BMO Harris Bank N.A. v. Mid-Ark Utilities & Rig Services, Inc. et al

Filing 29

ORDER denying without prejudice the 20 motion for default judgment against Mr. Penney; denying without prejudice the 26 motion for default judgment against Mid-Ark; and granting the 27 motion for summary judgment against Mr. Graham. No judgment is entered by the Court at this time, as all claims against all defendants have not yet been resolved. Signed by Judge Kristine G. Baker on 9/3/2019. (jbh)

IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
NORTHERN DIVISION
BMO HARRIS BANK, N.A.
v.

PLAINTIFF
Case No. 1:18-cv-00042-KGB

MID-ARK UTILITIES & RIG
SERVICES, INC., et al.

DEFENDANTS
ORDER

Before the Court are plaintiff BMO Harris Bank, N.A.’s (“BHB”) motions for entry of
default as to defendants Mike Penney and Mid-Ark Utilities & Rig Services Inc. (“Mid-Ark”) and
a motion for summary judgment against separate defendant Lonnie Graham (Dkt. Nos. 20, 26, 27).
For the reasons set forth below, the Court denies without prejudice the motion for default judgment
against Mr. Penney, denies without prejudice the motion for default judgment against Mid-Ark,
and grants the motion for summary judgment against Mr. Graham (Dkt. Nos. 20, 26, 27).
I.

Summary Judgment Motion

Before the Court is BHB’s motion for summary judgment as to separate defendant Mr.
Graham (Dkt. No. 27). Mr. Graham has not responded, and the time to do so has passed.
A.

Findings of Fact

The Court adopts the following findings of fact as set forth in BHB’s statement of
undisputed material facts attached to its motion for summary judgment against Mr. Graham (Dkt.
No. 27-4). Mid-Ark entered into a Loan and Security Agreement (the “Agreement”) with BHB in
the total amount of $312,207.00 for the purchase of certain Equipment (the “Equipment”) (Id., ¶
1). Pursuant to the Agreement, Mid-Ark agreed to make monthly payments for the purchase of
the Equipment beginning on or about March 1, 2016, for a term of 60 months (Id., ¶ 2). Pursuant
to the Agreement, Mid-Ark was obligated to pay a minimum monthly payment of $5,203.45 (Id.,

¶ 4). Pursuant to paragraph 5.1 of the Agreement, Mid-Ark would be in default if the “Debtor”
fails to pay when due any amount owed by the “Debtor” to BHB under the Agreement (Dkt. No.
27-4, ¶ 5). Further, pursuant to paragraph 5.2 of the Agreement, upon default, BHB may “declare
the indebtedness hereunder to be immediately due and payable.” (Id., ¶ 6). The Agreement was
signed by Mr. Penney in his capacity as President of Mid-Ark (Dkt. No. 27-2, at 10).
On or about December 29, 2015, Mr. Graham executed a Continuing Guaranty (the
“Graham Guaranty”) (Dkt. No. 27-4, ¶ 7). Pursuant to the Graham Guaranty, Mr. Graham agreed
to the prompt payment and performance of all obligations, liabilities, and undertakings of MidArk to BHB (Id., ¶ 8). Mr. Graham entered into a valid written contract with BHB to induce BHB
to extend credit to Mid-Ark, whereby he personally guaranteed Mid-Ark’s prompt payment of all
amounts owed to BHB, including all of Mid-Ark’s then-existing and future obligations, debts, and
liabilities to BHB (Dkt. No. 27-4, ¶ 9). By executing the Graham Guaranty, Mr. Graham
guaranteed the repayment of all amounts due under the Agreement and expressly agreed, and is
obligated, to pay BHB’s reasonable attorney fees and cost of any action instituted upon Mid-Ark’s
default (Id., ¶ 10). The Guaranty states that it “is an absolute and unconditional guarantee of
payment and not of collectability” (Dkt. No. 27-2, at 13).
On or about December 1, 2017, Mid-Ark defaulted under the terms of the Agreement by
failing to make the minimum monthly payment (Dkt. No. 27-4, ¶ 11). Mr. Graham defaulted on
his contractual obligations by failing to pay said amount upon Mid-Ark’s default (Id., ¶ 12). All
the Equipment was surrendered to BHB and then sold in a commercially reasonable manner (Id.,
¶ 13). As a result of Mr. Graham’s default, BHB has sustained significant damages in the amount
of $128,623.33, plus BHB’s attorneys’ fees, legal expenses, and other costs (Id., ¶ 14).

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B.

