Xerox Corporation v. Southeast Print Programs, Inc. et al
Filing
20
ORDER: Plaintiff Xerox Corporation's Motion for Default Final Judgment (Doc. # 16 ) is granted as set forth herein. The Clerk is directed to enter judgment in favor of Plaintiff Xerox Corporation and against Defendants Southeast Print Programs, Inc., and John Phillips in the amount of $1,112,375.11. Upon entry of judgment, the Clerk is directed to close this case. Signed by Judge Virginia M. Hernandez Covington on 10/25/2016. (DMD)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
XEROX CORPORATION,
Plaintiff,
v.
Case No.: 8:16-cv-2159-T-33TGW
SOUTHEAST PRINT PROGRAMS,
INC., a Florida corporation,
and JOHN PHILLIPS,
Defendants.
______________________________/
ORDER
This matter comes before the Court in consideration of
Plaintiff
Xerox
Corporation’s
Motion
for
Default
Final
Judgment (Doc. # 16), filed on September 6, 2016. For the
reasons that follow, the Court grants the Motion as set forth
herein.
I.
Background
On July 27, 2016, Xerox filed its Verified Complaint
alleging breach of contract, breach of promissory note, and
breach of guaranty against Southeast Print Programs, Inc.,
and John Phillips, in this Court on the basis of diversity
jurisdiction. (Doc. # 1). The Verified Complaint alleges
that, on May 9, 2007, Southeast entered into a sale and
maintenance contract with Xerox for a variety of office
1
equipment, including printers and copiers. (Id. at ¶¶ 8-9).
Additionally, Southeast leased further office equipment from
Xerox in 2010 and 2013. (Id. at ¶¶ 11-13, 15-17, 19-21).
Southeast
defaulted
on
its
payments
under
the
sale
and
maintenance contract and various lease agreements. (Id. at ¶¶
10, 14, 18, 22).
As a result, on October 21, 2014, Xerox and Southeast
entered into an Account Modification Agreement (Agreement),
which modified the terms of the previous sale and maintenance
contract and lease agreements. (Id. at ¶ 23). A copy of the
Agreement
was
attached
as
an
exhibit
to
the
Verified
Complaint. (Doc. # 1-6). Under the terms of the Agreement,
the lease agreements for various equipment were extended for
a new term of 84 months, commencing on November 1, 2014, and
expiring on October 31, 2021. (Doc. # 1 at ¶ 24). Xerox states
that the total amount due under the Agreement was $777,754.89,
plus interest. (Id. at ¶ 26).
Also
on
October
21,
2014,
Southeast
executed
and
delivered to Xerox a Promissory Note (Note) in the principal
amount of $333,290.55, which Xerox owns and holds. (Id. at ¶¶
39-40). Under the Note, Southeast agreed to make monthly
payments of $5,362.34, for a term of 84 months, commencing
December 1, 2014. (Id. at ¶ 41). Xerox attached a copy of the
2
Note as an exhibit to the Verified Complaint. (Doc. # 1-7).
Although Xerox avers that it owns and holds the Note, Xerox
is not currently in possession of the original and requests
that
the
Court
reestablish
the
Note
so
that
it
may
be
enforced. (Doc. # 1 at ¶¶ 55-60).
Furthermore,
Phillips,
individually,
signed
personal
Guaranties for the Agreement and Note. (Id. at ¶¶ 31, 49).
Subsequently,
Southeast
failed
to
make
the
agreed
payments on both the Agreement and the Note. (Id. at ¶¶ 25,
42). As provided in the terms of the Agreement and Note, Xerox
elected to accelerate all sums due under the Agreement and
Note. (Id.). Phillips also defaulted in his obligations to
pay the sums due under the Agreement and the Note. (Id. at ¶¶
33, 51).
As a result, on July 27, 2016, Xerox filed the Verified
Complaint. (Doc. # 1). Xerox effected service of process on
Southeast and Phillips on July 30, 2016. (Doc. ## 8, 9).
Southeast and Phillips failed to respond to the Verified
Complaint. On August 26, 2016, Xerox filed an application for
Clerk’s default. (Doc. # 11), and the Clerk issued its entry
of default on August 29, 2016 (Doc. ## 12, 13). Thereafter,
Xerox filed the present Motion. (Doc. # 16).
