Friesinger v. Gay

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Trustee ("Plaintiff" or "Trustee") of the estate of Debtor Carnell Sims ("Debtor"), as a result of the failure of Defendant Tonya Gay ("Defendant") to timely plead, defend, or otherwise respond to the Amended Complaint (Doc. 3) (as defined below) filed herein. The Court will grant, in part, and deny, in part, the Motion for Default Judgment as set forth below but first needs to address its constitutional authority to enter a final judgment.

II. Jurisdiction

The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 1334(b) and Amended General Order No. 05-02 (Amended Standing Order of Reference) entered by the United States District Court for the Southern District of Ohio, pursuant to 28 U.S.C. § 157(a). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(F). A proceeding "to determine, avoid, or recover preferences" is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(F); thus, "the Court has statutory authority to enter a final judgment on the preference claim at issue here." Nealey v. Ohio Att'y Gen. (In re Nealey), 673 B.R. 365, 376-77 (Bankr. S.D. Ohio 2025).

III. Constitutional Authority

Notwithstanding this Court's statutory authority, there is still the issue of its constitutional authority - whether entering a final default judgment will violate Article III of the Constitution - given that "[a]fter Stern v. Marshall, 564 U.S. 462 . . . (2011), a bankruptcy court may no longer rely solely on § 157(b)(2)'s distinction between core and noncore proceedings in determining the limits of its final adjudicative authority." Nealy, 673 B.R. at 376. Currently, "[c]ourts are split on whether preference claims involving creditors who have not filed proofs of claim, which is the case here, are Stern claims that bankruptcy courts lack authority to finally adjudicate." Id. (collecting cases). But even though Defendant has not filed a proof of claim, this Court might not need to "address whether a preference claim asserted against a defendant that has not filed a proof of claim is a Stern claim[,]" albeit for a different reason than in Nealy. Id. In Nealy, the parties consented to the Court's final adjudication. Id. at 377. Here, the issue is whether consent can be given or implied by actions (or, more precisely, inaction), rather than words. And this is another issue on which the courts are not uniform, although there does appear to be a majority approach. See, e.g., Moyer v. Koloseik (In re Sutton), 470 B.R. 462 (Bankr. W.D. Mich. 2012) (concluding, before Wellness was decided, that the bankruptcy court would not enter a default judgment and would prepare a report and recommendation instead) (cited in 10 Collier on Bankruptcy ¶ 7055.03

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(16th ed. 2026))); see also Villareal, 2022 Bankr. LEXIS 3575, at *1-2, 9 (making a report and recommendation on a motion for default judgment concerning preference and fraudulent transfer claims "on its own initiative because a bankruptcy court's authority to enter a final judgment, by default, in a controversy involving a so-called 'Stern claim' remains doubtful" and because District Judges had "concurred in this admittedly cautious approach" (citations omitted)). This Court ultimately agrees with those courts that have determined, both before and after Wellness was decided, that a defendant waives their right to adjudication by an Article III court - consents to a final adjudication by a bankruptcy court - by failing to respond to a summons, at least the variation of Summons (Doc. 4) that was served upon the Defendant in this case. See Wellness Int'l Network, Ltd. v. Sharif, 575 U.S. 665, 669, 683-84 (2015) (addressing "the question whether Article III allows bankruptcy judges to adjudicate [Stern] claims with the parties' consent[,]" observing that "[n]othing in the Constitution requires that consent to adjudication by a bankruptcy court be express[,]" and determining that "[t]he implied consent standard articulated in Roell supplies the appropriate rule for adjudications by bankruptcy courts under § 157." (citing and quoting Roell v. Withrow, 538 U.S. 580, 589-90 (2003) ("permitting waiver based on 'actions rather than words.' ")). Compare Exec. Sounding Bd. Assocs. v. Advanced Mach. & Eng'g Co. (In re Oldco M Corp.), 484 B.R. 598, 601 (Bankr. S.D.N.Y. 2012) (Glenn, J.) (pre-Wellness, concluding that, "by applying the correct analysis to the entry of a default judgment, Stern does not limit the bankruptcy court's authority to enter a default judgment when the defendant has failed to respond to the summons and complaint." (footnote omitted)), with Kravitz v. Deacons (In re Advance Watch Co.), 587 B.R. 598, 602 (Bankr. S.D.N.Y. 2018) (analyzing constitutional authority to enter default judgments on preference claims after Wellness was decided and concluding that "the Court continues to believe that the analysis in Oldco M. Corp. is correct, permitting the Court to enter default judgments in all adversary proceedings in which a defendant has failed to respond to a properly served summons and complaint."). The Summons (Doc. 4) issued in this adversary proceeding on October 3, 2025 contained the following language:

