Federal Agricultural Mortgage Corporation v. Assemi Brothers, LLC

• Court: District Court, E.D. California
• Decided: May 16, 2025
• Docket: 1:24-cv-01455
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 FEDERAL AGRICULTURAL No. 1:24-cv-01455-KES-SAB MORTGAGE CORPORATION, 12 Plaintiff, ORDER GRANTING 13 ROOSTER CAPITAL IV LLC’S v. MOTION TO INTERVENE 14 ASSEMI BROTHERS, LLC; MARICOPA 15 ORCHARDS, LLC; C & A FARMS, LLC; (Doc. 73) WHITESBRIDGE FARMS, LLC; 16 WILLOW AVENUE INVESTMENTS, LLC; LINCOLN GRANTOR FARMS, 17 LLC; COPPER AVENUE INVESTMENTS, LLC; ACAP FARMS, 18 LLC; CANTUA ORCHARDS, LLC; GRADON FARMS, LLC, 19 Defendants. 20

21 Rooster Capital IV LLC (“Rooster”), a junior lienholder on certain parcels of real 22 property that are the subject of this action, moves to intervene as a matter of right pursuant to 23 Federal Rule of Civil Procedure 24(a)(2). Doc. 73 (“Mot. Intervene”). No party filed an 24 opposition. For the reasons addressed below, the Court grants Rooster’s motion to intervene. 25 I. BACKGROUND 26 From January 8, 2018 to February 2, 2023, defendants Assemi Brothers, LLC, Maricopa 27 Orchards, LLC, C & A Farms, LLC, Whitesbridge Farms, LLC, Willow Avenue Investments, 28 1 LLC, Lincoln Grantor Farms, LLC, Copper Avenue Investments, LLC, ACAP Farms, LLC, 2 Cantua Orchards, LLC, and Gradon Farms, LLC signed a series of notes (the “Farmer Mac 3 Notes”) in favor of Conterra Agricultural Capital, LLC (“CAC”). Doc. 1 (“Compl.”) ¶ 18. The 4 Farmer Mac Notes are secured by deeds of trust on real property (the “Farmer Mac Deeds of 5 Trust”) in Fresno County, Kings County, and Kern County. Id. ¶ 20. Upon origination, the 6 Farmer Mac Notes were assigned by CAC to plaintiff Federal Agricultural Mortgage Corporation 7 (“Farmer Mac”). Id. Defendants allegedly defaulted on the Farmer Mac Notes, and Farmer Mac 8 asserts in this action that, as of November 21, 2024, it is owed at least $41,416,040.49. Id. ¶¶ 2, 9 4. 10 On February 2, 2023, defendants Maricopa Orchards, LLC, Copper Avenue 11 Investments, LLC, C&A Farms, LLC, ACAP Farms, LLC, Willow Avenue Investments, LLC, 12 Lincoln Grantor Farms, LLC, Cantua Orchards, LLC, and Gradon Farms, LLC (“the Rooster 13 Borrowers”) signed another note in favor of CAC in the amount of $7,400,000. Doc. 73-1, Ex. A 14 (“Rooster Note”). Pursuant to several deeds of trust (“the Rooster Deeds of Trust”), the Rooster 15 Note is secured by some of the same parcels of real property that secure Farmer Mac’s loans. 16 Doc. 73-1 (“Second Smith Decl.”) ¶ 9; Doc. 73-1, Exs. B–D. Upon origination, the Rooster Note 17 and Rooster Deeds of Trust were assigned to Rooster. Second Smith Decl. ¶ 8; Doc. 73-1, Exs. 18 E–G. The Rooster Deeds of Trust are in a junior position to the Farmer Mac Deeds of Trust. 19 Second Smith Decl. ¶ 10. 20 The Rooster Borrowers allegedly defaulted on the Rooster Note. Id. ¶ 12. Rooster asserts 21 that as of February 28, 2025, the current balance of the Rooster Note is $8,400,606.46, 22 constituting $7,400,000 in unpaid principal balance, $961,871.62 in interest, and $38,734.84 in 23 fees and charges. Id. ¶ 13. 24 On November 27, 2024, Farmer Mac filed the complaint in this action, asserting claims 25 for breach of contract, appointment of receiver, accounting, and specific performance, and 26 injunctive relief. Compl. ¶¶ 33–51. On January 3, 2025, at the agreement of Farmer Mac and all 27 defendants except Assemi Brothers, LLC, this Court appointed Lance Miller as receiver (the 28 “Receiver”) over the real property that secures the Farmer Mac Deeds of Trust. Doc. 29 1 (“Receivership Order”) at 2 n.1, 4–5 ¶ 1. The Court authorized the Receiver to, among other 2 things, sell the property. Receivership Order ¶ 4. 