Peter Szanto v. Wilmington Savings Fund Society, FSB

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 PETER SZANTO, Case No.: 25-cv-0890-BJC-BLM 12 Plaintiff, ORDER:

13 v. (1) GRANTING DEFENDANT'S 14 WILMINGTON SAVINGS FUND MOTION TO SET ASIDE DEFAULT SOCIETY, FSB, [ECF NO. 22]; 15

Defendant. 16 (2) GRANTING DEFENDANT’S REQUEST FOR JUDICIAL NOTICE 17 [ECF NO. 22-1]; AND 18 (3) GRANTING PLAINTIFF’S 19 REQUEST TO FILE A SUR-REPLY 20 [ECF NO. 25]

21 Pending before the Court is Defendant Wilmington Savings Fund Society, FSB’s 22 (“Wilmington”) Motion to Set aside Clerk’s Default and Default Judgment, along with a 23 Request for Judicial Notice. ECF Nos. 22, 22-1. Plaintiff filed a response in opposition to 24 the Motion, and Defendant replied. Plaintiff also filed a Motion to File a Sur-Reply. ECF 25 No. 25. For the reasons stated below, the Motions are GRANTED, and Defendant’s 26 Request for Judicial Notice is GRANTED. 27 // 28 1 I. BACKGROUND 2 This proceeding concerns real property located at 4484 Dulin Place, Oceanside, 3 California. Plaintiff contends he purchased the property on November 4, 2019, from his 4 aunt and was not advised of any competing interests in the property. Plaintiff claims that 5 Defendant did not give him notice of the alleged debt on the property and commenced a 6 trustee’s sale without properly following procedures. 7 On April 15, 2025, Plaintiff, proceeding pro se, filed the Complaint in this case, 8 asserting that Defendant had wrongfully recorded a Notice of Trustee’s Sale as to a Deed 9 of Trust for his residence. ECF No. 1. On June 11, 2025, Plaintiff filed a proof of service. 10 ECF No. 5. On June 16, 2025, Plaintiff filed a Motion for Preliminary Injunction to Enjoin 11 Trustee’s Sale. ECF No. 6. On July 2, 2025, Plaintiff filed a Request for Entry of Default 12 for Defendant’s failure to answer or otherwise respond to the Complaint and Motion. ECF 13 No. 8. On July 8, 2025, the Court entered default as to Defendant Wilmington Savings 14 Fund Society, FSB. ECF No. 9. On July 10, 2025, Plaintiff filed a Motion for Default 15 Judgment against Defendant Wilmington. ECF No. 10. On July 21, 2025, the Court set a 16 briefing schedule on the Motion for Default Judgment and directed Plaintiff to again serve 17 the Complaint on Defendant. ECF No. 12. On July 23, 2025, Plaintiff filed a second notice 18 of summons against Defendant. ECF No. 13. No response was received from Defendant. 19 On August 7, 2025, Plaintiff’s Motion for Preliminary Injunction was granted and 20 the Court entered default judgment against Defendant. ECF Nos. 17, 20. On August 21, 21 2025, Plaintiff filed a Motion to Correct an oversight in the Default Judgment. ECF No. 22 19. On August 29, 2025, the Court granted the Motion to Correct. ECF No. 20. 23 On October 1, 2025, Defendant filed the present Motion to Set Aside Default 24 Judgment, arguing that Defendant’s failure to respond was due to excusable neglect. ECF 25 No. 22. On October 22, 2025, Plaintiff filed a response in Opposition. ECF No. 23. On 26 October 29, 2025, Defendant filed a Reply. ECF No. 24. On November 5, 2025, Plaintiff 27 28 1 filed a Motion to File Sur-Reply. ECF No. 25. 2 Defendant argues that the Court should set aside default due to Defendant’s 3 inadvertence and excusable neglect in not making an earlier appearance. ECF No. 22 at 1. 4 According to Defendant, it does not service the loan Plaintiff is challenging, and PHH 5 Mortgage Corporation (“PHH”) is the sub-servicer for the loan, while Waterfall Asset 6 Management (“WAM”) is the loan manager. Id. Defendant claims it sent the Complaint 7 to WAM on July 2, 2025, as required “per its contractual obligations as servicer,” but 8 WAM did not forward the complaint to PHH “due to shorter staffing right before the July 9 4th holiday.” Id. As a result, Defendant claims that “the complaint did not reach PHH’s 10 normal intake channels, and the matter was not assigned out to outside counsel to handle.” 11 Id. On August 10, 2025, PHH learned of the Complaint and retained counsel on August 12 21, 2025. Id. Because the failure to respond was due to an inadvertent human error, 13 Defendant requests that the Court set aside the default judgment. 14 II. LEGAL STANDARD 15 Rule 60 requires that a party demonstrate “mistake, inadvertence, surprise, or 16 excusable neglect,” to set aside a default judgment. Fed. R. Civ. P. R. 60(b). Courts disfavor 17 default judgments and recognize the value of deciding cases on their merits whenever 18 reasonably possible. Pena v. Seguros La Comercial, s.a., 770 F.2d 811, 814 (9th Cir. 1985). 19 A defendant seeking relief under Rule 60(b)(1) must satisfy the three following Falk 20 factors: “(1) whether the plaintiff will be prejudiced, (2) whether the defendant has a 21 meritorious defense, and (3) whether culpable conduct of the defendant led to the default.” 