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Subh Investment, LLC v. Singh

United States District Court, D. Oregon, Eugene Division

March 19, 2018

SUBH INVESTMENT, LLC, Plaintiff,
v.
KARAN SINGH, Defendant.

          OPINION AND ORDER

          ANN AIKEN United States District Judge

         Plaintiff SUBH Investment, LLC ("SUBH"), has sued defendant Karan Singh alleging claims for breach of contract and waste, (doc. 1). On April 26, 2017, the Clerk made an entry of default against defendant, (doc. 6). Defendant now moves this Court to set aside the Entry of Default, (doc. 8). For the reasons set forth herein, defendant's motion is GRANTED.

         BACKGROUND

         On July 11, 20013, plaintiff, an Oregon Corporation, executed a contract, outlined on the back of a napkin, for the purchase of a sixty room hotel owned by defendant, a citizen of California, for a price of $750, 000. The hotel is located in Roseburg, Oregon and was associated with the America's Best Value Inn ("ABVI") brand. On July 14, 2003, plaintiff alleges it performed an inspection of the hotel which showed that the property was generally clean and in working order. Before closing the transaction, however, defendant executed a second contract with a competing buyer, JV Envision, LLC ("JV"), for $850, 000. Plaintiff then filed an action for specific performance of the sale agreement in Douglas County Circuit Court (No. 13-cv-3003-CC). On August 5, 2013, JV filed suit against defendant and plaintiff for specific performance of its contract. On August 12, 2013, defendant leased the property to JV, which operated the property during the underlying state litigation.

         The underlying case proceeded to a bench trial in September 2014, and on September 30, 2014, the trial court entered judgement in favor of plaintiff. The defendant was directed to promptly execute a deed and close the transaction, delivering possession to plaintiff no later than October 24, 2014. JV Investments subsequently settled its state claims against defendant. However, defendant allegedly refused to turn over possession of the hotel to plaintiff during the pendency of his appeal.

         The trial court denied defendant request for stay of the udgement and this decision affirmed by the Court of Appeals on January 27, 2015. On February 17, 2015, plaintiff obtained a writ of execution and took possession of the property on February 18, 2015. On October 1, 2015, plaintiff closed its transaction with defendant and obtained title to the property. On February 18, 2016 the Oregon Court of Appeals granted plaintiffs motion to dismiss defendant's still pending appeal and entered an appellate judgment in plaintiffs favor.

         Plaintiff filed the present action on February 17, 2017, alleging claims for breach of contract and waste. Plaintiff claims that when it took possession of the property in February 2015, it found that the property was severely damaged, nearly unusable as a hotel, and in need of extensive repairs. It further alleges that plaintiff and JV began using the property as a monthly apartment building. SUBH also learned that ABVI had terminated the hotel's franchise agreement, allegedly due to property damage. Plaintiff alleges that this reduced the money it could earn from the property as well requiring a significant fee to obtain a new franchise agreement. Plaintiff alleges damages in the amount $1, 250, 000.

         It is undisputed that on March 5, 2017, defendant was personally served with a summons and the Complaint in this case, (doc 3). On April 6, 2017, plaintiff moved for Entry of Default against defendant as 21 days had passed since service with no answer having been filed by defendant. On April 26, 2017, the Clerk made an Entiy of Default against defendant, (doc. 6) On June 7, 2017, defendant filed the present Motion to Set Aside the Entry of Default, (doc. 8) Oral argument was heard on September 27, 2017.

         LEGAL STANDARD

         Entry of default may be set aside upon a showing of good cause. Fed R. Civ. Pro. 55(c). The Ninth Circuit's good cause standard for setting aside entry of default is the same as that for setting aside default judgment under Rule 60(b), but the test for setting aside entry of default is less rigid and is more generous to the party in default. Franchise Holding II, LLC v. Huntington Rests. Group, Inc., 375 F.3d 922, 925 (9th Cir. 2004), cert, den., 544 U.S. 949 (2005). Further, "[t]he law does not favor defaults, " and "therefore, any doubts as to whether a party is in default should be decided in favor of the defaulting party." Eclectic Prod., Inc. v. Painters Prod., Inc., No. 2014 WL 12703283, at 1 (D. Or. 2014) (citing Bonita Packing Co. v. O'SuWvan, 165 F.R.D. 610, 614 (CD. Cal. 1995)).

         A court considers three factors when deciding whether to set aside default: (1) whether the defendant's culpable conduct led to the default; (2) whether the defendant has a meritorious defense; and (3) whether setting aside default would prejudice the plaintiff. Franchise, 375 F.3d at 925-926. The party in default bears the burden of establishing good cause, and "a finding that any one of these factors is true is sufficient reason for the district court to refuse to set aside the default." United States v. Signed Pers. Check No.73O of Yiibran S. Mesle, 615 F.3d 1085, 1091 (9th Cir. 2010). However, "the law does not favor defaults, and therefore, any doubts as to whether a party is in default should be decided in favor of the defaulting party." Eclectic Prod., Inc. v. Painters Prod, Inc., 2014 WL 12703283, at 1 (D. Or. 2014) (citing Bonita Packing Co. v. O'Sullivan, 165 F.R.D. 610, 614 (CD. Cal. 1995)).

         DISCUSSION

         First, I examine whether defendant's culpable conduct led to the default. Defendant admits that he did not file a timely response, but he argues that his conduct was excusable because of personal illness which did not allow him to personally deliver a copy of the complaint to an attorney.

         Negligent failure to respond is excusable if the defaulting party offers a credible, good faith explanation for the delay that negates "any intention to take advantage of the opposing party, interfere with judicial decision-making, or otherwise manipulate the legal process." TCI Group Life Ins. Plan v. Knoebber,244 F.3d 691, 697-98 (9th Cir. 2001). Further, the court may consider the defendant's ...


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