Otoe County Nat. Bank v. W & P Trucking, Inc., 84-1200

• Decision Date: 11 February 1985
• Docket Number: No. 84-1200,84-1200
• Parties: , Bankr. L. Rep. P 70,256 OTOE COUNTY NATIONAL BANK, Plaintiff-Appellee, v. W & P TRUCKING, INC., Charles E. Froelich, William J. Froelich, Jr., Defendants, and Jack D. Cramer, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 881

754 F.2d 881

40 Fed.R.Serv.2d 1482, Bankr. L. Rep. P 70,256

OTOE COUNTY NATIONAL BANK, Plaintiff-Appellee, v. W & P TRUCKING, INC., Charles E. Froelich, William J.

Froelich, Jr., Defendants,

and

Jack D. Cramer, Defendant-Appellant.

No. 84-1200.

United States Court of Appeals, Tenth Circuit.

Feb. 11, 1985.

James S. Matthews, Jr., Oklahoma City, Okl., for defendant-appellant.

Michael F. Stake of Sparks & Stake, P.C., Woodward, Okl., for plaintiff-appellee.

Before BARRETT, BREITENSTEIN and McWILLIAMS, Circuit Judges.

BREITENSTEIN, Circuit Judge.

After examining the briefs and the appellate record, this three-judge panel has determined unanimously that oral argument would not be of material assistance in the determination of this appeal. See Fed.R.App.P. 34(a); Tenth Cir.R. 10(e). The cause is thereby submitted without oral argument.

In this diversity action Otoe County National Bank, Otoe, a Nebraska resident, sued W & P Trucking, Inc., W & P, an Oklahoma resident, under a security agreement containing nineteen leases of trucks and their equipment. By the terms of the leases W & P was required to pay to Otoe a rental over a 48-month period. The payment was guaranteed by Cramer and two others, all Oklahoma residents. A default judgment was entered against Cramer. His motion to vacate the default was denied and he appeals. We affirm and remand with directions.

On or about May 26, 1982, W & P executed nineteen leases on trucks and their equipment to Otoe. Cramer, Charles E. Froelich, and William J. Froelich, Jr., each guaranteed payment of $1,217,720.00 to Otoe. W & P failed to make the monthly rental payments. On April 28, 1983, Otoe filed suit against W & P, Cramer, and the two Froelichs.

Cramer does not contest that he was validly served with summons and complaint on May 4, 1983, and given twenty days in which to answer. On May 9, 1983, W & P filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. On May 11, 1983 at the hearing on Oteo's application for pre-judgment replevin of the collateral underlying the leases, the trial court ordered, R. 194:

"NOW, on this 11th day of May, 1983, comes on for hearing the Application of Plaintiff for this Court's Order for Prejudgment Delivery of the personal property described in Plaintiff's Complaint. Plaintiff appeared by and through its attorneys, Sparks, Liles & Stake, P.C., and the Court was duly advised by said attorneys that the Defendant, W & P Trucking, Inc., has filed its Voluntary Petition in Bankruptcy under Chapter 11 of Title 11 of the United States Code.

The Court finds that pursuant to the automatic stay provisions of 11 U.S.C. Sec. 362(a) further action on behalf of Plaintiff is stayed until further notice.

IT IS THEREFORE ORDERED that this matter be held in abeyance until further [sic] of the Court."

On June 24, 1983, Otoe filed a motion for default judgment against the Froelichs and Cramer for failure to answer the complaint. On June 27, 1983, the trial court granted Otoe's motion for default judgment and awarded Otoe $1,217,720.00 plus $36,000.00 in attorney's fees and interest against Cramer and the Froelichs, R. 203.

On October 12, 1983, Otoe applied for an Asset Hearing Order and on November 17, 1983, Cramer was required to appear in court and show cause why he should not be required to pay the judgment entered against him. On December 12, 1983, Cramer moved to vacate the default judgment pursuant to Fed.R.Civ.P. 60(b). His motion was denied on January 12, 1984. R. 313-321. Cramer now appeals.

Cramer argues that the May 11, 1983, order stayed Otoe from further action against any defendant, not just W & P. He bases his argument on the failure of the order to specify to which of the four defendants it applied and the phrase holding the matter in abeyance. He also argues that the automatic stay should be interpreted to extend to guarantors of a bankruptcy debtor.

Section 362(a) provides:

"Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title ... operates as a stay applicable to all entities, of--(1) the commencement or continuation, including the issuance or continuation, including the issuance or employment of process, of a judicial, administrative, or other proceeding against the debtor that was or could have commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title...." (Emphasis supplied.)

Section 362(a) automatically stays proceedings against the debtor only and not co-debtors. Williford v. Armstrong World Industries, Inc., 4 Cir., 715 F.2d 124, 126-127; Wedgeworth v. Fibreboard Corp., 5 Cir., 706 F.2d 541, 544. The May 11, 1983, order stayed proceedings against W & P only and not against Cramer. Cramer's reliance on In Re: Johns-Manville Corp., 7 C.B.C.2d 1042, 26 B.R. 420 is misplaced. In that case a debtor was granted an automatic stay under Sec. 362(a). Johns-Manville sought to extend the stay under 11 U.S.C. Sec. 105 to preclude all suits against Manville's employees, agents and related entities. Neither W & P nor Cramer sought relief under Sec. 105 in this case.

Cramer argues that the default judgment should be set aside because he was not given written notice of the application for default judgment as required by Fed.R.Civ.P. 55(b)(2), which provides:

"If the party against whom judgment by default is sought has appeared in the action, he (or, if appearing by representative, his representative) shall be served with written notice of the application for judgment at least 3 days prior to the hearing on such application."

We agree with the trial court that there was no appearance made by the defendant or anyone acting in his behalf and, consequently, notice was not required.

Cramer says that his failure to answer the complaint was due to mistake, inadvertance, or excusable neglect and, hence, he was entitled to relief under Rule 60(b). He argues that it was his understanding, and that of his attorneys, Eugene Pieper and Douglas Quinn, both of whom were associated with Robert Bailey...