IF YOU FAIL TO RESPOND TO THIS SUMMONS, YOUR

FAILURE WILL BE DEEMED TO BE YOUR CONSENT TO

ENTRY OF A JUDGMENT BY THE BANKRUPTCY COURT

AND JUDGMENT BY DEFAULT MAY BE TAKEN

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AGAINST YOU FOR THE RELIEF DEMANDED IN THE

COMPLAINT.

Summons (Doc. 4) (bold capitalized text in original; italics and underlining added). This is the local form of summons used in the Southern District of Ohio, which is based on the Director of the Administrative Office of the United States Courts Bankruptcy Form B 2500A. In this situation, in which the Defendant was properly served but is in default under Federal Rule of Bankruptcy Procedure ("Bankruptcy Rule") 7012(a)(1) and Federal Rule of Civil Procedure ("Civil Rule") 55(a) by failing to respond to the Summons, even before Wellness was issued, this language was held sufficient to establish implied consent. See Oldco M Corp., 484 B.R. at 601. This Court likewise concludes that Defendant "[h]aving clearly been told the consequences of failing to timely respond to the complaint, and thereafter failing to do so, the [D]efendant evidenced clear and knowing, albeit implied, consent to this Court's entry of a default judgment." Id. at 615;¹see also Nat'l Events Holdings, LLC v. Schwartz (In re Nat'l Events Holdings, LLC), Nos. 20-01198, 19-01169, 2026 WL 2796193 (Bankr. S.D.N.Y. Sept. 17, 2026) (concluding that the "Defendant's 'knowing and voluntary election not to appear in response to the [S]ummons, notwithstanding the clear language of the [S]ummons that was validly served upon him, was a knowing and voluntary consent to the entry of a default judgment by this Court.' " (quoting Milazzo v. Technakraisri (In re Old DDUS, Inc.), 659 B.R. at 834-35)); 10 Collier on Bankruptcy ¶ 7055.03 n.54 & 55. As it concerns the "knowing and voluntary" aspect, the Summons provides clear notice of the consequences of a failure to respond, and the requirements of Bankruptcy Rule 7004 ensure that the Summons (Doc. 4) and Amended Complaint²(Doc. 3) (as defined below) were reasonably calculated to be received by Defendant. Of course, if for some reason the Summons and Complaint never reached the Defendant, there might be a basis for relief under Civil Rule 60(b), made applicable by Bankruptcy Rule 9024.

A final word on constitutional authority: From a practical standpoint, if a defendant can waive their right to defend an action seeking judgment against them, does that not also include a

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waiver of any right to pick which court enters that judgment? Waiving the right to defend an action is surely more consequential to a party than any right to have a certain court enter that judgment, or, pursuant to Civil Rule 55(b)(1), the clerk. Thus, what right would be vindicated by having an Article III court, rather than an Article I court, enter a default judgment against a party when the right to an Article III adjudication for a Stern claim is personal and waiver can be implied by conduct, as decided by the Supreme Court in Wellness, and that right has in fact been waived? 575 U.S. at 679 ("we conclude that allowing bankruptcy litigants to waive the right to Article III adjudication of Stern claims does not usurp the constitutional prerogatives of Article III courts."). If judgment can be entered against the Defendant based on her default, in accordance with Civil Rule 55(b) and Bankruptcy Rule 7055, then that default should necessarily constitute a lesser included waiver of any right to pick which court (or clerk) enters the default judgment. This Court believes this is the approach that "increase[es] judicial efficiency and check[s] gamesmanship[,]"

which is the concept the Supreme Court endorsed in Wellness. 575 U.S. at 685 (citing Roell, 538 U.S. at 590). Moreover, this does not involve "an objecting defendant forced to litigate involuntarily before a non-Article III court[,]" which is the type of situation in which the Supreme Court "has found a violation of a litigant's right to an Article III decisionmaker[.]" Id. at 682-83. Based upon the foregoing, this Court determines that it has constitutional authority, as well as statutory authority, to enter a final default judgment, if warranted based on the Motion for Default Judgment to which the Court now turns.

