PACCAR Financial Corp. v. Freeman et al

Filing 54

MEMORANDUM OPINION AND ORDER; PACCARs motion for a default judgment against Mr. Freeman, Docs. 26 and 47 , is GRANTED and a default judgment is ENTERED against Mr. Freeman. Per PACCAR's motions, the court awards PACCAR $700,684.95 in damages. The court will enter a separate final judgment. Signed by Judge Anna M Manasco on 11/1/2021. (DNW)

FILED
2021 Nov-01 PM 12:03
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
PACCAR FINANCIAL CORP.,
a corporation,
Plaintiff,
v.
LENN MORRIS and
RICKY FREEMAN,
Defendants.

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) Case No.: 2:17-cv-00110-AMM
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MEMORANDUM OPINION AND ORDER
This case is before the court on Plaintiff PACCAR Financial Corporation’s
(“PACCAR”) Motion to Renew Motion for Default Judgment Against Defendant
Ricky Freeman, Doc. 47, which incorporated PACCAR’s Renewed Motion for
Default Judgment Against Defendant Ricky Freeman, Doc. 26. PACCAR filed this
action against Lenn Morris and Ricky Freeman to collect indebtedness owed under
commercial guarantee agreements. Doc. 1. For the reasons explained below,
PACCAR’s motion is GRANTED and a default judgment against Ricky Freeman
is ENTERED.
I.

BACKGROUND

A. Factual Allegations

PACCAR financed the purchase of twelve tractors and trailers (the “Tractors
and Trailers”) by Forest Energies, LLC from Kenworth of Birmingham, Inc.
pursuant to six Security Agreement Retail Installment Contracts (the “Contracts”).
Doc. 1 ¶ 6. The Contracts were assigned to PACCAR and required Forest Energies,
LLC “to pay monthly installments to PACCAR, and further provide for the payment
of interest, late charges, costs of collection and attorneys’ fees.” Id. ¶¶ 6, 20.
Mr. Freeman and Mr. Morris “jointly and severally, guaranteed all
obligations” of Forest Energies, LLC under the Contracts. Id. ¶ 7. For each Contract,
Mr. Freeman executed a Security Agreement Guaranty, which provides, in part, that
Mr. Freeman “hereby unconditionally guarantees to Seller and its assigns, regardless
of the enforceability of the Contract, or any other circumstances which might affect
the liability of Guarantor that (i) all Buyer’s indebtedness under the Contract
(‘Debt’), including without limitation, each installment thereof will be paid in full
when due, whether at stated maturity or maturity by acceleration or otherwise, in
accordance with the terms of the Contract.” Id. ¶ 22.
Forest Energies, LLC defaulted on the contracts and filed for bankruptcy. Id.
¶ 21. “The amount due and owing under the Contracts as of the date of the
bankruptcy filing was $1,501,245.75, which sum does not include attorney’s fees
which are provided for in the Contracts.” Id. Accordingly, in its Complaint,
PACCAR requested reimbursement “in the amount due as of November 18, 2016 of
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$1,501,245.75, together with accrued and accruing interest, late charges, expenses
of collection, including attorneys’ fees and costs, as well as such other, further, or
different relief to which PACCAR may be entitled.” Id. ¶¶ 24-26.
After filing the Complaint, PACCAR “subsequently sold all collateral
vehicles securing the indebtedness owed . . . , which has reduced the amounts
sought.” Doc. 26 at 2 and ¶¶ 1-46. The Contracts contemplate a foreclosure sale of
the Tractors and Trailers upon default. Doc. 26-1 at 2-63 ¶ 11(e) (“Buyer agrees that
it is liable for and will promptly pay any deficiency resulting from any disposition
of the Collateral after default.”).
PACCAR now seeks the remaining amount owed, which is $700,684.95. Doc.
26 at 16; Doc. 47 at 3. Although, PACCAR asserts that attorneys’ fees and costs are
permitted by the Contracts and Security Agreement Guaranty, PACCAR “does not
seek attorneys’ fees or costs of collection . . . to avoid the necessity of any evidentiary
hearing.” Doc. 26 n.1.
B. Procedural History
On January 20, 2017, PACCAR filed its Complaint against the Defendants,
alleging one count: Count One – Personal Guaranties. Doc. 1. On January 26, 2017,
a process server served Mr. Freeman at 100 Edgil Road, Jasper, Alabama. Docs. 6,
8. Mr. Freeman did not answer or file a responsive pleading to the Complaint, nor
did he or an attorney for him ever appear in the case.
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On February 17, 2017, the day after Mr. Freeman’s answer was due, PACCAR
filed an Application for Entry of Default Against Defendant Ricky Freeman and an
Affidavit in Support. Docs. 10 and 11. On March 6, 2017, the Clerk of Court entered
a default as to Mr. Freeman. Doc. 12. On March 14, 2017, PACCAR moved for the
entry of a default judgment against Mr. Freeman. Doc. 15. On May 24, 2017, the
court denied without prejudice as premature the motion for a default judgment. Doc.
22.
On November 30, 2017, PACCAR renewed its motion for default judgment
against Mr. Freeman. Doc. 26. The court ordered Mr. Freeman to show cause why a
default judgment should not be entered. Doc. 35. Mr. Freeman did not respond to
the court’s order.
On August 8, 2018, the court stayed the entire case pending the bankruptcy
court’s resolution of defendant Lenn Morris’s liability. Doc. 40. The bankruptcy case
was discharged in favor of Mr. Morris on May 8, 2019. Doc. 46 at 1.
PACCAR renewed its motion for entry of default against Mr. Freeman on
November 26, 2019. Doc. 47. In support of its motion, PACCAR filed the Contracts,
Doc. 26-1 at 11-63, and purported to file the Security Agreement Guaranties signed
by Mr. Freeman. See id. at 65-70. Instead, PACCAR attached the Security
Agreement Guaranties signed by Mr. Morris. Id. However, the record contains the
Security Agreement Guaranties signed by Mr. Freeman. Doc. 1-7. To support its
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claim for damages under the Contracts and to present facts regarding the sale of the
collateral vehicles, which resulted in the reduced balances sought, PACCAR also
provided the declaration of a Senior Collector at PACCAR. Doc. 26-1 at 2-9.
The case was re-assigned to the undersigned on December 3, 2020. Doc. 53.
II.

STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 55, “[w]hen 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 entry of the clerk’s default, if the defendant is
not an unrepresented infant or a legally incompetent person, the plaintiff can apply
to the court for a default judgment. Fed. R. Civ. P. 55(b)(2). Before entering a default
judgment, the court may conduct hearings if it needs to “conduct an accounting; . . .
determine the amount of damages; . . . establish the truth of any allegation by
evidence; or . . . investigate any other matter.” Id. “A default judgment must not
differ in kind from, or exceed in amount, what is demanded in the pleadings.” Fed.
R. Civ. P. 54(c).
“A motion for default judgment is not granted as a matter of right.” Glennon
v. Rosenblum, 325 F. Supp. 3d 1255, 1261 (N.D. Ala. 2018) (quoting Pitts ex rel.
Pitts v. Seneca Sports, Inc., 321 F. Supp. 2d 1353, 1356 (S.D. Ga. 2004) (internal
footnote omitted)). A court’s entry of a default judgment “is only warranted when
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there is ‘a sufficient basis in the pleadings for the judgment entered.’” Surtain v.
Hamlin Terrace Found., 789 F.3d 1239, 1245 (11th Cir. 2015) (quoting Nishimatsu
Constr. Co. v. Houston Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)).1 The
Eleventh Circuit has interpreted “a sufficient basis” for the judgment as “being akin
to that necessary to survive a motion to dismiss for failure to state a claim.” Id. (citing
Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1370 n.41 (11th Cir. 1997) (“[A]
default judgment cannot stand on a complaint that fails to state a claim.”)). “In
addition to the pleadings, a court may consider evidence presented in the form of an
affidavit or declaration. Glennon, 325 F. Supp. 3d at 1261 (citing Frazier v. Absolute
Collection Serv., Inc., 767 F. Supp. 2d 1354, 1362 (N.D. Ga. 2011)). A defaulting
defendant “admits the plaintiff’s well-pleaded allegations of fact” for purposes of
liability. Buchanan v. Bowman, 820 F.2d 359, 361 (11th Cir. 1987) (quoting
Nishimatsu Constr. Co., Ltd. v. Houston Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir.
1975)).
III.

ANALYSIS
A. Subject Matter Jurisdiction

Before the court enters a default judgment, the court first must ensure that it
has subject matter jurisdiction. Glennon, 325 F. Supp. 3d at 1262. In the Complaint,

