United States District Court, E.D. Pennsylvania
LAWRENCE F. STENGEL, District Judge.
The United States of America, on behalf of the Rural Housing Service of the U.S. Department of Agriculture, brought this action against Richard L. Brown, Jr. requesting foreclosure of the defendant's real property due to his mortgage being in default. The plaintiff filed a motion for default judgment pursuant to Rule 55 of the Federal Rules of Civil Procedure. For the foregoing reasons, I will deny this motion.
This is a mortgage foreclosure case in which the plaintiff, through the Rural Housing Service (RHS) of the U.S. Department of Agriculture, loaned the defendant $189, 900.00 pursuant to Title V of the Housing Act of 1949, 42 U.S.C. §§ 1471-1490t. This court has jurisdiction over cases involving foreclosures of mortgages issued pursuant to the National Housing Act. On October 24, 2013, the plaintiff requested the Clerk of Court enter a default against the defendant pursuant to the Federal Rules of Civil Procedure for failing to appear, plead, or otherwise defend. On October 24, 2013, the Clerk of Court entered such a default. On October 24, 2013, the plaintiff filed a motion for default judgment pursuant to Rule 55 of the Federal Rules of Civil Procedure. On December 18, 2013, I denied the plaintiff's motion for default judgment without prejudice, due to deficiencies in the motion. On January 9, 2014, the plaintiff filed a second motion for default judgment.
II. STANDARD OF REVIEW
Federal Rule of Civil Procedure 55(b)(2) provides that a district court may enter default judgment against a party when default has been entered by the Clerk of Court. FED. R. CIV. P. 55(b)(2). Entry of a default judgment is within the court's discretion and is not automatic in the instance of "a defendant's failure to respond to the complaint." D'Onofrio v. Il Mattino , 430 F.Supp.2d 431, 437 (E.D. Pa. 2006) (citing Mwani v. bin Laden , 417 F.3d 1, 6 (D.C. Cir. 2005); Hritz v. Woma Corp. , 732 F.2d 1178, 1180 (3d Cir. 1984)). Judgment by default is generally disfavored in the interest of deciding a case on its merits. Budget Blinds, Inc. v. White , 536 F.3d 244, 258 (3d Cir. 2008); United States v. $55, 518.05 in U.S. Currency, 728 F.2d 192, 194-95 (3d Cir. 1984).
I denied the plaintiff's first motion for default judgment for several reasons, allowing the plaintiff to resubmit the motion to cure the deficiencies noted. I will address each deficiency in turn.
a. Proof of Notice
First, the plaintiff failed to show proof of notice of intent to foreclose. The Administrative Procedures Act (APA) applies to the decision to foreclose, as foreclosure by a federal agency under the National Housing Act is typically treated as an administrative decision. The APA requires that the agency provide the defendant with adequate notice of his opportunity to be heard before making an adjudicative decision, which in this case would be the decision to foreclose. My concern was that the defendant did not receive adequate notice of his rights. As the plaintiff recognizes, this is important and necessary to the foreclosure process.
In this motion, the plaintiff provided proof of the requisite notice. On June 27, 2012, the plaintiff sent the defendant notice of the acceleration of the mortgage, demand for payment of that debt, notice of right to cure, notice of intent to foreclose, and notice of the opportunity for a hearing concerning the foreclosure. It stated that "the entire indebtedness due on the promissory note(s)... is now declared immediately due and payable, " and, without payment, foreclosure would take place. There was a thirty day period in which the defendant could cure. The document included information on the defendant's right to a discussion with a RHS official and his right to an administrative appeal hearing.
Also included was an appeals rights attachment, outlining the different options defendant had, including: 1) reconsideration; 2) mediation; and 3) requesting an appeal. The notice was delivered by certified mail on July 3, 2012, and signed for by Suzanne M. Brown, as indicated by the return receipt. Suzanne M. Brown is the spouse of the defendant who resides with him at the mortgaged property, as indicated by the Rural Housing Service Payment Subsidy Renewal Certification dated August 23, 2011. Service of the Complaint and Summons was made upon Suzanne Brown on September 18, 2013, as shown by the Return of Service filed with the court. This documentation cures the deficiency present in the first motion. The defendant received adequate notice of his rights, and the plaintiff showed proof of notice of intent to foreclose.
b. Calculation of Damages
A second deficiency in the first motion was the plaintiff's failure to provide supporting documentation for its calculation of fees and costs which would allow the court to determine with "reasonable certainty" that the amount of late charges, attorney's fees, and the like were appropriate. While default judgment establishes that the defaulting party is liable for the allegations in the complaint, it does not establish the amount of damages owed by the defendant. Bricklayers & Allied Craftworkers v. WaterControl Servs., Inc., C.A. No. 09-3935, 2012 WL 3104437, at *7 (E.D.Pa. July 30, 2012). "The district court must instead conduct an inquiry in ...