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Business Loan Center, LLC v. M/V Cape Florida

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

April 19, 2018

BUSINESS LOAN CENTER, LLC, Plaintiff,
v.
M/V CAPE FLORIDA, in rem, Defendant.

          ORDER

          WILLIAM H. STEELE, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on plaintiff's Motion for Default Judgment (doc. 23). The Motion, as to which no opposition has been filed, is now ripe.[1] The Court has also considered the Supplemental Memorandum (doc. 25) filed by plaintiff in support of its Motion.

         I. Procedural History.

         Plaintiff, Business Loan Center, LLC, filed its Verified Complaint (doc. 1) against the M/V CAPE FLORIDA, in rem (the “Vessel”), on December 18, 2017. Well-pleaded factual allegations in the Complaint reflect that the Vessel's owners, nonparties Cape Towing, Inc. and Cape Towing Caribbean, Inc. (collectively, “Cape Towing”), became indebted to Business Loan Center in November 2007 pursuant to a promissory note secured by a Preferred Ship Mortgage on 100% of the Vessel in the amount of $2 million. (Doc. 1, ¶¶ 5-6.) The Complaint further alleges that Cape Towing defaulted on its indebtedness to Business Loan Center by failing to make installment payments on the note that were due and owing from October 2016 through the present. (Id., ¶ 8.) On the strength of these and other allegations, Business Loan Center's Complaint requested that the Vessel be arrested; that judgment be entered in plaintiff's favor in the amount of $1, 214, 657.77 (which was alleged to be the unpaid balance on the note as of December 8, 2017), plus reasonable attorney's fees, interest, and costs; and that the Vessel be condemned and sold to satisfy said judgment.

         On December 20, 2017, Magistrate Judge Bivins entered an Order (doc. 5) directing issuance of a warrant for arrest of the Vessel. The Clerk of Court promptly issued a Warrant for Arrest in Rem (doc. 6), after which the U.S. Marshals Service arrested the Vessel and placed it in the possession of a substitute custodian. (See doc. 13.) Plaintiff attempted to give actual notice of this action to Cape Towing via certified mailing dated January 19, 2018; however, Cape Towing refused delivery. (Willhoft Aff. (doc. 23-2), at 1 & Exhs. B & C.) Plaintiff also gave public notice of this action and the Vessel's arrest via publication in The Press Register on three occasions in February 2018. (Id. at 2 & Exh. A.) Neither Cape Towing nor any other claimant has ever submitted a verified statement of claim pursuant to Supplemental Rule C(6)(A), or has otherwise taken meaningful action to defend against Business Loan Center's in rem claims against the Vessel. All deadlines for doing so have long since expired.

         On March 21, 2018, the undersigned entered an Order (doc. 19) granting plaintiff's request for default. A Clerk's Entry of Default against the Vessel was entered on the same date pursuant to Rule 55(a), Fed.R.Civ.P. (See doc. 20.) Copies of the March 21 Order and the Clerk's Entry of Default were mailed to Cape Towing at two addresses of record, but were returned as undeliverable. (See docs. 21 & 22.) Despite a full and fair opportunity, and (at a minimum) constructive notice of the Vessel's arrest and these proceedings, Cape Towing has not come forward to oppose or object to these default proceedings against the Vessel. Accordingly, on April 5, 2018, Business Loan Center filed its Motion for Default Judgment (doc. 23), seeking entry of default judgment against the Vessel in the amount of $1, 214, 657.77, along with reasonable attorney's fees, interest and costs. Plaintiff served copies of its Motion on Cape Towing at its addresses of record, but that entity has neither appeared nor contested entry of default judgment against the Vessel in the specified amount.

         II. Propriety of Entry of Default Judgment.

         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 Systems, 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) (“Since this case involves a default judgment there must be strict compliance with the legal prerequisites establishing the court's power to render the judgment.”). Nonetheless, it is well established that a “district court has the authority to enter default judgment for failure … to comply with its orders or rules of procedure.” Wahl v. McIver, 773 F.2d 1169, 1174 (11th Cir. 1985).

