Abe Developments LLC v. Auto-Owners Insurance Company et al

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WO
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
Abe Developments LLC, et al.,
Plaintiffs,
v.
Auto-Owners Insurance Company, et al.,
Defendants.
No. CV-25-02792-PHX-KML
ORDER
This case has a strange history that resulted in defendant and counterclaimant Auto-
Owners Insurance Company (“Auto-Owners”) seeking default judgment against current
plaintiff Alvin Yono. (Doc. 48.) Default judgment is appropriate.
This case began when Abe Developments LLC filed suit in state court against Auto-
Owners and TAG-RH Agency, Inc. after Auto-Owners denied an insurance claim. (Doc.
1-1 at 18.) Auto-Owners removed the case to federal court and filed a motion to dismiss.
(Doc. 18.) That motion argued Abe Developments was “not the named insured (or any
insured) on the policy in question.” (Doc. 18 at 1-2.) Abe Developments did not respond
to the motion to dismiss, and the court granted the motion with leave to amend. (Doc. 20.)
TAG-RH had not yet been served or appeared so there was no discussion of the claims
against it.
The named insured, Alvin Yono, replaced Abe Developments and Yono filed an
amended complaint against the same two defendants. (Doc. 21.) Auto-Owners filed an
answer and asserted counterclaims for “recission of policy” and declaratory relief. (Doc.
Case 2:25-cv-02792-KML Document 50 Filed 08/04/26 Page 1 of 6

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25.) TAG-RH answered but did not assert any counterclaims. (Doc. 30.) Yono’s counsel
then moved to withdraw, claiming “[i]rreconcilable difference [had] arisen.” (Doc. 35 at
1.) The court allowed counsel to withdraw but warned Yono that if he proceeded without
counsel, he would be required to follow the same rules of procedure as all other litigants.
(Doc. 36.) The court gave Yono one week to either arrange for new counsel to file a notice
of appearance or for Yono to file a statement explaining he would proceed without counsel.
Yono did neither. Yono also failed to file a case management report that had been ordered
earlier.
A few weeks after counsel withdrew, Auto-Owners and TAG-RH filed a motion to
dismiss stating they had been unable to contact the counsel they believed was representing
Yono. (Doc. 41.) On January 22, 2026, the court ordered Yono to file a statement no later
than February 6, 2026 “explaining his failures to comply with previous deadlines” and to
file a response to the motion to dismiss. (Doc. 42 at 2.) The court warned Yono that Local
Rule 7.2(i) allows the court to summarily grant unopposed motions and, if he did not
respond to the motion to dismiss, his complaint would be dismissed. (Doc. 42 at 2.)
The February 6, 2026, deadline expired without any filings from Yono. On February
13, 2026, the court dismissed Yono’s complaint. That ended TAG-RH’s involvement in
this case but left Auto-Owners’s counterclaims pending. The court ordered Auto-Owners
to take additional action to resolve those counterclaims. (Doc. 43.) Auto-Owners moved to
strike Yono’s answer to the counterclaims, and no opposition was filed. (Doc. 44.) On
March 23, 2026, the court struck Yono’s answer and entered Yono’s default. (Docs. 46,
47.) Auto-Owners then moved for default judgment. (Doc. 48.) Yono did not respond to
the motion for default judgment.
The court must consider seven factors when deciding whether to enter default
judgment. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). The seven factors are:
(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s
substantive claim, (3) the sufficiency of the complaint, (4) the sum of money
at stake in the action; (5) the possibility of a dispute concerning material
facts; (6) whether the default was due to excusable neglect, and (7) the strong
policy underlying the Federal Rules of Civil Procedure favoring decisions on
the merits.
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Id. These factors establish default judgment is appropriate.
1. Possibility of Prejudice
The first factor regarding possible prejudice to Auto-Owners weighs in favor of
default judgment because if “default judgment is not granted, [Auto-Owners] will likely be
without other recourse for recovery.” PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d
1172, 1177 (C.D. Cal. 2002).
2. Merits of the Claims and Sufficiency of the Complaint
The second and third factors require assessing the merits of the Auto-Owners’s
counterclaims and the sufficiency of its complaint. These factors “are often analyzed
together and require courts to consider whether a plaintiff has state[d] a claim on which [it]
may recover.” Vietnam Reform Party v. Viet Tan - Vietnam Reform Party, 416 F. Supp. 3d
948, 962 (N.D. Cal. 2019) (simplified).
Auto-Owners alleges Yono applied for an insurance policy to cover a property in
Scottsdale. (Doc. 25 at 13.) In that application, Yono represented the “Property was to be
used as a ‘non-owner’, occupied (i.e., rental) property.” (Doc. 25 at 13.) Yono also
represented that no business would be conducted at the property and that the building on
the property would not be “undergoing any renovation or construction.” (Doc. 25 at 13.)