Legal Standard

Under Federal Rule of Civil Procedure 56(c), summary judgment is proper “if the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986). The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate
time for discovery and upon motion, against a party who fails to make a showing sufficient to
establish the existence of an element essential to that party's case, and on which that party will bear
the burden of proof at trial. Id. In such a situation, there can be “no genuine issue as to any
material fact,” since a complete failure of proof concerning an essential element of the nonmoving
party's case necessarily renders all other facts immaterial. Id. at 323. The moving party is “entitled
to a judgment as a matter of law” because the nonmoving party has failed to make a sufficient
showing on an essential element of his case with respect to which he has the burden of proof. Id.
A party seeking summary judgment always bears the initial responsibility of informing this
Court of the basis for its motion and identifying those portions of “the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any,” which it
believes demonstrate the absence of a genuine issue of material fact. Id. One of the principal
purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims
or defenses, and it should be interpreted in a way that allows it to accomplish this purpose. Id. at
324.
Federal Rule of Civil Procedure 56(e) allows for the possibility that a party may fail to
respond to another party's assertion of fact, or, in this case, not respond to any of the assertions
presented in the motion for summary judgment and accompanying filings. In this situation, the

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court may consider the facts undisputed or may “grant summary judgment if . . . the movant is
entitled to it [.]” Fed. R. Civ. P. 56(e).
The court must still determine whether summary judgment is appropriate, regardless of
whether the adverse party failed to respond. See United States v. One Parcel of Real Property
Located at 9638 Chicago Heights, St. Louis, Missouri, 27 F.3d 327, 329 n.1 (8th Cir. 1994).
C.

Analysis

The Court concludes that, based upon Mr. Graham’s lack of response to the motion for
summary judgment and lack of response to the statement of undisputed material facts, BHB is
entitled to summary judgment as to its claims against Mr. Graham. Pursuant to Rule 56(e), the
Court considers the facts alleged by BHB undisputed (Dkt. No. 27-4). Under the Local Rules of
the United States District Court for the Eastern and Western Districts of Arkansas, “[a]ll material
facts set forth in the statement [of undisputed material facts] filed by the moving party . . . shall be
deemed admitted unless controverted by the statement filed by the non-moving party . . . .” Local
Rule 56.1(c). Because there is no genuine issue of material fact in dispute as to the claims against
Mr. Graham, BHB is entitled to judgment as a matter of law on those claims pursuant to Federal
Rule of Civil Procedure 56.
No genuine dispute exists that Mid-Ark executed the Agreement that is attached to BHB’s
complaint (Dkt. No. 27-4, at ¶ 1). No genuine dispute exists that Mid-Ark defaulted under that
Agreement (Id., ¶ 11). Further, there is no genuine dispute that Mr. Graham executed the Graham
Guaranty and thereby agreed to pay all amounts due under the Agreement (Id., ¶¶ 8-10). There is
also no genuine dispute that Mr. Graham failed to pay the defaulted amount under the Agreement
after Mid-Ark failed to pay (Id., ¶ 12). As to the amount of damages to which Mr. Graham is liable
under the Agreement and the Graham Guaranty, there is no genuine dispute that the Equipment

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was sold and that the proceeds from that sale were applied to the total unpaid balance under the
Agreement, and there is similarly no genuine dispute that Mr. Graham’s indebtedness under the
Agreement and the Graham Guaranty totals $128,623.33, plus BHB’s attorneys’ fees, legal
expenses, and other costs (Id., ¶ 14).
As to the fact that Mr. Penney in his individual capacity has filed for Chapter 7 bankruptcy,
“[t]he automatic stay does not, in general, apply to actions against third parties.” Nat’l Bank of
Ark. v. Panther Mountain Land Dev., LLC, 686 F.3d 916, 921 (8th Cir. 2012); see In re Triad
Construction Co., Inc., 545 B.R. 597, 604 (W.D. Mo. Bankr. 2016) (stating that “[i]t is universally
acknowledged that an automatic stay of proceeding accorded by § 362 [(a)(1)] may not be invoked
by entities such as sureties, guarantors, co-obligors, or others with a similar legal or factual nexus
to the . . . debtor . . . .”) (quoting Lynch v. Jones-Manville Sales Corp., 710 F.2d 1194, 1196 (6th
Cir. 1983)). Furthermore, the Graham Guaranty is an “absolute and unconditional guarantee of
payment and not of collectability.” (Dkt. No. 27-2, at 13). Accordingly, the Court concludes that,
due to Mid-Ark’s default, BHB may proceed against the Graham Guaranty without pursuing
collection against Mid-Ark or Mr. Penney.
Accordingly, the Court grants BHB’s motion for summary judgment as to separate
defendant Mr. Graham (Dkt. No. 27). Mr. Graham is therefore liable to BHB for $128,623.33,
plus BHB’s attorneys’ fees, legal expenses, and other costs.
II.

Motions For Default Judgment

Also pending before the Court are BHB’s motions for default judgment against Mr. Penney
and Mid-Ark (Dkt. Nos. 20, 26). Rule 55 of the Federal Rules of Civil Procedure contemplates a
two-step process for the entry of default judgments. Fraserside IP L.L.C. v. Youngtek Solutions
Ltd., 796 F. Supp. 2d 946, 951 (N.D. Iowa 2011) (citation and internal quotation marks omitted).

