In re Bench
| Decision Date | 26 August 2016 |
| Docket Number | Bankruptcy Number: 12-26827 |
| Citation | 556 B.R. 500 |
| Parties | In re: George F. Bench, Debtor. |
| Court | U.S. Bankruptcy Court — District of Utah |
Eric C. Singleton, The Alta Law Group, PLLC, Salt Lake City, UT, for Debtor.
In this chapter 7 case, the Debtor failed to comply with the Trustee's request to produce bank statements, failed to respond to the Trustee's motion for turnover of the bank statements, failed to obey the subsequent turnover order, failed to answer the Trustee's ensuing complaint to revoke his discharge, and failed to object to the Trustee's motion for default judgment. On November 22, 2013, the Court entered its judgment revoking the Debtor's discharge under 11 U.S.C. § 727(d)(3).1 A month later, the Court closed the bankruptcy case. Some two and a half years later, the Debtor now asks the Court, based on an alleged satisfaction of the judgment and a penance of $2,793.00 paid to the Trustee, to set aside the default judgment and reinstate his discharge. For the reasons set forth herein, the Court declines to do so.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. The matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (b)(2)(J). Venue is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409.
Debtor George Bench filed a voluntary chapter 7 petition on May 25, 2012.2 At all relevant times during this case, the Debtor was represented by Eric Singleton. Shortly after the meeting of creditors held on June 19, 2012, the Debtor filed an Amended Schedule B disclosing an interest in multiple bank accounts.3 On August 22, 2012, the Court granted the Debtor a discharge under § 727.4
On January 23, 2013, the chapter 7 trustee, Elizabeth Loveridge (the “Trustee”), filed a motion to compel the Debtor to turn over bank statements covering the month of the petition date and the two months prior thereto.5 The Trustee served the motion and notice of hearing on the Debtor and his counsel.6 The Debtor did not respond or object to the Trustee's motion for turnover, and the Court granted the motion on February 20, 2013 (the “Turnover Order”).7 The Turnover Order required the Debtor to deliver the requested bank statements to the Trustee by March 6, 2013.8 The Debtor did not comply with the Turnover Order until sometime after his bankruptcy case was closed on December 31, 2013.9
Based on the Debtor's failure to comply with the Turnover Order, the Trustee commenced an adversary proceeding on June 6, 2013, seeking revocation of the Debtor's discharge under § 727(d)(3).10 Debtor's counsel received electronic notice of the complaint. On June 12, 2013, the Trustee filed a Return of Service indicating that on June 6, 2013, a process server had personally served the summons and complaint on the Debtor.11 Neither counsel nor the Debtor ever answered the complaint. The Trustee filed a motion for default judgment on September 26, 2013,12 and served the motion and notice of hearing by mailing a copy to the Debtor at his address on file with the Court.13 On October 15, 2013, the clerk entered a default certificate.14
The Trustee applied to the Court for default judgment in accordance with the applicable local rule,15 and the Honorable William T. Thurman held a hearing on the motion on November 13, 2013.16 David A. Nill appeared for the Trustee, but no other appearances were noted on the record.17 Based on the Debtor's failure to respond, and for other good cause appearing, the Court entered a default judgment revoking the Debtor's discharge on November 25, 2013 (the “Default Judgment”).18 On December 31, 2013, the Court closed the Debtor's chapter 7 case.19
On April 10, 2015—approximately seventeen months after the revocation of his discharge—the Debtor filed a motion to reopen the case and reinstate his discharge.20 On May 11, 2015, the Debtor filed an amended motion that only sought to reopen the case so that “the Trustee and Mr. Bench can enter into an agreement to resolve the issue.”21 On May 20, 2015, the Court reopened the case with the following notation in the order: 22
On March 9, 2016, the Debtor filed a stipulated motion to set aside the Default Judgment and reinstate his discharge.23 The stipulated motion was accompanied by a proposed order that the Court unsigned with the following language:
The Stipulated Motion requires notice to all parties in interest and a hearing, as indicated by the order reopening this case (see Dkt. No. 37). The Debtor should amend the Stipulated Motion to specify the statutory and legal authority for the Court to set aside a default judgment revoking a discharge when such judgment was entered more than two years ago.24
On March 17, 2016, the Debtor filed a second stipulated motion to reinstate his discharge (“Motion to Reinstate Discharge”), and set it for hearing.25 After the objection deadline had passed, the Debtor filed a proposed order, which the Trustee endorsed.26
While there were no objections to the Motion to Reinstate Discharge, and while the Trustee endorsed the proposed order, the Court had concerns about granting such relief in light of the facts of the case and the timing of the Debtor's motion. Accordingly, the Court set the matter for a hearing on April 19, 2016. At the hearing, Eric Singleton appeared for the Debtor, and Anthony M. Grover appeared for the Trustee. The Court expressed its concerns with granting such relief, and Debtor's counsel requested time to brief the issue. The Court continued the hearing and ordered the parties to submit supplemental briefing, if any, no later than May 10, 2016.27
On June 7, 2016, the Court conducted a final hearing on the Debtor's Motion to Reinstate Discharge. Eric Singleton appeared for the Debtor. Anthony M. Grover appeared for the Trustee. After hearing the arguments of counsel, the Court took the matter under advisement.
