Sales Force Won! Limited v. United States Small Business Administration et al

Filing 31

ORDER: IT IS ORDERED that Plaintiff's motion to expedite (Doc. 30 ) is GRANTED and Defendants' motion to set aside the default (Doc. 23 ) is DENIED [see attached Order for details]. Signed by Judge Douglas L Rayes on 4/27/18. (MAW)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Sales Force Won! Limited,
Plaintiff,

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ORDER

v.

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No. CV-17-04730-PHX-DLR

Teixidor Enterprises Incorporated, Capital
Core Investments LLC, Eduardo Teixidor,
and Marta Teixidor,

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Defendants.

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Defendants Teixidor Enterprises Incorporated, Capital Core Investments LLC, and

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Eduardo and Marta Teixidor move to set aside an entry of default against them. (Doc.

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23.) The issue is fully briefed. (Docs. 24, 27, 28.) Also before the Court is Plaintiff’s

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motion for expedited consideration of the motion to set aside. (Doc. 30.) For the

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following reasons, Defendants’ motion is denied and Plaintiff’s motion is granted.

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I. Background

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On November 13, 2017, Plaintiff filed a complaint against Defendants, the Small

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Business Association (“SBA”), and Wells Fargo National Bank, N.A. (“Wells Fargo”),

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seeking to quiet title against any claim those parties might assert on certain real property

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that Plaintiff purchased at a sale noticed by the Maricopa County Sheriff’s Office. On

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February 20, 2018, Plaintiff resolved its claim against the SBA. (Docs. 12, 14.) As of

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the date of this order, Wells Fargo has not appeared in this matter, and Plaintiff’s motion

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for entry of default judgment against it is currently pending. (Doc. 20.)

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Defendants were served on February 12, 2018, but failed to timely answer.

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Accordingly, on March 6, 2018, Plaintiff filed an application for an entry of default

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against Defendants. (Doc. 15.) The Clerk of Court entered default against Defendants

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the next day. (Doc. 18.) Defendants now move to set aside that default.

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II. Legal Standard

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Federal Rule of Civil Procedure 55(c) allows the Court to set aside an entry of

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default for good cause. When evaluating whether good causes exists, the Court considers

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three factors: (1) whether the party seeking to set aside the default engaged in culpable

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conduct that led to the default; (2) whether the party had no meritorious defense; and (3)

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whether setting aside the default would prejudice the other party. Franchise Holding II,

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LLC v. Huntington Restaurants Grp., Inc., 375 F.3d 922, 925-26 (9th Cir. 2004).

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Because these factors are disjunctive, “[a] sufficient finding against the movant on any

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one factor negates good cause.” FOC Fin. Ltd. P’ship v. Nat’l City Commercial Capital

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Corp., 612 F. Supp. 2d 1080, 1082 (D. Ariz. 2009).

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III. Discussion

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Defendants did not engage in culpable conduct leading to the default.

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defendant’s conduct is “culpable for purposes of the [good cause] factors where there is

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no explanation of the default inconsistent with devious, deliberate, willful, or bad faith

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failure to respond.” TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 697 (9th Cir.

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2001), overruled on other grounds by Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141

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(2001). Nothing about Defendants’ failure to timely answer suggests they acted willfully

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or in bad faith.

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After Defendants were served, they tendered the claim to their insurance carrier,

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Farmers Insurance. On March 5, 2018, counsel for Farmers Insurance contacted Plaintiff

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to request two days to determine whether it would accept Defendants’ tender. Plaintiff

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rejected this request.

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counsel. The next day, Defendants’ counsel notified Plaintiff’s counsel of their retention

On March 7, 2018, Farmers Insurance assigned Defendants

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and requested the entry of default be set aside. Plaintiff rejected this request, as well.

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Defendants have not indicated what coverage issue existed, why it took two days to

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resolve or why an answer could not have been filed before the coverage issue was

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decided. Although the Court has not found that Defendants engaged in culpable conduct,

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their failure to file a timely answer knowing that Plaintiff was poised to seek a default

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judgment if they did not, is curious.

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Nevertheless, Defendants have not shown good cause for setting aside the default

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because they fail to offer a meritorious defense. “All that is necessary to satisfy the

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‘meritorious defense’ [factor] is to allege facts that, if true, would constitute a defense.”

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U.S. v. Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d 1085, 1095 (9th Cir.

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2010). Plaintiff brings a quiet title action, which seeks to determine whether Defendants

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actually have an interest in the real property that is adverse to its own. A.R.S. § 12-1101.

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Defendants offer a series of potential defenses, all but one of which relate to potential

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claims against the SBA and have no bearing on the quiet title action that Plaintiff has

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brought. The only defense offered that relates to the quiet title action is that “discovery

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could show that [Defendants] ha[ve] other rights to the Property, for example, if Plaintiff

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failed to properly perfect its lien.” (Doc. 28 at 6.) But Defendants articulate no facts

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that, if true, would show that Plaintiff failed to do so.

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demonstrate a meritorious defense is “not extraordinarily heavy,” Defendants cannot

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meet this burden with rank speculation. TCI Grp., 244 F.3d at 700. In the absence of a

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reasonable, articulable basis for believing that Plaintiff failed to perfect its lien or that

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they have other rights to the property, Defendants have not met their minimal burden.

Although the burden to

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Because Defendants fail to offer a meritorious defense, the Court “need not

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consider . . . whether [P]laintiff would suffer prejudice if the [default] were set aside.”

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Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1988). Accordingly,

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IT IS ORDERED that Plaintiff’s motion to expedite (Doc. 30) is GRANTED and
Defendants’ motion to set aside the default (Doc. 23) is DENIED.
Dated this 27th day of April, 2018.

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Douglas L. Rayes
United States District Judge

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