Elsaesser v. Ioane et al

MEMORANDUM OF DECISION - 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF IDAHO
IN RE 	)
)
GERALD LINDSEY and 	) 	Case No. 03-21652-TLM
ONA LINDSEY, 	)
) 	MEMORANDUM OF DECISION
Debtors. 	)
________________________________ 	)
)
)
J. FORD ELSAESSER, Trustee, 	)
)
Plaintiff, 	)
)
vs. 	) 	Case No. 04-6098-TLM
)
MICHAEL SCOTT IOANE, et al, 	)
)
Defendants. 	)
________________________________ 	)
BACKGROUND AND FACTS
Chapter 7 Trustee and Plaintiff Ford Elsaesser (“Plaintiff”) sued numerous
parties in this adversary proceeding. Defendants Mountain Property Management
and Trust Company (“MPMT”), National Holding Trust (“NHT”), and Equitable
Financial Services (“EFS”) were defaulted and had a default judgment entered
against them. MPMT, NHT and EFS sought to set aside the default judgment,
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1 This answer was filed on behalf of the Defaulted Defendants and Defendants
Searchlight Trust, American Lending Services, Alana Louise Atchison, Marianne Holes, Rene
Lindsey and Loraine Robinet. All these Defendants are represented by attorneys Todd S.
Richardson and Clinton J. Henderson. Id.
MEMORANDUM OF DECISION - 2
were unsuccessful, appealed, and their appeal was adversely resolved. Defendant
Golden Opportunity (“GO”) was defaulted and a default judgment was entered
against it. GO never sought relief from that judgment. Collectively GO, MPMT,
NHT and EFS are referred to as the “Defaulted Defendants.”
On April 1, 2005, Plaintiff filed its first amended complaint. See Doc. No.
411. On April 18, 2005 the Defaulted Defendants, along with certain other
Defendants represented by the same counsel, filed an answer to the first amended
complaint. See Doc. No. 419.1
Plaintiff has moved to strike the answer to the first amended complaint to
the extent it is asserted by the Defaulted Defendants. See Doc. No. 448. This
motion was heard on June 1, 2005. See Doc. No. 477 (minute entry). The Court
took the issue under advisement subject to post hearing briefing. Id. That briefing
has now been filed. See Doc. Nos. 493, 499.
This decision constitutes the Court’s findings and conclusions to the extent
required by applicable rule. The Court finds Plaintiff’s motion well taken and it
will be granted.
DISCUSSION AND DISPOSITION
The Defaulted Defendants argue that when a plaintiff files an amended
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MEMORANDUM OF DECISION - 3
complaint, the same supercedes the original complaint and causes it to cease to
function as a pleading. Thus, they contend, a default judgment entered on such a
superseded complaint becomes a nullity and a judgment can be entered only upon
the amended complaint. See Doc. No. 493 at 2-5.
However accurate the authorities cited by the Defaulted Defendants might
be in general, the Court must consider the actual facts of this case. The Court
therefore reads those authorities through the prism provided by the pleadings filed
in and the history of this litigation.
Here, the first amended complaint states:
This First Amended Complaint is only as to Defendants for
which an Order of Default and Default Judgment have not been
entered.
See Doc. No. 411 at 5. This caveat might arguably have been better phrased. And
it was, perhaps, artless of Plaintiff to “name” the Defaulted Defendants as well as
all non-defaulted Defendants in this first amended complaint, and to repeat in its
prayer for relief requests that appear to relate to “all” Defendants. See id. at 41,
44-46.
Notwithstanding the less than fine brush used, Plaintiff has steadfastly
maintained that the first amended complaint is directed toward non-defaulted
Defendants only. In addition to the quoted language from page 5 of the first
amended complaint, Plaintiff’s service of the first amended complaint provides
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2 The Affidavit of Service also shows service on Attorney Henderson as counsel for the
same non-defaulted Defendants and also on Attorney Peter Cabbiness as an attorney for
Searchlight Trust and American Lending Services. Id. at 3.
MEMORANDUM OF DECISION - 4
further evidence that it was not directed toward the Defaulted Defendants and did
not supersede the original complaint as to them. See Doc. No. 412 (“Affidavit of
Service”) (reflecting service on Attorney Richardson “as attorney for Searchlight
Trust[,] Marianne Holes[,] American Lending Services[,] Loraine Robinet[,] Alana
Louise Atchison[, and] Rene Howden”).2
Nothing in the Affidavit of Service reflects any service on the Defaulted
Defendants whether through identified attorneys or otherwise. That Mr.
Richardson and Mr. Henderson received copies of the first amended complaint has
everything to do with their representation of numerous non-defaulted Defendants,
and nothing to do with their representation of the Defaulted Defendants. Without
service of the first amended complaint on the Defaulted Defendants, the first
amended complaint could not supersede the original complaint as to those parties.
Accord, Int’l Controls Corp. v. Vesco, 556 F.2d 665, 669 (2d Cir. 1977). Thus,
there was no renewal, resurrection, or reinvigoration of suit by Plaintiff against
those Defaulted Defendants or any waiver of the earlier default judgment.
Without quarreling with the general principal enunciated in the cases cited
by the Defaulted Defendants, those cases do not appear apropos to the case at bar.
Under the particular facts and circumstances of the present case, the Court
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MEMORANDUM OF DECISION - 5
concludes that Plaintiff’s prior default judgment against the Defaulted Defendants
has not been rendered moot or superseded by the filing of the first amended
complaint against and its service on non-defaulted Defendants.
CONCLUSION
Plaintiff’s motion, Doc. No. 448, will be GRANTED. Plaintiff shall submit
an appropriate form of order.
DATED: July 13, 2005
TERRY L. MYERS
CHIEF U. S. BANKRUPTCY JUDGE
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MEMORANDUM OF DECISION - 6
CERTIFICATE RE: SERVICE
A “notice of entry” of this Decision, Order and/or Judgment has been
served on Registered Participants as reflected by the Notice of Electronic Filing.
A copy of the Decision, Order and/or Judgment has also been provided to non-
registered participants by first class mail addressed to:
Michael S. Ioane
1735 East Bayshore Road, Suite 3A404
Redwood City, CA 	94063
Glen Halliday
1735 East Bayshore Road, Suite 3A404
Redwood City, CA 	94063
Case No. 04-6098-TLM (Elsaesser v. Ioane)
Dated: 	July 13, 2005
/s/Jo Ann B. Canderan
Judicial Assistant to Chief Judge Myers
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