DAVID C. GUADERRAMA, District Judge.
Presently before the Court is U.S. Bank National Association, as Successor Trustee to Bank of America, NA, Successor in Interest to LaSalle Bank NA, on behalf of the Registered Holders of Bear Stearns Asset Backed Securities I Trust 2006-PC1, Asset-Backed Certificates, Series 2006-PC1's ("Plaintiff") "Amended Motion for Default Judgment" (ECF No. 16) ("Motion"), filed on July 8, 2016. Plaintiff requests the Court to enter a default judgment pursuant to Federal Rule of Civil Procedure 55 against Defendants Pauline Vallejo and Richard Vallejo ("Defendants"). See Mot. 1-2. After considering the Motion, the record, and the applicable law, the Court concludes Plaintiff is entitled to the requested relief, and therefore, the Court will render a default judgment against Defendants.
Plaintiff is a national association and trustee with its main office in Ohio. See Compl. ¶ 6. It commenced suit on January 11, 2016, seeking declaratory judgment against Defendants. Id. at ¶¶ 20-21. Specifically, Plaintiff seeks
Mot. 4; Compl. 7. The real property and improvements in question are commonly known as 6253 Camino Allerge Drive, El Paso, Texas 79912, more particularly described as:
Compl. ¶ 4.
Thereafter, Plaintiff requested issuance of summons and that same day, the Clerk of the Court issued a summons to each of the Defendants. See ECF No. 3-5. Plaintiff subsequently asked for a reissuance of summons and summons were again issued against Defendants. See ECF Nos. 6-9. Plaintiff properly served Defendants with the summons on March 10, 2016. See Proof of Service 2, 4, ECF No. 10. To date, Defendants have not answered Plaintiff's Complaint in accordance with Federal Rule of Civil Procedure 12
On April 5, 2016, the Court entered an order to show cause against Defendants, ordering them to file a responsive pleading on or before April 12, 2016. See Order to Show Cause, 1-2, ECF No. 11. Plaintiffs failed to do so and have yet to file a responsive pleading in this matter. On May 17, 2016, Plaintiff filed its "Request for Entry of Default Judgment by the Clerk" (ECF No. 12). On May 18, 2016, the Clerk of the Court entered default against Defendants pursuant to Federal Rule of Civil Procedure 55(a). See Entry of Default, ECF No. 14. On May 17, 2016, Plaintiff first moved for default judgment. See First Motion for Default J., ECF No. 13. The Court denied Plaintiff's motion without prejudice because Plaintiff had "not provide[d] the Court with a copy of the Note, nor with any other evidence that [Defendants] are in breach of the Note and that [Plaintiff] is entitled to foreclose." Order Denying First Mot. for Default J. 6-7, ECF No. 15. Plaintiff, after presumably curing their deficiency, subsequently filed the instant Motion. On July 11, 2016, the Court ordered Plaintiff to file supplemental briefing. See ECF No. 17. Plaintiff did so on August 1, 2016. See Suppl. Brief, ECF No. 20.
The Clerk of the Court must enter default if a party fails to plead or otherwise defend, and the moving party shows that failure by affidavit or otherwise. See Fed. R. Civ. P. 55(a). After the Clerk enters default, a party may move for a default judgment. See Fed. R. Civ. P. 55(b); New York Life Ins. Co. v. Brown, 84 F.3d 137, 141 (5th Cir. 1996). Rule 55 of the Federal Rules of Civil Procedure provides that, following entry of default by the Clerk of the Court, a court can enter a default judgment when the "plaintiff's claim is [not] for a sum certain or a sum that can be made certain by computation." Fed. R. Civ. P. 55(b)(1).
In all other cases, a party must petition the court to enter default judgment if there is "a sufficient basis in the pleadings for the judgment entered." Nishimatsu Constr. Co., LTD. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) (footnote omitted). "The defendant, by his default, admits the plaintiff's well-pleaded allegations of fact, is concluded on those facts by the judgment, and is barred from contesting on appeal the facts thus established." Id. (citations omitted). When reviewing a motion for default judgment, a court takes the plaintiff's well-pleaded factual allegations as true, excluding monetary damages. See United States ex rel. M-CO Constr., Inc. v. Shipco Gen., Inc., 814 F.2d 1011, 1014 (5th Cir. 1987).
