SUN NATIONAL BANK v. SEAFORD SPECIALTY SURGERY CENTER, LLC et al

Filing 77

OPINION. Signed by Judge Robert B. Kugler on 10/20/2016. (TH, )

NOT FOR PUBLICATION

(Doc. No. 73)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
___________________________________
:
SUN NATIONAL BANK
:
:
Plaintiff,
:
:
v.
:
:
SEAFORD SPECIALTY SURGERY
:
CENTER, LLC, et al.,
:
:
Defendant(s). :
___________________________________ :

Civil No. 13-5800 (RBK/KMW)
Opinion

KUGLER, United States District Judge:
This matter derives from Defendant Seaford Specialty Surgery Center’s (“Seaford”) and
Defendant Medical Consulting Group Ambulatory Surgery Center’s (“Medical Consulting
Group”) (collectively, “Defendants”) alleged failures to repay promissory notes to Plaintiff Sun
National Bank (“Plaintiff”). Currently before the Court is Plaintiff’s Motion to Enter Default
Judgment (Doc. No. 73). For the reasons below, Plaintiff’s Motion is GRANTED IN PART.
I.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Plaintiff is the owner and holder of three promissory notes at issue in this case. Am.
Compl. ¶ 3. Plaintiff’s principal place of business is 226 Landis Avenue, Vineland, New Jersey,
08360. Id. ¶ 1. Seaford is a Delaware limited liability company comprised of members who are
citizens of states outside of New Jersey. Id. ¶ 4. Medical Consulting Group is a Missouri limited
liability company comprised of members who are citizens of states outside of New Jersey. Id. ¶

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4, 9. This motion stems from the Complaint filed against Seaford, Medical Consulting Group,
and other defendants on September 30, 2013 (Doc. No. 1).
On or about February 1, 2010, Plaintiff and Seaford entered into a Loan Agreement in
which Plaintiff agreed to make available to Seaford: (i) a loan in the original principal amount of
$1,850,000.00 (“1070301 Note”); (ii) a loan in the original principal amount of $1,172,000.00
(“1070401 Note”); and (iii) a loan in the original principal amount of $500,000.00 (“1070501
Note”) (collectively, “Notes”). Id. ¶ 14; Rohmeyer Decl. Exs. 1–5. Medical Consulting Group is
a guarantor of the loans. Am. Compl. ¶ 25. Pursuant to the Limited Guaranty and Suretyship
Agreement with Plaintiff (“Guaranty Agreement”), Medical Consulting Group agreed to repay
Plaintiff in an amount not to exceed “(i) 27.859% multiplied by the total amount of the
Obligations outstanding and unpaid at such time, plus (ii) 100% of all costs, fees, and expenses
incurred by [Plaintiff] in enforcing its rights against [Medical Consulting Group] under this
Guaranty.” Id.; Rohmeyer Decl. Ex. 7.
On September 30, 2013, Plaintiff filed a Complaint against multiple defendants, alleging
in part that Seaford and Medical Consulting Group defaulted on the Notes (Doc. No. 73). The
Complaint brings claims of breach of contract, unjust enrichment, and breach of the covenant of
good faith and fair dealing against Seaford and a claim of breach of contract against Medical
Consulting Group. On that same date, this Court issued summons to Plaintiff to be served upon
Defendants (Doc. No. 2). Both Defendants were properly served on October 7, 2013, with
service acknowledged and accepted by an officer of each Defendant (Doc. Nos. 4, 9). True and
correct copies of Returns of Service were filed with this Court on October 21, 2013 (Doc. Nos. 4,
9).

