In re Truong

• Decision Date: 11 January 2002
• Docket Number: Adversary No. 01-3112(LMW).,Bankruptcy No. 01-32242(LMW).
• Citation: 271 B.R. 738
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In re THANH V. TRUONG, Debtor. American Express Centurion Bank, Plaintiff, v. Thanh V. Truong, Defendant.

271 B.R. 738

In re THANH V. TRUONG, Debtor American Express Centurion Bank, Plaintiff, v. Thanh V. Truong, Defendant.

Bankruptcy No. 01-32242(LMW). Adversary No. 01-3112(LMW).

United States Bankruptcy Court, D. Connecticut.

January 11, 2002.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Steven W. Varney, Brown, Paindiris & Scott, LLP, Glastonbury, CT, for plaintiff.

Thanh V. Truong, Hamden, CT, defendant pro se.

MEMORANDUM OF DECISION RE: MOTION FOR ENTRY OF DEFAULT JUDGMENT

LORRAINE M. WEIL, Bankruptcy Judge.

The matter before the court is American Express Centurion Bank's ("American Express") Motion For Entry of Default Judgment (Doc. I.D. No. 7, the "Motion") pursuant to which American Express seeks entry of judgment against the above-captioned debtor (the "Debtor") to the effect that a $4,749.58 credit card debt owing to American Express is nondischargeable pursuant to Bankruptcy Code § 523(a)(2).¹

I. PROCEDURAL BACKGROUND

The Debtor commenced this chapter 7 case by petition filed on May 1, 2001 (the "Petition Date"). August 6, 2001 was set as the last date upon which complaints seeking a determination of the nondischargeability of certain claims (including Section 523(a)(2) claims) could be timely filed. The Debtor received his chapter 7 discharge on August 21, 2001.

On August 2, 2001, American Express filed the complaint (the "Complaint") that initiated this adversary proceeding. The Debtor is pro se in this proceeding and has failed to plead or otherwise defend.² In response to a motion filed by American Express (Doc. I.D. No. 5), the Clerk entered a default against the Debtor herein on October 23, 2001 (Doc. I.D. No. 6). American Express filed the Motion on November 7, 2001. The Motion was supported by, among other things, the Affidavit of American Express Centurion Bank in Support of Its Motion For Entry of Default Judgment (included in Doc. I.D. No. 7, the "Affidavit"). A hearing on the Motion on notice to the Debtor was held on November 28, 2001. The Debtor did not attend that hearing. At the conclusion of the hearing, the court took the matter under advisement. After due deliberation, the court is now prepared to issue this memorandum of decision.

II. DEFAULT JUDGMENT STANDARD

Entry of judgment by default is controlled by Rule 55 of the Federal Rules of Civil Procedure (made applicable here by Rule 7055 of the Federal Rules of Bankruptcy Procedure). A debtor who is named as a defendant in an adversary proceeding that arises in the bankruptcy case is always deemed to have appeared in the adversary proceeding for purposes of Rule 55(b)(2) of the Federal Rules of Civil Procedure. Batstone v. Emmerling (In re Emmerling), 223 B.R. 860, 867 (2d Cir. BAP 1997). See also 10A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2686 at 45 (3d ed.1998) (hereafter, "Wright, Miller & Kane") ("In order to ensure defendant an opportunity to defend against plaintiff's application, a court usually will try to find that there has been an appearance by defendant, which has the effect of requiring that notice of the application for a default be given.").

Although the Debtor has failed to plead, a motion for judgment by default is not granted as a matter of right. Rather, the court in its discretion may conduct a hearing "requiring some proof from the Plaintiff of the facts that must be established in order to determine the Debtor's liability." Wright, Miller & Kane § 2688 at 60-61. See also Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir.1993) ("As a general rule a . . . court should grant a default judgment sparingly . . . when the defaulting party is appearing pro se"). At the court's discretion, such proof may be made by affidavit. See Fed.R.Civ.P. 43(e) (made applicable here by Fed.R.Bankr.P. 9017). Further, "where the allegation is one of fraud, it is appropriate that the court evaluate . . . the evidence to insure that the drastic remedy of a determination of nondischargeability is not entered without the presentation of a prima facie case." United Counties Trust Co. v. Knapp (In re Knapp), 137 B.R. 582, 585 (Bankr.D.N.J.1992). See also General Electric Capital Corp. v. Bui (In re Bui), 188 B.R. 274, 276 (Bankr.N.D.Cal.1995) ("A plaintiff must demonstrate a prima facie case by competent evidence in order to obtain a default judgment."). A plaintiff has made a satisfactory prima facie showing where, from the evidence presented, "a factfinder could reasonably find every element that the plaintiff must ultimately prove to prevail in the action." Fisher v. Vassar College, 114 F.3d 1332, 1336 (2d Cir.1997) (en banc), cert. denied, 522 U.S. 1075, 118 S.Ct. 851, 139 L.Ed.2d 752 and reh'g denied, 523 U.S. 1041, 118 S.Ct. 1341, 140 L.Ed.2d 501 (1998) (abrogated on other grounds by Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000)).

