United States District Court, D. Idaho
THE UNITED STATES OF AMERICA, ex rel. CHARLES W. HOUPT, Plaintiff,
WELLS FARGO BANK, N.A., Defendant.
MEMORANDUM DECISION AND ORDER
Honorable Candy W. Dale United States Magistrate Judge
Court has before it four motions: (1) Plaintiff's Motion
for Partial Summary Judgment (Dkt. 22); (2) Defendant's
Motion for Summary Judgment (Dkt. 24); (3) Relator's
56(f) [sic] Motion for a Continuance of Defendant's
Motion for Summary Judgment to Allow for Additional Discovery
(Dkt. 30); and (4) Plaintiff's Motion for Order of
Duces Tecum Deposition for Certain SBA Employees
Charles Houpt brings this action against Wells Fargo Bank
National Association (Wells Fargo) pursuant to the False
Claims Act (FCA), 31 U.S.C. § 3729 et. seq.,
and the Financial Institutions Reform and Enforcement Act
(FIRREA), 12 U.S.C. § 1833a. Houpt alleges that Wells
Fargo presented a false or fraudulent claim for payment to
the Small Business Administration (SBA); made false
statements to the SBA; and, withheld material information
from the SBA related to an SBA loan secured by the
Houpts' real and personal property. He seeks civil
penalties under FIRREA for the bank's allegedly false
carefully considered the record, oral argument from both
parties on January 23, 2019, and relevant authority, the
Court will grant Defendant's motion for summary judgment
and deny Plaintiff's motion for partial summary judgment,
for the reasons explained below. And, Plaintiff's motion
to continue and his motion to take the deposition of SBA
employees will be denied.
Background - The SBA Loan and the State Court
dispute between Relator Charles Houpt and Wells Fargo has a
long history which began in 1993, when Gail and Charles Houpt
executed a promissory note in the original principal amount
of $312, 800 to American Bank of Commerce
(“ABC”). The loan was secured by both personal
property and real property commonly identified as 1954 S.
Yellowstone Highway in Idaho Falls, Idaho (the
“Property”). The Houpts granted a deed of trust
to ABC as beneficiary, and to First American Title Company
(“FATCO”) as Trustee, which was recorded in
Bonneville County as Instrument Number 846613 on or about
March 19, 1993. The loan was subject to the United States
Small Business Administration (“SBA”) Guarantee
under the ABC Note and Deed of Trust.
July of 1994 and April of 2001, several bank mergers
occurred. These bank mergers eventually resulted in the ABC
Note being assigned to Wells Fargo Bank Northwest National
Association. On February 5, 2004, Wells Fargo purchased most
of the assets and liabilities of Wells Fargo Bank Northwest,
and by means of that transaction, Wells Fargo obtained
ownership of the obligation owing under the ABC Note and ABC
Deed of Trust. Houpt v. Wells Fargo, No. CV2012-3518
(Idaho, 7th Dist, Jan. 7, 2014) (Mem. Dec. and
Order re: Motions for Summary Judgment). (Dkt. 27-1.) At the
time of the asset purchase, Wells Fargo did not record an
assignment of the ABC Deed of Trust. Houpt v. Wells Fargo
Bank, Nat. Ass'n, 160 Idaho 181, 184, 370 P.3d 384,
in November of 2007, the Houpts failed to make numerous
payments on the ABC Note to Wells Fargo. Although they were
able to bring their payments current on several occasions
prior to November 10, 2009, they made no payment to Wells
Fargo after November 10, 2009. Id.
about May of 2010, following the Houpts' initial default
on the ABC Note, Wells Fargo asked the SBA to pay the
guaranteed portion of the loan balance. At that time, the
balance due on the ABC Note was $69, 164.13. On May 4, 2010,
the SBA paid the loan guarantee to Wells Fargo. Decl. of
Glorfield ¶ 6. (Dkt. 26.) Wells Fargo received $56,
240.50. Houpt, 370 P.3d at 395.
October of 2010, Wells Fargo initiated non-judicial
foreclosure proceedings against the Houpts' Property. On
October 18, 2010, FATCO recorded a Notice of Trustee's
Sale, indicating ABC was the beneficiary of the Deed of
Trust. The sale date was set for February 17, 2011. On
February 16, 2011, the Houpts filed a bankruptcy petition
under Chapter 7 of the Bankruptcy Code in the United States
Bankruptcy Court for the District of Idaho, No. 11-40182-JDP,
which stayed the foreclosure proceedings.