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On October 24, 2013, Defendants filed an Application for Extension of Time to Answer,
Move, or Otherwise Reply (“Application”) pursuant to Local Civil Rule 6.1(b) (Doc. No. 13).
The Clerk of the Court granted the Application on October 25, 2013 (Doc. No. 14). On
November 12, 2013, Defendants Seaford, Medical Consulting Group, Claude DiMarco, and
Francisco J. Rodriquez filed a Motion to Dismiss Plaintiff’s Complaint (Doc. No. 26). After
Plaintiff filed its Opposition to Defendant’s Motion to Dismiss on December 2, 2013 (Doc. No.
30), Defendants filed a Notice of Withdrawal of its Motion to Dismiss on January 23, 2014 (Doc.
No. 45) and stated it would file an answer to the Complaint, if any, within twenty-one days of the
Notice. Defendants did not answer Plaintiff’s Complaint within twenty-one days and have yet to
do so.
Following Defendants’ failure to respond, Plaintiff filed a Request for Entry of Default
Against Defendants on April 15, 2015 (Doc. No. 64). The Clerk of the Court entered default
against Defendants on April 16, 2015. Plaintiff then filed a Motion for Default Judgment on May
26, 2015 (Doc. No. 68). This Court denied that Motion without prejudice because Plaintiff failed
to attach the relevant loan and guaranty agreements (Doc. No. 69, 70). Plaintiff subsequently
filed the present Motion for Default Judgment on May 16, 2016 (Doc. No. 73). On October 3,
2016, the Court ordered Plaintiff to amend the Complaint to properly plead the citizenship of
every party (Doc. No. 75), and on October 17, 2016, Plaintiff filed an Amended Complaint (Doc.
No. 76).
II.

DISCUSSION

Federal Rule of Civil Procedure 55(b)(2) allows the Court, upon motion, to enter default
judgment against a defendant that has failed to plead or otherwise defend a claim for affirmative
relief. Although the decision to enter default judgment is left principally to the discretion of the

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district court, there is a well-established preference in this Circuit that cases be decided on the
merits rather than by default whenever practicable. Hritz v. Woma Corp., 732 F.2d 1178, 1180–
81 (3d Cir. 1984). Consequently, the Court must address a number of issues before deciding
whether a default judgment is warranted in the instant case. If it finds default judgment to be
appropriate, the Court will then consider the question of damages.
A.

The Appropriateness of Default Judgment
1.

Jurisdiction

The Court must determine whether it has subject matter jurisdiction over Plaintiff’s claim
and personal jurisdiction over Defendants. See U.S. Life Ins. Co. in City of N.Y. v. Romash, Civ.
No. 09-3510, 2010 WL 2500163, at *1 (D.N.J. June 9, 2010). This Court has subject-matter
jurisdiction over this action pursuant to 28 U.S.C. § 1332. Plaintiff’s principal place of business
is in New Jersey. Seaford is a Delaware limited liability company comprised solely of members
who are citizens of states other than New Jersey. Medical Consulting Group is a Missouri limited
liability company that has members who are citizens of states other than New Jersey. The
amount in controversy exceeds $75,000.00, exclusive of interest and costs. Thus, there is subjectmatter jurisdiction over this action under diversity jurisdiction. This Court also has personal
jurisdiction over Defendants because all parties have consented to jurisdiction in this district.
Rohmeyer Decl. Ex. 1, § 11.6. In addition, all parties have agreed that this district is the proper
venue for disputes arising from or related to the loan documents. Id.
2.

Entry of Default

The Court must ensure that the Clerk properly exercised the entry of default under
Federal Rule of Civil Procedure 55(a). Rule 55(a) directs the Clerk of the Court to enter a party’s
default when the party “against whom a judgment for affirmative relief is sought has failed to

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plead or otherwise defend, and that failure is shown by affidavit or otherwise.” Defendants failed
to plead or otherwise defend this action. Accordingly, the Clerk appropriately issued the entry of
default under Rule 55(a).
3.

