2010 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 5-12-2010 

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. Ja ymo P rop LL C P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 09-2733

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Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

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. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

w . vi ll anova . e du . Re c omme nde d C it at ion " F ir s tB ank PR v

. J a ymo P r op LL C " (2010). 2010 D e cisio n s . P ape r 1354. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2010/1354NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

_____________ N o. 09- 2733

_____________ F I RS T BA NK P UE RT O R I CO , A ppel l ant v. J AYMO P RO P E RT I E S , L L C; F RE D J AY BEN DER ; M ELI SS A M AR Y B END ER

_____________ N o. 09- 2951

_____________ I n r e : F I RS T BA NK P UE RT O R I CO , Pet i t i oner

_______________ O n A pp eal from the D i stri ctC ou rtof the V i rgi n Isl and s

( D . C . N o. 08- cv- 00070) D i s tr i ctJ udge: C ur t i s V . G om ez

_______________ Subm i t t ed U nderT hi r d C i r cui tL A R 34. 1( a)

M ay7, 2010 B e f o re : S M IT H , C H A G A R E S a n d J O R D A N , C i r cui t Judges . ( Fi l ed: M ay12, 2010)

_______________ OPI NI ON O F THE COURT

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J O R D A N , C i r cui tJudge . Fi r s t B ank Puert o R i co ( “Fi r s t B ank”) appea l s fr om a M ay15, 2009 or derof the D i s tr i ctC our tof the V i r gi n I s l ands of the U ni t ed St at es deny i ng i t s m ot i on forentryof d ef au ltjud g m en t aga inst Jaym o P rop erti es, L L C , F red JayB en d er, an d M eli ssa M ary B ender . Forthe fol l ow i ng r eas ons , w e w i l l vaca t e the D i s tr i ctC our t ’ s or derand r emand forpr ocee di ngs cons i s t entw i th t hi s opi ni on. I . Backg r ound O n February18, 2005, the B ender s , i ndi vi dual l yand as M ember s / M anage r s of Ja ym o P ro p e rties , ex e c u ted a P o w e r o f A tto rn e ya u th o riz in g R o g e r H a rla n d to a c t as th e ir “true and l aw ful att orney - i n- fac t , ” and “ t o exec ut e and de l i veranycontr act s , l oan c o m m itm e n ts, c lo sin g sta tem e n ts, n o tes , loa n s, m o rtg a g e s, a n d o th e r re late d d o c u m e n ts w hi ch maybe nec es s aryand pr operi n or derfor[them] t o obt ai n a mort gage l oan . . . . ” (A pp . at50 . ) O n F ebruary24 , 20 05 , i n return fo r a l oan from F i rs t B ank , the B end ers , thr ough H ar l and, exec ut ed and de l i ver ed a pr om i s s orynot e t o Fi r s t B ank, i n w hi ch they p ro m ise d to p a yF irstB a n k th e p rin c ip a l su m o f $ 2 1 1 ,2 5 0 .0 0 , p lu s in ter e st o n u n p a id pr i nci pal ata y ear l yr at e of s even pe r cent , t o be pai d i n m onthl yi ns t al l m ent s begi nni ng on A pr i l 1, 2005. A s s ecur i tyforthe r epaym entof the pr om i s s orynot e, J aym o Pr opert i es and the B ender s , thr ough H ar l and, exec ut ed a mor t gage i n favorof Fi r s t B ank, on a pr opertyknow n as “Par cel N o. 3- 5B E s t at e Pas t ory , N o. 5A C ruz B ayQ uart er , St . J ohn, V i r gi n I s l ands , as s how n on PW D N o. D 9- 7749- T 004. ” (I d. a t 5 .)F ir stB an k p rod u ce d d o cu m en tat ion sh o w ing that, as o f Ja n u ary2 6 , 2 0 0 9 , the B en d ers 1 o w e d F irstB a n k $ 1 6 8 ,4 4 7 .7 4 in p rin c ip a l, plu s $ 1 3 ,6 6 2 .7 6 in a c c ru e d in ter e st, p lu s la te c h a rg e s o f

