Diaz v. Green Tree Servicing, LLC

Decision Date29 May 2015
Docket NumberNo. C15-359RSL,C15-359RSL
CourtU.S. District Court — Western District of Washington


This matter comes before the Court on plaintiffs' "Motion for Default Judgment." Dkt. # 8. Although defendant AAMES Funding Corporation dba AAMES Home Loan ("AAMES") was served with the Summons and Complaint on March 23, 2015, Dkt. # 4, it has not responded. On April 28, 2015, the Court entered an order of default against defendant AAMES. Dkt. # 9. Plaintiffs, proceeding pro se, now seek declaratory judgment in their favor against defendant AAMES, a defunct lending corporation. Plaintiffs also seek an award of monetary damages, including statutory treble damages.

Following the entry of default by the Clerk of the Court, a court may enter default judgment pursuant to Federal Rule of Civil Procedure 55(b). Under Federal Rule of Civil Procedure 55(b), the entry of default does not automatically entitle plaintiff to a court-orderedjudgment. Curtis v. Illumination Arts, Inc., 33 F. Supp. 3d 1200, 1210 (W.D. Wash. 2014). Rather, the decision to grant or deny default judgment is left to the court exercising its discretion. Id. "Factors which may be considered by courts in exercising discretion as to the entry of a default judgment include: (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits." Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).

Upon entry of default, the well-pleaded allegations of the complaint relating to defendant's liability are taken as true. DirecTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007); Tele Video Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). "[A] defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law." DirecTV, Inc., 503 F.3d at 854 (citations omitted). Additionally, the defaulting party admits all allegations as to liability but not allegations as to the amount of damages. Tele Video Sys., Inc., 826 F.2d at 917-18. "[N]ecessary facts not contained in the pleadings, and claims which are legally insufficient, are not established by default." Cripps v. Life Ins. Co., 980 F.2d 1261, 1267 (9th Cir. 1992). The Court has the power to require a plaintiff provide additional proof of facts or damages to ensure that the requested relief is appropriate. See Fed. R. Civ. P. 55(b)(2).

"Courts have a duty to construe pro se pleadings liberally, including pro se motions as well as complaints." Bernhardt v. Los Angeles Cnty., 339 F.3d 920, 925 (9th Cir. 2003). Although the Court must give a pro se litigant some leeway when construing his or her pleadings, "those pleadings nonetheless must meet some minimum threshold in providing a defendant with notice of what it is that it allegedly did wrong." Brazil v. U.S. Dep't of the Navy, 66 F.3d 193, 199 (9th Cir. 1995). Having reviewed the allegations of the Complaint and thesupporting exhibits and affidavit submitted by plaintiffs, the Court finds as follows:


Plaintiffs filed the present action to enforce an order of default judgment obtained in Cause No. 13-217RSL (W.D. Wash. Apr. 8, 2013). In that prior action, plaintiffs Gregorio and Maria Diaz ("plaintiffs Diaz") sued defendant AAMES Funding Corporation seeking to quiet title to their property located at 17119 Meadowdale Drive, Lynnwood, Washington 98039 ("the property"), and a declaratory order that the deed of trust that identified AAMES as a beneficiary, recorded on September 22, 2005 (Snohomish County Auditor's File No. 200509220838), was void. See Compl. (Dkt. # 1) at Ex.1. Plaintiffs in that case obtained a default judgment against defendant AAMES. Id. The default judgment declared that the deed of trust recorded on September 22, 2005 that identified AAMES as a beneficiary was void as unenforceable and that "AAMES is precluded from pursuing any interest in the property" under that deed of trust. Id.

After the entry of default judgment, plaintiffs Diaz obtained a mortgage loan on their property with Right Angle Ridge, LLC. Right Angle Ridge, LLC issued the loan relying on the prior default judgment. Compl. (Dkt. # 1) at ¶ 14. Plaintiff Harry Beggs is the sole loan servicing agent for Right Angle Ridge, LLC. Id. ¶ 2.

