Federal Sav. and Loan Ins. Corp. v. Kroenke

• Decision Date: 28 October 1988
• Docket Number: No. 87-3860,87-3860
• Citation: 858 F.2d 1067
• Parties: FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, as Receiver for Sun Belt Federal Bank, F.S.B., Plaintiff-Appellee, v. Frederick H. KROENKE, Jr., Defendant-Appellant. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1067

858 F.2d 1067

12 Fed.R.Serv.3d 1223

FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, as Receiver for Sun Belt Federal Bank, F.S.B., Plaintiff-Appellee, v. Frederick H. KROENKE, Jr., Defendant-Appellant.

No. 87-3860

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

Oct. 28, 1988.

Frederick H. Kroenke, Jr., Baton Rouge, La., pro se.

Bruce Schewe, New Orleans, La., for plaintiff-appellee.

Appeal from the United States District Court for the Middle District of Louisiana.

Before CLARK, Chief Judge, JOHNSON and JOLLY, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

Frederick H. Kroenke, Jr. appeals the denial of his Motion to Alter or Amend Judgment Denying Motion for Relief from Entry of Default. We affirm.

I

In February 1987, the Federal Savings & Loan Insurance Company ("FSLIC"), as receiver for Sun Belt Federal Bank, F.S.B. ("Sun Belt"), filed a complaint against Kroenke, seeking (1) a money judgment; (2) the recognition and maintenance of its mortgage and lien rights in and to certain immovable property; (3) the issuance of a Writ of Sequestration, causing the seizure of the mortgaged property pending the outcome of the litigation; (4) the appointment of FSLIC as the keeper of the mortgaged property; and (5) all other general and equitable relief to which it might be entitled.

On May 8, 1987, a copy of the summons and a copy of the complaint were served on Kroenke. Late in May, counsel for Kroenke made contact with counsel for FSLIC to request an informal extension of time in which to plead. FSLIC acknowledged on May 28, 1987 that it would take no action adverse to Kroenke for fifteen days thereafter.

In a letter dated June 26, 1987, Kroenke sent FSLIC a settlement proposal which concluded: "As we have agreed, I will not take any action in the above referenced matter while we are attempting to settle this matter without the necessity of litigation." Counsel for FSLIC denies by affidavit dated August 24, 1987, that any "agreement" in the form of an indefinite extension of time to plead was ever reached.

The parties differ on whether counsel for FSLIC made attempts to contact Kroenke's counsel to notify him that he should file a responsive pleading to FSLIC's complaint. Counsel for FSLIC states that on at least two occasions he attempted unsuccessfully to contact counsel for Kroenke by telephone to inform him that he would not agree to any period of inaction by Kroenke, but those calls were never returned. Counsel for Kroenke, also by affidavit, insists that no calls were received. At any rate, on July 6, 1987, the district court, sua sponte, directed Kroenke, himself an attorney, to file an answer or other pleading within ten days. If no answer were filed, the order stated, a default would be entered against him. On July 23, 1987, FSLIC moved for entry of default. The clerk of the court entered a preliminary default, and on July 27, 1987, the default judgment was confirmed.

On July 28, 1987, Kroenke filed a motion for relief from the default judgment, supported by an affidavit and memorandum setting forth his version of the facts. On September 11, the court denied the motion, and on September 18, Kroenke moved to alter or amend the September 11 judgment.

On October 14, 1987, the district court granted FSLIC's motion to correct the default judgment. The corrected judgment recognized FSLIC's mortgage and lien rights in the property at issue and provided for judgment "in the amount of $133,296.29 plus interest ... and reasonable attorneys' fees to be fixed at a later date" rather than "the sum of $166,620.36 dollars with interest" as provided in the original default judgment.

On October 20, 1987, the district court denied Kroenke's motion to alter or amend its September 11 judgment. Kroenke filed this timely appeal, arguing that the district court abused its discretion in denying his motion to alter or amend.

II

Because Kroenke raises the question, we first note that under Budinich v. Becton Dickinson and Co., a judgment on the merits is a "final decision" for purposes of section 1291, even though a claim for attorneys' fees is still pending, and regardless of whether attorneys' fees are deemed part of the merits. --- U.S. ----, 108 S.Ct. 1717, 1720-22, 100 L.Ed.2d 178 (1988). See generally Cobb v. Miller, 818 F.2d 1227 (5th Cir.1987). This court therefore has jurisdiction to decide this appeal.

III

A.

