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Southern States Bank v. Holley

United States District Court, M.D. Alabama, Eastern Division

September 12, 2018

SOUTHERN STATES BANK, successor in interest by merger with Columbus Community Bank, Plaintiff,
v.
TERESA WATSON HOLLEY, et al., Defendants.

          REPORT AND RECOMMENDATION

          DAVID A. BAKER UNITED STATES MAGISTRATE JUDGE

         Plaintiff, Southern States Bank, as successor in interest by merger with Columbus Community Bank, sues Defendants, Teresa Watson Holley, as Executrix of the Estate of Steven F. Watson; the United States; Capital One, N.A.; and Wells Fargo Bank N.A., in a two-count amended complaint for reformation of mortgage and to set aside a mortgage foreclosure deed. (Doc. 1-4). Before the court is the Plaintiff's Motion for Default Judgment Against Teresa Watson Holley, as Executrix of the Estate of Steven F. Watson, Capital One, N.A., and Wells Fargo, N.A. (Doc. 20). For the reasons that follow, the Magistrate Judge recommends Plaintiff's Motion for Default Judgment (Doc. 20) be granted.

         I. JURISDICTION

         The case was removed to this court by Defendant, the United States, pursuant to 28 U.S.C. §§ 1442 and 1444. (Doc. 1). No. party has contested jurisdiction or venue, and the court finds sufficient information of record to support both. See 28 U.S.C. § 1391. On March 5, 2018, this matter was referred to the undersigned for review by Chief United States District Judge W. Keith Watkins. (Doc. 12); see also 28 U.S.C. § 636(b); Rule 72, Fed. R. Civ. P.; United States v. Raddatz, 447 U.S. 667 (1980); Jeffrey S. v. State Bd. of Educ. of State of Ga., 896 F.2d 507 (11th Cir. 1990).

         II. LEGAL STANDARD

         Rule 55 of the Federal Rules of Civil Procedure outlines the procedure for obtaining default judgment against a party. Rule 55 requires an entry of default to precede the entry of a default judgment. See Fed. R. Civ. P. 55(a), (b). The effect of the entry of a default is that all of the factual allegations in the Complaint are taken as true, save for the amount of unspecified damages. Thus, if liability is well pled in the complaint, it is established by the entry of a default. Buchanan v. Bowman, 820 F.2d 359, 361 (11th Cir. 1987). After the entry of a clerk's default, where the damages are not for a “sum certain, ” the plaintiff is required to “apply to the court” for an entry of default judgment, pursuant to Rule 55(b)(2).

         The mere entry of a default by the Clerk does not, in itself, warrant the court entering a default judgment. See Tyco Fire & Sec. LLC v. Alcocer, 218 Fed.Appx. 860, 863 (11th Cir. 2007) (citing Nishimatsu Constr. Co. v. Hous. Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)). Rather, a defaulted defendant is only deemed to admit the plaintiff's well pled allegations of fact. Tyco Fire, 218 Fed.Appx. at 863. Furthermore, a default judgment bars the defendant from contesting those facts on appeal. Id. Therefore, before entering a default judgment for damages, a court must ensure that the well pled allegations in the complaint, which are taken as true due to the default, actually state a substantive cause of action and that there is a “substantive, sufficient basis in the pleadings for the particular relief sought.” Id.

         “Once liability is established, the court turns to the issue of relief.” Enpat, Inc. v. Budnic, 773 F.Supp.2d 1311, 1313 (M.D. Fla. 2011). “Pursuant to Federal Rule of Civil Procedure 54(c), ‘[a] default judgment must not differ in kind from, or exceed in amount, what is demanded in the pleadings,' and a court may conduct hearings when it needs to determine the amount of damages, establish the truth of any allegation by evidence, or investigate any other matter.” Enpat, 773 F.Supp.2d at 1313 (citing Fed.R.Civ.P. 55(b)(2)). The court may enter 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.” Rule 54(b), Fed.R.Civ.P. In order to enter a default judgment, the Court must find that an adequate showing has been made as to liability and the kind or amount of damages or other relief.

         III. PROCEDURAL AND FACTUAL BACKGROUND

         Plaintiff filed its Complaint to Set Aside Foreclosure Deed and Reform Mortgage in October 2017 in Circuit Court for Lee County, Alabama. (Doc. 1-1). Plaintiff amended the complaint to substitute the United States as a party Defendant for the Internal Revenue Service. (Doc. 1-3 at 54-58). On January 3, 2018, Defendant United States removed the case to this court, pursuant to 28 U.S.C. §§ 1442(a)(1) and 1444. (Doc. 1).

         On April 6, 2018, Plaintiff filed an application for entry of default against Defendants, Teresa Watson Holley, as Executrix of the Estate of Steven F. Watson, Capital One, N.A., and Wells Fargo, N.A., as these Defendants did not answer or respond to Plaintiff's complaint. (Doc. 15). On April 23, 2018, the Clerk entered a default against Defendants, Teresa Watson Holley, as Executrix of the Estate of Steven F. Watson, Capital One, N.A., and Wells Fargo, N.A. (Doc. 18). Plaintiff now moves for default judgment against these Defendants. (Doc. 20).

         In its Amended Complaint, Plaintiff alleges it entered into a Promissory Note with Steven F. Watson, now deceased, on or about September 16, 2013. (Doc. 1-4, ¶ 6). The Note was secured by a mortgage on property located at 34 Lee Road 843, Salem, Alabama. Id. ¶ 7. Plaintiff claims that due to a mutual mistake the mortgage fails to list all of the lots that encompass the subject property. Id. ¶ 8. The mortgage included only Lot 2, Block “B”, Unit No. 2, Lake Shores, but the property known as 34 Lee Road 843, Salem, Alabama also includes Lots 3, 4 and 25, Block “B”. Id. ¶¶ 8, 9. After Defendant Watson defaulted on the Note, Plaintiff conducted a foreclosure sale. Id. ¶ 10. Plaintiff alleges due to a mutual mistake of fact, only Lot 2 was foreclosed on rather than the entire property being foreclosed on. Id.

         Because of the mutual mistake of fact, Plaintiff's Amended Complaint seeks to equitably reform the mortgage, pursuant to Ala. Code § 35-4-150, in order to accurately reflect the proper legal description of the subject property as intended and currently used by the parties, and to set aside the foreclosure on the single lot so that a foreclosure can be conducted on the entire property. Id. ¶ 11. Count I of the Amended Complaint seeks reformation of the mortgage. Id. ¶¶ 12-14. Count II seeks to set aside the foreclosure deed so that the whole property can be foreclosed on. Id. ¶¶ 15-18. Plaintiff alleges that the grantee of the foreclosure deed- Defendant United States-consents to such setting aside. Id. ¶ 18. Plaintiff and Defendant United States stipulate that the mortgage should be reformed to reflect the proper legal description of the subject property and further stipulate that the foreclosure deed should be set aside. (Doc. 16).

         In its motion for default judgment, Plaintiff states it has already obtained a default against Defendants, Teresa Watson Holley, as Executrix of the Estate of Steven F. Watson, Capital One, N.A., and Wells Fargo, N.A., and to date these Defendants have not appeared, nor have they responded to Plaintiff's Amended Complaint. (Doc. 20, ¶¶ 5-7). Plaintiff ...


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