Brantley et al v. Boyd et al

Filing 341

ORDER DENYING 338 CROSS-CLAIMANTS' APPLICATION FOR DEFAULT JUDGMENT. Signed by Judge Maxine M. Chesney on October 25, 2013.(mmcsec, COURT STAFF) (Filed on 10/25/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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LARRY TYRONE BRANTLEY, SR., ELLEN
BRANTLEY,

No. C 07-6139 MMC
ORDER DENYING CROSS-CLAIMANTS’
APPLICATION FOR DEFAULT
JUDGMENT

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Plaintiffs,
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v.
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GARRETT BOYD, SERGEI KLYAZMIN,
ROYAL CROWN MORTGAGE, et al.,

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Defendants.

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AND RELATED CROSS-ACTION.

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Before the Court is cross-claimants Sergei Klyazmin (“Klyazmin”), MoDo Realty, Inc.

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(“MoDo”), and Royal Crown Mortgage, Inc.’s (“Royal Crown”) (collectively, “cross-

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claimants”) Application for Default Judgment by the Court against Cross-Defendant Garrett

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Boyd (“Boyd”), filed August 9, 2013, pursuant to Rule 55(b)(2) of the Federal Rules of Civil

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Procedure. No opposition has been filed. Having read and considered the papers filed in

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support of the application, the Court rules as follows.1
BACKGROUND

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The above-titled action arises from a scheme by defendant/cross-defendant Boyd to

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By order filed September 17, 2013, the Court vacated the hearing scheduled for
September 20, 2013, and took the matter under submission.

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convert funds belonging to plaintiffs Larry Tyrone Brantley, Sr. and Ellen Brantley

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(collectively, “the Brantleys”), which began with Boyd’s convincing the Brantleys to take out

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a $180,000 loan, secured by their residence and to be placed in escrow on a short-term

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basis for the purpose of assisting Boyd in qualifying for a $2,000,000 loan he needed to

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purchase a piece of property (see plaintiffs’ First Amended Complaint (“FAC”) ¶¶ 10, 11;

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cross-claimants’ First Amended Cross-Claim (“FACC”) ¶ 8); at the conclusion of sixty days,

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the $180,000 was to be returned to the Brantleys, who, in addition, were to receive a

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$25,000 payment from Boyd for their assistance in the $2,000,000 transaction (see FAC ¶

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10; FACC ¶ 8). Cross-claimants acted as the broker for the Brantleys and connected them

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with defendant Praveen Chandra (“Chandra”), a private lender, who made the above-

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referenced home equity loan to them (see FAC ¶¶ 13, 15; FACC ¶ 9), the terms of which

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included a balloon payment of $180,000 plus $30,000 in interest (see FAC ¶ 15). Prior to

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the Brantleys’ taking out that loan, however, and unbeknownst to them, the loan Boyd was

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endeavoring to obtain fell through. (See FAC ¶ 12.) Nevertheless, an escrow account was

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opened at defendant Academy Escrow, which subsequently, on oral misrepresentations by

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Boyd and in contravention of the express escrow instructions, released the $180,000 to

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Boyd, who then decamped with the funds. (See FAC ¶¶ 18, 23; FACC ¶¶ 8-9, 28.)

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Thereafter, Chandra demanded repayment and, when the Brantleys were unable to

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comply, instituted foreclosure proceedings on their home. (See FAC ¶ 26.)

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The above-titled lawsuit followed, in which the Brantleys, in addition to their claims

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against Boyd for conversion, asserted both federal and state law claims against cross-

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claimants and other participants in the transactions, including violations of the Truth in

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Lending Act (“TILA”), 42, U.S.C. § 1601, and Real Estate Settlement Procedures Act

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(“RESPA”), 12 U.S.C. § 2601-2617 (see FAC at 10-12), as well as negligence, breach of

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fiduciary duty and intentional infliction of emotional distress (see FAC at 13-15).

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In support of their claims against cross-claimants, the Brantleys alleged said

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defendants, prior to the consummation of the $180,000 loan and opening of escrow, were

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aware that Boyd’s loan had fallen through, and that they nonetheless, both negligently and
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in breach of their fiduciary duty, failed to inform the Brantleys of such development and

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thus the lack of any reason for the Brantleys to obtain a loan. (See FAC ¶¶ 12, 13; FACC ¶

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32.) Cross-claimants thereafter filed their cross-claim against Boyd, and subsequently

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their amended cross-claim, by which they seek full equitable indemnity as well as attorney’s

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fees and costs. On July 30, 2013, the Clerk of Court entered default against Boyd on the

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amended cross-claim and cross-claimants then filed the instant motion for default

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judgment.
DISCUSSION

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A.

