ALLIANCE Bank

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Raoul Barrie Clymer14150 Grant St., Suite 33Moreno Valley, CA 92553(951) [email protected]

Propria persona

UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

RAOUL BARRIE CLYMER, : CASE NO. EDCV 11-1414-VAP (OPX)Plaintiff, :

v. ::

KEVIN ELDER, RICHARD ELDER, :SCOTT WOODSIDE, PIMLICO : OBJECTION TO ALLIANCERANCH LLC, DRAKE DEVOLOP- : BANK’S MOTION TO DISMISSMENT, LLC, GOWIRELESS, INC., :ALLIANCE BANK, MARK COHEN, : et al., :

Defendants. :

Comes now, Raoul Barrie Clymer, plaintiff respectfully filing his objection to Alliance

Bank’s Motion to Dismiss and sets forth the following in support thereof:

I. INTRODUCTION I. INTRODUCTION

It is a sad day in the annals of American Jurisprudence when the filing of a Civil action is

considered by some as only “…to further harass…“ A families lifetime savings were invested

with the Defendants based upon promises and obligations that were all made with false

pretenses. Upon learning of the fraud Plaintiff attempted to circumvent litigation by approaching

certain of the named Defendants asking them to honor their contractual obligations and avoid

Civil R.I.C.O. prosecution. For being forthright and stalwart plaintiff was rewarded with a

OBJECTION TO MOTION TO DISMISS

mailto:[email protected]

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plethora of false accusations resulting in a TRO1 lodged against him.

II. SUMMARY OF THE FACTS AND ALLEGATIONS:

B&D was induced into a business venture by K. Elder; called the Pimlico Ranch LLC

Project. K. Elder stated he was the sole shareholder of GoWireless, Inc., and gave his personal

guarantee2, backed by GoWireless, Inc., for a timely completion of said business venture3. K.

Elder stated that he needed $3.5 to purchase the Pimlico Ranch LLC project with property

outright. Based upon K. Elder’s personal guarantee backed by his holdings in GoWireless B&D

accepted the terms stated within the Prospectus. B&D liquidated family owned real estate for

investment in Pimlico Ranch LLC. Subsequently, K. Elder directed B&D to wire more than six

Bank transfers totaling $3.5 into K. Elder’s personal bank account. B&D agreed to Subordination

of Deed of Trust for the sole purpose of a Construction Loan4. Alliance prepared and filed

Subordination of Deed of Trust on behalf of B&D thereby placing Alliance Bank as first in line

on Pimlico Ranch LLC title. Alliance Bank concealed the Loan Agreement and the amount

contained therein from B&D5. Defendant Woodside, on behalf of Pimlico Ranch LLC, prepared

the application for the Construction Loan. Alliance Bank approved said Application with

1 It should be noted that the State Court hearing for the TRO was held in a private Courtroom, without the ability to cross-examine the false bearing witnesses. When Plaintiff stated the right to cross-examine false bearing witnesses the Judge plainly stated “I don’t care about the U.S. Constitution, California Constitution, or the Fiji Constitution for that matter. They don’t have to be here they have their Attorney here.” There is no court record and the docket entry has Elder as present [which he was not.]. Plaintiff understands why Defendants want this Court to dismiss the R.I.C.O. claims and relinquish jurisdiction to the State Court.2 Besides the testimony of three witnesses to verify this, it can also be inferred from the fact that K. Elder gave his personal guarantee to obtain the $13.9 million dollar loan, so why wouldn’t he give his personal guarantee for the $3.5 million necessary to procure the $13.9 million loan.3 It should be noted K. Elder provided all three Body Shop phones free of charge thru GoWireless, Inc. as a bonus.4 Findlaw: Legal definition of construction loan - a short-term, to finance the cost of building a new home. The lender pays the builder based on milestones accomplished during the building process. For example, once a sub-contractor pours the foundation and it is approved by inspectors the lender will pay for their service.5 The Successor-in-interest, CB&T Bank, also denied Plaintiff a copy of the Loan Agreement and refused to state the total amount granted allegedly based upon their client’s privacy . However, they did provide the amount then currently owed once informed of Pimlico‘s default status with B&D.


