United States of America v. Welch et al

Filing 61

ORDER: 30 Clerks Entry of Default is stricken. 29 Motion for Entry of Default is denied. 39 Motion for Default Judgment is denied. Plaintiff shall file proof of proper service by 11/1/12. By Magistrate Judge Kristen L. Mix on 9/17/12.(dkals, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 11-cv-02292-CMA-KLM
USA,
Plaintiff,
v.
JAMES D. WELCH, individually and as Executive Trustee of Celestial Pursuits Trust,
AMRA WELCH, as nominee/alter ego of James D. Welch, and
CIT GROUP/EQUIPMENT FINANCING, INC.,
Defendants.
_____________________________________________________________________
ORDER
_____________________________________________________________________
ENTERED BY MAGISTRATE JUDGE KRISTEN L. MIX
This matter is before the Court on Plaintiff’s Motion for Default Judgment Against
CIT Group/Equipment Financing, Inc. [Docket No. 39; Filed May 4, 2012] (the “Motion”).
Plaintiff seeks entry of default judgment against Defendant CIT Group/Equipment
Financing, Inc. (“CIT”). Pursuant to Fed. R. Civ. P. 55(a), the Clerk of Court entered default
against Defendant CIT on February 2, 2012 [#30]. Defendant CIT has not responded to
Plaintiff’s Complaint [#1] or the present Motion. For the reasons set forth below, the Motion
[#39] is DENIED without prejudice.
I. BACKGROUND
Plaintiff initiated this lawsuit on August 31, 2011, seeking, in short, to reduce to
judgment outstanding federal tax liabilities assessed against Defendant James D. Welch
(“J. Welch”) and to foreclose federal tax liens against a parcel of real property located at

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11420 Teachout Road, Colorado Springs, Colorado (the “Property”). Compl. [#1] at 1, 3.
According to the Complaint, the Property was transferred by Warranty Deed
recorded on February 19, 1999 from Samuel’s Custom Homes, Inc. to Celestial Pursuits
Trust, of which Defendant J. Welch is the Executive Trustee. Compl. [#1] at 3. The funds
for the purchase of the Property came from Defendant J. Welch. Id. The Property was
later transferred from Celestial Pursuits Trust to Defendant J. Welch’s daughter, Defendant
Amra Welch by Quit Claim Deed recorded on December 15, 2003. Id.
Defendant CIT is named as a Defendant pursuant to 26 U.S.C. § 7403(b) “because
it may claim an interest in the real property at issue in this suit.” Id. at 2. In the Motion,
Plaintiff also asserts that “[o]n March 14, 2003, a Transcript of Judgment was entered
against [Defendant J. Welch] by [Defendant CIT] in the amount of $26,190.01.” Motion
[#39] at 1. No other allegations about Defendant CIT exist in either the Complaint or the
Motion.
II. ANALYSIS
The Court first examines whether the Clerk of the Court properly entered default
against Defendant CIT. On October 20, 2011, Plaintiff filed an Affidavit of Service [#6]
stating that it served Laura Nelson (“Nelson”), Legal Assistant for CIT Group/Equipment
Financing, Inc., on October 11, 2011. On November 20, 2011, Plaintiff filed another
Affidavit of Service [#20] stating that it served Emily Barnhard (“Barnhard”), Authorized R/A
for CTI Group/Equipment Leasing R/A: CT Corporation Systems, on November 4, 2011.
On February 2, 2012, Plaintiff filed a Motion for Entry of Default as to Defendant CIT [#29].
Plaintiff based its Motion for Entry of Default on the second Affidavit of Service. On
February 6, 2012, the Clerk of the Court entered default as to Defendant CIT based not on
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Plaintiff’s request with respect to the second Affidavit of Service, but with respect to
Plaintiff’s first attempt at service.
Rule 55(a) states: “When a party against whom a judgment for affirmative relief is
sought has failed to plead or otherwise defend, and that failure is shown by affidavit or
otherwise, the clerk must enter the party’s default.” Before entry of default, the Court must
first determine whether Defendant CIT was served. Plaintiff’s Affidavit of Service identifies
Defendant CIT as a corporation. See [#20]. Therefore, the Court analyzes the adequacy
of service in the context of Fed. R. Civ. P. 4(h), which establishes the requirements for
service of a corporation, partnership, or association.
Rule 4(h) provides that service on a corporation, partnership, or association is
adequate if effected “by delivering a copy of the summons and of 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 . . .” Fed. R. Civ. P. 4(h)(1)(B). On October 20, 2011,
Plaintiff filed an Affidavit of Service demonstrating that a private process server personally
delivered the summons to Ms. Nelson, a “legal assistant.” There is nothing in the record
to indicate that Ms. Nelson was a proper agent for service of Defendant CIT; in other
words, the record is devoid of evidence demonstrating that she is an officer or appropriate
agent of Defendant CIT on whom proper service could be made. The Court therefore finds
that service on Defendant CIT via Ms. Nelson is insufficient. See Fed. R. Civ. P. 4(h)(1)(B).
On November 23, 2011, Plaintiff filed its second Affidavit of Service, demonstrating
that a private process server personally delivered the summons to Ms. Barnhard as the
registered agent for “CTI Group/Equipment Leasing.” See Aff. of Serv. [#20]. On the basis
of this service, Plaintiff sought entry of default on February 2, 2012 [#29]. However, there
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is no evidence in the Motion for Entry of Default, in the Complaint, or anywhere else in the
record that “CTI Group/Equipment Leasing” is the same entity as Defendant “CIT
Group/Equipment Financing, Inc.”

The Court therefore finds that service on “CTI

Group/Equipment Leasing” is insufficient for entry of default without proof by Plaintiff that
it is the same entity as Defendant “CIT Group/Equipment Financing, Inc.”
Having found that Defendant CIT has not been properly served,
IT IS HEREBY ORDERED that the Clerk’s Entry of Default [#30] is STRICKEN.
IT IS FURTHER ORDERED that the Motion for Entry of Default as to Defendant CIT
[#29] is DENIED without prejudice.
IT IS FURTHER ORDERED that the Motion for Default Judgment [#39] as to
Defendant CIT is DENIED without prejudice.
IT IS FURTHER ORDERED that Plaintiff shall file proof of proper service on
Defendant CIT on or before November 1, 2012 or risk recommendation of dismissal of
CIT as a Defendant in this matter.

Dated: September 17, 2012

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