Opinion
Case No. 3:09-bk-7291-PMG Adv. No. 3:09-ap-614-PMG
06-23-2017
In re: Jon Philip Monson, II, Debtor. Alfred Galaz, Plaintiff, v. Jon Philip Monson, II, Defendant.
Chapter 7 ORDER ON DEBTOR'S MOTION FOR RELIEF FROM JUDGMENT, STAY OF EXECUTION, AND A PROTECTIVE ORDER, AND DEBTOR'S OBJECTIONS REGARDING POST-JUDGMENT DISCOVERY DEMANDS
THIS CASE came before the Court for hearing to consider the Debtor's Motion for Relief from Judgment, Stay of Execution, and a Protective Order, and Debtor's Objections Regarding Post-Judgment Discovery Demands. (Doc. 289).
On January 9, 2015, a Final Judgment was entered in this dischargeability action in favor of the Plaintiff, Alfred Galaz, and against the Debtor. On February 28, 2017, the Debtor filed a Motion for Relief from the Judgment. In the Motion, the Debtor seeks a determination that he purchased an interest in the underlying dischargeability claim in February of 2012, and therefore is an owner of the Judgment against himself.
Under Rule 60 of the Federal Rules of Civil Procedure, a motion for relief from a judgment must be made within a reasonable time. F.R.Civ.P. 60(c).
In this case, the Debtor's Motion was filed more than two years after the Judgment was entered. The Motion was not made within a reasonable time, because (1) the Debtor had knowledge of his claim for relief at the time that the Judgment was entered, (2) the Debtor did not seek to amend the Judgment under Rule 59 of the Federal Rules of Civil Procedure, and (3) the Debtor did not prosecute the claim in his appeal of the Final Judgment, and the appellate proceedings have concluded.
Accordingly, the Debtor's Motion for Relief from Judgment, Stay of Execution, and Protective Order should be denied.
Background
On August 31, 2009, the Debtor filed a petition under Chapter 7 of the Bankruptcy Code.
On December 4, 2009, Segundo Suenos, LLC, commenced this action by filing a Complaint Objecting to Discharge of Debtor and to Determine Non-Dischargeability of Debt. (Doc. 1).
On June 2, 2011, the Court entered an Order substituting Alfred Galaz (Alfred) and Raul Galaz (Raul) for Segundo Suenos as the plaintiffs in the action. (Doc. 39).
On July 27, 2012, the Court entered an Order on Defendant's Motions Regarding the Standing of Alfred Galaz and Raul Galaz as Plaintiffs. (Doc. 161). In the Order, the Court reviewed prior orders and documentation related to the interests of Alfred, Raul, and the Debtor in the dischargeability claim. (Doc. 161, pp. 5-8). Based on the record, the Court found:
Alfred purchased the dischargeability claim against Monson from the Receiver, and subsequently transferred a portion of the claim to Raul. Since Alfred did not transfer the entire claim to Raul, and since no other disposition appears in the record, it appears that Alfred retains at least a portion of the litigation claim against Monson. Consequently, the Court finds that Alfred has a personal stake in the outcome of the dischargeability action, and has standing to pursue the claim in this proceeding.(Doc. 161, p. 9)(Emphasis supplied). The Court also found that Raul no longer held a personal stake in the outcome of the proceeding, because Raul's partial interest in the claim had been sold to the Debtor early in 2012. (Doc. 161, pp. 10-11). Pursuant to these findings, the dischargeability action continued with Alfred as the sole plaintiff.
On October 3, 2012, the Debtor filed a Motion to Amend his Answer and Affirmative Defenses in the dischargeability action. (Doc. 165). In the Motion, the Debtor asserted that Alfred owned only a portion of the dischargeability claim, and that he (the Debtor) also owned an interest in the claim. Consequently, the Debtor asked permission to amend his answer to seek a declaration of the relative rights to the dischargeability claim as between the Debtor and Alfred, "if and to the extent" the Court ever determined that the underlying debt was nondischargeable. (Doc. 165, ¶¶5-9).
On January 29, 2013, the Court entered an Order denying the Debtor's Motion to Amend his Answer:
Essentially, the Debtor is asking the Court to liquidate the underlying claim, since it belongs to both the Plaintiff and the Defendant, and to allocate the parties' respective shares.(Doc. 178, pp. 2-3). In other words, the Court declined to liquidate the Debtor's interest at that time, because any apportionment of the dischargeability claim as between Alfred and the Debtor would be unnecessary if the Court ultimately found that the debt was dischargeable.
