Opinion
CIVIL ACTION NO: 02-2687 SECTION "R" (2)
December 16, 2002
ORDER AND REASONS
Before the Court is defendants' motion to dismiss under Rule 12(b)(6), or, in the alternative, motion for a more definite statement under Rule 12(e). For the following reasons, the Court finds that plaintiff Judy Arrington is not entitled to Rule 60(b) relief. In addition, the Court grants defendants' 12(b)(6) motion to dismiss plaintiff's claims under LA. Civ. CODE ANN. art. 2652, and the Court grants defendants' motion for a more definite statement of plaintiff's claims under the Federal Fair Debt Collection Practices Act.
I. Background
This matter arises out of Eldridge and Judy Arrington's purchase of a yacht. Both Eldridge and Judy Arrington are signatories on a promissory note and mortgage for the vessel with NationsBank, N.A. Sometime after the purchase of the yacht, Eldridge and Judy Arrington filed for divorce. In the divorce proceedings, a state court conveyed the yacht to Eldridge Arrington and conveyed a portion of Eldridge Arrington's retirement account to Judy Arrington. Judy Arrington, however, remained a signatory on the promissory note and mortgage. Eldridge Arrington failed to make the necessary payments on the yacht, prompting NationsBank to file a lawsuit in this Court on the note and mortgage against Eldridge Arrington and Judy Arrington and the vessel in rem. (Civil Action 00-CV-394.) Because the state court had awarded the yacht to Eldridge Arrington in the divorce proceedings, Judy Arrington expected Eldridge Arrington to defend the lawsuit, but he did not. The Court granted a motion for entry of default in that matter on March 9, 2000. Post-default, Eldridge Arrington filed an answer to the complaint. Then, the plaintiff in that matter moved for voluntary dismissal of the action, which motion was granted on July 28, 2000.
One year later, a second lawsuit was filed in this Court. This time, a new plaintiff — Republic Credit Corporation I — asserted that it acquired the note and mortgage from Bank of America (formerly NationsBank) and raised allegations nearly identical to those raised by NationsBank in the previous lawsuit. (Civil Action 01-CV-1889.) Republic Credit named as defendants Eldridge Arrington and Judy Arrington and the yacht in rem. Judy Arrington was served with the complaint, but she never made an appearance because she assumed, again, that her ex-husband would defend the lawsuit. Eldridge Arrington, who was also served with the complaint, never appeared in Court. Republic Credit obtained a default judgment on August 30, 2001, and the Court entered judgment against defendants in the amount of $501,313.54. Unbeknownst to Judy Arrington, Republic Credit then sold the vessel at judicial sale on October 20, 2001, the proceeds of which did not cover the full amount of the default judgment. Republic Credit assigned its interest in this matter to RFC Property I, Inc., a third-party collection agency that is now attempting to garnish an annuity held by Judy Arrington to pay the deficiency. A Motion for Garnishment Order in Civil Action 01-CV-1889 is pending before this Court.
On August 30, 2002, Judy Arrington filed this lawsuit seeking a declaratory judgment and nullification of the default judgment obtained by Republic Credit. In her complaint, plaintiff seeks relief pursuant to FED. R. Civ. P. 60(b). Plaintiff further seeks (1) to recover damages arising from defendants' violations of the Federal Fair Debt Practices Collection Act; (2) the right of redemption of all litigious rights purchased by defendants; and (3) attorneys' fees. Defendants move the Court to dismiss plaintiff's complaint pursuant to Rule 12(b)(6), or in the alternative, move for a more definite statement pursuant to Rule 12(e).
II. Discussion
A. Rule 60(b) Relief
At the outset, the Court is faced with the question of whether to treat plaintiff's request for relief from the default judgment as an independent action or whether to treat it as a Rule 60(b) motion for relief. The Fifth Circuit has long held that "[w]here the adverse party is not prejudiced an independent action for relief may be treated as a 60(b) motion, and conversely, a 60(b) motion may be treated as the institution of an independent action." Bankers Mortgage Company v. United States, 423 F.2d 73, 77 n. 7 (5th Cir. 1970). Plaintiff explicitly references Rule 60 in her complaint, and the adverse party is not prejudiced by treating the complaint as a Rule 60(b) motion. Therefore, to the extent that the complaint seeks relief from the default judgment, the Court construes it as a Rule 60(b) motion.
