PANDOLFELLI et al v. ALL POINTS CAPITAL CORP.

Filing 7

OPINION fld. Signed by Judge Faith S. Hochberg on 2/14/12. (sr, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
__________________________________________
IN RE:
:
:
BASIL PANDOLFELLI.
:
:
Debtor.
:
:
__________________________________________:
:
JPMORGAN CHASE BANK, N.A.,
:
:
Appellee,
:
:
v.
:
:
BASIL PANDOLFELLI,
:
Appellant.
:
__________________________________________:
ALL POINTS CAPITAL CORP.,
:
:
Appellee,
:
:
v.
:
:
BASIL PANDOLFELLI,
:
:
:
Appellant.
__________________________________________:
THE PROVIDENT BANK,
:
:
Appellee,
:
:
v.
:
:
BASIL PANDOLFELLI,
:
:
Appellant.
:
__________________________________________

1

Hon. Faith S. Hochberg, U.S.D.J.
OPINION
Date: February 14, 2012

Civil Case No. 11-5179 (FSH)

Civil Case No. 11-5231 (FSH)

Civil Case No. 11-7031 (FSH)

HOCHBERG, District Judge:
This matter comes before the Court upon three appeals filed by a bankruptcy debtor,
Basil Pandolfelli. All three appeals challenge the entry of default, the entry of default judgment,
and the entry of default judgment without a proof hearing against Pandolfelli by the bankruptcy
court. The default judgments were entered in favor of JP Morgan Chase Bank, N.A. (“Chase”),
All Points Capital Corp. (“All Points”), and The Provident Bank (“Provident”) (collectively,
“Creditors”). Because the issues raised by all three appeals overlap considerably, all three
appeals are addressed together herein. The Court has reviewed the submissions of the parties
and considered the motion on the papers in accordance with Fed. R. Civ. P. 78.
I.

BACKGROUND
Pandolfelli is the sole shareholder, Chairman, and CEO of RCA Capital Corp. (“RCA”).

RCA was in the business of financing the acquisition and/or leasing of equipment for borrowers
and customers in, inter alia, the graphic arts and converting business. RCA separately entered
into secured credit agreements with the Creditors. Each of the secured credit agreements
provided that it would be secured by a first priority perfected security interest and lien in defined
collateral. RCA represented in each security agreement that no prior or equal liens had been
granted with respect to the collateral pledged to each creditor and Pandolfelli entered into
guaranty agreements with each creditor. After RCA fell into default the Creditors filed actions
against RCA in New Jersey state court, which were consolidated.
The Creditors then filed an order to show cause seeking specific performance of their
rights under the respective security agreements. In response, RCA and Pandolfelli declared
bankruptcy. The Creditors then separately filed adversary proceedings against Pandolfelli in
response objecting to the dischargeability of Pandolfelli’s obligations under the guaranty

2

agreements pursuant to 11 U.S.C. § 523. 1 Chase filed its adversary complaint on July 20, 2009;
All Points and Provident filed their adversary complaints on July 21, 2009. Pandolfelli was
represented in his bankruptcy proceeding and his counsel requested an extension of time to
respond to the adversary complaints. All Points and Provident granted brief extensions.
The time for Pandolfelli to answer the Chase complaint expired on August 22, 2009, and
the time for Pandolfelli to answer the Provident and All Points complaints expired on September
8, 2009 and September 9, 2009, respectively. The Creditors requested the entry of default on
separate dates in September 2009. Default was entered against Pandolfelli in the Chase and All
Points proceedings on December 10, 2009, and Pandolfelli filed a motion to vacate default in all
three proceedings on December 14, 2009. Because default had not been entered in the Provident
proceeding, the Bankruptcy Court construed the motion to vacate default as a motion for
extension of time to answer. The Bankruptcy Court denied those motions in a letter opinion (the
“September 14, 2010 Opinion”). Pandolfelli then sought leave to take interlocutory appeals.
Judge Martini denied the motions for leave to appeal on March 14, 2011. Default was then
entered in the Provident proceeding, and default judgments were subsequently entered against
Pandolfelli in each proceeding. 2 Pandolfelli then filed a motion to vacate each default judgment
and to compel a proof hearing. The bankruptcy court denied the motions and Pandolfelli timely
appealed.