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conditions.

K. Elder was required to deposit equity funds totaling $3.5 into Alliance Bank6 to procure

the $13.9 million “Construction Loan.” [See exhibit 1, Construction Loan Agreement, page 2.]

As mandated in the Construction Loan Agreement for “Budget and Schedule of Estimated

Advances” wherein “Lender shall have approved detailed budget and cash flow projections of

total Project costs ….” a “Release Price Schedule by Lot” was created. See Exhibit 2.

Ultimately, Alliance Bank authorized the requested funds for construction and mandated

that “UNDISBURSED FUNDS” must be “REQUESTED….IN WRITING”. See Exhibit 3.

In the “Construction Loan” there was $3.8 million allocated from the Construction Loan

to Stewart Title for “pay off” which was not disclosed or agreed to by B&D. [See exhibit 3,

Other Disbursements:] Alliance Bank materially altered the Subordination Agreement by

changing the terms of the Construction Loan Agreement, from a short term loan for construction

purposes, containing a draw down payment schedule which protected B&D, into a purchase

money/long term personal loan; which was concealed by Alliance and others party to said

agreement from B&D.

Although the Trustee for B&D would continually inquire into the status of the Project the

named Defendants continually provided banking and/or permit excuses.

In the interim K. Elder paid interest as agreed the first three years using funds from

sources other than Pimlico Ranch LLC utilizing bank transfers and the U.S. Mail. K. Elder

refused to pay interest in the fourth year which precipitated Plaintiff’s investigation. All interest

payments were made in interstate commerce from Nevada to California.

Plaintiff has been making substantial cumulative lease payments7 for the Body Shops (3

6 Plaintiff is no scholar of Banking, however ,with “fractionalized reserve banking methods” that $3.5 million would equate to well over $35 million dollars for Alliance Bank.7 The family real estate was sold with lease back options and buy back options.


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shops in the Inland Empire) totaling approximately $50,000.00 per month for six years which is

attributable solely to the investment in Pimlico Ranch LLC Project. This causes Plaintiff and his

family undue stress and vexation in the current economy.

SUMMARY OF THE ALLEGATIONS:

Contrary to what the successor-in-interest, California Bank &Trust, would contend,

Alliance Bank is without clean hands. This was not simply a real estate business deal gone awry.

Nor is this a simple breach of contract. The property in question is as vacant a lot as the day it

was initially presented to the Trustee of B&D. However, there is $32,600,000.00 [$32.6 million]

verifiable funds invested in the Pimlico Ranch LLC project that are unaccounted for by any of

the named Defendants.

The first time that Alliance Bank and Pimlico Ranch LLC collaborated to manipulate

investment funds, Pimlico Ranch LLC ,by and through defendant Woodside, submitted an

Application for a secured “construction loan“ in early 2004. Alliance8 granted Pimlico Ranch

LLC a $11.4 million Construction Loan [hereinafter First Loan] back on or about April 28,

2004; a year and a half before B&D became involved with Pimlico. This loan was secured by a

Construction Deed of Trust. See exhibit 4.

On or about October 21, 2005, Defendants procured a $3.8 million loan against Pimlico

Ranch LLC title [hereinafter Second Loan] from Diversified Builder Services. This loan was

secured by a Deed of Trust. See exhibit 5.

On or about December 31, 2005, defendants secured a $3.5 million loan from B&D

[hereinafter Third Loan]. This loan was secured by a Deed of Trust. See exhibit 6.

Again in early 2006 defendant Woodside submits another Application to Alliance Bank

on behalf of Pimlico Ranch LLC for second “Construction Loan.“ On or about May 25, 2006,

8 It is unknown at this point who represented Alliance Bank in working with defendant Woodside for the First Loan. This will be resolved by discovery.


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Alliance issues a Construction Loan for $13.9 million to Pimlico Ranch LLC [hereinafter Fourth

Loan]. This loan was secured by a Construction Deed of Trust. See exhibit 7.

