Albizo et al v. Wachovia Mortgage et al

Filing 63

ORDER granting in part and denying in part 48 Motion to Quash signed by Magistrate Judge Allison Claire on 3/13/13. (Kaminski, H)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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HECTOR ALBIZO, et al.,
Plaintiffs,

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vs.

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No. 2:11-cv-2991 AC C

WACHOVIA MORTGAGE, et al.,
Defendants.

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ORDER
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On March 13, 2013, the court held a hearing on plaintiffs’ February 20, 2013

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motion to quash. Breyon Davis appeared for plaintiffs. Melissa Coyle appeared for defendants.

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On review of the motion, the documents filed in support and opposition, hearing the arguments

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of counsel, and good cause appearing therefor, THE COURT FINDS AS FOLLOWS:
RELEVANT BACKGROUND

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A.

Factual Allegations
In or around August 2006, plaintiffs Hector and Mary Albizo obtained a mortgage

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loan from World Savings Bank, FSB (now Wachovia Mortgage (“Wachovia”), a wholly-owned

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subsidiary of Wells Fargo Bank, N.A. (“Wells Fargo”)) secured by real property located at 7033

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Ludlow Drive, Roseville, CA 95747 (“the Subject Property”). A deed of trust was recorded in
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the Placer County Recorder’s Office on August 7, 2006.

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In or around July 2010, Wachovia contacted plaintiffs to inform them that they

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were behind on their mortgage. Plaintiffs claim that they were not behind on their mortgage

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payments. Instead, they accuse Wachovia of failing to withdraw funds through the automatic

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payment plan that they established through World Savings Bank, FSB. Plaintiffs maintain that

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the servicing of their mortgage loan has been impacted by two separate mergers during the first

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three years of the life of the loan: in or around October 2007, World Savings Bank, FSB merged

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with Wachovia, who began servicing plaintiffs’ mortgage loan, and in on or around January

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2009, Wachovia merged with Wells Fargo & Co., parent to Wells Fargo. Plaintiffs claim that

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they continued to make payments on their mortgage loan, remitting them to Wachovia through

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the automatic payment plan, and that any default on the mortgage loan was due to Wachovia’s

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negligence.

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Wachovia instructed plaintiffs to make a nearly-$15,000 payment to bring the

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account current. Plaintiffs allege that they were only behind two months on their payments,

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which was approximately $5,000 in arrears, due to Wachovia’s negligence, and that the amount

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sought by Wachovia to bring the account current was too high. Nonetheless, plaintiffs made the

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payment as instructed and received a letter of confirmation dated August 27, 2010 that the

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account was current. After this incident, which plaintiffs claim was a scheme by Wachovia to

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make money off of late fees and other charges, plaintiffs refused to continue with the automatic

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payment plan and instead began sending monthly checks with their mortgage statement.

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Plaintiffs claim that they made payments for September and October 2010 and

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were current on their payments at that time, but on October 29, 2010, plaintiffs learned that the

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Subject Property was scheduled for a foreclosure sale on November 2, 2010. Immediately,

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plaintiffs sent a letter to Wachovia to contest the sale. They also contacted an attorney, who

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suggested filing a Chapter 13 bankruptcy petition, which would stay the sale of the Subject

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Property.
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On or about November 2, 2010, a bankruptcy petition was filed and the sale of the

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Subject Property was stayed. Plaintiffs made the December 2010 mortgage payment as required

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by the bankruptcy court. Through their bankruptcy attorney, plaintiffs negotiated with Wachovia

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for a loan modification. However, plaintiffs were unable to make their March 2011 payment to

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Wachovia directly because, although the bankruptcy case was still pending, the bankruptcy court

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would no longer accept the mortgage payment.

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In or around April 2011, Wachovia received notice of the bankruptcy case’s

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dismissal and directed plaintiffs to send them a payment for the March 2011 payment. Plaintiffs

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sent a check to Wachovia, but the latter did not cash the check.

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In May 2011, plaintiffs completed an application for a loan modification. In or

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around June 2011, plaintiffs were informed by Wachovia that their application was still being

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reviewed.

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In or around July 2011, Wachovia informed plaintiffs that they qualified for a

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loan modification. On or around July 7, 2011, plaintiffs received a call from a Wachovia

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representative who discussed the terms of the loan modification.

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On July 18, 2011, the Subject Property was sold at a non-judicial foreclosure sale.
Plaintiffs were unaware of this sale.

