Foxwood Hills Prop. Owners Ass'n, Inc. v. 783-C, LLC (In re Foxwood Hills Prop. Owners Ass'n, Inc.), C/A No. 20-02092-HB

628 B.R. 891

IN RE: FOXWOOD HILLS PROPERTY OWNERS ASSOCIATION, INC., Debtor(s).

Foxwood Hills Property Owners Association, Inc., Plaintiff(s),

v.783-C, LLC et al., Defendant(s).

C/A No. 20-02092-HB

Adv. Pro. No. 20-80049-HB

United States Bankruptcy Court, D. South Carolina.

Signed March 17, 2021

Kyle A. Brannon, Julio E. Mendoza, Jr., Carl H. Petkoff, Nexsen Pruet, LLC, Columbia, SC, for Plaintiff(s).

Teri Callen, Columbia, SC, for Defendant James P. Kimball.

Michael Bland Dodd, The Dodd Law Firm LLC, Greenville, SC, for Defendant Sadie Investments.

James Logan, Logan & Jolly, LLP, Anderson, SC, for Defendant Oconee County FLC.

ORDER

Helen E. Burris, Chief US Bankruptcy Judge

THIS MATTER is before the Court on the pleading filed by Defendant Mason Thomas Porter seeking to be relieved of paying budget-based dues.¹

On July 23, 2020, Plaintiff Foxwood Hills Property Owners Association, Inc. filed an Amended Complaint naming over 3,300 defendants, who are property owners of record within the Foxwood Hills Community. The Court issued a Summons for the Amended Complaint on August 4, 2020, requiring responses to the Amended Complaint be filed and served within thirty days of the issuance of the Summons (September 3, 2020). The Association employed American Legal Claim Services, LLC ("ALCS") – a claims noticing agent employed in this case under SC LBR 2081-1² – to serve the Summons and the Amended Complaint on the defendants. An Affidavit of Service of Demetrius Jenkins of ALCS, filed on August 13, 2020, attests that ALCS served the defendants with copies of the Summons and Amended Complaint on August 11, 2020, by First Class U.S. Mail, using their last known addresses.³ The Affidavit of Service indicates "Thomas M Porter" was served at 531 Kinston Loop, Westminster, SC 29693. The mailed Summons and Amended Complaint was returned as undeliverable for approximately 221 of the named defendants, which did not include Porter.

After numerous defendants, including Porter, failed to file a timely response to the Amended Complaint, the Association filed a Motion for Default Judgment against those defendants on October 13, 2020.⁴ On October 16, 2020, an entry of default was made since no timely answer or response was filed by some defendants, including Porter.⁵ After entry of default and further deliberation, on December 3, 2020, the Court granted the Association's Motion, in part, and entered a Default Judgment against some defendants, including Porter. The order states it "grants relief to the Association only against the Default Judgment Defendants," who were defined in that order and listed on Exhibit A attached to the Default Judgment.⁶ In relevant part, the Default Judgment granted the relief requested by ordering, among other things, that the Default Judgment Defendants, and the successors in ownership of their lots in the Foxwood Hills community, are each a member of the Association and are obligated to pay budget-based fees, dues, and assessments.

Over two months later, on February 16, 2021, Porter filed a pleading asserting he was not served with a copy of the Summons and Amended Complaint and requesting he be relieved of paying budget-based dues. The return address on Porter's pleading is 531 Kinston Loop Drive , Westminster, SC 29693. The Association objects to Porter's requested relief. In response, Porter filed an affidavit attesting that he did not receive a copy of the Summons or Amended Complaint and did not know of this lawsuit through other means until February 2021 when he filed his pleadings with the Court. The return address on the envelope for Porter's affidavit is 531 Kinston Loop Road , Westminster, SC 29693.

There are two sources of relief from a default judgment: Rules 59 and 60 of the Federal Rules of Civil Procedure.⁷ Bankruptcy Rule 9023 states that motions seeking relief under Rule 59 "to alter or amend a judgment shall be filed ... no later than 14 days after entry of judgment." Rule 55(c) provides "the court may set aside an entry of default for good cause, and it may set aside a final default judgment under Rule 60(b)." Under Rule 60(b) :

the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons:

(1) mistake, inadvertence, surprise, or excusable neglect;

(2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b) ;

(3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party;

(4) the judgment is void;

(5) the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or

(6) any other reason that justifies relief.

"A motion under Rule 60(b) must be made within a reasonable time – and for reasons (1), (2), and (3) no more than a year after the entry of the judgment or order or the date of the proceeding." Fed. R. Civ. P. 60(c).