Kroenke argues that the district court abused its discretion in denying his motion for relief from both entry of default and from judgment of default under Fed.R.Civ.P. 55(c) and/or 60(b). Fed.R.Civ.P. 55(c) provides that "For good cause shown the court may set aside an entry of default and, if a judgment of default has been entered, may likewise set it aside in accordance with Rule 60(b)." Fed.R.Civ.P. 60(b) provides in relevant part that "the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence ... or (6) any other reason justifying relief from the operation of the judgment."

The Sixth Circuit has held that the same factors controlling the decision of a Rule 55(c) motion to set aside entry of default also apply to relief from the judgment under Rule 60(b). United Coin Meter v. Seaboard Coastline RR., 705 F.2d 839, 843-45 (6th Cir.1983) ("[w]hen relief is sought only from the entry of default, the standard is 'good cause,' and when relief is also sought from the entry of a judgment by default the 'reasons' set forth in Rule 60(b) may supply the good cause"). This is certainly a reasonable construction of the term "likewise" in Rule 55(c). Other courts have held that the standard for relief for "good cause" in cases of entry of default is more liberal than the standard for relief from a default judgment. See Phillips v. Weiner, 103 F.R.D. 177 (D.C.Me.1984); Meehan v. Snow, 652 F.2d 274 (2d Cir.1981); Moran v. Mitchell, 354 F.Supp. 86 (D.C.Va.1973); Whitman v. U.S. Lines, Inc., 88 F.R.D. 528 (Tex.D.C.1980).

In reviewing Kroenke's claims, we need not decide whether the Rule 55(c) "good cause" standard, as it relates to entry, and the reasons justifying relief from judgment under Rule 60(b) are equivalent. Review by a court of appeals of an appeal from an order refusing to reopen default is limited to the question whether the district court abused its discretion, and, as we further explain, we find no abuse of discretion in the district court's denying relief under either 55(c) or 60(b). See United States v. One 1978 Piper Navajo PA-31 Aircraft, 748 F.2d 316, 318 (5th Cir.1984); Farnese v. Bagnasco, 687 F.2d 761 (3d Cir.1982).

B.

Rule 60(b) permits relief for mistake, inadvertence, surprise, or excusable neglect, among other reasons. To merit relief, a party must show that its failure to file a timely answer or otherwise defend resulted from justifiable neglect and that a fair probability of success on the merits existed if the judgment were to be set aside. One 1978 Piper Navajo, 748 F.2d at 318-19. Courts generally look at three factors in ruling on a motion to set aside a default judgment under Rule 60(b)(1): (1) the extent of prejudice to the plaintiff; (2) the merits of the defendant's asserted defense and (3) the culpability of the defendant's conduct. Hibernia National Bank v. Administracion Central Sociedad Anonomia, 776 F.2d 1277 (5th Cir.1985).

FSLIC does not allege that it will be prejudiced by the delay in collecting the judgment from Kroenke should the default judgment be set aside; even if it had, the possibility of prejudice from delay is not sufficient in itself to require denial of Rule 60(b)(1) motion. Id. at 1280.

Looking at the second factor, Kroenke asserts four potential defenses in his motion to alter or amend the default judgment: usury; oral modification of his debt with a Sun Belt officer; FSLIC's failure to negotiate and settle the account in good faith; and unreasonable attorneys' fees provisions. These defenses were never asserted in Kroenke's motion to set aside the default judgment, but were first asserted in his motion to amend. In any event, they are meritless. First, La.R.S. 9:3509 (1983) prohibits a debtor in a commercial transaction from asserting usury as a defense, and the loan to Kroenke was to be used to acquire rental property--a commercial purpose. Second, oral agreements between debtors and banks are ineffective against the FDIC or FSLIC as a receiver. FDIC v. Langley, 792 F.2d 541 (5th Cir.1986), aff'd --- U.S. ----, 108 S.Ct. 396, 98 L.Ed.2d 340 (1987); FSLIC, as Receiver for Sun Belt Federal Bank, F.S.B. v. Lafayette Investment Properties, Inc., 855 F.2d 196 (5th Cir.1988) (the common law D'Oench, Duhme doctrine applies to FSLIC as well as the FDIC); 12 U.S.C. Sec. 1823(e) (codification of the D'Oench, Duhme doctrine). Kroenke's third proffered defense that FSLIC failed to negotiate with him in good faith to settle his account is unsupported by any cited authority and unsubstantiated by the record. Although some...