IN RE FARAH

DONALD STECKROTH, Bankruptcy JudgePage 3

Presently before the Court is a motion filed by Sal and Lamia Farah (hereinafter "Defendants"), seeking to vacate default judgment entered against them in 2001 for non-dischargeability of a debt in relation to a complaint filed by Robert Wasserman, Chapter 7 Trustee for the Estate of Willy Farah (hereinafter "Trustee" and "Estate" respectively). The Defendants claim that the entry of default judgment was improper and should be vacated because they no longer maintained the post office box address at which the summons and complaint were served, and thus did not receive notice of the complaint's filing. SM Financial Services Corporation (hereinafter "SMFS"), as assignee to the Trustee in this adversary proceeding, filed opposition. The matter was heard September 11, 2007 with Defendant Sal Farah allowed to participate via telephone conference at his request.

For the reasons that follow, the Defendants' motion is denied. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and the Standing Order of Reference from the United States District Court for the District of New Jersey dated July 23, 1984. This matter is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(I) and (O). Venue is proper under 28 U.S.C. §§ 1408 and 1409.

On July 1, 1999, a complaint was instituted in Superior Court against the Defendants by the Estate of Willy Farah for collection of unpaid rent pursuant to a lease for which the Defendants were lessees. Cert. of Brian W. Hofmeister in Opp'n to Mot., ¶ 6. The action resulted in a default judgment against the Defendants. Id. at ¶ 7. On November 10, 1999, a second complaint seeking the Defendants' eviction was filed by the Estate in Superior Court. Id. at ¶ 9. The matter was ultimately resolved pursuant to a stipulation of settlement. Id. at ¶ 10. On January 12, 2000, the Defendants filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. The Estate filed a motion for relief from the automatic stay to continue eviction proceedings in Superior Court due to the Defendants' failure to comply with the stipulation, which was subsequently granted. On or about July 10, 2000, the Trustee filed a complaint in this Court seeking to have the underlying default judgment for failure to pay rental obligations declared non-dischargeable. A copy of the Bankruptcy Court summons and complaint was served upon the Defendants by regular and certified mail at a post office box. Cert. of Brian W. Hofmeister in Opp'n to Mot., Exhibit K. The certified mail was refused by the Defendants on July 13, 2000. Id.; Defs.' Mot. to Vacate Default J., p. 2. The complaint sent via regular mail to the post office box was not returned. Cert. of Brian W. Hofmeister in Opp'n to Mot., ¶ 17. For failure to respond to the complaint, default judgment was entered by this Court against the Defendants on May 16, 2001.

Immediately after the entry of judgment, the Trustee mailed information subpoenas to the Defendants at the same post office box. Cert. of Brian W. Hofmeister in Opp'n to Mot., Exhibit L. Each Defendant immediately completed and returned an information subpoena listing the post office box as their address. Id. Thereafter, this Court Ordered the turnover of the Defendants' liquid assets located at Summit Bank in the amount of $5,000 to the Trustee. Now, on July 6, 2007, over six years after the non-dischargeability judgment was entered, the Defendants filed a motion to vacate the default judgment in the non-dischargeability action. The Defendants also seek to include the debt owed to the Estate of Willy Farah in their discharge of 2002.

Federal Rule of Civil Procedure Rule 60(b), applicable in bankruptcy proceedings pursuant to Federal Rule of Bankruptcy Procedure Rule 9024, provides:

[O]n motion and upon such terms as are just, the court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; . . . (4) the judgment is void; . . . or (6) any other reason justifying relief from the operation of the judgment.

FED. R. CIV. P. 60(b). A complaint improperly served is void and may be vacated under Federal Rule of Civil Procedure 60(b)(4). Gold Kist, Inc. v. Laurinburg Oil Co., 756 F.2d 14, 19 (3d Cir. 1985). Pursuant to the Federal Rule of Bankruptcy Procedure 7004(b)(1), service may be properly effected by mailing a copy of the summons and complaint to an individual's residence or to a place where the individual regularly conducts business or a profession. FED. R. BANKR. P. 7004(b)(1). However, service of process at a post office box may be valid against an adversary defendant who lacks either a residence or work address. See also Yates v. Forker (In re Patriot Co.), 303 B.R. 811, 814-15 (B.A.P. 8th Cir. 2004) (service upon the sole shareholder of a debtor-corporation at a post office box was valid as to the shareholder and therefore the debtor, despite the fact that the shareholder was incarcerated at the time of service, because an agent holding power of attorney was authorized to receive mail at the post office box in the shareholder's stead).

