Kravitz v. Deacons (In re Advance Watch Co.)

587 B.R. 598
CourtUnited States Bankruptcy Court, S.D. New York
DecidedJune 29, 2018
DocketCase No. 15–12690 (MG) Jointly Administered; Adv. Pro. No. 17–01137 (MG); Adv. Pro. No. 17–01155 (MG); Adv. Pro. No. 17–01159 (MG)
StatusPublished
Cited by20 cases

This text of 587 B.R. 598 (Kravitz v. Deacons (In re Advance Watch Co.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kravitz v. Deacons (In re Advance Watch Co.), 587 B.R. 598 (N.Y. 2018).

Opinion

MARTIN GLENN, UNITED STATES BANKRUPTCY JUDGE

Pending before the Court are three motions for entry of default judgments (collectively, the "Motions") filed in three adversary proceedings (the "Adversary Proceedings") in the bankruptcy case of Advance Watch Company Ltd. and its affiliated debtors and debtors in possession (the "Debtors") by Peter Kravitz, as Creditor Trustee of the Creditor Trust of Advance Watch Company Ltd. (the "Plaintiff"). The defendants in these Adversary Proceedings are Deacons, Wheeler Corporation Ltd. ("Wheeler"), and Display & Packaging Ltd. ("Display") (collectively, the "Defendants"). The Defendants are companies residing in and subject to the laws of Hong Kong. The Plaintiff seeks to avoid and recover preferential transfers between the Debtors and the Defendants under sections 547 and 550 of the Bankruptcy Code that occurred during the ninety-day period prior to the commencement of the bankruptcy cases on September 30, 2015. Because none of the Defendants have answered or otherwise appeared in any of these cases, the Plaintiff has moved for entry of default judgments against each of them.

The factual and legal issues implicated in these Motions are similar. The Motions raise the same issue whether a bankruptcy court may enter a final default judgment in an adversary proceeding in which the *600foreign defendant failed to respond to the summons and complaint. The facts relevant to the analysis in these Adversary Proceedings are similar. Each of the Defendants has its domicile in Hong Kong. In each case, the Plaintiff served the summons and complaint by causing the bailiff's assistant of the High Court of Hong Kong to personally serve each Defendant at its Hong Kong address. The Clerk's certificate of default, the motion for entry of a default judgment, and the notice of presentment were thereafter served on each of these Defendants in Hong Kong by U.S. Mail. Because service of the pleadings in each case was done in the same way, the Court will only discuss whether it may enter a default judgment in the first case listed in the caption- Kravitz v. Deacons (Adv. Proc. No. 17-01137) (the "Adversary Proceeding"). The Court's reasoning and conclusions apply to the other two pending Adversary Proceedings as well.1 The Court concludes that it may order entry of a final default judgment against each of the Defendants because each Defendant was properly served with, but failed to respond to, the summons and complaint; the subsequent documents related to the motion for entry of default judgment were also properly served on each of the Defendants by U.S. Mail.

I. BACKGROUND

On September 28, 2017, the Plaintiff filed a complaint (the "Complaint," ECF Doc. # 1) against Deacons (the "Defendant") to avoid and recover transfers of property. On October 30, 2017, the Plaintiff filed an amended complaint (the "Amended Complaint," ECF Doc. # 3), and the Foreign Summons and Notice of Pretrial Conference in an Adversary Proceeding (the "Summons," ECF Doc. # 4) was issued. Proof of service of the Summons and Amended Complaint was filed on February 21, 2018. (ECF Doc. # 7 (the "First Certificate of Service"); ECF Doc. # 8 at 6-7 (the "Affirmation of Service").) The bailiff's assistant of the Hong Kong High Court served the Summons and Amended Complaint upon the Defendant in Hong Kong on December 28, 2017, and the Defendant's secretary voluntarily accepted service. (See Affirmation of Service.) No counsel appeared for Deacons in this case, and no response to the Amended Complaint was ever filed.

On April 18, 2018, the Plaintiff filed a request for entry of a certificate of default by the Clerk of the Bankruptcy Court (the "Request for Default," ECF Doc. # 8). The Clerk issued the certificate of default on April 19, 2018 (the "Certificate of Default," ECF Doc. # 9), and proof of service of the Certificate of Default on the Defendant was filed on April 21, 2018 (the "Certificate of Notice," ECF Doc. # 10). The Plaintiff served the Clerk's Certificate of Default on the Defendant at its address in Hong Kong by first class mail. (See id .) The Defendant still failed to respond to the Amended Complaint or otherwise seek to vacate the Certificate of Default.

On April 30, 2018, the Plaintiff filed a motion, supported by the declaration of Kara E. Casteel, Esq., counsel for the Plaintiff (the "Declaration," ECF Doc. # 12-1), for entry of default judgment in the amount of $15,006.99 as of April 30, 2018, including interest and costs, with interest continuing to accrue (the "Motion," ECF Doc. # 12). On the same day, the Plaintiff also filed the notice of presentment of order for default judgment (the "Notice of Presentment," ECF Doc. # 11).

*601Proof of service of the Motion, Declaration, and Notice of Presentment on the Defendant by regular mail was filed on April 30, 2018. (See ECF Doc. # 13 (the "Second Certificate of Service").) No response was filed by the Defendant.

II. DISCUSSION

When a defendant fails to respond to a properly served complaint in an adversary proceeding, the plaintiff may move for entry of a default judgment on the claim. The procedure for seeking a default judgment is set forth in Fed. R. Bankr. P. 7055, which incorporates Fed. R. Civ. P. 55. Pursuant to Rule 55(a), the Bankruptcy Court Clerk "must enter [a] party's default" when "a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and the failure is shown by affidavit or otherwise." FED. R. CIV. P. 55(a). If a plaintiff's claim is for a sum certain or a sum that can be made certain by computation, the Clerk must enter judgment against the defaulting party in the amount of the claim. FED. R. CIV. P. 55(b)(1). Rather than asking the Clerk to enter default judgment, the plaintiff can also move for the bankruptcy judge to do so. FED. R. CIV. P. 55(b)(2).

In Exec. Sounding Bd. Assoc. v. Advanced Mach. & Engineering Co. (In re Oldco M Corp.) , 484 B.R. 598 (Bankr. S.D.N.Y. 2012), the Court analyzed whether a bankruptcy court has the authority to order entry of a final default judgment in an adversary proceeding where the defendant failed to respond to the summons and complaint. Relying on Supreme Court and Second Circuit precedent, the Court held that "implied consent is a proper basis for upholding the exercise of authority of a bankruptcy judge to enter a final order or judgment." Id. at 609 (citations omitted). The Court concluded that "the failure to respond to a properly served adversary complaint constitute[s] implied consent to the entry of a final judgment by a bankruptcy judge," such that "a bankruptcy judge has the constitutional authority to enter a final default judgment when the defendant fails to respond to the complaint."

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Bluebook (online)
587 B.R. 598, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kravitz-v-deacons-in-re-advance-watch-co-nysb-2018.