$ 1 ,4 7 1 .6 0 . T h e a f f ir m a tio n f

ro m M s . E d w a rd s w a s title d “ d e c la ra tio n ” ra th e r t h a n “ a f f ir m a tio n ,” 2 a di s t i nct i on t o w hi ch no one ha s att ache d l egal s i gni fi canc e. “A n aff i r m at i on, l i ke an oath, i s a dec l ar at i on of the truth of a s t at ement. . . . ” 58 A M . J UR . 2 D O ath and A f f i r m at i on § 2 (20 1 0 ). 3 W hen the B ender s defa ul t ed on thei rpaym ent s t o Fi r s t B ank, the bank f i l ed an 1 ac ti o n fo r de b t and fo rec losu re in the D istri ct C o u rto n M ay7 , 2 0 0 8 . A fter the B en d ers and J aym o Pr opert i es fai l ed t o defe nd the ac t i on, Fi r s t B ank fi l ed a mot i on forentryof d e f a u lt u n d e r F e d e ra l R u le o f C iv il P ro c e d u re 5 5 (a ). T h e C ler k o f C o u rt e n ter e d d e f

a u lt agai ns tthe B ender s and J aym o Pr opert i es on O ct ober9, 2008. T her eaf t er , on J anuary26, 2009, Fi r s t B ank fi l ed a mot i on fordefa ul tj udgm entunderR ul e 55( b) . A m ong i t s m ovi ng p a p e r s , F i r s t Ba n k i n c l u d e d s i g n e d a f f i r ma t i o n s f

r o m F i r s t Ba n k ’ s a t t o rn e y , J u s t i n K. H ol combe, s t at i ng that“upon i nform at i on and bel i ef, the B ender s ar e notunderthe age of ei ght een norar e theyi ncompet entper s ons ” (I d. at93) , and fr om Paul a N . E dw ar ds , V i ce Pr es i dentof Fi r s t B ank, s t at i ng that“[b] as ed on Fi r s t B ank’ s r ecor d, the B ender s ar e above th e a g e o f

e ig h tee n [ a n d b a se d u ]p o n in f o rm a tio n a n d b e lief

, the B e n d e rs a re n o t m e n tally in c o m p e te n t p e rs o n s .” (Id . at 68 . ) 2 O n M ay15, 2009, the D i s tr i ctC our tent er ed an or derdeny i ng Fi r s t B ank’ s m ot i on fordefa ul tj udgm ent , beca us e “[ t ] he ave r m ent s i n . . . the af fi r m at i on[s ] . . . r egar di ng the B en d ers’ status a s co m p eten t adu lt s are n o t bas ed o n p erso n al kn o w ledg e a n d there fo reFi r s t B ank al s o fi l ed a pe t i t i on fora w r i tof m andamus ( N o. 09- 2951) on J ul y6, 2009, 3 w h ic h w a s c o n s o lid a te d w ith th e p re s e n t a p p e a l. T h e p a rties a p p e a r to m e e t th e d iv e rsityre q u ire m e n ts o f 2 8 U .S .C . § 1 3 3 2 . W ith 4 r egar d t o di ver s i tyof ci t i zens hi p, Fi r s t B ank i s a banki ng i ns t i tut i on i ncorpor at ed under the law s o f P u erto R ico w ith it s p ri n cipa l place o f b u sine ss in P u erto R ico. T h e B en d ers ar e r es i dent s of the St at e of N or th C ar ol i na. J aym o Pr opert i es i s a N or th C ar ol i na l i m i t ed li ab il ityco rpo rati o n (“L L C ”). T h e re co rd su g g ests that the B en d ers a re the o n lym em b ers of J aym o Pr opert i es , and “the ci t i zens hi p of an LL C i s det erm i ned bythe ci t i zens hi p of eac h of i t s m ember s . ” See Zam bel l iF i r ew orks M f g. C o. , I nc. v. W ood , 592 F. 3d 412, 418 (3 d C ir . 2 0 1 0 ). T her e i s no ques t i on thatthe amounti n contr over s yexce eds $75, 000, as r equi r ed b y2 8 U .S .C . § 1 3 3 2 . 4 ar e notcompet entevi dence . ” (I d. at97. ) Fi r s t B ank t i m el yappea l ed fr om the D i s tr i ct C o u rt’s d e n ial o f