Cause of Action

The Court must determine whether the Complaint states a plausible cause of action. In
conducting this inquiry, the Court accepts as true a plaintiff’s well-pleaded factual allegations
and disregards mere legal conclusions See, e.g., Comdyne I. Inc. v. Corbin, 908 F.2d 1142, 1149
(3d Cir. 1990). The Court must ascertain whether the unchallenged facts constitute a legitimate
cause of action. Chanel, Inc. v. Gordashevsky, 558 F. Supp. 2d 532, 536 (D.N.J. 2008).
Plaintiff brings three breach of contract claims against Seaford for failure to make timely
payments on three Notes. See Rohmeyer Decl. Exs. 3–5. To state a valid breach of contract claim
under New Jersey law, a plaintiff must establish that: (1) a valid contract existed between the
plaintiff and defendant, (2) the defendant breached the contract, (3) the plaintiff performed her
obligations under the contract, and (4) the plaintiff incurred damages as a result of that breach.
See Nat’l Util. Serv., Inc. v. Chesapeake Corp., 45 F. Supp.2d 438, 448 (D.N.J. 1999). Plaintiff
also brings a breach of contract claim against Medical Consulting Group as a guarantor of the
loans. Guarantors are responsible for paying a borrower’s debt in the case of default. See Ford
Motor Credit Co. Lototsky, 549 F. Supp. 996, 998 (E.D. Pa. 1982).
Plaintiff has articulated a plausible cause of action against Defendants. There are valid
contracts between Plaintiff and Seaford, and Plaintiff and Medical Consulting Group: Plaintiff
entered into the Loan Agreement with Seaford on three Notes and entered into the Guaranty
Agreement with Medical Consulting Group. Defendants breached the contracts. Seaford
promised to make certain payments by certain dates, and allegedly failed to do so. Medical

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Consulting Group agreed to guarantee the loans, but allegedly failed to make payments as
required by the Guaranty Agreement. Plaintiff performed its obligations under the contract. It
provided loans to Seaford pursuant to the Loan Agreement and Notes. Finally, Plaintiff was
damaged as a result of Defendants’ breaches because Plaintiff did not receive payments under
the terms in the Loan Agreement, Notes, and Guaranty Agreement. Therefore, Plaintiff has
pleaded a plausible cause of action as to each of its four breach of contract claims.
Plaintiff brings a fourth claim against Seaford for unjust enrichment. To state a claim for
unjust enrichment, a plaintiff must allege: “(1) that the defendant has received a benefit from the
plaintiff, and (2) that the retention of the benefit by the defendant is inequitable.” Hassler v.
Sovereign Bank, 644 F. Supp. 2d 509, 519 (D.N.J. 2009), aff’d, 374 Fed. App’x. 341 (3d Cir.
2010) (quoting Wanaque Borough Sewerage Auth. v. Twp. of W. Milford, 677 A.2d 747, 753
(N.J. 1996)). Where a valid contract governs the parties’ rights and obligations, a party cannot
bring a claim for unjust enrichment. See Van Orman v. Am. Ins. Co., 680 F.2d 301, 311 (3d Cir.
1982). “[B]ecause unjust enrichment is an equitable remedy resorted to only when there was no
express contract providing for remuneration, a plaintiff may recover on one of the other theory,
but not both.” Caputo v. Nice-Pak Products, Inc., 693 A.2d 494, 498 (N.J. Super. Ct. App. Div.
1997).
Here, Plaintiff alleges that Seaford was unjustly enriched because Seaford did not repay
loans in accordance with the Loan Agreement and Notes. Those documents, however, constitute
valid contracts that govern the parties’ obligations. Because Plaintiff cannot recover for both
breach of contract and unjust enrichment over the same conduct and does not provide any
additional evidence of unjust enrichment, the Court finds no plausible unjust enrichment cause of
action.

