ACFC Delta Holdings, LLC v. Delta Waterways LLC ( 2020 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ACFC DELTA HOLDINGS, LLC, Case No. 19-cv-00813-WHO 8 Plaintiff, ORDER RE DEFAULT JUDGMENT v. 9 10 DELTA WATERWAYS LLC, Defendant. 11 12 Plaintiff moves for default judgment on its claim for bad faith waste against Delta 13 Waterways, LLC (“Delta”). Dkt. Nos. 21, 27. In a related case, I granted default judgment in 14 plaintiff’s favor on its claim for against Coast West LLC and Cruiser Haven Inc, both of which 15 served as guarantors on the original promissory note executed between Delta and plaintiff. See 16 Dkt. No. 70, Case No. 18-cv-5845 (N.D. Cal.) (“ACFC I”). Delta was not a defendant in ACFC I. 17 LEGAL STANDARD 18 Pursuant to Federal Rule of Civil Procedure 55(b)(2), a district court may enter a final 19 judgment in a case following a defendant’s default. Whether to enter a judgment lies within the 20 court’s discretion. Bd. of Trustees of Laborers Health & Welfare Tr. Fund for N. California v. 21 Cazadores Constr., Inc., No. 17-cv-05242-WHO, 2018 WL 986020, at *2 (N.D. Cal. Feb. 20, 22 2018). In order to exercise this discretion, the court must first confirm that it has subject matter 23 jurisdiction over the case and personal jurisdiction over the parties, as well as ensure the adequacy 24 of service on the defendant. Id. Once these elements are satisfied, the court turns to the following 25 factors (the “Eitel factors”) to determine whether it should grant a default judgment: (1) the possibility of prejudice to the plaintiff, (2) the merits of 26 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 27 dispute concerning material facts [,] (6) whether the default was due 1 Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). 2 DISCUSSION 3 In this matter, plaintiff moves for default judgment only on its second cause of action for 4 bad faith waste to real property. Neither the Amended Complaint nor the motion for default 5 judgment cite a particular statute or authority for plaintiff’s claim for bad faith waste, and it is 6 unclear what legal theory plaintiff makes its claim.1 Under California law, a claim for bad faith 7 waste may arise in the context of California’s antideficiency statutes, which prevent a party from 8 obtaining a deficiency judgment “after any foreclosure sale, private or judicial, of property 9 securing a purchase money mortgage.” Cornelison v. Kornbluth, 542 P.2d 981, 990 (1975); Cal. 10 Civ. Proc. Code § 580b. Courts have recognized bad faith waste as an “exception” to this bar, and 11 have allowed mortgagees to recover damages on this basis. Cornelison, 542 P.2d at 991. Plaintiff 12 has not asserted that California’s antideficiency legislation applies in this case.2 13 I have already granted judgment in favor of plaintiff in a related case in the amount of the 14 amount owing on the promissory note after foreclosure. While plaintiff may be entitled to 15 judgment against Delta on its breach of promissory note, it has already recovered judgment and 16 damages on that note against the guarantors of that note in ACFC I. Here, plaintiff requests 17 damages from Delta not for breach of the promissory note but for waste to the property. Such 18 damages would appear duplicative of the damages already awarded in ACFC I, because plaintiff 19 received the amount due on the note after the property was sold in foreclosure for sum less than 20 the amount of the loan. Indeed, plaintiff submitted a declaration of Darren Clow, which stated that 21 “[a]s part of the sale . . . ACFC was forced to discount the purchase price to offset the repair 22 costs.” Dkt. No. 25 at 3. Accordingly, there is no factual or legal information in the record that 23 indicates why plaintiff is entitled to additional damages resulting from bad faith waste. At any 24 1 Plaintiff has not identified any contractual provision that would provide this relief. The 25 Amended Complaint states that “[t]he deed of trust required Delta to not commit waste to the Marina,” Dkt. No. 6 ¶ 7, but plaintiff has not identified the deed of trust in the record or what 26 provision was allegedly violated. 27 2 It does not appear that the legislation would apply in this case. However, if it did, I note that 1 rate, plaintiff has failed to demonstrate the substantive merits and the sufficiency of the complaint 2 || with respect to its bad faith waste claim. See ACFC J at 2. 3 For this reason, I DENY plaintiff's motion without prejudice. If plaintiff wishes to provide 4 || further information supporting its request for judgment on its “bad faith waste” claim, it must 5 explain why, as a matter of law, it is entitled to such damages and why these damages would not 6 || be duplicative of the damages I have already awarded in ACFC I. Plaintiff shall file any renewed 7 || motion for default judgment by April 10, 2020. 8 IT IS SO ORDERED. 9 Dated: March 16, 2020 10 . 11 1 . Orrick 12 United States District Judge 16 Z 18 19 20 21 22 23 24 25 26 27 28