Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-02905/USCOURTS-cand-5_05-cv-02905-6/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1331(a) Fed. Question: Real Property

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1 Cesar Valverde is also known as "Cesar Ponte" and will hereinafter be referred to as "Ponte."

Esperanza Valverde will hereinafter be referred to as "Valverde."

*E-FILED 5/11/06*

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

JUAN MEDINA, MARIA

ANTOINETTE GARCIA, ET AL.., 

Plaintiffs,

 v.

ARGENT MORTGAGE COMPANY, 

ET AL.,

Defendants. /

NO. 05-cv-2905 RS

ORDER GRANTING

DEFENDANTS' MOTION TO

STAY PROCEEDINGS PENDING

RESOLUTION OF CRIMINAL

ACTION, DENYING MOTION TO

SEVER

I. INTRODUCTION

Defendants Summit Mortgage Realty, Inc., Esperanza Valverde, Herman Covarrubias, and

Cesar Valverde1

 request a stay of the above-entitled action due to the pendency of a criminal action

against defendants Valverde and Covarrubias, alleged to be employees of Summit. Plaintiffs oppose

the request, arguing that they will suffer prejudice if the Court grants a stay. The motion was fully

briefed and originally set to be heard in February of 2006. Initially the parties requested a

continuance, and the Court subsequently continued the matter on its own motion in light of the fact

that the Panel for Multi-Jurisdiction Litigation had issued a preliminary decision transferring this for

Case 5:05-cv-02905-HRL Document 80 Filed 05/11/06 Page 1 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

pre-trial purposes to the Northern District of Illinois. 

The proceedings to determine whether this action will become part of the multi-district

litigation are still pending. In the meantime, defendant R+Financial, Inc. dba Amerimac First

Mortgage ("Amerimac") has filed a motion to sever and proceed separately. In view of the

uncertainties that would arise from delaying action on these issues indefinitely, the Court heard oral

argument on both motions on May 3, 2006. Based on all papers filed to date, as well as on the oral

argument of counsel, the Court grants the request for a stay, and denies the motion to sever, for the

reasons expressed below.

II. BACKGROUND

This civil action arises as a result of defendants' alleged "predatory and abusive" lending

practices in extending home mortgage loans to plaintiffs who are monolingual Spanish-speaking

homeowners. As a result of what they contend are unfair mortgage rates and terms, plaintiffs face

the possibility of foreclosure on their homes. Although plaintiffs filed their complaint in this Court

in August 2005, they did not serve moving defendants until November 15, 2005. 

Defendants answered the complaint, asserting their Fifth Amendment rights against selfincrimination based on the criminal complaint which had been filed against them by the Santa Clara

County District Attorney on March 21, 2005. In the criminal action, Valverde and Covarrubias are

accused of stealing personal property and committing other wrongful acts against plaintiffs Juan

Medina, Maria Garcia, Oscar Alaniz, Francisco Lopez, Maria Carrillo, Maria Reyes, Joseph and

Yolanda Hidalgo, and Carlos and Veronica Aparicio, in connection with the refinancing of plaintiffs'

properties. Defendants now move to stay this action until the conclusion of the criminal proceedings,

which they estimate will be concluded by this summer. Plaintiffs oppose the request to stay these

proceedings, arguing that they can proceed with at least some discovery, that the corporate

defendant cannot assert the Fifth Amendment, and that they may suffer prejudice through the

dissipation of defendants' assets throughout the course of defendants' criminal trial. 

Defendant Amerimac is alleged to have participated in one of the transactions at issue,

involving a loan made to plaintiffs Alberto and Maria Reyes. Contending that it should not be

thrown together in one action with several other more centrally-involved parties, particularly should

Case 5:05-cv-02905-HRL Document 80 Filed 05/11/06 Page 2 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

the matter become part of the multi-district litigation, Amerimac contends that the controversy

between it and the Reyes should be severed. Plaintiffs oppose the motion. The remaining

defendants have indicated they do not object to the severance in this instance.

III. DISCUSSION

A. Motion to Stay

"While a district court may stay civil proceedings pending the outcome of parallel criminal

proceedings, such action is not required by the Constitution." Federal Sav. and Loan Ins. Corp. v.

