Davidson v. Bungay et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
RONALD ALAN DAVIDSON,
Debtor. 	No. 13-04-18262 SA
RONALD ALAN DAVIDSON,
Plaintiff,
v. 	Adv. No. 06-1079 S
JOHN BUNGAY, et al.,
Defendants.
MEMORANDUM OPINION ON PLAINTIFF’S MOTION
FOR CONTINUANCE AND DEFENDANTS’ MOTION
AND AMENDED MOTION TO SET ASIDE DEFAULT
This matter came before the Court for trial on August 1,
2007 on the merits of Defendants’ (M & C Cleaning Services, Inc.,
Juan Marinelarena and Victor Reyes) Motion to set aside default
(doc 56) and Amended Motion to set aside default (doc 65). 	After
Defendants rested in presentation of their case Plaintiff called
one of the Defendants to testify and then made an oral motion for
continuance in order to secure attendance of a witness. 	The
Court took the matters under advisement. 	Plaintiff appeared
through his attorneys Brandon Hertzler and Steven K. Eisenberg.
Defendants appeared through their attorneys Mark M. Rhodes and
Hazen H. Hammel. 	This is a core proceeding. 	28 U.S.C. §
157(b)(2)(A). 	For the reasons set forth below, the Court finds
that it should deny the oral motion for continuance and should
set aside the default. 	This Memorandum Opinion constitutes the
Court’s Findings of Fact and Conclusions of Law as may be
required by Fed.R.Bankr.P. 7052.
Case 06-01079-s Doc 111 Filed 02/20/08 Entered 02/20/08 13:23:53 Page 1 of 9

1Under Rule 45, witness and mileage fees must be tendered to
the witness when the subpoena is served. 	Klockner Namasco
Holdings Corp. v. Daily Access.Com, Inc., 211 F.R.D. 685, 687
(N.D. Ga. 2002). 	Otherwise, the witness is not compelled to
appear and the other party is not entitled to sanctions. 	Id.
Due to the reasons found below, the Court does not need to
address this issue.
Page -2-
MOTION FOR CONTINUANCE
Plaintiff seeks a continuance due to the nonappearance of
John Bungay/Bungay Properties, LLC at trial. 	John Bungay was a
party in this adversary proceeding until he was dismissed by
Order entered June 5, 2007 (doc 84). 	Bungay Properties, LLC has
never been a party to this adversary proceeding. 	Trial of this
matter was set at a pretrial conference held on July 2, 2007.
See Docket 94 (Order resulting from final pretrial conference.)
Docket entry 101 is a July 26, 2007 subpoena issued by attorney
Brandon Hertzler addressed to:
John Bungay, Pres. Bungay Properties, LLC
c/o National Registered Agents, Inc.
433 Paseo de Peralta
Santa Fe, NM 87501.
It compelled appearance at the August 1, 2007 trial. 	The
subpoena was served by a process server on July 26, 2007 on Lois
Caroline Pedres at 433 Paseo de Peralta, and the “manner of
service” was “personal to Lois Caroline Pedres.” 	The record is
silent as to whether a witness fee was tendered 1 .
The subpoena is unclear as to whether it is attempting to
elicit the testimony of John Bungay or Bungay Properties, LLC.
Case 06-01079-s Doc 111 Filed 02/20/08 Entered 02/20/08 13:23:53 Page 2 of 9