Here, the non-dischargeability complaint was not filed until after the Defendants were evicted from their home, and the Defendants never filed a change of address with the Court. The Trustee's counsel had previously represented the Estate in the underlying actions and evicted the Defendants. The Trustee's counsel was, therefore, well aware of these circumstances. The only remaining address known to the Trustee was the Defendants' post office box. The Defendants' claim that they no longer maintained the post office box at the time of service is simply incredible. First, Mr. Farah admits he affirmatively and intentionally refused service of the complaint at that address. Defs.' Mot. to Vacate Default J., p. 2; Cert. of Brian W. Hofmeister in Opp'n to Mot., Exhibit K. Second, the Defendants listed the post office box as their address in their responses to the information subpoenas, completed on May 22, 2001, after the non-dischargeability judgment was entered against them. Cert. of Brian W. Hofmeister in Opp'n to Mot., Exhibit L. Third, on October 10, 2000, three months after a copy of the complaint was served, the Trustee's counsel contacted the local postmaster to determine whether the Defendants had changed their address. In response, the postmaster informed the Trustee's counsel that no change of address order was on file and that the post office box address was still valid. Cert. of Brian W. Hofmeister in Opp'n to Mot., Exhibit N. Fourth, the service to the post office box address by regular mail was not returned.

Here, the Trustee was aware of only one address to serve the Defendants. Clearly, the post office box was still a valid address. While the certified service was refused, service by first-class mail was never returned. Under these circumstances, this Court deems that service was proper. The judgment is not void under Federal Rule of Civil Procedure 60(b)(4).

Default judgment may also be vacated on grounds of mistake, inadvertence, surprise, or excusable neglect. FED. R. CIV. P. 60(b)(1). As applicable here, to vacate default judgment on such grounds, the motion must be brought within one year or a reasonable time period. FED. R. CIV. P. 60(b). Under the circumstances sub judice, the Defendants knew of the judgment entered against them in May of 2001 as the Trustee's letter transmitting the information subpoenas made specific reference to the judgment. Cert. of Brian W. Hofmeister in Opp'n to Mot., Exhibit L. In addition, the Defendants were certainly aware that the Trustee had levied upon their bank account in December of 2001. Defs.' Mot. to Vacate Default J., p. 2. The Defendants' motion comes over five years from the latest of these occurrences and is therefore untimely.

Assuming arguendo that the motion was deemed timely, the Defendants provide no basis to vacate the judgment. A determination of whether neglect is excusable is "at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission." Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 395 (1993). Such circumstances include danger of prejudice to a debtor, length of delay and its potential impact on judicial proceedings, the reason for delay, and whether the movant acted in good faith. Id. The Defendants make no attempt to address these factors. However, it is evident that a lengthy period of time has elapsed since judgment was entered and that delay in filing the instant motion was due solely to the inaction of the Defendants.

In addition, the Defendants make no argument that would serve to vacate default judgment for purposes of mistake, surprise, or inadvertence. The Defendants were made explicitly aware of the default judgment only days after it was entered, at a minimum, by the cover letter attached to the information subpoenas. They were also well aware that their bank account was levied upon. Without explanation and over five years after the levy, they now move to vacate judgment. The grounds to vacate a judgment for mistake, surprise, or inadvertence are not operative here.

The only other basis by which the Defendants could obtain relief in this matter would be under Federal Rule of Civil Procedure 60(b)(6), which states that relief may be granted for "any other reason justifying relief from the operation of judgment." It is well established, however, that relief under 60(b)(6) may be granted only upon "a showing of exceptional circumstances." Coltec Indus., Inc. v. Hobgood, 280 F.3d 262, 273 (3d Cir. 2002) (citing In re Fine Paper Antitrust Litig., 840 F.2d 188 (3d Cir. 1988) (quotation omitted); see also U.S. Steel Corp. v. Fraternal Ass'n of Steel Haulers, 601 F.2d 1269, 1274 (3d Cir. 1979); Marshall v. Bd. of Educ. Bergenfield, N.J., 575 F.2d 417, 425 (3d Cir. 1978)). Here, no such exceptional circumstances exist. The Defendants were aware of the proceeding against them, and had ample opportunity to file a responsive pleading. They provide no convincing basis for their failure to do so, and certainly no exceptional circumstances as required by Federal Rule of Bankruptcy Procedure 9024.

For the reasons set forth above, the Defendants' motion is denied. An Order in conformance with this Opinion has been entered by the Court and a copy is attached hereto.