Red Star Mortgage Corporation v. Branch, et al

Filing 14

MEMORANDUM OPINION AND ORDER denying as moot 8 Opposed MOTION to Alter Judgment and transferring case to USDC for the Eastern District of Pennsylvania by Chief Judge M. Christina Armijo. (vv)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO

Red Star Mortgage Corporation,
Plaintiff/Judgment Creditor
v.

No. 16-mc-00046-MCA

Michael Branch; Branch Realty, LLC;
Xacattack, LLC f/k/a Renaissance Properties,
LLC, and Branch Realty Commercial Advisors,
Defendants/Judgment Debtors.
MEMORANDUM OPINION AND ORDER
THIS MATTER is before the Court on Motion of Michael Branch and Branch
Realty, LLC to Remove Default Judgment from Registration with New Mexico Courts and
for Stay of Execution of Judgment, filed January 31, 2017. [Doc. 8] The Court has
considered the parties’ submissions, the relevant law, and is otherwise fully advised in
the premises. For the reasons that follow, the Motion is not well taken and shall be
DENIED without prejudice to Defendants’ ability to pursue the requested relief in the
Eastern District of Pennsylvania.
BACKGROUND
This case began when Plaintiff/Judgment Creditor Red Star Mortgage Corporation
(Red Star) filed a complaint in a Pennsylvania county court, which was later removed to a
court within the Eastern District of Pennsylvania (EDPA), alleging, among other things,
non-payment of a commission in connection with refinancing a real estate project (the
Market Station at Santa Fe Railyards) in Santa Fe, New Mexico. [Doc. 9-1 p. 7; Doc. 9-6
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p. 2] Red Star is financial company in Pennsylvania. [Doc. 10-1 p. 2] Allen Branch
(Michael Branch’s son) allegedly entered into an agreement with Red Star for the Santa
Fe real estate project, the breach of which led to Red Star’s lawsuit. [Doc. 10-1] In the
original complaint, Branch Realty Commercial Advisors, Allen Branch, and Xacattack,
LLC (an LLC of which Allen Branch is the sole member), were named as defendants, but
Michael Branch and Branch Realty were not. [Doc. 9-1 p. 8; Doc. 9-7 p. 2; Doc. 9-3 p.
27-28] After the case was removed to the EDPA, Red Star filed a second amended
complaint naming the same relevant parties as defendants. [Doc. 9-1 p. 9] A third
amended complaint added Michael Branch and Branch Realty, LLC, as defendants.
[Doc. 9-7 p. 4]
There is conflicting information in the record about the nature of Branch Realty as
a business, and Allen and Michael Branch’s respective roles in the ownership and control
of the business. For instance, the present Motion is brought by “Michael Branch and
Branch Realty, LLC.” [Doc. 8 p. 1] And in a declaration submitted to the EDPA,
Michael Branch stated that “Branch Realty, LLC is a New Mexico Limited Liability
Company organized in 2001. I am the sole member of Branch Realty, LLC[.]” [Doc. 9-7
p. 4] In an affidavit submitted to the EDPA, however, Michael Branch described
“Branch Realty” as a sole proprietorship in Santa Fe, New Mexico which sometimes uses
the name “Branch Realty Commercial Advisors” as a description of its services, and
which is owned by Michael Branch. [Doc. 9-6 p. 7] And, in an affidavit submitted to the
EDPA, Allen Branch represented himself as “a principal member of Defendant Branch
Realty LLC d/b/a Branch Realty Commercial Advisors[,]” but his assertion is
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contradicted by another affidavit by Michael Branch which states that “Allen Branch is
an associate broker with Branch Realty but has no ownership interest in Branch Realty,
no management authority over Branch Realty, and no authority to bind me or Branch
Realty to any contractual obligations[.]” [Doc. 9-2 p. 26; Doc. 9-3 p. 27] Thus, it is far
from clear what Michael and Allen Branch’s respective roles are in the Branch business,
which may be an LLC or a sole proprietorship.
Two months after Red Star filed its second amended complaint naming Branch
Realty Commercial Advisors as a defendant, “Michael Branch d/b/a Branch Realty” filed
a complaint for declaratory relief against Red Star Mortgage and Allen Branch (among
others) in the First Judicial District Court in Santa Fe (the Santa Fe district court). [Doc.
8-1; Doc. 9-6 p. 3, 7] The complaint represented that “[a]n actual case and controversy
exists as to whether Michael Branch [is] indirectly named as a party to the Litigation” (a
reference to Red Start’s lawsuit then underway in the EDPA). [Doc. 8-1 p. 3] It
continued:
[i]f it is determined that there is an attempt to join Michael Branch as a
party to the [l]itigation through naming Branch Realty Commercial
Advisors, then this Court should determine that there is no jurisdiction in
courts of Pennsylvania over Michael Branch relating to the [l]itigation, as
Michael Branch has insufficient contacts with . . . Pennsylvania which
would submit him to its courts’ jurisdiction.
Wherefore, Michael Branch prays that this [c]ourt declare that Michael
Branch is not a party to the [l]itigation or, in the alternative, that there is no
jurisdiction over him in Pennsylvania courts[.]

