Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_15-cv-01207/USCOURTS-caed-2_15-cv-01207-0/pdf.json

Nature of Suit Code: 150
Nature of Suit: Overpayments &amp; Enforcement of Judgments
Cause of Action: 28:1332 Diversity-Breach of Contract

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UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF CALIFORNIA 

ENRIQUE ALVAREZ ZARDAIN, 

Plaintiff, 

v. 

IPACPA US, INC., a Delaware 

corporation, TRC HOLDINGS, INC., a 

Delaware corporation, and DOES 1-20, 

 Defendants. 

No. 2:15-cv-1207-MCE-EFB 

FINDINGS AND RECOMMENDATIONS 

 This matter is before the court on plaintiff’s motion for entry of default judgment against 

defendant IPACPA US, Inc.1

 For the following reasons, it is recommended that plaintiff’s motion 

be denied without prejudice.2

 

I. Background 

 Plaintiff brings this action for breach of contract against defendants IPACPA US, Inc. 

(“IPACPA”) and TRC Holdings, Inc. (“TRC”). ECF No. 2. According to the complaint, 

in August, 2012, plaintiff and IPACPA entered into a stock purchase agreement whereby plaintiff 

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 This case was referred to the undersigned pursuant to Eastern District of California 

Local Rule 302(c)(19) and 28 U.S.C. § 636(b)(1). 

2

 The court determined that oral argument would not materially assist in the resolution of 

the motion and the matter was ordered submitted on the moving papers. See E.D. Cal. L.R. 

230(g). 

Case 2:15-cv-01207-MCE-EFB Document 18 Filed 02/25/16 Page 1 of 7
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agreed to sell and IPACPA agreed to purchase plaintiff’s interest in Industrializadora de 

Productos Agricolas de la Cuenca del Papaloapan, S.A. DE C.V. (“Company”) for $1,750,000.00 

plus interest. Id. ¶ 11. Pursuant to the purchase agreement, the parties executed a promissory 

note whereby IPACPA agreed to pay plaintiff $750,000.00 plus interest at a rate of 7% per 

annum. Id. ¶ 12, Ex. A. 

 On the same date, plaintiff and IPACPA entered into a commercial commission agreement 

under which IPACPA agreed to pay plaintiff $3,250,000.00 to perform services as an agent of 

IPACPA. Id. at ¶ 13. Pursuant to that agreement, the parties executed a second promissory note 

whereby IPACPA promised to pay plaintiff the principal sum of $3,250,000.00 plus interest at a 

rate of 7% per annum. Id. at ¶ 14, Ex. B. Plaintiff further alleges that TRC was the guarantor of 

both notes. Id. ¶¶ 12, 14. Plaintiff claims that although IPACPA initially made payments under 

the notes, it has since defaulted. Id. ¶ 16. Plaintiff has requested payments, but defendants have 

refused to remit the outstanding balance and interest owed under the notes. Id. ¶¶ 16-17. 

 Plaintiff initiated this action on June 4, 2015. ECF No. 2. The complaint purports to 

assert four causes of action: (1) breach of contract; (2) unjust enrichment; (3) imposition of 

constructive trust; and (4) temporary, preliminary, and permanent injunctive relief. Id. at 4-5. 

Plaintiff seeks to recover the amount due under the notes plus interest, the imposition of a 

constructive trust and/or disgorgement of all property and assets wrongfully held, and injunctive 

relief enjoining defendants from dissipating and/or transferring any assets or funds which would 

hinder plaintiff from recovering the amount due under the notes. Id. at 6. 

 According to the proof of service filed on June 16, 2015, plaintiff personally served 

Corporation Service Company, IPACPA’s agent for service of process, with a copy of the 

summons and complaint on June 11, 2015. ECF No. 5. On July 6, 2015, plaintiff requested entry 

of IPACPA’s default, which the clerk subsequently entered. ECF Nos. 7, 8. Thereafter, plaintiff 

filed the instant motion for default judgment, which seeks entry of default judgment against 

defendant IPACPA. ECF No. 14. 

