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James Gary Hamilton, et al v. Us Bank

August 8, 2011

JAMES GARY HAMILTON, ET AL.,
PLAINTIFFS,
v.
US BANK, N.A., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Dana M. Sabraw United States District Judge

ORDER (1) GRANTING DEFENDANT JPMORGAN CHASE BANK, N.A.'S MOTION TO DISMISS, (2) DENYING PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT, AND (3) GRANTING DEFENDANT HOME ASIDE ENTRY OF DEFAULT SALES, INC.'S MOTION TO SET

Pending before the Court are (1) a motion to dismiss Plaintiffs' Complaint by Defendant JPMorgan Chase Bank, N.A., as successor by merger to Chase Home Finance, LLC ("JPM") (Doc. 3), (2) Plaintiff's motion for default judgment against Defendants U.S. Bank, N.A., Home Sales, Inc., Randall D. Naiman, and Naiman Law Group PC (Doc. 20), and (3) a motion to set aside entry of default by Defendant Home Sales, Inc. (Doc. 24). The motions for default judgment and to set aside entry of default are set for hearing on Friday, August 12, 2011. The matters are suitable for submission without oral argument pursuant to Local Civil Rule 7.1(d)(1). For the following reasons, (1) JPM's motion to dismiss is granted without prejudice, (2) Plaintiffs' motion for default judgment is denied, and (3) Home Sales, Inc.'s motion to set aside entry of default is granted.

I.

BACKGROUND

Plaintiffs allege they entered into a residential mortgage agreement with Downey Savings Bank, FSB in December 1999 and that Downey Savings Bank subsequently sold the note to a mortage-backed security. (Complaint ¶ 4.) Plaintiffs further allege they "have been unable to make the monthly payments on the subject property for some time now." (Id.) U.S. Bank claims to have the power to enforce the note on the property. (Id.) However, Plaintiffs allege no Defendant is in possession of the note and, therefore, Defendants do not have authority to foreclose upon the subject property.

Plaintiffs filed a Complaint on May 5, 2011. (Doc. 1.) The Complaint sets forth seven claims for relief against all Defendants: (1) to quiet title, (2) violation of the Fair Debt Collection Practices Act ("FDCPA"), (3) violation of 42 U.S.C. § 1983, (4) violation of the Real Estate Settlement Procedures Act ("RESPA"), (5) wrongful foreclosure, (6) slander of title, and (7) fraudulent inducement. JPM filed a motion to dismiss the Complaint on June 9, 2011. (Doc. 3.) Plaintiffs filed an opposition to the motion to dismiss and JPM filed a reply. (Docs. 23, 33.) Upon Plaintiffs' request, the Clerk entered default against Defendants Home Sales and U.S. Bank on June 20, 2011. (Doc. 8.) However, the Clerk did not enter default as to Defendants Randall D. Naiman and Naiman Law Group. (Doc. 11.) On July 1, 2011, Plaintiffs filed a motion for default judgment. (Doc. 20) Home Sales subsequently filed a motion to set aside entry of default against it on July 13, 2011. (Doc. 24.)

II.

DISCUSSION

A. Motion to Set Aside Entry of Default

Upon Plaintiffs' request, the Clerk entered default against Home Sales, Inc. on June 20, 2011. (Doc. 8.) Home Sales now moves the Court to set aside the entry of default. Plaintiffs did not file an opposition to the motion. The Court "may set aside an entry of default for good cause." Fed. R. Civ. P. 55(c). The court examines three factors when determining whether there is good cause: (1) whether the defendant's culpable conduct led to the default; (2) whether defendant has a meritorious defense; and (3) whether setting aside the default will prejudice the plaintiff. TCI Group Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001); Franchise Holding II, LLC, v. Huntington Rests. Grp., Inc., 375 F.3d 922, 926 (9th Cir. 2004). A court can deny the motion if consideration of any of the three factors weighs in favor of maintaining the default. Franchise Holding, 375 F.3d at 926 (citing Am. Ass'n of Naturopathic Physicians v. Hayhurst, 227 F.3d 1104, 1108 (9th Cir. 2000)). The defaulting party bears the burden of showing the default should be set aside. Id. However, "judgment by default is a drastic step appropriate only in extreme circumstances; a case should, whenever possible, be decided on the merits." United States v. Signed Personal Check No. 730 of Yurban S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010)(quoting Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984)). A court's discretion to set aside a default is "especially broad" where an entry of default, as opposed to a default judgment, is being set aside. O'Conner v. Nevada, 27 F.3d 357, 364 (9th Cir. 1994).

Home Sales claims it failed to timely file a responsive pleading due to an error in calculating the filing deadline. A consideration of the factors relevant to determining whether good cause exists supports setting aside the default entered against Home Sales. Home Sales does not appear to have engaged in culpable conduct in failing to timely respond. See Mesle, 615 F.3d at 1092 (quoting TCI Group, 244 F.3d at 697)("[A] movant cannot be treated as culpable simply for having made a conscious choice not to answer; rather, to treat a failure to answer as culpable, the movant must have acted with bad faith, such as an 'intention to take advantage of the opposing party, interfere with judicial decisionmaking, or otherwise manipulate the legal process.'"). Home Sales also states meritorious defenses to Plaintiffs' claims in its motion to set aside the entry of default. See id. at 1094 ("All that is necessary to satisfy the 'meritorious defense' requirement is to allege sufficient facts that, if true, would constitute a defense."). Finally, in light of the early stage of the litigation, Plaintiffs will not be prejudice by setting aside the entry of default. Accordingly, Home Sales' motion to set aside entry of default is granted.

B. Motion for Default Judgment

Plaintiffs move for default judgment against Defendants U.S. Bank, N.A., Home Sales, Inc., Randall D. Naiman, and Naiman Law Group PC. Because the Court grants Home Sales' motion to set aside entry of default, Plaintiffs' motion for default judgment as to Home Sales is denied as moot. As to Defendants Randall D. Naiman and Naiman Law Group PC, the Clerk did not enter default as to these Defendants. (Doc. 11.) Furthermore, they filed a responsive pleading on July 14, 2011. (Doc. 28.) Accordingly, Plaintiffs' motion for default judgment as to them is denied.

Finally, as to Defendant U.S. Bank, Federal Rule of Civil Procedure 55(b)(2) allows for entry of default judgment by the Court. "A plaintiff does not receive default judgment as a matter of right; rather, a court has discretion as to whether it should be granted." United States v. Boyce, 148 F. Supp. 2d 1069, 1093 (S.D. Cal. 2001) (citations omitted). In exercising that discretion, the following factors are considered: "'(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action[,] (5) the possibility of a dispute concerning material facts[,] (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.'" Id. (quoting Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986)). Consistent with this last factor, "any doubts as to the propriety of a default are usually resolved against the party seeking a default judgment." VonGrabe v. Sprint PCS, 312 F. Supp. 2d 1313, 1318 (S.D. Cal. 2004)(citing Pena v. Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir. 1985)). Here, consideration of these factors warrants denial of Plaintiffs' motion as to U.S. Bank. As an initial matter, Plaintiffs' motion does not address the merits of their Complaint and merely states that the Court is required to enter default judgment. In contrast, U.S. Bank has filed an opposition to Plaintiffs' motion setting forth meritorious defenses to Plaintiffs' Complaint. Plaintiffs did not file a reply to the opposition. Furthermore, U.S. Bank has filed a motion to set aside entry of default, which is set for hearing ...


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