Citizens Bank v. Tolani et al

Filing 33

MEMORANDUM RULING granting 31 MOTION for Default Judgment as to Sharanjit Dhillon filed by Citizens Bank. IT IS ORDERED that the Plaintiff is hereby awarded the amount of $2,791,889.64, plus interest at an annual percentage rate of 5.25% on the remaining balance of the loan until paid in full. IT IS FURTHER ORDERED that Plaintiff has until 9/30/2015 to submit sufficient evidence demonstrating its entitlement to costs and fees, as well as the amounts thereof, under Rule 1.5 of the Rules of Professional Conduct. Signed by Judge Elizabeth E Foote on 9/11/2015. (crt,Keifer, K)

UNI TED STATES DI STRI CT COURT
WESTERN DI STRI CT OF LOUI SI ANA
SHREVEPORT DI VI SI ON

CITIZENS BANK

CIVIL ACTION NO. 14-cv-215

VERSUS

JUDGE ELIZABETH ERNY FOOTE

SUNIL A. TOLANI, ET AL

MAGISTRATE JUDGE MARK HORNSBY

MEMORANDUM RULI NG
Before the Court is a Motion for Default Judgment filed by Plaintiff, Citizens Bank,
against Defendant, Sharanjit Dhillon (“Dhillon”).1 For the reasons given below, Citizens
Bank’s Motion For Default Judgment is GRANTED.
I.

Factual and Procedural Background
On August 31, 2007, Shreveport Hospitality, Inc. entered into a Loan Agreement

and a Universal Note and Security Agreement (collectively referred to herein as the “Loan”)
with Citizens Bank for a principal sum of $3,241,700.00.2 On that same date, Dhillon
executed a personal Guaranty in favor of Citizens Bank, in which she guaranteed the full
and prompt payment and performance of Shreveport Hospitality, I nc.’s obligations to
Citizens Bank. The interest rate applicable to the Loan is 2.00% above the “Prime Rate,”
which is defined in the Loan as the prime rate published in the Wall Street Journal,

1

Record Document 31.

2

Record Document 12-1, p. 5.
Page 1 of 13

adjusted quarterly from August 31, 2007 (the date of the note). 3 The Loan provides that
the interest is calculated on a 360/ actual basis.4
On January 11, 2011, Citizens Bank, Shreveport Hospitality, Inc., and Prince
Preferred Hotels Shreveport 2 (“Prince Preferred”) entered into the Modification of
Promissory Note.5 Under the Modification of Promissory Note and the Modification and
Assumption Agreement, Prince Preferred assumed the Loan and the obligation to pay the
Loan.6 On that same day, the above parties, Dhillon, Sunil Tolani (“Tolani”), and Neela
Kewalramani (“Kewalramani”) entered into a Modification and Assumption Agreement.7
Under the terms of the Modification and Assumption Agreement, Dhillon, Tolani, and
Kewalramani ratified and confirmed the obligations to guarantee payment and performance
of the Loan, and they each also executed a Reaffirmation of Guaranty on January 31,
2011.8 Although each of the Guaranties stated that a demand of payment is not required
upon a default, Citizens Bank made demands upon Prince Preferred and the Guarantors
upon default of the Loan. 9

3

Id. at p. 9.

4

“360/ actual basis” is a day count convention for calculating interest accrued on
U.S. Treasury bills and other money market instruments. It uses the actual number of
days in a month and 360 days in a year for calculating interest payments.
5

Id. at p. 5.

6

Id.

7

Id.

8

Id. at p. 7.

