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