3 On February 25, 2025, the Receiver filed a motion for entry of an order establishing 4 marketing, bid, and auction procedures so that he could proceed with an orderly process for 5 liquidating the property. Doc. 50 (“Sale Procedures Motion”). On March 3, 2025, Rooster filed 6 an opposition to the motion, noting that it had not been served with the motion. Doc. 55. 7 Accordingly, the Court continued the hearing on the motion, Docs. 57, 67, and the Receiver and 8 Rooster subsequently resolved their dispute about the motion, see Doc. 80. The Court held a 9 hearing on April 21, 2025, at which Rooster noted that it no longer had an objection to the sale 10 procedures motion. Doc. 81. However, Rooster has indicated that it may object to any future 11 motion by the Receiver to sell the property. Mot. Intervene at 6–7. 12 On April 14, 2025, Rooster filed a motion to intervene. Mot. Intervene. No party has 13 filed an opposition to Rooster’s motion to intervene, and the Court took the matter under 14 submission without oral argument pursuant to Local Rule 230(g). Doc. 91. 15 II. LEGAL STANDARD 16 “[I]ntervention is the requisite method for a nonparty to become a party to a lawsuit.” 17 U.S. ex rel. Eisenstein v. City of New York, New York, 556 U.S. 928, 933 (2009) (citing Marino v. 18 Ortiz, 484 U.S. 301, 304 (1988)). Whether made as of right or permissively, a motion to 19 intervene in a federal court suit is governed by Federal Rule of Civil Procedure 24. NAACP v. 20 New York, 413 U.S. 345, 365 (1973). Rule 24(a)(2) mandates that courts must allow anyone to 21 intervene as of right who, upon making a timely motion, “claims an interest relating to the 22 property or transaction that is the subject of the action, and is so situated that disposing of the 23 action may as a practical matter impair or impede the movant’s ability to protect its interest, 24 unless existing parties adequately represent that interest.” Fed. R. Civ. P. 24. To satisfy the 25 requirements of Rule 24(a)(2), a prospective intervenor bears the burden of establishing that: 26 (1) its motion is timely; (2) it has a significantly protectable interest relating to the subject of the action; (3) it is so situated that the 27 disposition of the action may as a practical matter impair or impede its ability to protect that interest; and (4) its interest is inadequately 28 represented by the parties to the action. 1 Sweet v. Cardona, 121 F.4th 32, 47–48 (9th Cir. 2024) (quoting Kalbers v. United States Dep’t of 2 Just., 22 F.4th 816, 822 (9th Cir. 2021)); see also Perry v. Proposition 8 Off. Proponents, 587 3 F.3d 947, 950 (9th Cir. 2009) (“Failure to satisfy any one of the requirements is fatal to the 4 application, and we need not reach the remaining elements if one of the elements is not 5 satisfied.”). 6 “In determining whether intervention is appropriate, [courts] are ‘guided primarily by 7 practical and equitable considerations, and the requirements for intervention are broadly 8 interpreted in favor of intervention.’” Cooper v. Newsom, 13 F.4th 857, 865 (9th Cir. 2021) 9 (quoting United States v. Alisal Water Corp., 370 F.3d 915, 919 (9th Cir. 2004)). “Courts are to 10 take all well-pleaded, nonconclusory allegations in the motion to intervene, the proposed 11 complaint or answer in intervention, and declarations supporting the motion as true absent sham, 12 frivolity or other objections.” Sw. Ctr. for Biological Diversity v. Berg, 268 F.3d 810, 820 (9th 13 Cir. 2001). 14 III. DISCUSSION 15 Rooster is entitled to intervene as of right pursuant to Rule 24(a)(2). The Court examines 16 each element of Rule 24(a)(2) in turn. 17 A. Timeliness 18 Timeliness hinges on “(1) the stage of the proceeding at which an applicant seeks to 19 intervene; (2) the prejudice to other parties; and (3) the reason for and length of the delay.” 20 Kalbers, 22 F.4th at 822 (internal quotation marks and citation omitted). “Delay is measured 21 from the date the proposed intervenor should have been aware that its interests would no longer 22 be protected adequately by the parties, not the date it learned of the litigation.” United States v. 23 Washington, 86 F.3d 1499, 1503 (9th Cir. 1996) (emphasis added). 