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[Doc. 8-1 p. 4] Approximately nine months later, on December 16, 2016, the
Santa Fe district court entered a default judgment against Red Star, which had not
entered an appearance in the matter, declaring:
. . . That Michael Branch personally or through any entity with which he is
associated, including Branch Realty, Branch Realty LLC or Branch Realty
Commercial Advisors, has had no contacts with the State of Pennsylvania.
. . . That Michael Branch personally or through any entity with which he is
associated, including Branch Realty, Branch Realty LLC or Branch Realty
Commercial Advisors, has had no involvement with . . . Red Star
Mortgage[.]
[and]
. . . That Michael Branch personally or through any entity with which he is
associated, including Branch Realty, Branch Realty LLC or Branch Realty
Commercial Advisors, is not bound by any actions of Allen Branch and
specifically by any actions or representations made by Allen Branch
relating to Red[ S]tar Mortgage Corporation[.]
[Doc. 8-5 p. 2] In the meantime, however, the case in the EDPA was proceeding
and Michael Branch involved himself in the proceedings.
In April of 2016, the EDPA entered a default for failure to appear, in
relevant part, against Branch Realty Commercial Advisors and Xacattack, LLC.
[Doc. 9-1 p. 10] Days later, Michael Branch, through a Pennsylvania law firm
called Montgomery McCracken Walker & Rhoads, LLP (“the Montgomery
firm”), moved to set aside the default of Branch Realty Commercial Advisors.
[Doc. 9-2] The motion was titled “Motion of Michael Branch d/b/a Branch Realty
to Set Aside Default of Branch Realty Commercial Advisors and for Leave to File
Motion to Dismiss.” The motion was made pursuant to Federal Rule of Civil
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Procedure 55(c) (which permits a court to set aside a default judgment for “good
cause”), and also sought leave to file a motion to dismiss the second amended
complaint for lack of personal jurisdiction and, in the alternative, for failure to
state a claim. [Doc. 9-2]
In a memorandum in support of the motion, Michael Branch argued, among
other things, that: he had no contact with Red Star or with the Eastern District of
Pennsylvania related to the allegations in Red Star’s second amended complaint;
“‘Branch Realty Commercial Advisors’ is a name sometimes used by Branch
Realty, which is a Santa Fe, New Mexico sole proprietorship owned and operated
by Michael Branch”; and because he was not named personally as a defendant in
Red Star’s lawsuit, he “did not consider himself to be at risk of liability either
individually or through his sole proprietorship, and further did not realize that a
response to the second amended complaint was required.”

