Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-00413/USCOURTS-caed-2_09-cv-00413-3/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 12:1821 Default of Loan by Promissary Note

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

ALVARO C. HERNANDEZ,

Plaintiff, CIV. NO. S-09-0413 MCE GGH 

vs.

MICHAEL A. MADRIGAL, JR., et al.,

FINDINGS AND RECOMMENDATIONS

 Defendants. 

___________________________/

Plaintiff’s motions for entry of default judgment against defendants Michael

Madrigal, Jr. and LIS Mortgage Corporation (“LIS Mortgage”), filed September 18, 2009, (dkt.

#s 32, 35), were submitted on the record. Upon review of the motions and the supporting

documents, and good cause appearing, the court issues the following findings and

recommendations.

BACKGROUND

Plaintiff filed the instant complaint in state court, and on February 10, 2009,

defendant FDIC (as receiver for Downey Savings) removed the action to this court. The

complaint concerns an alleged equity stripping scheme in which defendant Madrigal, plaintiff’s

son-in-law and employee of LIS Mortgage, was able to refinance the home owned by plaintiff

where Madrigal lived with plaintiff’s daughter without plaintiff’s knowledge or consent. 

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 Defendant Williams has been dismissed from the action. (Dkt. # 30.) 1

 Financial Title Company apparently has filed for bankruptcy protection. (Dkt. #22 at 2

3:14.)

 Defendants Countrywide and FDIC have filed answers. (Dkt. #s 10, 38.) 3

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Madrigal and plaintiff’s daughter eventually ended their relationship, and Madrigal entered into a

relationship with defendant Williams, an employee of defendant Financial Title Company. The 1 2

allegations are that Madrigal would act as a loan broker and Williams as an escrow agent and

notary as co-conspirators in order to strip the property of its equity by deceit and fraud. Plaintiff

further alleges that Countrywide Home Loans, Inc., as loan servicer which held the fraudulently

obtained note, conducted a deficient investigation. The complaint also alleges that Downey

Savings and Loan Association underwrote and funded the first of the fraudulent loans taken by

Madrigal, and was negligent in doing so. Most of the causes of action are against defendants

Madrigal, Williams, LIS Mortgage, and Financial Title, and include intentional deceit and

concealment, misappropriation of likeness, identity theft, invasion of privacy, conversion,

constructive fraud, unlawful lending practices, notary misconduct, and civil conspiracy to

defraud. The claim against FDIC as receiver for Downey Savings is for negligence. Claims

against Countrywide are declaration of identity theft and defamation of credit. 

According to affidavit, the complaint and first amended complaint were served on

defendant Madrigal on August 18, 2008 and April 4, 2009. Fed. R. Civ. P. 4(e)(2). Haro Aff. ¶

2b, d. (Dkt. # 18-2.) Defendant LIS Mortgage was served with the complaint on August 18,

2008 and with the first amended complaint on April 3, 2009. Haro Aff. ¶ 2b, d. (Dkt. # 19.) 

Pacific Atlantic Trading Co. v. M/V Main Express, 758 F.2d 1325, 1331 (9th Cir. 1985) (default

judgment void without personal jurisdiction). Defendants Madrigal and LIS Mortgage have

failed to file an answer or otherwise appear in this action. On May 28, 2009, the clerk entered 3

default against defendant LIS Mortgage. On May 29, 2009, the clerk entered default against

defendant Madrigal.

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 Frow alleged a conspiracy by several defendants to defraud one plaintiff of title to real

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property. Default judgment was entered against one defendant, although the others prevailed on

the merits. The Court found this result “unseemly and absurd, as well as unauthorized by law.” 

82 U.S. at 554. 

3

The instant motions for default judgment and supporting papers were served by

mail on defendants Madrigal and LIS Mortgage at their last known address. Defendants LIS

Mortgage and Madrigal filed no opposition to the motions for entry of default judgment. 

Plaintiff seeks entries of default judgment in the amount of $166,763.93 against each of these

defendants for lost equity, broker fees and emotional distress.

DISCUSSION

Entry of default effects an admission of all well-pleaded allegations of the

complaint by the defaulted party. Geddes v. United Financial Group, 559 F.2d 557 (9th Cir.