9

Id. at p. 9.
Page 2 of 13

Prince Preferred failed to pay the monthly installment amount of $33,918.97 due
on the Loan on July 1, 2013, August 1, 2013, and September 1, 2013.10 The Prime Rate
on August 31, 2013 was 3.25%, so the interest rate applicable on the Loan at the time of
default was 5.25%.11 The Guarantors also failed to make the above installation payments.
On December 4, 2013, Prince Preferred filed a voluntary petition for Chapter 11
bankruptcy, entitled In re Prince Preferred Hotels Shreveport, 2 L.L.C., in the United States
Bankruptcy Court for the Northern District of Texas, Dallas Division.12 This case was
transferred to the United States Bankruptcy Court for the Western District of Louisiana,
Shreveport Division.
The Loan is past due, owing and in default, in a principal amount of
$2,943,787.28.13 The Loan has late charges of $3,062.85, unpaid interest accrued through
October 7, 2013 in the amount of $51,086.98, and a prepayment penalty applicable to the
Loan in the amount of $29,437.87.
On Feburary 7, 2014, the present case was filed in this Court, seeking the collection
of the amounts owed by the Guarantors under the Loan.14 Tolani and Kewalramani were
dismissed without prejudice from the suit by the Court on August 29, 2014.15
10

Id. at p. 8.

11

Id. at p. 9.

12

Record Document 12-1, p. 9.

13

Record Document 12-1, p. 10.

14

Record Document 1.

15

Record Document 25.
Page 3 of 13

On August 28, 2012, Dhillon was served with a summons and a copy of the
complaint by certified mail, and Citizens Bank provided the Court with a Proof of Service
stating that she was personally served on June 8, 2014.16 Dhillon has failed to appear in
this matter to date. On May 16, 2014, Citizens Bank filed a Motion/ Request for Entry of
Default against Dhillon, and on May 20, 2014, the Clerk of Court filed an Entry of Default.17
On February 11, 2015, Magistrate Judge Hornsby issued a Memorandum Order
directing Citizens Bank to file a motion for default judgment or be subject to dismissal for
failure to prosecute. 18 On April 2, 2015, Citizens Bank filed the instant motion for default
judgment. On that same day, a Notice of Motion Setting was issued by the Clerk of Court,
which gave Dhillon notice of the motion for default judgment and allowed her twenty-one
days to respond.19 Dhillon has never responded.
II.

Law and Analysis
A.

Whether Default Judgment I s Appropriate

Federal Rule of Civil Procedure 55(a) provides that “[ 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). Rule 55(b) states that:

16

17

Record Documents 9 and 21.
Record Documents 11 and 16.

18

Record Document 28.

19

Record Document 13.
Page 4 of 13

[ a] party must apply to the court for a default judgment. ... If the party
against whom a default judgment is sought has appeared personally or by
a representative, that party or its representative must be served with written
notice of the application at least 7 days before the hearing. The court may
conduct hearings or make referrals–preserving any federal statutory right to
a jury trial–when, to enter or effectuate judgment, it needs to: (A) conduct
an accounting; (B) determine the amount of damages; (C) establish the truth
of any allegations by evidence; or (D) investigate any other matter.
Fed. R. Civ. P. 55(b)(2)(emphasis added).
“Nevertheless, Rule 55(b)(2) ‘gives the judge wide latitude in determining whether
such a hearing will be beneficial.’” Talen’s Marine & Fuel, L.L.C. v. Global Sales Agency,
Inc., No. 2:13-cv-920, 2013 WL 6075646, at * 2 (W.D. La. 11/ 18/ 13)(citations omitted).
“While a plaintiff is not entitled to a default judgment as a matter of right, the Court
accepts the well-pleaded allegations of fact in the plaintiff’s complaint in determining
whether default judgment should be entered.” Boyd v. Dill, No. 09-0021, 2011 WL
1304725, at * 3 (W.D. La. 04/ 1/ 11)(citing Nishimatsu Constr. Co. v. Houston Nat’l Bank,
515 F.2d 1200, 1206 (5th Cir. 1975)).
As a preliminary matter, the Court must determine whether Rule 55(b)(2)’s notice
requirement has been implicated in the present case. The Fifth Circuit Court of Appeals has
found that whether a district court must give notice to a defendant of a default judgment
depends on whether the defendant has “appeared in the action.” Rogers v. Hartford Life
& Acc. Ins. Co., 167 F.3d 933, 936 (5th Cir. 1999); Fed. R. Civ. P. 55(b)(2). “[ T] o qualify
as an appearance in the action and trigger Rule 55(b)(2)’s notice requirements, the
defendant’s actions merely must give the plaintiff a clear indication that the defendant
intends to pursue a defense and must ‘be responsive to the plaintiff’s formal court action.’”
Page 5 of 13