"Default judgments are a drastic remedy, not favored by the Federal Rules and resorted to by courts only in extreme situations." Sun Bank v. Pelican Homestead & Sav. Ass'n, 874 F.2d 274, 276 (5th Cir. 1989) (citations omitted). Relevant factors to be considered by the court include "whether material issues of fact are at issue, whether there has been substantial prejudice, whether the grounds for default are clearly established, whether the default was caused by a good faith mistake or excusable neglect, the harshness of a default judgment, and whether the court would think itself obliged to set aside the default on the defendant's motion." Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998).
Here, Plaintiff's claim seeks declaratory relief. See Compl. 3-4. The Court may grant a default judgment when a properly served defendant fails to respond to a complaint for declaratory relief. See Fid. & Guar. Life Ins. Co. v. Unknown Tr. of Revocable Trust-8407, No. CIV.A. 13-CV-412-PRM, 2014 WL 2091257, at *3 (W.D. Tex. May 16, 2014) (awarding default judgment in declaratory judgment action); Taylor v. City of Baton Rouge, No. CIV.A. 13-00579-BAJ, 2014 WL 4177275, at *3 (M.D. La. Aug. 25, 2014) (same).
Because Plaintiff seeks a declaratory judgment, the Court must engage in a three-step process to determine whether that relief is appropriate in this case. See Fid. & Guar. Life Ins. Co., 2014 WL 2091257, at *3 (citing Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000)). "First, the court must determine whether the declaratory action is justiciable[,] . . . [meaning that] an `actual controversy' exists between the parties to the action. Orix Credit Alliance, 212 F.3d at 895 (citing Rowan Companies, Inc. v. Griffin, 876 F.2d 26, 27-28 (5th Cir. 1989). If an "actual controversy" exists, the district court must then "resolve whether it has the `authority' to grant declaratory relief in the case presented." Id. (citing Travelers Ins. Co. v. Louisiana Farm Bureau Fed'n, Inc., 996 F.2d 774, 776 (5th Cir. 1993)). In the third step, "the court has to determine how to exercise its broad discretion to decide or dismiss a declaratory judgment action." Id. (citing Travelers Ins. Co., 996 F.2d at 778).
The Court must first determine if an "actual controversy" exists. "As a general rule, an actual controversy exists where `a substantial controversy of sufficient immediacy and reality' [exists] between parties having adverse legal interests." Fid. & Guar. Life Ins. Co., 2014 WL 2091257, at *3 (citation omitted) (alterations in original). "Whether particular facts are sufficiently immediate to establish an actual controversy is a question that must be addressed on a case-by-case basis." Fid. & Guar. Life Ins. Co., 2014 WL 2091257, at *3 (quoting Orix Credit Alliance, 212 F.3d at 896).
Here, Plaintiff alleges that Defendants are in breach of the security instrument and note. An "actual controversy" thus exists.
Having determined that an "actual controversy" exists, the Court now must determine whether it has the requisite authority. "Under the second element of the Orix Credit Alliance test, a district court does not have authority to consider the merits of a declaratory judgment action when: (1) the declaratory defendant previously filed a cause of action in state court; (2) the state case involved the same issues as those in federal court; and (3) the district court is prohibited from enjoining the state proceedings under [28 U.S.C. §] 2283." Id. at *4 (alteration in original) (quoting Sherwin-Williams Co. v. Holmes Cty., 343 F.3d 383, 388 n.1 (5th Cir. 2003)).
The Court is unaware of a similar, parallel, state court action still pending that is related to the instant case. The Court therefore has the authority to grant declaratory relief.
Finally, at the third step, the Court determines whether to exercise jurisdiction and grant the requested relief.
Id. at *4 (citing Sherwin-Williams, 343 F.3d at 388).
After reviewing the record, the Court holds that the factors balance in favor of the Court exercising jurisdiction in the Plaintiff's request for declaratory judgment. As noted above, there is no evidence of a similar, parallel, state court action still pending that is related to the instant case. There is no evidence that Plaintiff filed the action in anticipation of a suit, and there is no evidence or that Plaintiff has engaged in forum shopping in bringing suit. Furthermore, fairness weighs in favor of granting default judgment, and a declaratory judgment as resolving the question before the Court today would further judicial efficiency. The Court will therefore consider whether default judgment is appropriate in the matter.