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II. Legal Standard 

 Pursuant to Federal Rule of Civil Procedure 55, default may be entered against a party 

against whom a judgment for affirmative relief is sought who fails to plead or otherwise defend 

against the action. See Fed. R. Civ. P. 55(a). However, “[a] defendant’s default does not 

automatically entitle the plaintiff to a court-ordered judgment.” PepsiCo, Inc. v. Cal. Sec. Cans, 

238 F. Supp. 2d 1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 

(9th Cir. 1986)). Instead, the decision to grant or deny an application for default judgment lies 

within the district court’s sound discretion. 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). “In applying this discretionary 

standard, default judgments are more often granted than denied.” Philip Morris USA, Inc. v. 

Castworld Products, Inc., 219 F.R.D. 494, 498 (C.D. Cal. 2003) (quoting PepsiCo, Inc. v. 

Triunfo-Mex, Inc., 189 F.R.D. 431, 432 (C.D. Cal. 1999)). 

 As a general rule, once default is entered, the factual allegations of the complaint are taken 

as true, except for those allegations relating to damages. TeleVideo Systems, Inc. v. Heidenthal, 

826 F.2d 915, 917-18 (9th Cir. 1987) (citations omitted). However, although well-pleaded 

allegations in the complaint are admitted by defendant’s failure to respond, “necessary facts not 

contained in the pleadings, and claims which are legally insufficient, are not established by 

default.” Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 1992). A party’s 

default conclusively establishes that party’s liability, although it does not establish the amount of 

damages. Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977) (stating that although 

a default established liability, it did not establish the extent of the damages). 

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III. Discussion 

 A. Appropriateness of the Entry of Default Judgment Under the Eitel Factors 

 Here, plaintiff’s motion sufficiently establishes that the Eitel factors weigh in favor of 

default judgment. Plaintiff would possibly suffer prejudice absent entry of default judgment, as 

he would be unable to obtain relief against IPACPA for its alleged misconduct. Plaintiff has also 

sufficiently alleged a claim for breach of contract. To state a breach of contract claim, the 

plaintiff must allege (1) the existence of a contract, (2) plaintiff’s performance or excuse for 

nonperformance, (3) the defendants’ breach, and (4) damage to plaintiff.3 Amelco Elec. v. City of 

Thousand Oaks, 27 Cal. 4th 228, 243 (2002). Plaintiff alleges that he entered into two 

agreements with IPACPA, one for the sale of stock and the other for payment for the performance 

of services as an agent for IPACPA. ECF No. 2 ¶¶ 11, 12. Pursuant to these agreements, the 

parties executed two promissory notes, under which IPACPA promised to pay plaintiff 

$750,000.00 and $3,250,000.00, plus interest at 7% per annum, for a total of $4,000,000.00, plus 

interest. Id. ¶¶ 12, 14. Plaintiff alleges that he fully performed all obligations under the 

agreements. Id. ¶ 20. However, IPACPA failed to make all payments due under the notes. Id. 

¶ 21. As of the date this action was filed, the outstanding balance due was $3,134,168.68. These 

facts are sufficient to state a claim for breach of contract under California law. 

 Furthermore, accepting the complaint’s factual allegations as true, the likelihood of a 

dispute is minimal. See, e.g., Elektra Entm’t Group Inc. v. Crawford, 226 F.R.D. 388, 393 (C.D. 

Cal. 2005) (“Because all allegations in a well-pleaded complaint are taken as true after the court 

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 Although plaintiff’s complaint purports to assert causes of actions for unjust 

enrichment, constructive trust, and injunctive relief, his motion does not address these other 

claims. The court need not address these claims as the last two are remedies and not independent 

causes of action, and plaintiff cannot recover under both an unjust enrichment and breach of 

contract theory of liability. See Hill v. Roll Int’l Corp., 195 Cal. App. 4th 1295, 1306 (2011) 

(“Unjust enrichment is not a cause of action, just a restitution claim); Paracor Finance, Inc. v. 

General Elec. Capital Corp., 96 F.3d 1151, 1167 (9th Cir. 1996) (“[U]njust enrichment is an 

action in quasi-contract, which does not lie when an enforceable, binding agreement exists 

defining the rights of the parties”); Rasmussen v. Dublin Rarities, No. C 14-1534 PJH, 2015 WL 

1133189, at *13 (N.D. Cal. Feb. 27, 2015) (“a constructive trust is an equitable remedy, not a 

cause of action”); Ramos v. Chase Home Finance, 810 F. Supp. 2d. 1125, 1132 (9th Cir. 2011) 

(“The court follows a well-settled rule that a claim for ‘injunctive relief’ standing alone is not a 

cause of action”) (internal citations omitted). 

