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BMO Harris Bank N.A. v. APS Trans Inc.

United States District Court, E.D. California

May 16, 2017

BMO HARRIS BANK N.A., Plaintiff,
v.
APS TRANS INC., et al., Defendants.

          FINDINGS AND RECOMMENDATIONS GRANTING PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT AND DENYING WITHOUT PREJUDICE THE REQUEST FOR FEES AND COSTS (DOC. 10)

          Jennifer L. Thurston UNITED STATES MAGISTRATE JUDGE

         BMO Harris Bank, N.A., asserts that Harbhaja Sanghera and APS Trans Inc. failed to make payments owed under three loan and security agreements and are liable for breaches of the contracts. Defendants failed to respond to the allegations in the complaint, and Plaintiff now seeks default judgment against Defendants. (Doc. 10)

         For the following reasons, the Court recommends Plaintiff's motion for default judgment be GRANTED, and the request for fees and costs be DENIED without prejudice.[1]

I. Procedural History

         Plaintiff initiated this action by filing a complaint against the defendants on November 22, 2016. (Doc. 1) The Court issued summons to APS Trans Inc. and Harbhajan Sanhera on the same date. (Doc. 2) The defendants were served with the Summons and Complaint on December 16, 2016. (Docs. 4, 5) However, the defendants failed to respond within the time frame prescribed by the Federal Rules of Civil Procedure. Upon application of Plaintiff, default was entered against APS Trans Inc. and Harbhajan Sanghera on February 24, 2017. (Docs. 7, 8) Plaintiff filed the motion for default judgment now pending before the Court on April 19, 2017. (Doc. 10)

         II. Legal Standards Governing Entry of Default Judgment

         The Federal Rules of Civil Procedure govern the entry of default judgment. After default is entered because “a party against whom a judgment for relief is sought has failed to plead or otherwise defend, ” the party seeking relief may apply to the court for a default judgment. Fed.R.Civ.P. 55(a)-(b). Upon the entry of default, well-pleaded factual allegations regarding liability are taken as true, but allegations regarding the amount of damages must be proven. Pope v. United States, 323 U.S. 1, 22 (1944); see also Geddes v. United Financial Group, 559 F.2d 557, 560 (9th Cir. 1977). In addition, “necessary facts not contained in the pleadings, and claims which are legally insufficient, are not established by default.” Cripps v. Life Ins. Co. of North Am., 980 F.2d 1261, 1267 (9th Cir. 1992) (citing Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)).

         III. Plaintiff's Factual Allegations [2]

         Plaintiff alleges that Sanghera and GE Capital Commercial Inc. entered into Loan and Security Agreement No. 7953911-001 (the “First Agreement”) on April 2, 2015, and GE Capital “agreed to finance Sanghera's purchase of the equipment” for his business, APS Trans Inc. (Doc. 1 at 2, ¶¶ 4, 11) Sanghera agreed to pay $89, 285.40, including interest, under the First Agreement. (Id. ¶ 11) As collateral for the First Agreement, Sanghera offered a first-priority security interest in a refrigerated van trailer, VIN 1UYVS2530GU485906 . (Id. at 3, ¶ 15) GE Capital perfected its security interest by recording a lien on the certificate of title. (Id., ¶ 16)

         On November 11, 2015, APS Trans Inc. and Transportation Truck and Trailer Solutions, LLC (“TTTS”) entered into Loan Security Agreement No. 7970736-002 (the “Second Agreement). (Doc. 1 at 2, ¶ 12) Under the terms of the Second Agreement, APS Trans Inc. agreed to pay $93, 443.04, including interest. (Id. at 3, ¶ 12) “Sanghera guaranteed the full and timely performance of [APS Trans Inc.] under all of its present and future liabilities to, among others, TTTS and its successors and assigns.” (Id. at 3, ¶ 17) As collateral for the Second Agreement, TTTS received a first-priority security interest in a refrigerated van trailer, VIN 1UYVS2530GU571913. (Id., ¶ 15) TTTS perfected its security interest by recording a lien on the certificate of title. (Id., ¶ 16)