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As an attachment to the Motion, Xerox filed the affidavit
of its litigation specialist, Joni Ballard, outlining the
amounts owed under the Agreement and Note, in principal and
interest. (Doc. # 16-2). On October 24, 2016, following the
Court’s request for more information, Xerox filed Ballard’s
amended affidavit, providing information about the loss of
the Note. (Doc. ## 18, 19). Additionally, Xerox filed the
affidavit of its counsel Eric Zwiebel, which states that Xerox
incurred court costs in the amount of $400.00 and service of
process costs of $139.00, for a total of $539.00. (Doc. #
17).
Based upon the Clerk’s entry of default, the well-pled
factual allegations in the Verified Complaint, and the Motion
itself, the Court determines that the Motion is due to be
granted as set forth herein and further determines that a
hearing on this matter is not needed.
II.
Legal Standard
Federal Rule of Civil Procedure 55(a) provides: “When 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.”
A
district
court
may
enter
a
default
judgment against a properly served defendant who fails to
4
defend or otherwise appear pursuant to Federal Rule of Civil
Procedure 55(b)(2). DirecTV, Inc. v. Griffin, 290 F. Supp. 2d
1340, 1343 (M.D. Fla. 2003).
The mere entry of a default by the Clerk does not, in
itself, warrant the Court entering a default judgment. See
Tyco Fire & Sec. LLC v. Alcocer, 218 Fed. Appx. 860, 863 (11th
Cir. 2007) (citing Nishimatsu Constr. Co. v. Hous. Nat’l Bank,
515 F.2d 1200, 1206 (5th Cir. 1975)). Rather, a Court must
ensure that there is a sufficient basis in the pleadings for
the judgment to be entered. Id. A default judgment has the
effect of establishing as fact the plaintiff’s well-pled
allegations of fact and bars the defendant from contesting
those facts on appeal. Id.
III. Discussion
A.
Reestablishment of the Promissory Note
As the Court’s jurisdiction in this case is premised on
diversity, the Court applies Florida law in deciding whether
the Note should be reestablished. Under Florida law, “[t]o
foreclose upon a promissory note, the plaintiff must be the
‘holder’ in order to be the real party in interest . . . .
Once
the
promissory
plaintiff
note
in
establishes
a
that
foreclosure
it
can
action,
enforce
it
must
the
also
demonstrate that the defendant failed to pay pursuant to the
5
note.” Citibank, N.A. v. Dalessio, 756 F. Supp. 2d 1361, 1365
(M.D. Fla. 2010)(internal quotations and citations omitted).
“A party suing on a promissory note — whether just on
the note itself or together with a claim to foreclose on a
mortgage securing the note — must . . . be in possession of
the original of the note or reestablish the note pursuant to
Fla. Stat. § 673.3091.” Dasma Invs., LLC v. Realty Assocs.
Fund III, L.P., 459 F. Supp. 2d 1294, 1302; see also Fla.
Stat. §§ 702.015(2)(a), 702.015(3)(“The term ‘original note’
or ‘original promissory note’ means the signed or executed
promissory note rather than a copy thereof.”). “If it is not
in possession of the original note, and cannot reestablish
it, the party simply may not prevail in an action on the
note.” Dasma Invs., 459 F. Supp. 2d at 1302.
Under
possession
Florida
of
an
Statute
§
instrument
673.3091,
is
entitled
a
person
to
not
enforce
instrument if:
(a) The person seeking to enforce the instrument
was entitled to enforce the instrument when loss of
possession occurred, or has directly or indirectly
acquired ownership of the instrument from a person
who was entitled to enforce the instrument when
loss of possession occurred;
(b) The loss of possession was not the result of a
transfer by the person or a lawful seizure; and
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in
the
(c) The person cannot reasonably obtain possession
of the instrument because the instrument was
destroyed, its whereabouts cannot be determined, or
it is in the wrongful possession of an unknown
person or a person that cannot be found or is not
amenable to service of process.