IV. Background

Plaintiff commenced this adversary proceeding on September 3, 2025 by filing the Complaint (Doc. 1) against Defendant asserting three claims for relief: (a) avoidance and recovery of a preferential transfer in the amount of $10,000, pursuant to 11 U.S.C. §§ 547 and 550, made to Defendant as an "insider" of the Debtor, within one (1) year prior to the date Debtor, pro se, filed his chapter 7 petition on July 23, 2024 (the "Petition Date"); (b) objecting to any and all proofs of claim filed, or to be filed, by Defendant, pursuant to 11 U.S.C. § 502, which the Court construes as § 502(d), unless and until Defendant returns all monies due to Plaintiff; and (c) for prejudgment interest at the "applicable judgment rate" from July 5, 2025 (the date the demand letter was received by the Defendant), post-judgment interest at the judgment rate, and Plaintiff's costs and expenses incurred in connection with bringing this adversary proceeding. On October 3, 2025,

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Plaintiff filed an Am[]ended Complaint of Trustee to Avoid and Recover Preference Transfers Pursuant to 11 U.S.C. §§ 547 and 550; to Disallow Any and All Proofs of Claim Filed or to be Filed by Defendant; and for Costs and Other Relief (Doc. 3) (the "Amended Complaint"), which was largely the same as the Complaint (Doc. 1), except for updating the year of the relevant transactions from 2023 to 2024.³Also on October 3, 2025, the Clerk of Court issued a Summons (Doc. 4) directed to Defendant, and Plaintiff served the Summons and a copy of the Amended Complaint by regular, first class United States mail, postage fully prepaid, addressed to the Defendant, as shown in the Certificate of Service (Doc. 4).

Based on the Application for Entry of Default (Doc. 7) filed by Plaintiff on February 17, 2026, which was served upon the Defendant by ordinary U.S. Mail, the Clerk of Court issued an Entry of Default (Doc. 9) against Defendant, pursuant to Bankruptcy Rule 7055, on February 18, 2026. Then, on March 11, 2026, Plaintiff filed the Motion for Default Judgment (Doc. 11), supported by a Declaration in Support of Motion for Default Judgment (Doc. 11 at page 7-8) by the Trustee, to which she attached a Status Report Pursuant to Servicemembers Civil Relief Act to confirm that Defendant is not on active duty in the United States military. And the Motion for Default Judgment, along with a proposed Order Granting Motion for Default Judgment and Judgment, was served on Defendant by ordinary U.S. Mail, and Defendant has not filed a response to the Motion for Default Judgment with the Court.

Defendant Tonya Gay has not filed a proof of claim in Debtor's chapter 7 bankruptcy case, Case No. 24-31380, based on the Court's review of the Claims Register, of which the Court takes judicial notice pursuant to Federal Rule of Evidence 201(c), made applicable by Bankruptcy Rule

9017.

V. Analysis of Motion for Default Judgment

Defendant has failed to answer the Amended Complaint or otherwise affirmatively plead in this matter and, as such, the allegations set forth in the Amended Complaint are deemed

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admitted,⁴Defendant is in default, and, to the extent the Amended Complaint states a valid claim for relief, Plaintiff is entitled to judgment on the claims set forth in her Amended Complaint. Upon review of Plaintiff's Motion for Default Judgment and the filings in this adversary proceeding, this Court finds and concludes as follows:⁵

A. First Claim—to Avoid and Recover Preference (§§ 547(b) and 550)

Plaintiff's Motion for Default Judgment asserted that she is entitled to judgment by default

