Zhao et al v. Huang

Filing 14

MEMORANDUM AND ORDER that Plaintiffs' Motion for Default Judgment 11 is denied. Plaintiff's Complaint as it relates to the October 2014 Loan is dismissed with leave to amend. The stay of progression in this case is lifted. The clerk of the court is directed to terminate the dismissal paper deadline set for June 15, 2015. The case will be progressed according to the Federal Rules of Civil Procedure. Ordered by Chief Judge Laurie Smith Camp. (JSF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
ZEMIN ZHAO, AND ZHONG LING CHEN,
Plaintiffs,

8:15CV288

vs.
MEMORANDUM
AND ORDER

JI FENG HUANG,
Defendant.

This matter is before the Court on the Motion for Default Judgment (Filing No. 11)
submitted by Plaintiffs Zemin Zhao (“Zhao”) and Zhong Ling Chen (“Chen”) (collectively
“Plaintiffs”). For the reasons discussed below, the motion will be denied and Plaintiffs’
Complaint will be dismissed in part with leave to amend.
BACKGROUND
The Motion for Default Judgment comes before the Court in an unusual posture.
Plaintiffs filed a complaint (“Complaint”) (Filing No. 1) on August 3, 2015, alleging that
Defendant Ju Feng Huang (“Huang”)1 defaulted on payments on multiple promissory
notes she made in favor of Plaintiffs.

The Complaint alleges that Plaintiffs loaned

Huang $81,967.212 on November 27, 2013 (“November 2013 Loan”). For the loan,
Huang signed a promissory note, a copy of which is attached to the Complaint.3 (Id. at
ECF 2; id. at ECF 8–9.) According to the note, Huang agreed to repay the loan with an

1

Although Plaintiffs provide a California address for Huang, the filings indicate that Huang
presently resides in China.
2
All loans alleged herein were initially calculated in amounts corresponding to the Chinese
Renminbi.
3
Both of the promissory notes filed with the Court were handwritten in Mandarin. Both are
accompanied by an English translation and a notarized certificate provided by the translating company,
attesting to the translations’ accuracy. (See Filing No. 1 at ECF 7–11.)

interest rate of 3% per month, with her house serving as collateral. (Id. at ECF 8–9.)
The debt was to be repaid within one year.
On March 3, 2014, Plaintiffs loaned Huang $16,393.44 (“March 2014 Loan”) for
which Huang signed a promissory note and agreed to repay at 3% interest per month.4
(Id. at ECF 2.) On March 6, 2015, Huang paid loan interest, but never paid on the
principal amounts of either loan—a total of $98,360.65. (Id.)
On October 8, 2014, Plaintiffs loaned Huang $161,290.32 (“October 2014 Loan”).
Again Huang signed a promissory note, a copy of which is attached to the Complaint.
(Id. at ECF 2–3; id. at ECF 10–11.) Huang agreed to pay interest at a rate of 3% per
month, with her house again serving as collateral. (Id. at ECF 3.) As with the prior two
loans, the October 2014 Loan was due within one year—specifically, by October 8,
2015. Plaintiffs filed their Complaint on August 3, 2015, more than two months before
the October 2014 Loan was due. The Complaint prayed for judgment “if [Huang] does
not pay the amount due under the [October 2014 Loan]” in the amount of the unpaid
balance of the loan. (Id. at ECF 5.)
As of the date of this order, Huang has not filed an answer with the Court. On
November 18, 2015, however, Plaintiffs and Huang filed a Stipulation for Entry of
Judgment Upon Default (Filing No. 9) (“Stipulation”). The Stipulation was signed by
Plaintiffs and Huang, although Huang’s signature was not notarized.5 According to the
4

This promissory note is not attached to the Complaint.
In their identical affidavits, Zhao (Filing No. 12) and Chen (Filing No. 13) assert that Huang
notified Plaintiffs that she was unable to have her signature on the Stipulation notarized in China.
Included with the affidavits are images that Plaintiffs identify as Huang signing and holding the Stipulation
as well as images of the original message from Huang in Mandarin informing Plaintiffs of her inability to
have the Stipulation notarized, a translation of Huang’s message into English, and the translating
company’s certificate of the translation’s accuracy. (Filing Nos. 12 ¶ 3–7; 12 at ECF 4–8; 13 ¶ 3–7; 13 at
ECF 4–8).
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2

