United States District Court, D. Arizona
Douglas L. Rayes United States District Judge.
Teixidor Enterprises Incorporated, Capital Core Investments
LLC, and Eduardo and Marta Teixidor move to set aside an
entry of default against them. (Doc. 23.) The issue is fully
briefed. (Docs. 24, 27, 28.) Also before the Court is
Plaintiff's motion for expedited consideration of the
motion to set aside. (Doc. 30.) For the following reasons,
Defendants' motion is denied and Plaintiff's motion
November 13, 2017, Plaintiff filed a complaint against
Defendants, the Small Business Association
(“SBA”), and Wells Fargo National Bank, N.A.
(“Wells Fargo”), seeking to quiet title against
any claim those parties might assert on certain real property
that Plaintiff purchased at a sale noticed by the Maricopa
County Sheriff's Office. On February 20, 2018, Plaintiff
resolved its claim against the SBA. (Docs. 12, 14.) As of the
date of this order, Wells Fargo has not appeared in this
matter, and Plaintiff's motion for entry of default
judgment against it is currently pending. (Doc. 20.)
were served on February 12, 2018, but failed to timely
answer. Accordingly, on March 6, 2018, Plaintiff filed an
application for an entry of default against Defendants. (Doc.
15.) The Clerk of Court entered default against Defendants
the next day. (Doc. 18.) Defendants now move to set aside
Rule of Civil Procedure 55(c) allows the Court to set aside
an entry of default for good cause. When evaluating whether
good causes exists, the Court considers three factors: (1)
whether the party seeking to set aside the default engaged in
culpable conduct that led to the default; (2) whether the
party had no meritorious defense; and (3) whether setting
aside the default would prejudice the other party.
Franchise Holding II, LLC v. Huntington Restaurants Grp.,
Inc., 375 F.3d 922, 925-26 (9th Cir. 2004). Because
these factors are disjunctive, “[a] sufficient finding
against the movant on any one factor negates good
cause.” FOC Fin. Ltd. P'ship v. Nat'l City
Commercial Capital Corp., 612 F.Supp.2d 1080, 1082 (D.
did not engage in culpable conduct leading to the default. A
defendant's conduct is “culpable for purposes of
the [good cause] factors where there is no explanation of the
default inconsistent with devious, deliberate, willful, or
bad faith failure to respond.” TCI Grp. Life Ins.
Plan v. Knoebber, 244 F.3d 691, 697 (9th Cir. 2001),
overruled on other grounds by Egelhoff v. Egelhoff ex
rel. Breiner, 532 U.S. 141 (2001). Nothing about
Defendants' failure to timely answer suggests they acted
willfully or in bad faith.
Defendants were served, they tendered the claim to their
insurance carrier, Farmers Insurance. On March 5, 2018,
counsel for Farmers Insurance contacted Plaintiff to request
two days to determine whether it would accept Defendants'
tender. Plaintiff rejected this request. On March 7, 2018,
Farmers Insurance assigned Defendants counsel. The next day,
Defendants' counsel notified Plaintiff's counsel of
their retention and requested the entry of default be set
aside. Plaintiff rejected this request, as well. Defendants
have not indicated what coverage issue existed, why it took
two days to resolve or why an answer could not have been
filed before the coverage issue was decided. Although the
Court has not found that Defendants engaged in culpable
conduct, their failure to file a timely answer knowing that
Plaintiff was poised to seek a default judgment if they did
not, is curious.
Defendants have not shown good cause for setting aside the
default because they fail to offer a meritorious defense.
“All that is necessary to satisfy the
‘meritorious defense' [factor] is to allege facts
that, if true, would constitute a defense.” U.S. v.
Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d
1085, 1095 (9th Cir. 2010). Plaintiff brings a quiet title
action, which seeks to determine whether Defendants actually
have an interest in the real property that is adverse to its
own. A.R.S. § 12-1101. Defendants offer a series of
potential defenses, all but one of which relate to potential
claims against the SBA and have no bearing on the quiet title
action that Plaintiff has brought. The only defense offered
that relates to the quiet title action is that
“discovery could show that [Defendants] ha[ve]
other rights to the Property, for example, if Plaintiff
failed to properly perfect its lien.” (Doc. 28 at 6.)
But Defendants articulate no facts that, if true, would show
that Plaintiff failed to do so. Although the burden to
demonstrate a meritorious defense is “not
extraordinarily heavy, ” Defendants cannot meet this
burden with rank speculation. TCI Grp., 244 F.3d at
700. In the absence of a reasonable, articulable basis for
believing that Plaintiff failed to perfect its lien or that
they have other rights to the property, Defendants have not
met their minimal burden.
Defendants fail to offer a meritorious defense, the Court
“need not consider . . . whether [P]laintiff would
suffer prejudice if the [default] were set aside.”
Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388,
1392 (9th Cir. 1988). Accordingly, IT IS
ORDERED that Plaintiffs motion to expedite (Doc. ...