Redding Bank of Commerce v. Johannessen et al

Filing 30

MEMORANDUM and ORDER signed by Judge Morrison C. England, Jr. on 7/23/2010 ORDERING that Dft's 10 Motion to Vacate is GRANTED. The 9 Clerk's Entry of Default against Scott Johannessen is VACATED. However, as a result of Dft's noncompliance, Dft shall pay to Pltf $500.00 as costs incurred for Dft's failure to timely file a responsive pleading. Payment is to be made within 10 days. (Zignago, K.)

Redding Bank of Commerce v. Johannessen et al

Doc. 30

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Defendants. 16 17 18 19 20 21 22 23 24 25 26 27 28 Pursuant to Federal Rule of Civil Procedure 55(c), Defendant Scott Johannessen ("Defendant") presently moves to vacate the default judgment entered against him on March 31, 2010 in this action for Money and Account Stated by Plaintiff Redding Bank of Commerce ("Plaintiff"). For the reasons set forth below, ----oo0oo---v. SCOTT JOHANNESSEN and LORIE JOHANNESSEN, REDDING BANK OF COMMERCE, Plaintiff, MEMORANDUM AND ORDER No. 2:10-cv-00385-MCE-DAD UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

Defendant's Motion is granted. /// /// /// /// 1

Dockets.Justia.com

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BACKGROUND

On April 24, 2007 Defendant, along with co-defendant Lorrie Johannessen, obtained a $300,000 line of credit from Plaintiff secured by a Deed of Trust on their home. trust also encumbered the home. A more senior deed of

When Defendants defaulted on the None of the

senior loan, the house was sold in foreclosure.

proceeds from the trustee's sale went to the junior loan. Subsequently, Defendants defaulted on the junior loan as well. According to Plaintiff, the entire balance of the credit line, plus interest, remains unpaid. Plaintiff filed suit against defendants for Money and Account Stated in the Superior Court, County of Shasta. Plaintiff states it hired a process server who made three attempts at personal service before opting for substitute service, which under California law allows service to be effectuated by leaving a copy of the Summons and Complaint at the Defendant's place of business with a person apparently in charge, and thereafter mailing the summons and complaint to Defendant by first-class mail. See Cal. Code. Civ. Proc. 415.20.

Plaintiff states that on February 3, 2010, the process server left a copy of the Summons and Complaint with a person apparently in charge at Defendant's place of business. Plaintiff

states it mailed the Summons and Complaint to Defendant on February 12, 2010. On February 15, 2010, Defendant responded by Defendant's Notice of

removing the action to federal court.

Removal acknowledges receipt of the Summons and Complaint on or about February 3, 2010. 2

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Pursuant to Federal Rule of Civil Procedure 81, Defendant was required to file a response by the later of a) 21 days after receipt of the complaint by service or otherwise; b) 21 days after service of the complaint; or c) 7 days after notice of removal is filed. Therefore, Defendant's responsive deadlines

were approximately February 24, March 5, and February 22 respectively. Defendant did not file a responsive pleading with

the prescribed timelines. Plaintiff states that on March 24, 2010, counsel left a voicemail for Defendant stating that Plaintiff intended to take a default if a responsive pleading was not filed. Plaintiff states

that on March 25, 2010 it sent a letter informing Defendant that it would take a default if a responsive pleading was not filed by March 29, 2010 at 4:00 p.m. On March 30, 2010, Defendant

contacted Plaintiff's counsel asking that a copy of the letter and Complaint be emailed to him as he was on a trip and had left the items at home. that same day. Plaintiff's counsel sent him the materials

The next day, on March 31, 2010, Plaintiff filed The Court entered judgment against

for default judgment.

Defendant, and seven days later, on April 7, 2010, Defendant filed this Motion to Vacate.

STANDARD

Federal Rule of Civil Procedure 55(c) provides that "[f]or good cause shown the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b)." 3

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The Ninth Circuit has indicated that a district court's discretion is "especially broad where...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) (citation omitted); see also Brady v. United States, 211 F.3d 499, 504 (9th Cir. 2000). The defaulting party bears the

burden of establishing "good cause" to set aside an entry of default. Franchise Holding II, LLC v. Huntington Restaurants In determining

Group, Inc., 375 F.3d 922, 925 (9th Cir. 2004).

whether there is good cause to set aside entry of default, the court considers: (1) whether the defaulting party engaged in culpable conduct which led to the default; (2) whether the defaulting party has a meritorious defense; and (3) whether setting aside the default would prejudice the party who obtained it. Mendoza, 783 F.2d at 946. These factors are disjunctive,

therefore, the court may deny a Rule 55(c) motion if it finds any one of the foregoing factors. (citation omitted). Franchise Holding, 375 F.2d at 926

However, 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. 783 F.2d at 946 (other citations omitted). Mendoza,

ANALYSIS

Although the Court is not impressed by Defendant's failure to timely file a responsive pleading, nonetheless a resolution of the dispute on its merits is preferable. 4

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See Schwab v. Bullock, 508 F.2d 353, 355 (9th Cir. 1974).

It is

clear from Defendant's moving papers that he did not willfully abandon his claim, but rather he acted untimely. His Motion to

Vacate comes only thirty­two days after his responsive pleading deadline. Once learning of the Default, Defendant acted to

remedy the situation, filing this Motion to Vacate seven (7) days after the entry of judgment. Additionally, Defendant alleges that service of process was defective as the address served was not his true "place of business," and he does not believe personal service was ever attempted as required by California Code of Civil Procedure 415.20. Plaintiff counters that the address served was listed as

Defendant's place of business of the State Bar of California website, and that the process server signed an affidavit, subsequently provided to the Court, stating that personal service was attempted. Plaintiff admits that this signed affidavit of While

service was inadvertently left out of previous filings.

the Court finds that service was properly effectuated, the cloud of impropriety created by Plaintiff's failure to timely file a signed affidavit of service further warrants vacating the Default.

CONCLUSION

For good cause appearing, Defendant's Motion to Vacate (Docket No. 10) is GRANTED. The Clerk's March 31, 2010 entry of

Default Judgment against Defendant Scott Johannessen (Docket No. 9) is hereby vacated. 5

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However, as a result of Defendant's noncompliance with the mandates of Federal Rule of Civil Procedure 81, Defendant shall pay to Plaintiff the amount of $500.00 as costs incurred for Defendant's failure to timely file a responsive pleading after repeated notice and warnings of default. Payment is to be made

within ten (10) days from the date this order is electronically filed or the default will be reinstated. IT IS SO ORDERED. Dated: July 23, 2010

_____________________________ MORRISON C. ENGLAND, JR. UNITED STATES DISTRICT JUDGE

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