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Perez v. Wells Fargo N.A.

United States Court of Appeals, Eleventh Circuit

December 18, 2014

ENORA PEREZ, d.b.a. Perez Center, Counter Defendant, Plaintiff - Appellant,
v.
WELLS FARGO N.A., Counter Claimant, Defendant - Appellee, FIRST JOHN DOE THROUGH TENTH JOHN DOE, inclusive, Defendant - Appellee, UNITED STATES OF AMERICA, Third Party Defendant

Page 1330

Appeal from the United States District Court for the Northern District of Georgia. D.C. Docket No. 4:12-cv-00218-HLM.

For Enora Perez, d.b.a.: Perez Center, Plaintiff - Appellant: Roy E. Barnes, The Barnes Law Group, LLC, Marietta, GA; Kenneth C. Fuller, Fuller McKay Bournakis & Mitchell, Rome, GA; John Scott Husser, John S. Husser, PC, Rome, GA; James Cameron Tribble, Barnes Law Group, LLC, Marietta, GA.

For Wells Fargo Bank, N.A., Defendant - Appellee: Nancy H. Baughan, Rebeccah L. Bower, Parker Hudson Rainer & Dobbs, LLP, Atlanta, GA.

Before WILSON and ROSENBAUM, Circuit Judges, and SCHLESINGER,[*] District Judge.

OPINION

Page 1331

ROSENBAUM, Circuit Judge

A " [r]ose is a rose is a rose is a rose." [1] And a motion for an entry of default judgment is a motion for an entry of default judgment is a motion for an entry of default judgment is a motion for an entry of default judgment--even if its writer calls it a motion for judgment on the pleadings. So Rule 55's standard of " good cause" for setting aside an entry of default judgment--not the higher one of " excusable neglect" applicable to missed deadlines outside the default context--governs the court's determination of whether, despite her one-time error in not responding to a pleading, the non-moving party should get the opportunity to have her case considered on the merits before final judgment against her is entered.

In this case, Defendant-Counterclaimant Wells Fargo, N.A. (Wells Fargo), in its so-called " motion for judgment on the pleadings," urged the court to apply the excusable-neglect standard to preclude Plaintiff-Counter-defendant Enora Perez from filing an answer to Wells Fargo's counterclaim after Perez missed a single deadline to respond to the counterclaim. Then, because Perez had not been permitted to file her answer, Wells Fargo argued that the court should deem Wells Fargo's allegations in its counterclaim admitted and enter judgment in Wells Fargo's favor (a

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default judgment by any other name).[2] The court granted Wells Fargo's motion, effectively entering what amounted to a default judgment against Perez.

But process matters. And we have a strong preference for deciding cases on the merits--not based on a single missed deadline--whenever reasonably possible. So the order granting judgment on the pleadings and denying Perez the opportunity to file an answer to Wells Fargo's counterclaim must be reversed, and Perez must be given a chance to demonstrate that she should have her case considered on the merits. We also conclude that the district court's order denying Perez's motion to amend her complaint must be reversed.

I.

Perez's complaint alleges that she owned and operated her own business called Perez Center.[3] In connection with her business, in May 2012, Perez opened three accounts with Wells Fargo: a " Gold Business Services Package Account," a " Wells Fargo Simple Business Checking Account," and a " Business Market Rate Savings Account." She used the money that she deposited into these business accounts to support her family and to continue the operation of Perez Center.

By letter dated June 19, 2012, though, Wells Fargo informed Perez that it had blocked all monetary transactions on Perez's accounts and had deactivated the ATM cards linked to the accounts because Wells Fargo had made a " business decision to end [Perez's] deposit account relationship." Wells Fargo provided no further explanation for why it had closed Perez's accounts. At the time, Perez's three accounts held a combined almost $100,000.00.

In response to the letter, Perez made numerous calls to Wells Fargo to find out why Wells Fargo had closed her accounts and to try to obtain her money. But, according to Perez, Wells Fargo would not provide Perez with " any plausible explanation of why [her] bank accounts . . . were closed," and it refused to return the money in her accounts. So Perez filed suit against Wells Fargo in the Superior Court of Floyd County, Georgia, seeking injunctive and monetary relief.

Wells Fargo then removed this action to federal court on the basis of diversity jurisdiction. In federal court, Wells Fargo filed its answer and affirmative defenses and included a counterclaim against Perez and a claim against the United States for interpleader.[4] Wells Fargo alleged in its counterclaim that it had closed and frozen Perez's accounts after several United States Treasury checks had been deposited into them. According to the counterclaim, the contractual agreement between Wells Fargo and Perez allowed Wells Fargo to take these actions because depositing Treasury checks constituted money services business (MSB) activity, and Perez's accounts were " not approved for [ ] 'MSB' activity." Wells Fargo did not quote the contract or attach a copy of it to the

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counterclaim but instead simply characterized it.

The counterclaim further averred that about six weeks after it had frozen and closed Perez's accounts, on August 7, 2012, Wells Fargo had received a letter from the Internal Revenue Service (IRS) notifying Wells Fargo that it had " issued tax refunds that it should not have issued" and that it claimed an interest in the funds in Perez's accounts. This IRS letter is the only communication of any kind between Wells Fargo and the IRS that the counterclaim alleges. Because, in light of the August 7, 2012, IRS letter, Perez and the United States both claimed rights to the funds, Wells Fargo explained, it filed the counterclaim for interpleader to resolve the dispute. Finally, the counterclaim sought " litigation costs and attorneys' fees" from Perez, the United States, or both.

In response to Wells Fargo's counterclaim, the United States filed an answer repudiating any interest in the funds in Perez's accounts and requesting that the court deny the requested relief. Although the United States admitted that the IRS had sent the August letter to Wells Fargo claiming an interest in the funds in Perez's accounts, it stated that, upon further examination, the IRS had determined that the United States had " no right" to the funds in Perez's accounts.

So, nearly six months after it originally froze Perez's bank accounts and six weeks after the United States disclaimed any interest in the funds in Perez's accounts, on December 14, 2012, Wells Fargo returned to Perez part of the monies in Perez's accounts. Specifically, Wells Fargo tendered a check to Perez in the amount of $88,770.99--keeping about $10,000.00 for itself for " costs" and " attorneys' fees" incurred in freezing and closing Perez's accounts and in defending against Perez's attempts to get her money back.[5] By stipulation, the United States was dismissed from the case. Perez did not respond to the counterclaim.

When Perez did not file a response to Wells Fargo's counterclaim, Wells Fargo moved under Federal Rule of Civil Procedure 12(c) for judgment on the pleadings. In support of its motion, Wells Fargo argued that the court should deem admitted all of its allegations in the counterclaim since Perez had not filed a timely response to the pleading. Once deemed admitted, Wells Fargo asserted, the allegations in the counterclaim established that Perez's claim for wrongful closure of her accounts and withholding of her funds necessarily failed as a matter of law. Wells Fargo reasoned that, under the deemed-admitted allegations of the counterclaim, the contract governing Perez's accounts entitled Wells Fargo to freeze Perez's accounts since, in Wells Fargo's view, Perez had used her accounts for MSB activity, and her accounts were not approved for that purpose.

Perez timely filed a response to Wells Fargo's motion for a Rule 12(c) judgment on the pleadings and requested leave to file an out-of-time answer to the counterclaim. Although no default had been entered against Perez, she argued that not permitting her to respond out of time and instead deeming the allegations of the counterclaim admitted in ruling on ...


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