First National Bank of Oneida, N.A. v. Brandt

Filing 50

OPINION AND ORDER denying 46 MOTION to Set Aside Default, Response to Motion for Default Judgment and Memorandum of Law in Support Thereof 41 Clerk's Entry of Default , denying as moot 45 MOTION to extend time to and delay entry of default judgment. The Defendant shall respond to the motion for final default judgment on or before January 31, 2017. Signed by Judge Elizabeth A. Kovachevich on 1/17/2017. (EJJ)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

FIRST NATIONAL BANK OF ONEIDA,
N.A.,
Plaintiff,

v.

Case No: 8:16-cv-51-T-17MAP

DONALD H. BRANDT,
Defendant.
ORDER DENYING MOTION TO VACATE CLERK'S DEFAULT

This cause comes before the Court pursuant to the Defendant's Motion to Set

Aside Default, Response to Motion for Default Judgment and Memorandum of Law in
Support Thereof (Doc. No. 46) (the "Motion to Vacate") filed by the Defendant, Donald
H. Brandt (the "Defendant" or "Brandt"), and the Plaintiff's Response to Defendant's

Motion to Set Aside Default (Doc. No. 48) (the "Response") filed by the Plaintiff, First
National Bank of Oneida, N.A. (the "Plaintiff'' or "FNBO"). For the reasons set forth
below, the Motion to Vacate is DENIED.

I.

Introduction

"'(he Court must decide whether there is good cause to set aside a clerk's default
entered against the Defendant. In determining whether good cause exists to warrant
setting aside a default, courts examine several factors, including whether the Defendant
has a potentially meritorious defense to the suit. Because defenses relating solely to the
issue of damages, as opposed to liability, do not constitute meritorious defenses for
purposes of setting aside a default, and the Defendant has not asserted any potentially
meritorious defenses bearing on his liability for the Plaintiff's claims, the Defendant has

failed to demonstrate that good cause exists to set aside the default. Accordingly, the
Motion to Vacate will be denied.

II.

Background
A.·

FNBO loans money to Brandt; Brandt files for bankruptcy and later
defaults under his restructured obligations with FNBO.

The claims in this case arise from loans that FNBO made to Brandt in 2007 and
2009 (the "FNBO Loans") secured by liens on real property located in Tennessee and
Texas. Subsequent to the making of those loans, Brandt filed a voluntary petition under
Chapter 11 of the Bankruptcy Code in the Middle District of Florida, Case No. 8:09-bk16166-CPM (the "Bankruptcy Case") on July 29, 2009. In connection with confirmation
of Brandt's Chapter 11 plan of reorganization, Brandt issued FNBO a promissory note in
the amount of $142,353.65 (the "Plan Note") to compensate FNBO for unpaid interest
that had accrued during the Bankruptcy Case. The Bankruptcy Court entered an order
confirming Brandt's plan on December 31, 2011 (the "Confirmation Order"). Following
confirmation of the plan, the Plaintiff alleged that Brandt defaulted on the Plan Note and
FNBO Loans. The Bankruptcy Court granted FNBO stay relief to pursue its in rem rights
against Brandt, which resulted in foreclosure sales of the properties securing Brandt's
obligations. The sales of Brandt's properties apparently resulted in a deficiency, so FNBO
sought and obtained stay relief to file this case to pursue its in personam rights, if any,
against Brandt.

B.

FNBO sues to recover a deficiency judgment under the FNBO Loans
and Plan Note.

Following the Bankruptcy Court's order, FNBO commenced this case by filing a
complaint (Doc. No. 1) (the "Complaint") against Brandt on January 8, 2016. Despite
having been pending for more than one year, this action has yet to progress beyond the

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pleadings' stage. Much of the delay has been caused by uncertainty regarding the scope
of Brandt's remaining obligations to FNBO under the FNBO Loans and Plan Note.
Pursuant to orders entered on May 13, 2016 and October 25, 2016 (Doc. Nos. 21 and
32) (the "Dismissal Orders"), the Court resolved that issue by holding that Brandt's in
personam obligations to FNBO consist solely of his obligations under the Plan Note. In

other words, the Court dismissed FNBO's claims to the extent it sought a deficiency
judgment under the FNBO Loans, and restricted FNBO's recovery to any amounts owed
under the Plan Note. Consistent with the latter of the Dismissal Orders, the Plaintiff filed
a second amended complaint (Doc. No. 33) (the "SAC"), seeking to recover the amounts
owed under the Plan Note only, on October 31, 2016.