If the First Loan was subject to the same contractual conditions as the Fourth Loan,

Alliance benefited to the tune of $1.3 million on the First Loan. The Fourth Loan established that

Alliance retained $720,238.00 in Undisbursed Interest Reserve, $386,234.00 in Undisbursed

Contingency, $174,500.00 in Loan Fees, $30,000.00 in Construction Inspection & Fund

Control Fees [Emphasis added]. This is a combined total of approximately $2.6 million in their

coffers over a two year span on two transactions collateralized by the same 30 acre bare lot.

Plaintiff posits this pattern of activity gives rise to a cause of action for RICO conspiracy.

Approximately $32,600,000.00 invested in construction of the Pimlico Ranch LLC Project and

not one piece of heavy equipment touched the soil. It can be reasonably inferred that bank money

was disbursed knowing that it would not be utilized for the purpose of construction by a failing

financial institution: Especially in light of the fact the first “Construction Loan“ was not spent for

construction. It is little wonder why Alliance Bank failed.

Alliance Bank committed fraud by processing a “Construction loan” that was a “purchase

money/personal loan.” Alliance intentionally concealed the fact the “construction loan”

contained a $3.8 million pay off from B&D whom subordinated to the “construction loan” as

defined in the Construction Loan Agreement.

The aforesaid actions of Alliance Bank defrauded the Federal Reserve Bank. Discovery

will prove that Alliance securitized the Pimlico Ranch LLC Promissory Note, which was signed

and personally guaranteed by the managing members of Pimlico Ranch LLC, defendants K.

Elder, R. Elder, and Scott Woodside, to secure the funds from the Federal Reserve Bank.

III. PLAINTIFF LACKS STANDING


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Plaintiff is one member of a family that owns “Ben Clymer’s The Body Shop, Inc.”

[hereinafter Body Shop]. The Body Shop liquidated its real estate properties with lease back

options to finance the Pimlico Ranch LLC Project, which equates to a burden of approximately

$50,000.00 [$49,392.30] per month. Plaintiff contends that this ongoing financial burden is an

“injury to his business and property.“ This injury to Plaintiff’s business ipso facto gives Plaintiff

standing. The only requirement for RICO standing is that one be a "person injured in his business

or property by reason of a violation of section 1962." 18 U.S.C. § 1964(c). And the Supreme

Court has already told us that "by reason of" incorporates a proximate cause standard, Holmes v.

Sec. Investor Prot. Corp., 503 U.S. 258, @ 265-68, (1992), which is generous enough to include

the unintended, though foreseeable, consequences of RICO predicate acts.

Notwithstanding the aforesaid, Plaintiff has acquired assignment for 100% of the Pimlico

Ranch LLC Project from the successor-in-interest to B&D Clymer Real Estate, A Trust,

including but not limited to right to chose in action. It is Plaintiff’s position that he has standing

to seek redress.

IV. UNLESS PLAINTIFF SUFFICIENTLY ALLEGES A RICO CLAIMTHE COURT LACKS SUBJECT MATTER JURISDICTION

Even if the RICO conspiracy should not survive, this Court may exercise jurisdiction

based on diversity of the parties. Diversity jurisdiction extends to "all civil actions where the

matter in controversy exceeds . . . $75,000 . . . and is between . . . [c]itizens of different States."

28 U.S.C. § 1332(a)(1). The Complaint names, Defendant, GoWireless, Inc., stating the place of

incorporation and having headquarters in Las Vegas, Nevada and defendant, K. Elder, whom is

also a resident of Nevada. The pleadings of the said complaint also state an amount in

controversy exceeding $75,000.00. A Plaintiff must set forth affirmatively not only the state by

which these corporations have been incorporated, but also the state where each of them has its


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principal place of business. Brandt v. Bay City Super Market, D.C., 182 F.Supp. 937 (1960); and

Cameron v. Hodges, 127 U.S. 322, 8 S.Ct. 1154, 32 L.Ed. 132 (1888) Recently the U.S. Supreme

held “…..that the phrase "principal place of business" refers to the place where the corporation's

high level officers direct, control, and coordinate the corporation's activities.” Hertz.Corp. v.

