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Cremaldi v. Wells Fargo Bank, N.A.

United States District Court, D. Massachusetts

March 30, 2017

COSMO N. CREMALDI and CATHERINE L. CREMALDI, Plaintiffs
v.
WELLS FARGO BANK, N.A. d/b/a WELLS FARGO HOME MORTGAGE, Defendant.

          MEMORANDUM AND ORDER

          WOLF, D.J.

         On March 4, 2013, Cosmo and Catherine Cremaldi (the "Cremaldis") filed this action in the Middlesex Superior Court for the Commonwealth of Massachusetts alleging that defendant Wells Fargo Bank, N.A. ("Wells Fargo") irreparably damaged their credit, caused them to incur excessive interest charges, and caused them emotional distress while reviewing their eligibility for a loan modification. Plaintiffs allege that Wells Fargo repeatedly encouraged them to apply for a loan modification for which they were not qualified and instructed them to cease making mortgage payments. Plaintiffs further allege that after requiring them to wait for months while late fees and penalties accrued, Wells Fargo placed their mortgage in foreclosure without considering them for a modification. Plaintiffs allege that, as a result, they were required to pay Wells Fargo thousands of dollars in fees to reinstate their mortgage and avoid foreclosure.

         Plaintiffs allege violations of Mass. Gen. Laws Chapter 93A (Count I), misrepresentation (Count II), intentional infliction of emotional distress (Count III), and negligent infliction of emotional distress (Count IV). Defendant removed the case to this court on July 24, 2013. The case was referred to Magistrate Judge Jennifer C. Boal for full pretrial purposes, including a report and recommendation on any dispositive motions. See Docket No. 17.

         On June 29, 2016, defendant moved for summary judgment. See Docket No. 78. On August 2, 2016, plaintiffs moved to strike certain portions of the record submitted by defendant in support of its motion for summary judgment. See Docket No. 89. On August 16, 2016, defendant filed a cross motion to strike certain portions of the record submitted by plaintiffs in support of its opposition to defendant's motion for summary judgment. See Docket No. 92.

         The Magistrate Judge issued her Report and Recommendation on January 3, 2017. See Docket No. 108. In it, she recommends that the court allow defendant's motion to strike and allow in part and deny in part plaintiffs' motion to strike. In addition, she recommends that the court allow defendant's motion for summary judgment. On January 16, 2017, plaintiffs filed objections to the Report and Recommendation (Docket No. 110), and on January 30, 2017, defendant filed an opposition to those objections (Docket No. 112) .

         The court has reviewed de novo the issues to which a proper objection has been made. See Fed.R.Civ.P. 72(b)(3). The court finds the Report and Recommendation to be thorough, thoughtful, and persuasive. Therefore, the Report and Recommendation is being incorporated in this Memorandum and Order and is being adopted.

         In view of the foregoing, it is hereby ORDERED that:

         1. The Magistrate Judge's Report and Recommendation (Docket No. 108) is ADOPTED and INCORPORATED pursuant to 28 U.S.C. §636.

         2. For the reasons stated in the Report and Recommendation, Defendant's Motion to Strike (Docket No. 92) is ALLOWED.

         3. For the reasons stated in the Report and Recommendation, Plaintiffs' Motion to Strike (Docket No. 89) is ALLOWED in part and DENIED in part.

         4. For the reasons stated in the Report and Recommendation, Defendant's Motion for Summary Judgment (Docket No. 78) is ALLOWED.

         5. Judgment shall enter for defendant.

         REPORT AND RECOMMENDATION ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND PARTIES' CROSS-MOTIONS TO STRIKE [Docket Nos. 78, 89, 92]

          BOAL, M.J.

         January 4, 2017

         Plaintiffs Cosmo and Catherine Cremaldi have brought this action against defendant Wells Fargo Bank, N.A. d/b/a Wells Fargo Home Mortgage, alleging that Wells Fargo irreparably damaged their credit, caused them to incur excessive interest charges, and caused them emotional distress while reviewing their eligibility for a loan modification. Plaintiffs allege that Wells Fargo repeatedly encouraged them to apply for a loan modification for which they were not qualified and instructed them to cease making mortgage payments. After requiring the plaintiffs to wait for months while late fees and penalties accrued, Wells Fargo placed their mortgage in foreclosure without considering them for a modification. The plaintiffs further allege that they were required to pay Wells Fargo thousands of dollars in fees to reinstate their mortgage and avoid foreclosure.

         Wells Fargo has filed a motion for summary judgment in its favor on all of plaintiffs' claims. Docket No. 78.[1] For the following reasons, the Court recommends that the District Judge assigned to this case grant the motion.

         I. PROCEDURAL BACKGROUND

         On March 1, 2013, the Cremaldis filed their complaint in Massachusetts Superior Court. See Docket No. 7 at 38. Defendants removed the case to this Court on July 24, 2013. Docket No. 1.

