UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

COVINGTON DIVISION

IN RE:

DALE A. WAGENLANDER

DEBTOR                                                                                          CASE NO. 05-23669

L. CRAIG KENDRICK, TRUSTEE                                                   PLAINTIFF

VS.                                                                                                    ADV. NO. 06-2099

DALE A. WAGENLANDER; SYLVIA A.

WAGENLANDER; FIRSTAR BANK, N.A.;

DABGAB HOLDINGS, LLC                                                             DEFENDANTS

DABGAB HOLDINGS, LLC                                                             CROSS-CLAIMANT

VS.

DALE A. WAGENLANDER                                                              CROSS-DEFENDANT

MEMORANDUM OPINION AND ORDER

           This matter is before the court on the Debtor/Defendant’s Motion to Set Aside Default Judgment, and the responses of the Plaintiff and Defendant Dabgab Holdings, LLC (“Dabgab”). A Default Judgment was entered herein on March 26, 2007, finding that certain real estate of the Debtor and his wife was property of the estate. This court has jurisdiction of this matter pursuant to Judicial Code section 1334(b); it is a core proceeding pursuant to Judicial Code section 157(b)(2)(N).

           1.        Factual and procedural background.

           The Plaintiff sets out certain pertinent facts in his Response to Motion to Set Aside Default Judgment. An involuntary bankruptcy case was filed against the Debtor on October 10, 2005. The Debtor never responded to the filing. On November 7, 2005, the court entered an order requiring him to file schedules of assets and liabilities and a statement of financial affairs within fifteen days. He failed to comply with this order. The court then entered an Order to Show Cause on January 30, 2006 requiring the Debtor to appear and show cause why he should not be held in civil contempt for failing to obey the court’s November 7, 2005 order. The Debtor failed to appear or respond, and the court entered an order on March 10, 2006 directing that no discharge be entered in the case and that the Trustee proceed with administration of the case.

           The Plaintiff filed his Complaint in this court on December 27, 2006, seeking to sell real property of the Debtor and his wife pursuant to Bankruptcy Code section 363. Service of summons was executed on January 3, 2007. No answer was filed. Prior to the filing of the Plaintiff’s Motion for Default Judgment on March 24, 2007, Dabgab filed a motion seeking additional time to respond to the Complaint. The motion came on for hearing on February 13, 2007. The Debtor appeared at that hearing, accompanied by counsel. There was no further activity by the Debtor despite his apparent representations that he would prepare a defense, and the Plaintiff filed his Motion for Default Judgment. A Default Judgment was entered on March 26, 2007. The Debtor filed his Motion to Set Aside Default Judgment on April 13, 2007, based on his representation that “he was not represented by counsel and had no meaningful understanding of the rights impaired by this case.” This is the sum total of the Debtor’s contention.

           2.        Discussion.

           A default judgment may be set aside pursuant to Federal Rule of Civil Procedure 55(c), made applicable in bankruptcy by Federal Rule of Bankruptcy Procedure 7054, which states: “For good cause shown the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b).” Fed. R. Civ. P. 55(c). Rule 60(b), made applicable in bankruptcy by Federal Rule of Bankruptcy Procedure 9024, provides in pertinent part that relief from a final judgment or order may be had for “(1) mistake, inadvertence, surprise, or excusable neglect;” Fed. R. Civ. P. 60(b)(1).

           The court first notes that the Debtor made no argument pursuant to any rule. In any event, as the Plaintiff points out, the court must determine if good cause has been shown. The standard for such a demonstration in the Sixth Circuit was found in United Coin Meter Co. v. Seaboard Coastline R.R., 705 F.2d 839, 845 (6th Cir. 1983). The following factors were set forth therein: “(1) whether the plaintiff would be prejudiced; (2) whether the defendant had a meritorious defense; and (3) whether culpable conduct of the defendant led to the default.” Id. This case was modified, however, by Waifersong, Ltd. v. Classic Music Vending, 976 F.2d 290. There the court held that while it would consider the factors set out in United Coin Meter,

. . . the methodology for considering these factors and the weight to be accorded them depends on whether the court is confronted by an entry of default or a default judgment. When asked to set aside an entry of default, a court considers the first factor, the defendant’s culpability, in the general context of determining whether a petitioner is deserving of equitable relief. But when it is a judgment the defendant is seeking to avoid, the specific requirements of Rule 60(b) narrow the scope of the court’s equitable inquiry. When relief is sought under Rule 60(b)(1), the culpability factor is framed in terms of ‘mistake, inadvertence, surprise, or excusable neglect.’ Furthermore, while it may be argued that the three factors are to be ‘balanced’ by the court in determining whether to set aside an entry of default, balancing is demonstrably inappropriate when a court initially proceeds, as in the instant case, under Rule 60(b)(1). That is because the rule mandates that a defendant cannot be relieved of a default judgment unless he can demonstrate that his default was the product of mistake, inadvertence, surprise, or excusable neglect. It is only when the defendant can carry this burden that he will be permitted to demonstrate that he also can satisfy the other two factors: the existence of a meritorious defense and the absence of substantial prejudice to the plaintiff should relief be granted (sic).

Id. at 292. See also Wilson v. Cassidy (In re Cassidy), 273 B.R. 531 (Bankr. N.D. Ohio 2002).

           In the within matter, the Debtor has not only failed to demonstrate mistake, inadvertence, surprise or excusable neglect, he has not even argued these elements. The court therefore need not consider any other factor. There is nothing before the court that merits granting the Debtor relief from the Default Judgment. The court therefore concludes that the Debtor’s Motion to Set Aside Default Judgment should be, and it hereby is, overruled.

Copies to:

Virginia Southgate, Esq.

L. Craig Kendrick, Esq., Trustee

Dennis C. Helmer, Esq.