Friend, 130 S. Ct. 1181, @ 1186 (2009)

V. NONE OF THE PLAINTIFF’S SIX CAUSES OF ACTION CANNOT [Sic] WITHSTAND A RULE 12(B)(6) MOTION

A. Plaintiff has not satisfactorily alleged a RICO Claim

Counsel for Alliance claims “[t]he Complaint has failed to allege any predicate acts as to

Alliance Bank.” However, Plaintiff has pled that “Alliance Bank, by and through its acting

agent, Mark Cohen, did conspire with K. Elder, and others to commit bank fraud by issuing a

$13.9 million dollar ‘construction loan’ without regard for performance.” [Complaint page 10,

para. 54] Plaintiff also attached to Complaint, exhibit 8, which is the “Construction Deed of

Trust” based upon said “construction loan” filed in the Official Records of Riverside County by

Alliance dated May 25, 2006.

The bank fraud statute prohibits one who "knowingly executes, or attempts to execute, a

scheme or artifice ... to obtain any of the moneys ... credits ... or other property owned by" a

federally insured institution by making false pretenses. The plain language of the statute states

that each execution of the scheme constitutes a separate offense. See United States v. Poliak, 823

F.2d 371, @ 372 (9th Cir.1987), cert. denied, 485 U.S. 1029, 108 S.Ct. 1586, 99 L.Ed.2d 901

(1988).

Rule 9(b) provides that "[i]n all averments of fraud ... the circumstances constituting

fraud ... shall be stated with particularity." "A pleading is sufficient under rule 9(b) if it identifies

the circumstances constituting fraud so that a defendant can prepare an adequate answer from the


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allegations." Moore v. Kayport Package Express, Inc., 885 F.2d 531, @ 540 (9th Cir. 1989)

(citations omitted). "The plaintiff must set forth what is false or misleading about a statement,

and why it is false." In re GlenFed Inc. Sec. Litig., 42 F.3d 1541, @ 1548 (9th Cir.1994)

The aforesaid facts pled, combined with the exhibits, articulate the who, what, when and

where necessary for submitting a defense. Plaintiff believes this satisfies the requirements of

Rule 9(b).

It is an undeniable fact that the terms of said “Construction Loan Agreement” stated the

purpose of the loan with specificity as:

“CONSTRUCTION LOAN TO COMPLETE PHASE I OF A SEMI-CUSTOM SINGLE FAMILY RESIDENTIAL SUBDIVISION IN MURRIETA, CALIFORNIA (PHASE I INCLUDES COMPLETION OF ALL 25 LOTS AND BUILD OUT OF ONE MODEL HOME AND EIGHT PRODUCTION UNITS).” See exhibit 8

Alliance memorialized the method of payment in the “Construction Loan Agreement” as follows:

“Conditions precedent to each advance….Equity Funds. Borrower shall provide evidence of equity funds totaling $3,500,000.00 prior to the initial advance from the Loan Fund….Disbursement of Loan Funds. ….Borrower shall apply only for disbursement with respect to work actually done by the General Contractor and for materials and equipment actually incorporated into the Project…..Construction of the project. Commence construction of the project no later than June 25, 2006, and cause the improvements to be constructed and equipped in a diligent and orderly manner and in strict accordance with the plans and specifications approved by lender, the construction contract, and all applicable laws, ordinances, codes, regulations, and rights of adjoining or concurrent property owners. Borrower agrees to complete the Project for purposes of final payment to the General Contractor on or before May 25, 2007, regardless of the reason for delay.”

It is also an undeniable fact that Alliance assessed a $30,000.00 prepaid finance charge

for “Construction Inspections & Fund Control Fee” as evidenced by their document entitled

“Disbursement Request and Authorization”. See exhibit 8.


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In said exhibit is further evidence of bank fraud whereby a closer reading of said

document revels under the subheading:

“DISBURSEMENT INSTRUCTIONS: Other Disbursements: $3,800,000.00 Wire to Stewart

Title for payoff”.

When Alliance sold the Pimlico Ranch LLC Promissory Note, which was based upon the

Construction Deed of Trust, to the Federal Reserve Bank they committed Bank Fraud in

violation of Title 18 U.S.C. section 1344.

