United States District Court, D. Hawaii
ORDER ADOPTING FINDINGS & RECOMMENDATION TO DENY
MOTION FOR DEFAULT JUDGMENT AND TO SET ASIDE ENTRY OF DEFAULT
AS TO BOTH DEFENDANTS.
Derrick K. Watson, United States District Judge
11, 2017, Magistrate Judge Richard L. Puglisi entered his
Findings and Recommendation (“F&R”) to deny
the Motion for Entry of Default Judgment, filed by Plaintiff
American Contractors Indemnity Company (“AmCon”)
on June 16, 2017. AmCon filed Objections to the F&R on
July 18, 2017 (ECF No. 27) arguing, among other things, that
default judgment against Defendants is appropriate due to
their failure to timely respond to service of the pleadings
and because of Frank M. Fernandez's alleged
misrepresentations to the Court.
explained below, the Court ADOPTS the F&R (ECF No. 23),
DENIES AmCon's Motion for Default Judgment (ECF No. 16),
and sets aside the Entry of Default (ECF No. 14) as to both
Background Plaintiff AmCon, “a licensed surety
company in the State of Hawaii, ” seeks monetary
damages and other remedies for Defendants' alleged
failure to honor indemnification and guarantee provisions of
three related contracts (see ECF Nos. 1-1, 1-2,
1-3). Compl. ¶ 2, ECF No. 1.
first-a December 13, 2004 “Executing Agent's
Contract” (the “2004 Contract”)-AmCon
authorized Defendant Frank M. Fernandez (“Frank”)
to serve as its “agent . . . for the soliciting and
writing of Bail bonds” in the City and County of
Honolulu. See 2004 Contract, ECF No. 1-1. Under the
2004 Contract, Frank was required to perform certain duties
with respect to the appearance of persons bonded in court and
agreed to indemnify AmCon from any and all “liability,
loss, costs, damages, claims, suits, attorneys' fees, and
expenses of whatever kind” arising out of bonds
executed under the agreement. See Compl.
¶¶ 12-15. Defendant Janis H. Fernandez
(“Janis”) guaranteed Frank's obligations
under the 2004 Contract, and pursuant to that guaranty,
Defendants “agreed that all of their property, whether
real, personal, community or mixed, shall be subject to and
bound by the 2004 Contract.” Compl. ¶¶ 10-11;
see 2004 Contract at 2.
second contract-an April 19, 2007 “Executing
Agent's Contract” between AmCon and Janis (the
“2007 Contract”)-AmCon authorized Janis to serve
as its “agent” in the City and County of Honolulu
“for the soliciting and writing of Bail bonds.”
Compl. ¶¶ 16-18; see 2007 Contract, ECF
No. 1-2. As the 2004 Contract had required of Frank, the 2007
Contract required Janis to perform certain duties, to
indemnify AmCon from certain liabilities and expenses, and to
pay AmCon all sums due under the bonds subject to the
agreement. See Compl. ¶¶ 21-24. And as
Janis had done with respect to Frank's 2004 Contract,
Frank executed a guaranty of Janis's obligations to AmCon
in consideration of AmCon's agreement with Janis.
See 2007 Contract at 2; Compl. ¶ 19.
Frank, and Michael Panzo executed the third contract-a
January 9, 2008 “Bail Bond Division Sub-Agents
Contract” (the “2008 Contract”)-“for
the purpose of: constituting [Frank] as the General Agent for
the writing of bail bonds in the State of Hawaii; and
appointing Mr. Panzo as the Executing Agent for [AmCon] for
the soliciting and writing of Bail Bonds in the State of
Hawaii.” Compl. ¶ 26; see 2008 Contract,
ECF No. 1-3. On the same date, Frank executed a guaranty of
Mr. Panzo's obligations to AmCon, by which he
“unconditionally guaranteed and agreed to be bound to
[AmCon] for the full and complete payment and performance by
Mr. Panzo of all the provisions, conditions, covenants, and
agreements contained in the 2008 Contract.” Compl.
February 28, 2017, AmCon filed a Complaint against Defendants
for allegedly breaching the terms of the 2004 Contract, the
2007 Contract, and the 2008 Contract. Compl., ECF No. 1.
to the Complaint, AmCon “has performed all of its
obligation under the terms” of the three contracts in
question. Compl. ¶ 33. AmCon also asserts that
“Defendants and Mr. Panzo have written bail bonds with
[AmCon] as surety” under the three contracts, and
“[s]everal” of these bail bonds “have
resulted in unpaid forfeitures and/or judgment.” Compl.