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Plaintiff’s fifth claim is for breach of the covenant of good faith and fair dealing against
Seaford. Every contract in New Jersey contains an implied covenant of good faith and fair
dealing. Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assoc., 864 A.2d 387,
395 (N.J. 2005). To state a claim for breach of the implied covenant, a plaintiff must demonstrate
that: “(1) a contract exists between the plaintiff and the defendant; (2) the plaintiff performed
under the terms of the contract unless excused; (3) the defendant engaged in conduct, apart from
its contractual obligations, without good faith and for the purpose of depriving the plaintiff of the
rights and benefits under the contract; and (4) the defendant’s conduct caused the plaintiff to
suffer injury, damage, loss or harm.” TBI Unltd., LLC v. Clear Cut Lawn Decisions, LLC, Civ.
No. 12-3355, 2014 WL 3853900, at *3 (D.N.J. Aug. 5, 2014). However, a plaintiff “may not
maintain a separate action for breach of the implied covenant of good faith and fair dealing
[where] it would be duplicative of [its] breach of contract claim.” Hahn v. OnBoard LLC, Civ.
No. 09-3639, 2009 WL 4508580, at *6 (D.N.J. Nov. 16, 2009). Here, Plaintiff has not
demonstrated a plausible cause of action for breach of the covenant of good faith and fair dealing
because it arises from the same conduct underlying Plaintiff’s breach of contract claim.
4.

Emcasco Factors

The Court next must consider the Emcasco factors when determining whether default
judgment is appropriate. Doug Brady, Inc. v. New Jersey Bldg. Laborers Statewide Funds, 250
F.R.D. 171, 177 (D.N.J. 2008) (citing Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 74 (3d Cir.
1987)). The factors are: (1) whether the defaulting party has a meritorious defense, (2) if the
plaintiff is prejudiced by not granting the default, and (3) the defaulting party’s culpability. See
Emcasco Ins. Co., 834 F.2d at 74.

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The Court finds that all three factors favor granting default judgment on Plaintiff’s breach
of contract claims against Seaford and Medical Consulting Group. First, there is no indication
that either Defendant has a cognizable defense to Plaintiff’s allegations they failed to make
payments pursuant to the terms of the Loan Agreement, Notes, and Guaranty Agreement. Thus,
this factor is inconclusive. Hill v. Williamsport Police Dep’t, 69 F. App’x 49, 52 (3d Cir. 2003).
Second, because Defendants failed to answer the Complaint, Plaintiff has no alternative means of
vindicating his claim against Defendants and suffers prejudice if it does not receive a default
judgment. See Directv v. Asher, No. Civ. No. 03-1969, 2006 WL 680533, at *2 (D.N.J. Mar. 14,
2006). Third, Defendants’ failure to respond permits the Court to draw an inference of
culpability. See Surdi v. Prudential Ins. Co. of Am., Civ. No. 08-225, 2008 WL 4280081, at *2
(D.N.J. Sept. 8, 2008). Therefore, the Emcasco factors weigh in favor of entering default
judgment on the breach of contract claims.
B.

Damages

The Court is not bound to accept as true Plaintiff’s mere allegations concerning damages.
See Comdyne I. Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990). It is well established that
“[a] default is not an admission of the amount of damages claimed.” In re Indus. Diamonds
Antitrust Litig., 119 F. Supp. 2d. 418, 420 (S.D.N.Y. 2000).
Plaintiff seeks $1,206,148.52 of unpaid principal, accrued and unpaid interest, and late
fees as of May 20, 2015 with a daily per diem thereafter of $170.02 for the 1070301 Note.
Plaintiff also seeks $813,139.22 of unpaid principal, accrued and unpaid interest, and late fees as
of May 20, 2015 with a daily per diem thereafter of $117.32 for the 1070401 Note. Finally,
Plaintiff seeks $262,138.97 of unpaid principal, accrued and unpaid interest, late fees, and
prepayment fees as of May 20, 2015 with a daily per diem thereafter of $35.02 for 1070501

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Note. Against Medical Consulting Group, Plaintiff seeks compensatory and consequential
damages in the amount of $2,281,426.71 as of May 20, 2015.
1.