RICO CONSPIRACY:

Title 18 section 1962(d) proscribes a conspiracy to violate RICO. It provides: "It shall be

unlawful for any person to conspire to violate any of the [other RICO] provisions." 18 U.S.C. §

1962(d). Bank Fraud is a predicate act for RICO. When Alliance agreed to issue an open line of

credit for Pimlico Ranch LLC, when all documentation sold to the Federal Reserve Bank was for

a “Construction Loan“, Alliance Bank by and through its acting agent, Cohen, committed bank

fraud. It is the mere agreement to violate RICO that § 1962(d) forbids; it is not necessary to

prove any substantive RICO violations ever occurred as a result of the conspiracy. Aetna Cas.

Sur. Co. v. P & B Autobody, 43 F.3d 1546, 1562 (1st Cir.1994). See also, Salinas v. United

States, 522 U.S. 52, 118 S.Ct. 469, 139 L.Ed.2d 352 (1997), (which held that a defendant who

was acquitted of the substantive racketeering charge nonetheless could be convicted of

conspiracy to violate RICO.)

Paramount is the fact that the illegal agreement need not be express as long as its

existence can be inferred from the words, actions, or interdependence of activities and persons

involved. Id. If a RICO conspiracy is demonstrated, "[a]ll conspirators are liable for the acts of

their co-conspirators." Sec. Investor Prot. Corp. v. Vigman, 908 F.2d 1461, 1468 (9th Cir.1990)


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rev'd on other grounds sub nom. Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 112 S.Ct.

1311, 117 L.Ed.2d 532 (1992) (internal quotations and citations omitted). Holding RICO

conspirators jointly and severally liable for the acts of their co-conspirators reflects the notion

that the damage wrought by the conspiracy "is not to be judged by dismembering it and viewing

its separate parts, but only by looking at it as a whole." Vigman, 908 F.2d @ 1468. As a whole it

is impossible for Alliance to avert liability for fraudulently selling the Federal Reserve Bank a

short term Promissory Note backed by a “Construction Deed of Trust” with full knowledge the

money purchased would not be utilized for the intended purpose.

Although Alliance pleads that specific conduct of other named conspirators do not state a

claim against Alliance, Plaintiff would remind them that "…one who joins with the existing

conspirators in the criminal plan does not create a new conspiracy but becomes a member of the

existing conspiracy. Hence, an overt act committed prior to the new member joining will be just

as effective against him or her as against the prior parties....". U.S. v. Fernandez, 388 F.3d 1199

@ 1225 (9th Cir., 2004)

ALLIANCE’S BREACH OF FIDUCIARY DUTY:

“Alliance Bank, by and through its acting agent, Mark Cohen, did conspire with K. Elder,

and others to commit bank fraud by issuing a $13.9 million dollar “construction

loan” without regard for performance……. K. Elder, R. Elder, Woodside submitted application

for a “$13.9 million Construction Loan” utilizing the Pimlico Ranch LLC property as collateral,

approved by Alliance Bank, by and through its acting agent, Mark Cohen; with the knowledge by

all named herein that the “Construction Loan” was not going to be used for constructing the

Pimlico Ranch Project LLC.”

Plaintiff has submitted documentary evidence that establishes Alliance Bank prepared


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and filed in the Office of Records, in Riverside County, California, a Subornation of Deed of

Trust [on behalf of B&D] and a Construction Deed of Trust on the Pimlico Ranch LLC Project

Title.

It is Alliance’s position that ”… Plaintiff failed to allege facts demonstrating the existence

of any relationship between Alliance Bank and Plaintiff, let alone one that was fiduciary in

nature.” [Motion to Dismiss, page 10, ln 3-5] It is agreed that there was no “debtor and creditor”

relationship between B&D and Alliance. There is, however, evidence in the record that B&D, a

creditor already on title of Pimlico Ranch LLC Project, agreed to Alliances terms to subordinate

to Alliances position on the Pimlico Ranch LLC Projects title. The negotiating of, and agreeing

to terms between B&D and Alliance allowed both lenders to share in the profits of a “joint

venture.”

