CoVantage Credit Union v. Stangel (In re Stangel)

593 B.R. 607

In the MATTER OF: Danielle Marie STANGEL, Debtor.

CoVantage Credit Union, Plaintiff,

v.Danielle Marie Stangel, Defendant.

Case No. 17-20394-beh

Adv. Case No. 17-02132

United States Bankruptcy Court, E.D. Wisconsin.

Signed October 10, 2018

Justin J. Bates, Bates Legal Group, Wausau, WI, for Plaintiff

Danielle Marie Stangel, Shawano, WI, pro se

DECISION AND ORDER ON PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT

Beth E. Hanan, United States Bankruptcy Judge

Plaintiff CoVantage Credit Union filed a complaint seeking to except from discharge a debt resulting from the debtor's presentation of bad checks, relying on both 11 U.S.C §§ 523(a)(2)(A) and (a)(2)(B). The debtor did not respond to the complaint, so CoVantage moved for default judgment. Realizing that its two legal theories were inconsistent and mutually exclusive, CoVantage pursued judgment on only the claim under section 523(a)(2)(A). The Court held two prove-up hearings on the motion, at which counsel for CoVantage submitted supporting evidence.

After considering counsel's submissions and arguments, and the record in this case, the Court will grant the motion. Because the Court lacks sufficient evidence to determine the appropriate amount of the nondischargeable debt in one aspect, the Court will defer entering an order for judgment until CoVantage supplements the record with additional information.

JURISDICTION

The Court has jurisdiction under 28 U.S.C. § 1334 and the Eastern District of Wisconsin's July 16, 1984, order of reference. CoVantage's request for a determination of the nondischargeability of its debt is a core proceeding under 28 U.S.C. § 157(b)(2)(I). CoVantage's request for the entry of a money judgment under Wisconsin state law is non-core, but the debtor's failure to appear and defend against the claim, despite proper service of the summons and complaint, constitutes knowing and voluntary consent to the Court's final adjudication of that request. See Wellness Int'l Network, Ltd. v. Sharif , ––– U.S. ––––, 135 S.Ct. 1932, 191 L.Ed.2d 911 (2015) ; Kravitz v. Deacons (In re Advance Watch Co., Ltd.) , 587 B.R. 598, 602 (Bankr. S.D.N.Y. 2018) ; Campbell v. Carruthers (In re Campbell) , 553 B.R. 448, 452–53 (Bankr. M.D. Ala. 2016).

FACTS

CoVantage alleges that, between November 14 and November 15, 2016, the debtor-defendant Danielle Stangel made out four checks to herself, totaling $2,450, drawn on an Associated Bank account in her name. See CM-ECF Doc. No. 1, ¶¶ 5–8 and Exs. A–D. The debtor deposited these checks with CoVantage and then withdrew (most of) the funds shortly thereafter. Id. ¶ 9. The checks later were returned for insufficient funds. Id. ¶¶ 5–9. In late November 2016, CoVantage sent the debtor a demand letter for repayment of the overdrawn funds, in the amount of $2,405.25. Id. ¶ 10. The debtor never repaid, and the debt remains outstanding. Id.

At the prove-up hearings on CoVantage's motion for default judgment, CoVantage presented the affidavit of Kami Price, an agent of CoVantage. CM-ECF Doc. No. 18. The affidavit attaches four copies of returned checks from an Associated Bank account in Ms. Stangel's name, made out to Ms. Stangel, in amounts ranging from $250 to $850, issued between November 14 and November 15, 2016 (also attached as exhibits to the complaint).

Ms. Price avers that the debtor presented the checks to CoVantage on the following dates and times:

 Date/Time Presented Amount Disposition of funds
  November 14, 2016 at 10:12 AM     $850       $200 deposited
                                               $650 cash given to debtor
  November 14, 2016 at 11:13 AM     $250       All $250 given to debtor
  November 15, 2016 at 8:22 AM      $850       All $850 given to debtor
                                               Debtor also withdrew $150
  November 15, 2016 at 2:06 PM      $500       All $500 given to debtor1

[Editor's Note: The preceding image contains the reference for footnote¹ ].

CoVantage also presented the affidavit of Donna M. Woida, an employee of Associated Bank. CM-ECF Doc. No. 24. The affidavit attaches copies of financial records from Associated Bank, which show the following:

• An Associated Bank checking account was opened in Ms. Stangel's name around March 16, 2016, with a $3,000 deposit. Id. at 3.

• While open, the account had the following monthly ending balances (seeid. at 4, 6, 8, 10 and 12):

 Date Account Balance
    April 10, 2016     $94.75
    May 8, 2016        $19.83
    June 8, 2016       -$501.61
    July 10, 2016      -$363.94
    August 8, 2016     $0

• The reason for the August 8 ending balance of $0 was that Associated Bank charged off $377.94 in principal and fees on August 5, essentially balancing out the account. Id. at 12. There has been no further activity in the account to date.

