Grace Foundation reopening as horse lawsuits continue

“All we want to do is reopen,” said Beth DeCaprio, executive director of The Grace Foundation of Northern California.

The El Dorado Hills rescue group temporarily closed its programs, lessons, clinics and volunteer hours on Oct. 11, 2012. The January 2013 volunteer training was canceled. DeCaprio said the foundation has continued to care for all 250 animals at the ranch.

At the heart of the closure — money.

The Grace Foundation accepted custody of 20 abused and neglected horses from Whispering Pines Ranch near Susanville in April 2011. In August of that year, it took another 36. Many of the horses were pregnant mares. Some adults and foals have since died. Grace also accepted two goats, one donkey and two dogs from the ranch.

Since taking custody of the horses from Whispering Pines, Grace has received a total of $40,000 for their care, $20,000 each from Bank of America and Wells Fargo.

Without ownership of the horses, or a responsible party with authority, Grace has been unable to make the horses available for adoption or do some of the medical procedures the foundation would normally do. The question of who is responsible to pay Grace for care of the rescued animal has not been determined.

Ownership of the Susanville horses has been mired in a complex web of litigation: six lawsuits consolidated in the Superior Court of Lassen County, one of which has gone up on appeal to the U.S. Appellate Court, Third District; and a civil suit and countersuit being heard in Orange County Superior Court.

In the middle of all this litigation the Grace Foundation intends to reopen in February, according to DeCaprio. She has scheduled a work party at the ranch on Saturday, Jan. 19, from 9 a.m. to 1 p.m. and an open house from 1 to 2 p.m.

Grace Foundation was founded in 2003 by DeCaprio, who had years of experience with rescue animals. With the assistance of volunteers, the foundation provides critical care and rehabilitation for abused and neglected horses. Rescued horses are used in equine assisted-learning and therapeutic programs for youth and adults. Grace also rescues and rehabilitates dogs, cats, cows, sheep, goats, pigs, chickens and more.

The 600-acre ranch is located at 5800 Latigo Lane, west of Latrobe Road in El Dorado Hills, on property that MJM Properties donated for Grace’s use.

In the lead bankruptcy case in Lassen County Superior Court, Norman W. Allen vs. Summit Financial Group and others, the judge signed an order regarding temporary custody and care of horses and payment of court-appointed receiver on Dec. 15, 2012. In a consolidated case filed by Allen, Wells Fargo is the defendant. In a cross-complaint Wells Fargo and BAC Homes Loans Servicing filed against Allen and others.

The order states that Wells Fargo and Bank of America “have informed the court that they have identified a local rancher, David Schroeder, who is willing to take physical custody of and provide care for the August horses for a six-month period while the August horses’ owners come forward and/or while the August horses are adopted out. The court further understands that Bank of America and Wells Fargo are willing to make the necessary payments to Mr. Schroeder to allow for that six-month interim placement. Accordingly, the August horses shall be transferred from the Grace Foundation to Mr. Schroeder’s ranch pursuant to an agreement being proposed by Bank of America and Wells Fargo, and agreed to by Mr. Schroeder. The court understands that Wells Fargo and Bank of America sought out this arrangement with Mr. Schroeder upon their own voluntary initiative to protect the welfare of the horses. The Court’s approval of this voluntary arrangement does not impute ownership interest in the horses to the banks, nor does it obligate the banks to provide or pay for the care of the horses after the conclusion of this six-month interim placement period.”

The judge ordered that decisions regarding medical treatment of the horses be the responsibility of Schroeder’s veterinarian.

Jumana Bauwens, media relations with Bank of America Home Loans, said in a telephone interview on Jan. 11 that the bank had sent notice to Grace that Schroeder would come to Grace Foundation to pick up the horses.

A status conference regarding the August horses is scheduled for March 14 at 1 p.m. No mention is made of the April horses.

Grace’s response

The Grace Foundation’s website home page headlines, “Help Us Keep the Susanville Horses at Grace! The banks have refused our offer to keep the horses at Grace.”

In the Website newsletter, DeCaprio said, “Late Friday (Jan. 11), we received word that the banks had refused our offer to keep the horses at Grace and were planning on removing the horses from Grace next week.”

In addition to the Website, DeCaprio employed a vigorous media campaign.

DeCaprio said her offer to the banks (to care for the horses for the same amount that the banks agreed to pay Schroeder) “keeps the horses from a potentially life threatening move that risks the welfare and safety of the horses now and puts them in jeopardy of being euthanized in six months.”

Both the Website and Grace’s Facebook site carry calls to action. The Facebook page headlines a photo of the ranch entrance with the gate closed, and the caption, “Wells Fargo and Bank of America — How long will it take you to do the right thing?”

DeCaprio said she thinks Bank of America and Wells Fargo are the owners of the horses because the receiver worked for them. Bauwens said the banks’ interest was restricted to the real estate property. She also said that once Grace Foundation filed a lawsuit against the banks in July 2011 “all conversation ended.”

The Lassen County lawsuits

The ownership question arose from what first appeared to be an ordinary foreclosure of what was assumed by the mortgage servicer to be a thriving horse ranch operation in Susanville — a 40-acre spread called Whispering Pines Ranch. From the court records, it appears that Wells Fargo had given a loan to Norman Allen on a property adjacent to Whispering Pines, but with improvements on Whispering Pines as security. Apparently, through an error, the security improvements were not included in the real estate documents. Ultimately, there were several people involved in the ownership of the properties.