However, he

continued, upon receiving notice of default against Branch Realty Commercial
Advisors, he “recognized [that] he should obtain legal advice” and, after doing so,
he “promptly moved to set aside the default and for leave to file the [m]otion to
[d]ismiss.” [Doc. 9-2 p. 8, 10, 12] In his memorandum, Michael Branch also
argued that the EDPA lacked personal jurisdiction over him and Branch Realty.
[Doc. 9-2 p. 14]
In its response to Michael Branch’s motion, Red Star refuted Michael
Branch’s jurisdiction argument, pointing to evidence and legal authority to support
its assertion that Michael Branch’s personal jurisdiction challenge was
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“fallacious” and “futile” and suggesting that the argument should be “denied and
ignored” by the EDPA. [Doc. 9-3 p. 9-12] Red Star also requested that the EDPA
“join both Branch Realty, LLC and [Michael Branch] [to the litigation because]
they all shared in the use of the Branch Realty Commercial Advisors name that
they all permitted Allen Branch . . . to utilize on their behalf.” [Doc. 9-3 p. 9] In
his reply, Michael Branch both challenged Red Star’s personal jurisdiction
argument and consented to Red Star’s request to join him on the condition that the
default judgment was set aside and he was granted leave to file a motion to
dismiss. [Doc. 9-4 p. 2-8] As to the latter, Michael Branch argued that the EDPA
could “resolve [his motion] efficiently and justly by joining Michael Branch d/b/a
Branch Realty, vacating the default of Branch Realty, and granting leave for
Michael Branch d/b/a Branch Realty to move, as requested in the [m]otion, within
seven days to dismiss [Red Star’s] [s]econd [a]mended [c]omplaint as to him,
Branch Realty, and ‘Branch Realty Commercial Advisors.’” [Doc. 9-4 p. 4]
Upon completion of the foregoing briefing, on May 19, 2016, the EDPA
denied without prejudice the “Motion of Michael Branch d/b/a Branch Realty to
Set Aside Default of Branch Realty Commercial Advisors and for Leave to File
Motion to Dismiss” and, in the same order, granted Red Star leave to file a third
amended complaint joining Michael Branch and Branch Realty, LLC, as
defendants. [Doc. 9-5 p. 2] Although the matter of personal jurisdiction over
Michael Branch and Branch Realty, LLC, had been briefed by both parties, the
EDPA did not rule on that issue. Approximately one week later, Red Star filed a
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motion for default judgment against Allen Branch, Xacattack LLC, and Branch
Realty Commercial Advisors. [Doc. 9-1 p. 12] And, approximately two weeks
after that, on June 9, 2016, Red Star filed a third amended complaint naming
Michael Branch and Branch Realty, LLC, among others, as defendants. [Doc. 9-1
p. 13]
Days after Red Star filed its third amended complaint, the Montgomery firm
moved to withdraw as attorney for Michael Branch d/b/a Branch Realty [Doc. 9-1 p. 14;
Doc. 9-6] In its motion the Montgomery firm acknowledged that: each of Red Star’s
complaints had named “Branch Realty Commercial Advisors” as a defendant and that
this name is “sometimes used to describe services provided by Branch Realty, which is a
sole proprietorship owned and operated by Michael Branch[.]” [Doc. 9-6 p. 3] It further
acknowledged that Michael Branch
is aware that a motion seeking a default judgment against “Branch Realty
Commercial Advisors” is currently pending and aware of the consequences
that may flow from entry of a judgment on that motion. He is also aware
that on July 9, 2016, Red Star filed a Third Amended Complaint, naming
all the existing defendants and adding him individually, and Branch Realty
LLC, as defendants.
[Doc. 9-6 p. 4] And it provided Michael Branch’s business address and other
contact information for the court’s use. [Id.] As to Michael Branch, the Court
permitted the Montgomery firm to withdraw as counsel; the Court denied the
Montgomery firm’s motion to withdraw as to “Branch Realty” and “Branch
Commercial Advisors” Etc.” [Doc. 9-1 p. 15]