its m o tio n f

o r e n tryo f

d e f a u lt j u d g m e n t. 3 I I . Juri s di ct i on Pur s uantt o 48 U . S. C . § 1612( a) , the D i s tr i ctC our tof the V i r gi n I s l ands has “the j ur i s di ct i on of a D i s tr i ctC our tof the U ni t ed St at es , i ncl udi ng, butnotl i m i t ed t o, the d iversityjuri sd ict ion p rov ided fo r i n [2 8 U . S . C . § 1 3 3 2 . ]” H ere , the D istri ct C o u rt pos s es s ed di ver s i tyj ur i s di ct i on pur s uantt o 28 U . S. C . § 1332. 4 R e g a rd in g o u r a p p e llate ju risd ictio n , an o rd e r o f a D istric t C o u rt “ is o rd in a rily cons i der ed fi nal and appe al abl e under[28 U . S. C . ] § 1291 onl yi f i tends the l i t i gat i on on the mer i t s and l eave s nothi ng forthe courtt o do butexec ut e the j udgm ent . ” U ni t ed Stat es v . Sc a rfo , 263 F. 3d 80, 87 ( 3d C i r . 2001) ( ci t at i ons and quot at i ons om i t t ed) . A s a gene r al m a tter, th e re f

o re , d e n ials o f

m o tio n s f

o r d e f a u lt j u d g m e n t ar e n o t co n sid e re d a p p e a lab le fi nal or ders. See, e. g. , B i rd v. R eese , 875 F. 2d 256, 256 ( 9th C i r . 1989) ( “[A n] or der5

d en y ing h is m o ti o n fo r a d ef au ltjud g m en t . . . is no t a fina l app ea lable o rde r. ”); A d u lt F ilm A ss’ n o f A m . , Inc. v. T

hetf ord , 776 F. 2d 113, 115 ( 5th C i r . 1985) ( “[A ] deni al of [a ] m o tio n f o r d e f a u lt j u d g m e n t w a s n o t ap p e a lab le a s a f in a l o rd e r.”) ; McN

ut tv. C ar dox C orp ., 3 2 9 F .2 d 1 0 7 , 1 0 8 (6 th C ir. 1 9 6 4 ) (“ A n o rd e r d e n y in g a m o tio n f o r a d e f a u lt j udgm enti s notan appe al abl e or der . ”) . H ow ever , pur s uantt o the col l at er al or der d o c trin e , “a n o th e rw ise n o n -f in a l o rd e r c a n b e a p p e a led if it fin a llya n d c o n c lu siv e ly det erm i nes the di s put ed ques t i on, r es ol ves an i m por t anti s s ue s epar at e fr om the under l y i ng m er i t s , and i s eff ect i vel yunr evi ew abl e af t erfi nal j udgm ent . ” Sc a rfo , 263 F .3 d a t 8 7 ; c

f. R iva s v . C ity o

f P a ss a ic , 3 6 5 F .3 d 1 8 1 , 1 9 1 (3 d C ir. 2 0 0 4 ) (“ U n d e r c e rta in ci r cumst ance s , or der s deny i ng a mot i on fors um m aryj udgm entfal l w i thi n the s cope of th e c o lla te ra l o rd e r d o c tr in e .” ). T h e D istric t C o u rt’s M a y1 5 , 2 0 0 9 o rd e r d e n y in g e n tryo f d e f a u lt j u d g m e n t f