Dwight Allen Bennett lived on the Whispering Pines Ranch, along with some people who rented trailer space.

Timothy Ryan, principal in The Ryan Firm, in Irvine, was hired by BAC Home Loans Servicing, LP in 2004 to represent the company and Bank of America in litigation throughout California and to represent Bank of America in U.S. District Courts and U.S. Bankruptcy Courts in California. BAC was the servicer on the mortgage. It collected the payments and paid required taxes and insurance. If the mortgage were in default, BAC would institute foreclosure proceedings.

In an email, Ryan stated, “To clarify, no one retained me to do anything concerning the Grace Foundation. Our firm was retained to defend a lawsuit brought by Norman Allen in the Superior Court for the County of Lassen.”

At a hearing on Aug. 25, 2011, Timothy Ryan, told the bankruptcy court, “My bank’s got no dog in this fight. We don’t own that personal property (the horses). We thought there was an operating business at Whispering Pines. It turns out there is one boarded horse there. One. Everything else is a semi-feral herd that’s breeding and starving.”

DeCaprio and her veterinarian, Michael Russell, visited the ranch in April 2011. A statement by Russell in the bankruptcy court stated they had been contacted by Lassen Department of Public Works to evaluate the living conditions and health of animals identified for possible seizure by the department. DeCaprio submitted a full report to Lassen County Animal Control and recommended all the horses be removed. The receiver of the estate, Vicki Lozano, obtained an order allowing the receivership to release the horses to the county of Lassen which then released them to the custody of Grace Foundation.

It’s unclear who knew what when, but BAC attempted to foreclose on its interest in Whispering Pines after Bennett, who lived on the ranch, failed to make payments. Bennett claimed he had no mortgage with Wells Fargo. The default occurred in March 2009.

Just as the foreclosure was to take effect, Bennett filed for bankruptcy in August 2011. That would ordinarily mean an automatic stay; nothing could be done until the bankruptcy had been settled. It might have meant that Bennett retained possession of the horses. He claimed he donated the 20 horses in April, but wanted the August horses returned. In a hearing regarding his bankruptcy on Sept. 2, 2011, he responded to Judge McManus’s question, “Do you have the resources to feed the horses?” He told the Court, “Yes, sir. If I have the horses, I have the resources to feed them. I’m turning down rides every day. This is my busiest time of year. I average $10,000 a month on riding and training lessons.” He also said that the horses did not need any rehabilitation, and stated, “I love my horses. I take good care of my horses. They’re my business. There’s over $200,000 worth of horses.”

Judge McManus stated: “Automatic stay does not stop the exercise of police and regulatory powers. So if the county is the one who came onto the property and said these horses need care, and directed the turnover, then there’s nothing I can do about that.”

Bennett was arrested in Oct. 25, 2011, and charged with several counts of animal cruelty and one county of possession of a controlled substance.

In the Allen case, on Nov. 16, the judge “ordered termination of the automatic stay with respect to Bennett’s interest in the April and August horses.”

The bankruptcy judge found that Bennett had mismanaged the property and mismanaged the horses, leading to a diminution of the value of the ranch. He ordered Bennett to vacate the ranch and appointed a trustee to manage the property.

Bauwens said in a press release that she learned of Grace’s plight in the foundation’s May 2012 newsletter. Bank of America offered to make a donation of $200,000. Wells Fargo offered a similar donation. The combined $400,000 donations were offered in exchange for Grace agreeing to drop all claims against the banks and attorney Ryan. DeCaprio said she would have accepted the offers, but wanted to retain the right to pursue her claims against Ryan. Bauwens said if the bank failed to protect its outside counsel no one would want to work with the bank.

A Motion to Enforce Settlement Agreement filed by Evans Appraisal Services is set for hearing on Jan. 17.

The Orange County litigation

In July 2012 Grace’s lawyer, Stuart Leviton, the Leviton Law Group in Los Angeles, filed a lawsuit in El Dorado County Superior Court, Cameron Park, against Wells Fargo Bank, MLMI Trust Series, Bank of America, BAC Home Loans Servicing, Timothy Ryan, The Ryan Firm, Dwight Alan Bennett and Does 1 through 50. The complaint was for services rendered and charged fraud, breach of fiduciary duty and legal malpractice, and included a demand for a jury trial. Grace asked for $2 million in damages plus punitive and exemplary damages.

Ryan had visited the ranch and seen the conditions. Initially, he tried to help Grace. When their relationship deteriorated, Grace included Ryan in the lawsuit. As a defendant in the lawsuit, Ryan could no longer represent Back of America. On Oct. 31 2102,, the case was removed to Orange County, where Ryan lives. He filed a cross-complaint against The Grace Foundation of Northern California and Beth DeCaprio as an individual, charging intentional interference with a contract, defamation and trade libel, and included a demand for jury trial. Ryan’s cross-complaint asks for $5 million in general damages, plus punitive and exemplary damages. It also requests that Grace retract defamatory statements and an injunction preventing Grace from repeating them.

Ryan hired the firm of Jampol Zimet, in Los Angeles to file an answer to Grace’s complaint.

Bank of America and Wells Fargo Bank are now represented in this lawsuit by C. Scott Greene, of Bryan Cave LLP, San Francisco. Grace’s attorney, Stuart Leviton, filed a motion on Dec. 12 to be relieved as counsel. The motion was heard on Jan. 11. DeCaprio said Grace is looking for an attorney with bankruptcy experience.

A case management conference on all the claims is scheduled for April 16.