February 14, 2012, the Bankruptcy Court granted stay relief
to Wells Fargo, and the bank resumed foreclosure proceedings.
On March 5, 2012, FATCO filed an Amended Notice of Default,
Instrument No. 1411255, stating the ABC Note was in default
with an unpaid principal balance of $62, 452.66,
accrued interest in the amount of $11, 338.06, and legal and
other fees in the amount of $50, 381.82, for a total amount
due of $124, 172.54. On March 15, 2012, FATCO filed a new
Notice of Trustee's Sale, stating “Beneficial
Interest is now held by Wells Fargo Bank, National
Association, by merger agreement dated February 5,
2004.” The date of the new sale was set for July 17,
2012. Houpt, 370 P.3d at 388.
22, 2012, the Houpts filed a Complaint and Motion for
Preliminary Injunction in the District Court of the Seventh
Judicial District of the State of Idaho, in and for the
County of Bonneville, against Wells Fargo, claiming, among
other things, that Wells Fargo's actions constituted
wrongful foreclosure. The Houpts sought to halt the sale of
the state court litigation, on August 24, 2012, Wells Fargo
obtained a written assignment of the ABC Note and Deed of
Trust from Wells Fargo Northwest, and recorded the assignment
in the records of Bonneville County on September 4, 2012. On
September 17, 2012, the state district court denied the
Houpts' motion for preliminary injunction, noting that
Wells Fargo had recorded the assignment of the Deed of Trust.
Fargo resumed foreclosure proceedings on the Property, but in
June of 2013, the Houpts found a buyer for the Property
outside of the foreclosure proceedings. On July 16, 2013, the
Houpts and Wells Fargo filed a stipulation with the state
district court to accommodate the sale, which provided that
the Houpts could sell the Property, distribute $19, 156.65 of
the proceeds to Wells Fargo to reimburse it for property tax
payments, and deposit the remaining $139, 500.45 in
anticipated sale proceeds with the Clerk of the Court to be
distributed “according to the resolution of the
priorities of valid liens or other considerations.”
Id. The sale of the Property was completed per the
terms of the parties' stipulation.
motion practice ensued, and the state district court issued
two memorandum decisions. On January 7, 2014, the district
court granted Wells Fargo's motion for summary judgment.
The court ruled that the Houpts' claim for wrongful
foreclosure was moot, because: (1) Wells Fargo had recorded a
written assignment of the beneficiary's interest in the
ABC Deed of Trust on September 4, 2012; and (2) the Houpts
had voluntarily sold the Property outside the foreclosure
second memorandum decision issued on February 20, 2014, upon
motions for reconsideration, the state district court
reaffirmed that the Houpts' claims were moot because of
the stipulated sale of the Property. The court determined
also that Wells Fargo, by virtue of the earlier assignments
due to the bank mergers and the 2004 asset purchase
agreement, stepped into the shoes of ABC with respect to the
priority date of the lien secured by the Property. The court
noted that the failure to record the assignment of the ABC
Deed of Trust did not affect the assignment's validity,
nor Wells Fargo's first priority lien status as against
other lien holders in the Property.
court ordered the sale proceeds of the Property to be paid to
Wells Fargo and, after making certain deductions, awarded
Wells Fargo its costs and attorney fees. The district
court's award consisted of $62, 452.66 in principal, $17,
216.20 in interest, $20, 270.69 in costs, and $40, 111.50 in
attorney fees. The court ordered the entirety of the $139,
500.45 on deposit with the court to be disbursed to Wells
Fargo to satisfy the award of $140, 051.05.
March 4, 2014, the Houpts timely filed a notice of appeal. On
March 9, 2016, the Idaho Supreme Court issued a written
opinion affirming the district court's decision. The
appellate court agreed that Wells Fargo's recording of
the notice of assignment of beneficial interest on September
4, 2012, and the voluntary stipulated sale which occurred in
June of 2013, mooted the Houpts' wrongful foreclosure
claims against Wells Fargo. However, the court remanded for a
determination of what effect, if any, the SBA loan guarantee
payment made to Wells Fargo by the SBA on May 4, 2010, may
have had on the interest and balance due under the ABC Note.