Principal

The Court finds that Plaintiff is entitled to $1,785,381.40 in principal. This is a breach of
contract case where three Notes state that Seaford promised to pay Plaintiff principal and interest
amounts in monthly installments. It is undisputed that Seaford defaulted on its obligation to
make any payments and has not cured that default. Under the three Notes, the total amount of
remaining principal becomes due immediately in the event of a default. In addition, Medical
Consulting Group has not indemnified Plaintiff against Seaford’s default as agreed in the
Guaranty Agreement. Plaintiff submitted an affidavit stating that Seaford owed $941,657.64 in
principal on the 1070301 Note, $649,762.03 on the 1070401 Note, and $193,961.73 on the
1070501 Note. Therefore, the Court will award Plaintiff $1,785,381.40, the total amount of
unpaid principal.
2.

Interest

Plaintiff has not submitted adequate documentation for the Court to determine the interest
award. Plaintiff’s affidavit states that, as of May 20, 2015, unpaid interest totals $186,007.20
with a per diem rate of $170.02 on the 1070301 Note, $96,960.03 with a per diem rate of
$117.32 on the 1070401 Note, and $41,672.07 with a per diem rate of $35.02 on the 1070501
Note. The Notes provide that interest accrues during the Draw Period and Borrowing Period at
the Prime Rate plus 1.00%. However, Plaintiff provides no documentation as to the Prime Rate
during the Draw Period or Borrowing Period of the Notes in this case. Further, the Notes state
that interest following the Draw Period and Borrowing Period accrues at a rate of 2.45% plus the
Federal Home Loan Bank Amortizing Advances Rate, and upon an Event of Default accrues at

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the ordinary interest rate plus 18%. Plaintiff did not submit any documentation concerning the
number of days the loan accrued interest at the ordinary rate or Default Rate, or its interest
calculations applying those rates. Without this information, the Court cannot make an accurate
determination of Plaintiff’s interest award.
3.

Late Fees

The Court similarly finds that it is unable to accurately determine Seaford’s late fees.
Plaintiff alleges it is owed $78,483.68 on the 1070301 Note, $66,417.16 on the 1070401 Note,
and $24,565.55 on the 1070501 Note. The Notes state that late payments are subject to a late
charge of 10% of the payment due. Because Plaintiff has not submitted documentation as to the
amount of each late payment, the Court cannot calculate the total late fees.
4.

Prepayment Fees

Furthermore, the Court cannot determine the amount of prepayment fees. Plaintiff asserts
Seaford incurred prepayment fees on the 1070501 Note in the amount of $1,939.62. Note
1070501 subjects prepayment to different fee amounts depending on when prepayment is made.
Plaintiff has not provided the Court documentation on the amount and time of prepayment, so the
Court cannot determine prepayment fees at this time.
5.

Attorney’s Fees and Costs

Plaintiff also seeks $46,255.00 attorney’s fees and $6,187.00 in costs against Defendants.
The burden of proving that a request for attorney’s fees is reasonable rests on the party seeking
the fees. Rode v. Dellarciprete, 892 F.2d 1177, 1183 (3d Cir. 1990). To satisfy this burden, the
petitioner must “submit evidence supporting the hours worked and rates claimed.” Id. (quoting
Hensley v. Eckerhart, 461 U.S. 424, 433 (1983)). In this case, Plaintiff has not submitted any

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documentation supporting these figures. The Court therefore reserves judgment on the issue of
attorney’s fees and costs.
III.

CONCLUSION

For the reasons explained above, Plaintiff’s Motion for Default Judgement is GRANTED
as to the breach of contract claims against Defendants and DENIED as to the unjust enrichment
and breach of covenant of good faith and fair dealing claims against Seaford. The Court will
enter judgment against Defendants in the amount of $1,785,381.40. Plaintiff will have thirty (30)
days to provide supporting documentation regarding calculations of interest, late fees,
prepayment fees, and attorney’s fees and costs.

Dated:

10/20/2016

s/ Robert B. Kugler
ROBERT B. KUGLER
United State District Judge

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