Magnusson v. Ocwen Loan Servicing
2:14-cv-00161
D. Utah
Jun 20, 2014

Background

  • Sharon Magnusson executed a $417,000 promissory note in 2007 secured by a deed of trust on Bluffdale, Utah property. Servicing transferred from Taylor, Bean & Whitaker to Cenlar in Aug. 2009, then to Ocwen and later Nationstar. Freddie Mac purchased the property at a foreclosure sale in April 2012.
  • Magnusson alleges communication failures with Cenlar and others while seeking loan modification, was told to make a double December payment to cover a missed May 2010 payment, fell behind, and later pursued modification efforts (including trial-period payments).
  • Procedural posture: pro se complaint (Mar. 5, 2014) asserting declaratory judgment (against Ocwen, Nationstar, Cenlar), breach of contract (against Ocwen), and breach of the covenant of good faith and fair dealing (against Ocwen and Nationstar). Pending motions: Magnusson’s motion for default judgment against Ocwen and Cenlar’s Rule 12(b)(6) motion to dismiss.
  • Ocwen was served March 6, 2014, did not file until April 4, 2014; Magnusson moved for default judgment based on the late answer.
  • Cenlar moved to dismiss Magnusson’s declaratory judgment claim, arguing Cenlar only serviced the loan from Aug. 12, 2009 to Feb. 15, 2011 and later events concern other servicers.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether default judgment should be entered against Ocwen for late answer Ocwen failed to appear, plead, or defend within time; default judgment is warranted Ocwen filed an answer before default was entered; delay due to late retention of counsel and loan transfer complications Denied — default disfavored where defendant filed an untimely answer before entry of default; case to be decided on merits
Whether Magnusson stated a claim for declaratory judgment against Cenlar Magnusson seeks a declaration about the loan status and alleges Cenlar committed fraud by requesting a double payment Cenlar argues it no longer serviced the loan after Feb. 15, 2011 and subsequent claims concern other servicers; declaratory relief not appropriate for past acts Granted dismissal without prejudice — Magnusson failed to allege a justiciable, adverse, ripe controversy or legally protectible interest against Cenlar
Whether pro se status excuses pleading deficiencies Pro se plaintiff implicitly requests leniency and opportunity to amend Court: pro se litigants are not excused from meeting pleading standards and cannot have the court construct claims or supply facts Court declined to rewrite the complaint; dismissal without prejudice to permit proper pleading if facts support it
Appropriateness of declaratory relief for past conduct Magnusson uses declaratory relief to address alleged past misconduct by Cenlar Cenlar and authority: declaratory judgment is prospective and not a remedy for prior actions Declaratory relief denied as to Cenlar because relief sought relates to past conduct and no present adverse interest was alleged

Key Cases Cited

  • In re Rains, 946 F.2d 731 (10th Cir.) (default judgment appropriate only when adversary process halted by an unresponsive party)
  • H.F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 989 (D.C. Cir.) (policy favoring resolution on merits over default judgment)
  • Polaski v. Colorado Dept. of Transp., [citation="198 F. App'x 684"] (10th Cir.) (default judgment disfavored)
  • Colorado Comp. Ins. Auth. v. Raycomm Transworld Indus. Inc., 940 P.2d 1000 (Colo. App. 1996) (late answer filed before entry of default precluded default judgment)
  • Fibreboard Paper Prods. Corp. v. Dietrich, 475 P.2d 1005 (Utah 1970) (answer filed before default entry defeats default judgment)
  • Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (Sup. Ct.) (complaint must contain more than labels and conclusions)
  • Sutton v. Utah State Sch. for the Deaf & Blind, 173 F.3d 1226 (10th Cir.) (12(b)(6) standard explained)
  • Tal v. Hogan, 453 F.3d 1244 (10th Cir.) (court need not accept conclusory allegations)
  • GFF Corp. v. Associated Wholesale Grocers, Inc., 130 F.3d 1381 (10th Cir.) (well-pleaded facts accepted as true at motion to dismiss)
  • Hall v. Bellmon, 935 F.2d 1106 (10th Cir.) (court not obligated to act as advocate for pro se litigants)
  • Dunn v. White, 880 F.2d 1188 (10th Cir.) (court will not construct a legal theory or supply facts for pro se plaintiff)
  • SBA Commc’n, Inc. v. Zoning Comm’n of Town of Brookfield, 96 F. Supp. 2d 139 (D. Conn. 2000) (declaratory relief is prospective, not a remedy for past conduct)
  • Jensen v. Quality Loan Serv. Corp., 702 F. Supp. 2d 1183 (E.D. Cal. 2010) (declaratory relief inappropriate to remedy past servicing conduct)
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