Further, the court vacated the district court's grant of
attorney fees and costs for a determination that would
exclude all costs and fees incurred by Wells Fargo before it
recorded the notice of assignment of beneficial interest in
the ABC Note and Deed of Trust on September 4, 2012.
Id. at 398. The court explained that Wells Fargo
should not have been awarded attorney fees for the time
expended during its initial improper initiation of
foreclosure, before it had properly perfected its secured
interest in the Property by recording the notice of
assignment. Id. at 397-98.
the proceedings upon remand, the Houpts argued that Wells
Fargo's failure to follow the SBA's liquidation
procedures relieved them of their obligation to pay the full
balance remaining on the ABC Note, and should have prevented
the bank from recovering attorney fees and reduced its
recovery by the amount of the loan guarantee payment. The
court disagreed. In a written memorandum issued on November
29, 2016, the court held that Wells Fargo's alleged
failure to comply with SBA regulations did not alter the
terms of the Note payable to Wells Fargo, and that Wells
Fargo had the authority to collect the balance of the Note.
The court found also that the SBA loan guarantee payment to
Wells Fargo of $56, 240.86 to cover the guaranteed portion of
the Houpts' loan had no bearing on the amount of interest
or the loan balance owed. The court reduced the attorney fee
award per the Idaho Supreme Court's directive and awarded
$56, 908.00 for attorney fees incurred by Wells Fargo after
September 3, 2012.
court entered judgment for Wells Fargo as follows: principal
of $62, 452.66; interest through October 23, 2013, in the
amount of $17, 216.20; interest from October 24, 2013,
through April 7, 2014, of $1, 807.52; costs of $614.18; and
attorney fees of $56, 908.00, for a total judgment of $138,
998.56. The court ordered Wells Fargo to return $501.90 of
the $139, 500.46 previously distributed to it by the court.
Undisputed Facts Relevant to the Motions for Summary
Turning to the most facts relevant to the motions pending
before the Court, the following facts contained in the record
are undisputed, and some included above bear repeating to
understand the timeline of the present dispute.
February 5, 2004, Wells Fargo purchased the assets and
liabilities of Wells Fargo N.W., which included the ABC Note.
Aff. of Hart Ex. A, Houpt v. Wells Fargo, No.
CV2012-3518, Mem. Dec. at 3 (7th Dist. Idaho, Jan.
7, 2014). (Dkt. 27-1 at 3.) See also Aff. of Olsen
Ex. C. (Aff. of Glorfield ¶ 8, Dkt. 23-7 at 3.) By
November 1, 2007, the Houpts had failed to make
“numerous payments on the ABC Note.” Id.
On November 12, 2008, in response to a letter from Wells
Fargo, the SBA sent a letter to Wells Fargo noting the Houpt
Loan was in liquidation status, together with a packet of
information setting forth SBA guidelines applicable to SBA
loan liquidation proceedings. Compl. (Dkt 1-10 at 5 -
Aff. of Olsen, Ex. C. (Dkt. 23-8 at 1-27.)
November 10, 2009, the Houpts ceased making payments on the
ABC Note. Aff. of Hart Ex. A, Houpt v. Wells Fargo,
No. CV2012-3518, Mem. Dec. at 3 (7th Dist. Idaho,
Jan. 7, 2014). (Dkt. 27-1 at 3.) On April 19, 2010, Gary
Glorfield, the Vice President of Wells Fargo, requested the
SBA purchase the guaranteed portion of the Houpts' loan.
Aff. of Olsen Ex. C. (Dkt. 23-5 at 27.) Glorfield's
letter to the SBA indicated that the bank included
“copies of the collateral documents pertaining
to” the Houpts' loan. Id. On May 4, 2010,
the SBA paid Wells Fargo $56, 240.86, representing the
guaranteed portion of the outstanding debt pursuant to the
ABC Note. Id. (Dkt. 23-5 at 18.)
August 24, 2012, Wells Fargo N.W. executed an assignment of
the ABC Note and Deed of Trust, assigning the same to Wells
Fargo. Aff. of Hart Ex. A, Houpt v. Wells Fargo, No.
