Keeley v. Grider

Filing 8

MEMORANDUM OPINION & ORDER by Judge John G. Heyburn, II on 2/3/14: Appellants appeal is DENIED and this case is DISMISSED WITH PREJUDICE. cc:counsel, USBC (JBM)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
CIVIL ACTION NO. 13-CV-1164-H

KIM C. KEELEY

APPELLANT

V.
JAMES ALLEN GRIDER

APPELLEE

MEMORANDUM OPINION AND ORDER
This is an appeal from the order of the Bankruptcy Court dated September 30, 2013,
denying a motion to modify a final judgment pursuant to Rule 60(a), Federal Rules of Civil
Procedure. The Appellant here is a creditor to the bankruptcy debtor. In August 2012, Appellant
instituted an adversarial proceeding against the Debtor-Appellee seeking a monetary judgment of
$300,000 plus interest and a declaration that the debt was nondischargeable under 11 U.S.C.A. §
523(a)(1)(A) due to fraud in its obtainment. Debtor-Appellee received summons yet failed to
answer. In October 2012, Appellant obtained an Entry of Default and subsequently a Judgment
by Default entitling her to $384,375.00. Neither the judgment nor the affidavit required to obtain
it referred to the debt as non-dischargeable. Nearly one year later, in August 2013, DebtorAppellee received discharge in bankruptcy and Appellant sought a correction in the default
judgment to deem the debt non-dischargeable.
On an appeal from a bankruptcy court, a district court applies the “clearly erroneous”
standard of review to findings of fact, and reviews questions of law de novo. In re Gardner, 360
F.3d 551, 557 (6th Cir. 2004).

The parties have set forth the relevant circumstances. First, there seems to be no question
that the final result in Appellant’s adversarial proceeding is precisely as the Bankruptcy Court
intended. Indeed, the clerk of the court entered a default monetary judgment at Appellant’s
request, and exactly as the proposed order requested. The Bankruptcy Court declined to correct it
on the grounds that to change a judgment from a monetary one to also include declaratory relief
would affect the substantive rights of the parties. It emphasized, “Rule 60(a) allows a court to
correct records to show what was done. It is not designed to be used to change a judgment to
reflect what should have been done.” DN 1 at 421 (internal quotation omitted).
This Court agrees with Appellee that it would have been inappropriate for the Bankruptcy
Court to add declaratory relief to the default judgment. To do so would have been beyond the
scope of relief allowed under Rule 60. Moreover, the Court agrees that because Appellee did not
obtain a judgment in fraud, she could not add such relief under Rule 60.
A separate concept supports the Bankruptcy Court’s decision and its effect. Appellant
requested default judgment pursuant to Fed. R. Civ. P. 55(b)(1): “If the plaintiff’s claim is for a
sum certain . . . the clerk–on plaintiff’s request, with an affidavit showing the amount due–must
enter judgment for that amount . . ..” Declaratory relief that a debt is nondischargeable is plainly
not a claim for a sum certain or a sum that can be computed. A declaratory judgment could have
been entered only by the court–not the clerk–pursuant to Rule 55(b)(2), which states, “In all
other cases, the party must apply to the court for a default judgment.” Rule 55 applies in its
entirety to adversary proceedings, see Fed. R. Bankr. P. 7055, and under this Court’s reading of
rule, Appellant simply did not proceed under the appropriate prong of the rule.1

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Appellant

This distinction is not as technical as it may appear. Rule 55(b)(2) provides for hearings “when, to enter or
effectuate judgment, it needs to: . . . (C) establish the truth of any allegation by the evidence; or (D) investigate any
other matter.” A declaratory judgment in Plaintiff’s favor would likely have required such a hearing; the court at the
very least would have needed to test whether Appellant pled the fraud she alleged with the requisite particularity

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argues that regardless of whether one proceeds under 55(b)(1) or 55(b)(2), there is but one form
to request judgment by default and it does not require applicants seeking monetary relief to
designate a debt as “nondischargeable.” However, boilerplate forms necessarily require the use
of substantive judgment to complete them; Appellant demonstrated this understanding by
modifying the form to include language to grant monetary judgment in October 2012.
At best, the Bankruptcy Court had some discretion to determine whether the original
monetary default judgment was intended to include a more specific judgment in fraud or should
have been interpreted in that manner. This Court concludes that Bankruptcy Court acted within
its discretion to deny the request for an amended or corrected judgment.
Being otherwise sufficiently advised,
IT IS HEREBY ORDERED that Appellant’s appeal is DENIED and this case is
DISMISSED WITH PREJUDICE.
This is a final order.

February 3, 2014

cc:

Counsel of Record

before entering judgment in Appellant’s favor on the dischargeability issue. See, e.g., In re Mankins, 2009 WL
1616012, at *2 (analyzing creditor’s motion for default judgment under Fed. R. Civ. P. 55(b)(2) and noting, “Where
the plaintiff has alleged fraud, the Court is required to evaluate the evidence to ensure that a prima facie case has
been made.”) (internal citation omitted).

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