2The parties dispute whether in-hand personal service is
required to serve a subpoena. 	The Tenth Circuit has not
addressed this issue and the courts are divided. 	Compare
Klockner Namasco Holdings Corp. v. Daily Access.Com, Inc., 211
F.R.D. 685, 687 (N.D. Ga. 2002)(Rule 45 does not incorporate
service provisions of Rule 5; service on deponent’s wife at
residence is invalid.) with Hall v. Sullivan, 229 F.R.D. 501, 506
(D. Md. 2005)(Delivery of a subpoena by Federal Express satisfies
Rule 45.) 	See also 9A Charles Alan Wright and Arthur R. Miller,
Fed. Prac. & Proc. Civ.2d § 2454 (“The longstanding
interpretation of Rule 45 has been that personal service of
subpoenas is required. ... In recent years a growing number of
cases have departed from the view that personal service is
required and alternatively have found service of a subpoena under
Rule 45 proper absent personal service.” 	(Footnotes omitted.))
Due to the reasons found below, the Court does not need to
address this issue.
Page -3-
It is addressed to the registered agent, so it appears that the
LLC was the subject of the subpoena. 	However, Fed.R.Civ.P.
30(b)(6), applicable under Fed.R.Bankr.P. 7030, allows the
deponent entity to “designate one or more of its own officers,
directors, or managing agents, or other persons who consent to
testify on its behalf.” 	This subpoena attempted to designate the
identity of the deponent, so is probably objectionable. 	On the
other hand, if Plaintiffs were attempting to subpoena John Bungay
specifically, the Court finds that service of process on the
registered agent of the LLC was inadequate 2 . 	See Application of
Johnson & Johnson, 59 F.R.D. 174, 177 (D. Del. 1973)(Cannot serve
subpoena on named individual by making service on registered
agent for corporation.)
The main reason the Court denies the motion for continuance,
however, is the delay in issuing the subpoena. 	The trial date
Case 06-01079-s Doc 111 Filed 02/20/08 Entered 02/20/08 13:23:53 Page 3 of 9

3The Tenth Circuit has no published opinions that adopt the
three factors analysis in a Rule 55(c) motion. 	However, both
Guttman v. Silverberg, 167 Fed. Appx. 1, 4 (10 th Cir. 2005)
(unpublished), cert. denied, 547 U.S. 1112 (2006) and Hunt v.
(continued...)
Page -4-
was set on July 2, 2007. 	The subpoena did not issue until July
25 th , only six days before trial. 	The Court finds that six days
was not a reasonable time for compliance. 	This is especially
true given the nature of the service of the summons through an
agent in Santa Fe. 	Therefore, the Court will enter an Order
denying the oral motion for continuance.
MOTIONS TO SET ASIDE DEFAULT
Setting aside a default is governed by Fed.R.Civ.P. 55(c),
which is applicable to bankruptcy cases under Bankruptcy Rule
7055. 	Rule 55(c) states: “For 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).” 	In this case, default judgment has not been entered.
Therefore, Defendants need only show “good cause” to set aside
the default. 	“Good cause” is a less stringent standard than the
excusable neglect which must be shown under Rule 60(b). 	Dennis
Garberg & Assocs., Inc. v. Pack-Tech Int’l Corp., 115 F.3d 767,
775 n. 6 (10 th Cir. 1997).
Courts generally consider three factors in assessing good
cause in a default setting. 	Dierschke v. O’Cheskey (In re
Dierschke) 3, 975 F.2d 181, 183 (5 th Cir. 1992). 	“In determining
Case 06-01079-s Doc 111 Filed 02/20/08 Entered 02/20/08 13:23:53 Page 4 of 9

3(...continued)
Ford Motor Co., 65 F.3d 178, *3 (10 th Cir. 1995)(unpublished)
cite to and rely on the Dierschke case as stating the law. 	The
Tenth Circuit has applied the three factor analysis in a Rule
60(b) motion. 	See United States v. Timbers Preserve, Routt
County, Colorado, 999 F.2d 452, 454 (10 th Cir. 1993).
Page -5-
whether to set aside a default decree, the district court should
consider whether the default was willful, whether setting it
aside would prejudice the adversary, and whether a meritorious
defense is presented.” 	Id. (quoting United States v. One Parcel
of Real Property, 763 F.2d 181, 183 (5 th Cir. 1985).)
The Court finds that:
1) 	On or about May 18, 2005, M & C Cleaning Services, Inc.,
Juan Marinelarena and Victor Reyes entered into a lease
agreement with Bungay Properties, LLC for certain space in a
building at 717 Coal Ave. SE, Albuquerque, New Mexico.
(Exhibit 1). 	Part of the space was occupied by goods
belonging to Plaintiff. 	A lease addendum also dated May 18,
2005 states that “Merchandise that was left on premises is
projected to be moved by July 15 th , 2005. 	As attorneys and
insurance companies are involved, lessor will not be held
liable if inventory is not removed by this date. 	The
commencement of rent will not begin until the merchandise is
removed from the premises; even though first month’s rent
has been received June 1, 2005.” 	(Exhibit 2). 	Defendants
Case 06-01079-s Doc 111 Filed 02/20/08 Entered 02/20/08 13:23:53 Page 5 of 9