         Where, as here, defendant and putative claimants have failed to appear or otherwise respond to a pending lawsuit for four months, entry of default judgment is appropriate. Indeed, Rule 55 itself provides for entry of default and default judgment where a defendant “has failed to plead or otherwise defend.” Rule 55(a), Fed.R.Civ.P. In a variety of contexts, courts have entered default judgments against defendants who have failed to appear and defend in a timely manner following proper service of process.[2] In short, “[w]hile modern courts do not favor default judgments, they are certainly appropriate when the adversary process has been halted because of an essentially unresponsive party.” Flynn v. Angelucci Bros. & Sons, Inc., 448 F.Supp.2d 193, 195 (D.D.C. 2006) (citation omitted). That is precisely what has happened here. Despite service of process on the Vessel (and notice to all known claimants, including Cape Towing) in December 2017, no claims were made and no entity or person stepped forward to defend against this action.

         That said, a defendant's failure to appear and a Clerk's Entry of Default do not automatically entitle a plaintiff to a default judgment in the requested (or any) amount. After all, a default is not “an absolute confession by the defendant of his liability and of the plaintiff's right to recover, ” but is instead merely “an admission of the facts cited in the Complaint, which by themselves may or may not be sufficient to establish a defendant's liability.” Pitts ex rel. Pitts v. Seneca Sports, Inc., 321 F.Supp.2d 1353, 1357 (S.D. Ga. 2004); see also Nishimatsu Const. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1204 (5th Cir. 1975) (similar); Cotton States Mut. Ins. Co. v. Sellars, 2008 WL 4601015, *5 (M.D. Ala. Oct. 15, 2008) (“the failure to defend does not automatically entitle a plaintiff to recover”); Descent v. Kolitsidas, 396 F.Supp.2d 1315, 1316 (M.D. Fla. 2005) (“the defendants' default notwithstanding, the plaintiff is entitled to a default judgment only if the complaint states a claim for relief”). Stated differently, “a default judgment cannot stand on a complaint that fails to state a claim.” Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1370 n.41 (11th Cir. 1997); see also Eagle Hosp. Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298, 1307 (11th Cir. 2009) (“A default defendant may, on appeal, challenge the sufficiency of the complaint, even if he may not challenge the sufficiency of the proof.”).

         The threshold question, then, is whether the Complaint states a viable claim for relief. The Court readily concludes that it does. After all, the well-pleaded factual allegations of the Complaint (which are deemed admitted pursuant to Rule 55) identify in sufficient detail the subject promissory note, Cape Towing's default of same, plaintiff's security interest in the Vessel pursuant to the Preferred Ship Mortgage, Cape Towing's breach of its obligations under said Preferred Ship Mortgage, and plaintiff's contractual right to recover against the Vessel, in rem, pursuant to the express terms of the note and the Preferred Ship Mortgage.

         Because the Complaint is sufficient to state a claim against the Vessel, the Court finds that entry of default judgment is appropriate pursuant to Rule 55, given the failure to appear after service of process and the sufficiency of the well-pleaded factual allegations of the Complaint (which are now deemed admitted) to establish liability of the defendant Vessel to plaintiff.

         III. Amount of Damages.

         Notwithstanding the propriety of default judgment, it remains incumbent on Business Loan Center to prove damages. “While well-pleaded facts in the complaint are deemed admitted, plaintiffs' allegations relating to the amount of damages are not admitted by virtue of default; rather, the court must determine both the amount and character of damages.” Virgin Records America, Inc. v. Lacey, 510 F.Supp.2d 588, 593 n.5 (S.D. Ala. 2007); see also Eastern Elec. Corp. of New Jersey v. Shoemaker Const. Co., 652 F.Supp.2d 599, 605 (E.D. Pa. 2009) (“A party's default does not suggest that the party has admitted the amount of damages that the moving party seeks.”). Even in the default judgment context, “[a] 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. 2003); see also Adolph Coors Co. v. Movement Against Racism and the Klan, 777 F.2d 1538, 1544 (11th Cir. 1985) (explaining that damages may be awarded on default judgment only if the record adequately reflects the basis for award); Everyday Learning Corp. v. Larson, 242 F.3d 815, 818 (8th Cir. 2001) (affirming lower court's decision not to award damages on default judgment, where ...


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