         On August 30, 2013, Wells Fargo filed a motion to dismiss, Docket No. 8, which the District Court denied. Docket No. 16.

         The Cremaldis filed an amended complaint on May 15, 2015. Docket No. 27. On the same date, Wells Fargo filed a motion for reconsideration of the District Court's decision denying its motion to dismiss, which the District Court denied on November 2, 2015. Docket No. 37.

         Wells Fargo filed the instant motion for summary judgment on June 29, 2016. Docket No. 78. On August 2, 2016, the Cremaldis filed their opposition as well as a motion to strike certain portions of the record. Docket Nos. 87, 89. Wells Fargo filed a reply[2] and a cross-motion to strike on August 16, 2016. Docket Nos. 90, 92. The Court heard oral argument on December 14, 2016.

         II. FACTS

         A. Scope Of The Record

         Both parties have moved to strike evidence proffered by the other in support of their arguments. Docket Nos. 89, 92. Because the motions to strike bear on the evidence that the Court may consider in deciding Wells Fargo's motion for summary judgment, the Court is considering them first.

         1. Plaintiffs' Motion To Strike

         The Cremaldis have moved to strike the affidavits of Kimberly Ann Mueggenberg and Dallin Wilson. Docket No. 89. In the alternative, they move the Court to "strike all assertions set forth in said affidavits except as such portions as the Court deems appropriate to consider relative to [Wells Fargo's motion for summary judgment]." Id. at 1.

         Rule 56(c)(4) requires affidavits in support or opposition of motions for summary judgment to be made "on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." Fed.R.Civ.P. 56(c)(4). In deciding a motion for summary judgment, "a court may take into account any material that would be admissible or usable at trial... [but] inadmissible evidence may not be considered." Facev v. Dickhaut 91 F.Supp.3d 12, 19 (D. Mass. 2014) (quoting Horta v. Sullivan, 4 F.3d 2, 8 (1st Cir. 1993)). "If evidence cannot be presented in a form that would be admissible at trial, the court may not rely on it." Id. (citations omitted).

         A party moving to strike an affidavit must specify the objectionable portions of the affidavit and the specific grounds for objection. Id. (citations omitted). The Court will disregard only those portions of the affidavit that are inadmissible and consider the rest of it. Id. First, the Cremaldis request that the Court strike the entire Affidavit of Kimberly Ann Mueggenberg in Support of Wells Fargo's Motion for Summary Judgment ("Mueggenberg Aff"). Docket No. 80 at 14-182. Ms. Mueggenberg is the Vice President of Loan Documentation at Wells Fargo. Mueggenberg Aff. at ¶ 1. The Cremaldis object to the Court's consideration of Ms. Mueggenberg's affidavit because "she has no personal knowledge of the matters described in the business records for which she testifies, her testimony in some cases is misleading and inaccurate, and because Wells Fargo presumably has employees with personal knowledge of such matters and has not secured their affidavits or otherwise offered their testimony to this Court." Id., at 4-5.

         Ms. Mueggenberg specifically avers that in the regular performance of her job functions, she is "familiar with the business records maintained by Wells Fargo for the purpose of servicing mortgage loans and [has] personal knowledge of the operations and the circumstances surrounding the preparation, maintenance and retrieval of records in Wells Fargo's recordkeeping systems."[3] Mueggenberg Aff. at ¶ 3. This statement forms a sufficient foundation for an assertion of personal knowledge of the records attached to her affidavit. See Brown v. Bank of Am., No. 13-13256-PBS, 2015 WL 5163045, at *3 (D. Mass. Sept. 3, 2015); Foregger v. Residential Credit Solutions. Inc.. No. 12-11914-FDS, 2014 WL 1364788, at *4 (D. Mass. Apr. 4, 2014): see also Facev v. Dickhaut, 91 F.Supp.3d at 20-21 ("Motions to strike have been denied even when the declarant did not personally experience the matters discussed in the affidavit, but did review business or public records and included information from those records with the affidavit."). To the extent that the Cremaldis challenge the accuracy of Ms. Mueggenberg's statements or the substance of the underlying records, those arguments go to the weight of Ms. Mueggenberg's testimony and not to its admissibility. See Brown v. Bank of Am., 2015 WL 5163045, at *3. Therefore, the Court finds that Ms. Mueggenberg's affidavit may be considered in connection with Wells Fargo's motion for summary judgment.

