Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_15-cv-01692/USCOURTS-cand-5_15-cv-01692-1/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 28:1441 Petition for Removal- Action for Interpleader

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

WESTERN PROGRESSIVE, LLC,

Plaintiff,

v.

JOSE M ROBLES, et al.,

Defendants.

Case No. 15-cv-01692-BLF 

ORDER GRANTING UNITED STATES’ 

MOTION FOR DEFAULT JUDGMENT

[Re: ECF 41]

Defendant United States of America (“United States”) has moved for the entry of default 

judgment in favor of itself and against the following Defendants: Jose M. Robles, individually 

(“Robles”); Santa Clara, Department of Child Support Services (“SCDCSS”); Cal West Group, a 

trust, Carlos Velasquez and Jose Robles Co-Trustees (“Cal West”); Moonlight Group Trust, CoTrustee Jose M. Robles (“Moonlight”); and Encompass Insurance Company (“Encompass”) 

(collectively, “Requested Default Defendants”). ECF 41. Defendant Progressive Marathon 

Insurance Company, as subrogee of Edward Rodriguez (“Marathon Insurance”) filed a Statement 

of Non-Opposition to the motion. ECF 43. 

Finding this matter suitable for submission without oral argument, the Court VACATES 

the hearing set for December 10, 2015. For the reasons set forth below, the Court GRANTS the 

United States’ motion for default judgment against the Requested Default Defendants.

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I. BACKGROUND

On February 18, 2015, Plaintiff Western Progressive LLC commenced this interpleader 

action by filing a complaint in state court. See Compl., ECF 1-1. Plaintiff seeks to resolve 

competing claims to an undistributed surplus of $89,510.941from a trustee’s sale of Defendant 

Robles’ real property following his default on a loan. Compl. ¶ 17. 

Plaintiff alleges that Defendant Robles is the former owner of real property located at 5796 

Pontiac Drive, San Jose, CA. Id. ¶ 2, 13. On or about August 3, 2005, Robles borrowed a principal 

amount of $425,000 from Countrywide Bank, secured by a Deed of Trust. Id ¶ 14. On or about 

August 18, 2014, Plaintiff, the duly-appointed trustee of the Deed of Trust, held a foreclosure sale 

and sold the property for $565,000. Id. ¶¶ 15, 17. At the time of the sale, the amount of unpaid 

debt totaled $475,489.06. Id. ¶ 17. The sale resulted in the surplus of $89,510.94 at issue. Id.

Plaintiff interpleaded the United States, Requested Default Defendants, Marathon 

Insurance, City of San Jose (“San Jose”), and State of California Employment Development 

Department (“CEDD”) (together, “Defendants”). Plaintiff alleges that it is a disinterested 

stakeholder but that it incurred $4,230.00 in attorneys’ fees and costs, which it asks the Court to

deduct before the surplus funds are deposited with the Court. Id. ¶¶ 22, 23. 

The United States removed the action on April 14, 2015. See Petition for Removal, ECF 1. 

The United States filed an Answer on April 22, 2015. ECF 5. The United States claims an interest 

of $67,071.782of the interpled funds by virtue of a Notice of Federal Tax lien filed April 30, 

2015, securing the federal tax liabilities Robles owes for the unpaid employment taxes of his sole 

 

1

The United States’ Motion lists the amount at issue as $83,240.94. Memorandum in Support of 

Mot., ECF 42 at 8. However, the surplus funds remaining from the sale total $89,510.94. Compl. ¶ 

17. The Court refers to the total surplus as the interpled amount without determining any 

distribution of funds as that question is not currently before the Court. Should default judgment be 

entered, the United States and Marathon Insurance intend to file a Stipulated Request for 

Distribution pursuant to their respective interests in the interpled funds. See Memorandum at 8. 

2

The United States asserts that the Notice of Tax Lien was properly recorded in Santa Clara 

County, CA, where the real property is located. Memorandum ¶ 4. However, the Notice of Tax 

Lien lists a total of $67,021.78, $50 less than the United States claims. See Mot., Exh. 1 at 2. 

Furthermore, in its Answer, the United States claimed an interest of $68,615.82 as of May 31, 

2015. See United States Answer, ¶¶ 9, 10. The Court need not determine the amount the United 

States requests or to which it is entitled, as those issues are not before the Court on this motion.

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proprietorship, J.M. Robles Landscaping. See Mot., Exh. 2-18, ECF 41-1. 

