CGI FINANCE, INC. v. Luce et al

Filing 14

REPORT AND RECOMMENDATIONS re 9 MOTION for Default Judgment as to David A. Luce and Andrew D. Neilan filed by CGI Finance, Inc. Signed by: Judge Magistrate Judge Timothy J. Sullivan Objections to R&R due by 8/23/2013 Responses due by 8/23/2013. Signed by Magistrate Judge Timothy J. Sullivan on 8/6/13. (mps, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
CGI FINANCE, INC.

:

Plaintiff,

:

v.

:

DAVID A. LUCE, et al.

:

Defendants.

Case No. 13-00156-WDQ

:
REPORT AND RECOMMENDATION

This Report and Recommendation addresses the Motion for Default Judgment
(“Motion”) filed by Plaintiff, CGI Finance, Inc. (“CGI”), against Defendants, David A. Luce and
Andrew D. Neilan (collectively “Defendants”).

ECF No. 9.

Defendants have not filed a

response, and the time for doing so has passed. See Loc. R. 105.2.a. On July 2, 2013, in
accordance with 28 U.S.C. § 636 and Local Rule 301, Judge Quarles referred this case to me for
a report and recommendation on CGI’s Motion for Default Judgment. ECF No. 11. I find that a
hearing is unnecessary in this case. See Fed. R. Civ. P. 55(b)(2); Loc. R. 105.6. For the reasons
set forth below, I respectfully recommend that the Plaintiff’s Motion for Default Judgment be
GRANTED.
I.

FACTUAL AND PROCEDURAL HISTORY
A.

Factual Background

On July 2, 2003, Defendants purchased a 2000 Intrepid 356 CC 35’6” powerboat named
the “Take Over” (“the Vessel”) and, in doing so, financed their purchase with American Bank by
a Marine Note and Security Agreement (“the Note”) in the principal amount of $145,059.00 with
interest at the rate of 5% per annum. ECF No. 9-3. Under the terms of the Note, Defendants
were to make 240 monthly payments of $957.60 beginning on August 1, 2003. Id. In order to

secure this Note, Defendants executed and delivered to American Bank a “First Preferred
Mortgage of Vessel.” ECF No. 9-4. Pursuant to 46 U.S.C. § 31322, American Bank obtained a
“preferred mortgage” on the Vessel.
On December 28, 2007, American Bank assigned all of its interest in the Vessel,
including the Marine Note and Security Agreement and the Preferred Mortgage, to CGI. ECF
Nos. 9-5 & 9-6. Defendants defaulted under the terms of the agreement by failing to make their
payments. ECF No. 9-2. On October 4, 2011, Defendants executed a Loan Modification
Agreement with CGI that reduced the monthly payments for twelve months and also reamortized the loan based on the then-current principal balance. ECF No. 9-7.
On June 1, 2012, after Defendants defaulted under the terms of the Loan Modification
Agreement, CGI gave notice to Defendants of its intention to repossess the Vessel. ECF No. 9-8.
After no response from Defendants, CGI repossessed the Vessel on June 26, 2012. ECF No. 9-2,
¶ 12.1
On July 3, 2012, CGI provided Defendants with notice of the repossession, as well as
notice of the $104,753.97 balance due under the Loan Modification Agreement. ECF No. 9-9.
This amount included principal, interest, late charges, and repossession costs. Id. On August 21,
2012, CGI sold the Vessel at auction for $42,001.00. Id.

By letter dated August 29, 2012, CGI

provided Defendants with an accounting of the sale of the Vessel under the terms of the
agreement between the parties. ECF No. 9-11. The letter indicated that the total remaining
deficiency balance was $72,491.02. Id. Adding per diem interest through August 27, 2012, the
1

This Affidavit states that the repossession of the Vessel occurred on June 26, 2013 and
the private sale of the Vessel occurred on August 24, 2013. ECF No. 9-2, ¶¶ 12 & 14. Given the
impossibility of those dates (i.e., August 24, 2013 has yet to occur), the Court takes judicial
notice of the correct year – 2012 - and will not require Plaintiff to submit an amended Affidavit.
In addition, the Seller’s Closing Statement reflects that the sale of the Vessel occurred in August
2012. ECF No. 9-10 at 3.
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total amount due was $73,096.77. Id. On or about September 12, 2012, CGI received a prorated
insurance premium refund in the amount of $713.00. ECF No. 9-12. This refund offset the
Defendants’ delinquency, reducing the total deficiency to $71,778.02. ECF No. 9-2.
As of June 25, 2013, CGI alleged that it is entitled to $75,357.09. This amount is
comprised of the deficiency balance of $71,778.02 plus interest in the amount of $3,579.07 that
accrued at $9.83 per diem (364 days) since the Vessel’s repossession on June 26, 2012. ECF No.
9-2, ¶ 18.
B.

