Merchants and Farmers Bank v. Wegener

Filing 24

ORDER denying 14 Motion to Alter Judgment; denying 15 Motion to Set Aside Default. Signed by Judge S. Thomas Anderson on 11/18/11. (Anderson, S.)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
______________________________________________________________________________
MERCHANTS & FARMERS BANK,

)
)
Plaintiff,
)
)
v.
)
No.11-2614-STA-tmp
)
D. CURTIS WEGENER,
)
)
)
Defendant.
)
______________________________________________________________________________
ORDER DENYING DEFENDANT’S MOTION TO ALTER OR AMEND JUDGMENT
AND DENYING DEFENDANT’S RULE 60(b) MOTION FOR RELIEF FROM
DEFAULT JUDGMENT
______________________________________________________________________________
Before the Court are Defendant’s Motion to Alter or Amend Judgment (D.E. # 14), filed
on September 29, 2011, and Defendant’s Rule 60(b) Motion for Relief from Default Judgment
(D.E. # 15), also filed on September 29, 2011. For the following reasons, Defendant’s Motion to
Alter or Amend Judgment is DENIED and its Motion for Relief from Default Judgment is
DENIED.
BACKGROUND
On July 19, 2011, Plaintiff filed its complaint against Defendant alleging that Defendant
had failed to pay his sworn account to Plaintiff.1 (Compl. ¶ 18.) Plaintiff also alleged that

1

Tenn. Code Ann.§ 24-5-107 provides that

[a]n account on which action is brought, coming from another state or another
county of this state, or from the county where suit is brought, with the affidavit of
the plaintiff or its agent to its correctness, and the certificate of a state
1

Defendant had materially breached his Guaranty Agreements with Plaintiff. (Compl. ¶ 22.)
There are four Guaranty Agreements involved in this case: Defendant’s Guaranty Agreement as
to all of the obligations of 200 Linden Avenue Properties G.P., the Guaranty Agreement as to all
of the obligations of 5325 Summer Ave. Properties LLC, the Guaranty Agreement as to all of the
obligations of 8700 Fletcher Creek Cove Properties, and the Guaranty Agreement as to all of the
obligations of Hotel Development LLC. (Compl. ¶ 6-9.) Under these Guaranty Agreements,
Defendant is obligated to pay all amounts due or owing on the underlying Merchants & Farmers
Bank Loans.2 (Compl. ¶ 11.)
Summons was returned executed on July 27, 2011 (D.E. # 7), but Defendant did not
respond to Plaintiff’s Complaint. Plaintiff moved for default judgment on September 12, 2011
(D.E. # 8), and when the Clerk denied that Motion, Plaintiff motioned for entry of default
judgment on September 13, 2011 (D.E. # 10). The Clerk entered a notice of default on
September 14, 2011, and the Court granted default judgment in the amount of $3,497,662.22 on

commissioner annexed thereto, or the certificate of a notary public with such
notary public’s official seal annexed thereto, or the certificate of a judge of the
court of general sessions, with the certificate of the county clerk that such judge is
an acting judge within the county, is conclusive against the party sought to be
charged, unless that party on oath denies the account or except as allowed under
subsection (b).
Subsection (b) states that “[t]he court shall allow the defendant orally to deny the account under
oath and assert any defense or objection the defendant may have. Upon such denial, on the
plaintiff’s motion, or in the interest of justice, the judge shall continue the action to a date certain
for trial.” Id. § 24-5-107(b).
2

In his Answer, which Defendant attached as an Exhibit to his Motion for Relief
from Default Judgment, Defendant asserts that Plaintiff and Defendant entered into a settlement
as to amount owed under the Guaranty Agreement relating to 200 Linden Avenue Properties
G.P. on August 17, 2010.
2