Rule 60(b) provides:
On motion and upon such terms as are just, the court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence . . .; (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied . . .; or (6) any other reason justifying relief from the operation of the judgment.
FED. R. Civ. P. 60(b). There are eight factors that a court considers in exercising its discretion to grant relief pursuant to Rule 60(b): (1) that final judgments should not lightly be disturbed; (2) that relief under Rule 60(b) should not operate as a substitute for appeal; (3) that the rule should be liberally construed to achieve substantial justice; (4) whether the motion was filed within a reasonable amount of time; (5) that the interest in deciding cases on the merits outweighs, in the case of a default judgment, the interest in finality of judgments when there is merit in the movant's claim or defense; (6) whether, in the event that relief is sought from a trial on the merits, the movant had a fair opportunity to present his claim or defense; (7) whether there are any intervening equities that weigh against granting relief; and (8) any other factor relevant to the justice of the judgment under attack. Magness v. Russian Federation, 247 F.3d 609, 618-19 (5th Cir. 2001); United States v. Gould, 301 F.2d 353, 356 (5th Cir. 1962) (quoting 7 MOORE'S FEDERAL PRACTICE ¶ 60.19, at 237-39); Easley v. Pace Concerts, Inc., 1999 WL 649632, *2 (E.D.La. 1999). In determining whether there are sufficient grounds for setting aside a default judgment, district courts focus in particular on three issues: "(1) the extent of prejudice to the plaintiff; (2) the merits of the defendant's asserted defense; and (3) the culpability of [the] defendant's conduct." Rogers v. Hartford Life and Accident Insurance Company, 167 F.3d 933, 938-39 (5th Cir. 1999). The Fifth Circuit favors resolving cases on their merits and disfavors the use of default judgments. Id. at 936; see Seven Elves, Incorporated v. Eskenazi, 635 F.2d 396, 403 (5th Cir. 1981) (granting relief where an attorney promised his client that he would represent them and then withdrew from the case without notifying his client).
In applying these factors to this case, the Court concludes that Arrington is not entitled to Rule 60(b) relief. Arrington first asserts relief under Rule 60(b)(1) due to excusable neglect. The Court was unable to locate a case where, as here, a defendant was served with a complaint, did not make an appearance, and succeeded in setting aside a default judgment. To the contrary, the Fifth Circuit has held that a district court did not abuse its discretion when it refused to set aside a default judgment obtained when a defendant was notified of the lawsuit, waived service of process, and then failed to timely answer the complaint. Rogers, 167 F.3d at 939 (citing Baez v. S.S. Kresge Co., 518 F.2d 349 (5th Cir. 1975) and Gibbs v. Air Canada, 810 F.2d 1529 (11th Cir. 1987)).
Here, Judy Arrington was served with the complaint. She knew that she was a co-signatory on the note and mortgage on the yacht and that she had not been released from these obligations. Instead of making an appearance in court or answering the complaint, however, she chose to depend on her unreliable ex-husband to mount a defense to the action. In previous federal court litigation — the lawsuit regarding the same yacht that was filed in 2000 by the Bank of America — her ex-husband failed to answer the complaint until after a default judgment was entered against them.
The Court notes that if Eldridge Arrington answered the complaint in the second case solely on his own behalf, as he did in his belated answer in the first case, ( see 00-CIV-394), plaintiff still had an obligation to answer the complaint on pain of default.
Nevertheless, the Court is sympathetic to plaintiff's situation. By virtue of her status as a co-signatory on the vessel's mortgage, Judy Arrington is now on the hook for a yacht that was awarded to her ex-husband in divorce proceedings. In addition, the deficiency is considerable. But even if the Court found plaintiff's reliance on her admittedly untrustworthy ex-husband to be reasonable, the Court cannot grant relief because plaintiff has made no showing of a possibly meritorious defense.