Procedural History

On January 14, 2013, CGI filed a Complaint, in Admiralty, alleging a breach of contract
against Defendants. ECF No. 1; see 46 U.S.C. § 31325(b)(2)(A). CGI attached the following to
the Complaint: a copy of the Note, (ECF No. 1-4); the mortgage document (ECF No. 1-5); the
loan assignment document from American Bank to CGI (ECF No. 1-6); the mortgage assignment
document from American Bank to CGI (ECF No. 1-7); the Loan Modification Agreement (ECF
No. 1-8); CGI’s pre-repossession notice to the Defendants (ECF No. 1-9); CGI’s postrepossession notice to the Defendants (ECF No. 1-10); and an accounting spreadsheet (ECF No.
1-10).

In the Complaint, CGI sought judgment against the Defendants “in the amount of

$73,096.77, plus interest accruing at the per diem rate of $9.93 as of August 29, 2012, postjudgment interest, attorneys’ fees, costs, and expenses.” ECF No. 1 at 5.
On January 19, 2013, both Defendants were properly personally served by private
process server. ECF Nos. 4, 5. Defendants did not file an Answer. On May 14, 2013, Judge
Quarles entered an Order directing CGI to file a motion for entry of default by the Clerk and a
motion for default judgment or, alternatively, to provide the Court with a report as to why such
motions would be inappropriate. ECF No. 6. CGI failed to do so. On June 19, 2013, Judge
Quarles entered another Order granting CGI an additional ten days to respond to the May 14,
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2013 Order, or the case would be dismissed. ECF No. 7. On June 25, 2013, CGI filed its Motion
for Clerk’s Entry of Default. ECF No. 8. On June 27, 2013, CGI filed this Motion for Default
Judgment with attachments.

On July 2, 2013, the Clerk entered an Order of Default as to the

Defendants. ECF No. 10.
II.

LEGAL ANALYSIS
A.

Standard for Entry of Default Judgment

In determining whether to award a default judgment, the court accepts as true the wellpleaded factual allegations in the complaint as to liability. See Ryan v. Homecomings Fin.
Network, 253 F.3d 778, 780-81 (4th Cir. 2001); United States ex rel. Durrett-Sheppard Steel Co.
v. SEF Stainless Steel, Inc., No. RDB-11-2410, 2012 WL 2446151, at *1 (D. Md. June 26,
2012). Nonetheless, the court must consider whether the unchallenged facts constitute a
legitimate cause of action, since a party in default does not admit mere conclusions of law.
United States v. Redden, No. WDQ-09-2688, 2010 WL 2651607, at *2 (D. Md. June 30, 2012)
(citing Ryan, 253 F.3d at 790). Although the Fourth Circuit has a “strong policy that cases be
decided on the merits,” United States v. Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993),
default judgment “is appropriate when the adversary process has been halted because of an
essentially unresponsive party.” S.E.C. v. Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md. 2005). If
the court determines that liability is established, the court must then determine the appropriate
amount of damages. CGI Finance, Inc., v. Johnson, No. ELH-12-1985, 2013 WL 1192353, at *1
(D. Md. March 21, 2013). The court does not accept factual allegations regarding damages as
true, but rather must make an independent determination regarding such allegations. DurrettSheppard Steel Co., 2012 WL 2446151 at *1.
Rule 55 of the Federal Rules of Civil Procedure establishes the Court’s legal framework
for resolving this matter. “If, after entry of default, the Plaintiff’s Complaint does not specify a
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‘sum certain’ amount of damages, the court may enter a default judgment against the defendant
pursuant to Fed. R. Civ. P. 55(b)(2).” Id. A plaintiff’s assertion of a sum in a complaint does not
make the sum “certain” unless the plaintiff claims liquidated damages; otherwise, the complaint
must be supported by affidavit or documentary evidence. United States v. Redden, No. WDQ-092688, 2010 WL 2651607, at *2 (D. Md. June 30, 2012). Rule 55(b)(2) provides that “the court
may conduct hearings or make referrals . . . when, to enter or effectuate judgment, it needs to . . .
determine the amount of damages.” The court is not required to conduct an evidentiary hearing
to determine damages, however; it may rely instead on affidavits or documentary evidence in the
record to determine the appropriate sum. See, e.g., Mongue v. Portofino Ristorante, 751 F. Supp.
2d 789, 795 (D. Md. 2010).
B.