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clerk enters default judgment, there is no likelihood that any genuine issue of material fact 

exists.”) Although plaintiff seeks more than $3 million in damages, the amount sought is only 

what plaintiff is allegedly owed under the contracts. See PepsiCo, Inc., 238 F. Supp. 2d at 1177 

(“[t]he court must consider the amount of money at stake in relation to the seriousness of 

Defendant’s conduct.”); see also Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 

494, 500 (C.D. Cal. 2003). Further, the record also indicates that IPACPA was properly served 

with a copy of the summons and complaint (ECF No. 5), suggesting that its failure to appear in 

this action was not due to excusable neglect. Lastly, although “[c]ases should be decided upon 

their merits whenever reasonably possible,” Eitel, 782 F.2d at 1472, district courts have 

concluded with regularity that this policy, standing alone, is not dispositive, especially where a 

defendant fails to appear or defend itself in an action, PepsiCo, Inc., 238 F. Supp. 2d at 1177. 

 Accordingly, the Eitel factors weigh in favor of entry of default judgment against 

IPACPA on plaintiff’s contract claim. Nonetheless, entry of judgment at this time is premature. 

 B. Entry of Judgement Under Rule 54(b) 

 As defendant TFC has appeared in this action and filed an answer, in addition to satisfying 

the Eitel factors, plaintiff must also demonstrate that entry of final judgment against IPACPA is 

appropriate under Federal Rule of Civil Procedure 54(b). Plaintiff contends that entry of 

judgment is appropriate at this time because there is no risk of inconsistent judgments. ECF No. 

14-1 at 6. The court disagrees. 

 “When an action presents more than one claim for relief . . . or when multiple parties are 

involved, the court may direct entry of a final judgment as to one or more, but fewer than all, 

claims or parties only if the court expressly determines that there is no just reason for delay.” 

Fed. R. Civ. P. 54(b). “[W]here a complaint alleges that defendants are jointly liable and one of 

them defaults, judgment should not be entered against the defaulting defendant until the matter 

has been adjudicated with regard to all defendants.” In re First T.D. & Inv., Inc., 253 F.3d 520, 

532 (9th Cir. 2001) (citing Frow v. De La Vega, 82 U.S. 552, 554 (1872)). Even where the 

defendants are not jointly liable, a court may decline to enter judgement against a defaulted 

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defendant under Rule 54(b) where it could result in “incongruous and unfair” rulings. See id. at 

532. 

 Here, entry of final judgment against IPACPA at this juncture could potentially lead to 

incongruous and rulings. Defendant TRC’s liability is based solely as the guarantor of the 

promissory notes and IPACPA’s failure to satisfy its obligations under the notes. One potential 

defense available to TRC is that the contract plaintiff seeks to enforce is invalid. Indeed, in its 

answer TRC specifically raises lack of consideration as an affirmative defense. ECF No. 13 ¶ 50. 

Should TRC succeed in demonstrating that the alleged contracts were invalid, it would be 

incongruous and unjust to hold IPACPA liable for breach of unenforceable contracts. 

 Even if plaintiff ultimately succeeds on his breach of contract claim, there may also be a 

dispute concerning the appropriate amount of damages. For instance, TRC could potentially 

produce evidence demonstrating that IPACPA actually paid more of the principle owed under the 

contracts than plaintiff contends, and therefore the amount TRC would owe as guarantor would 

be less than the amount sought against IPACPA in the instant motion. Since TRC is only liable 

for the amount IPACPA failed to pay under the contract, it would be unjust to enter judgment 

against each defendant in different amounts for breach of the same contracts. 

 Stated differently, each defendant’s potential liability is too interwoven with the other’s to 

permit entry of judgment against IPACPA at this time. Accordingly, the court finds that there is a 

just reason to delay entry of judgment against IPACPA, and therefore the request for an 

interlocutory default judgment be denied. The denial for entry of a judgment default should be 

without prejudice to renewal at the conclusion of the case on the merits. 

IV. Conclusion 

 Accordingly, it is hereby RECOMMENED that plaintiff’s motion for default judgment 

(ECF No. 14) be denied without prejudice to renewal at the conclusion of the case on the merits. 

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

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

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“Objections to Magistrate Judge’s Findings and Recommendations.” 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 (9th Cir. 1991). 

DATED: February 24, 2016. 

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