TD BANK, N.A. v. SDI FURNITURE1 INTL. INC. et al

Filing 12

OPINION. Signed by Judge William J. Martini on 6/4/2024. (wh)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
TD BANK, N.A.,

Plaintiff,
Civ. No, 2:23-CV-03269 (WJM)
V.

SDI FURNITUREl INTL, INC., and DAVID
HOROWITZ,

OPINION

Defendants.

WILLIAM J. MARTINI, U.S.D.J.
Plaintiff TD Bank, N.A. f'TD Bank" or "Plaintiff) initiated this breach of contract
action against defendants SDI Furniture Intl, Inc., ("SDI") and David Horowitz ("Horowitz")

(collectively, "Defendants"). Plaintiff filed this instant motion for default judgment (the
"Motion") pursuant Federal Rule of Civil Procedure 55(b)(2). See ECF No. 11. The Court
decides the matter without oral argument. Fed. R. Civ. P. 78(b). For the reasons set forth

below. Plaintiffs motion for default judgement is GRANTED.

I. BACKGROUND
Plaintiff is a national banking association with a principal place of business in
Delaware. Compl. at ^| 2, ECF No. 1. Defendant SDI is a corporation incorporated in New
York with a principal place of business in New Jersey. Id. at ^ 3. Defendant Horowitz is a
citizen of the state of New York. Id, at K 4. On December 5, 2019, Plaintiff and Defendant
SDI entered into a small business administration loan agreement and a promissory note for
$150,000.00. Id. at ^ 7-9. Under the promissory note, SDI agreed to make only monthly
interest payments commencing January 5, 2020, for each month thereafter, until January 5,

2025, where SDI agreed to pay monthly installments of the principal and interest until
December 5, 2029, when all remaining amounts would become due. Id. at ^ 13. Defendant
Horowitz signed a commercial guaranty agreement guaranteeing payments under the
agreement between Plaintiff and SDI. See Compl. Ex. C. SDI failed to make the required
monthly payments and on September 13, 2022, Plaintiff declared the default, accelerated the
loan, and demanded immediate payment of all amounts due. Id. at ^ 15-17. On May 5, 2023,
Plaintiff reiterated its declarations of default, acceleration, and demand of immediate

payment. Id. at ^ 18. As of April 30, 2023, the principal amount of $140,752.82 is due under
the promissory note and loan agreement, as well as accrued interest and late charges. Id. at T[
20.

On June 14,2023, Plaintiff filed a three-count complaint against Defendants. ECF No.
1. Count One alleges Defendant SDI committed breach of contract by failing to make the
required monthly payments due under the note and loan agreement. Id. at ^ 7-20. Count Two
alleges both Defendants failed to make payments under the commercial guaranty agreement.
Id at T[T[ 21-31. Count Three alleges Defendants breached the commercial security agreement,

whereby SDI granted Plaintiff a security interest in all of SDPs assets as defined under the
agreement. Specifically, Plaintiff alleges that because of Defendants' breach. Plaintiff is
entitled to require SDI to assemble and make available the collateral at any place designated

by Plaintiff and to exercise all rights and remedies conferred upon Plaintiff. Id at ^[ 32-44.
Service was properly effected on Defendant Horowitz's housekeeper on July 5, 2023, after
Plaintiffs process server spoke with Defendant Horowitz's wife who directed the
housekeeper to accept the summons and complaint. See ECF No. 5. Service was also properly
effected on Defendant SDI on August 31, 2023 via certified mail. See Caruso DecL, ECF No.

11-3. Plaintiff filed for an entry of default with the Clerk of the Court on September 7, 2023
for Defendant Horowitz and on October 11,2023 for Defendant SDI, which were both entered
on September 8, 2023 and October 12, 2023, respectively. See ECF Nos. 6, 7. Plaintiff filed
a motion for default judgment as to both Defendants on January 12, 2024, and filed an
amended motion for default judgment on April 1, 2024. See ECF Nos. 9, 11. As of today's
Opinion, Defendants did not file any response to that motion, have not moved to vacate their
default, and have not filed any response to the complaint.