"in the amount of $10,000, plus interest from June 27, 2025 (the date of demand to the Defendant) until collected" based on 11 U.S.C. § 542, which is not the statutory basis of the claim asserted in either the Complaint or Amended Complaint, as evidenced by the title of the Amended Complaint as also recited in the Motion. In this respect, the Plaintiff's Motion is not well-taken. But despite this deficiency, because the amount of the default judgment sought by Plaintiff is consistent with the amount of the claim to avoid and recover a preferential transfer from Defendant, as an insider, which is $10,000, and because Defendant has been provided with ample notice and opportunity to defend this adversary proceeding, the Court finds that the incorrect statutory basis asserted in the Motion is immaterial given that the dollar amount of the judgment sought is exactly the same. So, instead of reviewing the assertions of the Motion for Default Judgment, the Court will analyze the allegation of the Amended Complaint, which is what Defendant is deemed to have admitted anyhow.

Based on the allegations of the Amended Complaint, Plaintiff's Motion for Default Judgment is well-taken with respect to the First Claim for Relief - Section 547 Avoidance of Preference Transfer, given that Plaintiff has alleged all the elements under 11 U.S.C. § 547(b) for a transfer made "between ninety days and one year before the date of filing of the petition,

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including that Defendant was an "insider" of the Debtor, as defined in 11 U.S.C. §§ 101(31)(A) and 102(3). Am. Compl. at 3, ¶ 8 ("Defendant is a close personal friend of the Debtor, with whom the Debtor lived as of the Petition Date."). In particular, the Trustee alleged that Debtor transferred $10,000 to Defendant in April 2024 (the "Transfer"), "in repayment of the loan she made to him to support his Business [CST Trucking Project K LLC]." Am. Compl. at 3, ¶ 9. Through the sale of a truck owned by CST Trucking, the Debtor received two checks drawn on the CST Trucking account: (1) $15,000 on April 12, 2024; and (2) $13,000 on April 16, 2024. Am. Compl. at 2-3, ¶ 7. Debtor was insolvent, "on a balance sheet test or any other applicable test, as of the time of the Transfer to the Defendant" based on his assets scheduled with a value of $1,716 and debts totaling $333,811. Am. Compl. at 3, ¶¶ 10-12. And the Transfer enabled Defendant to receive more than she would have if the Transfer had not been made and she received payment of the debt - the loan - to the extent provided by chapter 7 of Title 11 of the United States Code (the

"Bankruptcy Code"). Am. Compl. at 4, ¶ 24. In addition to the foregoing, the Trustee alleges that she "investigated that Transfer and has considered any reasonably knowable affirmative defenses potentially available pursuant to 11 U.S.C. § 547(c) and has determined that the Transfer is avoidable." Am. Compl. at 4, ¶ 25.

B. Second Claim—Objection to Claim Under § 502(d)

With respect to the Second Claim for Relief - Objection to Any and All Proofs of Claim Filed or to be Filed by Defendant, because Defendant Tonya Gay has not filed any proof of claim in Debtor's chapter 7 case, which necessitated the analysis of this Court's constitutional authority to enter a final default judgment, the Second Claim for Relief will be denied at this time as there is no relief the Court can grant. "Default by a defendant does not automatically entitle a plaintiff to entry of a default judgment." Columbiana Cnty. Sch. Emps. Credit Union, Inc. v. Cook (In re Cook), No. 05-8034, 2006 Bankr. LEXIS 446, at *9 (B.A.P. 6th Cir. Apr. 3, 2026) (citations omitted). "Instead, . . . the bankruptcy court must determine 'whether the unchallenged facts constitute a legitimate cause of action.' " Id. (quoting Fleet Credit Card Servs., L.P. v. Macias (In re Macias), 324 B.R. 181, 186 (Bankr. E.D.N.Y. 2004) (quoting Smith v. Household Fin. Realty Corp. (In re Smith), 262 B.R. 594, 597 (Bankr. E.D.N.Y. 2001)) (additional citation and internal quotation marks omitted)); see also supra note 3. In order to make this determination, similar to when considering a motion to dismiss under Civil Rule 12(b)(6), "the court should generally accept

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the well-pled factual allegations of a complaint (except those relating to the amount of damages) as true." Id. (citing Yang v. Hardin, 37 F.3d 282, 286 (7th Cir. 1994); Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61, 65 (2d Cir. 1981)).

