(PS) Avila v. NewRez LLC

• Court: District Court, E.D. California
• Decided: March 10, 2025
• Docket: 2:24-cv-02264
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 DAVID AVILA, et al, Case No. 2:24-cv-02264-TLN-CSK 12 Plaintiffs, FINDINGS AND RECOMMENDATIONS GRANTING DEFENDANT PEAK 13 v. FORECLOSURE SERVICES INC.’S AMENDED MOTION TO SET ASIDE 14 NEWREZ, LLC D/B/A SHELLPOINT MORTGAGE SERVICING, et al., 15 Defendants. (ECF No. 43) 16 17 Plaintiffs David Avila and John Hayne are proceeding in this action pro se.1 18 Pending before the Court is Defendant Peak Foreclosure Services Inc.’s amended 19 motion to set aside default pursuant to Federal Rules of Civil Procedure 55(c). Def. Am. 20 Mot. (ECF No. 43.) Plaintiffs have not filed an opposition to the motion. See Docket. 21 Finding no hearing necessary, the matter was taken under submission by the 22 undersigned. (ECF No. 45.) For the reasons that follow, the Court recommends 23 GRANTING Defendant’s amended motion to set aside default. 24 I. BACKGROUND 25 Plaintiffs filed their Complaint on August 21, 2024. (ECF No. 1.) On September 26 23, 2024, Plaintiffs filed their proof of service as to Defendant Peak Foreclosure 27 1 This matter proceeds before the undersigned pursuant to 28 U.S.C. § 636, Fed. R. 28 Civ. P. 72, and Local Rule 302(c). 1 Services. (ECF No. 9.) On November 27, 2024, Plaintiffs requested entry of default as to 2 Defendant Peak Foreclosure Services (ECF No. 32), and the Clerk’s entry of default was 3 entered on December 2, 2024 (ECF No. 34). Defendant Peak Foreclosure Services 4 moved to set aside the Clerk’s entry of default on December 31, 2024 and noticed it for 5 hearing before the assigned District Judge. (ECF No. 39.) On January 2, 2025, the 6 hearing on the motion was vacated by the assigned District Judge. (ECF No. 40.) On 7 January 20, 2025, Defendant Peak Foreclosure Services filed an amended motion to set 8 aside default and again noticed it before the assigned District Judge. (ECF No. 43.) On 9 January 21, 2025, the hearing on the amended motion was again vacated by the 10 assigned District Judge. (ECF No. 44.) On February 7, 2025, the undersigned took the 11 amended motion under submission after no opposition or statement of non-opposition by 12 Plaintiffs was filed. (ECF No. 45.) 13 II. LEGAL STANDARDS 14 The Federal Rules of Civil Procedure provide that “[t]he Court may set aside an 15 entry of default for good cause.” Fed. R. Civ. Proc. 55(c). A court’s discretion is 16 especially broad where an entry of default is being set aside, rather than a default 17 judgment. O'Connor v. State of Nev., 27 F.3d 357, 364 (9th Cir. 1994) (quoting Mendoza 18 v. Wight Vineyard Mgmt., 783 F.2d 941, 945 (9th Cir. 1986)). “To determine ‘good 19 cause’, a court must ‘consider[ ] three factors: (1) whether [the party seeking to set aside 20 the default] engaged in culpable conduct that led to the default; (2) whether [it] had [no] 21 meritorious defense; or (3) whether reopening the default judgment would prejudice’ the 22 other party.” United States v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d 23 1085, 1091 (9th Cir. 2010) (citing Franchise Holding II, LLC. v. Huntington Restaurants 24 Grp., Inc., 375 F.3d 922, 925-26 (9th Cir. 2004)). These factors are disjunctive, such that 25 the court may deny the motion if any of the three factors are true. Franchise Holding II, 26 LLC., 375 F.3d at 926. 27 / / / 28 / / / 1 III. DISCUSSION 2 The Court finds good cause to set aside Defendant Peak Foreclosure Services’ 3 entry of default. The Court addresses each of the factors below. 4 A. Culpable Conduct 5 The Court finds that Defendant Peak Foreclosure Services did not engage in 6 culpable conduct. “A defendant’s conduct is culpable if he has received actual or 7 constructive notice of the filing of the action and intentionally failed to answer….[I]n this 8 context the term ‘intentionally’ means that a movant cannot be treated as culpable simply 9 for having made a conscious choice not to answer; rather, to treat a failure to answer as 10 culpable, the movant must have acted with bad faith, such as an intention to take 11 advantage of the opposing party, interfere with judicial decision making, or otherwise 12 manipulate the legal process.” Mesle, 615 F.3d at 1092 (internal citations omitted). 