Densley v. Dyches (In re Dyches), Bankruptcy Case No. 10-26099

In re: TROY ALLEN DYCHES

and AUBREY CHARISSE DYCHES, Debtors.

KATHRYN DENSLEY, Plaintiff, v. TROY DYCHES, Defendant.

Bankruptcy Case No. 10-26099

Adversary Proceeding No. 10-2653

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF UTAH

December 13, 2019

Chapter 7

Hon. R. Kimball Mosier

MEMORANDUM DECISION

Plaintiff Kathryn Densley obtained a money judgment in Utah state court against Defendant Troy Dyches. When Dyches subsequently filed a chapter 7 petition, thereby interposing the "new defense of bankruptcy"¹ to the collection of that debt, Densley commenced the above-captioned adversary proceeding to except that debt from Dyches's discharge. She prevailed, and in 2011 the Court entered a judgment rendering the state court judgmentnondischargeable. Concerned that the statute of limitations to collect on a judgment under Utah law would soon expire, Densley filed a motion to renew this Court's judgment three days before the eight-year anniversary of its entry, which Dyches opposed. The Court conducted a hearing on that motion and took the matter under advisement.

After considering the relevant documents in this adversary proceeding and the parties' oral arguments, and after conducting an independent review of applicable law, the Court issues the following Memorandum Decision denying Densley's motion to renew the judgment. This Memorandum Decision constitutes the Court's findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a), made applicable to this adversary proceeding through Federal Rule of Bankruptcy Procedure 7052.²

I. JURISDICTION

The Court's jurisdiction over this adversary proceeding is properly invoked pursuant to 28 U.S.C. § 1334 and § 157(b)(1). Densley's complaint sought to except a debt from Dyches's discharge, making this a core proceeding within the definition of 28 U.S.C. § 157(b)(2)(I), and she successfully obtained a judgment of nondischargeability. Densley's current motion to renew that judgment is still within the Court's core jurisdiction because it asks the Court to continue enforcement of that judgment, and "the enforcement of orders resulting from core proceedings are themselves considered core proceedings."³ As a result, the Court may enter a final order. Venue is appropriate under 28 U.S.C. § 1409.

II. FINDINGS OF FACT

The facts of this case are neither complex nor lengthy. Kathryn Densley sued Profusion Capital, Inc. and Troy Dyches in Utah state court in 2009. On April 23, 2010, the state court entered default judgment in favor of Densley and against Profusion Capital and Dyches, jointly and severally, in the amount of $603,356.58.⁴ Two weeks later, Dyches and his wife, Aubrey Charisse Dyches, filed a chapter 7 petition in this Court.

Densley timely filed a complaint, which was later amended, objecting to the discharge of the state court judgment under 11 U.S.C. § 523(a)(2)(A) and (a)(6).⁵ Dyches failed to answer, and on June 17, 2011 this Court entered default judgment in favor of Densley and against Dyches, ordering that:

Defendant Troy Dyches'[s] indebtedness to Plaintiff/Creditor Kathryn Densley in the amount of $603,356.58 as determined by the Fourth Judicial District Court in the case entitled Kathryn Densley v. Profusion Capital, Inc., and Troy Dyches, Case No.: 090403030, and reflected in a judgment from that Court[,] is non-dischargeable under 11 U.S.C. § 523.⁶

The Court also awarded Densley fees and costs of $6,934.77 for a total nondischargeable debt of $610,291.35.⁷ As Densley's counsel admitted, the award of fees and costs was accomplished pursuant to the express provisions of the state court judgment, which stated that it "shall be augmented in the amount of the reasonable costs and attorney's fees expended in collecting [it] by execution or otherwise."⁸

The following year Dyches moved to set aside that default judgment, arguing principally that it was void under Fed. R. Civ. P. 60(b)(4) because Densley had not properly served theamended complaint or provided adequate notice of the motion for default judgment. The Court denied Dyches's motion to set aside and, with the exception of the withdrawal of Dyches's then-counsel, the docket lay silent until this year.⁹

On June 14, 2019, Densley filed a motion to renew this Court's June 17, 2011 judgment. Five days later, Densley filed a proposed order renewing the judgment.¹⁰ The Court refused to sign the order because Densley's motion did not comply with Utah R. Civ. P. 58C—one provision of Utah law governing renewal of judgments—but permitted her to amend the motion. Densley filed an amended motion on June 24, asserting that the judgment had grown to $765,799.50, reflecting accrued post-judgment interest and attorney's fees and deducting $1,000 for payments made.¹¹ Dyches filed an objection to the motion on July 11 and, more than a month later, filed a notice setting the matter for hearing according to the Local Rules of this Court. Densley filed a reply on September 9.

