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Pryor v. RW Investment Co., Inc. (In re Pryor)

Ninth Circuit Bankruptcy Appellate Panel Case No. CC-14-1526-KiBrD (August 3, 2015)
The Ninth Circuit Bankruptcy Appellate Panel ("BAP") affirmed the bankruptcy court's order denying the Debtor's motion. There is a high burden on a party seeking relief from a judgment based on fraud on the court. The Debtor did not meet that burden. The type of fraud asserted by the Debtor must involve egregious conduct, such as an unconscionable plan or scheme designed to improperly influence the court in its decision.
Procedural context:
Chapter 7 Debtor (Danny W. Pryor), appeals an order entered by the bankruptcy court denying his motion for relief from judgment pursuant to Fed.R.Civ.P. Rule 60(b)(1) and (3). Previously the bankruptcy court entered a default judgment excepting from discharge the obligation due to RW Investment Co., Inc. ("RW") and denial of discharge pursuant to 11 U.S.C. Sec. 727. In a prior appeal by the Debtor, the BAP affirmed the exception from discharge related to RW, but vacated the denial of the discharge based on RW abandoning those claims at the prove-up hearing.
In 2003, RW purchased a property for the purpose of constructing 6townhomes. To fund the project, RW obtained a loan from IndyMac Bank in July 2005 for $1.8 million. RW engaged Debtor in February 2006 as the general contractor for the project. RW filed a nondischargeability and denial of discharge complaint against Pryor seeking relief under §§ 523 and 727 on the grounds of fraud and embezzlement. As a sanction for Debtor not appearing at a status conference, Debtor's answer was struck and default was entered. The Debtor's first motion to set aside judgment was denied by the bankruptcy court because the Debtor had not provided any evidence of a "fraud upon the court". Debtor filed a second motion based on different sub-sections of Fed.R.Civ.P. Rule 60, but asserted the same basis as in the first motion.
KIRSCHER, BRANDT2 and DUNN, Bankruptcy Judges

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