COOPERATIVE FINANCE ASSOCIATION INC v. MCCLESKEY
Filing
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ORDER GRANTING 7 Motion for Default Judgment. Judgment shall be entered against Defendant in the total amount of $338,102.58, which includes principal due on the Notes, accrued interest, unpaid fees, and attorneys fees. Ordered by US DISTRICT JUDGE MARC THOMAS TREADWELL on 10/27/2016. (tlh)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
MACON DIVISION
THE COOPERATIVE FINANCE
ASSOCIATION, INC.,
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Plaintiff,
v.
STUART EUGENE MCCLESKEY,
Defendant.
CIVIL ACTION NO. 5:16-CV-314 (MTT)
ORDER
Before the Court is Plaintiff’s motion for default judgment. (Doc. 7). For the
following reasons, the motion is GRANTED.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff and Defendant executed a loan agreement, promissory note, and
security agreement dated April 24, 2014. (Doc. 1-1). The promissory note’s original
principal amount was $250,000, to be due on February 15, 2015, and the agreed
interest rate was the Cooperative Finance Association’s published base rate plus
2.00%. Id. at 5.
Defendant defaulted on the promissory note by failing to make payments when
due. (Doc. 1, at 3). On April 16, 2015, Plaintiff sent Defendant a notice of default via
certified mail, serving “as formal notice of demand for payment” of the outstanding
principal balance and accrued interest. (Doc. 1-2, at 2). On April 21, 2016, Plaintiff’s
attorney sent Defendant a letter via certified mail. (Doc. 1-3). In that letter, Plaintiff’s
attorney informed Defendant that Defendant was “hereby declared in default under the
Loan Documents by virtue of your failure to perform all of your obligations owed to
[Plaintiff] under the Loan Documents.” Id. at 2. The letter also advised Defendant to
“be on notice that the provision of the Loan Documents relative to the payment of
attorney’s fees in addition to the due and owing principal, interest and other charges
shall be enforced, and you have ten (10) days from the date of receipt of this letter to
pay all amounts owing thereunder without incurring liability for the attorney’s fees,” as
notice pursuant to O.C.G.A. § 13-1-11. Id. Finally, the letter spelled out the outstanding
principal and accrued interest as of April 18, 2016 and warned that “[i]nterest will
continue to accrue on the foregoing amounts at the per diem rate of $78.00691.” Id.
On June 30, 2016, Plaintiff filed suit against Defendant, alleging a claim of
breach of contract on the promissory note and also seeking attorney’s fees and
expenses. (Doc. 1). Defendant was personally served with a summons on July 18,
2016. (Doc. 4). Defendant has failed to plead or otherwise defend against the suit. On
August 15, 2016, the Clerk of Court entered default against Defendant. Plaintiff now
moves the Court for default judgment. (Doc. 7). Defendant has not responded to
Plaintiff’s motion.
II. DISCUSSION
Pursuant to Fed. R. Civ. P. 55(a), the Clerk of Court must enter a party’s default
if that party’s failure to plead or otherwise defend an action against it “is shown by
affidavit or otherwise.” After default has been entered, the Clerk may enter a default
judgment on the plaintiff’s request if the claim “is for a sum certain or a sum that can be
made certain by computation,” as long as the party is not a minor or incompetent and
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has not made an appearance. Fed. R. Civ. P. 55(b)(1). In all other cases, the plaintiff
must apply to the Court for a default judgment. Fed. R. Civ. P. 55(b)(2). The Court
must hold an evidentiary hearing to determine damages unless all the essential
evidence is already on the record. See S.E.C. v. Smyth, 420 F.3d 1225, 1232 n.13
(11th Cir. 2005) (“We have held that no such hearing is required where all essential
evidence is already of record.”); see also Fed. R. Civ. P. 55(b)(2) (“The court may
conduct hearings . . . .” (emphasis added)).
After the Clerk’s entry of default, a defendant is deemed to admit all well-pleaded
factual allegations in the complaint. Nishimatsu Const. Co., Ltd. v. Houston Nat’l Bank,
515 F.2d 1200, 1206 (5th Cir. 1975).1 An entry of default against the defendant does
not establish that the plaintiff is entitled to a default judgment, however. The defendant
is not deemed to admit (1) facts that are not well-pleaded or (2) conclusions of law. Id.