13 Defendant Peak Foreclosure Services argues it was “never served with Plaintiffs’ 14 Summons and Complaint, and became aware of Plaintiff[s]’ such filing upon receipt of 15 the Court’s Notice of entry of the 12/2/2024 Default.” Def. Am. Mot. at 5. Defendant Peak 16 Foreclosure Services further argues the proof of service is defective on its face and 17 therefore void because it does not list the individual served. Id. Defendant is correct. 18 Review of the proof of service on Defendant Peak Foreclosure Services indicates 19 personal service was completed on August 13, 2024 at 3:34 p.m. at 5900 Canoga 20 Avenue, Suite 220, Woodland Hills, CA 91367. (ECF No. 9 at 1.) However, the proof of 21 service does not indicate the individual that was served. Federal Rule of Civil Procedure 22 4(h) governs the specific requirements for service of process on a corporation within a 23 judicial district. Fed. R. Civ. P. 4(h). Under Rule 4(h)(1), a corporation can be served: 24 “(A) in the manner prescribed by Rule 4(e)(1) for serving an individual; or (B) by 25 delivering a copy of the summons and the complaint to an officer, a managing or general 26 agent, or any other agent authorized by appointment or by law to receive service of 27 process and-if the agent is one authorized by statute and the statute so requires-by also 28 mailing a copy of each to the defendant.” Fed. R. Civ. P. 4(h)(1)(A)-(B). Because the 1 Court cannot determine whether service was properly effectuated against Defendant 2 Peak Foreclosure Services and because Defendant Peak Foreclosure Services argues it 3 was never served with the summons, the Court finds Defendant Peak Foreclosure 4 Services was not culpable for the default. 5 B. Potentially Meritorious Defenses 6 Defendant Peak Foreclosure Services requests the entry of default be vacated so 7 that it “may properly defend this proceeding under the Federal Rules of Civil Procedure.” 8 Def. Am. Mot. at 5. This action arises from a mortgage foreclosure of a real property. 9 (ECF No. 1.) Although this Court is recommending that this case be dismissed for failure 10 to state a claim and for lack of subject matter jurisdiction (ECF No. 36), default against 11 Defendant Peak Foreclosure Services is not appropriate where service was not proper. 12 C. Prejudice to Plaintiffs 13 Finally, setting aside the entry of default will not prejudice Plaintiffs. Plaintiffs have 14 not shown prejudice and have not filed an opposition or statement of non-opposition to 15 the motion. Moreover, Defendant Peak Foreclosure Services promptly moved to set 16 aside the entry of default. 17 For all these reasons, the amended motion to set aside default should be granted. 18 IV. CONCLUSION 19 Based upon the findings above, it is RECOMMENDED: 20 1. Defendant Peak Foreclosure Services’ amended motion to set aside 21 default (ECF No. 43) be GRANTED; and 22 2. The Clerk of the Court be directed to set aside Defendant Peak 23 Foreclosure Services Inc.’s entry of default. 24 These findings and recommendations are submitted to the United States District 25 Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within 26 14 days after being served with these findings and recommendations, any party may file 27 written objections with the Court and serve a copy on all parties. This document should 28 be captioned “Objections to Magistrate Judge’s Findings and Recommendations.” Any 1 || reply to the objections shall be served on all parties and filed with the Court within 14 2 | days after service of the objections. Failure to file objections within the specified time 3 || may waive the right to appeal the District Court’s order. Turner v. Duncan, 158 F.3d 449, 4 | 455 (9th Cir. 1998); Martinez v. Yist, 951 F.2d 1153, 1156-57 (9th Cir. 1991). 5 6 | Dated: March 10, 2025 C iy S \U CHI SOO KIM 8 UNITED STATES MAGISTRATE JUDGE Q || 4, avil2264.24 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28