Hammer, In re
| Decision Date | 14 June 1991 |
| Docket Number | No. 90-15678,90-15678 |
| Citation | 940 F.2d 524 |
| Parties | , Bankr. L. Rep. P 74,133 In re Brian D. HAMMER, Debtor. Brian D. HAMMER, Appellant, v. Michael DRAGO and Ed Summers, Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Brian D. Hammer, in pro per.
Mark W. Frisbie, Law Offices of Elliott Abrams, Walnut Creek, Cal., for appellees.
Before BRUNETTI and RYMER, Circuit Judges, and ZILLY, ** District Judge.
Debtor Brian D. Hammer appeals pro se from the decision of the Bankruptcy Appellate Panel affirming the bankruptcy court's denial of his motion to set aside a default judgment. In re Hammer, 112 B.R. 341 (9th Cir. BAP 1990). We have jurisdiction pursuant to 28 U.S.C. Sec. 158(d), and we affirm.
Beginning in 1985, appellees Michael Drago and Ed Summers invested approximately $285,000 in several business enterprises under Hammer's control. That sum was secured by what Hammer concedes were forged deeds of trust. In September 1986, Hammer filed for Chapter 7 bankruptcy. On October 23, 1986, he executed a deed of trust on his personal residence naming appellees as the beneficiaries in the amount of $400,000. Hammer was indicted for mail fraud that same month; he surrendered for incarceration on February 6, 1987.
On January 5, 1987, appellees filed an adversary complaint requesting that Hammer's debt be declared nondischargeable on grounds of fraud, see 11 U.S.C. Sec. 523(a)(2)(A), and that judgment be entered against him. On January 9, 1987, they served Hammer with a summons and complaint by first class mail at the residence address provided on his bankruptcy petition. This service of process was made in accordance with Bankruptcy Rule 7004(b)(9). Appellees also sent copies of these documents to Hammer's former attorney. In late January 1987, the summons and complaint addressed to Hammer were returned undelivered. Appellees' subsequent efforts to locate Hammer through his former attorney and the clerk of the bankruptcy court were unsuccessful.
Hammer failed to answer the adversary complaint and on March 7, 1987, a default judgment was entered against him in the amount of $310,866.86. Appellees levied writs of execution against Hammer's property in December 1987 (securities brokerage account) and January 1989 (car). Hammer filed a claim of exemption for his vehicle and later moved the bankruptcy court to set aside the default judgment pursuant to Fed.R.Civ.P. 60(b)(6). 1 The bankruptcy court denied the Rule 60(b) motion. That denial was affirmed on appeal to the Bankruptcy Appellate Panel.
This court reviews a trial court's grant or denial of a Rule 60(b) motion for an abuse of discretion. See, e.g., Cassidy v. Tenorio, 856 F.2d 1412, 1415 (9th Cir.1988). The discretion vested in the trial court is limited by three policy considerations. First, since Rule 60(b) is remedial in nature, it must be liberally applied. Gregorian v. Izvestia, 871 F.2d 1515, 1523 (9th Cir.), cert. denied, --- U.S. ----, 110 S.Ct. 237, 107 L.Ed.2d 188 (1989). Second, default judgments are generally disfavored, and " '[w]henever it is reasonably possible, cases should be decided upon their merits.' " Id. (quoting Pena v. Seguros La Comercial, S.A., 770 F.2d 811, 814 (9th Cir.1985)). Third, where a defendant seeks timely relief from the judgment and has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the judgment. Id.
1. Culpable Conduct
A party's conduct is culpable if he has received actual or constructive notice of the filing of the action and failed to answer the complaint. Gregorian, 871 F.2d at 1523; Pena, 770 F.2d at 815. Hammer contends that he first learned of the complaint approximately two years after it was filed. 2 The bankruptcy court concluded that appellees effected service when they sent, by first class mail, a summons and complaint to Hammer at the address listed on his bankruptcy petition. Service in this fashion is expressly authorized by Bankruptcy Rule 7004(b)(9). 3 Hammer initiated these proceedings by filing his petition, and it was his responsibility to apprise the bankruptcy court of his forwarding address. See Pena, 770 F.2d at 815 (); see also In re Muzquiz, 122 B.R. 56, 59 (Bkrtcy.S.D.Tex.1990) (). Hammer was properly served under the Bankruptcy Rules, and his culpable conduct led to the default judgment.
2. Other Grounds
Although not necessary to the disposition of this appeal, we note here that the bankruptcy court did not abuse its discretion with respect to the other bases for denying relief from the default judgment. The bankruptcy court ruled that Hammer's request for relief was not timely filed under Rule 60(b). The Bankruptcy Appellate Panel reached the same conclusion and we also affirm on this basis. A motion under Rule 60(b)(6) must be brought "within a reasonable time." The bankruptcy court's conclusion that Hammer's unexcused two-year delay in objecting to the default judgment was not an abuse of discretion.
Finally, the bankruptcy court determined that Hammer lacked a meritorious defense. This determination was not an abuse of discretion. Hammer's unsworn contention that the debt owed to appellees had been the subject of a novation is a mere legal conclusion that cannot support disturbing the underlying judgment. Cassidy, 856 F.2d at 1415; In re Stone, 588 F.2d 1316, 1319 (10th Cir.1978).
Appellees allege that Hammer has taken a frivolous appeal and they request that we award them attorney's fees and costs pursuant to Fed.R.App.P. 38. The Bankruptcy Appellate Panel previously awarded attorney's fees and costs. Hammer did not contest that decision on appeal. An appeal is frivolous when the result is obvious, or the arguments advanced are wholly without merit. Hewitt v. Stanton,
798 F.2d 1230, 1233 (9th Cir.1986). We agree and appellees will be awarded...
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