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Foundation Capital Resources, Inc. v. Prayer Tabernacle Church of Love, Inc.

United States District Court, D. Connecticut

November 8, 2017

FOUNDATION CAPITAL RESOURCES, INC., Plaintiff,
v.
PRAYER TABERNACLE CHURCH OF LOVE, INC., Defendant.

          ORDER GRANTING RELIEF FROM DEFAULT JUDGMENT

          JEFFREY ALKER MEYER, UNITED STATES DISTRICT JUDGE

         Ten years ago defendant Prayer Tabernacle Church of Love, Inc. (“the Church”) took out a series of mortgage loans from plaintiff Foundation Capital Resources, Inc. (“Foundation”) in order to build a church in Bridgeport, Connecticut. The Church stopped making its loan payments in 2009, and ever since the parties have been struggling to resolve their dispute. The question before me is whether a default judgment that the Court entered against the Church should be the end of that dispute, or whether the case should be reopened and proceed to a resolution on the merits. Because I now conclude that the Church's default was not willful, that the Church may possibly have a meritorious defense, and that any prejudice to Foundation is primarily the result of its own decision to withdraw its prior foreclosure action in state court, I will grant the Church's motion for relief from judgment under Rule 60(b) of the Federal Rules of Civil Procedure.

         Background

         Foundation originally filed this foreclosure action against the Church in Connecticut Superior Court on July 10, 2013. Doc. #65-1 at 6. Foundation alleged that it made a series of three loans to the Church totaling $8, 148, 000 between 2007 and 2009 to finance the construction of a new church, secured by mortgages on several properties. Doc. #65-3 at 4-12. The Church defaulted on two of these loans in 2009, after which the parties entered into four separate forbearance agreements. The Church nonetheless failed to make its required payments. See Doc. #65-5 at 3.

         The case was litigated in state court for more than three years, during which time Foundation ultimately filed two amended complaints, one on July 16, 2013, and one on September 8, 2016, and the Church filed answers to both amended complaints, each of which contained special defenses and counterclaims. On September 29, 2016, the Superior Court issued a ruling on Foundation's motion to strike the Church's special defenses and counterclaims, denying the motion to strike as to everything except one counterclaim. Doc. #65-5.

         On November 18, 2016, just four days before the foreclosure action was set for trial, the parties reached a “Withdrawal and Tolling Agreement.” Doc. #65-1 at 13-20. Under this agreement, both sides pledged to withdraw their respective claims without prejudice, in contemplation that those claims might be raised again in a “New Action.” Id. at 14.

         Foundation then filed this action here in federal court on January 30, 2017. Doc. #1. The Church filed an answer on February 22, 2017, Doc. #11, but Foundation moved to strike the answer on the ground that the answer had been signed and filed by the Church's pastor (Kenneth Moales) who was not an attorney authorized to represent a corporate party in court. Doc. #12. This motion was granted at a hearing before Magistrate Judge Fitzsimmons on March 30, 2017. See Doc. #24.

         At the hearing before Judge Fitzsimmons, attorney Dennis Bradley appeared on behalf of the Church, having entered an appearance on the docket earlier that day, Doc. #22, and he made an oral motion for a one-week extension of time until April 7, 2017, to file a responsive pleading. Judge Fitzsimmons granted this motion. Doc. #23, #24.

         But the new deadline came and went without the Church filing an answer. On April 10, 2017, Foundation promptly moved for default entry pursuant to Fed.R.Civ.P. 55(a). Doc. #26. The Court granted this motion on April 27, 2017, and Foundation then moved for default judgment on May 15, 2017. Docs. #27, #28.

         Three days later, another attorney-Andre Cayo-filed a motion for extension of time to plead until June 16, 2017. Doc. #33. Attorney Cayo filed this and subsequent motions without ever filing a notice of appearance in this action.[1] The motion claimed that Attorney Bradley had been “unable to get ahold of previous counsel . . . who represented the Defendant in the State court for the same matter which is being re-litigated in this court.” Id. at 1. It also stated that Attorney Bradley had told Attorney Cayo that “he was unable to access his ECF account and had difficulties logging into the system to file papers.” Ibid. The motion stated that “new counsel has just been retained by Attorney Dennis Bradley to assist in this complicated litigation, ” that Attorney Cayo met with the Church and “explained the urgency of filing appropriate pleading immediately; even if he was not retained.” Id. at 1-2. Attorney Cayo then advanced several reasons why he had not been able to file a timely responsive pleading, including the Church's inability to fund the litigation and Attorney Cayo's lack of opportunity to review “the state court docket and papers, the evidence in possession of the Defendant and the discovery in possession of prior counsel ‘Attorney Crumbie' in the State case.” Id. at 2.

         Foundation opposed this motion for a number of reasons, Doc. #34, and the motion was denied on May 24, 2017. Doc. #35. The following day, Attorney Cayo filed an answer to the complaint. Doc. #36. Foundation moved to strike this answer, because the Church's default had already been entered, and therefore the Church was no longer in a position to file an answer. Doc. #37.

         On July 13, 2017, the Church moved to set aside the entry of default. Doc. #45. This motion was filed by Attorney Cayo and included an affidavit from Attorney Bradley, claiming without elaboration that he had had a “dire and severe family medical issue” to deal with, that when he requested the one-week extension of time on March 30 he “did not expect my family member[']s condition to become severe, ” and that he “was forced to drop everything and come to their [sic] aid.” Doc. #45-1 at 1. The motion also argued that the Church had a meritorious defense, as shown by the answer that Pastor Moales had filed on February 22, and that Foundation had violated Connecticut law requiring mediation in foreclosure cases. Doc. #45 at 1-2.

         The Court granted Foundation's motion to strike on July 17, 2017, and it denied the Church's motion to set aside the entry of default on September 11, 2017, at the same time granting Foundation's motion for default judgment. Docs. #46, #52. Judgment entered on September 19, 2017, along with an order of strict foreclosure. Doc. #56.

         On October 6, 2017, attorney John Williams filed a notice of appearance on the Church's behalf, along with a motion for relief from judgment under Rule 60(b), a motion for extension of time to file an appeal, and a motion to stay the execution of judgment. Docs. #65, #66, #67. The Court granted the motion for extension of time to file an appeal on October 17, 2017, Doc. #72, and at a motion hearing on October 27, 2017, the Court granted the Church's motion for stay of execution of the judgment, and also of the ...


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