1

In addition to the Creditors addressed in this appeal, an adversary proceeding was also
filed against Pandolfelli by the Pitman Company. The four adversary proceedings are:
JPMorgan Chase Bank, N.A. v. Pandolfelli, (DHS) Adv. Pr. No. 09-2068; The Provident Bank v.
Pandolfelli, (DHS) Adv. Pr. No. 09-2070; All Points Capital Corp. v. Pandolfelli, (DHS) Adv.
Pr. No. 09-2072; and Pitman Company v. Pandolfelli, (DHS) Adv. Pr. No. 09-2075.
2
Until this point, the adversary proceeding filed by the Pitman Company had proceeded
in a substantially similar manner to the other proceedings. However, that proceeding was
dismissed for failure to prosecute when the Pitman Company failed to seek a default judgment
against Pandolfelli after his motions for leave to take an interlocutory appeal were denied.
3

II.

STANDARD OF REVIEW
The standard of review for the bankruptcy court’s refusal to vacate the default and default

judgment is abuse of discretion. Jacobson v. Secivanovic (In re Secivanovic), Nos. 04-2381, 042466, 2005 WL 1583357, at *1 (3d Cir. July 7, 2005). The decision not to hold a hearing is
likewise reviewed for abuse of discretion. Hritz v. Woma Corp., 732 F.2d 1178, 1180 (3d Cir.
1984). Legal determinations are reviewed de novo, and factual determinations by the bankruptcy
court are reviewed for clear error. Ferrara & Hantman v. Alvarez (In re Engel), 124 F.3d 567,
571 (3d Cir. 1997). “[T]he clearly erroneous standard is fairly stringent: ‘It is the responsibility
of an appellate court to accept the ultimate factual determination of the fact-finder unless that
determination either is completely devoid of minimum evidentiary support displaying some hue
of credibility or bears no rational relationship to the supportive evidentiary data.’” Fellheimer,
Eichen & Braverman, P.C. v. Charter Technologies, 57 F.3d 1215, 1223 (3d Cir. 1995) (quoting
Hoots v. Pennsylvania, 703 F.2d 722, 725 (3d Cir. 1983)).
III.

DISCUSSION
Pandolfelli contends that the Bankruptcy Court erred: (1) when it denied his motion to

vacate the entry of default against him; (2) when it denied his motion to vacate the entry of
default judgment against him; and (3) when it entered default judgment against him without first
conducting a proof hearing. Because the same test is used to determine whether to set aside both
entry of default and entry of default judgment, see Feliciano v. Reliant Tooling Co., 691 F.2d
653, 656 (3d Cir. 1982), the first two aspects of Pandolfelli’s appeal may be discussed
simultaneously.

4

A.

Entry of Default and Default Judgment
When considering an application to set aside a default, or a default judgment, a court

“must consider the following three facts: (1) whether the plaintiff will be prejudiced; (2) whether
the defendant has a meritorious defense; and (3) whether the default was the result of the
defendant’s culpable conduct.” Gold Kist, Inc. v. Laurinburg Oil Co., 756 F.2d 14, 19 (3d Cir.
1985).
1.

A Meritorious Defense

“The threshold question is whether the defendant has alleged facts which, if established at
trial, would constitute a meritorious defense to the cause of action.” Resolution Trust Corp. v.
Forest Grove, Inc., 33 F.3d 284, 288 (3d Cir. 1994) (internal quotations omitted). The Third
Circuit has observed that “there would be no point in setting aside the default judgment. . . if [the
defendant] could not demonstrate the possibility of his winning.” U.S. v. $55,518.05 in U.S.
Currency, 728 F.2d 192, 195 (3d Cir. 1984). “[A] defendant does not have the right to have a
default judgment set aside automatically upon alleging a defense. Rather, we impose a more
stringent standard which requests that a defendant seeking to set aside a default judgment set
forth with some specificity the grounds for his defenses.” Harad v. Aetna Cas. and Sur. Co., 839
F.2d 979, 982 (3d Cir. 1988). “The showing of a meritorious defense is accomplished when
allegations of defendant’s answer, if established on trial, would constitute a complete defense to
the action.” $55,518.05 in U.S. Currency, 728 F.2d at 195 (internal quotations omitted). After
reviewing Pandolfelli’s proposed answers, the bankruptcy court concluded that they failed to set
forth a meritorious defense. See, e.g., September 14, 2010 Opinion at 7 (The proposed answer
set forth “nothing more than conclusory statements and denials which fail to establish a
meritorious defense”).