II. DISCUSSION
Fed. R. Civ. P. 55(b) "authorizes courts to enter a default judgment against a properly
served defendant who fails to file a timely responsive pleading." Chanel, Inc. v.
Gordashevsky, 558 F. Supp. 2d 532, 535 (D.NJ, 2008). Before the Court grants a motion for
default judgment, however, it must ensure, inter alia, (1) that personal jurisdiction exists over
the Defendants and (2) "that entry of default under Rule 55(a) was appropriate." Gov'tEmples.
Ins. Co. v. Pennsauken Spine <& Rehab P.C., 17-cv-11727, 2018 U.S. Dist. LEXIS 131529,

2018 WL 3727369, at n (D.N.J. Aug. 6, 2018). Where the Court has jurisdiction, because
the entry of default judgment prevents a decision on the merits, the mere fact of default does

not entitle a plaintiff to judgment. Rather, [i]t is well settled in this Circuit that the entry of
a default judgment is left primarily to the discretion of the district court." Hritz v. Woma
Corp,, 732 F.2d 1178, 1 180 (3d Cir. 1984) (citing Tozer v. Charles A. Krause Milling Co.,

l89F.2d242,244(3dCir. 1951)).
Once a party has defaulted, the "consequence of the entry of a default judgment is that
"the factual allegations of the complaint, except those relating to the amount of damages, will

be taken as true/" Comdyne /, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir.1990) (citing 10
C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure, § 2688 at 444 (2d ed.

1983)). An entry of default judgment requires that the Court determine whether a sufficient
cause of action has been stated "since a party in default does not admit mere conclusions of
law." Chanel, Inc. v. Gordashevsfy, 558 F.Supp.2d 532, 535 (D.N.J. 2008). After a cause of
action has been established, district courts must then determine whether the entry of default

judgment would be proper by considering: (1) whether the party subject to default has a
meritorious defense, (2) whether there is prejudice to the plaintiff if default judgment is

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denied, and (3) whether the default was due to the defendant's culpable conduct. See

Chamberlain v. Giampapa, 210 F,3d 154, 164 (3d Cir. 2000); Hritz, 732F,2d at 1181.
A. Jurisdiction and Service
This Court has subject matter jurisdiction over this case because the parties are
completely diverse and the amount in controversy exceeds $75,000. See 28 U.S.C. § 1332.
Plaintiff has its principal place of business in Delaware, Defendant Horowitz is a resident of
New Jersey, and Defendant SDI is incorporated in New York with a principal place of
business in New Jersey. See CompL ^ 2-4. The Court has personal Jurisdiction as the
contracts in dispute were entered into in New Jersey. See ECF No. 11-2. Defendants were
both properly served. Defendant Horowitz was served at his home on July 5, 2023. Plaintiffs
process server left the summons and complaint with Horowitz's housekeeper on July 5, 2023,
after he spoke with Defendant PIorowitz's wife who directed the housekeeper to accept the
summons and complaint. See ECF No. 5. Although courts have generally held that
housekeepers who do not live with a defendant cannot accept service on his behalf, the process
server's affidavit makes clear that he spoke with Defendant Horowitz's wife, who can accept
service on Horowitz's behalf, who then directed their housekeeper to physically receive the
papers. See ECF No. 5; see also Polo Fashions, Inc. v. B. Bowman & Co., 102 F.R.D. 905

(S.D.N.Y. 1984) (holding that service upon a housekeeper who did not reside with the
defendant was insufficient to constitute service upon the defendant). Defendant SDI was
properly served on August 31, 2023, via certified mail. See Caruso DecL, ECF No. 11-3.
B. Cause of Action Established
To succeed on a breach of contract claim, a plaintiff must establish; "(I) a contract

between the parties; (2) a breach of that contract; (3) damages flowing therefrom; and (4) that
the party stating the claim performed its own contractual obligations. Frederico v. Home

