United States District Court, D. New Mexico
PROPOSED FINDINGS AND RECOMMENDED
matter comes before me on Plaintiff's Motion for Default
Judgment. Doc. 16. United States District Court Judge Martha
Vazquez referred this Motion to me on January 25, 2018. Doc.
19. In the Motion, Plaintiff seeks default judgment against
Defendant R3F General Contractors, LLC, due to its failure to
appear or otherwise defend the present suit. Doc. 16. As a
result of Defendant R3F's failure to appear or otherwise
defend, Plaintiff seeks damages in the amount of $284, 208.38
in addition to statutory and post-judgment interest. Doc. 16
at 4. Based on my review of the pleadings, the relevant law,
and the record in this case, I recommend DENYING
Plaintiff's Motion without prejudice.
brought suit against Defendant R3F and Defendants Ruben and
Maria Acosta (Acosta Defendants) to recover losses it
allegedly suffered due to Defendants' failure to perform
its obligations pursuant to a construction contract with West
Las Vegas Schools (WLVS). Plaintiff's Complaint,
Doc. 1 at ¶ 6. Plaintiff alleges that once Defendants
abandoned the construction project, WLVS demanded that
Plaintiff, as surety of the performance and payment bonds,
undertake and perform Defendant R3F's obligations under
the contract. Doc. 1 at ¶ 9. Plaintiff ultimately
entered into a written agreement with WLVS whereby Plaintiff
paid WLVS the principal sum of $240, 100.84 in order to
satisfy Defendant R3F's remaining obligations under the
construction contract and thereby release Plaintiff under the
performance bond. Doc. 1 at ¶ 10.
and Defendants entered into an indemnity agreement prior to
Plaintiff's issuance of the bonds. Doc. 16-2. Defendant
Ruben Acosta signed the agreement on behalf of Defendant R3F.
Doc. 16-2. The Acosta Defendants also signed the agreement in
their individual capacities. Doc. 16-2. Pursuant to the
agreement, Defendants, as indemnitors, promised, among other
things, to exonerate and indemnify Plaintiff from all loss
costs, expenses and attorneys' fees suffered in
connection with any bonds issued by Plaintiff on behalf of
Defendants. Doc. 1 at ¶ 11. Consistent with the
indemnity agreement, Plaintiff alleges that it made a written
demand against Defendants after they defaulted on the
construction contract but that Defendants rejected the
demand. Doc. 1 at ¶ 18. Plaintiff alleges that, to date,
Defendants have not honored their obligations to indemnify,
or provide collateral or otherwise exonerate Plaintiff
pursuant to their obligations under the indemnity agreement.
Doc. 1 at ¶ 20.
filed suit on June 13, 2017. Doc. 1. Plaintiff brought claims
against Defendants for Reimbursement (Count I), Exoneration
(Count II), Breach of Indemnity Agreement (Count III), and
Specific Performance and Quia Timet (Count IV). Doc. 1. In
the Complaint, Plaintiff alleges that Defendants are
“jointly and severally” liable. Doc. 1 at ¶
filed a certificate of service in regard to Defendant R3F on
June 29, 2017. Doc. 5. Plaintiff's certificate of service
indicates that Plaintiff served Defendant R3F by leaving a
copy of the summons and Complaint with Defendant R3F's
statutory agent, Defendant Ruben Acosta on June 14, 2017.
Doc. 5. No counsel has entered an appearance on behalf of
Defendant R3F, nor has a responsive pleading been filed on
its behalf. Defendants Ruben and Maria Acosta, however, did
enter appearances in the case pro se. It appears from the
docket that the Acosta Defendants sent their answers directly
to Plaintiff, who then filed them on the docket on June 29,
2017. Docs. 8, 9. The Acosta Defendants later filed amended
answers on February 9, 2018. Docs. 21, 22. On August 3, 2017,
the Acosta Defendants filed a suggestion of bankruptcy on the
docket indicating that they had initiated Chapter 7
bankruptcy proceedings. Doc. 12.
Defendant R3F's failure to appear, Plaintiff moved for a
clerk's entry of default against it on August 24, 2017.
Doc. 13. The clerk's entry of default was entered on
August 25, 2017. Doc. 14. Plaintiff subsequently filed the
instant Motion for default judgment on January 5, 2018. Doc.
STANDARD OF REVIEW
judgments are a harsh sanction.” Ruplinger v.
Rains, 946 F.2d 731, 732 (10th Cir. 1991). The decision
to enter default judgment is “committed to the district
court's sound discretion.” Olcott v. Del. Flood
Co., 327 F.3d 1115, 1124 (10th Cir. 2003) (internal
quotation marks and citation omitted). In exercising that
discretion, the court must consider that “[s]trong
policies favor resolution of disputes on their merits”
and that “default judgment must normally be viewed as
available only when the adversary process has been halted
because of an essentially unresponsive party.”