         On November 20, 2015, APS Trans Inc. and TTTS entered into Loan and Security Agreement 7959431-002 (the “Third Agreement”). (Doc. 1 at 3, ¶ 13) Under the Third Agreement, APS Trans Inc. agreed to pay $ 199, 051.92, including interest. (Id.) Again, Sanghera guaranteed the full and timely performance of APS Trans Inc. under the Third Agreement. (Id., ¶ 17) As collateral for the Third Agreement, APS Trans Inc. offered a first-priority security interest in a Volvo tractor, VIN 4V4NC9EJXGN950662. (Id., ¶ 15) TTTS perfected its security interest for the Third Agreement by recording a lien on the certificate of title. (Id., ¶ 16)

         On December 1, 2015, GE Capital and TTTS “transferred and assigned to Plaintiff all of their respective rights, titles, and interests in and to the accounts with Defendants, including, without limitation, the Agreements, the Guaranty, and the security interests in the Collateral.” (Doc. 1 at 4, ¶ 18) Accordingly, Plaintiff is the successor-in-interest for the First, Second, and Third Agreements.

         In July and August 2016, Sanghera and APS Trans Inc. failed to make payments due under the agreements. (Doc. 1 at 4, ¶ 21) Specifically, “Sanghera failed to make the August 2, 2016 payment due under the First Agreement, and both APS and Sanghera failed to make the August 1, 2016 payment due under the Second Agreement and the July 5, 2016 payment due under the Third Agreement.” (Id.) Pursuant to the terms of the agreements, the entire amounts due were accelerated after Sanghera and APS Trans Inc. defaulted. (Id. at 4 ¶ 22; see also Id. 14-15 ¶ 4.1, 20-21 ¶ 4.1, 26-27 ¶ 4.1) “[T]he principal amount due under the First Agreement is $57, 450.73 as of August 2, 2016[;] the principal amount due under the Second Agreement is $67, 035.92 as of August 1, 2016[;] and the principal amount due under the Third Agreement is $144, 686.90 as of July 5, 2016.” (Id. at 4, ¶ 22)

         In addition, “Defendants are obligated to pay interest on all unpaid amounts at the default interest rate of eighteen percent (18%) per annum or the maximum rate not prohibited by applicable law.” (Doc. 1 at 4, ¶ 23) Calculated with a “360-day year of twelve 30-day months, ” the interest owed accrued at the rate of $134.68 per diem.[3] (Doc. 1 at 5; see also Doc. 1 at 13, 19, 25) Further, under the terms of the agreements, Defendants are obligated to pay late fees, including $669.60 under the First Agreement, $454.23 under the Second Agreement, and $1, 105.84 under the Third Agreement. (Id. at 5, ¶ 26) Finally, Defendants are obligated to pay attorneys' fees and costs for the enforcement of the agreements, such as this action. (Id., ¶ 28)

         Plaintiff contends Defendants are liable for breaches of each of the agreements and failing to pay the amounts due. (See Doc. 1 at 9-10) According to Plaintiff, “Calculated as of October 11, 2016, the amount due and owing under the Agreements, not including attorneys' fees and expenses or costs of collection, is an amount not less than $283, 074.36.” (Id. at 5, ¶ 29)

         IV. Discussion and Analysis

         Entry of default judgment is within the discretion of the Court. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). The entry of default “does not automatically entitle the plaintiff to a court- ordered judgment. Pepsico, Inc. v. Cal. Sec. Cans, 238 F.Supp.2d 1172, 1174 (C.D. Cal 2002), accord Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir. 1986). The Ninth Circuit determined:

Factors which may be considered by courts in exercising discretion as to the entry of a default judgment include: (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute concerning material facts, (6) whether the default was due to excusable neglect, and ...

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