22 23 24 1 Plaintiff seeks permission to file a sur-reply to respond to allegations he claims were 25 raised for the first time in Defendant’s Reply brief concerning a case from Wyoming many years ago. ECF No. 25 at 2. As a primary matter, the Court does not consider new 26 “arguments raised for the first time in a reply brief.” Zamani v. Carnes, 491 F.3s 990, 997 27 (9th Cir. 2007). However, the Court is also directed to construe pro se pleadings with leniency. Bernhardt v. Los Angeles County, 339 F.3d 920, 925 (9th Circ. 2003). Therefore, 28 1 Brandt v. American Bankers Inc. Co., 653 F.3d 1108, 1111 (9th Cir. 2011)(citing Falk v. 2 Allen, 739 F.2d 461, 463 (9th Cir.1984). When considering if Defendant’s conduct 3 constitutes “excusable neglect” under Rule 60(b)(1) the Court conducts an equitable 4 determination, “taking account of all relevant circumstances surrounding the party's 5 omission.” Pioneer Inv. Svcs. Co. v. Brunswick Assoc. Ltd., 507 U.S. 380, 395 (1993). 6 “Where timely relief is sought from a default ... and the movant has a meritorious defense, 7 doubt, if any, should be resolved in favor of the motion to set aside the [default] so that 8 cases may be decided on their merits.” Mendoza v. Wight Vineyard Mgmt., 783 F.2d 941, 9 945-46 (9th Cir. 1986) 10 III. DISCUSSION 11 The Court addresses each of the Falk factors in turn. 12 A. Prejudice 13 Prejudice is demonstrated when a plaintiff’s ability to “pursue his claim will be 14 hindered.” Falk, 739 F.2d at 463. A delay in litigation is considered prejudicial where it 15 “result[s] in tangible harm such as loss of evidence, increased difficulties of discovery, or 16 greater opportunity for fraud or collusion.” Thompson v. Am. Home Assurance Co., 95 F.3d 17 429, 433–34 (9th Cir. 1996). 18 Defendant argues that Plaintiff will not suffer prejudice because his “ability to 19 pursue his claims will not be hindered by this Court setting aside” the default judgment, 20 and “the issues may still properly be resolved through the litigation process.” Mot. at 11, 21 ECF No. 22. Defendant contends that vacating the default judgment would not be 22 inequitable, particularly considering that Plaintiff has filed two lawsuits in the last three 23 years. Id. at 11-12. 24 Plaintiff counters that he will suffer prejudice if the Court grants the Motion because 25 Defendant Wilmington failed to comply with the 21-day response rule. Opp. at 12, ECF 26 No. 23. Plaintiff claims that Defendant waited 168 days to respond but only provided a 27 reduced-staff justification during the July 4th weekend. In addition, Plaintiff claims the 28 additional delay in the case will prejudice him because he has “struggled to resolve any 1 possible debt allegation” for six years. Id. Finally, Plaintiff contends he will suffer 2 prejudice because Defendant Wilmington “present[ed] matters to this Court which are 3 known to be false,” including assertions that he has been declared a vexatious litigant by 4 numerous courts. Id. at 13. 5 The Court finds that Plaintiff will not suffer prejudice if the Motion is granted 6 because he will not be hindered in pursuing his claims. There is no evidence that the 7 additional delay will result in loss of evidence or increased discovery. See Thompson, 95 8 F.3d at 433–34. Moreover, Plaintiff’s argument that he will be prejudiced by the delay if 9 the Motion is granted because he has already spent 6 years attempting to settle the 10 controversy is insufficient to show prejudice because “delay alone does not constitute the 11 sort of prejudice cognizable” in a motion to set aside. Hawkins v. Bank of America, 2018 12 WL 3426218, * 3 (S.D. Cal. July 16, 2018). In addition, Plaintiff’s contentions that he is 13 prejudiced because Defendant misrepresented facts regarding his status as a vexatious 14 litigant is not relevant to the inquiry whether he will be hindered if the default judgment is 15 set aside. For these reasons, the first Falk factor weighs in favor of granting the Motion to 16 Set Aside. 17 B. Meritorious Defenses 18 "A defendant seeking to vacate a default judgment must present specific facts that 19 would constitute a defense. But the burden on a party seeking to vacate a default judgment 20 is not extraordinarily heavy." TCI Group Life Ins. Plan v. Knoebber ("TCI Group"), 244 21 F.3d 691, 697 (9th Cir. 2001) (emphasis in original) (citations omitted)(overruled on other 22 grounds as stated in Delgado v. Dempsey's Adult Care Homes, LLC, No. 22-15176, 2023 23 WL 3034263, at *1 (9th Cir. Apr. 21, 2023)). "All that is necessary to satisfy the 24 'meritorious defense' requirement is to allege sufficient facts that, if true, would constitute 25 a defense . . . ." TCI Group, 244 F.3d at 700. 