Depot, 507 F.3d 188, 203 (3d Cir. 2007). The well-pled factual allegations in Plaintiffs
complaint favor entering default judgment against Defendants for breach of contract. Plaintiff
sufficiently alleged a contract between the parties, specifically the loan and note agreement
between SDI and Plaintiff and the commercial security agreement between Plaintiff and both
Defendants. Plaintiff also sufficiently alleged a breach of those contracts. Plaintiff detailed
the execution of the loan documents between the parties and adequately alleged that
Defendants defaulted under the loan documents for nonpayment of the note. Plaintiff also
clearly suffered damages as a result of the breach since Defendants failed to make payments

outlined in the note. Finally, there is no indication that Plaintiff failed to perform any of its
own contractual obligations.
C. Whether The Entry of Default Judgment Would Be Proper
Defendants have no meritorious defense based on the limited record before the Court.
See e.g.. Teamsters Pension Fund of Philadelphia & Vicinity v. Am. Helper, Inc., 2011 U.S.

Dist LEXIS 115142 at M (D.N.J. Oct. 5, 2011) (fmding no meritorious defense where court
could not determine its existence since defendant did not respond). Defendants were properly
served on July 5, 2023 and August 31, 2023, and failed to appear, defend, or otherwise
respond to the complaint. See Caruso Dec!., ECF No. 11-3; see also ECF No. 5. Plaintiff is

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clearly prejudiced by Defendants' failure to. respond as it has been prevented from prosecuting
its case and seeking relief. See Govern v. Cont.11 Airlines, Inc., 2012 U.S. Dist. LEXIS 95135,

at n (D.N.J. Jul. 9, 2012) ("[Plaintiff will suffer prejudice if the Court does not enter default
judgment as Plaintiff has no other means of seeking damages for the harm caused by
Defendant.").

Similarly, absent any evidence to the contrary, "the Defendant's failure to answer
evinces the Defendant's culpability in default." Teamsters Pension Fzmd of Philadelphia^
2011 U.S.Dist LEXIS 115142 at 4:4. In this case, there is nothing before the Court to show
that Defendants' failure to respond was not willfully negligent. See id. (citing Prudential Ins.

Co. of America v. Taylor, 2009 U.S. Dlst. LEXIS 16531 at ^ 1 (DXJ. Feb. 27, 2009)) (finding
that when there is no evidence that the defendant's failure to answer the complaint was due
to something other than its own willful negligence, the defendant's conduct is culpable and
default judgment is warranted). Accordingly, the Court will enter default judgment against
Defendants as to liability.
D. Relief
Plaintiff seeks actual damages for Defendants' violations. Under the loan agreement,
a failure to make any payment constitutes an event of default where all amounts owed are

immediately due and payable in full. Defendant SDI agreed to pay Plaintiff a late payment
charge of 5% of the unpaid portion of any regularly scheduled payment that became 15 days
or more late, as well as reimburse Plaintiff for any reasonable costs and attorneys' fees
incurred in connection with Plaintiffs attempts to enforce its rights under the agreements. On

May 5, 2023, Plaintiff declared a default for failure to make a payment and demanded
immediate payment of all amounts due. As of January 10, 2024, the total amount of

$173,771.12 was due on the loan (consisting of $140,752.82 in principal, $18,268.80 in
accrued interest, $1,750,00 in appraisal fees, and $12,999,50 in legal fees). Similarly, $46.92
in interest is due beginning on January 11^ 2024 and for each day thereafter until payment is
made. The Court finds that Plaintiff has made an adequate showing of damages and will enter
default judgment against Defendants accordingly.

III. CONCLUSION
For the reasons set forth above. Plaintiffs motion for default judgment is GRANTED.
Judgment shall be entered against Defendants, jointly and severally, for damages in the

amount of $173,771.12 and daily interest payments of $46.92 beginning on January 11,2024
and until payment is made. Defendant SDI shall also make available its collateral to Plaintiff
pursuant to the commercial security agreement.
An appropriate Order shall follow.

Date: June ^,2024