Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_16-cv-02872/USCOURTS-casd-3_16-cv-02872-2/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1444 Notice of Removal- Foreclosure

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3:16-cv-2872-CAB-(NLS)

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

MARK WARREN,

Plaintiff,

v.

WELLS FARGO & CO., WELLS 

FARGO BANK, N.A., et al.

Defendants.

Case No.: 3:16-cv-2872-CAB-(NLS)

ORDER ON MOTION FOR 

DEFAULT JUDGMENT AND 

MOTION FOR RELIEF FROM 

DEFAULT 

[Doc. Nos. 41, 43]

This matter comes before the Court on Defendant Clear Recon Corp’s (“CRC”) 

Motion for Relief from Default [Doc. No. 43] and Plaintiff’s Motion for Default Judgment 

against CRC [Doc. No. 41]. The motions have been fully briefed, and the Court finds them 

suitable for submission without oral argument. For the following reasons CRC’s motion 

is granted, the entry of default is vacated, and Plaintiff’s motion for default judgment is 

deemed moot.

I. Background

On October 27, 2016, Plaintiff Mark Warren filed suit in the Superior Court of the 

State of California against Defendants Wells Fargo Bank, N.A., and Wells Fargo & 

Company (collectively “Wells Fargo”). [Doc No. 1-2.

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] On November 22, 2016, the Wells 

 

1 Document numbers and page references are to those assigned by CM/ECF for the docket entry.

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Fargo Defendants removed the action to this Court pursuant to the provisions of 28 U.S.C. 

§§ 1332 and 1441(b). [Doc. No. 1.] 

On March 22, 2017, Plaintiff requested and was granted leave to file an amended 

complaint. [Doc. Nos. 20, 21]. On March 30, 2017, the Amended Complaint (“FAC”) 

was filed, adding CRC as a Defendant and alleging a myriad of claims stemming from a 

mortgage on a property located in San Diego. [Doc. No. 22.]

On April 28, 2017, Defendant CRC filed a Declaration of Non-Monetary Status 

[Doc. No. 28] that attested to it being “the duly authorized Trustee or Substitute Trustee 

under the Deed of Trust that is the subject of this action.” [Doc. No. 28 at ¶ 1.] CRC 

declared that it believed it was “named in this action solely in its capacity as Trustee under 

said Deed of Trust, and not arising out of any wrongful acts or omissions on its part in the 

performance of its duties as trustee”. [Doc. No. 28 at ¶ 2.] Further CRC “agree[d] to be 

bound by whatever Order of Judgment issued by the Court regarding said Deed of Trust 

and shall not be subject to any monetary awards for damages, attorney fees or costs.” [Doc. 

No. 28 at ¶ 5.]

On May 24, 2017, Plaintiff filed an Application for Entry of Default Against CRC 

that asserted “as of the date this application was filed Defendant, Clear Recon Corp. has 

failed to appear or otherwise respond to this action.” [Doc. No. 35 at ¶ 5.] The application 

was accompanied by a declaration from Plaintiff’s attorney, Mr. Mark Reed attesting the 

CRC’s registered agent was duly served with a copy of the FAC on April 12, 2017. [Doc. 

No. 35-1 at 1.] Further, Mr. Reed declared that Defendant CRC “has failed to appear or 

otherwise respond to the action.” [Id. at ¶ 4.] 

On June 8, 2017 the Clerk of Court entered Default against Defendant CRC stating 

“it appears from the affidavit of counsel for Plaintiff and the records herein that each of the 

Defendants has failed to plead or otherwise defend in said action as required....” [Doc. 

No. 39.]

On June 20, 2017, Plaintiff filed a Motion for Default Judgment against Defendant 

CRC. [Doc. No. 41.] Plaintiff contends that he is entitled to statutory and actual damages 

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against CRC because CRC violated the Fair Debt Collection Practices Act when it 

continued its collection efforts after Plaintiff had disputed the debt. [Id. at 3-4.] Plaintiff 

seeks statutory damages of $1,000.00, an award of $7,500.00 to compensate him for the 

emotional distress he’s suffered as a result of the foreclosure proceedings, permanent 

injunctive relief enjoining CRC from having a trustee sale of the Property and attorneys’

fees in the amount of $10,000.00. [Id. at 4-6.]

On June 30, 2017, Defendant CRC filed a Motion for Relief from Default [Doc. No. 

43]. Attached to which was a Motion to Dismiss the First Amended Complaint [Doc. No. 

43-1] and Request for Judicial Notice in Support of Motion to Dismiss Plaintiff’s First 

Amended Complaint [Doc. No. 43-2]. CRC contends that it has two meritorious defenses 

to Plaintiff’s claims and that Plaintiff will not be prejudiced if the default is set aside. [Id. 

at 3-4.] CRC also highlights that, contrary to Plaintiff’s assertion otherwise, it did in fact 

enter an appearance, as evidenced by its filing of the Declaration of Non-Monetary Status. 