26 Defendant argues that it “has a number of defenses that preclude recovery for all of 27 Plaintiff’s claims as a matter of law,” including Plaintiff’s claims for fraud, abuse of 28 process, tortious interference, slander of title, abuse of the public record, and intentional 1 infliction of emotional distress. Mot. 7-11. Plaintiff does not challenge Defendant’s 2 purported defenses, stating that he “will not address Defendant’s defenses presently.” Opp. 3 at 11. 4 Here, Defendant sets forth detailed defenses to all of Plaintiff’s claims. For example, 5 Defendant argues the following: 6 Plaintiff has failed to plead with specificity a false or misleading statement by Defendant. Specifically, California law does not require a new notice of 7 default to be recorded where a new beneficiary obtains ownership of the note 8 and deed of trust before recording a notice of trustee’s sale. And as Plaintiff admits in his own complaint (Compl. at 5:25-27), he was in fact notified of 9 the change in beneficiary when the prior beneficiary recorded a notice of 10 assignment (Compl., Ex. B). See, e.g., Lawyers Title Co. v. Bradbury, 127 Cal. App. 3d 41, 46 (1981) (purpose of recording is to provide constructive 11 notice). 12 ECF No. 22 at 13. Accordingly, Defendant has met its burden to show meritorious defenses 13 to Plaintiff’s claims. Therefore, the second Falk factor is satisfied. 14 C. Culpable Conduct 15 "[A] defendant's conduct is culpable if he has received actual or constructive notice 16 of the filing of the action and intentionally failed to answer." TCI Group Life Ins., 244 F.3d 17 at 697 (emphasis in original) (citations omitted). 18 According to Defendant, there was no intentional delay. The Complaint was filed on 19 April 15, 2025, and Defendant was served on June 11, 2025. Defendant forwarded the 20 Complaint to WAM on July 2, 2025, and presumed WAM and PHH would defend on its 21 behalf as contractual required. WAM did not forward the Complaint to PHH “due to shorter 22 staffing right before the July 4th holiday.” Mot. at 1. However, it appears that WAM never 23 sent the Complaint to PHH. Instead, Plaintiff advised PHH of the action on August 10, 24 2025, when “PHH’s default servicing personnel received a copy of the summons and 25 complaint in this action directly from plaintiff Peter Szanto.” Kevin Flannigan Declaration 26 ¶¶ 5, 6, ECF No. 22-6. Despite WAM’s failure to forward the Complaint, as soon as PHH 27 became aware of the action, it began investigating and then retained counsel. Id. ¶ 6. These 28 1 facts demonstrate that the failure to properly distribute the complaint to the required parties 2 for response was not done intentionally. Therefore, there is no evidence of culpable conduct 3 on the part of Defendant Wilmington or PHH. Accordingly, the third Falk factor is 4 satisfied. 5 Under the present circumstances, the value of deciding the case on the merits weighs 6 in favor of granting the motion to set aside default judgment. Pena, 770 F.2d at 814. 7 D. Request for Judicial Notice 8 Defendant requests the Court take judicial notice of the following documents 9 pursuant to Federal Rules of Evidence 201: (1) the Deed of Trust recorded on September 10 13, 2005 as Instrument No. 2005-0787624 in the Official Records Office of the San Diego 11 Recorder’s Office; (2) the Affidavit of Death recorded on November 20, 2006, as 12 Instrument No. 2006-0824314, in the Official Records Office of the San Diego Recorder’s 13 Office; and (3) the Notice of Default recorded on November 9, 2021, as Instrument No. 14 2021-0777114, Official Records Office of the San Diego Recorder’s Office. ECF No. 22- 15 1 at 2-3. 16 A court may take judicial notice under Rule 201 of facts that are “not subject to 17 reasonable dispute in that [they are] either (1) generally known within the territorial 18 jurisdiction of the trial court or (2) capable of accurate and ready determination by resort 19 to sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. R. 201(b). 20 “Courts routinely take judicial notice” of deeds of trust and notice of default. Alexander v. 21 Deutche Bank Nat. Trust, 2013 WL 3320455, *3 (S.D. Cal. July 1, 2013). The documents 22 for which Defendant seeks judicial notice are publicly available at the San Diego 23 Recorder’s Office. Therefore, Defendant’s Request for Judicial Notice is GRANTED. 24 // 25 // 26 // 27 // 28 // l IV. CONCLUSION AND ORDER 2 For the foregoing reasons: (1) Defendant’s Motion to Set Aside Default Judgment is 3 || GRANTED. ECF No. 22; (2) Defendant’s Request for Judicial Notice is GRANTED ECF 4 ||No. 22-1; and (3) Plaintiff's Motion to File a Sur-Reply is GRANTED. ECF No. 25. 5 || Defendant is directed to file a response to the complaint_no later than June 30, 2026. The 6 || Clerk of Court is directed to vacate the Default Judgment and reopen the case. 7 IT IS SO ORDERED. 8 || Dated: June 5, 2026 9 10 oq Gar Cb A fu 1] 12 Honorable Benjamin J. Cheeks United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28