal point, DeCaprio claims that the receiver and the banks, though Ryan, asked the foundation to take the remaining 36 horses in August, using Lassen as an intermediary, a normal and routine rescue practice in counties that lack sufficient horse boarding facilities, she said.

Ryan told the Mountain Democrat that Lassen County’s Deputy Director of Public Works, Pete Heimbigner “contacted Grace about the remaining horses,” after which “Grace contacted the court-appointed receiver …  At no time did the banks ask Grace to take the horses.”

By way of confirmation, he points to a May 6 foundation fundraising e-mail that chronicles the case and states, “The Grace Foundation was then asked by the receiver and Lassen County officials to take custody of the horses.”

DeCaprio countered, “Heimbigner called us … but only to make sure it was OK to give the receiver and Mr. Ryan our number.”

A $40,000 bank grant that accompanied the transfer was precipitated by a flurry of phone calls and e-mails between bank representatives and the foundation that create a clear paper trail demonstrating that it was the banks, not the county, that initiated the transfer, she said. “There were a ton of questions, and a bunch of e-mails and they weren’t about Lassen County.”

The lawsuit chronicles the ensuing 10 months, which a foundation press release calls “a trail of lies and deceit perpetrated by the banks and their legal intermediary in a zealous rush to increase their foreclosure assets.”

The chronology includes Bennett filing for bankruptcy protection on Aug. 18, 2011, activating an “automatic stay,” which blocks creditors from seizing property. The lawsuit further alleges Ryan was present at a Superior Court proceeding the following morning where the stay was openly discussed.

Later the same day, Ryan met with DeCaprio, Lozano and Heimbigner to plan the removal of the horses, but failed to disclose the bankruptcy stay, according to DeCaprio.

The lawsuit also alleges that Ryan subsequently failed to notify the bankruptcy court, which was ruling on the disposition of the horses, that the receiver, “without legal authority, had already turned the horses over to Grace via Lassen County on Aug. 26 under the false pretense that Grace was now the ‘owner’ of the horses.”

“The lawsuit’s factual allegation is demonstrably inaccurate,” said Ryan. “We were honest with the bankruptcy court in every respect. I have never been dishonest with a judicial officer. Ever.”

“The order to release the animals to the County of Lassen was entered on July 29, 2011, three weeks prior to the bankruptcy,” Ryan continued.

DeCaprio countered, “He knows that federal (bankruptcy court) trumps state (Superior Court). Once the stay was invoked we should have been called off. He just wanted those horses out of there.”

All parties agreed that the foundation would take possession of the horses on Aug. 26, according to the lawsuit, which continues, “Everyone, including Ryan, also agreed that ownership of the subject horses would be conveyed to Grace immediately upon transfer.”

The banks’ $40,000 donation was based on the foundation being allowed to abort potentially disastrous pregnancies, and adopt any healthy Susanville horses quickly, said DeCaprio. It also assumed, falsely, that Lassen County would honor their end of the bargain, a $10,000 donation, according to the lawsuit.

Lassen County has since been sued by Bennett, who’s seeking $3.9 million for the “total destruction of his business,” according to the Lassen Times.

The bankruptcy court declared the horses abandoned on Jan. 3, 2012, but the foundation still has no ownership documents, another outcome that DeCaprio blames on Ryan, who failed to put a lien on the horses, she said.

As a result, ownership of the abandoned horses reverts to Bennett, she continued. Bennett, however, still faced animal cruelty charges, and is not allowed to own horses. “We wouldn’t give them to him anyway,” said DeCaprio.

Despite being $400,000 in debt, DeCaprio remains steadfast in her commitment to preventing the Susanville horses from being returned to Bennett, who still faces 65 felony counts of abuse and neglect.

“I’m not allowed to give them away and we won’t give them back,” she said.

The foundation has created a fund to continue operations, care for the Susanville horses and keep them out of Bennett’s hands. The foundation Website, thegracefoundation.com, explains how to help out or learn more.