The Debtor is seeking relief under Fed. R. Civ. P. 60(b)(5) and (6), as made applicable to bankruptcy matters by Fed. R. Bankr. P. 9024, from the Default Judgment revoking his discharge. While Rule 60(b) provides the possibility for relief from a final judgment, order, or proceeding, it is an extraordinary remedy that “may only be granted in exceptional circumstances.”28 Further, “Rule 60(b) is ‘not available to allow a party merely to reargue an issue previously addressed by the court when the reargument merely advances new arguments or supporting facts which were available for presentation at the time of the original argument.’ ”29 Moreover, Rule 60(b) “is not a substitute for appeal, and must be considered with the need for finality of judgment.”30
The Debtor seeks relief from the Default Judgment under Rule 60(b)(5) because “the judgment has been satisfied, released, or discharged,” and under Rule 60(b)(6) for “any other reason that justifies relief.” Motions under these two subsections “must be made within a reasonable time” after the entry of the judgment or order.31 What constitutes a reasonable time depends upon the facts and circumstances of the particular case.32 Courts also consider prejudice to other parties arising from the delay in bringing a Rule 60(b) motion.33
In this case, the Debtor was represented by counsel and had adequate notice of all legal proceedings. The Debtor asserts that he had difficulty obtaining the requested bank statements, but he offers no mitigating explanation for his failure to respond to the Trustee's motion and adversary proceeding. Further, the Court has not heard a cogent reason as to why the Debtor waited almost seventeen months to seek relief from the Default Judgment revoking his discharge.34 Finally, during those seventeen months, creditors had notice of the Default Judgment revoking the Debtor's discharge and were entitled to rely on its legal effect as to the collectability of their claims against the Debtor personally. As set forth more fully below, reinstating the Debtor's discharge at this late date—some two and a half years after the revocation of discharge—could result in confusion and prejudice to such creditors. Under these circumstances, the Court finds that the Motion to Reinstate Discharge was not brought within a reasonable time as required by Rule 60(c)(1).35
Nevertheless, even if seventeen months were a reasonable time within which to file the Motion to Reinstate Discharge, the Court would deny the requested relief for the following reasons.
A party seeking relief from a default judgment must satisfy not only one of the discrete subparts of Rule 60(b),36 but must also meet these three requirements: “(1) the moving party's culpable conduct did not cause the default; (2) the moving party has a meritorious defense; and (3) the non-moving party will not be prejudiced by setting aside the judgment.”37 A court need not examine all three; “if the default was the result of defendant's culpable conduct, the district court may refuse to set aside the default on that basis alone.”38 “Generally a party's conduct will be considered culpable only if the party defaulted willfully or has no excuse for the default.”39
The Debtor has failed to establish any of these requirements, and the Motion to Reinstate Discharge could be denied exclusively for that reason. In addition, rather than showing that the Debtor's culpable conduct did not...
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In re Porter, Case No. 13-10004-SAH
...or revoking a debtor's discharge falls outside the scope of judgments that can be satisfied under Rule 60(b)(5). In re Bench, 556 B.R. 500, 508 (Bankr. D. Utah 2016) (citing Mrozinski, 489 B.R. at 823; In re Jacobs, 2008 B.R. 4369273 *3); In re Christensen, 2015 WL 6125537 *3 (Bankr. W.D. N......