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SE Property Holdings, LLC v. Adams

United States District Court, S.D. Alabama, Southern Division

March 23, 2017

SE PROPERTY HOLDINGS, LLC, Plaintiff,
v.
MICHAEL TERRY ADAMS, Defendants.

          ORDER

          CALLIE V. S. GRANADE SENIOR UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Plaintiff SE Property Holdings, LLC's (“SEPH”) motion for entry of default judgment (Doc. 20) against Defendant Michael Terry Adams (“Adams”). Having considered the record as a whole, the Court has concluded a hearing is unnecessary and will consider the motion purely on the record before it. For the reasons stated below, the Court deems it proper to GRANT the motion in part.

         I. Background

         On October 8, 2003, Vision Bank-now SEPH[1]-loaned Adams $157, 000.00 through Loan Number 32387 (the “Loan”). (See Doc. 20-1, ¶ 4). Originally, the Loan was scheduled to mature on October 7, 2008, but Adams and SEPH agree to extend the maturity date to October 7, 2013. See Id. at ¶¶ 4-5. Thereafter, Adams defaulted on certain amounts due under the Loan. Id. at ¶ 6. In February 2015, after seeking advice from its attorneys, SEPH entered into a Forbearance Agreement, but Adams still “failed to pay the Indebtedness under the Loan.” Id. at ¶¶ 8-9.

         On August 3, 2015, SEPH demanded payment in full on the Loan, but Adams failed to cure the default. Id. at ¶¶ 11-12. Thereafter, SEPH initiated a suit against Adams in this Court[2] and foreclosed on the property securing the Loan on October 16, 2016. Id. at ¶¶ 13-14. On that day, Adams filed a voluntary Chapter 13 bankruptcy petition in the Southern District of Alabama, and the instant case was stayed. Id. at ¶ 15; see also Doc. 13. On February 24, 2016, the Bankruptcy Court granted SEPH's Motion for Nunc Pro Tunc Annulment of the Automatic Stay in that court to validate the foreclosure. (Doc. 20-1, ¶ 17). After the Bankruptcy Court dismissed Adams's case for failure to pay the proscribed Chapter 13 payment plan payments, SEPH initiated a suit in the Circuit Court of Baldwin County to eject Adams from the property. Id. at ¶¶ 17-18. The court entered the ejectment order on May 27, 2016. Id. at ¶ 19.

         This case returned to the Court's active docket on January 25, 2017. (Doc. 19). SEPH seeks entry of default judgment to recover the deficiency on the Loan as well as attorneys' fees and costs. As of February 2, 2017, the outstanding balance on the Loan totals $55, 871.28, plus accruing per diem interest. (See Doc. 20-1, ¶ 24; Doc. 20-2). This sum includes $43, 889.18 in principal, $10, 280.89 in interest, $105.48 in late fees, $895.73 in force placed insurance, and $700.00 in appraisal fees. Id. SEPH also seeks reimbursement for its attorneys' fees and expenses in the amount of $44, 863.43 for work performed and/or billed through January 31, 2017.[3] (See Doc. 20-1, ¶ 30; Doc. 20-4).

         II. Notice

         This Court generally requires some notice be given to defendants between the time of the service of the summons and complaint and the entry of a default judgment. See, e.g., JP Morgan Chase Bank, N.A. v. Surek, No. 11-263-KD-M, 2011 WL 5289254, at *2 (S.D. Ala. Nov. 4, 2011); Penn. Nat'l Mut. Cas. Ins. Co. v. King, No. 11-577-WS-C, 2012 WL 1712670, at *2 n.4 (S.D. Ala. May 15, 2012). At the outset, the Court is satisfied Adams had notice of the default proceedings. He was served with the summons and the Complaint in August 2015. (Doc. 8). The summons clearly stated, “If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint.” (Doc. 4). Moreover, the Clerk entered default against Adams on October 8, 2015, approximately seventeen months before this entry of default judgment. (See Doc. 10). Considering the length of time of the proceedings, including summons, entry of default, and a separate bankruptcy proceeding, the Court finds Adams had sufficient notice of the instant proceedings.