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In August 2016, the EDPA entered an order granting Red Star’s motion for entry
of default judgment against Xacattack, LLC and Branch Realty Commercial Advisors in
the amount of $163,247.80. [Doc. 9-1 p. 15-16] Shortly thereafter, Red Star filed a
motion for default judgment against Michael Branch and Branch Realty, LLC. [Doc. 9-1
p. 16] And, on October 6, 2016, the EDPA entered an order granting Red Star’s Motion
for Default Judgment against Michael Branch and Branch Realty, LLC $163,768.64.
[Doc. 9-1 p. 17]
On December 15, 2016, the proceedings in this Court commenced with Red Star’s
registration of its two foreign judgments out of the EDPA: one against Michael Branch;
and Branch Realty LLC [Doc. 1]; and one against Xacattack, LLC and Branch Realty
Commercial Advisors. [Doc. 2] The next day, as mentioned earlier, the First Judicial
District Court in Santa Fe entered a default judgment against “Red Sky [sic] mortgage
corporation,” among others, declaring that Michael Branch personally “or through any
entity with which he is associated, including Branch Realty, Branch Realty LLC or
Branch Realty Commercial Advisors, has had no contacts with the State of Pennsylvania”
and he has had no involvement with Red Star Mortgage. [Doc. 8-5] Then, on January
31, 2017, Michael Branch filed the present Motion of Michael Branch and Branch Realty,
LLC to Remove Default Judgment from Registration with New Mexico Courts and for

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Stay of Execution of Judgment seeking to remove from registration the EDPA’s default
judgment against Michael Branch and Branch Realty LLC.1 [Doc. 8]
As grounds for his Motion Michael Branch (hereinafter “Branch”) argues that the
EDPA did not have personal jurisdiction over him or over Branch Realty, LLC., and that
he did not respond to Red Star’s third amended complaint in the EDPA because he knew
that he had not had sufficient contacts with Red Star or the state of Pennsylvania to
establish such jurisdiction. [Doc. 8 p. 1-2] Rather, he contends, he “elected to defend any
attempts by Red Star to enforce any Pennsylvania judgment in New Mexico.” [Doc. 8 p.
2] In support of his lack-of-jurisdiction argument, Branch relies upon the default
judgment that he obtained in the First Judicial District Court in Santa Fe which, based
exclusively upon Branch’s own testimony, declared that Branch personally or through
any entity with which he was associated, had no contacts with the state of Pennsylvania
or with Red Star. [Doc. 8 p. 7-8]
ANALYSIS
Rule 55(c) of the Federal Rules of Civil Procedure permits the Court to set aside
. . . a final default judgment under Rule 60(b).” In turn, Rule 60(b)(4) permits the Court
to relieve a party from a final judgment where the judgment is void. “A default judgment
in a civil case is void if there is no personal jurisdiction over the defendant.” Hukill v.

1

On May 15, 2017 Red Star filed an application for writs of execution against Branch
Realty Commercial Advisors and Xacattack, LLC, with writs attached as exhibits. [Doc.
13] There are no objections to these writs.

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Okla. Native Am. Domestic Violence Coal., 542 F.3d 794, 797 (10th Cir. 2008) (alteration
omitted).
While the Court’s power to vacate its own earlier judgment under Rule 60(b) is
unquestioned, “it is unclear whether a court has the power to invoke Rule 60(b) to vacate
a judgment when the court in which the judgment is registered (the ‘registering court’) is
different from the court that entered the judgment (the ‘rendering’ court).” Budget
Blinds, Inc. v. White, 536 F.3d 244, 251 (3rd Cir. 2008). Therefore, “courts of
registration presented with Rule 60(b) motions have . . . shown a marked reluctance to
entertain them, generally deferring to the rendering courts. These courts have identified
several policies which support such deference, the most important of which is the
reluctance of any federal court to interfere with the judgment of a court of coordinate
level.” Indian Head Nat. Bank of Nashua v. Brunelle, 689 F.2d 245, 249 (1st Cir. 1982).
However, several circuits, including our Tenth Circuit, have suggested that while Rule
60(b) motions should generally be made before the rendering court, Rule 60(b)(4)
motions seeking relief from default judgments based on lack of personal jurisdiction may
be decided by the registering court. Budget Blinds, Inc., 536 F.3d at 253-54; Morris ex
rel. Rector v. Peterson, 871 F.2d 948 n.2 (10th Cir. 1989) (recognizing “the general rule
that a registration court . . . usually defers on Rule 60(b) motions to the court rendering
the judgment”; however exceptions may be made “where there is an allegation that the
judgment is void for lack of personal jurisdiction”); Harper Macleod Solicitors v. Keaty
& Keaty, 260 F.3d 389, 394 (5th Cir. 2001) (“Typically, relief under Rule 60(b) is sought
in the court that rendered the judgment at issue”; however, “registering courts may rely
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on Rule 60(b)(4) to void a default judgment if the rendering court was without
jurisdiction over the defendant.”); Covington Indus., Inc. v. Resintex A.G., 629 F.2d 730,
734 (2d Cir. 1980) (“[P]recedent exists supporting the proposition that Rule 60(b)(4)
may be invoked in the registration court to obtain relief from a foreign default judgment
attacked as void for lack of personal jurisdiction over the parties against whom it was
rendered[.]”); c.f. Best W. Int’l, Inc. v. Super Sunrise, LLC, 710 F.Supp.2d 613, 616 (E.D.
Ky. 2008) (citing Board of Trustees v. Elite Erectors, Inc., 212 F.3d 1031, 1034 (7th Cir.
2000) for the proposition that “[o]nly one [c]ircuit, the Seventh Circuit Court of Appeals,
has held that Rule 60(b)(4) motions must be presented to the rendering court” (emphasis
added)). Thus, in its discretion, a registering court may resolve a motion to void a default
judgment pursuant to Rule 60(b)(4) if the motion is based on the contention that the
rendering court lacked personal jurisdiction over the defendant.2
Policy reasons exist both favoring and disfavoring a registering court’s resolution
of a Rule 60(b)(4) motion brought on the ground that the rendering court lacked personal
jurisdiction to enter the default judgment. On one hand, “the longstanding principle that
a defendant is always free to ignore the judicial proceedings, risk a default judgment, and
then challenge that judgment on jurisdictional grounds in a collateral proceeding” is a
good justification for the registering court to resolve the issue of the rendering court’s
personal jurisdiction. Budget Blinds, Inc., 536 F.3d at 259 (alteration omitted). This is