Molinaro, 889 F.2d 899, 902 (9th Cir. 1989). In determining whether to stay civil proceedings, a

court should generally consider several factors, including: 1) the extent to which the defendant's fifth

amendment rights are implicated; 2) the interests of the plaintiffs in proceeding expeditiously with

the litigation; 3) the burden which any particular aspect of the proceedings may impose on the

defendants; 4) the convenience of the court in the management of its cases, and the efficient use of

judicial resources; 5) the interests of persons not parties to the civil litigation; and, 6) the interest of

the public in the pending civil and criminal litigation. Id.

Analysis of the factors noted above dictate that the present case should be stayed. There is no

real dispute that the fifth amendment rights of defendants Valverde and Covarrubias are clearly

implicated based on the similarity of the allegations contained in the criminal complaint with those

raised in the present action. Although plaintiffs correctly note that the corporate defendant cannot

invoke the protections of the fifth amendment, they fail to recognize the important fact that the

individual defendants are the persons most knowledgeable and the persons whom the corporation

would designate to testify on its behalf. In fact, it does not appear that there are any other corporate

personnel who could be so designated. In contrast, plaintiffs only recently filed this action and,

moreover, failed to serve defendants promptly with the summons and complaint, thereby at least

implicitly indicating no particular urgency regarding the prosecution of their civil action.

In contrast, significant burdens would be imposed on defendants were they forced to defend

parallel civil and criminal proceedings which implicate not only the individual defendants' fifth

amendment rights, but also their discovery obligations. While plaintiffs may perhaps be correct that

Case 5:05-cv-02905-HRL Document 80 Filed 05/11/06 Page 3 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

they could at least obtain relevant documents during discovery, engaging in that process piecemeal

would not appear to advance the litigation in any significant manner. Moreover, the current estimate

is that the criminal case will be scheduled for trial within a relatively short time frame and that,

accordingly, those proceedings will be concluded within the next six (6) months. As discovery has

not yet begun in this case, only the initial pleadings have been filed, and no dispositive motions have

yet been presented, the efficient use of judicial resources favors a stay in this action. 

Although plaintiffs argue they will suffer prejudice if this case is stayed, they have failed to

present any evidence to support that argument. To the contrary, the record indicates that plaintiffs

waited four months before serving their complaint on defendants. While it is certainly plausible that

valid reasons supported such a delay, it undercuts plaintiff's entitlement to complain about a roughly

similar delay. While plaintiffs mention other prejudicial factors, such as the continued operation of

defendants' business through which defendants could be defrauding other innocent homeowners or

the possibility of defendants using their present assets to pay for their defense costs, the record is

devoid of support for these arguments. Accordingly, weighing and balancing the factors noted

above, this action will be stayed through August 31, 2006, in consideration of the criminal

proceedings currently underway against defendants Valverde and Covarrubias. 

B. Motion to Sever

 Rule 20 (a) of the Federal Rules of Civil Procedure provides:

All persons may join in one action as plaintiffs if they assert any right to relief jointly,

severally, or in the alternative in respect of or arising out of the same transaction,

occurrence, or series of transactions or occurrences and if any question of law or fact

common to all these persons will arise in the action. All persons . . . may be joined in

one action as defendants if there is asserted against them jointly, severally, or in the

alternative, any right to relief in respect of or arising out of the same transaction,

occurrence, or series of transactions or occurrences and if any question of law or fact

common to all defendants will arise in the action. A plaintiff or defendant need not be

interested in obtaining or defending against all the relief demanded. Judgment may be

given for one or more of the plaintiffs according to their respective rights to relief,

and against one or more defendants according to their respective liabilities.

In considering the propriety of a joinder under this rule, the Ninth Circuit has observed, 

We start with the premise that Rule 20, Fed.Rules Civ.Proc., regarding permissive

joinder is to be construed liberally in order to promote trial convenience and to

expedite the final determination of disputes, thereby preventing multiple lawsuits.

[Citation.] As stated by the Supreme Court in United Mine Workers of America v.

Case 5:05-cv-02905-HRL Document 80 Filed 05/11/06 Page 4 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966):“Under the rules, the

impulse is toward entertaining the broadest possible scope of action consistent with

fairness to the parties; joinder of claims, parties and remedies is strongly

encouraged.”

League to Save Lake Tahoe v. Tahoe Regional Planning Agency, 558 F.2d 914, 917 (9th Cir. 1977).

