Walton v. Cohen et al

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at Greenbelt
In Re: 	Case No. 03-14929PM
Chapter 13
Paulette M. Walton,
Debtor.
Paulette M. Walton, 	AP No. 06-01757PM
Plaintiff,
v.
Brett Cohen, Yomma Cohen,
William Jefferson and First Franklin
Financial Corporation,
Defendants.
MEMORANDUM OF DECISION
This matter came before the court on February 27, 2007, on the motion filed by Brett and
Yomma Cohen (the “Cohen defendants”) to vacate the entry of default as to them, and the
opposition of Paulette M. Walton (the “plaintiff”) thereto. For the reasons set forth herein, the
motion will be denied.
This adversary proceeding was filed on October 23, 2006, against the four listed
defendants. The three-count complaint concerns an alleged post-filing conveyance of the
debtor's residence and seeks declaratory relief that the alleged conveyance is a nullity, damages
for an alleged violation of the automatic stay, or, in the alternative, for the avoidance of post-
petition transfers of any interest in the property. A summons was issued on November 16, 2006,
and under Federal Rule of Bankruptcy Procedure 7012(a), an answer was due in thirty days after
Date signed February 28, 2007
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issuance. 	Only William Jefferson filed an answer. The Clerk of the Court docketed Defaults as
to the remaining three defendants on December 26, 2006. The Cohen defendants filed a motion
for extension of the time to file an answer to the complaint that same day. The motion was not
acted on by the court because of the issuance of the Defaults. The Cohen defendants filed this
motion on January 24, 2007, to vacate the Default as to them. Rule 55(c) of the Federal Rules of
Civil Procedure applicable in adversary proceedings by virtue of Rule 7055 of the Federal Rules
of Bankruptcy Procedure, provides:
(c) Setting Aside Default. 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).
Rule 55(c) authorizes the court to set aside entry of default “[f]or good cause shown . . . . ” The
United States Court of Appeals for the Fourth Circuit held that when deciding whether to set
aside an entry of default, a court should consider whether the moving party has a meritorious
defense, acts with reasonable promptness, the personal responsibility of the defaulting party, the
prejudice to the opposing party, whether there is a history of dilatory action and the availability
of sanctions less drastic. See Payne v. Brake, et al., 439 F.3d 198, 204-5 (CA4 2006);
Consolidated Masonry & Fireproofing, Inc. v. Wagman Constr. Corp., 383 F.2d 245, 251 (CA4
1967); Lolatchy v. Arthur Murray, Inc., 816 F.2d 951, 953 (CA4 1987).
The Cohen defendants allege that their failure to file timely answers was attributed to the
plaintiff’s failure to personally serve Brett Cohen with a copy of the summons and complaint;
that counsel was retained to represent the Cohen defendants on December 19, 2006, and was
unable to obtain sufficient background information from prior counsel to properly answer; and
that there exists a meritorious defense. 	The court is unpersuaded by all of the Cohen
defendants’ arguments.
In United States v. Moradi, 673 F.2d 725, 727 (CA4 1982) (citing Central Operating Co.
v. Utility Workers of America, 491 F.2d 245, 252 n. 8 (CA4 1974)), the Court of Appeals held
that to establish the existence of a meritorious defense the defaulting party must make “a
presentation or proffer of evidence, which, if believed, would permit either the court or the jury
to find for the defaulting party.” The meritorious defense that the Cohen defendants refer to
remains a mystery. There is an assertion in the motion mentioning the existence of the
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“meritorious defense which this court should hear” and nothing more. Nor were affidavits filed
in support of the motion. Nothing was added about the defense during oral argument.
The Cohen defendants did not act with reasonable promptness as the motion to vacate the
Defaults was not filed until January 24, 2007 – nearly one month after entry. This, along with
the fact that the motion to extend the time to file answers to the complaint was not filed until
after the answers were due and on the day the Defaults were entered, establishes a pattern of
dilatory conduct.
There is no merit to the Cohen defendants’ argument that Brett Cohen was not
“personally” served with a copy of the complaint and summons. Rule 7004(b)(1) of the Federal
Rules of Bankruptcy Procedure permits service of process upon an individual within the United
States by first class mail postage prepaid. Personal service is not required. There is reason to
believe, based on the record, that the Cohen defendants received, via United States mail, copies
of the summons and complaint. The court finds the letter from Brett Cohen’s previous counsel
that is appended to the plaintiff's opposition persuasive. Brett Cohen was clearly aware of this
pending adversary proceeding and the deadlines established. Further, the letter is addressed to
the plaintiff’s counsel and is dated December 12, 2006 – six days before the answers were due.
New counsel was not retained until December 19, 2006 – one day after the answers were due.
The Cohen defendants chose to sit on their rights and are personally responsible for the entry of
Defaults against them. Their studied neglect is not excusable.
The Cohen defendants have failed to carry their burden. An appropriate order will be
entered.
cc: 	Paulette M. Walton
9123 Sheridan Street
Lanham, MD 20706
Scott C. Borison
5500 Buckeystown Pike
Frederick, MD 21703
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Brett Cohen
4301 Southern Ave.
Capitol Heights, MD 20743
Harvey S. Jacobs
Emily Karen Gumpert
11 N. Washington St., Suite 640
Rockville, MD 20850
Yomma Cohen
2802 Millvale Ave.
District Heights, MD 20747
William Jefferson
3239 Chester Grove Rd.
Upper Marlboro, MD 20774
Tonya L. Waller
Walker & Waller, PLLC
1717 K Street, N.W.
Suite 600
Washington, DC 20036
First Franklin Financial Corporation
2150 North First St., #100
San Jose, CA 95131
END OF MEMORANDUM OF DECISION
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