5

The Bankruptcy Court was correct. The proposed answers essentially state a series of
legal conclusions, unaccompanied by factual allegations that could “constitute a complete
defense to the action.” $55,518.05 in U.S. Currency, 728 F.2d at 195. Pandolfelli admits that he
is the chairman, CEO and sole shareholder of RCA, that the loan documents underlying his
obligations are valid, and that the loans at issue were made. All Points Complaint, All Points
Appellant R. 1, at ¶¶ 13-23; Proposed Answer, All Points Appellant R. 3, Ex. A at ¶¶ 13-23. 3
Pandolfelli admits that RCA defaulted under the loan documents and admits that he did not
perform his obligations pursuant to the accompanying personal guaranty agreements but states
the legal conclusion that any breaches of those documents were solely by RCA. All Points
Appellant R. 1, at ¶¶ 50-66; All Points Appellant R. 3, Ex. A at ¶¶ 50-66. Pandolfelli further
admits that the Creditors retained Weiser LLP to examine RCA’s books and records, and denies
knowledge or information regarding the findings of Weiser, but does not deny the actual
findings. All Points Appellant R. 1 at ¶¶ 69-78; All Points Appellant R. 3, Ex. A at ¶¶ 69-78.
Pandolfelli denies the specific allegations of fraud by contending that he was not
responsible for RCA’s books and records and that he personally did not make any material
misrepresentations relied upon by All Points, Chase, or Provident. Id. at ¶¶ 70-71, 75-79. He
denies converting RCA’s assets by directing RCA to pay his personal expenses based on his
contention that payments for personal items were properly disbursed in response to loans made
by Pandolfelli to RCA. Id. at ¶ 80. He then flatly denies summary allegations of fraud,
conversion, embezzlement, and willful and malicious injury of creditors. Id. at ¶¶ 81-105. In
effect, Pandolfelli denies each of the legal conclusions contained in the adversary complaint.
However he does not deny any of the core factual allegations establishing that Pandolfelli
3

The proposed answers in the Chase and Provident proceedings contain substantially similar
admissions and denials. See Chase Appellant R. 3, Ex. A; Provident Appellant R. 3, Ex. A.
6

directed RCA to pledge the same collateral to multiple lenders with the intent to deceive, or offer
any factual allegations of any kind that if proven, “would constitute a complete defense to the
action.” $55,518.05 in U.S. Currency, 728 F.2d at 195.
Pandolfelli has also acknowledged the accuracy of RCA’s schedules, which set forth the
obligations of RCA and Pandolfelli to the Creditors. Chase Appellee R. 15. The Creditors have
established their claims by competent evidence through their respective proofs of claim, which
mirror the allegations of the adversary complaints, and affidavits in support of entry of default
judgment. See Crédit Agricole Corp. v. Am. Home Mortg. Holdings (In re Am. Home Mortg.
Holdings), 637 F.3d 246, 256 (3d Cir. 2011) (“‘A proof of claim executed and filed in
accordance with these rules shall constitute prima facie evidence of the validity and amount of
the claim.’”) (quoting Fed. R. Bankr. P. 3001(f)).
The lack of a meritorious defense alone is sufficient to support the bankruptcy court’s
decision to deny Pandolfelli’s motions to vacate the entry of default and the default judgment
against him. See e.g., New Forum Publishers v. Nat’l Org. for Children, No. 02-1737, 2003 WL
22016941 (E.D. Pa. July 1, 2003), at *10 (quoting Resolution Trust Corp. v. Forest Grove, 33
F.3d at 288). However, because some courts have applied a more lenient standard with respect
to the entry of default, the Court notes that each of the other factors also supports the decision of
the Bankruptcy Court.
2.

