In re Antell

• Decision Date: 23 November 1992
• Docket Number: Bankruptcy No. 91-24656F.
• Parties: In re Malcolm ANTELL, Debtor.
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania

155 B.R. 921 (1992)

In re Malcolm ANTELL, Debtor.

Bankruptcy No. 91-24656F.

United States Bankruptcy Court, E.D. Pennsylvania.

November 23, 1992.

COPYRIGHT MATERIAL OMITTED

Jon M. Adelstein, Mitchell B. Gerson, Groen, Laveson, Goldberg & Rubenstone, Bensalem, PA, for debtor.

Gary E. McCafferty, Joseph Goldbeck, Jr., P.C., Philadelphia, PA, for Jefferson Bank.

MEMORANDUM

BRUCE I. FOX, Bankruptcy Judge:

The debtor, Malcolm Antell, filed a motion on July 14, 1992 to vacate this court's order of June 30, 1992 and for the imposition of sanctions against counsel for a secured creditor, Jefferson Bank. The order of June 30, 1992 had granted Jefferson Bank relief from the automatic stay by default. Jefferson Bank opposes the motion to vacate, and for sanctions; the debtor is supported orally in its request by Bank Hapoalim, B.M.

A hearing was held on the debtor's motion, at which time all parties expressly declined to offer any evidence other than the admissions found in the pleadings filed in this particular contested matter. I shall exercise my discretion, though, under F.R.E. 201 (incorporated by Fed.R.Bankr.P. 9017) and take judicial notice of the docket entries in this bankruptcy case. Accordingly, I shall summarize the evidence of record.

I.

The debtor filed a voluntary petition in bankruptcy under chapter 11 on August 30, 1991. On May 29, 1992, Jefferson Bank filed a motion for relief from the automatic stay. The evidence does not disclose the reason this relief was sought, but I would surmise that Jefferson asserted a secured claim and alleged that it had not received postpetition mortgage payments from the debtor. See generally In re Skipworth, 69 B.R. 526 (Bankr.E.D.Pa.1987); In re Wright, Egan & Assocs., 60 B.R. 806 (Bankr.E.D.Pa.1986); In re Keays, 36 B.R. 1016 (Bankr.E.D.Pa.1984). See also In re Shariyf, 68 B.R. 604 (E.D.Pa.1986).

On June 3, 1992, I issued an order requiring an answer to Jefferson Bank's motion for relief, pursuant to Fed.R.Bankr.P. 9014 and Local Bankr.R. 9014.1. See also Local Bankr. Form 9014.1A. This order directed that any answer to the motion for relief be filed with the clerk of court and served upon counsel for the movant, Jefferson Bank. Specifically, the order provided that an answer be filed and served "within 15 days after service of this Order, exclusive of the date of service. If no answer is filed, an order may be entered granting the relief demanded in the motion." Debtor's motion, Ex. A, at ¶ 1. The Order also scheduled a hearing on the motion for relief from the automatic stay for June 29, 1992 at 9:30 A.M.¹

The parties are in apparent agreement that on June 9, 1992, Jefferson Bank served the motion for relief, notice of hearing and order requiring answer upon the debtor.² (There was no evidence presented to show when the debtor received these documents.) The docket entries reflect that on Monday, June 29, 1992, Jefferson Bank filed a certification of no answer and sought judgment by default under Fed. R.Bankr.P. 7055 and 9014. Docketed later on the same date (June 29, 1992) is the debtor's answer in opposition to the motion for relief.

The debtor avers, and Jefferson Bank admits, that counsel for the debtor sent a copy of his answer to the motion for relief to counsel for Jefferson Bank, via facsimile machine, on Friday, June 26, 1992. Counsel for Jefferson Bank avers, however, that he was unaware of that service, as he was not in his office at the time of transmission; moreover, he also contends that he was unaware of service of this answer when he took default.

Counsel for Jefferson Bank admits, though, that on Friday, June 26, 1992 counsel for Bank Hapoalim, B.M. telephoned his office and then was sent via facsimile transmission a copy of Jefferson Bank's motion for relief. From this admission, it may fairly be inferred that it is more likely than not that Bank Hapoalim was not served with the motion or notice of hearing by Jefferson Bank prior to June 26, 1992.³ This admission becomes relevant because the debtor asserts, although Jefferson Bank denies, that Bank Hapoalim holds a "second mortgage on real estate against which Jefferson Bank seeks to foreclose. . . ." Motion and Answer, ¶ 7. Thus, the debtor and Bank Hapoalim assert that Bank Hapoalim is an interested party upon which service should have been, but was not, properly effected. Local Bankr.R. 9014.1(g)(7).

