PMJ Capital Corp. v. The Lady Antoinette et al
Filing
158
MEMORANDUM OPINION AND ORDER. For the foregoing reasons, NYAC's motion for the entry of default judgment is granted only as to defendant Frank Bauco. The Court awards $55,016.07 in damages, plus interest at the rate of 9% per annum fro m October 26, 2016 through the date of this Order. NYAC may submit a request for attorneys' fees and costs together with supporting documentation within four weeks of the date of this Order. This resolves Docket Number 101. SO ORDERED. re: 101 MOTION for Default Judgment as to DEFENDANTS FRANK BAUCO AND ANTIONETTE BAUCO filed by The New York Athletic Club of The City of New York Inc. (Signed by Judge Alison J. Nathan on 9/29/2018) (rjm) Transmission to Orders and Judgments Clerk for processing.
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USDC SD!-fV
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
PMJ Capital Corp.,
Plaintiff,
16-CV-6242 (AJN)
-vMEMORANDUM
OPINION & ORDER
Frank Bauco, et al.,
Defendants.
ALISON J. NATHAN, District Judge:
This case concerns a vessel foreclosure action brought by Plaintiff PMJ Capital Corp.
("PMJ") against individual defendants Frank and Antoinette Bauco ("the Baucos"), in rem
defendant the Lady Antoinette ("the Vessel"), and the New York Athletic Club ("NY AC"),
where the Lady Antoinette is be1ihed. Before the Court is NYAC's motion for the entry of
default judgment on its cross claim against the Baucos. For the following reasons, the Court
GRANTS the motion in part and DENIES in paii.
I.
BACKGROUND
On August 5, 2016, PMJ filed a complaint alleging that 500 Realty Associates LLC, of
which Mr. Bauco was a managing member, was in default on a $75,000 loan. Dkt. No. 1. The
loan was personally guaranteed by the Baucos and secured by a First Preferred Ship Mortgage in
favor of PMJ on the Vessel. Dkt. No. 74, Ex. C, D. In its Complaint, PMJ stated that Defendant
NY AC was in possession of the Vessel and had asserted a claim of lien in the amount of
$11,211.66. Dkt. No. 1.
According to PMJ, on September 22, 2016, the Baucos' attorney at the time, Phillip
Grimaldi, accepted service of the Summons and Complaint on behalf of the Baucos. See Dkt.
1
No. 13,
~
4. In exchange, PMJ agreed to extend the time for the Baucos to respond until October
20, 2016. See Dkt. No. 57, Ex. 1. However, the Baucos failed to do so, and on October 27,
2016, PMJ requested an entry of default against the Baucos. Dkt. No. 18. Around the same
time, PMJ requested that the Comi issue a warrant for the arrest of the Vessel and appoint
NY AC as custodian. See Dkt. Nos. 14-15. The Court issued the warrant and appointed NY AC
custodian of the Vessel, but denied PMJ' s request for a default without prejudice because it
could not conclude that service on Grimaldi clearly was proper. See Dkt. No. 31.
On December 8, 2016, NYAC filed its Verified Answer with Cross Claim alleging that
the Baucos owed $61,616.11 1 in unpaid bills for vessel storage, membership dues, and associated
costs from April 30, 2016 through October 22, 2016, plus interest and attorneys' fees. Dkt. No.
28. NY AC served the Verified Answer and Cross Claim on the Baucos by ce1iified and regular
mail and on Grimaldi by regular mail. Dkt. No. 29. On December 21, 2016, the Clerk of the
Court issued Cross Claim Summonses for service on the Baucos. Dkt. Nos. 36, 37. The
summonses and Verified Answer with Cross Claim were served by personal delivery to
Antoinette Bauco on January 10, 2017, and by mail on January 11, 2017. Dkt. No. 38.
In late January 2017, Grimaldi informed PMJ that he no longer represented the Baucos,
and PMJ served the Baucos personally on February 14, 2017. Dkt. Nos. 48, 49. When the
Baucos failed to respond to the complaint, PMJ again requested to enter default against them.
Dkt. No. 50. This time, on March 9, 2017, the Clerk of the Court entered a Certificate of Default
against the Baucos. Dkt. No. 52. On April 6, 2017, PMJ moved for an interlocutory sale of the
Vessel. Dkt. No. 55. On May 4, 2017, the Baucos, in their first filing in this litigation, requested
via new counsel an extension of time to respond to PMJ's motion, which the Comi granted. See
1
NY AC later corrected the statement on which the cross claim was based to reflect that the amount owed is
$55,016.07. See 0kt. No. 101, ~ 10.
2
Dkt. No. 65. On May 9, 2017, NYAC requested that default be entered against the Baucos for
failure to answer or otherwise respond to the cross claim. Dkt. No. 67. The Clerk of the Comi
issued the requested Ce1iificate of Default on May 17, 2017, one day after the Baucos submitted
their opposition to PMJ's motion and also moved to vacate the default that had previously been
entered against them for failing to answer PMJ's original complaint. Dkt. No. 73.