Prejudice to the Creditors

Pandolfelli argues that there was no demonstration of prejudice to any of the Creditors as
a result of his failure to timely answer the adversary complaints. Prejudice includes “loss of
available evidence, increased potential for fraud or collusion, or substantial reliance upon the
judgment.” Feliciano, 691 F.2d at 657. The Bankruptcy Court found as a matter of fact that

7

each of the Creditors had been prejudiced by Pandolfelli’s delay in answering because it
substantially increased the potential for loss of evidence and fraud. In the September 14, 2010
Opinion addressing all three of these cases, the court stated:
[T]he substantial delay in answering the Plaintiffs’ allegations has substantially
increased the potential for loss of available evidence, or fraud. These cases are
not simply legal disputes regarding the existence or extent of a debt. Rather, each
Plaintiff has alleged with specificity acts of actual fraud, including the
falsification of books and records and the diversion of millions of dollars away
from creditors and into Defendant’s pocket (citation omitted). As counsel for
Chase noted, ‘Defendant may have used the past four months to further cover his
tracks and divest himself of material assets’ (citation omitted). Consequently, the
Court finds that, given the nature of the allegations in the respective complaints,
Defendant’s lengthy delay in responding may have prejudiced Plaintiffs by
allowing time to destroy evidence or conceal assets.
September 14, 2010 Opinion at 4-5. The Court went on to conclude:
In light of these serious allegations, the Court finds a strong potential that the
Defendant could have used the interceding months to conceal or destroy evidence
or to conceal or squander assets. Thus, the Court finds that the four-month delay
in answering the allegations, which was caused entirely by the Defendant’s willful
refusal to participate in this litigation, presents a high probability of prejudice to
the Plaintiffs. 4
Id. at 7.
This factual determination by the Bankruptcy Court should be upheld unless it is
“‘completely devoid of minimum evidentiary support displaying some hue of credibility or bears
no rational relationship to the supportive evidentiary data.’” Fellheimer, Eichen & Braverman,
57 F.3d at 1223 (quoting Hoots, 703 F.2d at 725). The Bankruptcy Court’s finding that
Pandolfelli’s delay in answering increased the potential for loss of evidence and fraud is amply
supported by the records of the RCA and Pandolfelli bankruptcies, which establish that RCA
repeatedly fraudulently pledged the same collateral to multiple creditors over a substantial period
of time. See All Points Appellant R. 15, at 5-6; Chase Appellant R. 13, at 5; Provident Appellant
4

The Court notes that it appears that all of the RCA business records were subsequently lost by
the warehouse hired by the Trustee. Provident Appellant R. 15, Certification at 1.
8

R. 17 at 5. For instance, the affidavits filed by the Creditors demonstrate that certain equipment
was pledged as collateral to more than one bank. See, e.g., All Points Affidavit of Amount Due,
Appellant R. 9, at 16-17. Accordingly, the Bankruptcy Court’s factual finding regarding the
potential prejudice to the Creditors is not clearly erroneous and will be upheld.
3.

Culpable Conduct

“[T]he standard for ‘culpable conduct’ in this Circuit is the ‘willfulness’ or ‘bad faith’ of
a non-responding defendant.” Hritz, 732 F.2d at 1182. Culpable conduct “include[s] acts
intentionally designed to avoid compliance with court notices.” Id. at 1183.
Pandolfelli argues that his failure to timely answer was not willful, because he was
proceeding pro se and could not be expected to properly craft an answer that does not contain
improvident admissions and is compliant with the Bankruptcy Rules of Procedure, particularly in
a case with millions of dollars at stake. Pandolfelli contends that the findings of the bankruptcy
court that he had no real excuse and delayed answering in bad faith were unfounded and clearly
erroneous because the delay was a product of his need to engage counsel and secure funds to do
so while bankrupt and divorcing. Pandolfelli also notes that he sought an extension of time to
answer in each adversary proceeding, suggesting that he was not indifferent to his obligations.
However, Pandolfelli was represented in his bankruptcy case and had the opportunity to
consult with counsel about the filing of an answer. Further, it is undisputed that Pandolfelli and
his counsel were properly served with the adversary complaints and that Pandolfelli was fully
apprised of his obligation to answer the complaints. The Bankruptcy Court appropriately
rejected Pandolfelli’s claim that he could not answer the adversary complaints until he engaged
counsel to his satisfaction, correctly distinguishing delay caused by inadvertence from
Pandolfelli’s intentional decision not to respond to a complaint. See e.g., Coltec Indus., Inc. v.