Plaintiff does not allege in the Amended Complaint that Defendant has filed a proof of claim or an application for an administrative expense claim. And this Court's review of the Claims Register and docket for Debtor's chapter 7, Case No. 24-31380,⁶reflects that no proof of claim or application for administrative expense has been filed by or on behalf of Ms. Gay. The deadline for creditors to file proofs of claim in Debtor's chapter 7 case long ago expired on January 30, 2025 (see Notice of Need to File Proof of Claim (Doc. 19, Case No. 24-31380)). But an unsecured claim will arise pursuant to the judgment entered in conjunction with this Memorandum Opinion and Order, pursuant to 11 U.S.C. § 502(h), for which Defendant will have time to file a proof of claim under Bankruptcy Rule 3002(c)(3). However, Bankruptcy Rule 3002(c)(3) also provides that "the claim must not be allowed if the judgment imposes a liability that is not satisfied . . . within the 30 days [after the judgment becomes final] or any additional time set by the court." Fed. R. Bankr. P. 3002(c)(3). Accordingly, the issue may soon become moot, but in the meantime the Court can grant no relief under 11 U.S.C. § 502(d), which the Court perceives as the only basis for the Trustee's Second Claim for Relief (although Plaintiff does not specify under which subsection of § 502 she is asking the Court to disallow any and all proofs of claim that Defendant has not filed), such that the Second Claim for Relief will be dismissed, without prejudice to the Trustee later asserting an objection to any proof of claim later filed. This is partly because the Second Claim presently does not state a claim, but also so there are no remaining claims and this Court can proceed to enter a final judgment pursuant to Civil Rule 54, made applicable by Bankruptcy Rule 7054(a), while the Trustee retains the ability to object to any future claims filed. See Meoli v. Villarreal (In re Huffman), No. 22-80039, 2022 Bankr. LEXIS 3575, at *7 (Bankr. W.D. Mich. Oct. 31, 2022) (determining that the count of the complaint under

11 U.S.C. § 502(d) seeking disallowance of a claim that plaintiff did not allege the defendant filed, and for which the court took judicial notice had not been filed, was not ripe for adjudication (was premature) and "should be dismissed so as not to delay entry of judgment under Rule 54"); see

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also Gecker v. LG Funding, LLC (In re Hill), 589 B.R. 614, 631 (Bankr. N.D. Ill. 2018) ("LG Funding, however, has not filed a proof of claim in the chapter 7 bankruptcy cases" and "because no proof of claim has been filed, § 502(d) is inapplicable; the relief requested can not be granted; In re Brooke Corp., 469 B.R. 68, 74 (D. Kan. 2012) (dismissing Count IV of the Complaint by which the Trustee sought "disallowance, pursuant to 11 U.S.C. § 502(d), of any proof of claim filed by defendant" when the defendant had not filed any proof of claim). As concluded in Villareal, "[i]f the Defendant at some point files a claim, the Plaintiff may address it through the claims allowance process." Villarreal, 2022 Bankr. LEXIS 3575, at *7-8. In addition to the foregoing, the Trustee also asserts that "the term 'Claim' shall include without limitation, both pre and post-petition claims of Defendant, including any claimed administrative expense payable pursuant to 11 U.S.C. § 503." Am. Compl. at 5, ¶ 28. However, an objection to claim under 11 U.S.C. § 502(d) does not apply to an administrative expense claim. See Phoenix Rest. Grp., Inc. v. Proficient Food Co. (In re Phoenix Rest. Grp., Inc.), No. 303-0568A, 2004 Bankr. LEXIS 2186, at *61-62 (Bankr. M.D. Tenn. Dec. 16, 2004) (Lundin, J.) ("Judge Waldron in Roberds recently observed that 'there is a split in the case law on whether an administrative claim is subject to the requirements of 11 U.S.C. § 502(d).' " (citing In re Roberds,