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In July 29, 2011, Wachovia confirmed plaintiffs’ loan modification in writing.

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On or around late-August 2011, plaintiffs received a letter from Wachovia stating

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that their loan had been reinstated with revised terms pursuant to the loan modification.

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On September 21, 2011, plaintiffs received a final Notice to Vacate the Subject

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Property by September 27, 2011 from the Sheriff. Plaintiffs were locked out of their home by

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the Sheriff on September 27, 2011.

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Plaintiffs allege that they never received a Notice of Default, Notice of Trustee
Sale, Notice of Unlawful Detainer, or a 3/30/90-Day Notice to Vacate the Subject Property.

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B.

Procedural Background

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On October 7, 2011, plaintiffs filed suit in the Placer County Superior Court

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against defendants Wachovia Mortgage, a division of Wells Fargo Bank, N.A., the successor by

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merger to Wells Fargo Bank Southwest, N.A., f/k/a/ Wachovia Mortgage, FSB, f/k/a/ World

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Savings Bank, FSB (“Wells Fargo”) and NDeX West1. This action was removed to this court on

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November 9, 2011 pursuant to 28 U.S.C. § 1332 because the citizenship of the parties is entirely

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diverse and the amount in controversy exceeds $75,000. This action is before the undersigned

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pursuant to the consent of the parties. ECF No. 26.

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Plaintiffs are now proceeding on a first amended complaint (“FAC”) filed May

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18, 2012 setting forth four claims: (1) negligence, (2) set aside trustee’s sale; (3) breach of

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contract; and (4) breach of the implied covenant of good faith and fair dealing. Plaintiffs seek

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declaratory and injunctive relief, and damages in the amount of $200,000.

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On June 1, 2012, defendants filed an answer to the FAC wherein they also

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asserted a number of affirmative defenses, including unclear hands. ECF No. 33.

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C.

Discovery Dispute Background
On February 8 and 11, 2013, defendants served on Bank of America and the

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Golden 1 Credit Union subpoenas for the production of “All account statements related to

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[plaintiffs’] checking account[s . . .] from August 1, 2006 through October 31, 2011 . . . .”

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Plaintiffs objected to these subpoenas as overbroad and irrelevant. The parties met and

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conferred from February 12, 2013 through February 15, 2013, but were unable to resolve their

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differences.

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DISCUSSION
A.

The Parties’ Positions
Plaintiffs argue that the subpoenas seek irrelevant information because they ask

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This defendant was dismissed by stipulation on July 31, 2012. ECF Nos. 40-41.
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for documents that pre-date the contested events set forth in the FAC. They argue that their bank

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records are only relevant for the time frames surrounding the first foreclosure date of November

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2, 2010 and the July 2011 loan modification. Plaintiffs also assert a privacy objection.

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Defendants counter that the documents sought are directly relevant not only to

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plaintiffs’ claims but also to defendants’ affirmative defenses. Lastly, defendants accuse

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plaintiffs of forging documents and lying to the court. Defendants seek sanctions.

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B.

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Analysis
1.

Privacy

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Plaintiffs’ motion to quash is premised on relevancy and privacy objections. The

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court begins with plaintiffs’ privacy objection. In Valley Bank of Nevada v. Superior Court, 15

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Cal.3d 652, 656 (Cal. 1975), the court found “the general rule appears to be that there exists no

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common law privilege with respect to bank customer information.” Rather, “one’s confidential

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financial affairs as well as [ ] the details of one’s personal life” is protected by the constitutional

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right to privacy. Id. The “right of privacy is not absolute; it may be abridged to accommodate a

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compelling public interest.” Moskowitz v. Superior Court, 137 Cal. App. 3d 313, 316 (Cal. Ct.

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App. 1982) (citations omitted). One such interest is uncovering the truth in legal proceedings by

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allowing broad discovery. Id. When the right of privacy and the public interest conflict, the

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court must balance the interests for a fair resolution of the lawsuit. Id. A constitutional interest

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in privacy should be recognized in this balancing process. Seattle Times Co. v. Rhinehart, 467

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U.S. 20, 34-36 (1984).

