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In re Kubick

filed: September 9, 1994.

IN RE ROBERT KUBICK, D/B/A KUBICK ENTERPRISES, D/B/A SOUTHWEST ENTERPRISES, D/B/A QUADRANT & DEVELOPMENT CO., AND SHARON R. KUBICK, DEBTORS. ROBERT KUBICK, D/B/A KUBICK ENTERPRISES, D/B/A SOUTHWEST ENTERPRISES, D/B/A QUADRANT & DEVELOPMENT CO., AND SHARON R. KUBICK, APPELLANTS,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, APPELLEE.



Appeal from the United States Bankruptcy Court for the District of Alaska. Bk. No. A-92-00919-HAR, Adv. No. 92-00919-002. Honorable Herbert A. Ross, Chief Bankruptcy Judge, Presiding.

Before: Ollason, Ashland and Volinn, Bankruptcy Judges.

Author: Volinn

VOLINN, Bankruptcy Judge.

OVERVIEW

Debtors appeal a default judgment denying their discharge pursuant to § 727(a).*fn1 We VACATE the judgment.

STATEMENT OF FACTS

On April 5, 1993, appellee Federal Deposit Insurance Corporation (FDIC) filed a complaint objecting to the debtors' discharge pursuant to § 727. The complaint alleged jurisdiction and then restated, without any additional facts, the statutory language found in § 727(a)(2)(A) and (B) and § 727(a)(3) and (4). Service of the summons and complaint was properly made on the debtors and their counsel via mail. The debtors failed to answer or appear. On June 15, 1993, the FDIC moved for entry of default. On June 16, 1993, the clerk of the bankruptcy court entered a default against the debtors. The debtors did not move to vacate the default or appeal it.

On motion by the FDIC, the bankruptcy court entered a default judgment on June 21, 1993 without a hearing. The debtors did not move for relief from the judgment, but have appealed to the panel directly on the grounds that the complaint is insufficient to sustain a claim for relief.

STANDARD OF REVIEW

The power to grant a default judgment is within the broad discretion of the trial court. Alan Neuman Productions, Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir. 1988), cert. denied, 493 U.S. 858, 107 L. Ed. 2d 124, 110 S. Ct. 168 (1989) (citing Hawaii Carpenters' Trust Funds v. Stone, 794 F.2d 508, 511-12 (9th Cir. 1986); Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). A default judgment will be upheld unless there was an abuse of this discretion. Alan Neuman Productions at 1391-92. "Under the abuse of discretion standard, the panel must have 'a definite and firm conviction that the court below committed a clear error of judgment in the Conclusion it reached' before reversal is proper." In re Tong Seae (U.S.A.), Inc., 81 Bankr. 593, 597 (9th Cir. BAP 1988), citing Mission Indians v. American Management & Amusement, Inc., 824 F.2d 710, 724 (9th Cir. 1987).

ISSUE

Whether a default judgment based on a complaint to deny the debtor a discharge under § 727 that recites only statutory language as grounds for denial can support a default judgment with no further examination by the court.

Discussion

Although entry of a default judgment is usually attacked collaterally under Rule 60(b),*fn2 on direct appeal a defendant can contest the legal sufficiency of allegations contained in ...


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