Marathon Insurance filed an Answer on August 17, 2015. ECF 32. Marathon Insurance 

claims an interest in the interpled funds by virtue of a recorded judgment in the approximate 

amount of $10,768.19 as of August 19, 2015. Id. ¶ 9.

San Jose and CEDD both filed Disclaimers of Interest on July 6, 2015 and August 6, 2015, 

respectively. ECF 17, 31.

Each of the remaining Defendants—the Requested Default Defendants—was served with a 

copy of the complaint and summons, along with other documents identified in the proof of service 

(together, “Documents”), but failed to answer or otherwise plead. Robles was served personally, 

ECF 11, and Cal West and Moonlight were also served through personal service to Robles as CoTrustee of both, ECF 7, 12. SCDCSS was served by personal service of a copy of the Documents 

to its attorney, as well as via first-class mail. ECF 9. Encompass was served by delivery of a copy 

of the Documents to an individual authorized to accept service of process. ECF 10.

Based on the United States’ Requests for Entry of Default, see ECF 20, 22, 24, 26, 28, the 

Clerk filed Notices of Entry of Default against each Requested Default Defendant on August 18, 

2015. See ECF 34 (SCDCSS); 35 (Cal West); 36 (Robles); 37 (Moonlight); 38 (Encompass). The 

United States now seeks entry of default judgment against the Requested Default Defendants. 

Mot. at 1.

II. LEGAL STANDARD

In considering whether to enter a default judgment, a district court first must determine 

whether it has jurisdiction over the case. See In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). Next, 

the Court must “assess the adequacy of the service of process on the party against whom default is 

requested.” Walters v. Statewide Concrete Barrier, Inc., No. C-04-2559 JSW MEJ, 2006 WL 

2527776, at *2 (N.D. Cal. Aug. 30, 2006). Pursuant to Federal Rule of Civil Procedure 55(b), a 

court may then grant default judgment against a defendant who has failed to plead or otherwise 

defend an action. 

“The district court’s decision whether to enter a default judgment is a discretionary one.” 

Aldabe v. Aldabe, 616 F. 2d 1089, 1092 (9th Cir. 1980). In exercising its discretion, a district court 

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considers seven factors set forth by the Ninth Circuit in Eitel v. McCool, 782 F.2d 1470, 1471-72 

(9th Cir. 1986) (“Eitel factors”): (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 dispute concerning material facts; (6) whether default was due to 

excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure 

favoring decisions on the merits. In considering these factors after a clerk’s entry of default, the 

court takes all well-pleaded factual allegations in the complaint as true, except those with regard to 

damages. Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). 

III. DISCUSSION

A. Subject Matter Jurisdiction

Plaintiff originally brought this interpleader action in California state court. See Compl. 

The United States then removed the case to this Court because its claim to the interpleader funds is 

based on a federal tax lien. See Petition for Removal, ECF 1. 

Accordingly, the Court has federal question jurisdiction over this case pursuant to 28 

U.S.C. § 2410 (granting concurrent federal and state court jurisdiction to any interpleader with 

respect to property on which the United State has a lien). See Island Title Corp. v. Bundy, 488 F. 

Supp. 2d 1084, 1090 (D. Haw. 2007).

B. Service of Process

The Court must next assess whether service of process was sufficient against the 

Requested Default Defendants. 

With respect to Robles, Federal Rule of Civil Procedure 4(e) provides that “an individual . 

. . may be served in a judicial district of the United States by . . . following state law for serving a 

summons in an action brought in courts of general jurisdiction in the state where the district court 

is located.” California law allows for personal service. Cal. Code of Civ. Pro. § 415.10. 

Accordingly, service upon Robles was proper. See ECF 11.

With respect to Cal West, Moonlight, and Encompass, Federal Rule of Civil Procedure 

4(h) provides for service of a corporation, partnership, or association through any agent authorized 

to receive service of process. Cal West and Moonlight were served through personal service of 

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Robles, a trustee of both entities, as an agent authorized to receive service of process. ECF 7, 12. 

Encompass was also served through personal service to an individual authorized to accept service 

of process. ECF 10. Accordingly, service upon Cal West, Moonlight, and Encompass was proper.

With respect to Santa Clara Child Support Services, Federal Rule of Civil Procedure 

4(j)(2)(B) provides for service of any state-created governmental organization “in the manner 

prescribed by that state's law for serving a summons or like process on such a defendant.” 

