United States District Court, D. Oregon, Eugene Division
OPINION AND ORDER
AIKEN United States District Judge
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.
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
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
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.
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,
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.
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)).
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)).
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.
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 ...