"A joint venture is 'an undertaking by two or more persons jointly to carry out a single

business enterprise for profit." Weiner v. Fleischman 54 Cal.3d 476 (1991) There are three basic

elements of a joint venture: (1) the members must have joint control over the venture (even

though they may delegate it), (2) they must share the profits of the undertaking, and (3) the

members must each have an ownership interest in the enterprise. Unruh-Haxton v. Regents of

University of California 162 Cal.App.4th 343 (2008) "A joint venture . . . may be formed orally

or assumed to have been organized from a reasonable deduction from the acts and declarations of

the parties." (Weiner, @ 482-483.) In this case we have B&D who delegated controlling

position to Alliance as the principal lender in control of the project. Alliance was to maintain

control of the project by allocating the Construction Loan in a “draw down” as evidenced by

Alliance’s document called the “Release Price Schedule by Lot“. Both B&D and Alliance were

sharing in the profits of the Pimlico Project as evidenced by their respective contractual


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agreements and both said parties had an interest in the project as exhibited by their respective

Deed of Trust on Title to the Pimlico Ranch LLC Project.

Even should this Honorable Court find Plaintiff’s “joint venture” argument tenuous, it

can not be denied that the failure of Alliance to execute their contract utilizing the “draw down”

payment was the proximate cause of B&D’s loss. Should Alliance have paid out according to

performance B&D’s position would have been protected inasmuch as Pimlico would not have

had access to the funds without completion ,step by step, of the Construction as projected.

B&D was led to believe that subornation of their position was to a Construction Loan the

specific purpose of building the Pimlico Ranch LLC homes.9 This is confirmed by Alliance’s

document entitled “Construction Loan Agreement,” which states:

““CONSTRUCTION LOAN TO COMPLETE PHASE I OF A SEMI-CUSTOM SINGLE FAMILY RESIDENTIAL SUBDIVISION IN MURRIETA, CALIFORNIA (PHASE I INCLUDES COMPLETION OF ALL 25 LOTS AND BUILD OUT OF ONE MODEL HOME AND EIGHT PRODUCTION UNITS).”

And again in the document entitled “Disbursement Request and Authorization“ wherein is

found:

“SPECIFIC PURPOSE: The specific purpose of this loan is: CONSTRUCTION LOAN TO COMPLETE PHASE I OF A SEMI-CUSTOM SINGLE FAMILY RESIDENTIAL SUBDIVISION IN MURRIETA, CALIFORNIA (PHASE I INCLUDES COMPLETION OF ALL 25 LOTS AND BUILD OUT OF ONE MODEL HOME AND EIGHT PRODUCTION UNITS).” [See Exhibit 8]

However, a closer reading of said document revels under the subheading

“DISBURSEMENT INSTRUCTIONS: Other Disbursements: $3,800,000.00 Wire to Stewart Title for payoff”.

This fact was intentionally withheld from B&D because B&D was led to believe that

their $3.5 million cash investment was utilized to purchase the property and project outright.

9 B&D was never provided with a copy of the construction loan agreement or the amount of the loan. CB&T agents denied B&D a copy of the Contract agreement with Pimlico Ranch LLC when requested during investigation of the Projects true status.


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This would have raised questions from the onset.

Alliance would have this Court overlook the fact that Alliance filed a fraudulent

document in the Office of Records by recording a “Construction Deed of Trust” when Alliance

knew it was not a “Construction” loan but a money purchase/personal loan backed by personal

guarantees for acquisition. These facts were known to Alliance.

Alliance purports that “….. the Complaint fails to specify what conduct constituted

breach, or what damages resulted therefrom.” [MTD, page 10, ln 7&8]

Alliance issued a $13.9 million dollar “Construction Loan” with the knowledge that B&D

subordinated and yet Alliance clandestinely incorporated the purchase money into the

Construction loan and then failed to monitor and control the release of construction funds as per

contract; AND, by so doing B&D lost their entire equity of $3.5 million, plus 35% of the profits

and 10% annual interest. “The duty of a lender to supervise the use of loan funds arises only

from a written agreement to do so, or perhaps from the knowledge that the seller is relying on

such monitoring and the lender does not disclaim such reliance or the lender actively undertakes

such a role“. Resolution Trust Corp. v. BVS Development, Inc, 42 F.3d 1206 @ 1215 (9th Cir,

1994) By Contract Alliance was literally paid “$30,000.00 for Construction Inspections & Fund

Control Fee.”