2

This proposition is subject to the obvious caveat that the doctrine of issue preclusion
and the duty of courts to accord full faith and credit to the judgments of other courts
would bar a court from deciding a personal jurisdiction issue that had been litigated and
decided in an earlier proceeding. See Drexler v. Kozloff, 210 F.3d 389, *3-4 (10th Cir.
2000).
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particularly so “when the rendering court enters a default judgment based on nothing but
one party's failure to appear[,]” because under those circumstances, the rendering court
will not have addressed the jurisdiction issue, id. (italics omitted), and “the rendering
court necessarily is relatively unfamiliar with the merits of the case[.]” Best W. Int'l, Inc.,
710 F. Supp. 2d at 617–18.
On the other hand, the foremost reason disfavoring such action by the registering
court is “the reluctance of any federal court to interfere with the judgment of a court of
coordinate level.” Brunelle, 689 F.2d at 249. Other reasons include the furtherance of
comity among the federal district courts by referring questions of relief from the
judgment to the rendering court; the efficiency that stems from a registering court’s
deference to the original court, which is likely to be more familiar with the issues raised
by the motion for relief from judgment; and the furtherance of the registration statute’s
purpose, which is to simplify the collection of judgments. Id. In sum, “[t]hough judicial
efficiency and comity among district courts often counsel a registering court to defer
ruling on Rule 60(b) motions in favor of the rendering court, deference is less appropriate
when the challenged judgment was issued without the benefit of argument from one party
and the basis for the 60(b) challenge is jurisdictional.” Harper Macleod Solicitors, 260
F.3d at 395 (5th Cir. 2001) (citation omitted).
Under the particular circumstances of this case, judicial efficiency and comity
warrant this Court’s deference to the EDPA on the matter of that court’s personal
jurisdiction over Branch and Branch Realty, LLC. This is not a circumstance in which
the rendering court (the EDPA), lacking familiarity with the facts and circumstances of
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the case, the parties, and their respective positions on the matter of the EDPA’s personal
jurisdiction over Michael Branch and Branch Realty, LLC, entered a default judgment
based merely on Branch’s failure to appear. Nor is this a circumstance in which Branch
and Branch Realty, LLC “ignore[d] the judicial proceedings” in the EDPA and thereby
suffered default judgment that he now seeks to challenge. To the contrary, Michael
Branch, represented by the Montgomery firm, inserted himself into the proceedings in the
EDPA by filing a motion seeking to set aside the court’s default judgment against Branch
Realty Commercial Advisors and also seeking leave to file a motion to dismiss Red Star’s
second amended complaint for lack of personal jurisdiction and failure to state a claim.
[Doc. 9-2] In a concomitant memorandum to that court, Michael Branch argued that the
EDPA lacked personal jurisdiction over him and Branch Realty. [Doc. 9-2 p. 14]
Continuing his involvement in the proceedings, in a reply to Red Star’s response, Branch
continued to challenge the EDPA’s personal jurisdiction over him, and also consented to
Red Star’s request to join him as a defendant in its lawsuit. [Doc. 9-4 p. 2-8] To that
end, Branch represented to the EDPA it could “resolve [his motion] efficiently and justly
by joining [him] d/b/a Branch Realty, vacating the default of Branch Realty, and granting
leave for [him] d/b/a Branch Realty to move . . . within seven days to dismiss [Red
Star’s] [s]econd [a]mended [c]omplaint as to him, Branch Realty, and ‘Branch Realty
Commercial Advisors.’” [Doc. 9-4 p. 4] That Branch was simultaneously pursuing a
complaint for declaratory relief against Red Star Mortgage and Allen Branch (among
others) in the Santa Fe district court, and that he had the Montgomery firm withdraw
from representing him and thereafter ignored the EDPA proceedings when the EDPA did
13 

