Abernathy et al v. Church of God et al

Filing 72

MEMORANDUM OPINION and order ORDER,granting 63 MOTION for Default Judgment as to liability only w/leave to prove damages at trial; Because Plas have claims pending against other defts in this lawsuit that are subject to the same jury demand, the court will postpone setting this damages only portion of the lawsuit for a jury trial until a later date.. Signed by Judge Virginia Emerson Hopkins on 5/22/2013. (KAM, )

FILED
2013 May-22 PM 04:35
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
MIDDLE DIVISION
ROBERT GLENN ABERNATHY, et )
al.,
)
)
Plaintiffs,
)
)
v.
) Case No.: 4:11-CV-2761-VEH
)
CHURCH OF GOD a/k/a CHURCH )
OF GOD, INC., et al.,
)
)
Defendants.
)

MEMORANDUM OPINION AND ORDER
I.

Introduction and Procedural History
Plaintiffs initiated this breach of contract case against numerous Defendants

on August 2, 2011. (Doc. 1). In their complaint, Plaintiffs have demanded a jury
trial. (Id. at 25).
On August 28, 2012, Plaintiffs filed a Request for Entry of Default Pursuant
to Rule 55(a), Fed. R. Civ. P., Against Defendants Celestial Praise Church of God,
Inc. (“Celestial Praise”), Wayne Pitts (“Mr. Pitts”), and Wayne Pitts Real Estate &
Finance, Inc. (“Pitts Finance”) (Doc. 46) (the “Request”). Pursuant to this Request,
the clerk entered a default against all three defendants on September 7, 2012. (Doc.
48).

Pending before the court is the Motion of Plaintiffs for Default Judgments
Against Celestial Praise Church of God, Inc., Wayne Pitts, and Wayne Pitts Real
Estate & Finance, Inc. (Doc. 63) (the “Motion”) filed on March 28, 2013. On April
26, 2013, the court entered an order (Doc. 65) directing these Defendants to show
cause why the Motion should not be granted.
The record reflects that Defendants Pitts Finance and Celestial Praise received
notice of this show cause order. (Docs. 66, 67). Additionally, because he signed the
return receipt on behalf of Pitts Finance, Mr. Pitts also received a copy of this order.
(Doc. 66 at 1). The show cause deadline of May 16, 2013, has passed without any
response being filed by Defendants.
II.

Standard on Default Judgment
“When a party against whom a judgment for affirmative relief is sought has

failed to plead or otherwise defend as provided by these rules and that fact is made
to appear by affidavit or otherwise, the clerk shall enter the party’s default.” Fed. R.
Civ. P. 55(a). However, entry of default under Rule 55(a) does not entitle a party to
his requested relief. Either the clerk or the court must enter a default judgment under
Rule 55(b). Here, the court, and not the clerk, acts pursuant to Rule 55(b)(2).
Generally, the entry of a default judgment is committed to the discretion of the

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district judge. Mason v. Lister, 562 F.2d 343, 345 (5th Cir. 1977).1 The factual
allegations of a well-pleaded complaint are taken as true; hence, the court must decide
if these accepted facts state a cause of action for which relief can be granted.
Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1370 n.41 (11th Cir. 1987);
Nishimatsu Const. Co., Ltd. v. Houston Nat. Bank, 515 F.2d 1200, 1206 (5th Cir.
1975) (“There must be a sufficient basis in the pleadings for the judgment entered.”)
(footnote omitted); Descent v. Kolitsidas, 396 F. Supp. 2d 1315, 1316 (M.D. Fla.
2005) (same). When the amount of damages due is uncertain, an evidentiary hearing
is often required to determine the sum the defaulting defendant must pay. S.E.C. v.
Smyth, 420 F.3d 1225, 1231-32 (11th Cir. 2005). On the other hand, if a specific sum
is sought, a hearing may not be necessary.
However, if the plaintiff has demanded a jury trial, this court has concluded,
consistent with Rule 38 of the Federal Rules of Civil Procedure, that the better
practice is to empanel a jury for determining damages as “[a] proper demand may be
withdrawn only if the parties consent.” Fed. R. Civ. P. 38(d); cf. Kormes v. Weis,
Voisin & Co., 61 F.R.D. 608, 610 (E.D. Pa. 1974) (“Under the facts of the present
case, we will ‘in fairness and logic’ apply the consent requirement of Rule 38(d) to
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en
banc), the Eleventh Circuit adopted as binding precedent all decisions of the
former Fifth Circuit handed down prior to October 1, 1981.
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the default situation of Rule 55(b)(2), and will in the exercise of our discretion grant
a jury trial to defendant Alexander limited to the issue of damages.”).
Finally, as explained by Judge William H. Steele of the United States District
Court for the Southern District of Alabama regarding default judgments:
The law is clear, however, that Lacey’s failure to appear and the
Clerk’s subsequent entry of default against her do not automatically
entitle plaintiffs to a default judgment. Indeed, 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 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”); GMAC
Commercial Mortg. Corp. v. Maitland Hotel Associates, Ltd., 218 F.
Supp. 2d 1355, 1359 (M.D. Fla. 2002) (default judgment is appropriate
only if court finds sufficient basis in pleadings for judgment to be
entered, and that complaint states a claim). 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).
Virgin Records America, Inc. v. Lacey, 510 F. Supp. 2d 588, 591-92 (S.D. Ala. 2007)
(emphasis added).
III.