terms of the Stipulation, Huang was obligated to pay Plaintiffs $65,573.77 by October
15, 2015; $32,786.89 by November 30, 2015; $162,601.62 by February 28, 2016;
$105,573.77 by May 31, 2016; $1,000 by May 31, 2016 for Plaintiffs’ court costs; and
$5,000 by May 31, 2016 for Plaintiffs’ attorney’s fees. (Filing No. 9 at ECF 2.) The
Stipulation also stated that Plaintiffs would be “entitled to ask this Court to enter a
Judgment against [Huang],” (id. ¶ 4.), and that “the Court shall accept as presumptive
proof the recitation by Plaintiffs of . . . the existence of an event of default.” (Id. ¶ 9.)
The Stipulation also stated that “[Huang] waives the right to present conflicting evidence
as to any of the issues described herein” and “waives all right to assert any defense on
the merits . . . .” (Id.)
In its order dated December 10, 2015, this Court stated that it would regard the
Stipulation as a notice of settlement. Accordingly, the Court stayed progression of the
case pending payments by Huang to Plaintiffs per the terms of the Stipulation. (See
Filing No. 10.)
On December 22, 2015, Plaintiffs filed their Motion for Default Judgment alleging
that Huang made the first payment of the Stipulation’s payment schedule, but none
thereafter. Plaintiffs moved the Court to enter an order of “default judgment” against
Huang in the amount of $306,962.28 with an interest rate of 12% per annum. (Filing
No. 11 at ECF 2.)
DISCUSSION
Plaintiffs and Huang filed their Stipulation with the apparent intent that Huang
would waive her right to dispute the fact of her nonpayment before this Court. Thus,
when Plaintiffs filed affidavits attesting to Huang’s nonpayment on the agreed amount,
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the Court would enter a Default Judgment immediately, the normal procedural steps
being waived. In its order acknowledging the Stipulation as a notice of settlement, this
Court did not rule on the validity, enforceability, or appropriateness of the terms of the
Stipulation. The Court simply stayed progression of the case pending further notice
from the parties. The Court is not bound by the terms in the Stipulation that purport to
dictate how the Court should proceed in light of Huang’s alleged nonpayment.
Unlike a settlement where the Court dismisses the action but explicitly retains
jurisdiction to enforce the settlement’s terms, the parties here did not seek dismissal of
this action and the action was not dismissed. Plaintiffs’ Complaint, not the Stipulation,
remains the operative document before the Court. Because of this, and for the reasons
discussed below, the Court will dismiss the action in part with leave to amend and will
deny the Motion for Default Judgment.
Regarding the October 2014 Loan—a loan totaling $161,290.32—Plaintiffs’
Complaint does not state a present case or controversy. See Teague v. Cooper, 720
F.3d 973, 976 (8th Cir. 2013) (quoting Lewis v. Cont’l Bank Corp., 494 U.S. 472, 477
(1990)) (“Article III of the Constitution grants federal courts the power to hear ‘Cases’
and ‘Controversies.’ This ‘requirement subsists through all stages of federal judicial
proceedings.’”) Here, the Complaint describes a potential claim that may arise in the
future depending on the occurrence or nonoccurrence of certain events. See Parrish v.
Dayton, 761 F.3d 873, 875–76 (8th Cir. 2014) (quoting Texas v. United States, 523 U.S.
296, 300 (1998)) (“A claim is not ripe for adjudication if it rests upon contingent future
events that . . . may not occur at all.” (internal quotation marks omitted)); Fed. R. Civ. P.
8(a)(2) (“A pleading that states a claim for relief must contain . . . a short and plain
4

statement of the claim showing that the pleader is entitled to relief.”). As such, this
Court is without subject matter jurisdiction to adjudicate the claim predicated on the
October 2014 Loan.
To date, Plaintiffs have not moved this Court to amend the Complaint to reflect
the current status of the October 2014 Loan, although the Stipulation states that all
amounts remained unpaid as of November 11, 2015. (Filing No. 9. ¶ 3.) Short of such
amendment, any judgment entered by this Court regarding the October 2014 Loan
would be outside its Article III power and void as a matter of law. Kokkonen v. Guardian
Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (“Federal courts are courts of limited
jurisdiction. They possess only that power authorized by Constitution and statute, which
is not to be expanded by judicial decree . . . .” (internal citations omitted)); 50 C.J.S.
Judgment § 754 (2015) (“A judgment is void when . . . rendered by a court which lacked
personal or subject-matter jurisdiction.” (internal footnote omitted)). Therefore, on its
own motion, the Court will dismiss Plaintiffs’ Complaint as it pertains to the October
2014 Loan with leave to amend the Complaint to allege whether Huang is in arrears on
the October 2014 Loan now that the loan has come due. See 4:20 Commc'ns, Inc. v.
Paradigm Co., 336 F.3d 775, 778 (8th Cir. 2003) (“As parties may not expand the
limited jurisdiction of the federal courts by waiver or consent, subject matter jurisdiction
issues may first be raised at any time . . . .”)
Because Plaintiffs seek a judgment in an amount based on the three loans in
total, this Court will deny the Motion for Default Judgment. Chao v. Sauve, No. C032041 LRR, 2004 WL 503819, at *2 (N.D. Iowa Mar. 16, 2004) (“When a party moves for
entry of a default judgment, the court must exercise sound judicial discretion in
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determining whether the judgment should be entered.”); 10A Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure § 2685 (3d ed.) (“[A] party making the
request [for default judgment] is not entitled to a default judgment as of right, even when
defendant is technically in default and that fact has been noted under Rule 55(a).”6); see
also Oberstar v. F.D.I.C., 987 F.2d 494, 504 (8th Cir. 1993) (noting the Eighth Circuit’s
“strong judicial policy against default judgments”).

The Court is mindful that there

appear to be no issues of material facts, and this action may be appropriate for
disposition via subsequent motion.

The Court will consider any such motion in

accordance with the Federal Rules of Civil Procedure. Accordingly,
IT IS ORDERED:
1. Plaintiffs’ Motion for Default Judgment (Filing No. 11) is denied;
2. Plaintiff’s Complaint as it relates to the October 2014 Loan is dismissed with
leave to amend;
3. The stay of progression in this case is lifted;
4. The clerk of the court is directed to terminate the dismissal paper deadline set for
June 15, 2015; and
5. The case will be progressed according to the Federal Rules of Civil Procedure.
Dated this 26th day of January, 2016.
BY THE COURT:
s/Laurie Smith Camp
Chief United States District Judge

6

The Court notes that Plaintiffs have not attempted to comply with Federal Rule of Civil
Procedure 55, but rather circumvent it.

6