Page -6-
were also informed that there were legal proceedings
concerning the goods.
2) 	This adversary proceeding was filed on February 20, 2006.
The summons issued on February 22, 2006. 	Plaintiff filed a
certificate of service on February 23, 2006, that states
that the three defendants were served by mail on February
23, 2006, all at: 4532 Capri Court NW, Albuquerque, NM
87114. 	In addition, 	M & C Cleaning Services, Inc.’s
summons was addressed “ATTN: Officer or Managing or General
Agent.”
3) 	Defendants Juan Marinelarena and Victor Reyes are native
Spanish speakers and speak little or no English. 	Neither
had been sued before, and neither understood the words
“summons”, “complaint” or “defendant”.
4) 	Juan Marinelarena received the “letter” containing the
summons and complaint at the above address, which is his
home, in February, 2006. 	He saw that the letter involved
the business so he took it to the office. 	At the office he
and Victor Reyes opened the letter and saw the summons and
complaint, but neither understood what it was. 	They called
Bungay because the letter also had Bungay’s name on it,
telling him that they had a letter for him. 	Bungay came and
saw the summons and complaint and told them not to worry,
all was in control. 	Between February 2006 and February 2007
Case 06-01079-s Doc 111 Filed 02/20/08 Entered 02/20/08 13:23:53 Page 6 of 9

Page -7-
they repeatedly asked Bungay about the lawsuit regarding the
goods and he informed them that Juan Marinelarena would be
called as a witness at some point. 	Bungay never told the
Defendants that they needed an attorney or that this
adversary proceeding was not the same litigation as that
concerning the goods left on the premises.
5) 	On February 13, 2007, the Clerk entered default against the
three Defendants. 	Doc 53.
6) 	Also on February 13, 2007, Bungay went to Defendants’ office
and told Mrs. Reyes that Victor needed to speak to an
attorney because he needed to file something with the Court.
Bungay then told her that the Defendants had been named in a
lawsuit. 	On that day they obtained the services of a
lawyer.
7) 	On February 15, 2007, Defendants filed their Motion to Set
Aside Clerk’s Entry of Default. 	Doc 56.
8) 	On April 20, 2007, Defendants filed their Amended Motion to
Set Aside Clerk’s Entry of Default. 	Doc 65. 	The Amended
Motion has, as an exhibit, a proposed answer to the
complaint that denies any and all liability to the
Plaintiff. 	If Defendants were successful in proving the
allegations of their answer, they would have a complete
defense to the claim.
Case 06-01079-s Doc 111 Filed 02/20/08 Entered 02/20/08 13:23:53 Page 7 of 9

Page -8-
9) 	Plaintiff argued that the one-year delay in answering the
complaint has prejudiced him. 	However, he was unsuccessful
in proving that any witnesses would not be available or that
any evidence had been lost. 	He also argued that the
dismissal of Bungay from the case could prejudice his claims
against these Defendants. 	The Court finds that the
dismissal of Bungay is not prejudicial to Plaintiff. 	He is
still available as a witness if timely and properly
subpoenaed.
The Court concludes that:
1) 	The default was not “willful” because Defendants did not
understand they were being sued, could not read the
documents served on them, and were told by their landlord
that nothing needed to be done. 	The Court finds that in
these particular circumstances the Defendants reasonably or
at least justifiably relied on Bungay’s advice. 	Also, as
soon as the Defendants realized they had been sued they
contacted an attorney and expeditiously filed their motion
to set aside.
2) 	Setting aside the default will not prejudice the Plaintiff.
There was no showing that witnesses would be unavailable or
that evidence had been lost.
3) 	Defendants presented a meritorious defense.
4) 	The default should be set aside.
Case 06-01079-s Doc 111 Filed 02/20/08 Entered 02/20/08 13:23:53 Page 8 of 9

Page -9-
The Court will enter an Order setting aside the default and
scheduling a pretrial conference.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	February 20, 2008
copies to:
Brandon Hertzler
PO Box 3006
Albuquerque, NM 87190-3006
Steven K Eisenberg
261 Old York Rd Ste 410
Jenkintown, PA 19046-3722
Hazen Hammel
Rhodes & Salmon PC
1801 Lomas Blvd NW
Albuquerque, NM 87104
Case 06-01079-s Doc 111 Filed 02/20/08 Entered 02/20/08 13:23:53 Page 9 of 9