         The Cremaldis also object to consideration of the Affidavit of Dallin Wilson, Esq. in Support of Wells Fargo's Motion for Summary Judgment ("Wilson Aff."). Docket No. 80 at 184446. Attorney Wilson represents Wells Fargo in this matter. Attorney Wilson's affidavit authenticates and attaches documents that the Cremaldis produced in this litigation, or documents that he personally retrieved from publicly available sources. See Docket No. 92 at 4. The Cremaldis argue that the Court should not consider the affidavit to the extent that Attorney Wilson is characterizing the substance of the exhibits to the affidavit. Docket No. 89 at 5. The Cremaldis also argue that Attorney Wilson's characterizations are inconsistent with, if not intentionally misleading, regarding the contents of the documents. Id. Wells Fargo acknowledges that Attorney Wilson's descriptions of the contents of the documents are not evidence and that the Court may reach its own conclusions from its review of the documents. Docket No. 92 at 4-5. The Court therefore finds that it is appropriate to consider Attorney Wilson's affidavit only to the extent that it authenticates documents. The Court will not consider Attorney Wilson's characterization regarding the contents of the documents attached to his affidavit.

         Accordingly, the Court recommends that the District Judge grant in part and deny in part the Cremaldis' motion to strike as described above.

         2. Wells Fargo's Motion To Strike

         Wells Fargo has moved to strike Exhibit 4 to the Cremaldis' opposition to Wells Fargo's motion for summary judgment. Docket No. 92 at 12-14. Wells Fargo states that Exhibit 4 is a document captioned "Customer Account Activity Statement" with the heading "Attorney Work Product - Do Not Distribute." Id. at 12. In preparation for an earlier mediation session, Wells Fargo provided a copy of Exhibit 4 to the Cremaldis to allow them to better understand their payment history and to facilitate settlement in this matter. Id. In his email transmitting Exhibit 4 to plaintiffs' counsel, Wells Fargo's counsel stated the following:

Please note that this payment history was created specifically for settlement purposes only and is not admissible as evidence. Also note that the document is marked as "Work Product" and Wells Fargo is not waiving its right to assert privilege with respect to this document or any other during the course of litigation.

Docket No. 92-3.

         Rule 408 of the Federal Rules of Evidence prohibits the introduction into evidence of settlement offers or conduct or statements made during settlement negotiations "to prove or disprove the validity of amount of a disputed claim." Fed.R.Evid. 408. However, Rule 408 does not protect preexisting information simply because it was presented to the adversary in compromise negotiations. Fed.R.Evid. 408, Advisory Committee Notes, 2006 Amendment. At oral argument, counsel for Wells Fargo stated that Exhibit 4 was created by Wells Fargo for counsel's use in this litigation and was not prepared specifically for the mediation. Accordingly, Rule 408 does not preclude the use of Exhibit 4.

         To the extent that Wells Fargo argues that Exhibit 4 is protected by the attorney work product doctrine, see Docket No. 99 at 1, any privilege was waived when Wells Fargo shared the document with its adversary. See Brvan Corp. v. Chemwerth. Inc. 296 F.R.D. 31, 38 (D. Mass. 2013) (citations omitted) (work product protection is waived when documents are disclosed to adversary, see also United States v. Massachusetts Institute of Tech., 129 F.3d 681, 687 (1st Cir. 1997) ("[W]ork product protection is provided against 'adversaries, ' so only disclosing material in a way inconsistent with keeping it from an adversary waives work product protection.").

         Nevertheless, the Cremaldis have not properly authenticated Exhibit 4 as a business record or otherwise. Indeed, Wells Fargo maintains that the document has not been verified as accurate but was rather prepared solely to be of assistance to counsel in understanding the payment history for the Cremaldis' loan. See Docket No. 99 at 1. Because the Cremaldis have failed to establish that the document would be admissible in evidence, the Court may not properly rely on it. Accordingly, the Court recommends that the District Court grant Wells Fargo's motion to strike.

         B. FACTS[4]

         1. Background

         On May 2, 1972, the Cremaldis purchased the real estate located at 11-13 William Street, Cambridge, Massachusetts (the "William Street Property") for $44, 000.[5] On October 30, 1974, the Cremaldis purchased the real estate located at 588-590 Franklin Street, Cambridge, Massachusetts (the "Franklin Street Property") for $40, 000.[6] On October 29, 1991, the Cremaldis purchased the real estate located at 31-33 Putnam Avenue, Cambridge, Massachusetts (the "Putnam Avenue Property") for $270, 000.[7] At all relevant times, the Cremaldis were generating approximately $13, 000 per month from their rental units.[8]

         Cosmo Cremaldi entered into a loan with Wachovia Mortgage, FSB, a Federal Savings Bank, its successors and/or assignees, for the principal amount of $640, 000 (the "Loan") by signing a Fixed Rate Mortgage Note dated January 25, 2008.[9] The Loan was secured by a Mortgage on the William Street Property, that was also dated January 25, 2008 (the "Mortgage").[10]

         On November 1, 2009, Wachovia Mortgage, FSB changed its name to Wells Fargo Bank Southwest, N.A. and merged into Wells Fargo Bank, N.A.[11]

