FIRST CITIZENS BANK AND TRUST COMPANY INC v. WASATCH CORP et al

Filing 23

ORDER denying 19 Motion to Set Aside Default Judgment. Ordered by US DISTRICT JUDGE CLAY D LAND on 10/22/2015. (vac)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
ATHENS DIVISION
FIRST CITIZENS BANK AND TRUST
COMPANY, INC.,

*
*

Plaintiff,
*
vs.

CASE NO. 3:14-CV-104 (CDL)
*

WATSATCH CORP., JOHN W. COOK,
INA QUEEN COOK, JON B. COOK,
and ELAINE P. COOK,

*
*

Defendants.
O R D E R
Defendants

failed

to

answer

Plaintiff’s

complaint.

A

default judgment was entered that Defendants now seek to set
aside.

Because Defendants cannot establish any of the essential

elements for setting aside a default judgment, their motion (ECF
No.

19)

is

denied.

Because

Defendants’

motion

is

arguably

frivolous, their counsel shall show cause within fourteen days
of today’s order why counsel, pursuant to Rule 11 of the Federal
Rules of Civil Procedure and other applicable law, should not be
required to pay Plaintiff’s attorneys’ fees incurred in having
to respond to this motion.
Defendants owed a debt to Plaintiff on a promissory note.
Defendants subsequently filed for bankruptcy protection under
Chapter

11

of

the

U.S.

Bankruptcy

Code.

During

those

proceedings, the bankruptcy court approved a reorganization plan

that modified Plaintiff’s promissory note.
on

payments

owed

pursuant

modified promissory note.
collect

on

the

note.

to

the

Defendants defaulted

reorganization

plan

and

Plaintiff filed the present action to
When

Defendants

failed

to

answer

the

complaint within the time required, Plaintiff obtained a default
judgment on March 3, 2015.
approach,

Defendants

Consistent with their previous tardy

waited

six

months

to

file

the

present

motion to set aside the default judgment.
DISCUSSION
Defendants seek to set aside the default judgment based on
their

excusable

neglect

in

failing

to

answer

the

complaint.

Although excusable neglect may authorize the setting aside of a
default judgment, Fed. R. Civ. P. 60(b)(1), the defaulted party
must show that: “(1) it had a meritorious defense that might
have affected the outcome; (2) granting the motion would not
result in prejudice to the non-defaulting party; and (3) a good
reason

existed

for

failing

to

reply

to

the

complaint.”

Worldwide Web Sys., Inc. v. Feltman, 328 F.3d 1291, 1295 (11th
Cir. 2003) (quoting Fla. Physician’s Ins. Co. v. Ehlers, 8 F.3d
780,

783

(11th

Cir.

1993)

(per

curiam)).

Defendants

have

established none of these elements.
First, Defendants have no meritorious defense, and their
argument that they do is arguably frivolous.

They contend that

the bankruptcy reorganization plan required Plaintiff to provide

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Defendants’ bankruptcy counsel with actual written notice of any
missed payment on the note and that Plaintiff failed to provide
such notice.

Defendants’ argument misrepresents the contents of

the reorganization plan.

No such notice provision was included

in the final plan approved by the bankruptcy court.
10.3

of

Defendants’

proposed

plan

did

provide

Section

that

“written

notices [of Defendants’ failure to make timely payment on the
note] shall be given to the Reorganized Debtors in accordance
with the notice provisions in Section 10.10.”

Def.’s Mem. in

Supp. of Mot. to Set Aside Default J., Ex. A, First Am. Joint
Plan of Reorganization § 10.3, ECF No. 21.
instructs

that

notice

bankruptcy counsel.

should

be

Id. § 10.10.3.

Section 10.10 then

provided

to

Defendants’

But the bankruptcy court’s

order confirming the plan of reorganization states “Section 10.3
of

the

Plan

is

deleted

and

replaced

eliminating any notice requirement.

with”

a

new

section

Pl.’s Resp. to Def.’s Mot.

to Set Aside Default J., Ex. A, Order Confirming First Am. Joint
Plan

of

Reorganization

approved

plan

Defendants

now

did

4,

not

rely

on.

ECF

No.

include

22-2.

the

Moreover,

Thus,

notice

the

final

provision

Defendants

that

proposed

the

modification in response to Plaintiff’s objection to the notice
provision.
required

Id. at 2.

Plaintiff

Defendants’ counsel.

Nothing in the final reorganization plan

to

provide

written

notice

of

default

to

Plaintiff did send a demand letter to each

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Defendant informing them of the default on the note.

Compl. Ex.

E, Letters from Marion B. Strokes (Oct. 10, 2014), ECF No. 1.
Thus, Defendants’ suggested defense to the collection action is
non-meritorious and arguably frivolous.
Second,

the

substantial
judgment.

Court

prejudice

finds

if

that

Plaintiff

the

Court

set

would

suffer

the

default

aside

Defendants waited until six months after the judgment

was entered to even file a motion to set aside the judgment.
that

time,

Plaintiff

has

engaged

in

post-judgment

In

discovery,

foreclosed on the property that secured the note, and brought
garnishment proceedings in state court.

These efforts would all

be

set

for

naught

if

the

Court

were

to

aside

the

default

judgment.
Finally,

Defendants

have

not

established

explanation for failing to answer the complaint.
excuses.

First,

Defendants

blame

Plaintiff

a

reasonable

They offer two
for

failing

to

notify their bankruptcy counsel that they were in default, even
though

Plaintiff

explained.

had

no

obligation

to

do

so,

as

previously

Second, they maintain that some of the Defendants

were elderly and/or ill at the time that they received notice of
default and thus should be excused from following the law that
required

them

consequences.

to

file

a

timely

answer

or

suffer

the

legal

The Court is aware of no binding precedent that

excuses a party from filing an answer to a complaint solely

4

because the party was ill or feeble.

Nor does anything in the

present record suggest that the parties were legally incompetent
during

the

time

that

their

answers

were

due.

Defendants’

excuses do not constitute reasonable neglect.
CONCLUSION
Defendants

have

failed

to

demonstrate

that

the

judgment should be set aside under Rule 60(b)(1).

default

The Court

therefore denies Defendants’ motion (ECF No. 19).
Finding that Defendants’ motion to set aside the default
judgment

is

arguably

frivolous

under

Rule

11

and

other

applicable law, the Court orders Defendants’ counsel to show
cause within fourteen days of today’s order why counsel should
not be personally sanctioned and required to pay Plaintiff’s
attorneys’ fees incurred for having to respond to the present
motion.

Plaintiff shall submit evidence of its attorneys’ fees

incurred

in

having

to

respond

to

the

motion

to

set

aside

judgment within seven days of today’s order.
IT IS SO ORDERED, this 22nd day of October, 2015.

s/Clay D. Land
CLAY D. LAND
CHIEF U.S. DISTRICT COURT JUDGE
MIDDLE DISTRICT OF GEORGIA

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