September 16, 2011 (D.E. # 16.) On September 29, 2011, Defendant filed the Motions currently
before the Court.
The Court held a hearing on these Motions on November 10, 2011. At the hearing,
Defendant argued that Plaintiff’s mistake in calculating the amount owed to Plaintiff was the
only mistake that Defendant could present to the Court. Defendant reiterated his desire to
correct the amount owed, and he asserted that the amounts in the different settlement and
bankruptcy agreements between the parties should be recognized. When asked why he did not
timely file an answer, Defendant stated that the answer was being prepared when the motion for
entry of default judgment was filed, and the case was closed on the docket before he could file
the answer. Accordingly, Defendant asserted that his Motions should be granted.
In response, Plaintiff argued that the type of mistake alleged by Defendant was no reason
to grant the relief requested under Rule 60. Moreover, Plaintiff pointed out that Defendant did
not state why his answer was not timely filed, and the Complaint, as well as the Motion for Entry
of Default and the Motion for Default Judgment, included the amounts which Defendant owed
Plaintiff. Additionally, Plaintiff pointed out that the four agreements at issue are sworn account
which, pursuant to Tenn. Code Ann. § 24-5-107(a), require a statement from the debtor under
oath contesting the amount of money owed under the accounts. Therefore, Plaintiff argued that
Defendant’s Motions should be denied.
RULE 60(b) MOTION FOR RELIEF FROM DEFAULT JUDGMENT
Defendant filed this Motion (D.E. # 15) under Federal Rule of Civil Procedure 60(b)(1),
which provides that “[o]n motion and just terms, the court may relieve a party or its legal
representative from a final judgment, order, or proceeding for the following reasons: (1) mistake,

3

inadvertence, surprise, or excusable neglect.”3 A Rule 60(b)(1) motion provides relief in only
two situations: “(1) when a party has made an excusable mistake or an attorney has acted without
authority, or (2) when the judge has made a substantive mistake of law or fact in the final
judgment or order.”4 Here, the Court did not make a substantive mistake of law or fact in the
final judgment, as this is a motion for relief from a default judgment.5 Thus, the Court will focus
its evaluation on the first situation contemplated under Rule 60(b)(1): whether “a party has made
an excusable mistake or an attorney has acted without authority.”6 The Sixth Circuit has
determined that “where a party seeks relief from a default judgment, Rule 60(b)(1) should be
applied ‘equitably and liberally . . . to achieve substantial justice.’”7
In deciding whether to grant relief, courts weigh three relevant factors: “(1) whether the
party seeking relief is culpable; (2) whether the party opposing relief will be prejudiced; and (3)
whether the party seeking relief has a meritorious claim or defense.”8 In the Rule 60(b)(1)

3

Fed. R. Civ. P. 60(b)(1).

4

United States v. Reyes, 307 F.3d 451, 455 (6th Cir. 2002).

5

While an entry of default may be set aside for good cause shown under Federal
Rule of Civil Procedure 55(c), “the rules are different . . . when an entry of default has ripened
into a default judgment.” Psychopathic Records, Inc. v. Anderson, No. 08-13407, 2010 WL
2510992, at *1 (E.D. Mich. June 17, 2010). Thus, when considering a motion for relief from
default judgment, courts “must consider the equitable factors first enunciated in United Coin
Meter and determine whether the [defendant] has met the stricter requirements of Rule 60(b).”
Burrell v. Henderson, 434 F.3d 826, 832 (6th Cir. 2006).
6

See id.

7

Williams v. Meyer, 346 F.3d 607, 613 (6th Cir. 2003) (quoting United Coin Meter
v. Seaboard Coastline R.R., 705 F.2d 839, 844-45 (6th Cir. 1983)).
8

Id.
4

context, “culpability is framed by the specific language of the rule.”9 The party seeking relief
must carry the burden of proving “mistake, inadvertence, surprise, or excusable neglect”—that
is, of proving that the party is not culpable and that the default did not arise from his culpable
conduct—before the party “will be permitted to demonstrate that he [or she] also can satisfy the
other two factors.”10
Here, Defendant focuses his arguments for relief from default judgment on Plaintiff’s
mistaken calculations of the amounts due under the judgment.11 He states that “the 200 Linden
debt” is the “subject of a consummated settlement agreement which controlled the amount
owed” on that debt.12 Defendant also states that the parties have entered into agreements “in
principle for disposition of the Debtor’s property with proceeds to be applied” to the
indebtedness of the 5325 Summer Avenue debt and the Hotel Development debt.13 The
underlying obligors on the 5325 Summer Avenue debt and the Hotel Development debt are
Chapter 11 debtors in the Bankruptcy Court for the Western District of Tennessee.14 Therefore,
Defendant requests for the Court to set aside default judgment “due to mistake in calculation of
the amount of the judgment.”15

9

Id.