Auto-Owners issued a policy, but Yono’s representations were false, Auto-Owners relied
on those representations, and it “would not have agreed to issue the Policy” if Yono had
told the truth. (Doc. 25 at 15.)
In 2022, Yono acting through Abe Developments leased the property to a tenant
who planned “to convert the property into a restaurant.” (Doc. 25 at 14.) In approximately
August 2023, Yono learned “the building was completely demolished.” (Doc. 25 at 14.)
The following year, the lease was terminated. Yono submitted an insurance claim “for the
loss of and/or damage to the Property and loss of rents.” (Doc. 25 at 14.)
Auto-Owners asserts a claim for recission of policy under A.R.S. § 20-1109 and a
claim for declaratory relief that the insurance policy “does not apply” to Yono’s claim.
(Doc. 25 at 15.) Under Arizona law, a claim for rescission requires allegations there was a
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“misrepresentation in the insurance application” and “(1) the misrepresentation is
fraudulent, (2) the misrepresentation is material either to the acceptance of the risk, or to
the hazard assumed by the insurer, and (3) the insurer in good faith would . . . not have
issued the policy . . . if the true facts had been made known to the insurer as required either
by the application for the policy or otherwise.” James River Ins. Co. v. Hebert Schenk,
P.C., 523 F.3d 915, 920–21 (9th Cir. 2008) (simplified).
Auto-Owners has stated a claim for recission. Yono represented there would be no
business conducted on the property and there would be no renovation or construction. Yono
then leased the property to a tenant to operate a restaurant, and the building was demolished
to make way for new construction.
Auto-Owners also seeks declaratory relief the policy “does not apply to any losses
in connection with the Claim presented by Yono.” (Doc. 48 at 9.) The insurance policy
provided “coverage only for risk of accidental direct physical loss.” (Doc. 25 at 15.) The
damage at issue was intentional, not accidental, so Auto-Owners seeks declaratory
judgment that even if the policy were not void, coverage would not exist.
Auto-Owners has alleged sufficient facts to support both its rescission claim and its
claim for declaratory relief. The second and third default judgment factors support entering
default judgment.
3. Amount in Controversy
The fourth default judgment factor “requires that the court assess whether the
recovery sought is proportional to the harm caused by defendant’s conduct.” Landstar
Ranger, Inc. v. Parth Enterprises, Inc., 725 F. Supp. 2d 916, 921 (C.D. Cal. 2010). When
a large sum is at stake, this factor may weigh against default judgment. Curtis v.
Illumination Arts, Inc., 33 F. Supp. 3d 1200, 1212 (W.D. Wash. 2014). Auto-Owners is not
seeking any monetary damages, but Yono initially claimed damages of approximately
$700,000. (Doc. 1-1 at 19.) That amount weighs against allowing default judgment.
4. Dispute Over Material Facts
The fifth factor is whether there are any disputes over material facts. Yono’s
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decision to stop participating means there is no indication of such disputes. This factor
weighs in favor of default judgment.
5. Excusable Neglect
There is no evidence that Yono’s behavior is the result of excusable neglect. See
Shanghai Automation Instrument Co. v. Kuei, 194 F. Supp. 2d 995, 1005 (N.D. Cal. 2001)
(defendants’ failure to respond to complaint could not “be attributable to excusable
neglect” because “[a]ll were properly served with the Complaint, the notice of entry of
default, as well as the papers in support of the instant motion.”). This factor supports default
judgment.
6. Policy Favoring Decisions on the Merits
The seventh factor recognizes a preference for resolving matters on their merits.
This factor, as always, weighs against entry of default judgment. “However, the mere
existence of Fed.R.Civ.P. 55(b) indicates that this preference, standing alone, is not
dispositive.” PepsiCo, 238 F. Supp. 2d at 1177 (simplified).
7. Default Judgment is Merited
Balancing the relevant factors, default judgment is appropriate.
8. Relief
It is Auto-Owners’s burden to prove it is entitled to the relief it seeks. See
Blumenthal Distrib., Inc. v. Comoch Inc., 652 F. Supp. 3d 1117, 1131 (C.D. Cal. 2023).
Accepting the allegations of the complaint as true, Auto-Owners has established it is
entitled to rescind the policy and, if not rescinded, the policy would not cover the
intentional damage.
IT IS ORDERED the Motion for Default Judgment (Doc. 25) is GRANTED. The
Auto-Owners policy referenced in the counterclaim is void ab initio because of
misrepresentations by Yono in the insurance application. In addition, the Auto-Owners
policy referenced in the complaint does not apply to any losses in connection with the claim
presented by Yono referenced in the complaint.
/
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IT IS FURTHER ORDERED the Clerk of Court shall enter judgment in favor of
Auto-Owners Insurance Company and against Alvin Yono and close this case.
Dated this 4th day of August, 2026.
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