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Irby v. F & S Auto Sales, LLC

United States District Court, Middle District of Alabama, Southern Division

May 12, 2015

MONROE IBRY, III, Plaintiff-Appellant,
v.
F & S AUTO SALES, LLC, and MICHAEL JONES, Defendants-Appellees.

MEMORANDUM OPINION AND ORDER

W. KEITH WATKINS CHIEF UNITED STATES DISTRICT JUDGE

Monroe Irby, III, appeals the order of the United States Bankruptcy Court for the Middle District of Alabama in Adversary Proceeding No. 14-03025-DHW, which set aside entry of default and granted judgment in favor of Defendants-Appellees F & S Auto Sales, LLC (“F & S”), and Michael Jones (collectively, “Defendants”). (Doc. # 2-12.) Mr. Irby’s timely appeal of the order and judgment has been fully briefed. (Docs. # 14, 15, 16.) Upon consideration of the parties’ arguments, the record, the Bankruptcy Court’s reasoned decisions, and the relevant law, the court concludes that the order setting aside entry of default and granting judgment in favor of Defendants is due to be affirmed in part and vacated and remanded in part.[1]

I. JURISDICTION AND VENUE

This court has subject-matter jurisdiction to hear appeals from orders of the Bankruptcy Court. 28 U.S.C. § 158(a). Venue is proper because an appeal “shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving.” Id. Personal jurisdiction and venue are uncontested.

II. STANDARD OF REVIEW

A bankruptcy court’s findings of fact are reviewed for clear error, and its legal conclusions and any mixed questions of law and fact are reviewed de novo. Educ. Credit Mgmt. v. Mosley (In re Mosley), 494 F.3d 1320, 1324 (11th Cir. 2007); Christopher v. Cox (In re Cox), 493 F.3d 1336, 1340 n.9 (11th Cir. 2007). A finding of fact “is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” Anderson v. City of Bessemer City, N.C. , 470 U.S. 564, 573 (1985) (citation, internal quotation marks, and alterations omitted).

III. BACKGROUND

Mr. Irby filed a voluntary Chapter 13 petition on February 14, 2013. Pursuant to this petition, a notice of bankruptcy was sent to all of Mr. Irby’s known creditors, including F & S.[2] On October 22, 2013, F & S filed an untimely proof of claim with the Bankruptcy Court in the amount of $15, 925.13. Notwithstanding Mr. Irby’s bankruptcy and F & S’s pending claim, Mr. Irby alleges that F & S – through its owner, Michael Jones – repossessed the vehicle on February 11, 2014, in violation of 11 U.S.C. §§ 362(a)(3)-(6), which prohibits creditors from taking certain actions against a debtor or the property of a debtor-estate.

In light of Defendants’ actions, Mr. Irby filed the underlying adversary proceeding with the Bankruptcy Court on February 17, 2014. Neither Defendant timely answered or otherwise responded to the complaint, and on April 1, 2014, Mr. Irby requested an entry of default. That same day, but before the Clerk entered defaults against Defendants, Defendants filed a motion to set aside the request for entry of default and to allow for the filing of untimely answers, as well as a motion to dismiss the adversary proceeding.

The Bankruptcy Court held a hearing on Defendants’ motions on April 28, 2014. At the conclusion of the hearing, the Bankruptcy Court denied Mr. Irby’s request for entry of default in light of Defendants’ repeated efforts to obtain counsel. The Bankruptcy Court also denied Defendants’ motion to dismiss and set the case for a “trial on the merits” on June 9, 2014. (Doc. # 11-2, at 12.) The next day, the Bankruptcy Court entered three orders confirming the previous day’s oral determinations. (Docs. # 2-6, 2-7, 2-8.)

When the Bankruptcy Court denied Defendants’ motion to dismiss, the clock began to run on Defendants’ time to answer Mr. Irby’s complaint. Pursuant to Federal Rule of Bankruptcy Procedure 7012(a)(1), Defendants had fourteen days to file their answer from notice of the Bankruptcy Court’s decision denying their motion to dismiss. This deadline passed with no answer from Defendants, so on Friday, May 16, 2014, Mr. Irby filed a renewed request for entry of default.

At 7:07 a.m. the following Monday – before the Clerk acted on Mr. Irby’s renewed request for entry of default – Defendants electronically filed their answer to Mr. Irby’s complaint. At 11:12 a.m. that same day, however, the Clerk of the Bankruptcy Court entered defaults against both Defendants. No further filings or court orders were entered from that point forward, and on June 9, 2014, both parties appeared before the Bankruptcy Court for the previously scheduled hearing.

At the beginning of the hearing, the Bankruptcy Court engaged in discussions to determine the status of the case’s procedural posture and initially indicated its belief that the Clerk’s entry of default had solidified Mr. Irby as the prevailing party and that the present hearing was limited to the issue of damages. (Doc. # 11-1, at 13) (“They won. . . . [Plaintiff] filed a complaint alleging a wilful violation of the stay. There was no response. There was a default judgment entered. So this is a damage hearing only on the issue.”). Counsel for Defendants, however, quickly pointed out his belief that the previous entry of default (the one requested on April 1, not the one requested on May 16) had been set aside at the April 28, 2014 hearing and that the parties were present to begin a trial on the merits. (Doc. # 11-1, at 14.)

Counsel for Mr. Irby then countered with a summary of the most recent actions taken in the case, namely Defendants’ failure to answer within fourteen days of the court’s denial of the motion to dismiss, Mr. Irby’s renewed motion for entry of default, and the Clerk’s entry of default on May 19, 2014. (Doc. # 11-1, at 15.) Counsel for Defendants then added that an answer was filed the Monday immediately following Mr. Irby’s filing of the renewed motion for entry of default because the preceding court orders did not specify a time to answer. (Doc. # 11-1, at 16.) With this recitation of the facts, the Bankruptcy Court explained that he would consider the recent filings, but ...


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