To obtain Rule 60(b) relief, Arrington must "show the existence of a defense of sufficient merit to indicate the possibility that the outcome may differ upon retrial." Seven Elves, 635 F.2d at 403; see also Hibernia National Bank v. Administracion Central Sociedad Anonima, 776 F.2d 1277, 1280 (5th Cir. 1985). In this regard, Mrs. Arrington makes two claims. First, Arrington asserts that she was entitled to receive notice of the sale of the yacht. Rule 5 of the Federal Rules of Civil Procedure, however, expressly provides that "[n]o service need be made on parties in default for failure to appear" except for pleadings asserting new or additional claims. Second, she asserts that the mortgage was not assignable. The mortgage explicitly provides to the contrary: "This Mortgage may be assigned by [NationsBank] at any time without prior notice to you." (Def.'s Reply Memo. in Support of Mot. to Dismiss, Ex. 1, Mortgage, ¶ 31.) In response, Arrington cites to a commitment letter that signals approval of the loan and provides that "[t]he terms of this commitment may not be assigned or modified except in writing signed by you and the Bank." (Compl. ¶ 3.) As defendants point out, the commitment letter states only that the commitment letter is not assignable. The mortgage must be distinguished from the commitment letter; it stands on its own as a binding agreement and does not make reference to the commitment letter. Its terms, including the term providing for assignment, are unambiguous and cannot be impeached with parol evidence. The Court notes that plaintiff does not challenge the authenticity of the Note and Mortgage. Accordingly, the Court finds that plaintiff is not entitled to Rule 60(b)(1) relief because she has not made a showing of a possibly meritorious defense. Rogers, 167 F.3d at 939.
Because the Court treats plaintiff's complaint as a motion for relief under Rule 60(b), it is permitted to look beyond the pleadings to ascertain whether Arrington has a sufficiently meritorious claim or defense.
The Court further finds Arrington'5 assertions that defendants obtained the default judgment through fraud and misrepresentation to be wholly without merit. FED. R. CIV. P. 60(b)(3). To prevail on a Rule 60(b)(3) motion, a party "must establish by clear and convincing evidence (1) that the adverse party engaged in fraud or other misconduct and (2) that this misconduct prevented the moving party from fully and fairly presenting his case." Government Financial Services One Limited Partnership v. Peyton Place, Inc., 62 F.3d 767, 772 (5th Cir. 1995) (internal citations omitted). Given that the mortgage is assignable, defendants did not misrepresent facts or otherwise engage in fraud in asserting that the mortgage was assigned. Further, defendants' representation that the Note and Mortgage were conveyed on April 3, 2001 when they were actually conveyed on April 4, 2001 and notarized on May 8, 2001, is not material. Arrington has therefore made no showing that the default judgment was "unfairly obtained." Id.
B. Defendants' Motion to Dismiss and Motion for More Definite Statement
In addition to seeking relief pursuant to Rule 60, Arrington raises several new claims for relief in her complaint. Plaintiff seeks damages pursuant to the Federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, and the right of redemption of all litigious rights available under Louisiana law. Defendants move the Court to dismiss these claims under Rule 12(b)(6) and, in the alternative, move for a more definite statement under Rule 12(e).
In a motion to dismiss for failure to state a claim under Rule 12(b)(6), the Court must accept all well-pleaded facts as true and view the facts in the light most favorable to the plaintiff. See Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996); American Waste Pollution Control Co. v. Browning-Ferris, Inc., 949 F.2d 1384, 1386 (5th Cir. 1991). The Court must resolve doubts as to the sufficiency of the claim in plaintiff's favor. Vulcan Materials Company v. City of Tehuacana, 238 F.3d 382, 387 (5th Cir. 2001). Dismissal is warranted if it appears certain that the plaintiff cannot prove any set of facts in support of her claim that would entitle her to relief. Id.; Piotrowski v. City of Houston, 51 F.3d 512, 514 (5th Cir. 1995) (quoting Leffall v. Dallas Indep. Sch. Dist., 28 F.3d 521, 524 (5th Cir. 1994)).