its w ith in th e s c o p e o f

th e c o lla te ra l o rd e r d o c tr in e , in th e c ir c u m s ta n c e s o f th is c a s e . Fi r s t B ank’ s appea l pr es ent s an i s s ue s epar at e fr om the under l y i ng m er i t s , beca us e the D i s tr i ctC our t ’ s deni al of Fi r s t B ank’ s m ot i on forentryof def aul tj udgm entw as bas ed s ol el yon i t s i nt erpr et at i on of the pr ocedur al r equi r ement s of R ul e 55. A s a r es ul t , the D i s tr i ctC our t ’ s or derconcl us i vel ydet erm i nes the di s put ed i s s ue as t o the meani ng of R ul e 55, and as t o w hetherthe entr yof def aul tj udgm entw as pr oper . Second, abs entour re v iew , the D istric t C o u rt c a n c o n tin u e to d e n ym o tio n s f o r e n tryo f

d e f a u lt j u d g m e n t, b a s e d o n its in te rp re ta tio n o f R u le 5 5 , a n d th o s e d e n ia ls w ill c o n tin u e to e v a d e re v ie w .See, e. g. , F i rst B an k P uert o R i co v. Lockh art , C iv il N o . 2 0 0 8 -2 8 , 2 0 0 9 U .S . D ist. 5 L E X IS 6 0 3 0 5 , at * 3 (D .V .I. Ju ly1 5 , 2 0 0 9 ) (“ T h e a f f id a v it th a t F irstb a n k h a s s u b m itt e d is n o t b a se d o n [ th e ] A tto rn e y [ ’s] p e rso n a l k n o w led g e th a t L o c k h a rt is n o t an in f a n t, i ncompet ent , ors ervi ng i n t he mi l i t ary . A s s uch, i tcannotbe cons i der ed compet ent ev iden ce fo r de fa u lt . ”); Isla n d Y a c h t C h a rte rs , In c . v. Ma lg a g lio , C i vi l N o. 2006- 210, 2 0 0 9 W L 1 5 0 7 4 0 6 , at * 1 (D .V .I. M a y2 8 , 2 0 0 9 ) (“ P lain tiff s h a v e f a iled to m e e t th e ir bur den of s how i ng thatdefa ul tj udgm enti s appr opr i at e [be caus e t ] heyhave notpr ovi ded co m p eten t evid en ce that [th e d ef en d an t] is no t an in fa n t or an inco m p eten t perso n . ”); F lags tarB ank, F

SB v. D educc a , C i vi l N o. 2007- 26, 2009 U . S. D i s t . L E X I S 43403, at*3 ( D . V . I . M ay21, 2009) ( r ej ect i ng an att orney ’ s decl ar at i on thatan i nves t i gat i on di d not r evea l anyadj udi cat i on as t o a party ’ s i ncompet encyas i ns uffi ci entevi dence , and th e re f o re d e n y in g th e m o tio n f o r d e f a u lt j u d g m e n t); N

u n ez v . L o v e ll , C i vi l N o. 2005- 7, 2 0 0 9 W L 9 4 3 2 7 7 , at * 1 (D .V .I. A p ril 3 , 2 0 0 9 ) (“ [ T ]h e P lain tiff s h a v e f a iled to m e e t th e ir bur den of s how i ng thatdefa ul tj udgm enti s appr opr i at e [be caus e t ] heyhave notpr ovi ded c o m p e ten t ev id e n c e th a t [ d e f e n d a n ts] a re n o t in f

a n ts o r in c o m p e ten t p e rso n s.” ); U. S. D e p t. of A g ric u ltu re v . D a v id , C ivil N o . 2 0 0 5 -14 1 , 2 0 0 8 W L 3 1 0 1 7 9 9 , at *2 (D . V . I. 2008) ( deny i ng entr yof def aul tj udgm entbeca us e ther e w as no “compet entevi dence anyw her e el s e i n t he U SD A ’ s m ovi ng paper s es t abl i s hi ng thatD avi d i s notan i nfantor inco m p eten t. ”). 6 F o llo w in g a d e n ial o f