On January 18, 2018, the Court denied PMJ' s motion for an interlocutory sale and
provisionarily vacated the default as to PMJ's complaint, contingent on the Baucos posting bond
or another form of adequate security. Dkt. No. 88. The Court ordered the Baucos to inform the
Court when they had posted security and to file an answer to PMJ's complaint. Id. The Baucos
duly filed an answer, Dkt. No. 90, but have thus far failed to post the bond required to vacate the
default.
Now before the Court is NYAC's motion for default judgment against the Baucos on the
cross claim, which was filed on Feburary 27, 2018 and served on the Baucos the same day. Dkt.
Nos. 101, 103. Notwithstanding the March 13, 2018 deadline for opposing the motion for
default judgment, on March 20, 2018, the Baucos filed a request for an extension of time in
which to respond. Dkt. No. 112. NY AC opposed this request, noting that both the NYAC
motion and a joint letter filed by the parties on March 2, 2018, correctly stated the opposition
deadline as March 13, 2018. Dkt. No. 113. The Comi denied the untimely request for an
extension of time to oppose. Dkt. No. 114.
II.
DISCUSSION
Federal Rule of Civil Procedure 55 sets out a two-step procedure to be followed for the
entry of judgment against a party who fails to defend: the entry of a default, and the entry of a
default judgment. New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005). The first step, entry of a
3
default, simply "formalizes a judicial recognition that a defendant has, through its failure to
defend the action, admitted liability to the plaintiff." City of New York v. Mickalis Pawn Shop,
LLC, 645 F.3d 114, 128 (2d Cir. 2011); Fed. R. Civ. P. 55(a) ("When 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."). The second step,
entry of a default judgment, "converts the defendant's admission of liability into a final judgment
that terminates the litigation and awards the plaintiff any relief to which the court decides it is
entitled, to the extent permitted by Rule 54(c)." Mickalis Pawn Shop, 645 F.3d at 128. Rule
54(c) states, "[a] default judgment must not differ in kind from, or exceed in amount, what is
demanded in the pleadings." Fed. R. Civ. P. 54(c).
A. Default Judgment Is Warranted
Here, entry of a default judgment is warranted. The Baucos initially failed to appear or
respond in any way, either to the original complaint or the cross claim. Then, when the Baucos
began to participate in the case, they nevertheless failed to answer or respond in any way to the
cross claim. Finally, the Baucos missed the deadline to oppose the instant default judgment
motion, despite having appeared and made other filings previously.
Even with this history, the court is expected to exercise "sound judicial discretion" in
determining whether a default judgment should be entered. CHARLES ALAN WRIGHT ET AL., 10A
FED. PRAC. & PROC. CIV. § 2685 (4th ed. 2017). The Court may consider factors such as: the
amount of money at stake; whether material issues of fact or issues of substantial public
importance are at issue; whether the default is largely technical; whether plaintiff has been
substantially prejudiced by the delay involved; whether the grounds for default are clearly in
doubt; how harsh an effect default judgment might have; whether the default was caused by a
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good-faith mistake or by excusable or inexcusable neglect; and plaintiffs actions throughout. Id.
Having considered these factors, the Comi finds default judgment appropriate in these
circumstances. 2
B. NY AC Establishes a Prima Facie Case for Recovery against Frank Bauco
The Court must also evaluate damages. The first step is to look to the complaint to
determine whether the plaintiff has established a prim a facie case for recovery. See Lenard v.
Design Studio, 889 F. Supp. 2d 518, 528 (S.D.N.Y. 2012). Where a plaintiff creditor brings a
claim to recover debts owed by defendants as reflected in an account stated, "plaintiff must prove
the existence of an agreement between defendants and himself based upon prior transactions
between them." Carey v. ~Mui-Hin Lau, 140 F. Supp. 2d 291,298 (S.D.N.Y. 2001). "Such an
agreement is implied if plaintiff shows that ( 1) defendants received invoices from him, and (2)
defendants failed to object within a reasonable time or defendants made partial payment on
account." Id.
In its cross claim, NY AC alleged that the Baucos were liable for unpaid charges incurred
pursuant to a Vessel Be1ihing/Storage Agreement. See Dkt. No. 28. NYAC has provided a copy
of the Vessel Be1ihing/Storage Agreement signed by the Frank Bauco on March 12, 2010. See
Dkt. No. 102, Ex. 6. The agreement provides that if the vessel owner becomes delinquent in
sums owed to NY AC, the owner shall be liable for "interest at the legal rate, costs and
2
Though the Court previously determined that a conditional vacatur of the Bau cos' default as to the
original complaint was appropriate, the circumstances are substantially different here. See Dkt. No. 88. In its
previous Order, the Court concluded that the Baucos' default was willful, but found that other factors weighed in
favor of vacating the default. Id. at 13. Specifically, the Court found that the Baucos had a potentially meritorious
defense with respect to PMJ's claims, and that the Comt could protect against the risk of financial harm by requiring
the Baucos to post bond as a condition of vacatur. Id. There is no indication in the record that the Baucos have a
potentially meritorious defense to the cross claim, on the other hand. Moreover, the Baucos have been unable or
unwilling to comply with the condition of posting security, so there is little indication that imposing such a condition
would be efficacious in response to the instant motion.