Jurisdiction
As discussed above, the Brantleys’ complaint alleges both federal and state claims.

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The Court thus has original jurisdiction over the federal claims and supplemental

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jurisdiction over the state claims. See 28 U.S.C. § 1331 (providing “district courts shall

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have original jurisdiction of all civil actions arising under the . . . laws . . . of the United

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States); § 1367 (providing “district courts shall have supplemental jurisdiction over all other

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claims that are so related to claims in the action within . . . original jurisdiction that they

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form part of the same case or controversy”).

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B.

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Default Judgment
After entry of default by the clerk, a default judgment may be entered by the district

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court. See Fed. R. Civ. P. 55(b)(2). “The district court’s decision whether to enter a default

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judgment is a discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980).

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The factors courts consider in exercising that discretion include:

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(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s
substantive claim, (3) the sufficiency of the complaint, (4) the sum of
money at stake in the action[,] (5) the possibility of a dispute concerning
material facts[,] (6) whether the default was due to excusable neglect, and
(7) the strong policy underlying the Federal Rules of Civil Procedure
favoring decisions on the merits.

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Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Upon entry of default, “the factual
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allegations of the complaint, except those relating to the amount of damages, will be taken
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as true.” See Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917–18 (9th Cir. 1987).
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In their FACC, cross-claimants bring two claims: Equitable Indemnity (First Cause of
Action) and Tort of Another (Second Cause of Action). The Court addresses each in turn.

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1. Equitable Indemnity

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Cross-claimants allege that at a settlement conference conducted in November

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2012, they entered into a settlement agreement with plaintiffs, by which plaintiffs dismissed

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their claims against cross-claimants in exchange for a payment by cross-claimants in the

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amount of $25,016.50. (See FACC ¶¶ 24, 30.)2 Cross-claimaints now seek judgment

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against Boyd in that amount. (See FACC ¶ 34; Memorandum of Points and Authorities in

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Support of [Cross-Claimants’] Application for Default Judgment (“Cross-Claimants’ App.”) at

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10-11, 18.)

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“The basis for [equitable] indemnity is restitution, and the concept that one person is

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unjustly enriched at the expense of another when the other discharges liability that it should

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be his responsibility to pay.” W. Steamship Lines, Inc. v. San Pedro Peninsula Hosp., 8

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Cal. 4th 100, 108 (1994). “Although traditional equitable indemnity once operated to shift

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the entire loss . . ., the doctrine is now subject to allocation of fault principles and

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comparative equitable apportionment of loss.” Prince v. Pacific Gas & Elec. Co., 45 Cal.

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4th 1151, 1158 (2009). “Comparative equitable indemnity includes the entire range of

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possible apportionments–from no indemnity to total indemnity.” City of Huntington Beach v.

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City of Westminster, 57 Cal. App. 4th 220, 224 (1997).

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a. Total Indemnity

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As noted, cross-claimants seek total indemnity. Total indemnity is available,

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however, only “when one party bears 100 percent of the fault and another bears none.”

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See id. In this instance, the requisite showing has not been made. Rather, as set forth in

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the FAC, cross-claimants owed to the Brantleys both a duty of care and a fiduciary duty to

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inform them of significant developments known to cross-claimants, and cross-claimants

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failed to inform the Brantleys that there no longer existed a reason for them to take out the

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Cross-claimants also allege, without disclosing the sum paid, that Academy
Escrow settled with plaintiffs at the same conference. (See FACC ¶ 24.)
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home equity loan that ultimately led to their loss of $180,000 and the potential loss of their

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home. The FACC contains no allegation to the contrary and, indeed, cross-claimants

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“acknowledge that they might have been found liable to plaintiffs on plaintiffs’ negligence

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cause of action if the matter had proceeded to trial.” (FACC ¶ 32.)

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Accordingly, cross-claimants are not entitled to total indemnity.

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b. Partial Indemnity

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As noted, equitable indemnity encompasses not only total indemnity but also partial

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indemnity. Although cross-claimants have not sought, either in their FACC or the instant

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application, a judgment of partial indemnity, let alone made any suggestion as to how such

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an award could be made, the Court, as discussed below, nonetheless has considered the

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matter.