CV2012-3518, Mem. Dec. at 4 (7th Dist. Idaho, Jan. 7, 2014);
(Dkt. 27-1 at 4.) On September 4, 2012, Wells Fargo recorded
the assignment of the Deed of Trust. Id.
the state court litigation the Houpts had commenced on June
22, 2012, against Wells Fargo, Houpt obtained documents from
the SBA and discovery from Wells Fargo. On January 10, 2013,
the Houpts (at their attorney's direction) requested
documents from the SBA pursuant to the Freedom of Information
Act. Decl. of Olsen ¶ 9, Exs. A, B, C. (Dkt. 31 at 3,
10-15.) Carol Hulme, attorney advisor to the SBA, responded
to the Houpts' FOIA request on January 10, 2013.
Id. Ex. A. (Dkt. 31 at 10.)Later, on September 10, 2013,
Carol Hulme responded to an inquiry by the Houpts'
counsel concerning the earlier FOIA request, confirming that
all SBA documents had been produced. Id. Ex. C.
(Dkt. 31 at 15.) Also in September of 2013, the Houpts issued
a subpoena to the SBA, after which the Houpts learned the SBA
had paid the loan guarantee to Wells Fargo. Compl. ¶ 42.
See also Aff. of Olsen ¶ 5 (Dkt. 23 at 2);
Decl. of Olsen ¶ 9, Ex. B (Dkt. 31 at 13.) And on August
20, 2013, Wells Fargo answered the Houpts' requests for
admission, wherein the Bank admitted that the SBA had paid to
Wells Fargo the loan guarantee in May of 2010. Aff. of Olsen
Ex. C. (Dkt. 23-7 at 28.)
February 20, 2014, the state court issued is memorandum
decision and order on the Houpts' and Wells Fargo's
respective motions to reconsider filed in the state court
litigation. It awarded Wells Fargo $140, 051.05, and ordered
the clerk to release the funds to Wells Fargo. Aff. of Hart
Ex. B, Houpt v. Wells Fargo, No. CV2012-3518, Mem.
Dec. at 31 (7th Dist. Idaho, Feb. 20, 2014); (Dkt. 27-2 at
31.) Compl. ¶ 46.
March 27, 2014, the Houpt loan was satisfied by Wells
Fargo's receipt of the net proceeds from the voluntary
sale of the Property. Decl. of Glorfield ¶ 7. (Dkt. 26.)
In April of 2014, Wells Fargo repaid the loan guarantee to
the SBA, shortly after Wells Fargo received the proceeds from
the sale of the Property. Decl. of Glorfield ¶ 8; Decl.
of Piccioni ¶ 3. (Dkt. 25, 26.) Neither Glorfield, who
is the Vice President of and a custodian of records for Wells
Fargo, nor Piccioni, who is an officer of the United States
Small Business Administration and a custodian of records
familiar with the Houpts' SBA loan file, included
documentation of the loan guarantee repayment with their
declarations. However, both Glorfield and Piccioni declared
that their statements were based upon their own personal
knowledge and made under penalty of perjury.
December 10, 2014, in response to a third email inquiry from
the Houpts, Carol Hulme at the SBA confirmed there were no
new documents in the SBA file, and that all documents related
to the Houpts' SBA loan had been provided to the Houpts
pursuant to their earlier FOIA request. Decl. of Olsen ¶
9, Ex. C. (Dkt. 31 at 15.)
September 21, 2016, during the state court proceedings
following the Idaho Supreme Court's remand, Wells Fargo
produced its entire loan file, including its correspondence
with the SBA, in response to the Houpts' requests for
production of documents. Compl. ¶ 43. Aff. of Olsen Ex.
C. (Dkt. 23-5 - 23-7.) See also Aff. of Hart Ex. C,
Houpt v. Wells Fargo, No. CV2012-3518, Mem. Dec. at
6-10 (7th Dist. Idaho, Nov. 29, 2016); (Dkt. 27-3 at
October 20, 2016, the Houpts deposed Gary Glorfield, Wells
Fargo's 30(b)(6) designee. During his deposition,
Glorfield testified he began working for Wells Fargo in
January of 1996 and became familiar with the Houpt SBA loan
upon its transfer to him on January 20, 2006. Aff. of Olsen
Ex. C, Glorfield Depo. at 17. (Dkt. 23-4 at 6.) Glorfield was
questioned about Wells Fargo's earlier production of
documents. Glorfield Depo. at 25. (Dkt. 23-4 at
8.) He also was asked whether certain
documents, such as an SBA litigation plan, wrap-up report,
and the like, were sent to the SBA, to which Glorfield
testified that he either did not know the answer to the
question, or that the document in question was not required
to be completed. Glorfield Depo. at 43-82. (Dkt. 23-4 at
November 29, 2016, the state court issued its memorandum
decision on the motions for summary judgment on remand from
the Idaho Supreme Court. It found that Wells Fargo was due
$138, 998.56, and must return approximately $500 of the money
previously disbursed to the bank by the state court in 2014.