[Id. at 3.]

On July 19, 2017, Plaintiff filed his response in opposition to CRC’s motion for 

relief from Default. [Doc. No. 44.] Plaintiff counters that Defendant CRC’s filing of the 

Declaration of Non-Monetary Status did not constitute an appearance, that even if it the 

Court considers it to be an appearance it does not prevent entry of default, and that CRC 

has not provided a proper basis to set aside default. [Id.]

On July 26, 2017, Defendant CRC filed its Reply to the motion for relief from 

default. [Doc. No. 45.]

II. Discussion

Federal Rule of Civil Procedure 55(c) provides that a “court may set aside an entry 

of default for good cause shown.” Fed. R. Civ. P. 55(c). The moving party bears the 

burden of showing “good cause” to set aside default. See id. Determining if good cause 

exists requires the court consider three factors: (1) whether [the defendant] engaged in 

culpable conduct that led to the default; (2) whether [the defendant] had a meritorious 

defense; or (3) whether reopening the default would prejudice [the plaintiff].” Franchise 

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Holding II, LLC v. Huntington Rests. Grp., Inc., 375 F.3d 922, 925-926 (9th Cir. 2004). 

As these factors are disjunctive, a district court is free to deny the motion if any of the

three factors favor denial. Am. Ass’n of Naturopathic Physicians v. Hayhurst, 227 F.3d 

1104, 1108 (9th Cir. 2000). The underlying concern in considering whether to set aside 

entry of default is “whether there is some possibility that the outcome of suit after full trial 

will be contrary to the result achieved by the default.” Hawaii Carpenters’ Trust Funds v. 

Stone, 794 F.2d 508, 513 (9th Cir. 1986).

If a defendant has received actual or constructive notice of the filing of the action 

and intentionally failed to answer, its conduct is culpable. Franchise Holding II, 375 F.3d 

at 926; Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1989). Here, 

Defendant CRC filed a Declaration of Non-Monetary Status on April 28, 2017, sixteen 

days from the date of service of the summons and FAC. [Doc. No. 28.] CRC contends 

that this filing constituted its formal appearance in this action, and that the declaration “is 

a statutorily permissible tool under state law, pursuant to Civil Code §2924l, and has been 

recognized by numerous federal courts in response to similarly situated litigation under 

federal jurisdiction.” [Doc. No. 43 at 3:16-18.] Noticeably absent from Plaintiff’s 

application for default is any mention of this filing. In light of the circumstances, the Court 

concludes that Defendant did not intentionally fail to answer or otherwise engage in 

culpable conduct which led to the default.2

To justify setting aside default, a defendant must present the court with specific facts 

that would constitute a defense. Franchise Holding II, 375 F.3d at 926. Defendant CRC

asserts that as the foreclosure trustee: (1) it is not a debt collector within the meaning of 

the FDCPA; and (2) its actions regarding the sale of the Property were privileged under 

California Civil Code Sections 2924(d) and 2947. [Doc, No. 43 at 3-4.] Accordingly, 

 

2 The Court does not decide whether the procedure set forth in California Civil Code § 2924l applies in 

federal court.

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Defendant has met this prerequisite by providing the Court with factual support 

establishing the existence of two meritorious defenses.

To be prejudicial to plaintiff, the setting aside of default would have to hinder 

plaintiff’s ability to purse his claim. Thompson v. Am. Home Assurance Co,, 95 F.3d 429, 

433-34 (“the delay [in setting aside default] must result in tangible harm such as loss of 

evidence, increased difficulties of discovery, or greater opportunity for fraud or 

collusion”). Here, Defendant asserts that Plaintiff will not be prejudiced if the entry of 

default is set aside because it is nothing more than a nominal defendant, the litigation is in 

its early stages, and there is ample to time remaining to conduct discovery. The Court 

agrees with Defendant and finds that Plaintiff will not suffer prejudice. 

In sum, Defendant has demonstrated that it has meritorious defenses, Plaintiff will 

not be prejudiced and that it did not intentionally fail to answer or otherwise respond. 

Therefore, Defendant has sustained its burden of showing good cause to set aside the entry 

of default. 

III. Conclusion

For the reasons set forth above, the Court GRANTS Defendant CRC’s motion to set 

aside default [Doc. No. 43]. Pursuant to Federal Rile of Civil Procedure 55(c) and for good 

cause shown, the Court sets aside the Clerk’s entry of default, entered on June 8, 2017. 

CRC’s motion to dismiss, attached to the motion for relief from default [Doc. No. 43-1, 

43-2.], filed nunc pro tunc to June 30, 2017, is Defendant CRC’s responsive pleading.

It is further ORDERED that Plaintiff’s motion for default judgment [Doc. No. 41] is 

deemed MOOT.

It is SO ORDERED.

Dated: October 26, 2017

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