C.

Brandt's local counsel moves to withdraw from the case; the
assigned Magistrate Judge grants the motion subject to certain
requirements.

Four days after the Plaintiff filed the SAC, the Defendant's local counsel, Joel S.
Treuhaft, filed a motion to withdraw (Doc. No. 34) (the "Motion to Withdraw"), citing
irreconcilable differences with his client. Through the Motion to Withdraw, Mr. Treuhaft
requested that the Court "stay these proceedings 15 days from the entry of the order
granting this Motion, to allow the Defendant to obtain new counsel."

The Plaintiff

responded to the Motion to Withdraw on November 7, 2016, and noted that staying the
proceedings would disrupt the parties' mediation already scheduled for November 11,
2016. The Plaintiff further noted that the Defendant was still represented by separate pro
hac counsel, John Phillip Newton, so there was no need for the case to be stayed pending
retention of additional counsel. On November 15, 2016, the Magistrate Judge granted
the Motion to Withdraw, ordered Brandt to obtain new local counsel within 14 days, and

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warned Brandt that failure to do so would result in the termination of Brandt's pro hac
counsel, Mr. Newton (Doc. No. 37) (the "Withdrawal Order").

D.

Brandt fails to respond to the SAC within the time permitted.

Pursuant to Federal Rule of Civil Procedure Rule 15(a)(3), the Defendant had 14
days from service of the SAC to respond. Since the Plaintiff served Brandt with the SAC
on October 31, 2016, the deadline to respond to the SAC was November 14, 2016.
Adding three days to account for electronic service under the former version of Rule 6(d),
the latest possible deadline for Brandt to respond to the SAC appears to have been
November 17, 2016.
Nevertheless, to the extent that the Withdrawal Order can be read to have granted
Brandt a 15 day stay to retain substitute local counsel, the case would have been stayed
for a period of 15 days beginning on November 15, 2016. The 15 day period would have
expired on November 30, 2016; assuming that Brandt would still be entitled to two
additional days to respond to the SAC (Brandt would have still had two days to respond
to the SAC when the case was stayed on November 15, 2016, assuming an original
response deadline of November 17, 2016), the latest possible deadline for the Defendant
to respond to the SAC was December 2, 2016.
A review of the docket reflects that Brandt did not respond to the SAC with the time
permitted.

E.

The Plaintiff moves for a Clerk's Default and final default judgment; a
Clerk's Default is entered against Brandt.

On November 23, 2016, given that it appeared the Defendant had failed to timely
respond to the SAC, the Court entered an order to show cause why the case should not
be dismissed against FNBO for failing to promptly move for a clerk's default. (Doc. No.

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39) (the "Show Cause Order"). The docket reflects that both parties were served with
the Show Cause Order on November 23, 2016, and that no activity occurred until
November 30, 2016, when the Plaintiff moved for entry of a clerk's default. A Clerk's
Default was entered on December 1, 2016, and the Plaintiff moved for entry of a final
default judgment (Doc. No. 42) on December 5, 2016.
F.

Brandt seeks to vacate the Clerk's Default.

Eight days after the Plaintiff moved for a final default judgment, on December 13,
2016, Brandt filed a prose "Motion to Extend Time and Delay Entry of Default Judgment"
(Doc. No. 45) (the "Motion to Extend"). Through the Motion to Extend, Brandt seeks
additional time to respond to the motion for final default judgment pending approval of his
substitute counsel's employment application by the Bankruptcy Court. On December 19,
2016, the Defendant, through his substitute counsel, filed the Motion to Vacate, seeking
to vacate the Clerk's Default. In support, the Defendant attaches a proposed Answer and
Defenses (the "Answer and Defenses"), and claims that good cause exists to warrant

vacating the Clerk's Default based on (1) the short period of time that elapsed between
expiration of the deadline to respond to the SAC and the filing of the Motion, (2) the issues
surrounding the withdrawal of the Defendant's prior counsel, and (3) the lack of any
prejudice suffered by the Plaintiff. The Plaintiff filed its Response on December 30, 2016,
arguing that Brandt had no excuse for failing to timely respond to the SAC, as he was
represented by counsel through November 29, 2016, and that the Answer and Defenses
do not put forth any meritorious defenses to liability under the Plan Note.

Ill.

