Covarrubias v. Gower

• Decision Date: 19 April 2016
• Docket Number: Case No. 13-cv-04611-EMC
• Parties: HERMAN MICHAEL COVARRUBIAS, Petitioner, v. ROBERT GOWER, Respondent.
• Court: U.S. District Court — Northern District of California

HERMAN MICHAEL COVARRUBIAS, Petitioner, v. ROBERT GOWER, Respondent.

Case No. 13-cv-04611-EMC

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

April 19, 2016

ORDER DENYING PETITION FOR WRIT OF HABEAS CORPUS

I. INTRODUCTION

Herman Covarrubias filed this pro se action for a writ of habeas corpus under 28 U.S.C. § 2254. The Court dismissed two claims and issued an order to show cause why the writ should not be granted as to eighteen other claims asserted in the petition. Respondent has filed an answer and Mr. Covarrubias has filed a traverse. For the reasons explained below, the petition will be DENIED.

II. BACKGROUND

Herman Covarrubias and Esperanza Valverde were husband and wife mortgage brokers, operating Summit Mortgage One mortgage brokerage. According to Mr. Covarrubias, the "essence of the charges" was that he "(1) misrepresented the terms and costs of loans to borrowers; (2) misrepresented the borrowers' income and employment information to the lenders; and (3) forged three documents." Docket No. 1 at 38. The California Court of Appeal described the crimes:

A prospective borrower engages the services of a mortgage broker to work with wholesale lenders on the borrower's behalf. The wholesale lender's loan representative works directly with the broker, not the borrower. The broker submits a loan application and other documentation on behalf of the borrower to the wholesale lender's loan representative. This documentation is then forwarded to the wholesale lender's loan underwriter, who makes the decision whether to fund the loan. The purpose of the underwriting process is to ensure that the borrower will be able to repay the loan.

This case involved five wholesale lenders: Argent Mortgage Corporation (Argent), BNC Mortgage (BNC), Downey Savings and Loan (Downey), WMC Mortgage (WMC), and World Savings (World). These lenders relied on the information on the loan applications and documentation submitted by brokers to determine whether the borrowers would be able to repay the loans. Where the application was for a "stated income" loan, the lender relied on the broker to ensure that the borrower's stated income was accurate. [Footnote omitted.] Typically, the underwriter would issue a conditional loan approval that required further documentation. The loan would not actually be funded until the conditions were met.

Because the broker's fees are funded from the total loan amount, the borrower ends up paying those fees. Typically the broker's fee is 1 percent of the loan amount, but it may legally be as high as 5 percent. The wholesale lender may require a longer prepayment penalty period if the broker's fee is high in order to ensure that the lender profits from the loan. The borrower on a refinancing transaction had the legal right to cancel the transaction within three days after signing the documents.

Defendants acted as brokers on numerous transactions with these five wholesale lenders. These were subprime loans. Subprime loans include stated income loans, loans to borrowers with poor credit scores, and loans with high loan-to-value ratios. Many of the borrowers represented by defendants did not speak or read English, could not read the documents (which were always in English), and did not understand the details of the transactions. Defendants lied to these borrowers about the amounts of their fees and misrepresented the terms of the loans. Valverde notarized backdated deeds of trust in order to prevent the borrowers from exercising their rights to cancel refinancing transactions. Defendants prepared and submitted loan applications that misrepresented the borrowers' income and assets, and forged documents to support those applications.

People v. Valverde, et al., Cal. Court of Appeal No. H034263, July 25, 2012 opinion ("Cal. Ct. App. Opinion") at 2-4.

Following a jury trial in Santa Clara County Superior Court, Mr. Covarrubias was convicted of 19 counts of grand theft and three counts of forgery, with sentence enhancements for excessive takings. He was sentenced to 19 years and 8 months in state prison in May 2009.¹

Mr. Covarrubias appealed. In July 2012, the California Court of Appeal affirmed the conviction, and in November 2012, the California Supreme Court denied his petition for review. Mr. Covarrubias also filed a petition for writ of habeas corpus in the state courts. The California Court of Appeal and the California Supreme Court denied his habeas petitions.

