CitiMortgage Inc v. First Residential Mortgage Services Corporation

Filing 38

MEMORANDUM AND ORDER IT IS HEREBY ORDERED that Plaintiffs motion for default judgment is GRANTED in the amount of $763,080.48, plus applicable costs, subject to the filing of a timely and proper Bill of Costs. (Doc. No. 35.)IT IS FURTHER ORDERED that the Clerks Office is directed to serve a copyof this Memorandum and Order and the accompanying Judgment on Defendant FirstResidential Mortgage Services Corporation at the address of service employed by the process server. A separate Judgment shall accompany this Memorandum and Order. Signed by District Judge Audrey G. Fleissig on 2/24/14. (JWJ)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
CITIMORTGAGE, INC.,
Plaintiff,
vs.
FIRST RESIDENTIAL MORTGAGE
SERVICES CORPORATION,
Defendant.

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Case No. 4:13CV00703 AGF

MEMORANDUM AND ORDER
The matter is before the Court on the motion of Plaintiff CitiMortgage, Inc. for
default judgment against Defendant First Residential Mortgage Services Corporation.
Plaintiff is a New York corporation having its principal place of business in Missouri and
is engaged in the business of purchasing, reselling, and servicing residential mortgage
loans on the secondary mortgage market. Defendant is a New Jersey corporation
engaged in the business of originating, sourcing, and reselling residential mortgage loans.
Plaintiff asserts that Defendant breached certain loan and underwriting agreements
entered into by the parties. For the reasons set forth below, the motion for default
judgment will be granted.
Plaintiff filed its complaint on April 15, 2013. (Doc. No. 1.) Defendant was
properly served on April 24, 2013. (Doc. No. 5.) On May 2, 2013, attorneys Ronald J.
Eisenberg and Robert Schultz of Schultz & Associates, LLP entered their appearance on
behalf of Defendant and filed a motion for a more definite statement under Federal Rule

of Civil Procedure 12(e). (Doc. Nos. 7-9.) The parties proceeded with discovery and on
September 3, 2013, the Court referred the matter to mediation. (Doc. No. 19.)
Defendant’s counsel filed a motion to withdraw as attorney on November 4, 2013, stating
that Defendant could not afford the cost of the mediation or the defense of the suit. (Doc.
No. 24.) On November 15, 2013, the Court extended the deadline for the mediation, and
advised Defendant of its ability to request a pro bono mediator. The Court also advised
Defendant that a corporation cannot appear pro se before the Court and that if substitute
counsel was not engaged, default judgment would be entered against Defendant. (Doc.
No. 25.) The Court gave Defendant until December 2, 2013, to file any objections to the
proposed withdrawal of counsel. No objections were filed, and on December 5, the Court
granted the motion of Defendant’s counsel to withdraw and reminded Defendant that
default judgment would be entered against it unless substitute counsel was engaged.
(Doc. No. 28.) At Plaintiff’s request, the Clerk of Court entered default against
Defendant on January 29, 2014. (Doc. No. 32.) On February 3, 2014, Plaintiff filed a
motion for default judgment against Defendant accompanied by affidavits in support of
its prayer for damages. (Doc. Nos. 35 & 36.) Defendant has not filed a response to
Plaintiff’s motion for default judgment, and the time to do so has expired.
Background
The allegations of the complaint and the affidavits filed in support indicate that in
2004, the parties entered into a contract (“The Agreement”) whereby Plaintiff agreed to
purchase from Defendant residential mortgage loans that met certain underwriting
criteria. See Doc. No. 35-2. The Agreement provided that if Defendant sold Plaintiff a

loan that did not comply with the underwriting requirements, Plaintiff could require
Defendant to repurchase the loan. See id.
After Plaintiff conducted an audit of loans purchased from Defendant, it identified
nine noncompliant loans. Pursuant to the requirements of the Agreement, Plaintiff gave
Defendant a notice of the noncompliant loans and demanded that Defendant either cure
the underwriting deficiencies or repurchase the loans. Defendants neither cured nor
repurchased the loans within the time specified and Plaintiff then brought this action for
breach of the Agreement.
Applicable Law
Default judgments are disfavored by the law, United States ex rel. Time Equip.
Rental & Sales, Inc. v. Harre, 983 F.2d 128, 130 (8th Cir. 1993), and their entry is
discretionary. Taylor v. City of Ballwin, 859 F.2d 1330, 1332 (8th Cir. 1988). A court
may exercise its discretion to enter a default judgment where a corporate party fails to
abide by the requirement that it be represented by counsel. Ackra Direct Mktg. Corp. v.
Fingerhut Corp., 86 F.3d 852, 857 (8th Cir. 1996) (providing that a corporation may not
proceed pro se and noting that a failure to obtain counsel may lead to default).
Prior to the entry of a default judgment, a court should satisfy itself that the
plaintiff is entitled to judgment by reviewing the sufficiency of the complaint and the
substantive merits of the plaintiff’s claim. Jenkins v. E. Asset Mgmt., LLC, No. 4:08-CV1032 CAS, 2009 WL 2488029, at *2 (E.D. Mo. Aug. 12, 2009). Because the liability of
a defendant is established upon entry of default, once default is entered, the plaintiff is
not required to further establish its right to recover. Brown v. Kenron Aluminum & Glass

Corp., 477 F.2d 526, 531 (8th Cir. 1973) (stating that on establishment of default, “the
defendant has no further standing to contest the merits of plaintiff’s right to recover”).
Although the factual allegations set forth in the complaint are taken as true, allegations
relating to the amount of damages must be proven. Fed. R. Civ. P. 8(b)(6) (providing
that “[a]n allegation—other than one relating to the amount of damages—is admitted if a
responsive pleading is required and the allegation is not denied”); Everyday Learning
Corp. v. Larson, 242 F.3d 815, 818 (8th Cir. 2001).
Discussion
Upon review of Plaintiff’s complaint and accepting the allegations in the
complaint as true, the Court concludes that Plaintiff has established Defendant’s breach
of the Agreement and that Plaintiff is entitled to a default judgment. With respect to
damages, the Court has reviewed and considered the affidavits and documentation
Plaintiff offered in support of its prayer, and concludes that Plaintiff’s request is
appropriate, and will award the damages Plaintiff seeks.
Accordingly,
IT IS HEREBY ORDERED that Plaintiff’s motion for default judgment is
GRANTED in the amount of $763,080.48, plus applicable costs, subject to the filing of a
timely and proper Bill of Costs. (Doc. No. 35.)
IT IS FURTHER ORDERED that the Clerk’s Office is directed to serve a copy
of this Memorandum and Order and the accompanying Judgment on Defendant First
Residential Mortgage Services Corporation at the address of service employed by the
process server.

A separate Judgment shall accompany this Memorandum and Order.
_______________________________
AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 24th day of February, 2014.