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See Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc) (adopting as
binding precedent all decisions of the former Fifth Circuit issued prior to October 1, 1981).
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PACCAR asserts that the court has original jurisdiction over the action “under 28
U.S.C. § 1332(a) since there is complete diversity between the parties and the
amount in controversy exceeds $75,000.00, exclusive of interest and costs.” Doc. 1
¶ 4.
In its Complaint, PACCAR asserts that Mr. Morris and Mr. Freeman are liable
for contractual damages of at least $1,501,245.75. Id. at 6. In its default judgment
motions, PACCAR asserts that after the foreclosure of the Tractors and Trailers, Mr.
Freeman is liable for contractual damages of $700,684.95. Doc. 26 at 16; Doc. 47 at
3. Based on these factual allegations, the court is satisfied that more than $75,000 is
in controversy.
As to the requirement of complete diversity between the parties, PACCAR
alleges that it “is a Washington corporation qualified to do business in the state of
Alabama, with its principal place of business [in] Washington.” Doc. ¶ 1. Mr.
Freeman is an “adult citizen of the State of Alabama” Id. ¶ 2. And, Mr. Morris is an
“adult citizen of the State of Alabama.” Id. ¶ 3. Accordingly, the parties are
completely diverse, and the court therefore has subject matter jurisdiction over this
case pursuant to 28 U.S.C. § 1332.
B. Personal Jurisdiction
The court also must determine that it has personal jurisdiction over the
defendant. Glennon, 325 F. Supp. 3d at 1263 (citing Oldfield v. Pueblo De Bahia
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Lora, S.A., 558 F.3d 1210, 1217 (11th Cir. 2009)). Under Rule 4 of the Federal Rules
of Civil Procedure, “[s]erving a summons or filing a waiver of service establishes
personal jurisdiction over a defendant . . . who is subject to the jurisdiction of a court
of general jurisdiction in the state where the district court is located.” Fed. R. Civ.
P. 4(k)(1)(A).
PACCAR alleges that Mr. Freeman “is not an infant or an incompetent person,
and is not on active duty in any of the branches of the Uniform Services.” Doc. 11
at 1-2. The record indicates that Mr. Freeman was personally served on January 26,
2017, at 100 Edgil Road in Jasper, Alabama. Doc. 8. Therefore, the court is satisfied
that it has personal jurisdiction over the in-state defendant Mr. Freeman.
C. Liability
PACCAR asserts one theory of recovery—breach of the Contracts and the
Security Agreement Guaranties. Doc. 1 ¶ 26. “A federal court in a diversity case is
required to apply the laws, including principles of conflict of laws, of the state in
which the federal court sits.” O’Neal v. Kennamer, 958 F.2d 1044, 1046 (11th Cir.
1992). “Alabama applies the traditional doctrine[] of lex loci contractus to contract
claims. . . . Th[is] doctrine states that a contract is governed by the laws of the state
where it is made except where the parties have legally contracted with reference to
the laws of another jurisdiction.” Colonial Life & Acc. Ins. Co. v. Hartford Fire Ins.
Co., 358 F.3d 1306, 1308 (11th Cir. 2004) (cleaned up).
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Here, each Contract specifies that it is “entered into in the State of Alabama
and is governed by its laws.” Doc. 1-1 at 3; Doc. 1-2 at 3; Doc. 1-3 at 3; Doc. 1-4 at
4; Doc. 1-5 at 3; Doc. 1-6 at 3. The Security Agreement Guaranties do not contain
additional choice of law terms. See Docs. 1-7 and 1-8. Therefore, the court finds that
the law of the state of Alabama apply.
A breach-of-guaranty claim is a breach-of-contract claim. “The elements of a
breach-of-contract claim under Alabama law are (1) a valid contract binding the
parties; (2) the plaintiff[’s] performance under the contract; (3) the defendant’s
nonperformance; and (4) resulting damages.” Dupree v. PeoplesSouth Bank, 308
So.3d 484, 490 (Ala. 2020) (cleaned up). Additionally, under Alabama law, “[e]very
suit on a guaranty agreement requires proof of the existence of the guaranty contract,
default on the underlying contract by the debtor, and nonpayment of the amount due
from the guarantor under the terms of the guaranty.” Delro Indus., Inc. v. Evans, 514
So.2d 976, 979 (Ala.1987).
The facts alleged in PACCAR’s Complaint are sufficient to allege a breach of
the Security Agreement Guaranties against Mr. Freeman under Alabama law. First,
to establish the existence of a binding contract, PACCAR submitted Security
Agreement Guaranties wherein Mr. Freeman promised to pay Forest Energies,
LLC’s obligations under the Contracts. Doc. 1-7. Second, PACCAR “performed
under the Contracts by financing the purchase of Tractors and Trailers.” Doc. 26 at
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14-15. Therefore, PACCAR pleaded facts that satisfy the element of performance.
Third, the unambiguous terms of the Security Agreement Guaranties establish that
Mr. Freeman agreed to pay outstanding amounts under the Contracts. In the Security
Agreement Guaranties executed by Mr. Freeman, he “guarantee[d] to [PACCAR] .