III. CONCLUSIONS OF LAW

A judgment creditor may renew its judgment in federal court but must do so in accordance "with the state law governing such relief" applicable in the state in which the federal court sits.¹² In Utah, the Renewal of Judgment Act (Act)¹³ and its rule-based counterpart, UtahR. Civ. P. 58C, govern renewal of a judgment. While bankruptcy courts apply state substantive law frequently, renewal of a judgment, at least in this District, presents one of the few times when a bankruptcy court will apply state procedural law. Perhaps owing to the rarity of following that law in this Court, both parties struggled to comply with its requirements. As a result, the Court must address at the outset whether the parties complied with the procedural requirements to bring Densley's motion to renew before the Court for decision.

Densley complied with Rule 58C in that she sought renewal of her judgment by motion, but her original motion did not hew to other aspects of Rule 58C. The motion's defects include its failure to provide a copy of the judgment with the motion,¹⁴ and to state, via supporting affidavit, what efforts Densley had made to determine if the address she used to send notice of the motion to Dyches was his correct address.¹⁵ In addition, Densley violated the Rule 7 procedures applicable to motions, which Rule 58C(a) expressly incorporates by reference.¹⁶ Among other things, Rule 7 requires that a nonmoving party be given fourteen days after a motion is filed to file a memorandum in opposition.¹⁷ If a nonmoving party files such a memorandum, the moving party has seven days after its filing to file a reply.¹⁸ "When briefing is complete or the time for briefing has expired, either party may file a 'Request to Submit for Decision,'" but a court will not rule on a motion unless a party files a request to submit the motion for decision.¹⁹ When a court is ready to rule, it will direct a party "to prepare a proposed order confirming the court's decision."²⁰ In fact, Rule 7 prohibits filing a proposed order before acourt reaches a decision.²¹ Densley's premature submission of a proposed order was out of sequence with Utah's detailed motion procedures. Simply put, none of the procedural antecedents to submission of a proposed order had yet occurred. The Court had not called for an order confirming its decision because it had not reached one; it had not reached one because the motion had not been submitted for decision; and the motion had not been submitted for decision because the period in which Dyches could have opposed the motion had not yet passed.²²

Dyches has argued that the Court should deny Densley's motion because of these defects.²³ This argument is unavailing. The previously described shortcomings were not fatal, but curable, and the Court permitted Densley to amend her motion to fix them. To be sure, the amended motion suffers from some of the same problems, namely that it does not provide a copy of the judgment with the motion, nor does it state what efforts Densley made to determine if Dyches's address was correct. In addition, the parties failed to file a request to submit the motion for decision. The Court concludes, however, that these defects do not prevent the Court from considering the merits of the motion for three reasons. First, Densley's failure to attach a copy of the judgment is not material because Dyches and the Court can readily access it on the docket. Second, Dyches's objection obviates any concern over whether he received proper notice of the motion. Third, the motion eventually came before the Court for decision, albeit because Dychesnoticed the matter for hearing under the Court's Local Rules. To require that a request to submit be filed after conducting a hearing on the motion would elevate form over substance.²⁴

But the procedural problems do not end with Densley's motion; they extend to Dyches's objection and Densley's reply. Dyches objected to the motion seventeen days after it was filed, which was three days after the Rule 7(d)(1) deadline,²⁵ and his objection does not comply with the requirements for titling and organizing a memorandum in opposition.²⁶ What's more, Densley filed her reply nearly two months after Dyches's objection, well after the seven-day reply deadline, and it likewise fails to conform to the titling and organizational requirements for a reply memorandum.²⁷ Neither party raised the timeliness of the other's filings or otherwise challenged their conformity with Rule 7, and the Court can find no provision in that rule that requires striking tardy memoranda. Absent an objection, the Court will consider Dyches's memorandum in opposition and Densley's reply memorandum.

On to the merits. While the parties' noncompliance with the Act and Rule 58C does not preclude the Court from hearing the motion to renew, Densley's noncompliance with one crucialrequirement of the statute and the rule prevents the Court from granting it. The pith of this case deals with Utah Code Ann. §...