Fla. Stat. § 673.3091(1). Additionally,
A person seeking enforcement of an instrument under
subsection (1) must prove the terms of the
instrument and the person’s right to enforce the
instrument. If that proof is made, § 673.3081
applies to the case as if the person seeking
enforcement had produced the instrument. The court
may not enter judgment in favor of the person
seeking enforcement unless it finds that the person
required to pay the instrument is adequately
protected against loss that might occur by reason
of a claim by another person to enforce the
instrument. Adequate protection may be provided by
any reasonable means.
Id. at § 673.3091(2).
A party seeking to reestablish a lost note may meet these
requirements either through a lost note affidavit or by
testimony from a person with knowledge. Figueroa v. Fed. Nat’l
Mortg. Ass’n, 180 So. 3d 1110, 1114 (Fla. 5th DCA 2015). If
the party relies on a lost-note affidavit, the affidavit must
establish that whoever lost the note “was entitled to enforce
it when the loss of possession occurred; the loss of the note
was not the result of a transfer or lawful seizure; and [the
party]
cannot
reasonably
obtain
possession
of
the
note
because of the loss.” Id. (citation omitted); see also Branch
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Banking & Trust Co. v. S & S Dev., Inc., 620 F. App’x 698,
701 (11th Cir. 2015)(“[U]nder Florida law, ‘[t]here is no
requirement
that
[BB
&
T]
prove
exactly
how
[it]
lost
possession of the note,’ as long as its affidavit, on its
face,
meets
the
requirements
of
Fla.
Stat.
§
673.3091(1).”)(citation omitted)).
Xerox produced the amended affidavit of Joni Ballard,
its litigation specialist, in which Ballard avers that she
has personal knowledge that Xerox is the owner and holder of
the Note and Agreement. (Doc. # 19 at ¶ 3). Also, Ballard
asserts that the allegations set forth in the Complaint are
true and correct, including the allegations that Southeast
and Phillips failed to make the required payments. (Id.). The
amended affidavit further states:
[T]he original of the Promissory Note which is
attached to Plaintiff’s Verified Complaint as
Exhibit “F” has been lost. Xerox Corporation was
entitled to enforce it when the loss of possession
occurred. The loss of possession of the [Note] was
not the result of a transfer or lawful seizure. A
thorough search has been made to locate the [Note]
but Xerox Corporation cannot reasonably obtain
possession of the [Note] because its whereabouts
cannot be determined. The manner of loss was an
inadvertent misplacement of the instrument. The
original [Note] was supposed to be placed in the
workout file located in the workout office of Xerox
Corporation, located at 1301 Ridgeview Drive,
Lewisville, Texas 75057. I personally looked
through the workout file and original [Note] was
not in the file.
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(Doc.
#
19
at
¶
4).
Thus,
Ballard’s
amended
affidavit
establishes that Xerox “was entitled to enforce it when the
loss of possession occurred; the loss of the note was not the
result of a transfer or lawful seizure; and [Xerox] cannot
reasonably obtain possession of the note because of the loss,”
as required by Fla. Stat. § 673.3091(1). Figueroa v. Fed.
Nat’l Mortg. Ass’n, 180 So. 3d at 1114.
Furthermore, by their failure to respond to the Verified
Complaint,
Southeast
and
Phillips
admit
that
Southeast
executed and hold the Note. See PNC Bank, N.A. v. Starlight
Properties & Holdings, LLC, No. 6:13-cv-408-ORL, 2014 WL
2574040, at *9 (M.D. Fla. June 9, 2014)(“By their failure to
respond to the complaint, all Defendants admit that PNC is
the owner and holder of the Promissory Note . . . .”).
Finally,
Xerox
agrees
to
indemnify
Southeast
and
Phillips from any loss they might incur from a claim by
another person to enforce the Note. (Doc. # 1 at ¶ 60). Under
Florida law, “[t]he court may not enter judgment in favor of
the person seeking enforcement unless it finds that the person
required
to
pay
the
instrument
is
adequately
protected
against loss that might occur by reason of a claim by another
person to enforce the instrument.” Fla. Stat. § 673.3091(2).