315 B.R. at 476 (citations omitted)). "Roberds concluded that 11 U.S.C. § 502(d) was not a barrier to the allowance of an administrative expense. This court agrees."); see also In re Plastech Engineered Prods., 394 B.R. 147, 161 (Bankr. E.D. Mich. 2008) ("[t]he Court rejects the Debtor's contention that § 502(d) applies generally to § 503(b) administrative expenses and also rejects the Debtor's alternative argument that § 502(d) should in any event apply to § 503(b)(9) expenses."). Further, there is no indication that Defendant has asserted or would have any basis to assert an administrative expense claim, such that there is likewise no relief this Court can grant on this basis, at this time, even if 11 U.S.C. § 502(d) did apply.

In conclusion with regard to the Second Claim, in the event that Ms. Gay later files a proof of claim, which would either be untimely or filed pursuant to 11 U.S.C. § 502(h) and Bankruptcy Rule 3002(c)(3), the Trustee can object at that time, as appropriate; however, because there currently is no proof of claim, there is no relief the Court can presently grant.

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C. Count Three—Claim for Prejudgment Interest

The Plaintiff's Motion asserted that she is entitled to judgment by default "in the amount of $10,000, plus interest from June 27, 2025 (the date of demand to the Defendant) until collected[.]" Mot. for Default J. at 3. The Amended Complaint, however, alleged that Plaintiff was entitled to recover "prejudgment interest at the applicable judgment rate from July 5, 2025 (the date the demand letter was received by the Defendant)" plus post-judgment interest, her costs and expenses. Am. Compl. at 5, ¶ 31. In respect to the differing start date of pre-judgment interest requested in the Motion for Default Judgment, in comparison to the Amended Complaint, it is not well-taken as it is the allegations of the Amended Complaint that Defendant is deemed to have admitted, not the assertions in the Motion for Default Judgment. The Court, however, will award prejudgment interest from the date sought in the Amended Complaint, which is July 5, 2025, as well as the deferred filing fee cost of $350.

VI. Conclusion

For the foregoing reasons, the Motion for Default Judgment is hereby GRANTED, in part, and DENIED, in part, such that Plaintiff is entitled to a judgment by default pursuant to Civil Rule 55(b)(2), as made applicable by Bankruptcy Rule 7055, as set forth in this Memorandum Opinion and Order. Accordingly,

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that judgment will be separately entered, pursuant to Civil Rules 54(a) and 58(a), made applicable by Bankruptcy Rules 7054(a) and 7058, in favor of Plaintiff and against Defendant Tonya Gay, for the relief requested in Claims One and Three for Relief in the Amended Complaint (but not on Claim Two), due to Defendant's admissions by default of the allegations in the Amended Complaint, based upon which the Court concludes as follows:

a. On Count One of the Amended Complaint it is hereby determined that the Transfer from Debtor to Defendant in the amount of $10,000 in April 2024 was a preferential transfer to an insider that is avoidable under 11 U.S.C. § 547 and is recoverable by the Trustee from the Defendant pursuant to 11 U.S.C. § 550;

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b. Count Two of the Amended Complaint is hereby dismissed without prejudice to the Trustee later asserting an objection to any claim that Defendant may file, either untimely or pursuant to 11 U.S.C. § 502(h) and Bankruptcy Rule 3002(c)(3);

c. On Count Three of the Amended Complaint, Plaintiff is entitled to recover prejudgment interest on the amount avoided and recovered, $10,000, at the federal judgment rate under 28 U.S.C. § 1961 in effect on and from June 27, 2025 to the date of entry of the judgment, plus post-judgment interest, also at the federal judgment rate under 28 U.S.C. § 1961, in effect on the date of judgment, until collected; and

d. Plaintiff is awarded the deferred filing fee of $350.00 as costs of this action, payable by Defendant.

IT IS SO ORDERED.

Copies to:

Via ECF:

Patricia J. Friesinger (Counsel for the Plaintiff) Via Regular Mail:

Tonya Gay, 1769 Hopewell Ave., Dayton, OH 45417 (Defendant)