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Michael Phelan v. Mecom Equipment

April 1, 2013

MICHAEL PHELAN, PLAINTIFF,
v.
MECOM EQUIPMENT, LLC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Allison Claire United States Magistrate Judge

FINDINGS & RECOMMENDATIONS

Pending before the court is plaintiff's November 14, 2012 motion for default judgment.*fn1 The court held an evidentiary hearing on this matter on February 13, 2013. Jennifer Duggan and Geoffrey Westbrook appeared on behalf of plaintiff. There were no appearances for defendants. On review of the motion, consideration of the evidence submitted at the hearing, and good cause appearing therefor, THE COURT FINDS AS FOLLOWS:

FACTUAL ALLEGATIONS

On June 30, 2002, real property located at 1143 Fremont Street, Colusa, Colusa County, California ("the Subject Property") was declared to be tax-defaulted. Am. Compl. ¶ 12.

On March 20, 2008, a Notice of Power to Sell Tax-Defaulted Property was recorded with the Colusa County Recorder's Office, Instrument Number 2008-0001416, making the Subject Property subject to a power of sale for nonpayment of taxes by the then-current owners, Kenneth R. Whitmire and Iva Whitmire, Whitmire Kenneth Ray and Iva Leana Trustees dba Capital Waste ("the Former Owners"). Id.

Plaintiff purchased the Subject Property from the Colusa County tax collector on March 3, 2009 and recorded a deed of trust on July 2, 2009 in the Colusa County Recorder's Office, Instrument Number 2009-2837. Am. Compl. ¶ 12. All taxes and assessments levied and payable have been paid. Id.

RELEVANT PROCEDURAL BACKGROUND

Plaintiff initiated this quiet title action in this court*fn2 pursuant to Cal. Rev. & Tax. Code § 3950 on June 28, 2010 against known defendants Mecom Equipment, LLC ("Mecom"); Pawnee Leasing Corporation ("Pawnee"); State of California, California Department of Toxic Substances Control ("DTSC"); State of California, Employment Development Department ("EDD"); and United States, Internal Revenue Service ("IRS"). Each of these known defendants had filed liens on the Subject Property. Pursuant to state statute, plaintiff also named "all other persons unknown, claiming any right, title, estate, lien, or interest in the [Subject Property] adverse to Plaintiff's ownership, or any cloud on Plaintiff's title thereto" ("Unknown Defendants").

On July 14, 2010, plaintiff moved for an order to serve the Unknown Defendants by publication pursuant to Cal. Rev. & Tax. Code § 3960. ECF No. 9. This request was granted on August 12, 2010, ECF No. 17, and plaintiff published notice of this lawsuit in The Appeal-Democrat on August 20, August 27, September 3, and September 10, 2010. See ECF No. 34; Krugh Decl. ¶ 5. Plaintiff also posted a copy of the summons and complaint in a conspicuous place on the Subject Property. Krugh Decl. ¶ 6; Cal. Rev. & Tax. Code § 3958. Finally, plaintiff recorded a Notice of Pendency of Action on July 10, 2010 with the Colusa County Recorder's Office, Instrument Number 2010-0002422. See ECF No. 12, Ex. A.

As of the date of the hearing on the instant motion, each of the liens filed by the known defendants had been extinguished or released, and plaintiff dismissed these defendants from suit. See ECF Nos. 35, 36 (Mecom); 28, 30 (Pawnee); 33, 37, 39 (DTSC); 29, 31 (EDD); 36, 45, 46, 64 (IRS).

This action is now proceeding against the statutorily-mandated Unknown Defendants. On November 7, 2012, plaintiff filed a request for entry of default as to these defendants. ECF No. 57. On November 9, 2012, the Clerk of Court entered their default. ECF No. 58.