Discussion
A district court may set aside the entry of a Clerk's Default "for good cause."

Lorenzo v. Wells Fargo Bank, N.A. (In re Lorenzo), 606 F. App'x 548, 551 (11th Cir. 2015).

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"Good cause is not susceptible to a precise formula." Id.

Rather, courts consider

numerous factors to determine whether a litigant has shown good cause to set aside an
entry of default. Id. Those factors include (1) whether the defaulting party presented a
meritorious defense to the suit~ (2) whether the failure to act was willful; (3) whether the
non-defaulting party would suffer prejudice as a result of the default being set aside; (4)
whether the public interest is implicated; (5) whether the defaulting party suffered
significant financial loss, and (6) whether the defaulting party acted promptly to correct
the default. Id. "These factors are not 'talismanic,"' and the goal behind them is to identify
whether circumstances warrant a finding of good cause to set aside the default. Id.
Importantly, "[c]ourts have found the lack of a meritorious defense particularly important
in assessing whether good cause exists to set aside an entry of default." Id. "This makes
good sense: If a defendant can offer no meritorious defense to a claim, litigating that claim
is just a longer road to the same destination reached by the entry of default." Id.
Here, a review of the Motion to Vacate demonstrates that the Defendant lacks a
meritorious defense to the SAC. The Defendant only raises three affirmative defenses:
(1) improper valuation of FNBO's collateral; (2) failure to comply with Brandt's plan of
reorganization in the Bankruptcy Case; and (3) failure to apply collateral sources of
recovery, such as mortgage insurance or other rights of setoff. Of these, the first and
third relate solely to the issue of damages, not to Brandt's ultimate liability in the action.
This is an important distinction because defenses relating solely to the issue of damages,
as opposed to liability, do not cohstitute meritorious defenses for purposes of setting aside
a default. See Jeri-Jo Knitwear, Inc. v. E.S. Sutton, Inc., 1995 WL 714367, at *3 (S.D.N.Y.
Dec. 1, 1995). Moreover, while the second affirmative defense does go to the merits of

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FNBO's claims, the Court previously ruled that the Plan Note constitutes a post-petition
obligation not subject to the terms of Brandt's plan of reorganization pertaining to general
unsecured claims. See (Doc. No. 21, at 6-7).

Thus, the Court has already rejected

Brandt's second affirmative defense as it pertains to FNBO's claims under the Plan Note.
Accordingly, Brandt has failed to put forward any meritorious defense as to liability under
the Plan Note and, as a result, the first (and most important factor) cuts strongly in favor
of the Plaintiff.
Turning to the remaining factors, the Court does not believe that the Defendant
has identified sufficient facts to warrant setting aside the Clerk's Default. As to the first
factor, there is no indication that Brandt's failure to respond to the SAC was anything
other than willful. As evidenced by the motion to extend time he filed on December 13,
2016, Brandt has demonstrated that he is more than capable of filing prose papers and
motions. Nevertheless, Brandt failed to respond to the SAC even after having the issue
brought to his attention through the Show Cause Order. Brandt's failure to respond to the
SAC after being put on notice that his response was overdue demonstrates a willful failure
to act on the part of the Defendant. Turning to the third and fifth factors, while the Court
does not believe the Plaintiff would suffer significant prejudice as a result of setting aside
the Clerk's Default, it is also worth noting that the Defendant does not stand to suffer any
significant financial loss if the Motion is denied. This is because the Defendant may still
raise any defense bearing on the amount of damages in response to the motion for final
default judgment. Finally, while the Court will concede that the Defendant moved quickly
in seeking to set aside the default, this does not outweigh the public's interest in the
prompt and efficient resolution of this case. Simply put, both parties will benefit if the

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remaining damages-related issues are resolved through a truncated proceeding on the
motion for final default judgment.

Reopening this case for discovery and protracted

motion practice will do little to advance the private or public interests at stake in this action.
IV.

Conclusion

Accordingly, it is
ORDERED that the Motion to Vacate is DENIED, and the Motion to Extend is
DENIED AS MOOT.

It is further ORDERED that Brandt shall respond to the Plaintiff's motion for final
default judgment on or before January 31, 2017, at which point the matter will be referred
to the assigned Magistrate Judge for a report and recommendation.
DONE and ORDERED in Chambers, in Tampa, Florida this 17th day of January,

2017.

Copies furnished to:
Counsel of Record

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