. . .
Because the liquidation of the underlying claim may be obviated by the outcome of the dischargeability action, and based on considerations of efficiency and economy for both the Court and the parties in this case, the Debtor's Motion to amend his Answer should be denied.
A final evidentiary hearing was conducted in the dischargeability action on October 23, 2014.
On January 9, 2015, the Court entered its Findings of Fact, Conclusions of Law, and Memorandum Opinion, and also entered a Final Judgment. (Docs. 264, 265). Paragraph 2 of the Final Judgment states:
2. Final Judgment is entered in favor of the Plaintiff, Alfred Galaz, and against the Debtor, Jon Philip Monson, II, on Count III of the Second Amended Complaint, and the debt owed by the Debtor, Jon Philip Monson, II, to the Plaintiff, Alfred Galaz, in the amount of $117,950.00 is nondischargeable in the Debtor's Chapter 7 case pursuant to §523(a)(6) of the Bankruptcy Code.(Doc. 265, p. 2)(Emphasis supplied).
On January 23, 2015, the Debtor filed a Notice of Appeal of the Final Judgment. (Doc. 268).
On September 30, 2015, the United States District Court entered an Order affirming the Final Judgment against the Debtor. (Doc. 286).
The Debtor further appealed the decision to the Eleventh Circuit Court of Appeals, and the Eleventh Circuit entered an Opinion affirming the Final Judgment on November 21, 2016. Monson v. Galaz, 661 Fed.Appx. 675 (11 Cir. 2016).
Discussion
On February 28, 2017, the Debtor filed a Motion for Relief from Judgment, Stay of Execution, and a Protective Order. (Doc. 289).
The Debtor filed the Motion for Relief after Alfred Galaz requested certain discovery from the Debtor in an effort to enforce the Final Judgment. In the Motion, the Debtor asserts that Alfred "seeks to collect on a Judgment Alfred Galaz no longer has material (or any) rights to," and that Alfred should not be permitted to enforce a claim that the Debtor actually owns. (Doc. 289, pp. 2-3).
The Motion is brought pursuant to certain rules of discovery, and pursuant to Rule 7062 and Rule 9024 of the Federal Rules of Bankruptcy Procedure.
Rule 9024, which relates to relief from a judgment or order, generally provides that Rule 60 of the Federal Rules of Civil Procedure applies in bankruptcy cases. Rule 60(b) sets forth the grounds for such relief, including any "reason that justifies relief." F.R.Civ.P. 60(b)(6). Rule 60(c) relates to the timing and effect of a Rule 60 motion, and provides in part:
Rule 60. Relief from a Judgment or Order.F.R.Civ.P. 60(c)(Emphasis supplied). As a general rule, "[w]hat qualifies as a reasonable time depends on the facts of a given case, including the length and circumstances of the delay, intervening rights, the possibility of prejudice to the opposing party and the desirability that judgments be final." In re Teligent, 306 B.R. 752, 758 (Bankr. S.D.N.Y. 2004)(quoted in In re Lykes Bros. Steamship Co., Inc., 399 B.R. 555, 560 (Bankr. M.D. Fla. 2009)). The Court should "consider the particular circumstances of the case and balance the interest in finality with the reasons for the movant's delay." In re Indu Craft, Inc., 2011 WL 2619501, at 5 (Bankr. S.D.N.Y.).
. . .
(c)Timing and Effect of the Motion.
(1) Timing. A motion under Rule 60(b) must be made within a reasonable time - and for reasons (1), (2), and (3) no more than a year after the entry of the judgment or order or the date of the proceeding.
In this case, the Debtor's Motion for Relief from the Judgment was not filed within a reasonable time under Rule 60 of the Federal Rules of Civil Procedure.
The Final Judgment was entered against the Debtor on January 9, 2015, and the Debtor did not file his Motion for Relief from the Judgment until February 28, 2017, more than two years after it was entered. In the intervening years, the Debtor appealed the Judgment to the United States District Court, and then to the Eleventh Circuit Court of Appeals, and the Judgment was affirmed in the appellate proceedings.
The Debtor's delay in filing the Motion for Relief from the Judgment is not reasonable for at least three reasons.