Analysis
The Motion seeks the entry of a default judgment against Defendants Celestial

Praise, Mr. Pitts, and Pitts Finance for claims arising from various loans and

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promissory notes that are at issue in this lawsuit. (See Doc. 63 at 2-3 (listing amounts
owed to Plaintiffs under subject promissory notes)). The court has reviewed the
complaint and it appears that Plaintiffs have averred sufficient facts that, due to their
admission as a result of Defendants’ failure to appear after being duly served, liability
in favor of Plaintiffs has been established as to the specific claims asserted against
these defaulted Defendants.
More specifically, in their complaint, Plaintiffs allege that Celestial Praise is
obligated to them as a promissor on multiple promissory notes. (Doc. 1 at 4-6 ¶¶ 1316). Regarding the roles of Mr. Pitts and Pitts Finance, Plaintiffs assert that they
“acted as an intermediary or ‘finder’ between individual church members and
churches seeking financing” and that they “solicited . . . and prepared the documents
for the . . . loans” that are the subject of Plaintiffs’ lawsuit. (Doc. 1 at 12 ¶ 33).
Plaintiffs also contend that in securing the loans for the benefit of borrower
Celestial Praise, Mr. Pitts and Pitts Finance made various misrepresentations upon
which Plaintiffs relied to their detriment (id. at 12 ¶ 36) and, after execution of the
loans, they acted for the benefit of Celestial Praise and “deprive[d] the [P]laintiffs of
the benefit of their bargains.” (Id. at 13 ¶ 37).
The collection of loans totaling over one million dollars which Mr. Pitts and
Pitts Finance arranged for Plaintiffs to fund are now in default. (Doc. 1 at 13 ¶ 39).
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Plaintiffs have notified Celestial Praise, Mr. Pitts, and Pitts Finance about the
defaulted status of the loans, have demanded payment, and have yet to receive any
type of payment from Defendants. (Id. at 13 ¶¶ 39-41; id. at Exs. H-K).
Under count I of the complaint, Plaintiffs seek to recover from the borrowers,
including Celestial Praise, “the outstanding indebtedness in full” under the defaulted
loans. (Doc. 1 at 15 ¶ 55). In count V, Plaintiffs demand judgment against Celestial
Praise “for the damages proximately related to . . . negligence or wantonness.” (Doc.
1 at 19 ¶ 76).
Count VII seeks to hold Mr. Pitts and Pitts Finance liable for the
misrepresentations that they made to Plaintiffs relating to the status of Celestial Praise
as a borrower upon which Plaintiffs reasonably relied when entering into the loan
transactions with Celestial Praise. (Doc. 1 at 23 ¶ 90). Finally, in count VIII,
Plaintiffs ask for judgment against Mr. Pitts and Pitts Finance for breaching their
fiduciary duty owed to Plaintiffs and “failing to disclose Pitts Finance’s ongoing and
conflicting agency relationship[s]” with Celestial Praise and other defendants. (Doc.
1 at 24 ¶ 94).
Thus, the court finds, based upon the admitted allegations contained in
Plaintiffs’ complaint (Doc. 1), that Defendants Celestial Praise, Mr. Pitts, and Pitts
Finance are liable to Plaintiffs under the respective common law counts that are
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asserted against them which arise from the defaulted loan transactions. However, the
court, as is its customary practice, reserves for jury determination the amount of
damages Plaintiffs should recover on these claims.
IV.

Conclusion
Accordingly, the Motion is GRANTED as to liability only with leave for

Plaintiffs to prove their damages at trial. Because Plaintiffs have claims pending
against other defendants in this lawsuit that are subject to the same jury demand, the
court will postpone setting this damages only portion of the lawsuit for a jury trial
until a later date.
DONE and ORDERED this 22nd day of May, 2013.

VIRGINIA EMERSON HOPKINS
United States District Judge

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