24 Rooster learned that its interests may no longer be adequately protected by the parties 25 shortly after the Receiver filed the Sale Procedures Motion on February 25, 2025. See Doc. 55-1 26 (“First Smith Decl.”) ¶ 14. Rooster learned that the Receiver was preparing to sell the property 27 when the parties to this action informed Rooster, which appears to have occurred sometime after 28 1 the Sale Procedures Motion was filed because Rooster was not initially served with the motion.1 2 Id. This information alerted Rooster that its interests were no longer adequately protected by 3 existing parties because a sale of the real property that secures the Rooster Notes could potentially 4 result in less than full satisfaction of the debt owed to Rooster. Rooster filed its motion to 5 intervene on April 14, 2025, a week prior to the date of the hearing on the Sale Procedures 6 Motion. Mot. Intervene. Given that Rooster learned that its interests might no longer be 7 adequately protected by existing parties sometime between February 25 and March 3, 2025, and 8 Rooster filed the motion to intervene about seven weeks later, there was no substantial delay. See 9 Western Watersheds Project v. Haaland, 22 F.4th 828, 840 (9th Cir. 2022) (finding motion to 10 intervene timely when the proposed intervenor’s “motion came just three months after it 11 discovered that its leases were involved in this litigation”). 12 Additionally, even though Rooster moved to intervene only a week prior to the hearing on 13 the Sale Procedures Motion, no party would be prejudiced by the timing of Rooster’s motion to 14 intervene because Rooster promptly filed an opposition to the Sale Procedures Motion on March 15 3, 2025, well in advance of the hearing on that matter. See Doc. 55. The parties were made 16 aware of the grounds for Rooster’s objection to the Sale Procedures Motion no later than eight 17 days after the Sale Procedures Motion was filed, so the fact that Rooster did not immediately file 18 a motion to intervene could not have prejudiced them. See Western Watersheds Project v. 19 Haaland, 22 F.4th at 838 (“[T]he only relevant prejudice [under the timeliness factor] is that 20 which flows from a prospective intervenor’s failure to intervene after he knew, or reasonably 21 should have known, that his interests were not being adequately represented.” (quotations 22 omitted)). Accordingly, Rooster’s motion to intervene was timely. 23 B. Significantly Protectable Interest 24 “Whether an applicant for intervention demonstrates sufficient interest in an action is a 25 practical, threshold inquiry. No specific legal or equitable interest need be established.” Sw. Ctr. 26 for Biological Diversity, 268 F.3d at 818 (quoting Greene v. United States, 996 F.2d 973, 976 27 1 Given that Rooster was not served with the Sale Procedures Motion but filed its opposition on 28 March 3, 2025, see Doc. 55, this date was sometime between February 28 and March 3, 2025. 1 (9th Cir. 1993) (citing Portland Audubon Soc’y v. Hodel, 866 F.2d 302, 308 (9th Cir. 1989)). “It 2 is generally enough that the interest [asserted] is protectable under some law, and that there is a 3 relationship between the legally protected interest and the claims at issue.” Id. (quoting Sierra 4 Club v. United States EPA, 995 F.2d 1478, 1484 (9th Cir. 1993)). 5 Rooster possesses a significantly protectable interest. Under California law, a deed of 6 trust “entitles the lender to reach some asset of the debtor if the note is not paid.” Alliance 7 Mortgage Co. v. Rothwell, 10 Cal. 4th 1226, 1235 (Cal. 1995). Pursuant to the Rooster Deed of 8 Trust, the Rooster Note is secured by the real property that is the subject of this action. First 9 Smith Decl. ¶ 9; Doc. 73-1, Exs. B–D. Its legally protected interest therefore shares a clear 10 relationship to the claims at issue in this case. Accordingly, Rooster has a significantly 11 protectable interest. 