10

Id.

11

(Def.’s Mot. for Relief from Default J., D.E. # 15, at 2.)

12

(Id. at 1.)

13

(Id. at 2.)

14

(Id. at 1-2.)

15

(Id. at 2.)
5

Plaintiff argues that “Defendant has not set forth any basis under fact or law in his
Motion that might begin to warrant the relief requested by Defendant in his Motion.”16 Plaintiff
notes that Defendant “did not deny that he was served with a copy of the Complaint, that he
failed to timely file any response to the Complaint, or that he was unaware of [Plaintiff’s] motion
for entry of default judgment.”17 Plaintiff states that Defendant’s alleged mistake—that of
Plaintiff’s miscalculation of the sum owed by Defendant—does not affect Defendant’s ability to
timely file a response to Plaintiff’s Complaint.18
The Court finds that the type of mistake asserted by Defendant, while a novel argument,
is not the sort of mistake contemplated by Rule 60(b)(1). It is not a mistake regarding adequate
notification of the proceedings19 or the denial of a request for an extension of time.20 Rather, the
summons was returned executed as to Defendant on July 27, 2011, putting him on notice of the
allegations against him. Defendant took no action until thirteen days after entry of the Order
granting Plaintiff’s Motion for Default Judgment. Defendant’s Motion provides no reason for
his failure to respond to the allegations in Plaintiff’s Complaint, and the excuse presented at the

16

(Pl.’s Resp. in Opp’n to Def.’s Rule 60(b) Mot., D.E. # 18, at 1.) Plaintiff also
argues that Defendant’s Motion “implicitly admits proper service and knowledge of the deadline
to submit a response to [Plaintiff’s] Complaint.” (Id.) Nowhere in Defendant’s three-page
Motion does Defendant admit service of the Complaint, nor does Defendant mention the passage
of any deadline. However, at the hearing, Defendant stated that his reason for not timely filing
an Answer was that he was in the process of preparing it. Defendant would have had to receive a
copy of the Complaint to be in the process of drafting an answer. Accordingly, the Court infers
that Defendant was properly served with the Complaint.
17

(Id. at 4.)

18

(Id.)

19

See Weiss v. St. Paul Fire & Marine Ins. Co., 283 F.3d 790, 795 (6th Cir. 2002).

20

See Williams, 346 F.3d at 613-14.
6

hearing of preparing an answer is inadequate and insufficient. Therefore, the Court finds that
Defendant has not carried his burden to demonstrate that the default was the result of a mistake.
Because Defendant has not met his initial burden, the Court need not evaluate the second and
third factors identified in Williams. Accordingly, Defendant’s Motion for Relief from Default
Judgment is DENIED.
MOTION TO ALTER OR AMEND JUDGMENT
Defendant also requested the Court to alter or amend the default judgment against him
(D.E. # 14). Federal Rule of Civil Procedure 59(e) requires a motion to alter or amend a
judgment to “be filed no later than [twenty-eight] days after the entry of the judgment.”21 Here,
Defendant has timely filed his Rule 59(e) Motion, as he filed it thirteen days after default
judgment was ordered. According to the Sixth Circuit, “[m]otions to alter or amend judgment
may be granted if there is a clear error of law, newly discovered evidence, an intervening change
in controlling law, or to prevent manifest injustice.”22 Normally, “a motion to alter or amend a
judgment under Rule 59(e) allows a court to ‘reconsider matters properly encompassed in a
decision on the merits.’”23 This reconsideration allows the court to “rectify its own mistakes in
the period immediately following the entry of judgment.”24

21

Fed. R. Civ. P. 59(e).

22

GenCorp, Inc. v. Am. Int’l Underwriters, 178 F.3d 804, 834 (6th Cir. 1999).

