Mortg. Elec. Registration Sys., Inc. v. Frank J. Patock, Jr., Douglas Lynch, Clearview Fin., LLC

Decision Date20 May 2009
Docket NumberCivil No. 2006–190.
Citation51 V.I. 917
PartiesMORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC., Plaintiff, v. Frank J. PATOCK, Jr., Douglas Lynch, Clearview Financial, LLC and Plaatsdale Associates, LLC, Defendants.
CourtU.S. District Court — Virgin Islands


Gregory H. Hodges, Esq., St. Thomas, U.S.V.I., for the plaintiff.

Steven Hogroian, Esq., St. John, U.S.V.I., for defendant Frank J. Patock, Jr.

Douglas Lynch, Holmdel, NJ, Pro se defendant.

Benjamin A. Currence, Esq., St. Thomas, U.S.V.I., for defendants Clearview Financial, LLC and Plaatsdale Associates, LLC.


GÓMEZ, Chief Judge.

Before the Court is the motion of Frank J. Patock, Jr. (Patock) to set aside the entry of default against him, and to set aside this Court's March 20, 2008, Judgment. For the reasons stated below, the Court will grant the motion.


On January 16, 2004, Patock and Douglas Lynch (Lynch) executed a promissory note, in which they promised to pay Flagstar Bank, FSB (“Flagstar”) the principal amount of $640,000, plus interest, in monthly installments commencing on March 1, 2004 (the “Note”). As security for the repayment of the Note, Patock and Lynch executed a mortgage (the Mortgage) in favor of Flagstar covering real property described as Parcel No. 157 Chocolate Hole, No. 11 Cruz Bay Quarter, St. John, U.S. Virgin Islands, as shown on P.W.D. Drawing No. F–612–T60 comprising of 1 U.S. acres, more or less (the “Property”). Clearview Financial Services, LLC (Clearview) and Plaatsdale Associates, LLC (Plaatsdale) hold collateral mortgages on the Property.

On October 23, 2006, Mortgage Electronic Registration System, Inc. (MERS), as the mortgagee under the Mortgage and nominee for the lender Flagstar, initiated this action for debt and foreclosure. MERS claims that Patock and Lynch defaulted under the terms of the Note and Mortgage.

MERS thereafter filed a return of service indicating that on October 30, 2006, MERS' complaint and summons were personally served on Patock at 8 Rosedale Terrace, Holmdel, NJ 07733 (the “Rosedale Terrace” address). It also filed a return of service indicating that service was effected on Lynch by means of delivering MERS' complaint and summons to Patock, a person of suitable age and discretion, at the Rosedale Terrace address on October 30, 2006. Neither Patock nor Lynch have filed answers to MERS' complaint.

MERS requested entry of default on its complaint against Patock and Lynch, pursuant to Federal Rule of Civil Procedure 55(a) (Rule 55(a)). 1 In December, 2006, the Clerk of the Court entered default against Patock and Lynch.

In July, 2007, MERS filed a motion for default judgment against Patock and Lynch and for summary judgment against Clearview and Plaatsdale.2 On March 20, 2008, the Court granted MERS' motion and entered a judgment of foreclosure against the defendants. The Judgment was entered in favor of MERS and against Patock and Lynch for the principal amount of $606,139.45, plus interest and late charges. It stated that the Mortgage held by MERS was a first priority lien on the Property, and that the collateral mortgages held by Clearview and Plaatsdale were second and third priority liens. It also directed the Property to be sold by the U.S. Marshals. Finally, the Judgment ordered that any proceeds remaining after the sale be returned to Patock and Lynch.

On April 21, 2008, Clearview and Plaatsdale appealed from the March 20, 2008, Judgment.

On June 17, 2008, Patock filed the instant motion to set aside the March 20, 2008, Judgment.3

On February 12, 2009, the United States Court of Appeals for the Third Circuit reversed the portion of the March 20, 2008, Judgment directing any remaining surplus be given to Patock and Lynch, and remanded the matter for further proceedings. On March 6, 2009, the mandate issued from the Third Circuit with respect to Clearview and Plaatsdale's appeal.4


Pursuant to Rule 55(c), [t]he court may set aside an entry of default for good cause, and it may set aside a default judgment under Rule 60(b).” Generally, in ruling on a motion to set aside a default under Rule 55(c) or a default judgment under Rule 60(b), the Court must consider the following three factors: (1) whether the plaintiff will be prejudiced; (2) whether the defendant has a meritorious defense; and (3) whether the default was the result of the defendant's culpable conduct.” Gold Kist, Inc. v. Laurinburg Oil Co., Inc., 756 F.2d 14, 19 (3d Cir.1985).