         2. The Cremaldis' Attempts To Modify The Loan

         In 2010, the Cremaldis started having financial problems and trouble making their monthly mortgage payments.[12] Around September 2010, the Cremaldis began contacting Wells Fargo to request assistance in staying current on their Mortgage.[13] In September 2010, a borrower[14] contacted Wells Fargo to set up a payment arrangement.[15]

         In September and October 2010, the Cremaldis did not have enough funds available to pay their Mortgage.[16] On November 30, 2010, Ms. Cremaldi called Wells Fargo and told them that she was unable to make her Mortgage payment.[17] Wells Fargo's representative suggested that the long-term solution would be a loan modification but that the Cremaldis were not eligible for the Home Affordable Modification Program ("HAMP") because they were not behind on their Loan Payments.[18] Wells Fargo's notes on the call also state that the Cremaldis were only having trouble for December and were looking for a one-month deferment.[19] The note also states that Wells Fargo's representative "adv[ised] borrower to call back next week about a potential repayment plan reduction for borrowers. 1-800-282-3451. Stated consquences [sic]."[20]

         Ms. Cremaldi testified that when the Cremaldis first started contacting Wells Fargo, they were only seeking a temporary deferment (forbearance) and were not interested in a permanent loan modification.[21] Mr. Cremaldi did not understand the difference between a temporary deferment and a permanent loan modification and the first time he heard about HAMP was in 2015.[22]

         The Cremaldis allege that at some point they were instructed to stop making mortgage payments so that they would qualify for a loan modification. Because this is a key allegation of their case, and the parties have different characterizations of the Cremaldis' testimony on this point, the Court quotes the relevant portions of the Cremaldis' testimony in this regard below. Mr. Cremaldi testified as follows:

Q: I understand your claim in this lawsuit is that at some time someone from Wells Fargo instructed you to stop paying your mortgage, is that correct?
A: That is correct.
Q: We'll get to answers to interrogatories that you guys produced in this case, but is it true that you claim November 30th is the first time someone from Wells Fargo instructed you to stop paying your mortgage?
A: Again, my memory, I know it was mentioned somewhere along the line but I couldn't give you a timeline.
Q: Fair to say though there's nothing in this entry that mentions the bank instructing you to stop paying your mortgage.
A: No.
***
Q: So I know you say you don't remember exactly when somebody from Wells Fargo told you to stop paying your mortgage. When they did tell you, can you tell me to the best of your memory what exactly they told you in regards to stop paying your mortgage?
A: I was told that I was up to date on my mortgage payments and that I didn't qualify because I'd have to be in default.
Q: Did they only tell you you were not eligible because you were not in default or did they actually tell you you should stop paying your mortgage?
A: That's correct, what you're saying.
Q: Were you surprised to hear the bank telling you to stop paying your mortgage?
A: Yes.
Q: Did you ask them any questions about what the consequences would be if you stopped paying your mortgage?
A: Yes.
Q: What did they tell you? A: That I was not to worry, that eventually it would all straighten out once the modification or whatever they were talking about was concluded.
***
Q: Generally speaking though, is it your recollection that you did make periodic payments to the bank during this time?
A: Yes.
Q: And what was the purpose of making those periodic payments if the bank had told you to stop making payments?
A: Good faith, trying to establish good faith.
Q: During this time do you recall ever telling the bank that the reason you had stopped paying was because somebody at the bank had told you to stop paying?
A: That conversation could have come up, yeah.

         Deposition of Cosmo Cremaldi (Ex. C to Wells Fargo's Statement of Undisputed Facts) ("Mr. Cremaldi Depo."), pp. 19:21-20:12; 21:11-22:11; 50:5-17.

         Ms. Cremaldi testified as follows:

Q: So when you called on November 30th, your testimony is that you were unable to make your mortgage payment, is that correct?
A: Uh-hum. Yes.
Q: I believe this is the phone call that you allege was when Wells Fargo first told you to stop making your mortgage payments; is that true?
A: It was after we had filed the papers for the - - what was it called again?
Q: HAMP? Modification?
A: Modification. It was after so many of them that we then said what else can we do.
Q: On November 30th, which seems pretty early in the process, is it your testimony that at that point in time the bank didn't tell you to stop making your mortgage payments, at least on this phone call on November 30?
A: What year was that?
Q: 2010.
A: I can't remember. I don't know what year it was. It was after all this started. Q: So it was after you submitted some applications?
A: Yes.
Q: Do you know if as of November 30, 2010, you guys had submitted any paperwork yet?
A: I can't remember.
Q: Does this sound like this is maybe the first time you learned about a modification?
A: Yes. That's true.
Q: Do you remember who it was at Wells Fargo that told you to stop paying the mortgage?
A: There's a sheet I wrote down names. It was different people.
Q: So there was more than one person who told ...

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