1977). The court finds the well pleaded allegations of the complaint state a claim for which

relief can be granted. Anderson v. Air West, 542 F.2d 1090, 1093 (9th Cir. 1976).

The court is cognizant of the fact that normally a final decree on the merits of an

action may not be made against one of several defendants against whom a joint charge is

pending. Frow v. De La Vega, 82 U.S. (15 Wall.) 552, 21 L.Ed. 60 (1872) (involving a single

alleged joint fraud and resulting in inconsistent adjudications as to liability) ; see also Pfanstiel 4

Architects v. Choutreau Pet., 978 F.2d 430, 433 (8th Cir. 1992); In re Uranium Antitrust

Litigation, 617 F.2d 1248, 1256-58 (7th Cir. 1980) (holding that Frow does not apply to

defendants alleged to be jointly and severally liable, although the damages hearing should be

postponed until trial because claims were based on a single injury (a single price-fixing scheme);

accord, Dundee Cement Co. v. Howard Pipe and Concrete Products Inc., 722 F.2d 1319, 1324

(7th Cir. 1983)); Gulf Coast Fans v. Midwest Elec. Importers, 740 F.2d 1499, 1512 (11th Cir.

1984) (default judgment should not be entered against “similarly situated” defendants whose

alleged liability, along with that of the remaining defendants, rests on a single contract);

International Controls Corp. v. Vesco, 535 F.2d 742, 746-47 & n. 4 (2d Cir.1976) (Frow controls

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 The Carmack Amendment permits imposition of joint and several liability. Jessica 5

Howard Ltd. v. Norfolk Southern Railway Co., 316 F.3d 165, 169 (2 Cir. 2003). nd

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“in situations where the liability of one defendant necessarily depends upon the liability of the

other.”).

In re Uranium Antitrust Litigation acknowledged that Frow does not preclude

entry of default judgment against some defendants where other defendants remain in the

litigation, even where liability is joint and several. 617 F.2d at 1258. Nevertheless, there is still

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the possibility of inconsistent determinations as to damages, as well as the lack of judicial

economy, in that “there could be two distinct damages awards on a single claim involving joint

and several liability.” Id. at 1262. If plaintiff later prevails against the answering defendant, the

damage award could be different; however, the joint nature of the claim precludes different

findings as to damages against all defendants. Id. Furthermore, where defendants are jointly

liable for the entire award, plaintiff could look to any one defendant for full satisfaction of the

damage award. Id.

In this case, although the causes of action against defendants Madrigal and LIS

Mortgage are distinct from those brought against defendants Downey Savings (FDIC) and

Countrywide, some of the damages requests overlap. For example, plaintiff seeks $50,000 in

emotional damages against each of the following defendants: Madrigal, LIS Mortgage, Financial

Title, and Downey. FAC at 29-30. A trial against the answering defendants might result in an

inconsistent verdict on these damages and/or a judgment of a different amount. 

Furthermore, the declarations as submitted are not adequate to support an award

of $50,000 in emotional distress damages against each defendant. (Dkt. #32-4, 35-4.) 

The court has discretion to decide whether to enter a judgment by default. 10A

Wright, Miller & Kane, Federal Practice & Procedure, § 2685 (1998). In the instant case, no

reason appears to justify the entry of default judgment against two of multiple defendants with

the possibility of inconsistent liability adjudications. 

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In view of the foregoing findings, it is the recommendation of this court that

plaintiff’s application for entry of default judgment be DENIED. 

These findings and recommendations are submitted to the United States District

Judge assigned to this case, pursuant to the provisions of Title 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 “Objections to Magistrate Judge’s Findings and Recommendations.” Any reply to the

objections shall be served and filed within seven days after service of the objections. The parties

are advised that failure to file objections within the specified time may waive the right to appeal

the District Court's order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

DATED: 01/28/10

/s/ Gregory G. Hollows

___________________________________

 GREGORY G. HOLLOWS

UNITED STATES MAGISTRATE JUDGE

GGH:076

hernandez0413.def.wpd

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