9

Hobgood, 280 F.3d 262, 274 (3d Cir. 2002) (“[C]ourts have not looked favorably on the
entreaties of parties trying to escape the consequences of their own counseled and
knowledgeable decisions.”) (internal quotations omitted).
In the September 14, 2010 Opinion denying Pandolfelli’s motion to vacate the defaults
and extend the time to answer in these proceedings, the Bankruptcy Court stated:
Because the Defendant’s only proffered reason for the delay in answering the
complaints is that he preferred not to defend these suits until he could afford
counsel of his choice, the Court finds that the delay was entirely within his
control. As such, the Court finds that this element of the Pioneer analysis weighs
in favor of willful neglect rather than excusable neglect.
See September 14, 2010 Opinion at 5. When denying Pandolfelli leave to take interlocutory
appeals, Judge Martini agreed with this aspect of the Bankruptcy Court’s analysis noting:
[A]ll Appellant is really claiming is that the divorce proceeding impeded his
ability to access the funds he needed to retain counsel of his choice . . . . [T]he
Bankruptcy Court appropriately found that these circumstances do not even
provide an excuse for [Pandolfelli’s] failure to answer the complaint or otherwise
plead, let alone constitute “exceptional circumstances.”
Pandolfelli v. JP Morgan Chase Bank, N.A., Nos. 10-5366, 10-5390, 10-5367, 2011 WL 915132,
at *3 (D.N.J. Mar. 14, 2011). The Bankruptcy Court’s culpability analysis is not clearly
erroneous. Pandolfelli does not claim to have retained counsel until months after his deadline to
answer had passed in each proceeding. It is undisputed that Pandolfelli was represented in his
Chapter 7 proceeding and was aware of his obligation to answer the adversary complaints. Even
after retaining counsel Pandolfelli did not take immediate action, instead waiting to file a
proposed answer until after default had been entered against him in the Chase and All Points
proceedings. When default was subsequently entered in the Provident proceeding, Pandolfelli
again did not respond until after Provident had moved for default judgment and the judgment
was entered against him by the Bankruptcy Court clerk. See Provident Appellant R. 11. Under

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these circumstances, the Bankruptcy Court’s factual findings regarding Pandolfelli’s culpability
are well founded and should not be disturbed.
B.

Entry of Default Judgment without a Hearing
A proof hearing is not mandatory; a trial court has broad discretion and is entitled to rely

on the record before it in entering judgment. See, e.g., Pope v. U.S., 323 U.S. 1, 12 (1944) (“It is
a familiar practice and an exercise of judicial power for a court upon default, by taking evidence
when necessary or by computation from facts of record, to fix the amount which the plaintiff is
lawfully entitled to recover and to give judgment accordingly.”). See also General Elec. Capital
Corp. v. Clifton Radiology Assocs., LLC, No. 05-4867, 2007 WL 1791267, at *3-5 (D.N.J. 2007)
(concluding that entering a judgment without conducting an evidentiary hearing is within the
discretion of the court). The court may, however, conduct a hearing when necessary to
“determine the amount of damages,” Fed. R. Civ. P. 55(b)(2), to “establish the truth of any
allegation by evidence,” Fed R. Civ. P. 55(b)(3), or to “investigate any other matter.” Fed. R.
Civ. P. 55(b)(4). 5 A court’s decision not to hold a hearing is reviewed for abuse of discretion.
See Rainey v. Diamond State Port Corp., 354 Fed. App’x 722, 724 (3d Cir. 2009). In the Chase
hearing on Pandolfelli’s motion to set aside default judgment, 6 the Bankruptcy Court specifically
concluded that no evidentiary hearing was necessary, based in part on its extensive experience
with the RCA and Pandolfelli bankruptcies. See Tr. of June 7, 2011 Hearing, Chase Appellant
R. 13, at 5-6, 11.
Pandolfelli contends that the bankruptcy court improperly permitted the entry of a default
judgment without a hearing. His arguments can be divided into two objections, which will be
5