a m o tio n f

o r e n tryf o r d e f a u lt j u d g m e n t, a c a se w ill e ith e r re m a in open and pe r m anent l ys t al l ed, or , i f the non- r es pons i ve partyappea r s , the ca s e w i l l be li ti g ated o n the m erit s o r de fa u ltjud g m en t w il l be g ran ted, bu t th e D istri ct C o u rt ’s i nt erpr et at i on of R ul e 55 w i l l nevercome t o the for e. I ndeed, the D i s tr i ctC our thas r epea t edl ydeni ed mot i ons forentr yof def aul tj udgm ent , and thos e deni al s have e vaded r evi ew . A ccor di ngl y , w e have j ur i s di ct i on t o r evi ew the D i s tr i ctC our t ’ s or derundert he

5 col l at er al or derdoctr i ne.B eca us e the i s s ue on appe al i s the meani ng of Feder al R ul e of Ci vi l Pr ocedur e 55, our 6 re v ie w is p le n a ry. See Artw ay v. A t t or ney G en. of Stat e of N . J. , 81 F. 3d 1235, 1245 ( 3d C ir . 1 9 9 6 ) ( le g a l q u e s tio n s a re “ s u b je c t to p le n a ry re v ie w .” ).

7 I I I . D i s cus s i on 6 F e d e ra l R u le o f

C iv il P ro c e d u re 5 5 p ro v id e s th a t, af ter th e c ler k ’s e n tryo f

d e f a u lt a g a in st a d e f

e n d a n t, a c o u rt m a ye n ter d e f a u lt j u d g m e n t ag a in st th a t d e f e n d a n t. F ED . R. C IV . P. 55( b) . H ow ever , “[a ] defa ul tj udgm entm aybe ent er ed aga i ns ta mi noror i ncompet entper s on onl yi f r epr es ent ed bya gene r al guar di an, cons ervat or , orotherl i ke f id u c ia ry w h o h a s a p p e a re d .” I d. A cc o rdin g ly , F ir stB an k , as th e p artym o v ing fo r en try o f d e f a u l tj u d g m e n t , p r o v i d e d th e D i s tr i c tC o u r tw i th a f f i r m a t i o n s f

r o m i t s a t t o rn e y, s t at i ng that“upon i nform at i on and bel i ef, the B ender s ar e notunderthe age of ei ght een norar e theyi ncompet entper s ons , ” and f r om the V i ce Pr es i dentof Fi r s t B ank, s t at i ng t hat “[b] as ed on Fi r s t B ank’ s r ecor d, the B ender s ar e above the age of ei ght een [ and bas ed u] pon i nform at i on and bel i ef, the B ender s ar e notm ent al l yi ncompet entper s ons . ” ( A pp. at93 ; 68 . ) Th e D i stri ctC ou rtden i ed F i rs t B ank ’s m oti on , becau se i tdecided thatthese “ave r m ent s [ar e] notbas ed on per s onal know l edge a nd ther efor e ar e notcompet ent evi dence . ” (I

d. at 97 . ) W hi l e ther e has been l i t t l e gui dance fr om ourC our t , a r evi ew of ca s e l aw fr om se v e ra l d istric t co u rts s h o w s th a t, i n th e c o n tex t o f a m o tio n f

o r e n tryo f

d e f a u lt j u d g m e n t, an af fi davi toraff

i r m at i on fr om the movi ng partyori t s att orney , i ndi cat i ng thatthe d e f e n d a n t is a c o m p e ten t ad u lt, is ro u tin e lytre a ted a s s u f f icie n t f o r a c o u rt to e n ter d e f

a u lt8

ju d g m e n t ag a in st th a t d e f e n d a n t, as su m in g th a t th e o th e r re q u ire m e n ts f o r e n tryo f

d e f a u lt ju d g m e n t c o n ta in e d in R u le 5 5 h a v e b e e n m e t. See, e. g. , W i l l i am C on sal o & So ns Farm s, I n c . v . Mex - Pr o d u c e Sa l e s , L L C, C i vi l N o. 08- 348, 2008 U . S. D i s t . L E X I S 89424, at*5 ( D . A r i z. O ct . 22, 2008) ( r el y i ng on the att orney ’ s aff i davi tt o concl ude that