First, the Debtor was aware of his claim for relief at the time that the Judgment was entered. Specifically, the Debtor contends that he is entitled to relief from the Judgment because he purchased at least a portion of the dischargeability claim against himself in February of 2012, three years before the Judgment was entered. (Doc. 289, Exhibit D). In fact, the Debtor had filed papers asserting his interest in the dischargeability claim at least twice during the course of the litigation. (See Docs. 138, 165).
In other words, this is not a case in which the two-year delay was justified because the grounds for relief were not known to the Debtor until long after the Judgment was entered. See F.R.Civ.P. 60(b)(2), regarding relief from a judgment based on newly discovered evidence that could not have found in time to move for a new trial.
Second, even though he knew about his claim at the time that the Judgment was entered, the Debtor did not file a motion to alter or amend the Judgment under Rule 59 of the Federal Rules of Civil Procedure, as made applicable to this proceeding by Rule 9023 of the Federal Rules of Bankruptcy Procedure. F.R.Bankr.P. 9023; F.R.Civ.P. 59.
The Debtor's failure to seek an amendment of the Judgment is significant in this case, because the Judgment was a determination of nondischargeability in the liquidated amount of $117,950.00. (Doc. 265). Consequently, the Debtor knew as of the Judgment date that (1) his interest in the dischargeability claim would not be obviated by the discharge of the debt, and that (2) the status of the case was ripe for a request to amend the Judgment amount to reflect his interest in the dischargeability claim. (See Doc. 178).
Third, the Debtor did not prosecute the claim as part of his appeal of the Judgment. The Debtor filed a Notice of Appeal and a Statement of Issues on Appeal, but the Notice and designated issues do not include the Debtor's purchase of the dischargeability claim as a defense to the Judgment. (Docs. 268, 279).
The United States District Court entered an Order affirming the Judgment on September 30, 2015, and the Eleventh Circuit Court of Appeals entered an Opinion affirming the Judgment on November 21, 2016. The Orders affirm the Judgment amount, and neither Order indicates that the Debtor had asserted on appeal that the Judgment amount should be reduced to account for his interest in the dischargeability claim. (Doc. 286, pp. 20-21; In re Monson, 661 Fed.Appx. 675, 685-86 (11 Cir. 2016)). The Eleventh Circuit, for example, stated that the Debtor had presented no evidence to support his defenses, and that "Monson has shown no reversible error in the district court's award of $117,950 in damages." In re Monson, 661 Fed.Appx. 675, at n. 12.
In summary, the Debtor asserts an ownership interest in the dischargeability claim against himself. The Debtor was aware of his interest at the time that the Final Judgment was entered in the dischargeability action. After the entry of the Judgment, the Debtor did not seek an amendment of the judgment debt under Rule 59 of the Federal Rules of Civil Procedure, or prosecute the claim in his appeal of the Judgment. The Motion for Relief under Rule 60(b) was not filed until more than two years after the entry of the Judgment, after the appellate proceedings had concluded, and after Alfred began his efforts to enforce the debt.
Under these circumstances, including the length of the delay and the litigation history in this case, the Court finds that the Motion for Relief from the Judgment was not filed within a reasonable time under Rule 60 of the Federal Rules of Civil Procedure. In re Teligent, 306 B.R. at 758(quoted in In re Lykes Bros. Steamship Co., Inc., 399 B.R. at 560.).
Conclusion
On January 9, 2015, a Final Judgment was entered in this dischargeability action in favor of the Plaintiff, Alfred Galaz, and against the Debtor. On February 28, 2017, the Debtor filed a Motion for Relief from the Judgment. In the Motion, the Debtor seeks a determination that he purchased an interest in the underlying claim in February of 2012, and therefore is an owner of the Judgment against himself.
Under Rule 60 of the Federal Rules of Civil Procedure, a motion for relief from a judgment must be made within a reasonable time. F.R.Civ.P. 60(c).
In this case, the Debtor's Motion was filed more than two years after the Judgment was entered. The Motion was not made within a reasonable time, because (1) the Debtor had knowledge of his claim for relief at the time that the Judgment was entered, (2) the Debtor did not seek to amend the Judgment under Rule 59 of the Federal Rules of Civil Procedure, and (3) the Debtor did not prosecute the claim in his appeal of the Final Judgment, and the appellate proceedings have concluded.
Accordingly:
IT IS ORDERED that the Debtor's Motion for Relief from Judgment, Stay of Execution, and a Protective Order is denied.
DATED this 23 day of June, 2017.
BY THE COURT
Paul M. Glenn
PAUL M. GLENN
United States Bankruptcy Judge