Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-01423/USCOURTS-azd-2_09-cv-01423-4/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

William J. Eason; 

Erie Lee Eason, 

Plaintiffs, 

vs.

IndyMac Bank, FSB; 

MTC Financial, Inc. dba Trustee Corps.;

MERS, 

Defendants. 

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

No. CV 09-1423-PHX-JAT

ORDER

On June 4, 2010, after consideration of the factors bearing on the determination of

whether to grant default judgment set forth in Eitel v. McCool, 782 F.2d 1470 (9th Cir. 1986),

the Court denied Plaintiff William J. Eason’s motion for default judgment against Defendants

Indymac and Homeplaceloans.com and ordered the Clerk of the Court to enter judgment in

favor of Defendants. Plaintiff moves for reconsideration of the Court’s Order and Judgment

(Doc. 66, 68). Under Rule 60(a), the Court may correct a mistake in a judgment or order

arising from an oversight. Fed. R. Civ. P. 60(a). The Court will grant Plaintiff’s motions for

reconsideration. However, for the reasons set forth below, this correction does not alter the

outcome of the case.

I. Background

This case is based on alleged violations of the Truth in Lending Act (“TILA”), and

also includes an action for quiet title based on a “produce the note” argument. Plaintiff

Case 2:09-cv-01423-JAT Document 69 Filed 11/05/10 Page 1 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

brought suit in Maricopa County Superior Court seeking injunctive relief. On July 8, 2009,

Defendant MTC Financial, Inc. (“MTC”) removed to this Court. On April 6, 2010, the Court

granted the motions of two defendants, MTC and Mortgage Electronic Registration System

(“MERS”), to dismiss for failure to state a claim. The remaining two defendants, IndyMac

and Homeplaceloans.com, have failed to plead or otherwise defend. The Clerk of the Court

has entered default. (Doc. #60.) 

Plaintiff moved for default judgment. After entry of default by the Clerk of the Court

under Rule 55(a), the Court may then grant default judgment under Rule 55(b)(2). However,

entry of default judgment is not a matter of right, but is entirely within the court’s sound

discretion. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In Eitel v. McCool, 782

F.2d 1470 (9th Cir. 1986), the Ninth Circuit enumerated seven factors that a court may

consider in determining whether to grant default judgment.

On April 14, 2010, Plaintiff submitted an affidavit—making no reference to the Eitel

factors—requesting declaratory relief on his TILA claims and requesting quiet title. The

Court found that Plaintiff had not satisfied the Eitel factors, but permitted Plaintiff to file an

amended motion for default judgment addressing these deficiencies. On May 21, 2010,

Plaintiff filed an amended motion for default judgment. After the Court denied the amended

motion and ordered the case to be closed, Plaintiff filed a Motion for Reconsideration on

June 14, 2010 (Doc. 66). On October 25, 2010, Plaintiff filed an Emergency Motion for

Reconsideration that duplicated the text of the first motion for reconsideration (Doc. 68).

II. The Motion for Default Judgment

Plaintiff requests that the Court exercise its discretion and enter default judgment

against Defendants IndyMac and Homeplaceloans.com. In exercising this discretion, the

Court is guided by a consideration of 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 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.

Case 2:09-cv-01423-JAT Document 69 Filed 11/05/10 Page 2 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 While the majority of Court have required that borrowers allege an ability to tender

the balance of the subject loan in order to state a claim for rescission under TILA, Garcia v.

Wachovia Mortg. Corp., No. 2:09-cv-03925-FMC-FMOx, 2009 WL 3837621 at *10 (C.D.

Cal. Oct. 14, 2009), some courts have held that failure to plead ability to tender affirmatively

is not fatal to a TILA rescission claim at the pleadings stage. See, e.g., ING Bank v. Ahn, No.

C 09-995 THE, 2009 WL 2083965, at *2 (N.D. Cal. July 13, 2009) (noting that “Yamamoto

did not hold that a district court must, as a matter of law, dismiss a case if the ability to tender

is not pleaded. Rather, all of these cases indicate that it is within the trial court's discretion

to choose to dismiss where the court concludes that the party seeking rescission is incapable

of performance.”). In any event, because Plaintiff has sought default judgment, the Court

must examine whether Plaintiff has the capacity to pay back what he has received under the

loan, without which TILA rescission will be unavailable. Yamamoto, 329 F.3d at 1173.

- 3 -

Eitel, 782 F.2d at 1471-72. Because there are two separate substantive claims, the Court will

first analyze the second factor—the merits of each of plaintiff’s substantive claims—and then

move on to the remainder of the Eitel factors.

A. Merits of Plaintiff’s TILA Claims

Plaintiff requests the Court enter declaratory judgment that Defendants IndyMac and

Homeplaceloans.com committed violations of TILA, that Plaintiff exercised his statutory

right of rescission to cancel the security agreement, and, thus, that Plaintiff’s entire liability

on the promissory note has been cancelled. 

In the Court’s original order, the Court stated that Plaintiff’s loan “was to finance the

acquisition of a property purchased for use as a primary residence.” Plaintiff, in his motion

for reconsideration, avers that “[t]he loan in question was, in fact, a refinance...” (Doc. 68 at

4). While Plaintiff had not previously alleged this fact, the Court now accepts this allegation.

Because the loan at issue in this case is a refinance, TILA rescission is available.

