United States District Court, D. Colorado
ORDER DENYING PLAINTIFF'S MOTION FOR DEFAULT
CHRISTINE M. ARGUELLO UNITED STATES DISTRICT JUDGE
matter is before the Court on Plaintiff Fifth Third
Bank's Motion for Entry of Default Judgment against Lucy
Morales and the Lucy T. Morales Revocable Living Trust
(Defaulting Defendants). (Doc. # 45.) Defendants Marie
Korallus and Marie Ludian (Non-defaulting Defendants) filed a
joint response, objecting to Plaintiff's request on
grounds that the rule announced in Frow v. De La
Vega, 82 U.S. 552, 554 (1872), prevents this Court from
entering a default judgment against the Defaulting Defendants
until the case has been adjudicated on the merits as to the
Non-defaulting Defendants. (Doc. # 49.) As explained below,
the Court agrees that the Frow rule is applicable
here and therefore denies Plaintiff's Motion.
filed its Complaint in this case on May 27, 2016 (Doc. # 1)
and served it upon the Defendants in June and July 2016 (Doc.
## 10-13). The Non-Defaulting Defendants filed its joint
Answer in August 12, 2016. (Doc. # 19.) Neither Defaulting
Defendants filed an answer, entered an appearance, or
otherwise responded to the Complaint, and on October 17,
2016, the Clerk entered default against them. (Doc. # 26.) On
July 10, 2017, Plaintiff filed the instant Motion for Default
Judgment as to the Defaulting Defendants. (Doc. # 45.)
Neither Defaulting Defendant has responded to the Motion.
is in default if it fails to appear or otherwise defend.
Fed.R.Civ.P. 55. However, a party's default is not
necessarily sufficient to entitle a plaintiff to an entry of
default judgment. See Bixler v. Foster, 596 F.3d
751, 762 (10th Cir. 2010). Instead, “[o]nce default is
entered, ‘it remains for the court to consider whether
the unchallenged facts constitute a legitimate cause of
action.'” See id.
to the longstanding rule announced in the venerable case of
Frow, 82 U.S. at 554, in a case with multiple
defendants, judgment should not be entered against a
defaulting defendant before the case has been decided on the
merits as to the remaining defendants, or all defendants have
defaulted. See Hunt v. Inter-Globe Energy, Inc., 770
F.2d 145, 147 (10th Cir. 1985). Otherwise, a court might
enter contradictory judgments resulting in an
“absurdity.” See Frow, 82 U.S. at 554.
For example, “there might be one decree of the court
sustaining the charge of joint fraud committed by the
defendants; and another decree disaffirming the said charge,
and declaring it to be entirely unfounded.”
Id. Essentially, the key aim of this rule is the
avoidance of inconsistent judgments, Wilcox v. Raintree
Inns of Am., Inc., 76 F.3d 394 (10th Cir. 1996), and it
has been frequently recognized and applied in this Circuit.
See, e.g., Hunt, 770 F.2d at
147-48; Wilcox, 76 F.3d at 394; Gen. Steel
Domestic Sales, LLC v. Chumley, 306 F.R.D. 666, 669 (D.
Colo. 2014); Pratt v. South Canon Supply Co., 47
Colo. 478 (1910); Salomon Smith Barney, Inc. v.
Schroeder, 43 P.3d 715, 716 (Colo.App. 2001).
Frow rule is particularly applicable when multiple
defendants are alleged to be jointly and severally liable
because consistent damage awards on the same claim are
essential among joint and several tortfeasors. E.g.,
Hunt, 770 F.2d at 148. The rule can also be applied
when defaulting and non-defaulting defendants have closely
related defenses. E.g., Gulf Coast Fans, Inc. v.