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First, pursuant to Rule 55(a), the party seeking a default judgment must have the clerk of court
enter the default by submitting the required proof that the opposing party has failed to plead or
otherwise defend. Id. Second, pursuant to Rule 55(b), the moving party may seek entry of
judgment on the default under either subdivision (b)(1) or (b)(2) of the rule. Id. Entry of default
under Rule 55(a) must precede a grant of default judgment under Rule 55(b). Id.
To consider a motion for default under Rule 55(a), the clerk requires an affidavit or
affirmation setting forth proof of service, including the date thereof; a statement that no responsive
pleading has been received within the time limit set by the Federal Rules of Civil Procedure or as
fixed by the Court; and a statement that the defendant against whom default is sought is not a
minor, incompetent, or in military service as required by 50 U.S.C. § 3931.
A.

Default Judgment Against Mr. Penney

As to BHB’s motion for default judgment against Mr. Penney, the Court notes that a notice
of bankruptcy has been filed which indicates that Mr. Penney has declared bankruptcy (Dkt. No.
28). Pursuant to the automatic stay under 11 U.S.C. § 362, the Court denies without prejudice
BHB’s motion for a default judgment against Mr. Penney (Dkt. No. 20). If BHB is granted relief
from the automatic stay as to Mr. Penney or if there is some other basis for the Court’s
consideration of this motion for default judgment against Mr. Penney, BHB may file a request with
the Court seeking reconsideration of this Order and BHB’s request for default judgment against
Mr. Penney.
B.

Default Judgment Against Mid-Ark

The Court denies BHB’s motion for default judgment against Mid-Ark (Dkt. No. 26). The
Clerk has entered a default against Mid-Ark (Dkt. No. 25). Once a defendant is in default, the
factual allegations of the complaint, “except those relating to the amount of damages, will be taken

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as true.” 10A Charles Alan Wright et al., Federal Practice and Procedure § 2688 (3d ed.). When
moving for default judgment, a plaintiff must prove its entitlement to the amount of monetary
damages requested, and the Court is required to make an independent determination of the sum to
be awarded unless the amount of damages is certain. Lifted Research Grp., Inc. v. Behdad, Inc.,
591 F. Supp. 2d 3, 6 (D.D.C. 2008). “Entry of a default judgment . . . [is] committed to the sound
discretion of the district court. Default judgments, however, are not favored by the law.” United
States v. Harre, 983 F.2d 128, 130 (8th Cir. 1993). “Default judgment for failure to defend is
appropriate when the party’s conduct includes willful violations of court rules, contumacious
conduct, or intentional delays. On the other hand, default judgment is not an appropriate sanction
for a marginal failure to comply with time requirements.” Ackra Direct Mktg. Corp. v. Fingerhut
Corp., 86 F.3d 852, 856 (8th Cir. 1996) (internal citations and quotation marks omitted).
The Court denies BHB’s motion for default judgment against Mid-Ark because the
representations made in the motion do not square with the representations made in BHB’s motion
for summary judgment against Mr. Graham. The Court notes that, as an initial matter, BHB in its
complaint sued Mid-Ark, Mr. Penney, and Mr. Graham each for the amount of $199,398.26 plus
BHB’s attorneys’ fees, legal expenses, and other costs (Dkt. No. 1). Specifically, in support of its
motion for summary judgment against Mr. Graham, BHB has produced the Agreement executed
by Mid-Ark for the purchase and financing of the Equipment and the affidavit of Kimberly Mundt,
a litigation specialist for BHB (Dkt. No. 26-2, at 1-12). Ms. Mundt states that BHB requests a
default judgment against Mid-Ark in the amount of $199.398.26. One of the submitted documents,
titled “LOAN DAMAGE CALCULATOR,” establishes that Mid-Ark owes a principal balance of
$181,756.76, repossession fees of $7,357.71, interest in the amount of $8,982.94, and late charges

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in the amount of $1,300.85 (Id., at 12). In sum, this document establishes Mid-Ark’s indebtedness
in the total amount of $199,398.26 (Id.).
These documents submitted in support of the request for default judgment against Mid-Ark
do not appear to take into account the sale of the Equipment and the subsequent application of the
proceeds from that sale against the outstanding balance, as described in the documents supporting
the motion for summary judgment as to Mr. Graham. Based upon the documents submitted in
support of the motion for summary judgment, the Court is concerned that a default judgment
against Mid-Ark in the amount of $199,398.26 would overstate the outstanding balance and
contradict the other record evidence before the Court. For these reasons, the Court denies without
prejudice BHB’s motion for default judgment against separate defendant Mid-Ark (Dkt. No. 20).
III.

Conclusion

For the foregoing reasons, the Court denies without prejudice the motion for default
judgment against Mr. Penney, denies without prejudice the motion for default judgment against
Mid-Ark, and grants the motion for summary judgment against Mr. Graham (Dkt. Nos. 20, 26,
27). No judgment is entered by the Court at this time, as all claims against all defendants have not
yet been resolved.
It is so ordered, this the 3rd day of September 2019.

________________________________
Kristine G. Baker
United States District Judge

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