         III. Analysis

         In this Circuit, “there is a strong policy of determining cases on their merits[, ] and we therefore view defaults with disfavor.” In re Worldwide Web Sys., Inc., 328 F.3d 1291, 1295 (11th Cir. 2003); see also Varnes v. Local 91, Glass Bottle Blowers Ass'n of U.S. and Canada, 674 F.2d 1365, 1369 (11th Cir. 1982). Nonetheless, it is well established that a “district court has the authority to enter default judgment for failure . . . to comply with its order or rules of procedure.” Wahl v. McIver, 773 F.2d 1169, 1174 (11th Cir. 1985).

         The Federal Rules of Civil Procedure establish a two-part process for obtaining a default judgment. Fed.R.Civ.P. 55. If “a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” FED. R. CIV. P. 55(a). After default has been entered, if the “claim is for a sum certain or a sum that can be made certain by computation, ” the clerk must enter default judgment. Id. at 55(b)(1). In all other circumstances, such as here, “the party must apply to the court for a default judgment.” Id. at 55(b)(2). Importantly, a “default judgment must not differ in kind from, or exceed amount in, what is demanded in the pleadings.” Id. at 54(c).

         Rule 55(b)(2) also provides the Court may conduct a hearing to enter a judgment if the Court needs to “conduct an accounting, ” “determine the amount of damages, ” “establish the truth of any allegation by evidence, ” or “investigate any other matter.” Fed.R.Civ.P. 55(b)(2). Upon review of the docket, the motion for default judgment, and supporting evidence, the Court finds a hearing is unnecessary. Securities and Exchange Comm'n v. Smyth, 420 F.3d 1225, 1231-2 & n. 13 (11th Cir. 2005) (where “all essential evidence is already of record, ” a hearing is generally not required).

         The Eleventh Circuit has held, although “a default is not treated as an absolute confession by the defendant of his liability and of the plaintiff's right to recover, a defaulted defendant is deemed to admit the plaintiff's well-pleaded allegation of fact. The defendant, however, is not held to admit facts that are not well-pleaded or to admit conclusions of law.” Tyco Fire & Sec., LLC v. Alcocer, 218 F. A'ppx 860, 863 (11th Cir. 2007) (per curiam) (citations and internal quotations admitted). Moreover, “before entering a default judgment for damages, the district court must ensure that the well-pleaded allegations of the complaint . . . actually state a cause of action and that there is a substantive, sufficient basis in the pleadings for the particular relief sought.” Id. (emphasis omitted). When assessing damages in connection with a default judgment, the Court has “an obligation to assure that there is a legitimate basis for any damage award it enters.” Anheuser Busch, Inc. v. Philpot, 317 F.3d 1264, 1266 (11th Cir. 2007). Additionally, SEPH must establish a “prima facie liability case” against Adams. Pitts ex rel. Pitts v. Seneca Sports, Inc., 321 F.Supp.2d 1353, 1357 (S.D. Ga. 2004) (citations omitted).

         A. Claims Asserted

         SEPH asserted one claim against Adams for breach of contract. (Doc. 1). Under Alabama law, loan documents are governed under contract law. See Penick v. Most Worshipful Prince Hall Grande Lodge F & A M of Alabama, Inc., 46 So.3d 416, 428 (Ala. 2010) (construing terms of a mortgage, notes, and modification agreement). In order to prevail on its claim, SEPH must establish the following breach of contract elements: “(1) a valid contract binding the parties; (2) the plaintiff's performance under the contract; (3) the defendant's nonperformance; and (4) resulting damages.” Shaffer v. Regions Fin. Corp., 29 So.3d 872, 880 (Ala. 2009); Vision Bank v. Algernon Land Co., L.L.C., 2011 WL 1380062, at *7 (S.D. Ala. Apr. 12, 2011).

         In light of the foregoing principles, the Court has reviewed the Complaint and is satisfied SEPH has established a viable claim for breach of contract. SEPH and Adams entered into a valid, binding contract in the initial mortgage agreement and the subsequent modifications thereof. SEPH clearly performed by loaning the funds to Adams, and Adams failed to perform when he defaulted on the loan repayment. Additionally, SEPH incurred damages, as explained below.

         B. ...


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