However, if the Court finds that the default judgment was improperly entered, consideration of those three factors is unnecessary and the judgment should be set aside as a matter of law. Id. (explaining that the factors “apply only when the default judgment was authorized and the only question before the district court is whether to exercise its discretion to set aside the default”); see also Bludworth Bond Shipyard, Inc. v. M/V Caribbean Wind, 841 F.2d 646, 649 (5th Cir.1988) (“When ... a district court lacks jurisdiction over the defendant because of lack of service of process, the judgment is void and, under Rule 60(b)(4), the district court must set it aside, regardless of whether the movant has a meritorious defense.” (internal citations omitted)). “Any doubt should be resolved in favor of the petition to set aside the [default] judgment so that cases may be decided on the merits.” Medunic v. Lederer, 533 F.2d 891, 894 (3d Cir.1976).


Patock argues that the entry of default and the March 20, 2008, Judgment should be vacated because he was never actually served with MERS' complaint and summons in this case.

The Third Circuit has made clear that [a] default judgment entered when there has been no proper service of the complaint is, a fortiori, void, and should be set aside.” Gold Kist, Inc., 756 F.2d at 19.

As a general matter, the plaintiff bears the burden of establishing jurisdiction. See Provident Nat'l Bank v. Cal. Fed. Sav. & Loan Ass'n, 819 F.2d 434, 437 (3d Cir.1987). However, the Second, Seventh, and Ninth Circuits have held that, if a defendant had actual notice of the action but failed to assert improper service of process until after the entry of a default judgment, that defendant bears the burden of proving that service did not occur.5See, e.g., S.E.C. v. Internet Solutions for Business Inc., 509 F.3d 1161, 1165 (9th Cir.2007); Burda Media, Inc. v. Viertel, 417 F.3d 292, 299 (2d Cir.2005); Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 400–01 (7th Cir.1986).

Here, MERS claims that Patock has long had notice of this action. MERS relies on a declaration of Ronald E. Miller (“Miller”), the managing member of Plaatsdale and Associates. Miller states that he had a telephone conversation with Patock about this matter on March 21, 2007, before the entry of the Judgment. However, Patock has submitted a declaration in which he states that the subject of his March, 2007, conversations with Miller was the possibility of filing a foreclosure action against Lynch on a different parcel of real property than the one implicated in this case. Patock further states that “the only time I spoke with Miller about the MERS foreclosure lawsuit was when I met with him on April 24, 2008. Neither before nor after that date have I spoken, either on the telephone or in person, with Miller regarding the MERS lawsuit.” (Ex. A to Reply to Mot. to Set Aside 2, ¶ 4, July 10, 2008.) Patock also denies that he has known of the case since March, 2007. Instead, he asserts that he “first learned about the case when [he] received a copy of the judgment entered by the court.” ( Id. at ¶ 6.)

In light of the above evidence, the Court is not convinced that Patock had actual notice of the instant action. Thus, the Court will apply the general rule that “the party asserting the validity of service bears the burden of proof on that issue.” Grand Entm't Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 493 (3d Cir.1993).

To meet its burden, MERS points to the signed return of service showing that Patock was served with MERS' complaint and summons at the Rosedale Terrace address. A signed return of service generally serves as prima facie evidence giving rise to a presumption of valid service. See Blair v. City of Worcester, 522 F.3d 105, 111 (1st Cir.2008); Homer v. Jones–Bey, 415 F.3d 748, 752 (7th Cir.2005); see also In re Graves, 33 F.3d 242, 251 n. 16 (3d Cir.1994) (noting that the court “give[s] weight to an objective indication that process has been served”). The presumption of valid service may be rebutted if the defendant demonstrates that service was not received. See Blair, 522 F.3d at 111–12;Homer, 415 F.3d at 752;see also O'Brien v. R.J. O'Brien & Assocs., Inc., 998 F.2d 1394, 1398 (7th Cir.1993) (explaining that the presumption of valid service “can be overcome only by strong and convincing evidence” (quoting Hicklin v. Edwards, 226 F.2d 410, 414 (8th Cir.1955)). Because MERS has provided prima facie evidence that Patock was served with process, the burden shifts to Patock to prove that service was not actually made.

Patock has submitted an affidavit stating that he was never served with the complaint and summons in this case. Patock avers that he has never resided at the Rosedale Terrace address. Rather, Patock states that his home address is 56 Wittenberg Court, Oceanport, NJ 07757, and that his business has a mailing address at Caller Service 7202, Shrewsbury, NJ 07702, and a physical address at 43 Gilbert Street North, Tinton Falls, NJ 07724. Patock also avers that the physical description on the return of service does not match his description. MERS has not offered any evidence to rebut those declarations in Patock's affidavit.6

In view of the foregoing, the Court finds that Patock has satisfied his burden of proving that he was not actually served with the summons and complaint in this matter. See, e.g., Blair, 522 F.3d at 112 (holding that the...

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