¶¶ 34-35. Moreover, AmCon claims that
“Defendants and Mr. Panzo have also issued bail bonds
that were not reported” to it; and AmCon represents
that although it “has made several demands to
Defendants and Mr. Panzo for the indemnification of the
reported bail bonds and the unpaid forfeitures and/or
judgments, ” no payment or indemnification has been
made. Compl. ¶¶ 37-39. For its grievances, AmCon
requests at least $326, 870.67 in damages, among other
remedies. Compl. ¶ 41.
represents that upon filing the Complaint on February 28,
2017, it “caused copies of the Complaint, Summons,
Notice to Parties Regarding Service Pursuant to Rule 4 of the
Federal Rules of Civil Procedure, Notice of a Lawsuit and
Request To Waive Service of a Summons and an (unexecuted)
Waiver of the Service of Summons, together with
self-addressed stamped envelopes[, ] to be mailed” to
Defendants' known address. See Mem. in Supp. of
Mot. for Default J., ECF No. 16-1 [hereinafter DJ Mem.];
see also Civil Waiver of Serv. Packet, ECF No. 8.
When an executed Waiver of Service of Summons was not
returned, AmCon “retained the services of a process
server, Neal F. Yoro, to effect service” on Defendants.
DJ Mem. at 6; see Yoro Decl., ECF No. 22-1.
AmCon's proofs of service were filed on April 24, 2017
(ECF Nos. 11, 12) and indicate that Yoro served Frank
(personally) and Janis (through Frank) on April 1,
failed to receive any response from Defendants within 21 days
of service, AmCon filed its “[Request] for Entry of
Default Against [Defendants]” (ECF No. 13) on May 2,
2017. See Fed. R. Civ. P. 12(a)(1). The Clerk of
Court entered default the next day. Entry of Default, ECF No.
14. According to counsel for AmCon (Scott I. Batterman),
Frank called Mr. Batterman two weeks after default was
entered-on May 16-and claimed to be in the process of
retaining an attorney in order to defend the action.
See Decl. of Counsel ¶¶ 5-6, ECF No. 22-2
[hereinafter Batterman Decl.]). According to Frank and Janis,
however, Frank called and spoke to Mr. Batterman in order to
inform him that neither defendant had been properly served;
and although Mr. Batterman stated that he would return
Frank's call, he failed to do so. See Decl. of
Frank M. Fernandez ¶¶ 3-8, 11, ECF No. 18-1
[hereinafter Frank Decl. I]; Decl. of Janis H. Fernandez
¶¶ 3-8, 11, 15, ECF No. 21-1 [hereinafter Janis
16, 2017, AmCon filed the Motion for Entry of Default
Judgment (“DJ Mot.” or “DJ Motion”;
ECF No. 16) against Frank and Janis and mailed hard copies of
the motion to Defendants' residence. See
Batterman Decl. ¶ 8. In the DJ Motion, AmCon asserted
that Defendants “breached their obligations under the
terms of the 2004 Contract, the 2007 Contract, and the 2008
Contract by failing to indemnify [AmCon] for the liabilities,
costs, and expenses that [AmCon] sustained and/or incurred in
connection with the bonds written by Defendants and Mr.
Panzo; and by failing to honor their guarantees of such
obligations.” See DJ. Mem. at 5, ECF No. 16-1.
Frank filed his Response to the DJ Motion, thereby making his
first appearance in the case, on June 26, 2017 (ECF No. 18),
and Janis filed her Response to the DJ Motion on July 3, 2017
(ECF No. 21). AmCon filed its Reply in Support of the DJ
Motion (ECF No. 22) on July 7, 2017.
11, 2017, Magistrate Judge Puglisi entered the F&R, in
which he found that “[despite] failing to timely
respond to the Complaint, Defendants have indicated their
clear intent to defend this case by filing Responses to
[AmCon]'s [DJ] Motion[.]” F&R at 4, ECF No. 23.
The Magistrate Judge therefore recommended that:
(1) [AmCon]'s Motion for Entry of Default Judgment . . .
(2) The entry of default against Defendants . . . be set
(3) Defendants . . . be directed to file responses to the
Complaint no later than 10 days after the district court acts
on this Findings and Recommendation.
F&R at 5.
the Court are AmCon's objections to the F&R (ECF No.
27), wherein AmCon urges the Court not to exercise its
discretion on behalf of Defendants and enter default judgment
at this time. Obj. Mem. at 2. Defendants responded to these
objections on July 27, 2017 (ECF Nos. 28 (Frank), 29
those responses were Defendants' declarations, in which
they informed the Court of their intent “to defend and
pursue any and all claims involved in this matter” and
set forth a non-exhaustive list of eight potential defenses
they might raise. See Decl. of Frank M. Fernandez
¶¶ 3-4, ECF No. 28-1 [hereinafter Frank Decl. II];
Decl. of Janis H. Fernandez ¶¶ 3-4, ECF No. 29-1
[hereinafter Janis Decl. II].
reasons stated below, the Court ADOPTS the F&R, DENIES
AmCon's DJ Motion, and ...