Aff. of Hart Ex. C, Houpt v. Wells Fargo, No.
CV2012-3518, Mem. Dec. (7th Dist. Idaho, Nov. 29, 2016).
Houpt, as relator, filed this lawsuit against Wells Fargo on
September 11, 2017. On October 2, 2018, Houpt filed his
motion for partial summary judgment. On October 23, 2018,
Wells Fargo filed its motion for summary judgment. On
November 13, 2018, Houpt filed a motion to continue the
briefing on Wells Fargo's motion for summary judgment,
together with a motion to take depositions of designated SBA
employees, claiming he needs additional discovery.
Nonetheless, Houpt responded to Wells Fargo's motion.
Summary Judgment Standard
Federal Rule of Civil Procedure 56 provides, in pertinent
part, that the “court shall grant summary judgment if
the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed.R.Civ.P. 56(a). “Only
disputes over facts that might affect the outcome of the suit
under the governing law will properly preclude the entry of
summary judgment.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). For summary judgment
purposes, an issue must be both “material” and
“genuine.” An issue is “material” if
it affects the outcome of the litigation; an issue is
“genuine” if it must be established by
“sufficient evidence supporting the claimed factual
dispute ... to require a jury or judge to resolve the
parties' differing versions of the truth at trial.”
Hahn v. Sargent, 523 F.3d 461, 464 (1st Cir. 1975)
(quoting First Nat. Bank of Ariz. v. Cities Serv.
Co., 391 U.S. 253, 289 (1968)); see also British
Motor. Car Distrib. v. San Francisco Auto. Indus. Welfare
Fund, 883 F.2d 371, 374 (9th Cir. 1989). “Where
the record taken as a whole could not lead a rational trier
of fact to find for the non-moving party, there is no genuine
issue for trial.” Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986).
parties submit cross motions for summary judgment, a court
independently searches the record for factual disputes.
See Fair Hous. Council of Riverside Cnty., Inc. v.
Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001). The
filing of cross motions for summary judgment “where
both parties essentially assert that there are no material
factual disputes” does not vitiate a court's
responsibility to determine whether disputes as to material
facts are present. See id.
considering a motion for summary judgment, a court does not
make findings of fact or determine the credibility of
witnesses. See Anderson, 477 U.S. at 255. Rather, it
must draw all inferences and view all evidence in the light
most favorable to the nonmoving party. See
Matsushita, 475 U.S. at 587-88; Whitman v.
Mineta, 541 F.3d 929, 931 (9th Cir. 2008).
asserts he is entitled to summary judgment on the issue of
liability under the FCA and the FIRREA. He contends that
Wells Fargo falsely represented to the SBA that it held a
beneficial interest in the ABC Note such that it was not
entitled to payment of the SBA loan guarantee. He claims that
Wells Fargo's failure to submit required reports under
applicable SBA regulations should subject the bank to
penalties under a reverse false claim theory. And finally, he
argues Wells Fargo is liable under the FIRREA because the
bank wrongfully initiated foreclosure; retained the SBA loan
guarantee payment; and failed to follow SBA reporting
Fargo asserts it is entitled to summary judgment on
Houpt's causes of action brought under the FCA because
Wells Fargo did not make a false statement to the SBA, and
the bank is not subject to SBA regulations applicable to SBA
supervised lenders, thereby excusing it from reporting
requirements. Wells Fargo argues also that Houpt's cause
of action under the FACA is barred by applicable statutes of
limitation. As for Houpt's cause of action seeking civil
penalties under the FIRREA, Wells Fargo argues Houpt has not
established the bank committed criminal misconduct to support
reasons explained below, the Court will grant Wells
Fargo's motion for summary judgment on Houpt's FCA
and FIRREA claims. Houpt has failed to establish the
essential elements of a cause of action under the FCA, and
even if he could do so, the claims are time barred by the
applicable statutes of limitations. Nor is Houpt authorized
to bring an action for civil penalties under the FIRREA under
the plain language of the statute.