“The Court must consider whether the unchallenged facts constitute a legitimate cause
of action, since the party in default does not admit a mere conclusion of law. In
considering any default judgment, the Court must consider (1) jurisdiction, (2) liability,
and (3) damages.” Johnson v. Rammage, 2007 WL 2276847, at *1 (M.D. Ga.) (citing
Pitts v. Seneca Sports, Inc., 321 F. Supp. 2d 1353, 1356 (S.D. Ga. 2004)). The
defendant is not deemed to admit the plaintiff’s allegations relating to the amount of
damages, also. Patray v. Nw. Publ’g, Inc., 931 F. Supp. 865, 869 (S.D. Ga. 1996); see
also Anheuser Busch, Inc. v. Philpot, 317 F.3d 1264, 1266 (11th Cir. 2003) (“A court
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The Eleventh Circuit has adopted as binding precedent the decisions of the former
Fifth Circuit rendered prior to October 1, 1981. Bonner v. City of Prichard, 661 F.2d
1206, 1209 (11th Cir. 1981) (en banc).
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has an obligation to assure that there is a legitimate basis for any damage award it
enters . . . .”).
A. Jurisdiction and Liability
The factual allegations in the complaint and the attached documents, deemed
admitted by Defendant, establish that Plaintiff is a corporation with diversity citizenship
in Missouri and Kansas and that Defendant is an individual with diversity citizenship in
Georgia. (Doc. 1, at 2). Therefore, the Court possesses diversity jurisdiction over this
case pursuant to 28 U.S.C. § 1332. The allegations also show that the Court also holds
personal jurisdiction over Defendant. (Doc. 1, at 2).
The factual allegations also show that Defendant has failed to pay the amounts
owed under the promissory note and Plaintiff has a right to recover the amounts owed.
See (Docs. 1; 1-1) (setting forth the terms of the promissory note and Defendant’s
breach of the note).
B. Damages
An evidentiary hearing is not necessary to determine damages because there is
sufficient evidence on record.
1. Principal, accrued interest, and unpaid fees
The factual allegations, deemed admitted, show that as of the date of this Order,
Defendant is liable for $249,622.12 in principal; $57,289.84 in accrued interest; and
$474.42 in unpaid fees. See (Doc. 1, at 4) (setting forth the principal; the amount of
accrued and unpaid interest of $47,773.00 as of June 27, 2016; the ongoing per diem
interest rate of $78.00691 between June 27, 2016 and the date of this judgment,
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totaling 122 days; and the amount of unpaid fees). Defendant is therefore liable for
$307,386.38 in total principal, accrued interest, and fees.
2. Attorney’s fees
Pursuant to O.C.G.A. § 13-1-11(a), “[o]bligations to pay attorney's fees upon any
note or other evidence of indebtedness . . . shall be valid and enforceable and
collectable as a part of such debt if such note or other evidence of indebtedness is
collected by or through an attorney after maturity.” If the promissory note provides for
attorneys’ fees in an unspecified amount, as here, “such provision shall be construed to
mean 15 percent of the first $500.00 of principal and interest owing on such note . . .
and 10 percent of the amount of principal and interest owing thereon in excess of
$500.00.” O.C.G.A. § 13-1-11(a)(2). A party seeking to collect attorney’s fees allowed
by this statute must give the debtor written notice after maturity, and the notice must
state the debtor has ten days to pay the principal and interest due without being liable
for attorney’s fees. O.C.G.A. § 13-1-11(a)(3). If all these requirements are met, the
provision for attorney’s fees is enforceable. TermNet Merch. Servs., Inc. v. Phillips, 277
Ga. 342, 344, 588 S.E.2d 745, 747 (2003).
The factual allegations in the complaint and attached correspondence show the
above requirements have been met. Accordingly, Defendant is liable for attorney’s fees
in the amount of 15% of $500 and 10% of the remaining principal and accrued interest
($306,411.96). Defendant is therefore liable for $30,716.20 in attorney’s fees.
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III. CONCLUSION
The Plaintiff’s motion for default judgment (Doc. 9) is GRANTED. Judgment
shall be entered against Defendant in the total amount of $338,102.58, which includes
principal due on the Notes, accrued interest, unpaid fees, and attorney’s fees.
SO ORDERED, this 27th day of October, 2016.
S/ Marc T. Treadwell
MARC T. TREADWELL, JUDGE
UNITED STATES DISTRICT COURT
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