Fed. R. Civ. P. 55 governs defaults in adversary proceedings in bankruptcy court. Fed. R.
Bankr. P. 7055.
6
Pandolfelli’s counsel indicated he did not intend to attend a hearing on his motion to set aside
default judgment in the All Points proceeding. See Aug. 15, 2010 Opinion, All Points Appellant
R. 15, at 4.
11

considered in turn: 1) that the unchallenged facts did not constitute a cause of action, and 2) that
the amount owed was not adequately demonstrated by the filings.
1.

The Facts Constitute a Legitimate Cause of Action

For a court to enter default judgment, “the unchallenged facts [must] constitute a cause of
action, since a party in default does not admit mere conclusions of law.” Directv v. Asher, No.
03-1969, 2006 WL 680533, at *2 (D.N.J. Mar. 14, 2006). Once a party has defaulted, “the
factual allegations of the complaint, except those relating to the amount of damages, will be
taken as true.” Comdyne I v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990) (internal quotations
omitted) (citing Thomas v. Wooster, 114 U.S. 104 (1884)).
The Creditors each sought to have their debts exempted from discharge pursuant to 11
U.S.C. § 523(a)(2)(A) by reason of: (1) fraud by Pandolfelli, (2) embezzlement or larceny by
Pandolfelli, and (3) willful and malicious injury by Pandolfelli. “Exception to discharge, based
upon 11 U.S.C. § 523(a)(2)(A) requires a showing of actual fraud, not merely fraud that would
be implied in law.” Shaw v. Santos (In re Santos), 304 B.R. 639, 651 (Bankr. D.N.J. 2004).
Actual fraud for § 523(a)(2)(A) purposes is proved by establishing each of the
following elements: (1) that the debtor obtained money, property or services
through a material misrepresentation; (2) that the debtor, at the time of the
transaction, had knowledge of the falsity of the misrepresentation or reckless
disregard or gross recklessness as to its truth; (3) that the debtor made the
misrepresentation with intent to deceive; (4) that the plaintiff reasonably relied on
the representation; and (5) that the plaintiff suffered loss, which was proximately
caused by the debtor’s conduct.
Id. See also Starr v. Reynolds (In re Reynolds), 193 B.R. 195, 200 (D.N.J. 1996).
Because “a debtor will rarely, if ever, admit that deception was his purpose,” “intent to deceive
can be inferred from the totality of the circumstances, including the debtor's reckless disregard
for the truth.” Insurance Co. of N. Am. v. Cohn (In re Cohn), 54 F.3d 1108, 1118-19 (3d Cir.
1995).
12

Pandolfelli challenges the adequacy of the showing of actual fraud in all three cases.
Pandolfelli argues that the allegations of fraud in the respective complaints are not particularized
in any way, some of the allegations are made upon information and belief, and the applications
for default judgment are based upon incompetent supporting materials. Pandolfelli contends that
the five elements of fraud are not established, that the allegations of fraud are not definitive
enough because they simply suggest that “it appears” or is “likely” there was fraud, and that how
the entire amount claimed by each creditor is because of Pandolfelli’s misconduct is never
established. He argues that the factual allegations do not sufficiently demonstrate that he
directed the misconduct attributed to RCA. He also contends that although the bankruptcy court
stated that Pandolfelli could conceivably be held liable for RCA’s actions under an alter ego
theory, no facts were adduced to establish this theory, nor was it pleaded in the complaints. 7
Because the factual allegations in the complaint are accepted as true, Comdyne, 908 F.2d
at 1149, the only issue is whether those facts, along with the evidence in the record, constitute
claims. In declining to set aside default judgment, the Bankruptcy Court conducted a diligent
analysis of the validity of the claims in each case, a review of which demonstrates that entry of
default judgment was warranted.
The Bankruptcy Court first identified the five element test to bar discharge under 11
U.S.C. § 523(a)(2)(A). The Bankruptcy Court concluded that elements (1), (4), and (5) of the
test were undisputed, because RCA pledged the same collateral to several lenders, including the
Creditors, causing them to suffer losses as a result of material misrepresentations. See All Points
7

