Ditech Financial LLC v. Sommerset Park Homeowners Association et al

Filing 107

ORDER. IT IS ORDERED that 100 , 102 , 103 SFR's Motions for Default Judgment, are GRANTED. Default Judgment is GRANTED in favor of SFR and against Borrowers, HFRC, and Allied as to SFR's quiet title/declaratory relief claims. Signed by Chief Judge Gloria M. Navarro on 8/26/2019. (Copies have been distributed pursuant to the NEF - JQC)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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BANK OF NEW YORK MELLON, f/k/a
Bank of New York, as Trustee for the
Certificateholders of the CWABS, Inc., AssetBacked Certificates, Series 2006-2,

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Plaintiff,
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vs.
SOMMERSET PARK HOMEOWNERS
ASSOCIATION, et al.,

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Defendants.

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Case No.: 2:16-cv-01811-GMN-DJA
ORDER

Pending before the Court are the Motions for Default Judgment, (ECF Nos. 100, 102–

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03), filed by Defendant SFR Investments Pool 1, LLC (“SFR”), against Cross-Defendants

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Liliana M. Morfin and Raul Chiang-Bueno (“Borrowers”), Household Finance Realty

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Corporation (“HFRC”), and Allied Collection Services, Inc. (“Allied”) (collectively “Cross-

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Defendants”). For the reasons addressed below, SFR’s Motions for Default Judgment are

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GRANTED.

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I.

BACKGROUND1
This case arises from the non-judicial foreclosure on real property located at 6652 Lund

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Drive, Las Vegas, Nevada 89108 (the “Property”). (See Deed of Trust, ECF No. 85-1).

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Borrowers financed their purchase of the Property in 2005 by way of a loan in the amount of

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$228,000 secured by a deed of trust. (Id.). Plaintiff Bank of New York Mellon (“Plaintiff”)

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The summary that follows is limited to facts necessary to decide the presents Motions.

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became beneficiary under the deed of trust through an assignment recorded on November 17,

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2017. (See Assignments of Deed of Trust, ECF Nos. 85-2–85-5).

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Upon Borrowers’ failure to pay all amounts due, Sommerset Park Homeowners

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Association (“HOA”), through its agent Alessi & Koenig, LLC (“A&K”), initiated foreclosure

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proceedings on the Property. Pursuant to NRS Chapter 116, A&K recorded a notice of

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delinquent assessment lien, following by a notice of default and election to sell. (See Notice of

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Lien, ECF No. 85-8); (Notice of Default, ECF No. 85-9).

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Prior to the sale, Bank of America, N.A. (“BANA”), Plaintiff’s loan servicer at the time,

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sought to preserve the first deed of trust by satisfying the HOA superpriority lien. (See Request

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for Accounting, Ex. 2 to Miles Bauer Aff., ECF No. 85-10). On December 29, 2010, BANA

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sent A&K a check for $228.09, which A&K rejected. (Tender Letter, Ex. 4 to Miles Bauer

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Aff.); (see also A&K 30(b)(6) Dep. 46:24–47:5, ECF No. 85-11). A&K proceeded with

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foreclosure proceedings, recording a notice of trustee’s sale. (Notice of Sale, ECF No. 85-14).

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On December 5, 2012, A&K sold the Property to SFR for $7,800.00. (See Trustee’s Deed Upon

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Sale, ECF No. 85-15).

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On July 10, 2019, the Court issued its decision with respect to HOA, SFR, and

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Plaintiff’s motions for summary judgment. (See Order, ECF No. 98). The Court granted

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Plaintiff summary judgment on its quiet title claim on the basis that BANA, Plaintiff’s

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predecessor in interest, validly tendered the HOA superpriority lien, thus invalidating the sale

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insofar as it purported to extinguish the deed of trust. (Id. 11:3–10). Rather than unwinding the

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foreclosure sale, however, the Court issued a declaration stating SFR purchased the Property

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subject to Plaintiff’s first deed of trust, which continues to encumber the Property. (Id.). As

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such, the Court denied SFR’s motion for summary judgment on Plaintiff’s quiet title claim and

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on SFR’s competing quiet title claim. (Id. 12:9–12).

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Following the Court’s Order, SFR filed the Motions presently before the Court against

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Cross-Defendants, who SFR alleges purport to claim junior, adverse interests in the Property.