Rogers, 167 F.3d at 937 (quoting Baez v. S.S. Kresge Co., 518 F.2d 349, 350 (5th Cir.
1975)). The Fifth Circuit has found that “mere acceptance of formal service of process
cannot constitute an appearance for purposes of Rule 55(b)(2)” because “if we construed
the phrase that broadly, then every defendant would become entitled to notice....” Id. The
court stated that “we will not interpret the phrase ‘appeared in the action’ so broadly as
to eviscerate the appearance requirement of Rule 55(b)(2).” Id.
Here, the record indicates that Dhillon accepted formal service of process on August
20, 2014.20 Dhillon was served with Citizens Bank’s complaint and failed to file an answer
within the requisite time period. There is nothing else in the record to indicate that Dhillon
ever “appeared in the action.” As such, it is not necessary for the Court to ensure that
Dhillon received notice of the potential default judgment. The Court finds that default
judgment is proper.
B.

Whether There I s Sufficient Basis For Judgment I n The Pleadings

Due to her default, Dhillon is deemed to have admitted the allegations set forth in
Citizens Bank’s complaint. Nonetheless, the Court must review the pleadings to determine
whether Citizens Bank can establish a viable claim for relief. Nishimatsu Constr., 515 F.2d
at 1206. Citizens Bank alleges that Dhillon is in violation of her Guaranty and is liable for
the principal amount of the Loan and several other fees associated with the Loan.21

20

Record Documents 21.

21

Record Document 31. The Court notes that although Magistrate Judge Hornsby
instructed Citizens Bank to include the legal bases for liability and damages in its
motion for default judgment, Citizens Bank has failed to do so.
Page 6 of 13

As this case is before the Court under diversity jurisdiction, it must apply Louisiana
substantive law. See Bradley v. Allstate Ins. Co., 620 F.3d 509, 517 n.2 (5th Cir.
2010)(citing Erie R.R. v. Tompkins, 304 U.S. 64 (1938)). Additionally, the Guaranty states
that it shall be governed by Louisiana law. 22 Under Louisiana law, a contract of guaranty
and a contract of suretyship are equivalent, and the terms may be used interchangeably.
DROR Intern., L.P. v. Thundervision, L.L.C., 11-215 (La. App. 5th Cir. 12/ 13/ 11); 81 So.
3d 182, 185.
Louisiana law defines suretyship as “an accessory contract by which a person binds
himself to a creditor to fulfill the obligation of another upon the failure of the latter to do
so.” La. C.C. art. 3035. The nature of the surety’s promise is to satisfy the entire obligation
if the debtor fails to do so. Revision Comments (b), La. C.C. art. 3045. The nature of the
surety’s undertaking does not change simply because other sureties join in the same or
multiple acts of suretyship for the same principal obligation. La. C.C. art. 3045; See Bank
One v. SWC Corp., 36,043 (La. App. 2 Cir. 08/ 14/ 02); 823 So. 2d. 1060, 1062. Article 3045
of the Louisiana Civil Code obviates any implication of a joint obligation owed by multiple
sureties to the creditor because each remains bound to the full performance, and the
benefit of division is denied. SWC Corp., 823 So. 2d at 1062.
In SWC Corp., the court found that even though the guaranty agreement included
the common law phrase “jointly and severally liable,” this language did not alter the
general rule provided by Article 3045, and each of the sureties in that case was obligated

