Opinion
CIVIL ACTION NO. 3:03-3181-10.
April 15, 2004
APPEAL FROM THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF SOUTH CAROLINA, John E. Waites, United States Bankruptcy Judge.
ORDER
This matter is before the Court pursuant to an appeal by I.P., L.L.C., Trexler Enterprises, L.L.C., James A. Trexler, James W. Trexler, Hazelene Trexler, Julie C. Trexler, and Terry A. Trexler (the "Appellants") from a decision by the United States Bankruptcy Court for the District of South Carolina, Adversary No. 03-80003-W. This Court has jurisdiction over this appeal pursuant to 28 U.S.C. § 158.
I.
On January 6, 2003, the underlying adversary proceeding was commenced by the Trustee when he filed the Complaint. The Clerk of the Bankruptcy Court issued a Summons on January 8, 2003. The Bankruptcy Trustee served each of the Appellants by depositing copies of the Summons and Complaint in the United States mail on Friday, January 17, 2003. The Trustee sent copies of the Summons and Complaint by regular first class mail. None of the Defendants responded to the Complaint within thirty (30) days of the issuance of the Summons.
On February 11, 2003, the Trustee submitted an Affidavit of Default. On February 20, 2003, the Clerk of Court filed an Entry of Default, and, on February 26, 2003, the Court entered an Order of Default. The Appellants filed a motions to be relieved from the entry of default under Rule 60 on March 7, 2003 and under Rule 55 on March 21, 2003. The Honorable John E. Waites, United States Bankruptcy Judge, held a hearing on these motions on March 28, 2003. Upon concluding that the appropriate standard in deciding the Motions to be Relieved from Default was Rule 60 instead of Rule 55, the Bankruptcy Judge issued on May 22, 2003 an Order denying the motions. The Appellants filed a Motion for Reconsideration pursuant to Rule 59 of the Federal Rules of Civil Procedure on May 30, 2003. The Bankruptcy Judge denied the Motion for Reconsideration in a July 28, 2003 written order.
On August 26, 2003, a hearing on the issues of damages was held. The Bankruptcy Judge issued an Order in connection therewith on September 16, 2003. Appellants timely filed their notices of appeal. On December 22, 2003, this Court entered an Order granting a temporary stay of the sale of any assets of the bankruptcy estate during the pendency of the appeal.
II.
The Appellants contend that the Bankruptcy Judge abused his discretion in denying their motion to be relieved from default. In the Bankruptcy Court, the Appellants sought relief under both Rules 55 and 60 of the Federal Rules of Civil Procedure. Rule 55(c) provides, "[f]or 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). The Bankruptcy Judge held that the Appellants had satisfied all the factors of Rule 60 except Rule 60's higher standard of excusable neglect. The Appellants argue that Rule 55's good cause shown standard is less stringent than Rule 60's standard. Applying either standard, the Court finds that Appellant Hazelene Trexler has met her burden of proof.
Hazelene Trexler had just lost her husband on December 31, 2002. She was served less than a month thereafter. This Court finds that this loss constitutes good cause shown or excusable neglect. As such, she should have been relieved from default and it was an abuse of discretion to not grant her motion for relief. As to the other Appellants, the Court finds that they do not meet either standard and therefore find that the Bankruptcy Judge did not abuse his discretion in denying those Appellants' motion.
III.
Upon consideration, the Bankruptcy Judge's decision as to Hazelene Trexler is REVERSED and she is relieved from default and her case is REMANDED for a trial on the merits. Hazelene Trexler is hereby granted fifteen (15) days within which to file an answer. The decision of the Bankruptcy Judge as to I.P., L.L.C., Trexler Enterprises, L.L.C., James W. Trexler, Julie C. Trexler, and Terry A. Trexler is AFFIRMED. The stay of the Bankruptcy Court's proceedings as previously ordered by this Court is hereby LIFTED.