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Specifically, SFR seeks default judgment against: (1) Borrowers, who granted the first deed of

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trust to Plaintiff’s predecessors in interest; (2) HFRC, the holder of the second deed of trust

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executed by Borrowers; and (3) Allied, who secured a default judgment against Borrowers in

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state court. (See Second Deed of Trust, Ex. 1-B to Mot. for Default J., ECF No. 100-3);

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(Assignments, ECF Nos. 100-4, 100-5); (See Order Granting Default J., ECF No. 100-6).

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II.

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LEGAL STANDARD
Obtaining a default judgment is a two-step process governed by Rule 55 of the Federal

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Rules of Civil Procedure. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). First, the

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moving party must seek an entry of default from the clerk of court. Fed. R. Civ. P. 55(a). Then,

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after the clerk of court enters default, a party must separately seek entry of default judgment

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from the court in accordance with Rule 55(b). Fed R. Civ. P. 55(b). Upon entry of a clerk’s

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default, the court takes the factual allegations in the complaint as true. Nonetheless, while the

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clerk’s entry of default is a prerequisite to an entry of default judgment, “a plaintiff who obtains

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an entry of default is not entitled to default judgment as a matter of right.” Warner Bros. Entm’t

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Inc. v. Caridi, 346 F. Supp. 2d 1068, 1071 (C.D. Cal. 2004) (citation omitted). Instead,

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whether to grant a default judgment is in the court’s discretion. Id.

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The Ninth Circuit has identified several relevant factors in determining whether to grant

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default judgment including: (1) the possibility of prejudice to the plaintiff; (2) the merits of the

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plaintiff’s substantive claims; (3) the sufficiency of the complaint; (4) the sum of money at

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stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the

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default was due to the excusable neglect; and (7) the strong public policy favoring decisions on

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the merits. Eitel, 782 F.2d at 1471–72.

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III.

DISCUSSION
SFR moves for default judgment against Borrowers, HFRC, and Allied, requesting

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declaratory relief with respect to its crossclaims. SFR has initiated the two-step process

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required by Rule 55 by moving for clerk’s entry of default against Cross-Defendants, (ECF

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Nos. 80–84), which the clerk of court subsequently entered, (ECF No. 87). In accordance with

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Rule 55(b), SFR brings the present Motions.

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Upon reviewing the documents and pleadings on file in this matter, the Court finds that

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the Eitel factors support entry of default judgment in favor of SFR, and against Cross-

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Defendants. The first Eitel factor weighs in favor of default judgment. A defendant’s failure to

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respond or otherwise appear in a case “prejudices a plaintiff’s ability to pursue its claims on the

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merits,” and therefore satisfies this first factor. See, e.g., Nationstar Mortg. LLC v. Operture,

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Inc., No. 2:17-cv-03056-GMN-PAL, 2019 WL 1027990, at *2 (D. Nev. Mar. 4, 2019); ME2

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Prods., Inc. v. Sanchez, No. 2:17-cv-667-JCM-NJK, 2018 WL 1763514, at *1 (D. Nev. Apr.

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12, 2018); see also PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal

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2002) (“If Plaintiffs’ motion for default judgment is not granted, Plaintiffs will likely be

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without other recourse for recovery.”).

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Regarding the second and third Eitel factors, the Court finds SFR’s crossclaims for quiet

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title, with a requested remedy of declaratory relief, are sufficiently pleaded and meritorious as

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to the Cross-Defendants. “A plea to quiet title does not require any particular elements, but

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‘each party must plead and prove his or her own claim to the property in question’ and a

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‘plaintiff’s right to relief therefore depends on superiority of title.” Chapman v. Deutsche Bank

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Nat’l Tr. Co., 302 P.3d 1103, 1106 (Nev. 2013) (quoting Yokeno v. Mafnas, 973 F.2d 803, 808

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(9th Cir. 1992)).

