Evolve Fed. Credit Union v. Dominguez

• Decision Date: 12 January 2012
• Docket Number: EP-11-CV-367-KC
• Parties: EVOLVE FEDERAL CREDIT UNION, Plaintiff, v. MARIA CONSUELO DOMINGUEZ RODRIGUEZ, SERGIO R. RODRIGUEZ, MIGUEL DOMINGUEZ and MARIA G. DOMINGUEZ, Defendants.
• Court: U.S. District Court — Western District of Texas

EVOLVE FEDERAL CREDIT UNION, Plaintiff,

v.MARIA CONSUELO DOMINGUEZ

RODRIGUEZ, SERGIO R.

RODRIGUEZ, MIGUEL DOMINGUEZ and MARIA G. DOMINGUEZ, Defendants.

EP-11-CV-367-KC

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS EL PASO DIVISION

Dated: January 12, 2012

ORDER

On this day, the Court considered Plaintiff Evolve Federal Credit Union's Motion for Default Judgment ("Motion"), ECF No. 17. For the reasons set forth herein, the Motion is DENIED in part and TAKEN UNDER ADVISEMENT in part. The Court finds that additional briefing is necessary before the Court can rule on the remaining claim.

I. BACKGROUND

The following facts are considered admissions and are therefore taken as true, as is proper when defendants default. See Nishimatsu Constr. Co. v. Hous. Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). In 2005, Defendants Sergio Rodriguez and Maria Rodriguez, husband and wife, purchased property located at Lot 12, Block B, Patterson Subdivision, and Addition to the City of El Paso, El Paso County, Texas, according to the plat thereof on File in Volume 14, Page 12, Real Property Records of El Paso County, Texas ("Lot 12" or "the Property"). Pl.'s First Am. Original Compl. and Req. for Declaratory J. ("Complaint") ¶ 11, ECF No. 18. Maria and Sergio Rodriguez subsequently conveyed Lot 12 via warranty deed to themselves and Maria Rodriguez's mother, Maria Dominguez. Compl. ¶ 11. In June of 2008, Maria and Sergio Rodriguez applied to Plaintiff for a $98,000 home equity loan (the "loan") to be secured by a deed of trust on Lot 12. Compl. ¶ 12.

Maria and Sergio Rodriguez appeared at Plaintiff's office to sign the deed of trust without Maria Dominguez. Compl. ¶ 14. When Plaintiff's representative, Lilia Flores, inquired about Maria Dominguez's absence, Maria Rodriguez falsely stated that Maria Dominguez was her maiden name and that Maria Dominguez and Maria Rodriguez were one and the same. Compl. ¶ 14. Maria Rodriguez presented a certificate of naturalization with the name Maria Dominguez as proof of identity. Compl. ¶ 14; Aff. of Lilia Flores Ex. 3, ECF No. 14-3. Maria Rodriguez then signed the deed of trust "Maria Consuelo Rodriguez, a/k/a Maria Dominguez." Compl. ¶14; Aff. of Lilia Flores Ex. 4, at 8, ECF No, 14-4. Sergio Rodriguez did not correct his wife's misrepresentation. See Compl. ¶¶ 14-15.

Maria and Sergio Rodriguez stopped making payments on the loan approximately one year after it was issued. Compl. ¶ 16. Plaintiff filed an Application for Foreclosure ("Application") in the 210th District Court, El Paso County, Texas. Aff. of Lane Reedman ¶ 4, ECF No. 15. In response, Defendants Maria Rodriguez, Sergio Rodriguez, and Maria Dominguez filed a lawsuit challenging the validity of the loan, which was later consolidated with the Application. Id. On December 8, 2010, the state court granted the Application and entered judgment against Defendants Maria Rodriguez, Sergio Rodriguez, and Maria Dominguez in theamount of $100,425.41 plus $20,197.47 in attorney's fees and expenses. See Aff. of Lane Reedman Ex. 10, ECF No. 15-5.

On July 15, 2011, Defendants provided Plaintiff with notice that Defendants were rescinding the loan transaction pursuant to the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. See Aff. of Lane Reedman Ex. 11 ("Notice of Rescission"), ECF No. 15-6. The Notice of Rescission also stated that Defendants planned to file a lawsuit against Plaintiff for violations of TILA. Id. In response, Plaintiff filed the instant lawsuit seeking a declaratory judgment that the "conduct of Defendant Maria Consuelo Dominguez Rodriguez constitutes fraud and bars exercise of the right of rescission by any of Defendants" and a permanent injunction restraining Defendants "from commencing any action to rescind the loan transaction giving rise to this suit," as well as costs and any further relief to which Plaintiff is entitled. Compl. ¶ 21.

Plaintiff served Defendants with summons and a copy of the Complaint. Twenty-one days have passed since service of process, and Defendants have failed to appear. See Fed. R. Civ. P. 12(a)(1)(A)(i). Plaintiff now seeks default judgment pursuant to Federal Rule of Civil Procedure 55. See Mot.; Fed. R. Civ. P. 55.

