United States District Court, N.D. California, San Francisco Division
ORDER SETTING ASIDE DEFAULT AND DENYING MOTIONS FOR DEFAULT JUDGMENT AS TO BANK OF AMERICA AND THORNBURG Re: Dkt. Nos. 24, 27, 28, 29, 35
NATHANAEL M. COUSINS, Magistrate Judge.
Pending before the Court are motions for default judgment by pro se plaintiff Susan Lee against three of the defendants in this matter, Thornburg Mortgage Home Loans Inc., TMST Home Loans, Inc. formerly known as Thornburg Mortgage Home Loans Inc. (collectively, "Thornburg"), and Bank of America, N.A., as well as those defendants' motions to set aside default. For the reasons set forth below, the Court finds that there is good cause to set aside default, and, therefore, DENIES WITHOUT PREJUDICE the motions for default judgment.
On February 7, 2014, Lee filed her complaint in this case. The complaint names as defendants Thornburg Mortgage Home Loans Inc. "in its capacity as originating lender and purported mortgage servicer, " TMST Home Loans, Inc. formerly known as Thornburg Mortgage Home Loans Inc. "as purported servicer, " Select Portfolio Servicing Inc. ("SPS") "as purported servicer, " Mortgage Electronic Registration Systems Inc. ("MERS") as "purported Nominee for Thornburg, " Quality Loan Services Corporation ("Quality") "as purported Trustee under the Deed of Trust, " U.S. Bank National Association "(successor to Bank of America, N.A., successor by merger to LaSalle Bank N.A.), as Trustee, on behalf of the holders of the Thornburg Mortgage Securities Trust 2007-4 Mortgage Loan Pass-Through Certificates, Series 2007-4; (in its capacity as purported assignee of Plaintiff's Deed of Trust), " and Bank of America, N.A. "successor by merger to LaSalle Bank N.A., as former Trustee, on behalf of the holders of the Thornburg Mortgage Securities Trust 2007-4 Mortgage Loan Pass-Through Certificates, Series 2007-4." Dkt. No. 1 at 7.
Lee alleges that, on June 28, 2007, she executed a deed of trust on her property at 20 Kingsland Place, Oakland, California, as security for a loan. Dkt. No. 1 ¶¶ 5, 18. Lee further alleges that she "timely paid her mortgage payments when she began experiencing an unforeseen financial hardship." Id. ¶ 19. Lee alleges that "there was an attempt to securitize the Mortgage by assigning and transferring the Mortgage" to the Thornburg trust "but the mortgage loan was never actually assigned and transferred." Id. ¶ 22. Lee claims that this "fatal defect renders Defendants third-party strangers to the underlying debt obligation without the power or right to demand payment, declare default, negotiate her Loan, and foreclose on her Property." Id. ¶¶ 30, 39, 85. Lee further alleges that the "failure of Defendants to assign her mortgage to LaSalle Bank as trustee of the Thornburg Trust, before the closing date of the trust or at any time, would not entitle [Bank of America] and/or U.S. bank to be the successor trustee due to the fact at no time any proper assignment was ever made to LaSalle Bank." Id. ¶ 37. Lee alleges that defendants' "fabricated Assignment of Deed of Trust, " that "purports to assign from MERS (as nominee for Thornburg Mortgage Home Loans Inc.), to U.S Bank for value received, all beneficial interest under said Deed of Trust, " is void. Id. ¶ 41.
Lee's complaint asserts nine causes of action, against all defendants unless otherwise noted, for: (1) Declaratory Relief; (2) Quasi Contract; (3) Negligence; (4) violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692; (5) violations of the California Business and Professions Code § 17200; (6) violations of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1641(g) (against U.S. Bank and Doe defendants); (7) violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962; (8) Fraud; and (9) Accounting. Dkt. No. 1. The relief sought by Lee includes no less than $5, 000, 000 in damages, and "an order finding that Defendants have no legally cognizable rights as to Plaintiff, the Property, Plaintiff's Promissory Note, Plaintiff's Deed of Trust or any other matter based on contract or any of the documents prepared by Defendants, tendered to and executed by Plaintiff." Id. at 48.
On March 5, 2014, Quality moved to dismiss the complaint. Dkt. No. 8. After obtaining a brief extension of their time to respond to the complaint from the Court, defendants SPS, MERS, and U.S. Bank, identified as the successor to Bank of America, filed a motion to dismiss the complaint on March 13, 2014. Dkt. No. 14.
On March 18, 2014, Lee filed requests for entry of default against Thornburg and Bank of America. Dkt. Nos. 16, 17, 18. On March 19, 2014, the Clerk of the Court entered default against those defendants. Dkt. No. 19. On March 20, 2014, counsel for Bank of America as Trustee filed a notice of appearance, stating that Bank of America "intends to vigorously defend this action and will immediately seek to vacate and set aside any notice of entry of default entered against it." Dkt. No. 20. On March 21, 2014, Bank of America filed its motion to set aside default. Dkt. No. 24. On the same day, Lee filed motions for default judgment as to Bank of America and Thornburg. Dkt. Nos. 27, 28, 29. On March 24, 2014, counsel for Thornburg filed a notice of appearance, stating Thornburg's intent to defend the action and to seek to vacate and set aside entry of default. Dkt. No. 31. On April 2, 2014, Thornburg moved to set aside default. Dkt. No. 35. On April 3, 2014, Bank of America and Thornburg filed oppositions to Lee's motions for default judgment. Dkt. Nos. 36, 37.
The Court scheduled the motions for default judgment and the motions to set aside default to be heard on the same day, prior to hearing the pending motions to dismiss the complaint. Dkt. No. 38. The Court subsequently took the motions for default judgment and the motions to set aside default under submission, finding them suitable for disposition without oral argument. See Civ. L.R. 7-1(b).
The Court has federal question jurisdiction over the FDCPA, TILA, and RICO claims under 28 U.S.C. § 1331, and supplemental jurisdiction over the state law claims under 28 U.S.C. § 1367. All parties have consented to the jurisdiction of a magistrate judge under 28 U.S.C. § 636(c). Dkt. Nos. 4, 11, 13, 23, 32.
II. LEGAL STANDARD
Pursuant to Federal Rule of Civil Procedure 55(c), a district court "may set aside an entry of default for good cause." Fed.R.Civ.P. 55(c). To determine whether a party has demonstrated "good cause, " a court must consider three factors: (1) whether the party seeking to set aside the default engaged in culpable conduct that led to the default; (2) whether it had no meritorious defense; or (3) whether reopening the default judgment would prejudice the other party. United States v. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010).
The district court has discretion to determine whether a party has demonstrated "good cause" to set aside an entry of default. Madsen v. Bumb, 419 F.2d 4, 6 (9th Cir. 1969). "The court's discretion is especially broad where, as here, it is entry of default that is being set aside, rather than a default judgment." Mendoza v. Wight Vineyard Mgmt., 783 F.2d 941, 945 (9th Cir. 1986). "Where timely relief is sought from a default... and the movant has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the [default] so that cases may be decided on their merits." Id. at 945-46 (quoting Schwab v. Bullock's Inc., 508 F.2d 353, 355 (9th Cir. 1974)); Eitel v. McCool, 782 ...