23

SPX Corp. v. Mastercool, U.S.A., Inc., No. 3:10-cv-1266, 2011 WL 3610094, at
*1 (N.D. Ohio Aug. 17, 2011) (quoting Ashburn v. Gen. Nutrition Ctrs., 533 F. Supp. 2d 770,
773 (N.D. Ohio 2008)).
24

White v. N.H. Dep’t of Empt. Sec., 455 U.S. 445, 450 (1982).
7

In support of his Motion, Defendant argues that, in requesting a judgment in the amount
of $3,497,662.22, “Plaintiff failed to give Defendant appropriate credit in computing the amount
of default judgment as called for” in light of various bankruptcy and consummated settlement
agreements limiting the amount owed.25 Defendant states that Plaintiff and Defendant entered
into a “consummated settlement agreement” as to the 200 Linden Avenue debt and that they had
entered into an “agreement in principle” allowing proceeds from a Chapter 11 bankruptcy
proceeding to be applied to the 5325 Summer Avenue and Hotel Development debts.26
Defendant asserts that Plaintiff erroneously calculated the amount Defendant owes to Plaintiff
because Plaintiff allegedly failed to consider the parties’ settlement agreements and agreements
in principle.
Plaintiff’s Response is substantially similar to its Response to Defendant’s Motion for
Relief from Default Judgment.27 Plaintiff focuses on Defendant’s failure to deny that he was
served with a copy of the Summons and Complaint and that Defendant failed to explain why he
failed to file a response to the Complaint.28 Moreover, Plaintiff notes that Defendant did not
explain or address what effect Plaintiff’s alleged mistake in calculating the sum owed by
25

(Def.’s Mot. to Alter or Amend J., D.E. # 14, at 1-2.)

26

(Id.)

27

Plaintiff begins by erroneously citing Tennessee procedural law for the
proposition that the standard of review under Federal Rules 59 and 60 are the same. (Pl.’s Resp.
in Opp’n to Def.’s Mot. to Alter or Amend J., D.E. # 19, at 2.) However, because this action is
in federal court by virtue of diversity jurisdiction under 28 U.S.C. § 1332, the Court will apply
federal procedural law and Tennessee substantive law. See generally Erie R.R. v. Tompkins, 304
U.S. 64 (1938). Under the Federal Rules of Civil Procedure, the standards of review for Motions
filed under Rule 59 and Rule 60 differ, and the Court will review Defendant’s Rule 59 Motion
under the standard articulated above.
28

(Pl.’s Resp. in Opp’n to Def.’s Mot. to Alter or Amend J., D.E. # 19, at 4.)
8

Defendant had on Defendant’s ability to timely file a response to the Complaint.29 Plaintiff
states that Defendant had notice of the amount of money asserted against him and had “multiple
and ample opportunities to contest the amount owed,”30 as exhibits to the Complaint and the
Motion for Entry of Default Judgment contained affidavits of officials at Merchants & Farmers
Bank stated the amount owed by Defendant.
At the hearing, Plaintiff also focused on Tenn. Code Ann. § 24-5-107(a), which provides
that the amount of a sworn account is conclusive unless it is denied under oath in court or
through a sworn statement. After pointing out that Defendant has not submitted any sworn
statements contesting the amount of the debt, Plaintiff asserted that Defendant should not be
permitted to pay less than the amount stated in the Guaranty Agreements.
The Court finds that there has not been a clear error of law, an intervening change in
controlling law, or newly discovered evidence meriting an alteration in the judgment entered in
this case. Accordingly, the only standard upon which Defendant’s Motion could be granted
would be prevention of manifest injustice. However, the enforcement of Tennessee’s law
regarding sworn accounts is not a manifest injustice; to the contrary, this Court’s failure to
enforce that law would be unjust. Accordingly, the Court finds that Defendant has not met the
requirements of Rule 59(e). Thus, Defendant’s Motion to Alter or Amend Judgment is
DENIED.
CONCLUSION

29

(Id.)

30

(Id. at 5.)
9

For the reasons set forth above, Defendant’s Rule 60(b) Motion for Relief from Default
Judgment is DENIED. Defendant’s Motion to Alter or Amend Judgment is also DENIED.
IT IS SO ORDERED.
s/ S. Thomas Anderson
S. THOMAS ANDERSON
UNITED STATES DISTRICT JUDGE
Date: November 18, 2011.

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