However, the Ninth Circuit has held that TILA’s framework gives a trial court discretion to

condition rescission on a tender by the borrower of the property, or the property’s reasonable

value, to the lender. Yamamoto v. Bank of New York, 329 F.3d 1167, 1171 (9th Cir.2003).1

 “At the end of the day, [Plaintiff] will not be entitled to rescission unless [Plaintiff] can

tender the principal balance of the loan.” Avina v. BNC Mortg., No. C 09- 04710 JF, 2009

WL 5215751, at * 2-3 (N.D. Cal. Dec. 29, 2009) (internal quotations omitted). As Plaintiff

Case 2:09-cv-01423-JAT Document 69 Filed 11/05/10 Page 3 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 -

has not alleged that he is ready, willing and able to tender the full amount owed, TILA

rescission is unavailable. Thus, the second Eitel factor weighs heavily against granting

default judgment.

B. Merits of Plaintiff’s Action for Quiet Title

Plaintiff also requests the Court quiet title as to all defendants. However, Arizona law

requires a complaint for an action to quiet title to include an allegation of title in plaintiff.

The Court, in its previous order, found that Plaintiff’s status as a trustor is not such an

allegation under Arizona law governing Deeds of Trust, A.R.S. § 33-801, et seq. (2007).

(See May 14, 2010 Order.) Until Plaintiff pays off the loan, it is the trustee—not Plaintiff,

the trustor—who holds the title in trust. 

Plaintiff, in the amended motion, offers two reasons why the Court ought to allow it

to bring an action to quiet title. First, Plaintiff argues that a quiet title action may be brought

by a party holding any interest in the land even if the party has no claim of title. (Doc. #63

at 4.) This construction of A.R.S. § 12-1101 (2007) is at odds with the established precedent

of the Arizona Supreme Court; Verde Water & Power Co. v. Salt River Valley Water Users’

Ass’n, 197 P. 227 (Ariz. 1921), explicitly provides “that a complaint to quiet title... [must]

show title in the plaintiff...” Id. at 228. Plaintiff provides no legal authority suggesting that

this precedent has been or ought to be overturned.

Second, Plaintiff argues that the TILA rescission discussed above invalidates the title

that the trustee would otherwise hold. As the Court finds that this statutory right is not

applicable in this case, the trustee’s title remains undisturbed. 

Quiet title is not a remedy available to a trustor under an Arizona Trust Deed until the

debt is paid or tendered. Plaintiff has not paid the loan amount, nor has Plaintiff alleged that

he is ready, willing and able to tender the full amount owed. Thus, Plaintiff’s purported use

of the action to quiet title is inappropriate. Thus, for this claim also, the second Eitel factor

weighs heavily against granting default judgment.

Case 2:09-cv-01423-JAT Document 69 Filed 11/05/10 Page 4 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 -

C. Other Eitel factors

The first Eitel factor weighs in favor of default judgment, as Plaintiff will be

prejudiced because Plaintiff would be without other recourse for recovery against Defendants

Indymac and Homeplaceloans.com. Pepsico, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172,

1177 (C.D. Cal. 2002).

The third Eitel factor—the sufficiency of the complaint—weighs against default

judgment. As discussed above, Plaintiff’s complaint is legally insufficient as to all claims.

The fourth Eitel factor weighs against default judgment. Under this factor, the Court

considers the amount of money at stake in relation to the seriousness of defendants’ conduct.

Eitel, 782 F.2d at 1471-72. In his motion for default judgment, Plaintiff states that he is

seeking no damages or costs, but requests that his entire loan liability of roughly $200,000

cancelled. The seriousness of defendants alleged violations is inconsistent with such a large

award.

The fifth Eitel factor also weighs against default judgment. On entry of default, all

well-pleaded facts in the complaint are taken as true, except those relating to damages.

TeleVideo Sys., Inc., 826 F.2d at 917-18. However, as discussed above, Plaintiff has not

plead all material facts needed to support his claims (including failing to allege title in the

Plaintiff). Therefore, there is a possibility that a dispute may arise from a material fact not

yet plead. Accordingly, the Court finds that the fifth factor weighs against default judgment.

The sixth Eitel factor weighs in favor of default judgment. Here, the possibility that

default resulted from excusable neglect appears unlikely. Defendants Indymac and

Homeplaceloans.com failed to answer the complaint or otherwise respond and neither

defendant opposed Plaintiff’s motion for default judgment. Accordingly, this factor weighs

in favor of granting default judgment.

The final factor—the strong policy underlying the Federal Rules of Civil Procedure

favoring decisions on the merits—weighs against default judgment, as “cases should be

decided upon their merits whenever reasonably possible.” Eitel, 782 F.2d at 1472.

Case 2:09-cv-01423-JAT Document 69 Filed 11/05/10 Page 5 of 6
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 6 -

Therefore, because factors two, three, four, five, and seven weigh against granting

default judgment, the Court finds that Plaintiff is not entitled to default judgment against

Defendants Indymac and Homeplaceloans.com.

Accordingly,

IT IS ORDERED that Plaintiff’s motions for reconsideration (Doc. 66, 68), which

the Court interprets as motions for corrections pursuant to Rule 60(a), are GRANTED.

IT IS FURTHER ORDERED that, as this Order supercedes the June 4, 2010 Order

(Doc. 64), the June 4, 2010 Judgment (Doc. 65) is VACATED.

IT IS FURTHER ORDERED that Plaintiff’s motion for default judgment (Doc. 63)

is DENIED.

IT IS FURTHER ORDERED that Plaintiff’s Motion to Correct the Record to

Reflect the Proper Name of Defendant Entity to its Formal Appellation, re: IndyMac

Mortgage Services, a division of One West Bank FSB (Doc. 67) is DENIED as moot.

IT IS FURTHER ORDERED directing the Clerk to enter judgment in favor of

Defendants and close the case.

DATED this 5th day of November, 2010.

Case 2:09-cv-01423-JAT Document 69 Filed 11/05/10 Page 6 of 6