Plaintiffs bring the present action in response to defendant AAMES's sale of the allegedly voided interest, and in response to an attempt by the buyer, defendant Green Tree Servicing, LLC ("Green Tree"), to collect on the invalidated note. According to the allegations in plaintiffs' Complaint, on May 5, 2014, the loan servicer for defendant AAMES's note, National Mortgage, LLC, sent plaintiffs Diaz an IRS Form 1099-C acknowledging a cancellation of debt in the amount of $68,770.31. Id. ¶ 10, Ex. 2. Despite the prior default judgment and the notice of cancellation of debt, defendant AAMES thereafter sold the voided note and deed of trust to defendant Green Tree. Id. ¶ 11. On February 19, 2015, defendant Green Tree sent plaintiffs Diaz two separate invoices, Nos. 82504360 and 82529354, each demanding a separate paymentof $68,770.31. Id. ¶ 15. Plaintiffs plead that defendant Green Tree sent those invoices despite having constructive and actual notice of the initial default judgment and the IRS Cancellation of Debt form. Id.

Plaintiffs allege that defendants AAMES and Green Tree conspired together to sell the voided interest. Thereafter, plaintiffs allege defendants conspired together to continue to attempt to enforce the voided interest in a scheme to defraud plaintiffs. Id. ¶¶ 22-23. Plaintiffs allege that defendant Green Tree is attempting to fraudulently collect a double recovery on an invalid debt. Id. ¶ 18. Plaintiffs further allege defendants used the mail to carry out their fraudulent scheme, and point to the two invoices sent to plaintiffs via mail as evidence. Id. ¶¶ 22-23. Plaintiffs bring claims for mail and wire fraud, 18 U.S.C. §§ 1314, 1343; civil claims under the Racketeer Influenced and Corrupt Organization Act (RICO), 18 U.S.C. § 1962, based on the predicate offenses of mail fraud; claims of fraud in violation of 18 U.S.C. § 1001 and 18 U.S.C. § 1005; and state law claims for fraud and civil conspiracy. Id. at ¶¶ 34-81.

Plaintiffs claim they will suffer harm if defendants' continued attempts to collect on an extinguished debt are allowed to proceed. Id. ¶ 27. In the present action, plaintiffs seek to enforce the Court's prior default judgment and request declaratory relief in the form of an order permanently enjoining defendants, and any successors in interest, from attempting to enforce the Deed of Trust No. 200509220838 recorded on September 22, 2005, which was declared invalid by the Court's prior order. Affidavit in Support of Default Judgment (Dkt. # 8-1) at ¶ 3(f). Plaintiffs also seek declaratory relief enjoining defendants, and any successors in interest, from attempting to enforce the Deed of Trust No. 200509220837 recorded on September 22, 2005. Id. Plaintiffs request the Court to issue an order to show cause as to why defendant AAMES should not be held in contempt of court. In addition, plaintiffs seek actual damages in an amount equal to the face value of their property, actual damages in an amount equal to the face value of the note held by Right Angle Ridge, punitive damages, and treble damages. Id. ¶ 3, Compl.(Dkt. # 1) at 30.


A. Article III Standing

A federal court must satisfy itself that it has jurisdiction, including establishing that a plaintiff has Article III standing to sue. See Orr v. Orr, 440 U.S. 268, 271 (1979). The standing inquiry is plaintiff-specific. Allen v. Wright, 468 U.S. 737, 752 (1984). To establish Article III standing, "[a] plaintiff must allege a personal injury that is fairly traceable to the defendant's conduct and is likely to be redressed by the requested relief." Id. at 750. The personal injury element requires plaintiff to show he or she suffered an injury-in-fact that is both concrete and particularized, and either actual or imminent (as opposed to conjectural or hypothetical). Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). As the party invoking federal jurisdiction, plaintiffs bear the burden of establishing standing. Id.

Apart from this constitutional mandate, the standing inquiry also contains prudential limitations on the exercise of federal court jurisdiction. Warth v. Seldin, 422 U.S. 490, 498 (1975). Prudential standing doctrine demands that a plaintiff must "assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties." Id. at 499.

Based on the allegations in the Complaint, plaintiffs Gregorio and Maria Diaz, as the owners of the property at issue in this case, each meet this standard. However, the Complaint is devoid of facts necessary to establish that plaintiff Harry Beggs has standing. Plaintiffs plead that plaintiff Beggs "is the designated loan servicing agent for the Right Angle Ridge, LLC's interest in the subject property by reason of a note and mortgage whose value would be adversely and greatly harmed if the Defendants . . . would be permitted to proceed with the continued attempts at the fraudulent collection . . . ." Compl. (Dkt. # 1) ¶ 12. This conclusory allegation is insufficient to establish standing. The entity with the actual interest in the loan inthe property is Right Angle Ridge, LLC, as the holder of the mortgage note. Plaintiff Beggs is merely an agent of Right Angle Ridge,...

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