Liability

Plaintiff brings this suit under 46 U.S.C. § 31325(b)(2)(A) to enforce a claim of
outstanding indebtedness on the mortgage Defendants secured for the Vessel. This court has
admiralty jurisdiction pursuant to 28 U.S.C. § 1333 and Fed. R. Civ. P. 9(h). I have reviewed
Plaintiff’s Complaint and find that Plaintiff has stated a cause of action based on Defendants’
breach of the Loan Modification Agreement and Preferred Mortgage of Vessel. The record
shows that Plaintiff sent Defendants notice of its intention to repossess the Vessel (ECF No. 9-8),
notice of its repossession and intention to auction the Vessel (ECF No. 9-9), and notice of the
Vessel’s final sale and Defendants’ remaining deficiency balance (ECF No. 9-10). Defendants
did not object to the information contained in those notices. Further, Defendants failed to
respond after they were personally served the Complaint on January 19, 2013 (ECF Nos. 4 & 5)
and after the Clerk entered default on July 2, 2013 (ECF No. 10). Accordingly, all of the
Plaintiff’s allegations — other than those pertaining to damages — are deemed admitted. See
Fed. R. Civ. P. 8(b)(6); Ryan, 253 F.3d at 780 (4th Cir. 2001). Because Plaintiff has stated a
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legitimate cause of action for breach of contract, I find that Plaintiff is entitled to a default
judgment against the Defendants.
C.

Damages

Having determined that Plaintiff has established liability, it is now appropriate to
determine the damages to which Plaintiff is entitled. I have reviewed the documents attached to
Plaintiff’s Complaint, as well as to the Plaintiff’s Motion for Entry of Default Judgment, and I
find that Plaintiff is entitled to recover Defendants’ outstanding balance on the Marine Note and
Security Agreement and Preferred Mortgage. The balance comes to $75,357.09. This amount
includes the reduced deficiency amount of $71,778.02 (after the insurance premium refund of
$713.00), which covers the unpaid principle balance, interest accrued prior to repossession, late
charges, and fees incurred during repossession and as a result of sale. ECF Nos. 9-10 & 9-11.
This amount also includes $3,579.07 of interest that accrued at a rate of 5% annum from the date
of the repossession to the date of the Motion ($9.83 per diem x 364 days). ECF Nos. 1-4 & 1-11.
I conclude that Plaintiff’s request for $75,357.09 is supported by the documentary evidence in
the record and recommend that this request be GRANTED.
Plaintiff also requests post-judgment interest, and I recommend that this request also be
GRANTED, pursuant to 28 U.S.C. § 1961. See CGI Finance, Inc,. 2013 WL 1192353 at *2
(citing Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1031-32 (4th Cir. 1993) (declaring
that federal law requires post-judgment interest to be awarded on the entire amount of the
judgment)). Although Plaintiff claimed to be entitled to attorney’s fees in its Motion, Plaintiff
did not submit a motion for attorney’s fees and subsequently informed the Court that it is no
longer seeking attorney’s fees in the default judgment. ECF No. 13. Thus, the Court finds no
need to address the matter.

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III.

CONCLUSION
In sum, I recommend that:
1.

The Court grant Plaintiff’s Motion for Entry of Default Judgment (ECF No. 9);

2.

The Court award Plaintiff $75,357.09 in damages, which includes the deficiency

balance plus post-repossession interest until the date of the Motion;
3.

The Court award Plaintiff post-judgment interest at the statutory rate.

I also direct the Clerk to mail a copy of this Report and Recommendation to Defendants
at the addresses listed on Plaintiff’s Complaint. ECF No. 1.
Any objections to this Report and Recommendation must be served and filed within
fourteen (14) days, pursuant to Fed. R. Civ. P. 72(b) and Local Rule 301.5.b.

August 6, 2013
Date

/s/
Timothy J. Sullivan
United States Magistrate Judge

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