Additionally, in the All Points proceeding, Pandolfelli argues that All Points may have included
a claim that is not within the scope of the personal guaranty agreement he executed. However,
this argument was not raised before the Bankruptcy Court and has therefore been waived. See
Int’l Fin. Group v. Kaiser Group Int’l (In re Kaiser Group Int’l), 399 F.3d 558, 565 (3d Cir.
2005) (stating “the general rule that when a party fails to raise an issue in the bankruptcy court,
the issue is waived and may not be considered by the district court on appeal”).
13

Appellant R. 15, at 5-6; Chase Appellant R. 13, at 5; Provident Appellant R. 17, at 5. That
conclusion is amply supported by the record. First, an analysis conducted by Weiser on behalf of
the three Creditors demonstrated that collateral was pledged to multiple lenders, and that the
Creditors provided financing to Pandolfelli and RCA based on the pledged collateral. See, e.g.,
Chase Appellant R. 1, ¶¶ 41-48. Second, the proofs of claim filed by the three Creditors in these
cases attest to the fact that collateral was pledged to multiple lenders. See, e.g., Chase Appellant
R. 11, Ex. H. Finally, the proofs of claim filed in the RCA bankruptcy, which Pandolfelli
certified as accurate, demonstrate that collateral was pledged to multiple lenders.

See, e.g.,

Chase Appellant R. 11, Ex. G.
The Court then focused on elements (2) and (3): whether the debtor knew the
representations were false or acted with reckless disregard for the truth, and whether the debtor
made the representations with intent to deceive. The Court noted that while fraud “supporting
nondischargeability may not be implied in law, it may be inferred as a matter of fact.” In re
Santos, 304 B.R. at 665-66.
The Bankruptcy Court began its analysis by finding that although the creditors’
allegations of fraud were not presumed true:
the factual allegation that the Defendant pledged the same collateral to multiple
lenders is accurate and well known to the Court through its handling of the
bankruptcy proceedings. It is inconceivable that the Defendant’s corporation
could have pledge the same collateral to multiple lenders without knowing that it
was acting with reckless disregard to the truth and without an intent to deceive its
lenders . . . . Thus, under the totality of the circumstances, the Court may infer the
presence of the Defendant’s knowledge and intent to deceive the lenders.
See All Points Appellant R. 15, at 6; Chase Appellant R. 13, at 6; Provident Appellant R. 17, at
6. The Bankruptcy Court also specifically addressed Pandolfelli’s argument that no misconduct

14

was alleged directly against him and that there was insufficient evidence linking him personally
to any alleged misconduct stating:
In truth, it ignores the obvious. The Defendant was the Chairman, Chief
Executive Officer, and sole shareholder of RCA and would, or should, have been
fully aware of all contracts and agreements the company entered into.
All Points Appellant R. 15, at 6. See also Chase Appellant R. 13, at 6; Provident Appellant R.
17, at 6 (reaching similar conclusions). In support of its conclusion that Pandolfelli was liable
for the debts entered into by RCA, the Bankruptcy Court found that Pandolfelli could be liable
for the debts of RCA on an alter ego theory of piercing the corporate veil. All Points Appellant
R. 15, at 6; Chase Appellant R. 13, at 6; Provident Appellant R. 17, at 6.
Again, the Bankruptcy Court’s conclusions were correct. The Bankruptcy Court based its
conclusions on its extensive involvement with the RCA and Pandolfelli cases, and correctly
inferred from Pandolfelli’s control of RCA that he was aware of the frauds. Moreover, in each
Complaint, the facts of which were deemed admitted, the Plaintiffs spelled out their allegations
that Pandolfelli had converted RCA’s assets by causing RCA to make payments for his own
benefit. All Points App. R. 1, at ¶ 80; Chase App. R. 1, at ¶ 49; Provident App. R. 1, at ¶ 69.
Further, the Bankruptcy Court’s conclusion that Pandolfelli had used RCA to perpetrate a fraud
was sufficiently established by the claims filed in the RCA bankruptcy, which Pandolfelli
certified and which demonstrated that the same collateral was pledged to multiple creditors. See
Chase Appellant R. 11, Exs. F-H.
2.