. . that (i) all [Forest Energy, LLC’s] indebtedness under the Contract . . . will be
paid in full when due.” Doc. 1-7 at 2-7. PACCAR pleaded facts that satisfy the
element of breach because PACCAR alleges that Mr. Freeman as guarantor has
“breached [his] obligations under the Contracts and the Security Agreement
Guaranties.” Id. ¶ 26.
Additionally, PACCAR asserts that, as a result of the default of the Contracts,
“PACCAR disposed of the collateral [Tractors and Trailers] in a commercially
reasonable manner.” Doc. 26 at 15. Although disposing of the Tractors and Trailers
resulted in “proceeds . . . from the sales,” PACCAR continued to suffer damages in
the amount of $700,684.95 after the sales. Id. Accordingly, the court finds that
PACCAR has adequately pleaded a claim for breach of contract against Mr. Freeman
under Alabama law.
D. Damages
Although a defaulted defendant admits well-pleaded allegations of liability,
“allegations relating to the amount of damages are not admitted by virtue of default.”
Glennon, 325 F. Supp. 3d at 1268 (quoting PNCEF, LLC v. Hendricks Bldg. Supply,
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LLC, 740 F. Supp. 2d 1287, 1292 (S.D. Ala. 2010)). A district court must “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). If the record is sufficient, a district
court may determine the amount of damages without a hearing. See S.E.C. v. Smyth,
420 F.3d 1225, 1232 n.13 (11th Cir. 2005).
PACCAR requests that the court enter a default judgment in its favor against
Mr. Freeman in the amount of $700,684.95. Doc. 26 at 16. To support its claim for
damages, PACCAR provided the declaration of Steve Selvar, a Senior Collector in
the Corporate Portfolio Department for PACCAR, Doc. 26-1 at 2 ¶ 1. The Selvar
Declaration recites each Contract’s payoff prior to foreclosure sale, proceeds of each
foreclosure sale, foreclosure sale expenses, and total deficiencies after foreclosure
sales. Id. at 3-7 ¶¶ 4-46. Further, the Selvar Declaration “is given on the basis of
[Mr. Selvar’s] personal knowledge and review of the records of PACCAR pertaining
to the indebtedness . . . and kept in the ordinary course of business by the office of
PACCAR.” Id. at 2 ¶ 1.
Federal Rule of Civil Procedure 54 provides that “[a] default judgment must
not differ in kind from, or exceed in amount, what is demanded in the pleadings.”
Fed. R. Civ. P. 54(c). PACCAR’s Complaint requests “judgment against Ricky
Freeman and Lenn Morris, jointly and severally, in the amount due as of November
18, 2016 of $1,501,245.75, together with accrued and accruing interest, late charges,
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expenses of collection, including attorneys’ fees and costs, as well as such other,
further, or different relief to which PACCAR may be entitled.” Doc. 1 at 6. In
PACCAR’s Renewed Motion for Default Judgment Against Defendant Ricky
Freeman, PACCAR requests “judgment against Mr. Freeman in the amount
$700,684.95 and other, different relief as this Court deems just and appropriate.”
Doc. 26 at 16. PACCAR specifically declines to “seek attorneys’ fees or costs of
collection . . . to avoid the necessity of any evidentiary hearing.” Id. at 12 n.1. In
PACCAR’s latest Motion to Renew Motion for Default Judgment Against
Defendant Ricky Freeman, PACCAR again requests “judgment against Mr.
Freeman in the amount $700,684.95 and such other, different relief as this Court
deems just and appropriate.” Doc. 47 at 3.
The court awards PACCAR the amount sought in its renewed motions for
default judgment against Mr. Freeman. Docs. 26 and 47. The Selvar Declaration
attached to PACCAR’s Renewed Motion for Default Judgment Against Defendant
Ricky Freeman, Doc. 26, indicates that after foreclosing on the Tractors and Trailers,
the amount due under the Contracts was $700,684.95. Doc. 26-1 at 3-7 ¶¶ 4-46. The
Selvar Declaration provides sufficient detail of the payoff amounts and foreclosure
proceeds and expenses. 2 Additionally, it provides that it is based on PACCAR’s
2

There appears to be a scrivener’s error in PACCAR’s Renewed Motion for Default Judgment
Against Defendant Ricky Freeman, Doc. 26 at 8 ¶ 33. That paragraph asserts that “[t]he Fourth
Contract payoff prior to the foreclosure sales was $500,014.20.” Id. However, the Selvar
Declaration states that “[t]he Fourth Contract payoff prior to the foreclosure sales was
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records kept in the ordinary course of business. Id. at 2 ¶ 1. Accordingly, PACCAR
is entitled to damages in this amount.
IV.

CONCLUSION

PACCAR’s motion for a default judgment against Mr. Freeman, Docs. 26 and
47, is GRANTED and a default judgment is ENTERED against Mr. Freeman. Per
PACCAR’s motions, the court awards PACCAR $700,684.95 in damages. The court
will enter a separate final judgment.
DONE and ORDERED this 1st day of November, 2021.

_________________________________
ANNA M. MANASCO
UNITED STATES DISTRICT JUDGE

$505,014.20.” Doc. 26-1 at 6 ¶ 35. The court is satisfied that the deficiency calculations are correct
when relying on the assertions in the Selvar Declaration.
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