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U.S. Bank Trust, N.A. v. Monroe

United States District Court, N.D. New York

March 8, 2017

U.S. BANK TRUST, N.A., as Trustee for LSF9 Master Participation Trust, Plaintiff,
v.
OWEN MONROE, individually and as surviving spouse of Phyllis Monroe, Defendant.

          MEMORANDUM-DECISION AND ORDER

          LAWRENCE E. KAHN, U.S. DISTRICT JUDGE

         I. INTRODUCTION

         Presently before the Court is plaintiff U.S. Bank Trust, N.A.'s motion for default judgment, seeking the foreclosure and sale of real property owned by defendant Owen Monroe. Dkt. No. 12 (“Motion”); see also Dkt. No. 13 (“Attorney Affidavit”). For the following reasons, U.S. Bank's Motion is denied and the complaint is dismissed for lack of subject matter jurisdiction.

         II. BACKGROUND

         On December 14, 2015, U.S. Bank-through its attorneys, Gross Polowy, LLC-filed its complaint in this action, alleging nonpayment of a mortgage by Monroe. Dkt. No. 1 (“Complaint”) ¶ 11. U.S. Bank seeks a judgment for the outstanding amount under the loan, along with the foreclosure and sale of Monroe's property to satisfy this debt. Id. ¶¶ 1, 11-13.

         U.S. Bank asserts subject matter jurisdiction based on diversity of citizenship, claiming that it is a citizen of Delaware while Monroe is a citizen of New York. Id. ¶¶ 2-3, 6. In support of its own citizenship, U.S. Bank alleges that it “is a national association with its principal place of business [in] . . . Wilmington, DE.” Id. ¶ 2. U.S. Bank brings this case on behalf of the LSF9 Master Participation Trust, for which it serves as trustee. Id. ¶ 10; see also id. ¶ 2 (“Plaintiff is the owner and holder of the subject Note and Mortgage or has been delegated authority to institute this Mortgage foreclosure action by the owner and holder of the subject Note and Mortgage.”); id. Schedule A (noting assignment to the LSF9 Master Participation Trust, and then to U.S. Bank as its trustee, in endorsements to the note). The Complaint does not contain any details concerning U.S. Bank's role as trustee or the powers it has over the trust property (including the mortgage here).

         Monroe failed to appear in this action, and on February 2, 2016, the Clerk of the Court noted his default. Dkt. No. 8. On March 17, 2016, U.S. Bank moved for default judgment. Mot. The Motion was supported by an Attorney Affidavit, which included a copy of the Complaint, a proposed judgment, the entry of default, calculations of damages and fees, and sworn statements attesting that Monroe was properly served but nonetheless failed to appear. Attorney Aff. ¶¶ 3, 7, 9; Dkt. Nos. 13-1 to -9.[1] This affidavit did not include sworn statements that Monroe is not an infant or otherwise incompetent, that he is not in the military service, that the amount sought “is justly due and owing, ” “that no part has been paid, ” and that the “disbursements sought to be taxed” either have been or necessarily will be made. L.R. 55.2(a).[2]

         III. LEGAL STANDARD

         A. Subject Matter Jurisdiction

         A fundamental predicate to judgment in the federal courts is the existence of subject matter jurisdiction. “Dismissal of a case for lack of subject matter jurisdiction . . . is proper ‘when the district court lacks the statutory or constitutional power to adjudicate it.'” Ford v. D.C. 37 Union Local 1549, 579 F.3d 187, 188 (2d Cir. 2009) (per curiam) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)). A lack of subject matter jurisdiction cannot be waived, and may be raised by motion or sua sponte at any time. E.g., Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 107 (2d Cir. 1997); see also Fed.R.Civ.P. 12(h)(3) (“If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.”). The party asserting subject matter jurisdiction carries the burden of proving its existence by a preponderance of the evidence. E.g., Makarova, 201 F.3d at 113; Augienello v. FDIC, 310 F.Supp.2d 582, 587-88 (S.D.N.Y. 2004). This is true even on a motion for default judgment, since the principle that a default deems the well-pleaded allegations of the complaint to be admitted is inapplicable when a court doubts the existence of subject matter jurisdiction. Transatlantic Marine, 109 F.3d at 108.

         B. Default Judgment

         “Federal Rule of Civil Procedure 55 provides a two-step process that the Court must follow before it may enter a default judgment against a defendant.” Elec. Creations Corp. v. Gigahertz, Inc., No. 12-CV-1423, 2013 WL 3229125, at *3 (N.D.N.Y. June 25, 2013) (quoting Robertson v. Doe, No. 05-CV-7046, 2008 WL 2519894, at *3 (S.D.N.Y. June 19, 2008)). “First, under Rule 55(a), when a party fails to ‘plead or otherwise defend . . . the clerk must enter the party's default.'” Id. (alteration in original) (quoting Robertson, 2008 WL 2519894, at *3). Second, under Federal Rule of Civil Procedure 55(b)(2), “the party seeking default judgment is required to present its application for entry of judgment to the court.” Id. (quoting Robertson, 2008 WL 2519894, at *3).

         “When a default is entered, the defendant is deemed to have admitted all of the well-pleaded factual allegations in the complaint pertaining to liability.” Bravado Int'l Grp. Merch. Servs., Inc. v. Ninna, Inc., 655 F.Supp.2d 177, 188 (E.D.N.Y. 2009) (citing Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992)). “While a default judgment constitutes an admission of liability, the quantum of damages remains to be established by proof unless the amount is liquidated or susceptible of mathematical computation.” Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974); accord, e.g., Bravado Int'l, 655 F.Supp.2d at 190. “[E]ven upon default, a court may not rubber-stamp the non-defaulting party's damages calculation, but rather must ensure that there is a basis for the damages that are sought.” United States v. Hill, No. 12-CV-1413, 2013 WL 474535, at *1 (N.D.N.Y. Feb. 7, 2013) (alteration in original) (quoting Overcash v. United Abstract Grp., Inc., 549 F.Supp.2d 193, 196 (N.D.N.Y. 2008)). “The burden is on the plaintiff to establish its entitlement to recovery.” Bravado Int'l, 655 F.Supp.2d at 189. “While ‘the court must ensure that there is a basis for the damages specified in a default judgment, it may, but need not, make the determination through a hearing.'” Id. at 190 (quoting Fustok v. Conticommodity Servs., Inc., 122 F.R.D. 151, 156 (S.D.N.Y. 1988)).

         Under Local Rule 55.2(b), the moving party must submit with its motion for default judgment: (1) a clerk's certificate of entry of default, (2) a proposed form of default judgment, (3) a copy of the pleading to which no response has been made, and (4) an affidavit. L.R. 55.2(b). The affidavit must set forth that: (1) the party against whom judgment is sought is not an infant, incompetent, or in military service; (2) the party against whom judgment is sought “has defaulted in appearance in the action”; (3) service was properly effected under Federal Rule of Civil Procedure 4; (4) the amount sought “is justly due and owing, ...


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