22

Record Document 31-11, ¶24.
Page 7 of 13

for the full performance of the debtor’s obligation. Id. at 1063. Additionally, the court
found that because the sureties’ obligations to the obligee are solidary in nature, the Civil
Code articles on solidarity provide that “unless the obligation is extinguished,” the obligee
may pursue separate actions against the solidarity obligors. Id. (citing La. C.C. art. 1795).
The court found that this principle allows for the possibility of separate judgments. I d.
While performance rendered by one of the solidary obligors extinguishes the obligation and
relieves the others of liability, it is the obligor’s burden to prove that performance as an
affirmative defense. Id. In SWC Corp., although the obligor had already obtained a
judgment against one of the sureties, the court allowed it to obtain a judgment against the
other surety because there was evidence in the record that the debt remained unpaid. Id.
at 1064.
In the present case, Citizens Bank has provided a copy of the Guaranty signed by
Dhillon, and it clearly sets forth Dhillon’s suretyship obligation. The Guaranty requires that
Dhillon pay amounts due under the Loan if the Obligor is unable or unwilling to do so.23
Citizens Bank has presented evidence that the Loan is in default and Prince Preferred is in
bankruptcy. 24 Citizens Bank made a demand upon Dhillon to pay the installments of the
Loan that were in default. She has not complied with the demand. Considering the above,
Citizens Bank has established a viable claim for relief under Louisiana suretyship laws.

23

Record Documents 31-11 and 31-12.

24

Record Document 12-1.
Page 8 of 13

C.

Amount Due

“A defendant’s default concedes the truth of the allegations of the Complaint
concerning the defendant’s liability, but not damages.” Ins. Co. of the W. v. H&G
Contractors, Inc., No. 10-390, 2011 WL 4738197, at * 4 (S.D. Tex. 10/ 05/ 11)(citing Jackson
v. FIE Corp., 302 F.3d 515, 524-25 (5th Cir. 2002)). The amount due must be proven by
a hearing or a demonstration of detailed affidavits establishing the necessary facts. Id. If
the amount due can be determined with mathematical calculations by reference to the
pleadings and supporting documents, a hearing is unnecessary. Id. The Court finds in the
instant case that the evidence provided by Citizens Bank is sufficient to determine the
amount due, and a hearing is unnecessary.
The Guaranty states that: “Guarantor further agrees to pay all expenses (including
reasonable attorney’s fees and legal expenses) paid or incurred by Lender in endeavoring
to collect the [ Loan] , or any part thereof, and in enforcing or defending this Guaranty,
whether or not a lawsuit is commenced.” 25 The Reaffirmation of Guaranty signed by Dhillon
on January 31, 2011 states that: 26
Guarantor affirms that the [ Loan] shall in no manner affect the obligations
of Guarantor under the Guaranty, and the obligations of Guarantor shall
continue to mean and include all loans, advances, debts, liabilities and
obligations, howsoever arising, owed by Existing Borrower and Assuming
Borrower to the Lender of every kind and description ... direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising under the [ Loan] ... including, without limitation, all interest, fees,
charges, expenses, attorney’s fees and accountants’ fees chargeable to

25

Record Document 12-1, p. 6.

26

Record Document 31-12.
Page 9 of 13

Existing Borrower and Assuming Borrower or payable to Existing Borrower
and Assuming Borrower thereunder.
Citizens Bank has provided evidence that the principal balance on the Loan at the
time of the commencement of this action was $2,943,787.28.27 There are late charges on
the Loan in the amount of $3,062.85.28 The unpaid interest on the Loan, accrued through
October 7, 2013, is $51,086.98.29 Citizens also seeks the 5.25% interest it is owed per
annum on the remaining balance of the loan until the principal balance is repaid in full.
After Prince Preferred filed Chapter 11 bankruptcy, a bankruptcy plan was confirmed,
which provides payments on the Loan to Citizens Bank.30 The payments which have been
made total $206,047.47, and that amount shall be subtracted from the total amount due
to Citizens Bank. Considering the above, the total amount sought by Citizens Bank is
$2,791,889.64, plus the continually accruing interest on the principal balance of the loan
at a rate of 5.25% per year.
The Court finds that Citizens Bank has provided sufficient evidence of the amount
owed under the Guaranty and the Reaffirmation of Guaranty, and as Dhillon has been
found to be in breach of the Guaranty and the Reaffirmation of Guaranty, the Court awards
Citizens Bank the amount of $2,791,889.64, plus interest at an annual percentage rate of
5.25% on the remaining balance of the Loan until paid in full.

