Kinney et al v. Select Portfolio Services
Filing
33
AMENDED OPINION AND ORDER granting 21 Opposed MOTION to Compel Discovery (Signed by Magistrate Judge B. Janice Ellington) Parties notified.(mserpa, 2)
United States District Court
Southern District of Texas
ENTERED
December 03, 2015
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
WILLIAM KINNEY, et al,
Plaintiffs,
VS.
SELECT PORTFOLIO SERVICES,
Defendant.
David J. Bradley, Clerk
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§ CIVIL ACTION NO. 2:15-CV-68
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AMENDED1 OPINION AND ORDER GRANTING PLAINTIFFS’
MOTION TO COMPEL DISCOVERY
Pending is Plaintiffs’ motion to compel Defendant, Select Portfolio Servicing, Inc.
(SPS), to answer an Interrogatory and produce documents related to the Interrogatory
(D.E. 21). Defendant responded to the motion to compel and Plaintiffs filed a reply to
the response (D.E. 27, 28). As discussed more fully below, Plaintiffs’ motions to compel
Defendant to answer Interrogatory No. 6 and produce the requested documents is granted.
JURISDICTION AND VENUE
This court has jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1343. Venue is
proper in this court because a substantial part of the actions about which Plaintiffs
complain occurred in San Patricio County, Texas, which is located in the Southern
District of Texas.
1
This opinion is modified only to reflect the December 1, 2015, changes to FED. R. CIV.
P. 26(b)(1).
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BACKGROUND
A. Factual Background
Plaintiffs William and Leah Kinney obtained a home equity loan from a lender
(original lender) in January 2005 in the amount of $66,000.2 The promissory note was
secured by a deed of trust dated January 26, 2005. On February 2, 2010 the note and
deed of trust were assigned to "Wells Fargo Bank, N.A. in Trust on Behalf of the
Certificate Holders for Asset Back Securities Corporation Home Equity Loan Trust,
Series 2005-HE3, Asset Backed Pass-Through Certificates, Series 2005-HE3" (Wells
Fargo). Wells Fargo then entered into a mortgage servicing agreement with BAC Home
Loans Serving, LP (BAC). At some point, SPS began acting as the servicer of Plaintiffs'
mortgage loan on behalf of Wells Fargo (D.E. 27, p. 1, n. 1).
On November 29, 2010 Plaintiffs received a notice of default and intent to
accelerate from Wells Fargo/BAC telling them they were in default on the note and it
would be accelerated if Plaintiffs did not bring the note current under the deed of trust.
On December 31, 2010 Plaintiffs received notice that the note had been accelerated and
counsel had been obtained to foreclose on the property. On August 22, 2012 counsel for
BAC and Wells Fargo filed an application for foreclosure in the 343rd District Court of
San Patricio County, Texas. The foreclosure proceeding was dismissed for want of
2
Plaintiffs allege the original lender was Countrywide Financial Corporation but
Defendant identifies the original lender as the WMC Mortgage Corporation (D.E. 23-1,
25, 31). The identity of the original lender is not relevant to disposition of this discovery
motion.
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prosecution and neither Wells Fargo nor BAC ever moved to vacate the judgment or
reinstate the lawsuit.
Subsequently, Wells Fargo and defendant SPS sent further correspondence to
Plaintiffs indicating that they intended to institute foreclosure proceedings against
Plaintiffs' property. Plaintiffs filed the instant lawsuit in state court and it was removed
to this federal court. Plaintiffs seek a declaratory judgment that the foreclosure is barred
by limitations and the doctrine of res judicata and that SPS has no right or authority to
foreclose on the note.
SPS asserts several affirmative defenses in response to Plaintiffs' claims.
In
addition, SPS seeks a finding that if its lien is set aside, Defendant should be equitably
and contractually subrogated to prior valid liens on the property and granted a judgment
allowing it to foreclose on the liens.
B. Motion to Compel
As part of its discovery, Plaintiffs sent Defendant the following interrogatory:
Please state the exact dollar amount paid by Wells Fargo (if any) to acquire the
lien in question. In your Answer please also specify the date on which the sum(s)
were paid and to whom such sum(s) was/were paid.