• The highest ending balance on any given date during the period the account was open was $2,380.13 on March 17, 2016. The balance fell below $1,000 on March 21, and, aside from an April 12 balance of $1,012.99 due to a $1,000 deposit that day, it remained below $1,000 until the account was closed. Seeid. at 5, 7, 9, 11 and 13. The last date the account had a positive balance was June 16, 2016. Id. at 11.

• During the statement period of May 9 through June 8, 2016, the account incurred $217 in overdraft fees, and $35 in returned item fees. Id. at 9. During the statement period of June 9 through July 10, 2016, the account incurred $210 in overdraft fees, and $175 in returned item fees. Id. at 11. Two checks (for $325.92 and $35) also were returned during that period. During the statement period of July 11 through August 8, 2016, the account incurred $14 in overdraft fees, and $35 in returned item fees. Id. at 12.

• The debtor received what appear to be bi-weekly payroll deposits ("HEARTLAND EMPLOY DIR DEP") into her Associated Bank checking account in the following amounts on the following dates (seeid. at 8 and 10):

 Date Deposit Amount
    May 18, 2016      $401.09
    June 1, 2016      $727.61
    June 15, 2016     $777.81
    June 29, 2016     $597.68

• An Associated Bank savings account was opened in Ms. Stangel's name around March 16, 2016, with a $1,000 deposit. Id. at 17.

• While open, the account had the following monthly ending balances (seeid. at 19, 20, 22, and 24):

 Date Account Balance
    March 31, 2019     $101.01
    April 30, 2016     $1.01
    May 31, 2016       -$3.99
    June 30, 2016      -$8.99
    July 31, 2016      $0

• The savings account was closed on July 1, 2016 (an entry for July 1, 2016 states "Account Closure"). Id. at 24.

The financial statements from Associated Bank are undated, and counsel for CoVantage did not know when/if the debtor received the statements, or when/if the debtor learned that her account(s) had been closed. The statements list the debtor's address as N6967 Lake Crest Ln, Shawano, WI.

In its complaint, CoVantage claims that the debtor's actions caused it "direct loss and damage in the amount of $2,405.25." CM-ECF Doc. No. 1, ¶ 20. Citing to Wis. Stat. §§ 943.24 and 895.446, CoVantage seeks a money judgment of $7,500.90 as treble damages,² plus all accrued interest cost and actual reasonable attorney fees. Id. ¶ 21.

The schedules and other statements the debtor filed in her main bankruptcy case establish the following:

• The debtor's bankruptcy attorney was paid (by someone else, on Ms. Stangel's behalf) on July 22, 2016. See Case No. 17-20394-beh, CM-ECF Doc. No. 1, at 44.

• As of her January 20, 2017 bankruptcy filing, the debtor had been employed for four months as a CNA at Golden Living, with monthly take-home pay of $746.92 (and gross pay of $821.17). Id. at 35–36.

• The debtor's average gross monthly income for the six months before she filed her bankruptcy (July through December 2016) was $533. Id. at 47–48.

• Her petition lists her address as N6967 Lakecrest Lane, Shawano, WI.

DISCUSSION

A defendant's default does not, standing alone, entitle the plaintiff to a default judgment. Federal Rule of Civil Procedure 55(b)(2), made applicable by Bankruptcy Rule 7055, grants the Court broad discretion to conduct hearings and receive evidence it deems proper before entering a default judgment. "Because of the impact of a nondischargeability action on the ‘fresh start’ arising from the entry of an order of discharge pursuant to 11 U.S.C. § 727(a), bankruptcy courts are particularly reluctant to ‘rubber stamp’ motions for default judgments in adversary proceedings filed to determine dischargeability of indebtedness ...." MBNA America Bank, N.A. v. Hostetter (In re Hostetter) , 320 B.R. 674, 679 (Bankr. N.D. Ind. 2005). Additionally, "[u]pon default, the well-pled allegations of the complaint relating to liability are taken as true, but those relating to the amount of damages suffered ordinarily are not." Wehrs v. Wells , 688 F.3d 886, 892 (7th Cir. 2012). Damages must be proved "unless the amount claimed is liquidated or capable of ascertainment from definite figures contained in the documentary evidence or in detailed affidavits." United States v. Di Mucci , 879 F.2d 1488, 1497 (7th Cir. 1989). In deciding whether CoVantage is entitled to a default judgment, the Court must determine whether CoVantage has proven a prima facie case of nondischargeability of its debt. See Mega Marts, Inc. v. Trevisan (In re Trevisan) , 300 B.R. 708, 713 (Bankr. E.D. Wis. 2003).

Section 523(a)(2)(A) provides, in relevant part: "A discharge under [Chapters 7, 11, 12, or 13] of this title does not discharge an individual debtor from any debt ... for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by ... false pretenses, a false representation, or actual fraud." 11 U.S.C. § 523(a)(2)(A). To except a debt from discharge under this section of the Code, a creditor must prove either: (1) the debtor made a deliberate misrepresentation or a deliberately misleading omission on which the creditor justifiably relied (in other words, the debt was...