Rains, 946 F.2d at 732 (internal quotation marks and
citation omitted). In such circumstances, default judgment
serves to protect a litigant from “interminable delay
and continued uncertainty as to his rights.”
Id. at 732-733 (internal quotation marks omitted).
Rule of Civil Procedure 55 sets out a two-step process for a
default judgment. First, a party must obtain a Clerk's
entry of default. See Fed.R.Civ.P. 55(a)
(“When a party against whom a judgment for affirmative
relief is sought has failed to plead or otherwise defend, and
that failure is shown by affidavit or otherwise, the clerk
must enter the party's default.”); Watkins v.
Donnelly, 551 Fed. App'x 953, 958 (10th Cir. 2014)
(unpublished) (“Entry of default by the clerk is a
necessary prerequisite that must be performed before a
district court is permitted to issue a default
judgment.”). Second, the party must either request the
clerk to enter default judgment when the claim is for
“a sum certain or a sum that can be made certain by
computation, ” Fed.R.Civ.P. 55(b)(1), or, “[i]n
all other cases, the party must apply to the court for
default judgment.” Fed.R.Civ.P. 55(b)(2).
following reasons, I recommend that default judgment not be
entered against Defendant R3F at this time. The Tenth Circuit
follows the rule set out in Frow v. DeLaVega, 82
U.S. 552 (1872), which holds that default judgment should not
be against one defendant in multi-defendant cases when it is
alleged that the defendants are jointly liable “until
the matter has been adjudicated with regard to all
defendants, or all defendants have defaulted.” See
Hunt v. Inter-Globe Energy, Inc., 770 F.2d 145, 147
(10th Cir. 1985) (citing 10 C. Wright, A. Miller & M.
Kane, Federal Practice and Procedure § 2690, at
455-56 (1983)). The Tenth Circuit has concluded that this
rule also applies where the defendants are alleged to be
jointly and severally liable, as well as where they
“have closely related defenses.” Wilcox v.
Raintree Inns of America, Inc., 76 F.3d 394, 1996 WL
48857, *3 (Feb. 2, 1996) (unpublished). The “key aim of
the rule is the avoidance of inconsistent judgments.”
Id. Under such circumstances, the “proper
procedure is to enter default but not enter judgment against
the defaulter unless the plaintiff prevails against the
appearing defendants[.]” Applied Capital, Inc. v.
Gibson, 05-98 JB/ACT, 2007 WL 5689322, * 9 (D.N.M. Sept.
27, 2007) (unpublished); Amazon, Inc. v. Dirt Camp,
Inc., 273 F.3d 1271, 1274 n. 1 (10th Cir. 2001).
noted above, Plaintiff requests “judgment against
Defendants R3F General Contractors, LLC, and Rubin Acosta and
Maria Acosta…jointly and severally.” Doc. 1 at
7. Further, as Defendants are all indemnitors under the
indemnity agreement underlying Plaintiff's right to
relief, it is apparent that Defendants “have closely
related defenses.” Wilcox, 1996 WL 48857, at
*3. While Defendant R3F has not entered an appearance or
otherwise chosen to defend this lawsuit, the Acosta
Defendants entered appearances and filed responsive
pleadings. Accordingly, pursuant to the Frow rule,
default judgment would be improper at this time.
Additionally, because the Acosta Defendants have initiated
bankruptcy proceedings, this is not a case in which Defendant
R3F's failure to defend has unduly halted the adversary
process. 11 U.S.C. 362(a) (providing for an automatic stay
upon the initiation of bankruptcy proceedings);
Rains, 946 F.2d at 732 (stating that “default
judgment must normally be viewed as available only when the
adversary process has been halted because of an essentially
unresponsive party.”). For these reasons, I recommend
that the Court deny Plaintiff's Motion without prejudice
at this time with leave to re-file once this matter has been
adjudicated as to all Defendants.
said, I further briefly address an issue raised by United
States District Judge James Parker in a similar context. In
Tilga v. United States, Judge Parker recognized that
“at least one Circuit Court has found it ‘most
unlikely' that the Frow rule survived the
promulgation of [Fed.R.Civ.P.] 54(b).” Civ. No. 14-256
JAP/RHS, 2015 WL 13667048, *4 (D.N.M. Jan. 2, 2015) (citing
Int'l Controls Corp. v. Vesco, 535 F.2d 742m 746
n.4 (2d Cir. 1976)). As an initial matter, the default
judgment in Tilga did not involve jointly liable
defendants. Id. at 4. Regardless, the case cited by
Judge Parker is from the Second Circuit and the Tenth Circuit
has not articulated any such reservations regarding
Frow. Thus, district courts in New Mexico continue
to apply the Frow rule in appropriate circumstances.
See Mays v. Court Services, Inc., Civ. No. 09-662
KG/KBM, 2014 WL 12789019, *2 (D.N.M. Aug. 19, 2014) (applying
Frow rule and declining to enter default judgment
against non-responding jointly liable ...