Here, Amerimac contends that there is no particular relationship among the various plaintiffs

and their respective claims other than the fact that all are generally alleged to have been victimized

in similar ways, including through exploitation of their limited English language skills. Amerimac

emphasizes that it is charged only with having participated in a single, self-contained loan

transaction, only involving the Reyes plaintiffs, and that it only is allegedly to have received fees of

approximately $17,000 for so doing. Amerimac dismisses the allegations of agency between the

defendants as "clearly erroneous boilerplate."

Amerimac's characterization of the complaint, however, unduly minimizes the basic nature

of what the plaintiffs are alleging. In broad terms, plaintiffs are alleging an ongoing scheme and

enterprise, headed by the individual defendants, where those individual defendants repeatedly

victimized persons in similar circumstances, with the assistance of various mortgage brokers,

including Amerimac. It may be true that Amerimac is only alleged to have participated in one of the

loans at issue, and it may be true that the allegation of an agency relationship existing as among and

between all of the defendants is conclusory and insufficiently supported by allegations of fact. What

is sufficiently alleged, however, is the common thread that defendant Valverde (at a minimum) was

at the center of all of these transactions, working in concert with the other defendants (including

Amerimac) to carry out her alleged scheme. Indeed, although the complaint somewhat ambiguously

alleges that Valverde was employed by Amerimac or defendant Summit (FAC para 24), it plainly

links Amerimac to Valverde and the other defendants' overall practices.

While it is not clear what, if any, liability the other defendants might have to the Reyes if

they were to prove their allegations, it seems likely that any liability of Amerimac to the Reyes

would be joint and several, at least in part, with any liability of Valverde to the Reyes. Under these

circumstances, it would be anomalous to require severance such that the Reyes would be forced to

Case 5:05-cv-02905-HRL Document 80 Filed 05/11/06 Page 5 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

 To the extent that Amerimac's may have envisioned that, after severance, the Reyes would

proceed against Amerimac and Valverde in the separate suit, a similar inefficiency would result in that

Valverde would be forced to defend two suits with overlapping issues.

6

litigate their claims against Valverde and Amerimac in two separate lawsuits.2

Denial of severance at this junction does not mean that all of these claims necessarily will

ultimately be tried in a single proceeding. The Court retains its discretion under Rule 20 (b) of the

Federal Rules of Civil Procedure to "make such orders as will prevent a party from being

embarrassed, delayed, or put to expense by the inclusion of a party against whom the party asserts

no claim and who asserts no claim against the party, and may order separate trials or make other

orders to prevent delay or prejudice," should circumstances warrant as this case develops. On the

present record, however, and based on the allegations of the complaint as to the nature of the

individual defendants' mode of operation, the motion will be denied.

V. CONCLUSION

Defendant Amerimac's motion to sever is DENIED. The remaining defendants' motion to

stay this action in consideration of the criminal case pending against defendants Valverde and

Covarrubias in Santa Clara County Superior Court is GRANTED. This action is hereby STAYED

through August 31, 2006. Defendants shall file and serve a status report with this Court on or before

August 15, 2006, setting forth the status of the criminal action.

IT IS SO ORDERED.

Dated: May 11, 2006 

RICHARD SEEBORG

United States Magistrate Judge

Case 5:05-cv-02905-HRL Document 80 Filed 05/11/06 Page 6 of 7
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

THIS IS TO CERTIFY THAT NOTICE OF THIS ORDER HAS BEEN DELIVERED TO:

Philip M. Adleson padleson@ahk-law.com, tclark@ahk-law.com

Kerstin Arusha kerstina@lawfoundation.org

Peter N. Brewer pbrewer@brewerfirm.com, julia@brewerfirm.com

Moses Diaz mosesd@lawfoundation.org, moses@ucdavis-alumni.com

Kyra Ann Kazantzis kyrak@lawfoundation.org

Hsiao C. Mao mmao@ahk-law.com, dvajretti@ahk-law.com

Jack R. Nelson jnelson@reedsmith.com, cahunt@reedsmith.com; jnelson@reedsmith.com

Paul E. Rice price@rutan.com, erice@rutan.com

James F. Zahradka , II jamesz@lawfoundation.org, teresam@lawfoundation.org

Dated: May 11, 2006 Chambers of Judge Richard Seeborg

By: /s/ BAK 

Case 5:05-cv-02905-HRL Document 80 Filed 05/11/06 Page 7 of 7