II. DISCUSSION

A. Jurisdiction

The Court must first address its jurisdiction to hear this case "since the court must find jurisdiction before determining the validity of a claim." Moran v. Kingdom of Saudi Arabia, 27 F.3d 169, 172 (5th Cir. 1994) (quoting Gould, Inc. v. Pechiney Ugine Kuhlmann, 853 F.2d 445, 449 (6th Cir. 1988), abrogated on other grounds by Am. Telecom Co., L.L.C. v. Republic of Lebanon, 501 F.3d 534, 540 n.8 (6th Cir. 2007)). Subject matter jurisdiction is the "authority ofthe court to adjudicate the type of controversy involved in the action." Carlisle v. United States, 517 U.S. 416, 434-35 (1996) (Ginsburg, J., concurring) (quoting Restatement (Second) of Judgments § 11 (1982)). "The district courts of the United States . . . are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute." Exxon Mobil Corp. v. Allapattah Servs., 545 U.S. 546, 552 (2005) (internal quotation omitted). Because jurisdiction "is mandatory for the maintenance of an action in federal court," a case must be dismissed if jurisdiction is lacking. Avitts v. Amoco Prod. Co., 53 F.3d 690, 693 (5th Cir. 1995); see also Fed. R. Civ. P. 12(h)(3).

Plaintiff seeks a declaratory judgment and injunction, and claims the Court has federal question jurisdiction under 28 U.S.C. § 1331 and pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201-02. Compl. ¶ 6. Plaintiff asserts that the underlying controversy arises under TILA and requests a declaration of its right to assert a defense against a claim for rescission, as well as an injunction barring Defendants from seeking rescission. Compl. ¶¶ 6, 18-19.

Sections 2201 and 2202 create a declaratory judgment remedy, but do not expand the Court's jurisdiction. Pub. Serv. Comm. of Utah v. Wycoff Co., Inc., 344 U.S. 237, 242 (1952). Thus, an action for declaratory judgment must still meet traditional jurisdictional requirements. See Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72 (1950). When a plaintiff in a declaratory judgment actions seeks a declaration of his right to assert a defense, as is the case here, "it is the character of the threatened action, and not of the defense, which will determine whether there is federal-question jurisdiction." Wycoff 344 U.S. at 248; see also Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 19 (1983) (in establishing jurisdiction, courts ask "if the declaratory judgment defendant brought a coerciveaction to enforce its rights, [whether] that suit would necessarily present a federal question").

Here, Defendants have threatened to sue Plaintiff for violations of TILA. Notice of Rescission at 1. Because TILA is a federal law, the threatened suit would present a federal question. See Lowe v. Ingalls Shipbuilding, A Div. of Litton Sys., Inc., 723 F.2d 1173, 1181 (5th Cir. 1984). Thus, the Court has federal question jurisdiction over Plaintiff's action.

B. Standard

A default shall be entered if a party fails to plead or otherwise defend, and that failure is shown by affidavit or otherwise. Fed. R. Civ. P. 55(a). After default is entered, a party may move for a default judgment.¹ See Fed. R. Civ. P. 55(b)(2); N. Y. Life Ins. Co. v. Brown, 84 F.3d 137, 141 (5th Cir. 1996). A "party is not entitled to a default judgment as a matter of right, even where the defendant is technically in default." Lewis v. Lynn, 236 F.3d 766, 767 (5th Cir. 2001) (quoting Ganther v. Ingle, 75 F.3d 207, 212 (5th Cir. 1996)). Indeed, "[d]efault judgments are a drastic remedy, not favored by the Federal Rules and resorted to by courts only in extreme situations." Id. (quoting Sun Bank of Ocala v. Pelican Homestead and Sav. Ass'n, 874 F.2d 274, 276 (5th Cir. 1989)).

Moreover, a default judgment will only be rendered if there is "a sufficient basis in the pleadings for the judgment entered." Nishimatsu, 515 F.2d at 1206. Thus, when a plaintiff failsto state a claim upon which relief could be granted, a court may deny a request for default judgment. Lewis, 236 F.3d at 767-68 (holding denial of default judgment is appropriate in situations where factual allegations, even if found true, do not establish liability).

In deciding whether a plaintiff has stated a claim upon which relief could be granted, the Court must accept well-pleaded facts as true and view them in a light most favorable to the plaintiff. Calhoun v. Hargrove, 312 F.3d 730, 733 (5th Cir. 2002); Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000). Still, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks omitted) (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)); Colony Ins. Co. v. Peachtree Constr., Ltd., 647 F.3d 248, 252 (5th Cir. 2011). Thus, in order for the Court to find that Plaintiff has stated a legally viable claim, the Complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true." Twombly, 550 U.S. at 555 (internal citation omitted).

C. Analysis

Plaintiff requests (1) a declaratory judgment that Maria Rodriguez's fraud in obtaining the loan bars her right to rescind the loan; and (2) a permanent injunction preventing Defendants from seeking to rescind the loan. The Court considers each request in turn.

1. Declaratory judgment on fraud barring the right to rescission.

The Declaratory Judgement Act permits courts to declare "the rights and other legal relations" of adverse parties in an actual case...