“ [ d ]e f e n d a n ts a re n o t in f

a n ts [ o r] in c o m p e ten t p e rso n s” f o r p u rp o se s o f

e n ter in g d e f

a u lt ju d g m e n t); P ruden t i al I ns. C o. of Am . v. B are , C ivil N o . 0 6 -41 3 1 , 2 0 0 7 U . S . D ist . L E X IS 72600, at*5- 6 ( D . N . J . Sept . 28, 2007) ( “Pl ai nt i ff s ubm i t t ed [] an af fi davi tcert i fy i ng t hat the N onr es pons i ve D efe ndant s ar e nei theri ncompet ent , nori nfant s [, and thus w e] fi nd[] th a t d e f a u lt j u d g m e n t is a p p ro p ria te, u n d e r [ R u le 5 5 ].”) ; Li ncoln. G en. I ns . C o. v. G rossbard , C i vi l N o. 05- 1602, 2006 U . S. D i s t . L E X I S 33466, at*2 ( M . D . Pa. M ay25, 2006) ( r el y i ng on att orney ’ s decl ar at i on thatnon- r es pons i ve partyi s notan i nfantor in c o m p e ten t p e rso n ). T h a t trea tm e n t is c o rre c t. T o re q u ire m o re is to g o b e y o n d th e R u le and , i n a case li ke thi s, t o im po se an un necessarybu rden on ordi narybu si ness transact i on s. I n s hor t , w e hol d t hat , atthe t i m e a pa r tym oves forentryof def aul tj udgm ent underR ul e 55( b) , an af fi davi toraff

i r m at i on fr om thatpartyori t s att orneys t at i ng i n good fai th thatthe non- r es pons i ve def endanti s a compet entadul ti s notl es s than compet ent evi dence of thatfac tm er el ybeca us e i ti s founded upon i nform at i on and bel i ef r athert han a n a s s e rt io n o f

p e rs o n a l k n o w le d g e . C f . Kulhaw i k v. H

older , 5 7 1 F . 3 d 2 9 6 , 2 9 8 (2d C ir . 2009) ( “[W ] hen an a t t orneym akes s t at ement s underpenal tyof per j uryi n an af

fi davi torG i ven ourhol di ng her e, Fi r s t B ank’ s pet i t i on fora w r i tof m andamus i n the 7 c o n s o lid a te d c a s e (N o . 0 9 -2 9 5 1 ) w ill b e d e n ie d a s m o o t. 9 an af fi r m at i on, th[os e] s t at ement s do cons t i tut e partof the evi dent i aryr ecor d and mustbe c o n s id e re d .” ); 2 A C .J .S . A f f i da vi t s § 4 6 (“A ff

idav it s o n inf

o rm ati o n an d b eli ef

are p erm itted in ce rt ain c ir cu m stan ce s, b u t m ayb e e x p resslyp rec lud ed b ystatu te. ”). I V . C oncl usi on T he D i s tr i ctC our terr ed as a mat t erof l aw i n deci di ng thatthe evi dence s ubm i t t ed b yF ir s tB a n k in s u p p o rt o f its m o tio n f

o r e n tr yo f

d e f a u lt ju d g m e n t w a s n o t c o m p e te n t. W e thus w i l l vaca t e the D i s tr i ctC our t ’ s or derand w i l l r emand forpr ocee di ngs cons i s t ent w i th thi s opi ni on. 7