On November 14, 2012, plaintiff filed the instant motion for default judgment against the Unknown Defendants. This motion was initially set to be heard on January 23, 2013, but at that hearing the court raised sua sponte the question of its jurisdiction. In the complaint, plaintiff asserted that the court's jurisdiction existed pursuant to 28 U.S.C. § 2410. Under Section 2410, the United States may be joined as a party in a quiet title action affecting property upon which it claims a lien. Bank of Hemet v. United States, 643 F.2d 661 (9th Cir. 1981). While Section 2410 waives sovereign immunity, it does not confer jurisdiction. Shaw v. United States, 331 F.2d 493 (9th Cir. 1964) ("[I]t is the position of this Circuit that 28 U.S.C. § 2410 does not, in addition to waiving sovereign immunity, confer jurisdiction upon the federal courts.") (internal citations omitted). See also Wright, Miller & Cooper, 14 Fed. Prac. & Proc. Juris. § 3656 (3d ed. 2012) ("A party seeking relief under Section 2410, however, must show that subject matter jurisdiction exists under some other applicable statute.").

In light of this unresolved issue, the court continued the January 23, 2013 evidentiary hearing to February 13, 2013 and directed plaintiff to file supplemental briefing addressing the court's jurisdiction. In plaintiff's response to the court's order, he asserted two bases for the court's jurisdiction: 28 U.S.C. § 1444*fn3 and 28 U.S.C. § 1340*fn4 . As set forth more fully in the order dated February 6, 2013, the undersigned determined that, because the instant case was initiated in this court and notwithstanding the previously-removed state case, 28 U.S.C. § 1444 was inapplicable and thus did not confer jurisdiction. See ECF No. 68. Nonetheless, because the court found jurisdiction proper pursuant to 28 U.S.C. § 1340, plaintiff was granted leave to file an amended complaint. Id.

On February 8, 2013, plaintiff filed a first amended complaint setting forth a proper basis for the court's jurisdiction. ECF No. 69. There, plaintiff also stated that, while preparing for the January 23, 2013 hearing, he discovered that a judgment against one of the Former Owners, Iva L. White, entered on December 9, 2009 in the Sacramento County Superior Court (case No. 34-2008-00001615), was recorded against the Subject Property on June 1, 2010 by West Coast Fueling Services, Inc. ("West Coast Fueling"). Am. Compl. ¶ 24.

On February 13, 2013, the court held an evidentiary hearing on plaintiff's motion for default judgment where plaintiff presented documentary and testimonial evidence in support of his motion, as discussed more fully infra. No appearances were made for any known or Unknown Defendants. Additionally, as of the date of this order, no opposition to plaintiff's motion for default judgment has been filed.

By order dated March 1, 2013, the court declined to consider the validity of West Coast Fueling's lien until that entity, whose identity had become known, was given an opportunity to respond. See ECF No. 72. Plaintiff was therefore directed to serve a copy of his supplemental brief and motion for default judgment on West Coast Fueling. See ECF No. 73. Although West Coast Fueling was personally served and granted until March 22, 2013 to make an appearance in this case, that date has now passed and there has been no response from West Coast Fueling.

DISCUSSION

Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend against the action. See Fed. R. Civ. P. 55(a). However, "[a] defendant's default does not automatically entitle the plaintiff to a court-ordered judgment." PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986)); see Fed. R. Civ. P. 55(b) (governing the entry of default judgments). Instead, the decision to grant or deny an application for default judgment lies within the district court's sound discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making this determination, the court may consider the following factors:

(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. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Default judgments are ordinarily disfavored. Id. at 1472.

A. Factor One: Possibility of Prejudice to Plaintiff

The first Eitel factor considers whether the plaintiff would suffer prejudice if default judgment is not entered, and such potential prejudice to the plaintiff militates in favor of granting a default judgment. See PepsiCo, Inc., 238 F. Supp. 2d at 1177. Here, plaintiff would potentially face prejudice if the court did not enter a default judgment. Absent entry of a default judgment, plaintiff would be without ...


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