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reasonable attorneys' fees," in addition to the principle. Id. NYAC has also provided a
Statement of Account for Frank Bauco dated December 31, 2016, totaling $55,016.07, which
was mailed to the Baucos and to which they have not objected. See Dkt. No. 102, Ex. 7.
Given this evidence, the Court finds that NY AC has established a prim a facie case for
recovery against Frank Bauco, who is listed as the owner of the Vessel in the March 12, 2010
Agreement and in whose name the Statement of Account was issued. See id., Ex. 6, 7.
However, Antoinette Bauco's name does not appear on either document, and NYAC makes no
argument for her individual liability. 3 The Court therefore cannot conclude that NYAC has
established a prima fade case for recovery against Antoinette Bauco personally.
C. NY AC Provides Sufficient Evidence of Damages
Once liability is established, the "sole remaining issue before the comi is whether the
plaintiff has provided adequate support for the relief it seeks." Bleecker v. Zetian Sys., Inc., No.
12-CV-2151, 2013 WL 5951162, at *6 (S.D.N.Y. Nov. 1, 2013) (citing Transatlanhc A1arine
Claims Agency, Inc. v. Ace Shipping Corp., Div. ofAce Young Inc., 109 F.3d 105, 111 (2d Cir.
1997)). "Even when a default judgment is warranted based on a paiiy's failure to defend, the
allegations in the complaint with respect to the amount of the damages are not deemed true. The
district court must instead conduct an inquiry in order to ascertain the amount of damages with
reasonable certainty." Credit Lyonnais Sec. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir.
1999) (internal citations omitted). "Establishing the appropriate amount of damages involves
two steps: (1) 'determining the proper rule for calculating damages on ... a claim'; and (2)
'assessing plaintiffs evidence supporting the damages to be determined under this rule."'
3
The Tranchina Declaration refers to the Baucos together as the "Bauco defendants," and does not
distinguish between the two for purposes of liability. See Dkt. No. 102.
6
Begum v. Ariba Disc., Inc., No. 12-CV-6620, 2015 WL 223780, at *4 (S.D.N.Y. Jan. 16, 2015)
(quoting Credit Lyonnais, 183 F.3d at 155).
On an inquest for damages, the plaintiff bears the burden of proof and must introduce
sufficient evidence to establish the amount of damages with reasonable certainty. Transatlantic
Marine, 109 F.3d at 111. The Second Circuit has approved the holding of an inquest by
affidavit, without an in-person court hearing, "as long as [the Court has] ensured that there was a
basis for the damages specified in the default judgment." Id (internal quotation omitted); see
also Action S.A. v. Marc Rich & Co., 951 F.2d 504, 508 (2d Cir. 1991) (leaving the decision of
whether a hearing is necessary for determining damages to the discretion of the district court).
Here, NYAC seeks damages in the amount of $55,016.07, the total reflected in the
December 31, 2016 Statement of Account. Dkt. No. 102, Ex. 7. The charges in the Statement of
Account are itemized with the exception of the Balance Forward. See id NYAC has provided
supplemental information regarding the charges that comprise the Balance Forward, which totals
$10,911.18. See id, Ex. 8. NY AC has also provided a declaration of its counsel asse1iing that
Frank Bauco owes NY AC $55,016.07 in liquidated damages, plus interest on that amount
accruing from October 26, 2016, the date on which the Court ordered appointment of substitute
custodian of the vessel, to the date of this Order. Id NY AC seeks interest at the "legal rate," as
provided for in the Vessel Berthing/Storage Agreement. Id, Ex. 7. Though the rate is not
specified in the agreement, New York law provides that the legal pre-judgment rate of interest is
9% per annum. C.P.L.R. § 5004. Accordingly, NYAC has provided sufficient evidence of the
damages that Frank Bauco owes with respect to liquidated damages and interest.
NY AC also seeks to recover attorneys' fees and costs under the contract, but requests
permission to defer quantifying its claim. The Comi therefore provisionally denies the request
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without prejudice, and grants NY AC leave to file a quantified claim for attorneys' fees and costs
supported by proper documentation at a later date.
III.
CONCLUSION
For the foregoing reasons, NYAC's motion for the entry of default judgment is granted
only as to defendant Frank Bauco. The Comi awards $55,016.07 in damages, plus interest at the
rate of9% per annum from October 26, 2016 through the date ofthis Order. NYAC may submit
a request for attorneys' fees and costs together with supporting documentation within four weeks
of the date of this Order. This resolves Docket Number 101.
SO ORDERED.
d'-,,
Dated: September
2018
New York, New York
United States District Judge
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