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Where a defendant enters into a settlement with a plaintiff, the settling defendant

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may seek from any nonsettling concurrent tortfeasor contribution based on comparative

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fault, and “the trier of fact determines the fault attributable to all parties.” See, e.g., Union

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Pacific Corp. v. Wengert, 79 Cal. App. 4th 1444, 1446, 1450 (2000). Having considered

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the facts presented, the Court apportions fault as follows: 70% to Boyd, 20% to Academy

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Escrow, and 10% to cross-claimants. The Court next determines whether cross-claimants,

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in settling with the Brantleys for the sum of $25,016.50, paid more than their proportionate

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share of the Brantleys’ damages. See, e.g., id. at 1447.

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In that regard, the Court first notes that under California law, defendants are jointly

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and severally liable for a plaintiff’s economic damages and only severally liable for a

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plaintiff’s non-economic damages. See id. Consequently, comparative equitable indemnity

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is available only for that portion of a settlement attributable to economic damages. See id.

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at 1451. Where, as here, the settlement does not specify the proportion thereof attributable

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to economic loss, the trier of fact determines “what percentage of the settlement represents

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a reasonable compromise of [the plaintiff’s] economic damages.” See id. at 1452.

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To make that calculation, a court must first determine the total amount of damages

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incurred by the plaintiff and then determine the percentage thereof constituting non-

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economic damages; the amount of a plaintiff’s damages may be determined either by

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reference to the total amount of the settlements reached or by independent proof. See id.

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at 1451. Here, as noted, the total amount of the settlements is not before the Court.

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Consequently, the Court has endeavored to determine the amount of the Brantleys’

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damages by reference to the facts contained in the FAC, the FACC, the instant application,

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and other portions of the relevant record.

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Based on the record before it, the Court finds the Brantleys’ total damages to be

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$354,300, which sum comprises the $180,000 in converted funds (see FACC ¶¶ 8, 28),

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pre-judgment interest thereon in the amount of $69,300 (see Referral for Reassignment

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with Recommendation to Grant [Plaintiffs’] Motion for Default Judgment, filed April 30, 2013

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(“Referral and Recommendation”) ¶ 6.a), the $30,000 interest payment owed to Chandra

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on the loan (see FAC ¶ 15, Cross-Claimants’ App. at 2), and emotional distress in the

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amount of $75,000 (see Referral and Recommendation ¶ 6.b.; Order, filed July 16, 2013).

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The Brantleys’ economic damages thus represent 79% of their total damages ($279,300 /

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$354,300). Applying that percentage to the settlement at issue, the Court finds the amount

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subject to contribution from Boyd is $19,763. See Union Pacific, 79 Cal. App. 4th at 1452.

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As noted, cross-claimants proportionate fault is 10%. If that percentage is applied to

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the Brantleys’ economic damages, which, as noted, are $279,300, the amount of cross-

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claimants’ proportionate share is $27,930, which sum is substantially more than $19,763.

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Accordingly, cross-claimants are not entitled to partial equitable indemnity.

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2. Tort of Another

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Cross-claimants further seek, under the doctrine of tort of another, an award of

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$81,952.75 in attorney’s fees and also costs in the amount of $11,738.03. Under California

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law, the “general rule” is that “attorney’s fees are to be paid by the party employing the

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attorney.” See Prentice v. N. Am. Title Guar. Corp., 59 Cal. 2d 618, 647 (1963).

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Nevertheless, “[a] person who through the tort of another has been required to act

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in the protection of his interests by bringing or defending an action against a third person is

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entitled to recover compensation for the reasonably necessary loss of time, attorney’s fees,

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and other expenditures thereby suffered or incurred.” Id. Where the proposed indemnitee

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has defended a claim “upon his own contract, or for his own misfeasance,” however, such

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indemnification is not available. See Davis v. Air Technical Indus., Inc., 22 Cal. 3d 1, 6

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(1978) (reversing award of attorney’s fees to party defending against own wrongdoing;

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noting “tort defendants, even if vindicated, must pay for their own defense”).
Here, as noted, the Brantleys’ lawsuit against cross-claimants was based on

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allegations of negligence and breach of fiduciary duty, and cross-claimants themselves

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concede “they might have been found liable to plaintiffs on plaintiffs’ negligence cause of

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action if the matter had proceeded to trial.” (FACC ¶ 32.)
Accordingly, cross-claimants are not entitled to an award of attorney’s fees and

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costs.
CONCLUSION

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For the reasons stated above, cross-claimants’ Application for Default Judgment is
hereby DENIED.
IT IS SO ORDERED.
Dated: October 25, 2013

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MAXINE M. CHESNEY
United States District Judge

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