Here, given that Xerox is the original holder of the Note,
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and Xerox states that the Note was misplaced rather than
transferred or lawfully seized, the Court finds that Xerox’s
representation that it will indemnify Southeast and Phillips
is adequate protection. See Id. (“Adequate protection may be
provided by any reasonable means.”); see also Branch Banking
& Trust Co., 620 F. App’x at 701 (“[B]ecause [the concern
that a third party will later surface and try to enforce the
same promissory note] does not arise in every case, ‘adequate
protection is a flexible concept’ and ‘depend[s] on the degree
of
certainty
about
the
facts
in
the
case.’”)(citation
omitted).
Based
on
Xerox’s
undisputed
representations
in
the
Verified Complaint and amended affidavit, the Court finds
that Xerox has met its burden to reestablish the Note. Cf.
Branch Banking & Trust Co. v. S & S Dev., Inc., No. 8:13-cv1419-T-30TGW, 2014 WL 2215703, at *2 (M.D. Fla. May 28, 2014),
aff’d, 620 F. App’x 698 (11th Cir. 2015)(“Plaintiff produced
such an affidavit thereby establishing the above-mentioned
facts to support reestablishment of the lost Note. Defendants
have not produced evidence to the contrary.”); compare Home
Outlet, LLC v. U.S. Bank Nat’l Ass’n, 194 So. 3d 1075, 1078
(Fla. 5th DCA 2016)(“Since the lost-note affidavit was not
entered into evidence, and White did not establish that he
10
had any personal knowledge as to whether the original lender
was entitled to enforce the note when it was lost or whether
the note was lost during a transfer or lawful seizure, U.S.
Bank
failed
to
meet
its
burden
to
reestablish
the
lost
note.”).
Therefore, the Court may enforce the terms of the Note
and enter judgment in favor of Xerox.
B.
Damages
Xerox maintains that, as of August 30, 2016, it is
entitled
to
an
award
of
$739,685.49
(comprised
of
the
$777,754.89 amount due on the Account Modification Agreement,
less the $119,544.00 fair market value of the recovered
equipment, and default interest at the rate of 18% from
December 22, 2015, to August 29, 2016, in the amount of
$81,474.60) for the breach of the Agreement. (Doc. # 19 at ¶
7). For the breach of the Note, Xerox states it is entitled
to $346,302.70 (comprised of $333,290.55 in principal on the
Note, and default interest at the rate of 15% from May 26,
2016, through August 29, 2016, in the amount of $13,012.15).
(Id. at ¶ 9). The total of these amounts is $1,085,988.19.
Additionally, for the breach of the Note, Xerox states
in the amended affidavit that it is entitled to prejudgment
interest of $324.60 for each day since it filed the Motion.
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(Id. at ¶ 7). As there have been fifty-six days between the
filing of the Motion and the date of this order, Xerox is
entitled to an additional $18,177.60 in prejudgment interest
on the Account Modification Agreement. For the breach of the
Agreement, Xerox states that it should receive $136.97 in
prejudgment interest per day. Thus, Xerox is entitled to
$7,670.32 in default interest on the Note. Finally, Xerox is
entitled to $539.00 in litigation costs. (Doc. # 17). Thus,
as of October 19, 2016, the total amount of the judgment is
$1,112,375.11.
Accordingly, the Court finds that Xerox is entitled to
a judgment against Southeast and Phillips in the amount of
$1,112,375.11, representing the amounts outstanding on the
Agreement and Note, interest, and litigation costs. The Clerk
is directed to enter judgment in favor of Xerox and against
Southeast and Phillips in the amount of $1,112,375.11.
Accordingly, it is
ORDERED, ADJUDGED, and DECREED:
(1)
Plaintiff Xerox Corporation’s Motion for Default Final
Judgment (Doc. # 16) is GRANTED as set forth herein.
(2)
The Clerk is directed to enter judgment in favor of
Plaintiff
Xerox
Corporation
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and
against
Defendants
Southeast Print Programs, Inc., and John Phillips in the
amount of $1,112,375.11.
(3)
Upon entry of judgment, the Clerk is directed to CLOSE
THIS CASE.
DONE and ORDERED in Chambers in Tampa, Florida, this
25th day of October, 2016.
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