California law provides for service of the state or any of its agencies by leaving a copy at the 

“usual mailing address . . . with the person who is apparently in charge thereof and by thereafter 

mailing a copy of the summons and complaint by first-class mail.” Cal. Code Civ. Pro. 415.20. 

The individual must also be over 18 years of age and be informed of the contents of the documents 

being served. Id. Santa Clara Child Support Services was served with a copy of the Documents by 

personal service to its attorney at the Department’s address, as well as by first-class mail. ECF 9.

Accordingly, service upon Santa Clara Child Support Services was proper. 

C. Eitel Factors

Having determined that it has jurisdiction over the case and that service was proper, the 

Court must finally consider the Eitel factors to determine whether or not to enter default judgment 

against the Requested Default Defendants. “As a general rule, after properly effecting service of 

process in an interpleader action, a named interpleader defendant who fails to answer the 

interpleader complaint and assert a claim to the res forfeits any claim of entitlement that might 

have been asserted.” Trustees of ILWU-PMA Pension Plan v. Coates, No. C-11-3998 EMC, 2013 

WL 556800, at *2 (N.D. Cal. Feb. 12, 2013).

The Court finds that, on balance, the Eitel factors weigh in favor of granting default 

judgment. First, Plaintiff would suffer prejudice if the Court did not enter default judgment against 

the Requested Default Defendants because it would be denied the finality of judgment sought 

through this interpleader action. California Reconveyance Co. v. United States, No. CIVS07-0774 

WBS EFB, 2007 WL 2815031, at *2 (E.D. Cal. Sept. 24, 2007) (citing Aetna Life Ins. Co. v. 

Bayona, 223 F.3d 1030, 1034 (9th Cir.2000).

The second and third factors—the merits of Plaintiff’s claim and the sufficiency of the 

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Complaint—also weigh in favor of default judgment. Together, these factors require “plaintiffs' 

allegations [to] state a claim on which the [plaintiff] may recover.” Kloepping v. Fireman's Fund,

No. 94–cv–2684 TEH, 1996 WL 75314, at *2 (N.D. Cal. Feb.13, 1996); see also Danning v. 

Lavine, 572 F.2d 1386, 1388 (9th Cir.1978). The primary purposes for an action in interpleader 

are “(1) to protect the party depositing the funds with the court from secondary, follow-up actions 

and (2) to protect the resources of the interpleading party.” Trustees of ILWU-PMA Pension Plan

2013 WL 556800 at *2. Accepting Plaintiff’s allegations in the Complaint as true, the Court finds 

that Plaintiff has stated a claim upon which it may recover, as resolution of the Defendants' rights 

to the surplus funds will protect the Plaintiff from multiple liability. Id. While the facts as pled 

also reveal that the Request Default Defendants have potential claims to the surplus funds, those 

defendants have failed to pursue their claims by failing to answer the complaint or otherwise 

appear. See California Reconveyance, 2007 WL 2815031 at *2. Therefore, the second and third 

Eitel factors weigh in favor of entering default judgment.

The fourth Eitel factor—the sum of money at stake in the action—is neutral in interpleader 

actions. Trustees of ILWU-PMA Pension Plan, 2013 WL 556800 at *2.

The Court finds that the fifth Eitel factor—the possibility of a dispute concerning material 

facts—weighs in favor of entering default judgment. The Request Default Defendants have made 

no effort to challenge the interpleader complaint. Therefore, there is nothing on the record before 

the Court to suggest that a factual dispute exists. Id.

The sixth factor—whether the default was due to excusable neglect—also weighs in favor 

of entering default judgment. “It is unlikely that the defendant's failure to answer, and the resulting 

defaults entered by the clerk, were the result of excusable neglect where the plaintiff effectuated 

service on the defendant via . . . a method permitted by law.” Id (internal citations omitted).

Finally, while public policy favors decisions on the merits, Requested Default Defendants’

failure to defend this action renders a decision on the merits “impractical, if not impossible.” Id. 

(citing PepsiCo, Inc. v. California Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal.2002)). Thus, 

the seventh factor weighs in favor of entering default judgment.

In sum, the Court finds that the Eitel factors weigh in favor of entering default judgment 

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against Requested Default Defendants. Accordingly, the Court GRANTS the motion for default 

judgment against Robles, Santa Clara Child Support Services, Cal West, Moonlight, and 

Encompass.

IT IS SO ORDERED.

Dated: December 7, 2015

 ______________________________________

BETH LABSON FREEMAN

United States District Judge

Case 5:15-cv-01692-BLF Document 51 Filed 12/07/15 Page 7 of 7