12 C. Practical Impairment 13 Courts should “follow the guidance of [the] Rule 24 advisory committee notes that state 14 that ‘[i]f an absentee would be substantially affected in a practical sense by the determination 15 made in an action, he should, as a general rule, be entitled to intervene.’” Sw. Ctr. for Biological 16 Diversity, 268 F.3d at 822 (quoting Fed. R. Civ. P. 24 advisory committee’s notes). 17 The Receiver has made clear that, upon the conclusion of an auction, he may seek to sell 18 the property free and clear of all liens, claims, and encumbrances, with all such liens, claims, and 19 encumbrances to attach to the proceeds from the sale. See Doc. 83 (“Sale Procedures Order”) ¶ 7. 20 While the specific terms of any such sale are not presently before the Court and will likely be the 21 subject of a subsequent motion by the Receiver, Rooster would be substantially affected if its 22 liens were to attach only to the sale proceeds and those proceeds were insufficient to satisfy the 23 full amount of the debt owed to Rooster. Thus, Rooster’s significantly protectable interest may 24 be impaired by determinations to be made in this action. 25 D. Inadequacy of Representation 26 The final element, adequacy of representation, “‘is satisfied if the applicant shows that 27 representation of his interest may be inadequate’—a ‘minimal’ burden.” Kalbers, 22 F.4th at 828 28 1 | (quotations omitted). “Particularly relevant factors here include ‘whether the present party is 2 | capable and willing to make [the intervenor’s] arguments’ and ‘whether a proposed intervenor 3 | would offer any necessary elements to the proceeding that other parties would neglect.’” Citizens 4 | for Balanced Use v. Mont. Wilderness Ass’n, 647 F.3d 893, 898 (9th Cir. 2011) (citation omitted). 5 Rooster’s interest in this action will not necessarily be adequately represented by other 6 | parties. Plaintiff Farmer Mac’s interest as the senior lien holder may be significantly different 7 | than Rooster’s interest as a junior lien holder, including depending on the amount of sale 8 || proceeds available to repay the lienholders. The Receiver has indicated that he may seek to sell 9 | the property free and clear of all liens, with all such liens to attach to the proceeds of the sale. 10 | Sale Procedures Order {| 7. There may be appropriate business justifications for doing so, 11 | although that issue is not presently before the Court. Nevertheless, Rooster has indicated that it 12 || may oppose any such request by the Receiver because of Rooster’s status as a junior lienholder. 13 || See Mot. Intervene at 6—7. Of course, “‘a primary purpose of equity receiverships is to promote 14 | orderly and efficient administration of the estate . . . for the benefit of creditors.” SEC v. Hardy, 15 | 803 F.2d 1034, 1038 (9th Cir. 1986). “Nonetheless, even if the Receiver’s actions ultimately 16 | benefit the receivership entity’s creditors, . . . the Receiver stands in the shoes of the receivership 17 || entities, not in the shoes of the creditors.” Winkler v. McCloskey, 83 F.4th 720, 727 (9th Cir. 18 |} 2023). While the Court has no doubt that the Receiver will seek to maximize the recovery to all 19 | creditors, his duty to the receivership estate generally may potentially be at odds with Rooster’s 20 | arguments seeking to maximize Rooster’s specific interests. Accordingly, Rooster may be 21 || inadequately represented by the existing parties to this action. 22 | IV. CONCLUSION 23 Each element of Rule 24(a)(2) is satisfied by Rooster’s proposed intervention. 24 | Accordingly, Rooster’s motion to intervene as of right, Doc. 73, is GRANTED. 25 26 | IT IS SO ORDERED. _ 27 Dated: _ May 16, 2025 4h 3g UNITED STATES DISTRICT JUDGE