A "very strict interpretation of Rule 60(b) is essential if the finality of judgments is to be preserved." Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 873, 108 S. Ct. 2194, 100 L. Ed.2d 855 (1988) (Rehnquist, C.J., dissenting) (citations omitted). A party's mere disagreement with the Court's ruling, or request that the Court change its mind, does not warrant relief. See Aikens v. Ingram , 652 F.3d 496, 512 (4th Cir. 2011) (King, J., dissenting) (quoting United States v. Williams, 674 F.2d 310, 313 (4th Cir. 1982) ); see also U.S. ex rel. Becker v. Westinghouse Savannah River Co. , 305 F.3d 284, 290 (4th Cir. 2002) (discussing Rule 59(e) ). Relief from judgment under Rule 60(b) requires a showing that the motion was timely, the movant has a meritorious defense, exceptional circumstances exist, and the opposing party would not be unfairly prejudiced by having the motion set aside. Vinten v. Jeantot Marine Alls., S.A. , 191 F. Supp. 2d 642, 649 (D.S.C. 2002) (citing Dowell v. State Farm Fire & Cas. Auto. Ins. Co., 993 F.2d 46, 48 (4th Cir.1993) ).

"Motions under Rule 60(b) must be brought ‘within a reasonable time’ and ‘the movant must make a showing of timelines.’ " McLawhorn v. John W. Daniel & Co. , 924 F.2d 535, 538 (4th Cir. 1991). What constitutes a "reasonable time" for filing a Rule 60(b) motion is "[b]ased on the circumstances" of the case, see Wells Fargo Bank, N.A. v. AMH Roman Two NC, LLC , 859 F.3d 295, 300 (4th Cir. 2017), "taking into consideration the interest in finality, the reason for delay, the practical ability of the litigant to learn earlier of the grounds relied upon, and [the consideration of] prejudice [if any] to other parties." Kagan v. Caterpillar Tractor Co. , 795 F.2d 601, 610 (7th Cir. 1986).

A meritorious defense requires a proffer of evidence which would permit a finding for the defaulting party or which would establish a valid counterclaim ... "The underlying concern is ... whether there is some possibility that the outcome ... after a full trial will be contrary to the result achieved by the default." 10 C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2697, p. 531 (2d ed. 1983).

Augusta Fiberglass Coatings, Inc. v. Fodor Contracting Corp. , 843 F.2d 808, 812 (4th Cir. 1988) (internal citations omitted). If the movant is able to make these showings, then he or she must also satisfy one or more the grounds set forth in Rule 60(b) : (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud, misrepresentation, or misconduct by the opposing party; (4) the judgment is void; (5) the judgment has been satisfied, release or discharged; or (6) any other reason that justifies relief.

Rule 7004(b)(1) of the Federal Rules of Bankruptcy Procedure allows service to be made within the United States by first class mail "[u]pon an individual other than an infant or incompetent, by mailing a copy of the summons and complaint to the individual's dwelling house or usual place of abode ..." Further, Rule 9006(e) of the Federal Rules of Bankruptcy Procedure provides that "service of process and service of any paper other than process or of notice by mail is complete on mailing." "If service is made by mail, there is no requirement that a receipt or acknowledgment of service be obtained from the defendant." 10 Collier on Bankruptcy ¶ 7004.03 (16th ed. 2020) (footnote and citations omitted).

The Supreme Court has repeatedly held that notice by first-class mail is sufficient, notwithstanding the Court's obvious awareness that not every first-class letter is received by the addressee." Weigner v. City of New York , 852 F.2d 646, 651 (2d Cir. 1988). For this reason, courts have held that Rule 9006(e) creates a rebuttable presumption that the paper mailed was received by the party to whom it was sent.

In re Boyd , 618 B.R. 133, 162-63 (Bankr. D.S.C. 2020).

"To invoke the presumption, a party must prove that the letter was properly addressed, stamped, and mailed ... Courts have routinely held that an affidavit of service is sufficient evidentiary material to raise the presumption of receipt after proper mailing." Id. at 163 (quotation marks and citations omitted). "This presumption may only be overcome by evidence that the mailing was not actually accomplished and the mere denial of receipt is insufficient." In re Warren , 532 B.R. 655, 662 (Bankr. D.S.C. 2015) (citation omitted). Rather, this "very strong" presumption "can only be rebutted by specific facts and not by invoking another presumption and not by a mere affidavit to the contrary ... A general denial does not constitute the strong evidence needed to overcome the presumption of receipt." Boyd , 618 B.R. at 163 (citations omitted). "If evidence is presented that the sender did not actually accomplish the mailing or that the mail was returned as undeliverable, then the sender would not be entitled to the presumption." Id. (citations...