Midwest Electronics Importers, Inc., 740 F.2d 1499, 1512
(11th Cir.1984) (noting that when defendants are similarly
situated, but not jointly liable, judgment should not be
entered against a defaulting defendant if the other
defendants prevail on the merits); Wilcox, 76 F.3d
at *3 (same). Moreover, default judgment against a defendant
who was secondarily liable on the plaintiff's claim
cannot be entered until the plaintiff succeeds on its claim
against the defendant who was primarily liable.
Pratt, 47 Colo. at 478; see also Salomon Smith
Barney, 43 P.3d at 716.
Complaint raises three Claims for Relief: (1) Avoidance of
Fraudulent Transfer pursuant to Colo. Rev. Stat. §
38-8-105(a); (2) Avoidance of Fraudulent Transfer pursuant to
Colo. Rev. Stat. § 38-8-105(b); and (3) Civil
Conspiracy. (Doc. # 1.)
under the First and Second Claims, Plaintiff contends that
the Defaulting Defendants fraudulently transferred real
property (the Montrose Property) to the Non-defaulting
Defendants, without receiving adequate consideration, to
intentionally avoid payment of an outstanding judgment
against the Defaulting Defendants. (Id. at
¶¶ 45-74.) Plaintiff requests that this Court hold
the Defendants jointly and severally liable for the transfer
and any consequent monetary damages. (Id. at
¶¶ 55, 85.) Among other things, Plaintiff requests
that this Court enjoin the Defendants from further
disposition of the Montrose Property, appoint a receiver to
take charge of the Montrose Property, and enter foreclosure
of the Judgment Lien against it. (Id. at ¶ 85.)
Third Claim, Plaintiff alleges that “[t]hrough their
collective participation in a fraudulent scheme, i.e. the
fraudulent transfer of the Montrose Property, Defendants
engaged in the tort of civil conspiracy.” (Id.
at ¶ 76.) Plaintiff requests a monetary judgment against
Defendants, jointly and severally, for any damages related to
this Claim. (Id. at ¶ 85.)
each of these Claims, Plaintiff essentially asserts that all
Defendants should be held jointly and severally liable for
the fraudulent and unlawful transfer of the Montrose
Property. (Id. at pp. 7, 8, 10.) In so contending,
Plaintiff's claims against the Defaulting Defendants and
Non-defaulting Defendants are substantially intertwined and
interdependant, particularly with regard to the requested
relief. This is not only because Plaintiff requests that the
Defendants be held jointly and severally liable but also
because the Defendants have closely related defenses. For
example, with regard to Claim Two, the Non-defaulting
Defendants allege that adequate consideration was provided
for the transfer of the Montrose Property, and with regard to
Claim Three, the Non-defaulting Defendants argue they did not
conspire with the Defaulting Defendants to engage in
fraudulent conduct. If valid, these defenses could operate to
preclude judgment against the Defaulting Defendants as well.
Court nonetheless recognizes that it may be possible to hold
the Defaulting Defendants, as transferors, liable under
§ 38-8-105 (a)-(b) or for civil conspiracy, while not
holding the Non-defaulting Defendants, as transferees,
liable. But, it is also possible that, at this early stage in
the proceedings, findings and conclusions on these Claims
could still result in inconsistent judgments - a result that
the Frow rule guards against. For example, if this
Court presently finds the Defaulting Defendants liable under
Claims One and Two, this could void the transfer of the
Montrose Property. If this Court were to later find in favor
of the Non-defaulting Defendants on their contention that
they took the Montrose Property “in good faith for
reasonably equivalent value, ” (Doc. # 19, p. 5.), the
transfer could be deemed valid, i.e. not voidable.
See Colo. Rev. Stat. § 38-8- 109(4). Even if
these judgments could be ultimately reconciled, this Court
sees no reason to risk such inconsistency at this time,
especially considering that the damages related to these
claims are inevitably intertwined and Plaintiff concedes that
this Court cannot yet determine them. (Doc. # 50, p. 4,
“[T]he Court cannot disentangle an award of damages
against the Defaulting Defendants ...