As noted above, a hearing on Jefferson Bank's motion for relief had been scheduled for Monday, June 29, 1992. Counsel for the debtor appeared in court at the appointed time and date for the hearing, but as the record revealed no response to the motion, and as Jefferson Bank's counsel demanded default, no hearing was conducted. Instead, I granted the movant's request for relief from the stay, by default, by order dated June 30, 1992. See Orange Theatre Corp. v. Rayherstz Amusement Corp., 130 F.2d 185 (3d Cir. 1942) (when the defendant has failed to file a timely responsive pleading, the entry of default under Rule 55 is ministerial).⁴

On July 14, the debtor filed the instant motion ". . . to open the order of June 30, 1992. . . ." The motion was served upon Jefferson Bank and Bank Hapoalim, B.M. on July 21, 1992. (Certificate of service filed by the debtor on August 14, 1992.)

In sum, the debtor presents two arguments from the above facts. First, he contends that Jefferson Bank had no basis to obtain relief by default because a timely answer had been filed. Second, he argues that Jefferson Bank, knowing that it was not entitled to default, wrongfully sought default nonetheless (thus warranting the imposition of sanctions against it). Bank Hapoalim contends that no relief should have been entered without proper notice as to it. For the following reasons, I conclude that the debtor is entitled to have the default set aside by virtue of Fed.R.Bankr.P. 9024 (incorporating Fed.R.Civ.P. 60), but is not entitled to sanctions.⁵

II.

First, I note that the debtor does not state with particular clarity the procedural rule upon which he moves to have this court "open the judgment" of June 30, 1992. I shall therefore analyze the debtor's request for relief in terms of the two procedural means by which it appears the debtor could raise this request.

To the extent the motion could be considered as one made for reconsideration pursuant to Fed.R.Bankr.P. 9023 (incorporating, inter alia, Fed.R.Civ.P. 59(e)), I find that the debtor's motion is untimely. This rule requires that motions to alter or amend the judgment be served within ten days of the entry of an order. This requirement is jurisdictional, and cannot be extended in the discretion of the court. E.g., Smith v. Evans, 853 F.2d 155, 157 (3d Cir.1988). Here, the motion to open the June 30, 1992 order was filed on July 14, 1992 and served on July 21, 1992, well beyond the ten day period allowed by Rule 9023. Therefore, I have no authority to reconsider that order. Compare In re Zawisza, 73 B.R. 929, 931 n. 1 (Bankr.E.D.Pa. 1987) (Scholl, B.J.) (even if answer to motion to dismiss was late, court had discretion to vacate the order entered by default upon a timely request for reconsideration).

The debtor's motion may also be understood, however, as requesting relief pursuant to Fed.R.Bankr.P. 7055 and 9024, which incorporate Fed.R.Civ.P. 55 and 60. As such, I find the motion is presented in a timely manner. Accord, e.g., In re Mapson, 93 B.R. 161, 166 (Bankr.C.D.Ill.1988); 6 Moore's Federal Practice § 55.101 at 55-53 (2d ed. 1992). Cf. In re Juil, Inc., 52 B.R. 343 (Bankr.E.D.Pa.1985).

The standard for reopening a default judgment pursuant to Fed.R.Civ.P. 60(b) is generally defined by three factors in this circuit.⁶ These factors include whether Jefferson Bank would be substantially prejudiced if the judgment were opened; whether the defaulting party, the debtor, has a "facially meritorious" defense; and whether culpable conduct of the debtor led to the default. E.g., Gross v. Stereo Component Systems, Inc., 700 F.2d 120, 122 (3d Cir.1983); Feliciano v. Reliant Tooling Co., 691 F.2d 653, 656 (3d Cir. 1982); Reid v. Liberty Consumer Discount Co., 484 F.Supp. 435, 438 (E.D.Pa. 1980); In re Brasby, 109 B.R. 113, 125 (Bankr.E.D.Pa.1990). The burden rests upon the debtor as movant to show that all three factors are satisfied. Gross v. Stereo Component Systems, Inc., 700 F.2d at 124.

In this instance, to be afforded relief under most provisions of Rule 60(b) or Rule 55(c), the debtor must demonstrate that it had a facially meritorious defense to the motion for stay relief filed by Jefferson Bank. E.g., Gross v. Stereo Component Systems, Inc.; In re Brasby. At best, the only evidence on this point is found in paragraph 8 of his motion to open, in which the debtor states that he has many good defenses to the Motion for relief from stay, including but not limited to the following:

A. Debtor\'s Plan of Arrangement is due to be filed with this Court within two (2) weeks, and Jefferson Bank will not be prejudiced by waiting until the Debtor\'s Plan of Arrangement is confirmed or denied.

B. Since the Petition in Bankruptcy was filed, Debtor has been paying to Jefferson Bank the sum of One Thousand Dollars ($1,000) per month to be applied to the mortgage. While these payments are less than the monthly amount required thereunder, they are sufficient so that the total debt owing to Jefferson Bank is not materially greater than it was at the time the original Petition for Relief was filed.

This is the only "evidence" offered on issue of the debtor's ability to prevail on the merits, and Jefferson Bank denies these averments as a "conclusion of law." Answer to Motion, ¶ 8. Even if I accept as true the factual allegations made by the debtor in its motion to open, see In re Mapson, 93 B.R. at 166 (that the requisite showing of a meritorious defense may be made by a defaulting party through allegations in its motion), his unsupported conclusions as to...