Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-00774/USCOURTS-caed-2_07-cv-00774-1/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1335 Interpleader Action

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

CALIFORNIA RECONVEYANCE

COMPANY,

Plaintiff, No. CIV S-07-0774 WBS EFB

 vs.

UNITED STATES OF AMERICA, et al., FINDINGS AND RECOMMENDATIONS

Defendants. 

 /

On September 12, 2007, plaintiff California Reconveyance Company’s motion for default

judgment came on for hearing before the undersigned. Jana Logan appeared as plaintiff’s

counsel. No other parties appeared. Having reviewed the submitted documents, and as set forth

below, the court recommends that plaintiff’s motion for default judgment against defendants

Donald Park , Raymond P. Lohmeier, and KI Investments, LLC, be granted. 

I. BACKGROUND

 Plaintiff is the successor trustee under a deed of trust executed by David E. Rinker and

Judith Ann Rinker (referred to collectively as the “Rinkers”), to secure a promissory note in the

original sum of $264,000.00. Compl., at ¶¶ 15-16. The Rinkers executed a deed of trust

originally in favor of Long Beach Mortgage Company dba Financing USA, as beneficiary, dated

December 22, 1988, and securing the $264,000.00 promissory note. Compl., at ¶ 15. Plaintiff is

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the successor trustee to First American Title company, the trustee named under the deed of trust. 

Compl., at ¶ 16. Pursuant to its power of sale under the deed of trust, plaintiff conducted a nonjudicial foreclosure sale of property formerly owned by the Rinkers, on or around April 11,

2005. Compl., at ¶ 17. The property was sold to the highest bidder and resulted in surplus

funds, which after payment of the foreclosing beneficiary’s debt and fees and costs, amounted to

$111,980.83. Compl., at ¶ 18. 

Plaintiff filed a complaint in interpleader on April, 23, 2007, naming defendants with

adverse and conflicting claims to the surplus funds. Those defendants are as follows: the United

States, acting through the Internal Revenue Service; the State of California Franchise Tax Board;

Donald Park; Raymond P. Lohmeier; Capital Associates, Inc.; Lake California Property Owners

Association, Inc.; Northern California Collection Service, Inc.; and, KI Investments, LLC.

Defendants Northern California Collection Service, Inc., Capital Associates, Inc., and 

Lake California Property Owners Association, Inc. have disclaimed any interest to the interplead

funds. Defendants Donald Park, Raymond P. Lohmeier, and KI Investments, Inc. (referred to

collectively as the “defaulting defendants”), have failed to file an answer or otherwise respond to

the complaint. The record shows that plaintiff served the defaulting defendants with the

complaint and summons on May 2, 2007. See Docket nos. 17, 18, 20. 

On June 6, 2007, plaintiff moved for entry of default against the defaulting defendants,

and the Clerk entered default against them on June 7, 2007. The remaining defendants, the

United States and the State of California Franchise Tax Board, have filed no objections to the

entry of default judgment, and continue to pursue their respective claims to the interplead funds. 

II. DISCUSSION

A. Standard 

Pursuant to Federal Rule of Civil Procedure 55(a), the court clerk is required to enter

default when the fact of default is established by affidavit or otherwise. Fed. R. Civ. P. 55(a). In

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this case, default was established by plaintiff and entered on June 7, 2007. Now before the court

is plaintiffs’ application for entry of default judgment against defendants pursuant to Fed. R. Civ.

P. 55(b)(2). It is within the sound discretion of the district court to grant or deny a default

judgment. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making this

determination, the court considers the following 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 a dispute concerning the

material facts, (6) whether the default was due to excusable neglect, and

(7) the strong policy underlying the Federal Rules of Civil Procedure

favoring decisions on the merits. 

Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). 

B. Analysis

The first Eitel factor weighs in plaintiff’s favor. Plaintiff would be prejudiced if default

judgment were not granted, because it would be denied the certainty that an interpleader is

intended to provide. Aetna Life Ins. Co. v. Bayona, 223 F.3d 1030, 1034 (9th Cir. 2000)

(“Interpleader’s primary purpose is not to compensate, but rather to protect stakeholders from

multiple liability as well as from the expense of multiple litigation.”). Without entry of default

judgment against the defaulting defendants, plaintiff cannot be satisfied that the competing

stakeholders’ claims are finally resolved. 

The second and third factors also weigh in plaintiff’s favor as well. As a general rule,

once default is entered, the factual allegations of the complaint are taken as true, except for those

allegations relating to the damages. TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-18

(9th Cir. 1987) (citations omitted). Here, the facts as plead by plaintiff reveal that the defaulting

defendants have potential claims to the surplus funds. Compl., at ¶¶ 7, 8, 12. However, those

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

appear in this action. 

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The fourth Eitel factor, the sum of money at stake, does not clearly weigh in either

party’s favor. Plaintiff wishes to resolve the conflicting claims to the interplead funds and assure

itself that the funds are released to the proper party. While the defaulting defendants have

potential claims to those funds, they have failed to pursue such claims. With regard to the fifth

factor, no genuine issue of material fact exists because the allegations in the complaint are taken

as true, TeleVideo Systems, 826 F.2d at 917-18, and the defaulting defendants have submitted

nothing to contradict them or otherwise support their potential claims to the interplead funds. 

The sixth factor also weighs in plaintiff’s favor since the defaulting defendants have

failed to make any appearance in this case even though they were served with the complaint and

summons. Defendants’ failure to respond to the complaint or otherwise appear cannot be

deemed “excusable neglect.” 

Finally, only the seventh Eitel factor weighs against granting the motion for default

judgment. The strong policy underlying the Federal Rules of Civil Procedure favors decisions

on the merits. Eitel, 782 F.2d at 1472. Nonetheless, where a defendant fails to answer the

complaint, a decision on the merits is “impractical, if not impossible.” Elektra Ent. Group, Inc.

v. Crawford, 226 F.R.D. 388, 393 (C.D. Cal. 2005) (citations omitted). Given the defaulting

defendants’ failure to appear or otherwise pursue their claims to the interplead funds, this factor

does not preclude an entry of default judgment against them. Id. at 393. Thus, on balance, the

factors weigh in favor of granting plaintiff’s motion for entry of default judgment. 

III. CONCLUSION

In light of the foregoing findings this court hereby RECOMMENDS that: 

1. Plaintiff’s application for entry of default judgment be granted against KI

Investments, LLC, Donald Park, an individual, and Raymond P. Lohmeier, an individual; 

2. The judgment specify that Defendants KI Investments, LLC, Donald Park, an

individual, and Raymond P. Lohmeier, an individual, shall have no claim to the surplus funds

and shall take nothing from the surplus funds; and, 

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3. Plaintiff California Reconveyance Company be discharged of all liability with respect

to the surplus funds as to the defaulting defendants KI Investments, LLC, Donald Park, an

individual, and Raymond P. Lohmeier. 

These findings and recommendations are submitted to the United States District Judge

assigned to the case, pursuant to the provisions of Title 28 U.S.C. § 636(b)(l). Within ten (10)

days after being served with these findings and recommendations, any party may file written

objections with the court and serve a copy on all parties. Such a document should be captioned

“Objections to Magistrate Judge’s Findings and Recommendations.” Any reply to the objections

shall be served and filed within ten (10) days after service of the objections. Failure to file

objections within the specified time may waive the right to appeal the District Court’s order. 

Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153, 1157 (9th

Cir. 1991).

DATED: September 24, 2007.

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