Tripodi v. Welch, 14–4084.

• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)
• Citation: 810 F.3d 761
• Docket Number: No. 14–4084.,14–4084.
• Parties: Robert C. TRIPODI, Jr., an individual and citizen of California, Plaintiff–Appellee, v. Nathan WELCH, an individual and citizen of Utah, Defendant–Appellant, and Capital Concepts, L.L.C., a Utah limited liability company; Blair S. Arnell, an individual and citizen of Utah ; Nathan Arnell, an individual and citizen of Utah ; Prime West Jordanelle, L.L.C., a Utah limited liability company; PWJ HOLDINGS, a Utah limited liability company; Oil Well Properties, L.L.C., a Utah limited liability company; John Does I–X, Defendants.
• Decision Date: 13 January 2016

810 F.3d 761

Robert C. TRIPODI, Jr., an individual and citizen of California, Plaintiff–Appellee,
v.
Nathan WELCH, an individual and citizen of Utah, Defendant–Appellant,
and
Capital Concepts, L.L.C., a Utah limited liability company; Blair S. Arnell, an individual and citizen of Utah ; Nathan Arnell, an individual and citizen of Utah ; Prime West Jordanelle, L.L.C., a Utah limited liability company; PWJ HOLDINGS, a Utah limited liability company; Oil Well Properties, L.L.C., a Utah limited liability company; John Does I–X, Defendants.

No. 14–4084.

United States Court of Appeals, Tenth Circuit.

Jan. 13, 2016.

810 F.3d 762

Submitted on the briefs:^*

810 F.3d 763

Arnold Richer and Patrick F. Holden of Richer & Associates, P.C., South Jordan, UT, for Plaintiff–Appellee.

Lawrence D. Hilton of Legal Tender Services, P.L.L.C., Alpine, UT, for Defendant–Appellant.

Before KELLY, McKAY, and PHILLIPS, Circuit Judges.

KELLY, Circuit Judge.

Debtor–Appellant Nathan Welch appeals from the district court's order denying his motion for judgment on the pleadings and determining that a default judgment is nondischargeable in bankruptcy. Tripodi v. Capital Concepts, LLC, No. 2:09–CV–00071–CW, 2014 WL 2967941, at *9 (D.Utah July 1, 2014). Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

Background¹

This case arises out of the failure of the Talisman project, a high-end real estate development project in Wasatch County, Utah. Beginning in 2006, Mr. Welch worked to procure funding for the Talisman project, partly through a relationship with Capital Concepts, LLC, a third-party entity that solicited investors. Appellee Robert Tripodi was one of these investors, eventually putting $1 million into Talisman. To secure Mr. Tripodi's investment, Mr. Welch issued three promissory notes to Capital Concepts, which in turn, assigned the notes to Mr. Tripodi. Initially issued for one-year terms, the notes had an 18 percent annual interest rate, which increased to 24 percent upon default. The notes were personally guaranteed by Mr. Welch and secured by two separate but identical deeds of trust. These deeds secured multiple promissory notes up to $9.125 million and provided equal lien priority for the notes.

Mr. Welch ultimately defaulted on the notes. In January 2009, Mr. Tripodi filed a complaint against Mr. Welch in federal district court, alleging violations of state and federal securities laws. In March, Mr. Welch answered the complaint. In July, Mr. Welch's attorney filed a motion to withdraw as counsel, and the district court granted the motion and allowed Mr. Welch twenty days to engage a new attorney or appear pro se. I Aplt.App. 60–62. For seven months, Mr. Welch did not respond. In March 2010, Mr. Tripodi filed a motion for entry of default. The court granted the motion for entry of default and issued an order to show cause as to why a default judgment should not be entered.See Order, Tripodi v. Capital Concepts, LLC, No. 2:09–CV–00071–CW (D.Utah Mar. 30, 2010), ECF Nos. 37–38. Receiving no response, the district court entered an order granting the entry of default judgment against Mr. Welch in April 2010, providing various remedies, including foreclosure, and reserving on damages, costs, and attorney's fees. I Aplt.App. 90–92.

For the next year, Mr. Tripodi offered proof of damages, costs, and attorney's fees. In May 2011, the court found Mr. Tripodi was owed $729,161.65 plus post-judgment interest. II Aplt.App. 130. Mr.

810 F.3d 764

Welch then filed a voluntary petition for Chapter 7 bankruptcy in August 2011. IV Aplt.App. 414. Nearly two years later, Mr. Tripodi sought relief from the automatic stay. In June 2013, the bankruptcy court granted the motion, see II Aplt.App. 145–49, and Mr. Tripodi petitioned the district court for an entry of final default judgment and determination of post-judgment interest. On July 23, 2013, the district court directed the clerk to enter final monetary judgment. Id. at 172–77. Two days later, the clerk entered a monetary judgment for $729,161.65 with post-judgment interest accruing from May 23, 2011. See Judgment, Tripodi v. Capital Concepts, LLC, No. 2:09–CV–00071–CW (D.Utah July 25, 2013), ECF No. 120.

For the first time in almost four years, Mr. Welch mounted a defense. Mr. Welch opposed a determination of damages and filed a cross-motion to set aside entry of default. The district court denied his motion as untimely and struck the memorandum in opposition. Id. at 197. Each party then filed post-judgment motions. Mr. Tripodi moved for an order determining that the judgment against Mr. Welch was nondischargeable under 11 U.S.C. § 523(a)(19). At the same time, Mr. Welch filed a motion asking the district court to (1) reconsider its refusal to set aside the entry of default under Fed.R.Civ.P. 55(c), (2) set aside the default judgment under Fed.R.Civ.P. 60(b), and (3) enter a judgment on the pleadings in Mr. Welch's favor under Fed.R.Civ.P. 12(c). In February 2014, the district court heard oral arguments on the motions. IV Aplt.App. 329–72. Ruling from the bench, the district court denied Mr. Welch's motion to set aside entry of default and entry of default judgment, and then, in a written order, the district court denied Welch's motion for judgment on the pleadings and granted Mr. Tripodi's motion finding the judgment was nondischargeable. Tripodi, 2014 WL 2967941, at *9.

Discussion

Mr. Welch argues the district court erred in denying his motion for judgment on the pleadings and in granting Mr. Tripodi's motion that the default judgment is nondischargeable under 11 U.S.C. § 523(a)(19). We disagree.

A. Judgment on the Pleadings

Mr. Welch first attacks the default judgment on the merits, claiming that Mr. Tripodi failed to state a cause of action in his initial complaint. In doing so, Mr. Welch chooses not to directly challenge the district court's entry of default judgment against him; rather, he mounts a roundabout attack by questioning the sufficiency of the pleadings. Therefore, although this appeal ostensibly challenges the district court's denial of Mr. Welch's motion for judgment on the pleadings—a decision we typically review de novo—we believe that an unavoidable threshold question is the "validity of the default judgment." See, e.g., Dennis Garberg & Assocs., Inc. v. Pack–Tech Int'l Corp., 115 F.3d 767, 771 (10th Cir.1997). We review a district court's entry of default judgment for an abuse of discretion. Niemi v. Lasshofer, 770 F.3d 1331, 1352 (10th Cir.2014). Because the entry of a default judgment is committed to the sound discretion of the district court, we will not overturn the court's decision "without a clear showing that ... it manifests a clear error of judgment." Olcott, 327 F.3d at 1124.

After a default judgment is handed down, a defendant admits to a complaint's well-pleaded facts and forfeits his or her ability to contest those facts. Id. at 1125 (quoting Jackson, 302 F.3d at 525 ). Here, by...