The excerpts from Alliance’s “Construction Loan Agreement” are as follows:

“Conditions precedent to each advance….Equity Funds. Borrower shall provide evidence of equity funds totaling $3,500,000.00 prior to the initial advance from the Loan Fund….Disbursement of Loan Funds. ….Borrower shall apply only for disbursement with respect to work actually done by the General Contractor and for materials and equipment actually incorporated into the Project…..Construction of the project. Commence construction of the project no later than June 25, 2006, and cause the improvements to be constructed and equipped in a diligent and orderly manner and in strict accordance with the plans and specifications approved by lender, the construction contract, and all applicable


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laws, ordinances, codes, regulations, and rights of adjoining or concurrent property owners. Borrower agrees to complete the Project for purposes of final payment to the General Contractor on or before May 25, 2007, regardless of the reason for delay.”

Unfortunately May 25, 2007, came and went. Alliance and Pimlico modified the Construction

Loan numerous times extended said loan from eleven months to over six years. All the while

Plaintiff is making almost $50,000.00 a month payments for the money invested in Pimlico.

Under California law, "a lender and a borrower may not bilaterally make a material

modification in the loan to which the seller10 has subordinated, without the knowledge and

consent of the seller to that modification, if the modification materially affects the seller's rights."

Gluskin v. Atlantic Sav. & Loan Assn., 32 Cal.App.3d 307, @ 314, (1973). B&D subordinated

to a “Construction Loan”, not purchase money loan; thereby Alliance did modify the loan. To

exacerbate the issue Alliance provided extensions without notice. But, paramount is the issue of

modifying the “construction loan” due in eleven months after issuance of funds, into a personal

loan that is due on a unknown date over six years after receipt of funds.

The Ninth Circuit Court of Appeals recognized Gluskin and held that:

Gluskin discerns a public policy need for protecting the seller from such reprehensible conduct even in the absence of a malevolent purpose. Read properly, Gluskin does no more than find a duty of good faith and fair dealing in a subordination agreement, preventing two of the parties from substantially impairing the third's interest in the joint enterprise. As the Ninth Circuit has explained, "[t]he rule articulated in Gluskin aims to protect subordinated sellers from secret agreements between buyers and lenders against the interest of the subordinated seller." Resolution Trust Corp. v. BVS Development, Inc. 42 F.3d 1206, @ 1215 (9th Cir.1994) [Emphasis added.]

Plaintiff contends that Alliance Bank had a contractual and fiduciary duty to B&D to inspect the

construction and control the funds; especially since this was the second “Construction Loan“

10 The California Appellate “court expressly refused to decide whether public policy justified granting a subordinating hard money lender less protection than a subordinating seller…” Lennar Northeast Partners v. Buice (1996) 49 Cal.App.4th 1576, @ 1587-88


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issued on the same vacant lot for the same LLC. Plaintiff believes it would be reasonable to infer

by Alliance’s deliberate avoidance of monitoring the funds that Alliance had prior knowledge the

funds were not going to be used for the construction of the Pimlico Ranch LLC Project.

“Therefore, we conclude that under California law, when a seller subordinates his purchase

money lien to a lender's lien by permitting the lender to record first, and the lender knows that

the seller has agreed to record his deed second for the purpose of affecting a subordination, the

priority of the lender's lien is contingent upon the fulfillment of any conditions stated in the

seller's lien, whether or not the lender has actual knowledge of those conditions at the time the

deeds are recorded.” Sunset Bay Associates, In re, 944 F.2d 1503, @ 1513 (9th Cir. 1991)

Alliance Bank had full knowledge B&D was NOT subordinating to a construction loan.

PROMISSORY FRAUD:

Alliance made an agreement with B&D with the assurance that they would act as

specified. However, when the breaching party never intended to perform in the first place, the

promise is fraudulent, plain and simple. Promisees have a right to think that they are bargaining

for performance, not an action for breach of contract.