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SFR alleges that to the extent Borrowers, HFRC, and Allied purport to claim an interest
in the Property, SFR’s purchase of the same extinguished those interests by operation of NRS

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Chapter 116. (See SFR’s Answer 16:28–17:7, 17:20–18:3, ECF No. 24). Per the Court’s Order

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on the parties’ summary-judgment motions, the HOA sale is only void to the extent it

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extinguished the deed of trust by foreclosure of the HOA superpriority lien. (See Order 11:3–

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10, ECF No. 98); Bank of Am., N.A. v. SFR Invs. Pool 1, LLC, 427 P.3d 113, 121 (Nev. 2018)

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(“[A]fter a valid tender of the superpriority portion of an HOA lien, a foreclosure sale on the

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entire lien is void as to the superpriority portion . . . .”).

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Stated differently, the Court’s Order did not impact SFR’s purchase of the Property, or

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the sale’s extinguishment of the subpriority portion of the HOA lien. Consequently, the

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foreclosure of the subpiority portion of the HOA lien, following SFR’s purchase, caused the

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extinguishment of all junior liens. See, e.g., Cogburn St. Tr. v. U.S. Bank Nat’l Ass’n as Tr. to

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Wachovia Bank, Nat’l Ass’n, 442 P.3d 138 (May 31, 2019, Nev. 2019) (unpublished) (“[T]he

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Bank’s tender extinguished the HOA’s superpriority lien. As a result, the HOA foreclosure sale

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necessarily only included the subpriority lien . . . . A valid foreclosure on a lien extinguishes all

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junior liens, but all senior liens remain.”) (citing SFR Invs. Pool 1 v. U.S. Bank, 334 P.3d 408,

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414 (Nev. 2014)); see also Restatement (Third) of Prop.: Mortgages § 7.1 (1997) (“A valid

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foreclosure of a mortgage terminates all interests in the foreclosed real estate that are junior to

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the mortgage being foreclosed and whose holders are properly joined or notified under

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applicable law.”). Therefore, SFR is entitled to a declaration that its interest in the Property is

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superior to any purported interest of Borrowers, HFRC, and Allied, to the extent they assert any

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adverse interest in the Property.

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The fourth factor weighs in favor of default judgment because SFR seeks only

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declaratory relief and no monetary damages against Cross-Defendants. (SFR’s Answer 18:21–

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25); (Mot. for Default J. 5:2–6, ECF No. 101). The fifth Eitel factor, which concerns the

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possibility of a dispute regarding material facts, favors SFR. Courts have recognized that,

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“[o]nce the clerk enters a default, the well-pleaded factual allegations of the [moving party’s]

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complaint are taken as true, except for those allegations relating to damages.” ME2 Prods.,

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2018 WL 1763514, at *2 (quoting O’Brien v. United States, No. 2:07-cv-00986-GMN-GWF,

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2010 WL 3636171, at *4 (D. Nev. Sept. 9, 2010)). Taking SFR’s allegations as true, Cross-

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Defendants possessed interests in the Property junior to that of Plaintiff, which was

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subsequently extinguished upon SFR’s purchase. (SFR’s Answer 16:28–17:7, 17:20–22).

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With respect to the sixth Eitel factor, the Court finds that Cross-Defendants’ failure to

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appear was not the result of excusable neglect. Cross-Defendants were served in December

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2016, (ECF Nos. 37–38, 42–43), and their answers were due in early January 2017. The clerk

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of court entered default against Cross-Defendants on February 14, 2019, (ECF No. 87), and

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SFR filed the present Motions on August 7, 2019, (ECF Nos. 100, 102–03). Cross-Defendants’

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failure to appear or otherwise file anything with respect to this action during this time period

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counsels against a finding of excusable neglect. See ME2 Prods., 2018 WL 1763514, at *3;

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O’Brien, 2010 WL 3636171, at *6.

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The seventh and final Eitel factor concerns public policy considerations. While public

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policy generally favors disposition on the merits, the Court concludes that default judgment is

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appropriate in light of the other Eitel factors.

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IV.

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CONCLUSION
IT IS HEREBY ORDERED that SFR’s Motions for Default Judgment, (ECF Nos. 100,

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102, 103), are GRANTED. Default Judgment is GRANTED in favor of SFR and against

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Borrowers, HFRC, and Allied as to SFR’s quiet title/declaratory relief claims.

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The Clerk of Court is instructed to close this case.

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DATED this _____ day of August, 2019.

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_________________________________
Gloria M. Navarro, Chief Judge
United States District Court
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