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Although plaintiffs do have a privacy interest in their bank statements and in

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information contained in those statements that is unrelated to the instant action (i.e., deposits and

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withdrawals unrelated to plaintiffs’ mortgage payments), it is also true that defendants maintain

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an interest in defending themselves in this lawsuit. Such defense necessarily turns in part on the

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state of the evidence regarding plaintiffs’ claims that they have always been able to pay their

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mortgage loan and that any purported default was due to defendants’ negligence in failing to
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withdraw available funds from plaintiffs’ bank account(s). Weighing these competing interests

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leads the court to overrule plaintiffs’ privacy objections. A protective order will sufficiently

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protect plaintiffs’ privacy interests while permitting appropriate discovery.

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2.

Relevance
Regarding the scope of permissible discovery, Rule 26(b)(1) provides that unless

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otherwise limited by court order, “[p]arties may obtain discovery regarding any nonprivileged

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matter that is relevant to any party’s claim or defense—including the existence, description,

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nature, custody, condition, and location of any documents or other tangible things and the

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identity and location of persons who know of any discoverable matter.” Fed. R. Civ. P. 26(b)(1)

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(emphasis added). Rule 26(b)(1) further provides that “[r]elevant information need not be

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admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of

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admissible evidence.” Id. However, as the Advisory Committee Notes to the 2000 Amendment

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to Rule 26(b)(1) indicate, the “Committee intends that the parties and the court focus on the

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actual claims and defenses involved in the action.”

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The defendants’ subpoenas are very clearly related to the claims in this case.

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Plaintiffs accuse defendants of negligence for unilaterally stopping the withdrawals of mortgage

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payments from plaintiffs’ bank accounts pursuant to the automatic payment plan and despite the

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availability of funds. Defendants assert that their records reflect their attempts to withdraw

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funds, but inability to actually do so due to insufficient funds in the accounts. Defendants seek

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the bank records in support of their defense to the negligence claim.

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Defendants also seek the bank statements in support of their affirmative defense

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of unclean hands. In the FAC, plaintiffs’ assert that they were “never in default” and that

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defendants should have never foreclosed on the Subject Property. Again, defendants’ records

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contradict plaintiffs’ allegations. These records show that plaintiffs were experiencing financial

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difficulty in early-2008 when they deferred their January 2008 and February 2008 payments.

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The plaintiffs were to resume making payments in March 2008, but failed to make that payment.
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Wells Fargo claims it sent at least nine letters between March 2008 and November 2008

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informing plaintiffs that they were in default. Ultimately, Wells Fargo offered plaintiffs a loan

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modification effective December 1, 2008. Wells Fargo’s records indicate that plaintiffs missed

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at least nine payments before receiving the December 2008 loan modification. Plaintiffs again

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missed the June 1, 2009 mortgage payment. In April 2010, plaintiffs again applied for a loan

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modification, but Wells Fargo denied this application within days after it was submitted. Shortly

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thereafter, Wells Fargo recorded a notice of default. This foreclosure sale was stayed when

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plaintiffs filed their bankruptcy petition. Once plaintiffs’ bankruptcy petition was dismissed in

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April 2011, Wells Fargo again initiated foreclosure proceedings by recording and posting a

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second notice of trustee’s sale on plaintiffs’ front door on April 27, 2011. Despite plaintiffs’

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allegations, Wells Fargo claims that it gave plaintiffs notice of the sale and that it did not offer

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plaintiffs a loan modification agreement in July 2011.

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Accordingly, plaintiffs’ motion to quash on grounds of relevance will be denied.

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Defendants will, however, be limited to seeking documents from the time period of January 2008

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through August 2011.

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C.

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Defendants’ Request for Sanctions
Defendants request costs associated with opposing the instant motion. Because it

appears the position of both parties was substantially justified, this request will be denied.

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Based on the foregoing, IT IS HEREBY ORDERED that:

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1. Plaintiffs’ motion to quash is granted in part. The subpoenas served on Bank

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of America and Golden 1 Credit Union shall be limited to the time period of January 2008

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through August 2011. All bank statements shall be produced within fourteen days from the date

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of this order and shall be produced solely for the purpose of preparing for trial in this action.

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They shall not be filed in the public record of this action without written permission of plaintiffs

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or a court order. Exhibits consisting of protected documents sought to be used in pretrial

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motions shall be submitted to the court under seal pursuant to the procedure outlined by Local
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Rule 141.

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2. Defendants’ request for expenses is denied.
DATED: March 13, 2013.

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ALLISON CLAIRE
UNITED STATES MAGISTRATE JUDGE

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