The Damages are a Sum Certain

Pandolfelli’s second contention—that the amount owed is uncertain—is also without
merit. The court need not conduct a hearing as to damages if the damages are susceptible to
computation. Comdyne, 908 F.2d at 1152 (citing Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir.

15

1974)). See also Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989) (holding
that no damages hearing was necessary where the court “relied upon detailed affidavits and
documentary evidence, supplemented by the District Judge's personal knowledge of the record”).
Pandolfelli argues that the Creditors did not simply seek to recover a sum certain and that
the supporting documents filed by the Creditors contained averments based on the unverified
allegations of their adversary complaints and about which the declarants could not have had
personal knowledge. He further argues that the supporting documents lack detail and are
insufficient to establish the amount owed. In addition, with regard to the Provident action only,
Pandolfelli contends there were inconsistencies in the amount Provident reported it was owed.
Pandolfelli states that the Provident’s Complaint sought to recover $4,059,447.28, while its
Affidavit of Amount Owed stated that the claim was $1,675,857.90, and the bankruptcy court
entered a judgment of $2,027,608.30. However, as Provident explained in its Objection to
Defendant’s Motion to Vacate the Default Judgment, the affidavit in fact calculates judgment for
$2,027,608.30, and the initial amount recited was merely a typographical error, Provident
Appellant R. 11, at 3 n.2, and the amount in the complaint included loans not attributable directly
to Pandolfelli’s fraud, Provident Appellant R. 10 at 9, 19.
In the All Points and Provident proceedings, the amount owed was established by the
affidavits and declarations submitted by each of the Creditors in support of the motions for
default judgment. All Points Appellant R. 9, Affidavit at 17-18; Provident Appellant R. 10, at
19. Those affidavits demonstrate that the amounts owed are tied directly to Pandolfelli’s fraud,
because each claim arises from loans secured by collateral pledged to multiple creditors or from
loans secured by supposedly outstanding leases made by RCA Capital for which there were in
fact no leases receivable. All Points Appellant R. 9, Affidavit at 11-18. Provident Appellant R.

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10, at 12-19. In the Chase proceeding, the claims are established by the proofs of claim filed in
the RCA case, Chase Appellee R. 13 & 14, and Pandolfelli’s bankruptcy, Chase Appellee R. 12.
In addition, counsel for Pandolfelli admitted to the Bankruptcy Court in a June 7, 2010 hearing
that Pandolfelli did not dispute the amount of the claim. Chase Appellee R. 13, at 10.
Moreover, the stipulation and consent order between the Creditors and the trustee in the
RCA bankruptcy that granted relief to the Creditors from the automatic bankruptcy stay confirms
the amounts of the secured allowed claims of Chase, All Points, and Provident, and lists the
loans for which the securing collateral was pledged to multiple creditors. Chase Appellee R. 17,
Ex. A. Above all, the Bankruptcy Court correctly relied on the schedules filed in the RCA
bankruptcy, which established the debts owed to all three Creditors in these adversary
proceedings, Chase Appellee R. 13 & 14, and which Pandolfelli swore, under penalty of perjury,
to be true and accurate, Pandolfelli Declaration, Chase Appellee R. 15.
Because the unchallenged facts constituted a cause of action in each proceeding, and
because the damages were adequately proven by the evidence, the Bankruptcy Court did not
abuse its discretion when it entered default judgment without an evidentiary hearing.
IV.

CONCLUSION
For the reasons discussed above, the Court will deny Pandolfelli’s appeals. An

appropriate Order will issue.

/s/ Faith S. Hochberg__________
Hon. Faith S. Hochberg, U.S.D.J.

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