not resolve his motion in the exact manner that he specified, strikes this Court as a type of
maneuver that is not aligned with the policies justifying a registering court’s
consideration of motions brought pursuant to Rule 60(b)(4). [Doc. 8-1; Doc. 9-6 p. 3, 7]
In light of the EDPA’s familiarity with the facts of this case, the parties’ respective
arguments concerning the EDPA’s personal jurisdiction over Branch and Branch Realty,
LLC, and the necessity of discussion and consideration of Pennsylvania’s long-arm
statute and the Pennsylvania cases that interpret it to resolve the matter, the Court
declines to rule upon the issue of the EDPA’s personal jurisdiction over Branch and
Branch Realty, LLC related to Red Star’s litigation. See Best W. Int'l, Inc, 710 F. Supp.
2d at 618 (noting the necessary “discussion and consideration of the Arizona long-arm
statute and the Arizona cases which interpret it” as one reason for referring a Rule
60(b)(4) motion to the rendering court). To the extent that Branch intends to pursue this
Motion, he may do so in the EDPA, which for all of the foregoing reasons is a more
suitable forum therefor. See Covington Indus., Inc., 629 F.2d at 738 (Lumbard, J.,
concurring) (recognizing the registering court’s discretion to hold that the rendering court
is a more suitable forum for the Rule 60(b)(4) motion).
CONCLUSION
For the reasons stated herein, IT IS ORDERED that:
1. The Clerk is of this Court is directed to TRANSFER this case to the U.S. District
Court for the Eastern District of Pennsylvania, and to transmit a certified copy of
the entire record to that court.

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2. The Motion of Michael Branch and Branch Realty, LLC to Remove Default
Judgment from Registration with New Mexico Courts and for Stay of Execution of
Judgment, filed January 31, 2017, [Doc. 8] is hereby DENIED WITHOUT
PREJUDICE to the extent that it seeks relief from the declaratory judgment.
Michael Branch and Branch Realty, LLC may pursue this Motion in the U.S.
District Court for the Eastern District of Pennsylvania.
3. The Motion of Michael Branch and Branch Realty, LLC to Remove Default
Judgment from Registration with New Mexico Courts and for Stay of Execution of
Judgment, filed January 31, 2017, [Doc. 8] is hereby DENIED AS MOOT to the
extent that it seeks to stay execution of the Default Judgment against Michael
Branch and Branch Realty, LLC.
4. Although there are no objections to the writs of execution against Branch Realty
Commercial Advisors and Xacattack, LLC [Doc. 13], issuance of these writs of
execution shall be stayed pending adjudication of the merits of the jurisdiction
issue discussed herein by the Court in the Eastern District of Pennsylvania.
SO ORDERED this 19th day of September, 2017 in Albuquerque, New Mexico.

_____________________________
M. CHRISTINA ARMIJO
Chief United States District Judge

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