The Court is satisfied that the grounds for the entry of default judgment against Defendants Pauline Vallejo and Richard Vallejo are met. The Clerk of the Court has entered a default against Defendant. See Entry of Default. By their default, Defendants have admitted the factual allegations in Plaintiff's Complaint. See Jackson v. FIE Corp., 302 F.3d 515, 524-525 (5th Cir. 2002) (citation omitted). In addition, Plaintiff has filed a declaration from its counsel attesting that Defendants are not infants, incompetent, or eligible for relief under the Servicemembers Civil Relief Act of 2003. See Motion, Exs. A, A-1, A-2. Moreover, there are no material issues of fact precluding judgment in Plaintiff's favor or any indication that Defendant's default has been caused by a good faith mistake or excusable neglect. Finally, the Defendants have had more than enough opportunity to defend the matter if they were so inclined; they are currently overdue in responding to the Court's show cause order alerting them to the possibility of default judgment being rendered against them.
In light of the above, the Court must decide what damages Plaintiff is entitled to receive for Defendant's breach. Plaintiff's Complaint seeks a declaratory judgment that Defendants are in default on their obligations under the relevant security agreement. See Compl 4. Plaintiff also requests "judgment that Plaintiff is entitled to enforce the power of sale in the Security Instrument through foreclosure of the Property pursuant to the Note, Security Instrument, and Texas Property Code § 51.002, or alternatively, judicial foreclosure;" as well as attorneys' fees and costs. Mot. 5; accord Compl. 7. In its supplemental brief, Plaintiff clarifies that it is seeking "a judicial foreclosure of the Loan Agreement and sale of the property by law enforcement." Suppl. Brief 2.
In determining whether a party is entitled to foreclose on a promissory note secured by real property, a federal court applies the substantive law of the forum state, in this case Texas. See Resolution Trust Corp. v. Starkey, 41 F.3d 1018, 1023 (5th Cir. 1995). Accordingly, in order to show that it is entitled to the damages it seeks, Plaintiff "need not prove all essential elements of a breach of contract, but only must establish the note in question, that [Defendant] signed the note, that [Plaintiffs are] the legal owner[s] and holder[s] thereof, and that a certain balance [is] due and owing on the note." See id. (quoting Clark v. Dedina, 658 S.W.2d 293, 295 (Tex. App. — Houston [1st Dist.] 1983, writ dism'd)); accord Charles R. Tips Family Trust v. PB Commercial LLC, 459 S.W.3d 147, 152 (Tex. App. — Houston [1st Dist.] 2015, no pet.) (citations omitted).
Here, Plaintiff has produced a copy of the Note dated July 25, 2005, for a sum of $170,000.00 plus interest, which was executed by Defendant Pauline Vallejo. See Mot., Ex. B ("Note") at 1. Plaintiff has similarly produced a security instrument in the same amount dated July 25, 2005, signed by Defendants, see Mot., Ex. C ("Security Instrument") at 1, and an Assignment whereby Mortgage Electronic Registration Systems, Inc., the original lender under the Note, granted, assigned, and transferred to Plaintiff all beneficial interest in the Note and Security Instrument, see Mot., Ex. D ("Assignment") at 1. Plaintiff has produced a notice of default showing that the Note is currently due for the May 1, 2008, payment and all subsequent monthly payments, as well as a notice of acceleration effective May 22, 2014. See Mot., Exs. E-F. Lastly, Plaintiff has provided evidence documenting the interest charges, maintenance expenses, and escrow advances on taxes and insurance accrued as of December 30, 2015.
The Court finds that Defendant has defaulted on the Note and Security Instrument and that Plaintiff is therefore entitled to enforce the rights thereunder.
"Under Texas law, lenders have a substantive right to elect judicial or nonjudicial foreclosure in the event of a default. . . ." Douglas v. NCNB Tex. Nat'l Bank, 979 F.2d 1128, 1130 (5th Cir. 1992); accord In re Erickson, 566 F. App'x 281, 284 (5th Cir. 2014) (citations omitted). As its remedy for Defendants' default on the Note, Plaintiff has elected to pursue a judicial foreclosure. See Suppl. Brief 2. Plaintiff is entitled to such a remedy.
Accordingly,
The Court hereby enters a
Such debt
The Court
