de la Cruz v. Aegis Wholesale Corporation et al

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
SANDRA F. DE LA CRUZ, 	No. 08-12081
Debtor(s).
______________________________________/
SANDRA F. DE LA CRUZ,
Plaintiff(s),
v. 	A.P. No. 09-1153
AEGIS WHOLESALE CORPORATION, et al.,
Defendant(s).
_______________________________________/
Memorandum on Motion to Amend Judgment
_________________
Debtor and plaintiff Sandra De la Cruz owns a residence at 990 Central Avenue, Napa,
California. She scheduled creditor Aurora Loan Services as holding a note secured by a first deed of
trust in this property and Aegis Wholesale Corporation as holding a second deed of trust. She alleges
that the value of the property is less than the amount owed to Aurora. She brought this adversary
proceeding seeking to “strip off” the Aegis lien and reduce the amount she owes to Aurora to the value
of the property.
Aegis and defendant Mortgage Electronic Registration Systems, Inc., (“MERS”) were properly
served and failed to answer. Judgment has been entered against them by default. Aurora filed a proof
of claim for the amount owed on its note and filed a timely answer in the adversary proceeding,
Entered on Docket
June 04, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 09-01153 Doc# 37 Filed: 06/03/10 Entered: 06/04/10 12:59:50 Page 1 of 2

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alleging that its lien is not subject to modification or reduction pursuant to § 1322(b)(2) of the
Bankruptcy Code.
Citing “Rule 9023(e) of the Federal Rules of Bankruptcy Procedure,” which the court can’t
seem to find, the debtor has made a motion to amend the default judgment to include Aurora. Her
argument is that Aurora has represented in discovery that it is merely the agent for MERS. Since
MERS has lost and since it and Aurora are “in privity,” the judgment should be made applicable to
Aurora also.
The dispute before the court has been very poorly briefed by both sides, but the essential issue
(not correctly identified by either party) is whether or not the principle of claims preclusion bars one
defendant from defending an action where a default judgment has been entered in the same action
against a co-defendant with whom it is in privity. The short answer in this case is “no,” because the
judgment is not final. Rule 54(b) of the Federal Rules of Civil Procedure, made applicable to
bankruptcy adversary proceedings by Rule 7054(a) of the Federal Rules of Bankruptcy Procedure,
provides that where, as here, the court has made no express determination that there is no just reason
for delay, any order or other decision that adjudicates the rights and liabilities of fewer than all the
parties does not end the action as to any of the claims or parties and may be revised at any time before
the entry of a judgment adjudicating all of the claims and all the parties’ rights and liabilities. 	See
Robi v. Five Platters, Inc., 838 F.2d 318, 321-22 (9th Cir.1988); AVX Corp. v. Cabot Corp., 424 F.3d
28, 31 (1st Cir. 2005).
For the foregoing reasons, the motion to amend the judgment will be denied. The court will
hear and decide this case on the merits, revising the default judgments as necessary to effect justice.
Counsel for Aurora shall submit an appropriate form of order.
Dated: June 3, 2010
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 09-01153 Doc# 37 Filed: 06/03/10 Entered: 06/04/10 12:59:50 Page 2 of 2