“Promissory fraud is a subspecies of the action for fraud.” See Behnke v. State Farm

General Ins. Co., 196 Cal. App. 4th 1443, 1453 (2011). "A promise to do something necessarily

implies the intention to perform; hence, where a promise is made without such intention, there is

an implied misrepresentation of fact that may be actionable fraud." Id. The elements of

promissory fraud are a promise made regarding a material fact without any intention of

performing it; the existence of the intent not to perform at the time the promise was made; intent

to deceive or induce the promisee to enter into a transaction; reasonable reliance by the

promisee; nonperformance by the party making the promise; and resulting damage to the


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promise. Id. “

Here Alliance promised to issue a “Construction Loan”; not a purchase money/personal

line of credit. B&D subordinated to a “construction loan” based upon the representations of

Alliance.

The United States Supreme Court has recently discussed the fraud scienter requirement,

holding in Tellabs, Inc. v. Makor Issues and Rights, Ltd., 127 S.Ct. 2499 (2007), that a strong

inference "must be cogent and compelling, thus strong in light of other explanations." According

to the Court, "[t]he reviewing court must ask: When the allegations are accepted as true and

taken collectively, would a reasonable person deem the inference of scienter at least as strong as

any opposing inference?" Id. @ 2511.

The facts are that Alliance gave Pimlico a first loan of $11.4 million and never built a

house. Alliance gave Pimlico a second loan for $13.9 million and never built a house. Alliance

mislead B&D by stating they subordinating to a “construction loan” when it was a “money

purchase loan/personal loan.”

Plaintiff believes that one can reasonably infer that there was no intent to build Phase I of

Pimlico Ranch LLC within the time-frame stated in the Prospectus and that Alliance knew the

project would never be completed in a timely fashion. An iinference can be derived from the fact

Allaince issued a unbridled line of credit for $13.9 million; in lieu of the contractually obligated

draw down for performance. Plaintiff would ask that this Court follow the U.S. Supreme Court‘s

admonition "We reiterate, however, that the court's job is not to scrutinize each allegation in

isolation but to assess all the allegations holistically." Tellabs, Id. @ 2511

UNJUST ENRICHMENT:

Plaintiff incorporated paragraphs 1 through 56 into the cause of action for unjust


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enrichment. Plaintiff states that Alliance benefited almost $2.6 million unjustly by fraudulently

providing a purchase money/personal line of credit to Pimlico at Plaintiff’s expense.

Notwithstanding that Alliance’s breach of fiduciary duty is the proximate cause of K. Elder’s

unjust enrichment.

BREACH OF CONTRACT:

Plaintiff incorporated paragraphs 1 through 52 into the cause of action for breach of

contract. It is admitted that Alliance Bank is not a party to the contract in question. However, it

was Alliance Bank’s failure to execute the Construction Loan Agreement and inspect the

construction and control the release of funds, for which they were paid and contractually bound,

that is the proximate cause of the breach complained off.

Plaintiff will seek leave to amend his complaint to include a cause of action for

intentional interference of contract against Cohen, Alliance, and others to be named pursuant to

discovery.

FRAUD:

Plaintiff incorporated paragraphs 1 through 66 into the cause of action for fraud.

Everyone of the named Defendants knew that the Subordination of Deed of Trust Alliance

executed on behalf of B&D was fraudulent. All parties had knowledge the loan contained

purchase money and there was not going to be “construction inspections and fund control.” All

parties knew that failure to build Pimlico Ranch LLC as projected would financially ruin B&D’s

subordinated position in the project.

Plaintiff contends that he has met the standard of Rule 9 in pleading fraud by Alliance

Bank.

WHEREFORE, it is respectfully requested that a ruling on Alliance Bank’s Motion to


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Dismiss be deferred until such time as limited discovery can be conducted to find Mark Cohen

and depose him. Limited discovery requested will vitiate the need to make repetitive

amendments to the complaint.

IN ALTERNATIVE, should the Court dismiss any cause of action that Plaintiff be

granted leave to amend the defects articulated.

DATE: January 9, 2012

Respectfully submitted,

Raoul Barrie Clymer


ALLIANCE Bank

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