27

Record Document 12-1, p. 10.

28

Id.

29

Id.

30

Id.
Page 10 of 13

D.

Attorney’s Fees and Costs

In addition to the amount sought above, Citizens Bank seeks to recover attorney’s
fees and costs under the Guaranty. 31 As Citizens Bank’s entitlement to attorney’s fees
arises out of a breach of the Louisiana Civil Code, Louisiana law determines the amount
to which Citizens Bank is entitled to recover. Under Louisiana law, courts are empowered
to inquire into the reasonableness of attorney’s fees as part of their inherent authority to
regulate the practice of law. Smith v. State, Dept. of Transp. & Dev., 899 So. 2d 516, 527
(La. 2005). State courts, including Louisiana, generally utilize Rule 1.5 of the Rules of
Professional Conduct when inquiring into the reasonableness of attorney fees. Chevron
U.S.A., Inc. v. Aker Maritime, Inc., 389 F.3d 497, 505 (5th Cir. 2012)(“In Louisiana, the
amount of an attorney’s-fee award is governed by Rule 1.5 of the Rules of Professional
Conduct.”)(citation omitted).
Rule 1.5 provides, in part:
a) a lawyer shall not make an agreement for, charge, or collect an
unreasonable fee or an unreasonable amount for expenses. The factors to
be considered in determining the reasonableness of a fee include the
following:
(1)
the time and labor required, the novelty and difficulty of the
questions involved, and the skill requisite to perform the legal
service properly;
(2)

(3)

31

the likelihood, if apparent to the client, that the acceptance of
the particular employment will preclude other employment by
the lawyer;
the fee customarily charged in the locality for similar legal
services;

Record Document 31, p. 10.
Page 11 of 13

(4)

the amount involved and the results obtained;

(5)

the time limitations imposed
circumstances;

(6)

the nature and length of the professional relationship with the
client;

(7)

the experience, reputation, and ability of the lawyer or lawyers
performing the services; and

(8)

whether the fee is fixed or contingent.

by

the

client

or

the

In its motion for default judgment, Citizens Bank simply provides the Court with a
list of dates and corresponding amounts of money that it states it paid in attorney’s fees
and costs in this action. However, Citizens Bank has not provided the Court with any
evidence establishing the basis for the attorney’s fees and costs it claims to be owed.
The Court therefore reserves Citizens Bank’s right to petition for costs and attorney's
fees but orders Citizens Bank to submit sufficient evidence demonstrating its entitlement
to costs and fees, as well as the amounts thereof, by September 30, 2015. If Citizens
Bank fails to support its claim by that date, the request for costs and attorney's fees will
be denied, judgment will be entered as specified above, and the Clerk's Office will be
directed to close this case.
III.

Conclusion
For the forgoing reasons, I T I S ORDERED that Plaintiff’s Motion For Default

Judgement is GRANTED.

Page 12 of 13

I T I S FURTHER ORDERED that the Plaintiff is hereby awarded the amount of
$2,791,889.64, plus interest at an annual percentage rate of 5.25% on the remaining
balance of the Loan until paid in full.
I T I S FURTHER ORDERED that Plaintiff has until September 30, 2015 to submit
sufficient evidence demonstrating its entitlement to costs and fees, as well as the amounts
thereof, under Rule 1.5 of the Rules of Professional Conduct.
THUS DONE AND SI GNED in Shreveport, Louisiana, this 11th day of September,
2015.

_____________________________
Elizabeth Erny Foote
United States District Judge

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