(Ex. A to Mot. to Compel; D.E. 21-1, p. 4). Plaintiffs also asked Defendants to produce
any documents evidencing or relating to any payments identified in its answer to the
interrogatory (Id.). Defendant objected to the requests by arguing that the information
and material sought was not within the scope of discovery, was not relevant to the case or
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controversy and was proprietary in nature (Id.).3 Defendant added in its objections that
the amount it paid to acquire the note was irrelevant because it is entitled to recover the
face value of the note.
In their motion to compel, Plaintiffs argue that whether Defendant actually paid its
own money to acquire the note is relevant to its equitable subrogation claim because an
element of its cause of action is that it must establish that its own funds paid off the debt
of another, citing in support S.E.C. v. Kaleta, No. 4:09-3674, 2011 WL 6016827 (S.D.
Tex. 2011). Plaintiffs assert that neither Wells Fargo nor SPS paid anything to discharge
the indebtedness of Plaintiffs. Defendant counters that the assignment of the lien to
Wells Fargo is valid and the amount it paid to the original lender is irrelevant to the
resolution of the either the limitations issue or its equitable subrogation argument.
APPLICABLE LAW
Federal Rule of Civil Procedure 26 outlines the scope of permissible discovery:
Scope in General. Unless otherwise limited by court order, the scope of
discovery is as follows: Parties may obtain discovery regarding any
nonprivileged matter that is relevant to any party's claim or defense and
proportional to the needs of the case, considering the importance of the
issues at stake in the action, the amount in controversy, the parties' relative
access to relevant information, the parties' resources, the importance of the
discovery in resolving he issues, and whether the burden or expense of the
proposed discovery outweighs its likely benefit. Information within this
scope of discovery need not be admissible in evidence to be discoverable.
FED. R. CIV. P. 26(b)(1) (eff. Dec. 1, 2015). "Courts construe discovery rules liberally to
serve the purposes of discovery: providing parties with information essential to the
3
Defendant did not raise the issue of whether the information was proprietary in its
response to the motion to compel.
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properly litigation of all relevant facts, eliminating surprise, and promoting settlement.
Ferko v. National Ass'n for Stock Car Auto Racing, Inc., 218 F.R.D. 125, 132 (E.D. Tex.
2003)(citing Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 (1978)). "The
threshold for relevance at the discovery stage is lower than at the trial stage." Rangel v.
Gonzalez Mascorro, 274 F.R.D. 585, 590 (S.D. Tex. 2011). Unless it is clear that the
information sought can have no possible bearing on a party's claim or defense, the request
for discovery should be allowed. Merrill v. Waffle House, Inc., 227 F.R.D. 467, 470
(N.D. Tex. 2005). The party resisting discovery has the burden of establishing lack of
relevance by demonstrating that the requested information either does not come within
the broad scope of relevance or that the potential harm caused by discovery would
outweigh the ordinary presumption in favor of broad disclosure. Id. at 470-471. Where
relevance is in doubt, the court should be permissive in allowing discovery. Rangel, 274
F.R.D. at 590.
Defendant cites cases where courts have permitted assignees of a mortgagee to
claim equitable subrogation for a lien without requiring that the assignee provide
information on how much it paid for the assignment. See Chase Home Fin., L.L.C. v. Cal
W. Reconveyance Corp., 309 S.W.3d 69, 633 (Tex. App.--Houston [14 Dist.] 2010) and
LaSalle Bank Nat. Ass'n v. White, 246 S.W.3d 616, 617 (Tex. 2007). However, nothing
in either of those cases indicates whether discovery was ever an issue and neither case
addresses the relevancy of the information sought by Plaintiffs in this case. Moreover,
the fact that the amount paid by an assignee was not mentioned in the court decisions
does not lead to the conclusion that it was not relevant to the proceedings.
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The information sought by Plaintiffs may provide further clarification of the
nature of the assignment of the lien in this case and Defendant has not argued that the
information will be burdensome to obtain. Given the Rule 26 presumption in favor of
broad discovery, Plaintiffs' motion to compel is granted.
CONCLUSION
Based on the foregoing, Plaintiff's Opposed Motion to Compel Discovery (D.E.
21) is GRANTED. Within twenty days of the date of this order, Defendant is ordered to
produce the information requested in Plaintiffs' Interrogatory No. 6 and to produce any
documents evidencing or relating to any payments identified in Interrogatory No. 6.
ORDERED this 3rd day of December, 2015.
___________________________________
B. JANICE ELLINGTON
UNITED STATES MAGISTRATE JUDGE
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