On September 12, 2013, Mr. Covarrubias filed this action for a writ of habeas corpus pursuant to 28 U.S.C. § 2254. The petition alleged twenty claims: (1) the trial court's refusal to grant Mr. Covarrubias' discovery request for, and the trial court's exclusion of, evidence of a general industry practice of lending to unqualified borrowers denied Mr. Covarrubias his federal constitutional rights to due process and to present a defense; (2) Mr. Covarrubias' right to due process was violated because the evidence was insufficient to support the sentence enhancements under California Penal Code sections 186.11 and 12022.6 for excessive taking; (3) the trial court violated Mr. Covarrubias' Sixth and Fourteenth Amendment rights by failing to instruct the jury as to the definition of a "loss" in the sentence enhancement allegations; (4) "the court abused its discretion when it sentenced [Mr. Covarrubias] to the term of 19 years and 8 months," Docket No. 1 at 13; (5) the use of false evidence to convict Mr. Covarrubias deprived him of his federal constitutional right to a fair trial; (6) the search and seizure were illegal, in violation of Mr. Covarrubias' Fourth Amendment rights; (7) Mr. Covarrubias' federal right to due process was violated because the jurors were exposed to general news about the collapse of the financial markets but the trial court would "not allow[] evidence on how the subprime market really worked," id. at 6; (8) Mr. Covarrubias' right to due process was violated by the prosecutor's misconduct, id.; (9) Mr. Covarrubias' federal constitutional right to a fair trial was violated because the "prosecutor deliberately misled defense about the theory of [Mr. Covarrubias'] guilt," id. at 7; (10) Mr. Covarrubias' right to due process was violated because Mr. Covarrubias "was convicted on the basis of facts different than those facts on which charges were based," and the indictment was changed at the end of trial, id.; (11) Mr. Covarrubias' right to due process was violated by a vindictive prosecution; (12) Mr. Covarrubias' right to due process was violated because the "prosecutor sent people to the federal government to open a civil case" against Mr. Covarrubias as a tactic to deplete him of his resources and ability to properly defend himself, id. at8; (13) Mr. Covarrubias' right to due process was violated by the bad faith destruction of potentially exculpatory evidence; (14) Mr. Covarrubias' right to due process was violated because the prosecutor stopped or edited undercover surveillance tape; (15) Mr. Covarrubias was deprived of his constitutional right to a fair trial because the trial judge was biased; (16) the cumulative effect of the errors deprived Mr. Covarrubias of a fair trial; (17) Mr. Covarrubias was deprived of his Sixth Amendment right to effective assistance of counsel when counsel "didn't use evidence against alleged victims," id. at 11; (18) Mr. Covarrubias' right to due process and Eighth Amendment rights were violated because "a single conspiracy was unconstitutionally used to impose a sentence for multiple conspiracies," id.; (19) Mr. Covarrubias was deprived of his Sixth Amendment right to effective assistance of counsel in that counsel failed to call William Russell to testify; and (20) Mr. Covarrubias' right to due process was violated because the prosecutor misled the jury about Mr. Covarrubias' involvement in loan transactions and a conspiracy.

Claim 4 was dismissed in an earlier order because it was a state law error claim and did not allege the violation of petitioner's rights under the Constitution, laws or treaties of the United States. Claim 6 was dismissed in the same order because it was for a Fourth Amendment violation and barred by Stone v. Powell, 428 U.S. 465, 481-82, 494 (1976). Docket No. 15 at 3-4.

The Count found cognizable the other eighteen claims for relief and issued an order to show cause. Respondent has filed an answer and Mr. Covarrubias has filed a traverse, a supplement to the traverse, and an addendum to the supplement to the traverse The matter is now ready for a decision on the merits.

III. JURISDICTION AND VENUE

This Court has subject matter jurisdiction over this habeas action for relief under 28 U.S.C. § 2254. 28 U.S.C. § 1331. This action is in the proper venue because the petition concerns the conviction and sentence of a person convicted in Santa Clara County, California, which is within this judicial district. 28 U.S.C. §§ 84, 2241(d).

IV. STANDARD OF REVIEW

This Court may entertain a petition for writ of habeas corpus "in behalf of a person in custody pursuant to the judgment of a State court only on the ground that he is in custody inviolation of the Constitution or laws or treaties of the United States." 28 U.S.C. § 2254(a).

The Antiterrorism And Effective Death Penalty Act of 1996 ("AEDPA") amended § 2254 to impose new restrictions on federal habeas review. A petition may not be granted with respect to any claim that was adjudicated on the merits in state court unless the state court's adjudication of the claim: "(1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or (2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding." 28 U.S.C. § 2254(d).

"Under the 'contrary to' clause, a federal habeas court may grant the writ if the state court arrives...