A district court will grant a motion for a more definite statement pursuant to Rule 12(e) when the pleading at issue "is so vague or ambiguous that a party cannot reasonably be required to frame a responsive pleading." FED. R. Civ. P. 12(e). The motion must state the defects in the pleading and the details desired. See id. A party, however, may not use a Rule 12(e) motion as a substitute for discovery. Mitchell v. E-Z Way Towers, Inc., 269 F.2d 126, 132 (5th Cir. 1959). Given the liberal pleading standard set forth in Rule 8, Rule 12(e) motions are disfavored. See Mitchell, 269 F.2d at 132; Gibson v. Deep Delta Contractors, Inc., 2000 WL 28174, *6 (E.D.La. 2000). At the same time, the Supreme Court recently noted that "[i]f a pleading fails to specify the allegations in a manner that provides sufficient notice," then a Rule 12(e) motion may be appropriate. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 122 S.Ct. 992, 998 (2002).
As to the Federal Fair Debt Collection Practices Act claim, 15 U.S.C. § 1692, Arrington alleges that defendant RFC Property I engaged in "continuous attempts to collect a void judgment obtained herein against plaintiff based on false representations, incorrect documentation, and unfair and misleading means of collection embraced by the Act." (Compl. ¶ 12.) Defendants assert that plaintiff has failed to state a claim for relief because "she fails to identify how RFC violated the [Act] . . . ." (Def.'s Mot. to Dismiss, at 10.) The Court agrees that the complaint does not give defendants much to go on, especially given the Court's determination that the judgment was not void and that the mortgage is assignable. Nevertheless, the Court cannot conclude at this stage that plaintiff has no claim under the Act. Accordingly, the Court grants defendants' motion for a more definite statement of this claim, providing Arrington the opportunity to reassert this claim in light of this Order. She must do so within 15 days of the entry of this Order.
As to the claim for redemption of litigious rights, the complaint alleges that "[d]efendant Republic Credit Corporation I, on information and belief, simply purchased a litigious right to sue plaintiff and her ex-husband on May 8, 2001, within the meaning of Article 2652 of the Louisiana Civil Code . . . ." (Compl. ¶ 6.) Article 2652 provides that a right is litigious "when it is contested in a suit already filed." LA. Civ. CODE ANN. art. 2652 (West 2002). The complaint does not indicate that a lawsuit was pending on May 8, 2001. To the contrary, the complaint indicates that Republic Credit filed a complaint on June 20, 2001. (Compl. ¶ 7.) Accordingly, even taking plaintiff's allegations as true, the Court finds that plaintiff fails to state a claim under Article 2652 pertaining to a sale of litigious rights on May 8, 2001.
The Complaint also alleges that a second sale of litigious rights took place. Arrington alleges that Republic Credit sold its interest in this matter to RFC Property I "following the default deficiency judgment." (Compl. ¶ 12.) Once final judgment has been entered a right is no longer litigious within the meaning of Article 2652. Calderera v. O'Carroll, 551 SO.2d 824, 826-27 (La.Ct.App. 1989); Hawthorne v. Humble Oil Refining Company, 210 So.2d 110, 112 (La.Ct.App. 1968). Accordingly, again taking plaintiff's allegations as true, the Court finds that Arrington fails to state a claim under Article 2652 pertaining to a sale of litigious rights by Republic Credit to RFC Property I.
III. Conclusion
For the foregoing reasons, the Court finds that plaintiff is not entitled to relief pursuant to Rule 60(b). In addition, the Court grants defendants' 12(b)(6) motion to dismiss plaintiff's claims under LA. Civ. CODE ANN. art. 2652, and the Court grants defendants' motion for a more definite statement of plaintiff's claims under the Federal Fair Debt Collection Practices Act. Plaintiff must file this statement within 15 days of the entry of this Order.