III. FACTUAL BACKGROUND

The following "facts" have been either gleaned by the court from the Debtor's bankruptcy schedules and Statement of Financial Affairs filed with this court (included in Doc. I.D. No. 1, collectively, the "Schedules") or American Express has made prima facie proof of the same pursuant to the Affidavit.³ Accordingly, the following "facts" are deemed established for the purposes of this memorandum.

On or about October 16, 1999, the Debtor completed an application (the "Application") for a "preapproved" American Express Blue Card (the "Card"). In the Application, the Debtor represented yearly income of $40,000.00 and "Additional Personal Income" (from employment as a "temp") of $9,600.00. (Affidavit ¶ 35 and Exhibit B.) The Debtor returned the Application to American Express who (after a credit check) issued the Card to and opened a corresponding account (the "Account") for the Debtor sometime in October, 1999. (Affidavit ¶ 7.)⁴ At all relevant times, the "Total Credit Line" available to the Debtor in respect of the Account was $2,000.00. (Exhibit A.)

For the Period from at least April of 2000 through January 6, 2001, the Debtor apparently used the Card without incident and made regular payments thereon equal to or exceeding the required minimum monthly payment. (See Affidavit ¶ 28.)⁵ On the Account statement "closing date" of January 3, 2001, the Account balance was $1,338.74 and the Account was not in default. (See Exhibit A.) From January 7, 2001 through January 30, 2001, the Debtor incurred approximately $625.00 in charges as a result of what appears to be relatively unexceptional Card use. (See id.) The Debtor then commenced what can best be described as a singular seven-day period (the "Relevant Period") described immediately below.

On January 31, 2001, a purported payment (the "First Payment") by check in the amount of $1,828.60 was posted to the Account. (Exhibit A.) On February 1, 2001, the following charges were posted against the Account: a $404.58 charge at Home Depot for "building supplies"; a second charge at Home Depot in the amount of $442.32 also for "building supplies"; and a cash advance in the amount of $313.99 at the Mohegan Sun Resort Casino in Uncasville, Connecticut. (Id.) On February 2, 2001, the following charges were posted against the Account: a $582.99 charge at Circuit City for "electronics/appliances"; and a $54.53 charge at Petco for "pets/supplies". (Id.) On February 3, 2001, a $61.25 cash advance was charged against the Account. (Id.) On February 4, 2001, the First Payment was reversed because the Debtor's check was returned by the payor bank for insufficient funds. (Affidavit ¶ 19 and Exhibit A.) However, on the same date, a purported payment (the "Second Payment") in the amount of $1,952.67 was posted to the Account. The source of the Second Payment was a "phone payment using Express Cash". (Id.)⁶ On February 6, 2001, the following charges were posted against the Account:

                Charge Amount     Description
                $500.00           charge for "food/beverage" at Ming
                                  Palace
                $300.94           charge for "Coach handbags" at
                                  Macy's at Herald Square New
                                  York
                $860.59           charge for "fine watches" at Macy's
                                  at Herald Square New York
                $ 31.73               charge for "building supplies"
                                      at Home Depot
                $100.00           cash advance (New York)
                $ 62.00               cash advance (New York)
                

(Exhibit A.) Slightly more than a week after the conclusion of that singular week (on February 14, 2001), the Second Payment was reversed with the notation "returned check/declined bank transactions". (Id.) The Debtor never purported to make another payment on the Account. As of the Petition Date, the balance on the Account was $5,997.24 (see Affidavit ¶ 9), $3,714.92⁷ of which was incurred during the Relevant Period. On the Account statement "closing date" of February 4, 2001, the Account was $1,856.78 over the credit limit (giving effect to the cancellation of the First Payment). (See Exhibit A.) On the statement "closing date" of March 4, 2001, the Account was $3,859.21 over its credit limit. (Id.)

As noted above, the Debtor commenced this case less than ninety days later. The record does not disclose when the Debtor first contacted an attorney to discuss the commencement of this case. In his sworn Schedules, the Debtor declared that he had no current income as of the Petition Date and stated that he did not expect any improvement in that situation during the upcoming year. (See Schedules (ScheduleI — Current Income of Individual Debtor(s)).)⁸ The Schedules further stated that the Debtor had had no income for the period January 1, 2001 through the Petition Date, no income for calendar year 2000, and (perhaps) $5,000 in income for calendar year 1999. (See Schedules (Statement of Financial Affairs, Item 1, 2).)⁹ In the Schedules, the Debtor listed assets totaling approximately $85,000 in value,¹⁰ no secured or priority claims and approximately $140,000 in...