STATE BANK & TRUST CO. v. PHILLY WHOLESALE, LLC et al

Filing 32

MEMORANDUM. SIGNED BY HONORABLE GERALD J. PAPPERT ON 9/22/2017. 9/22/2017 ENTERED AND COPIES MAILED TO COUNSEL AND E-MAILED.(amas)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
STATE BANK & TRUST CO., d/b/a
PATRIOT CAPITAL
CIVIL ACTION
No. 16-05508

Plaintiff,
v.
PHILLY WHOLESALE, LLC
SAURABH KAMRA
MALWA INVESTORS GROUP, INC.
HARPINDER SINGH
Defendants.
PAPPERT, J.

September 22, 2017
MEMORANDUM

State Bank & Trust Company d/b/a Patriot Capital entered into two equipment
financing agreements—one with Philly Wholesale, LLC, which was personally
guaranteed by Saurabh Kamra, and another with Malwa Investors Group, Inc., which
was personally guaranteed by Harpinder Singh. Defendants initially failed to appear
or otherwise defend the suit, and default was entered against them. Patriot thereafter
moved for the entry of default judgment. Defendants subsequently retained counsel
who filed a motion to open default as to Malwa and Singh only and informed the Court
that he would not oppose the entry of default judgment with respect to the breach of
contract and breach of guaranty claims against Philly Wholesale and Kamra (counts
one and three).1 The Court denies Malwa and Singh’s Motion and grants Patriot’s

Though Patriot also brought a count of fraud against Malwa and Singh, see (Compl. ¶¶ 69–
76), it did not move for the entry of default judgment on that claim, see (ECF No. 6).
1

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Motion.
I.
Patriot sued on October 20, 2016, asserting breach of contract claims against
Philly Wholesale and Malwa Investors (counts one and two), breach of guaranty claims
against Kamra and Singh (counts three and four) and fraud claims against all
Defendants (counts five and six). (Compl. ¶¶ 30–76; ECF No. 1.) Defendants initially
failed to appear or otherwise defend the suit, and Patriot moved for default judgment
on the breach of contract and breach of guaranty claims on December 13, 2016. (ECF
Nos. 5 & 6.) The clerk of court entered default on April 19, 2017, and the Court
scheduled a hearing on the request for default judgment in order to ascertain damages.
(ECF No. 8.)
The day before the hearing was to take place, Julius Crawford contacted the
Court purporting to represent all of the Defendants. He informed the Court that he
intended to move to open default with respect to Malwa and Singh but did not intend to
do so with respect to Philly Wholesale and Kamra because they did not have a
meritorious defense. The Court accordingly cancelled the hearing and directed
Crawford to enter his appearance and file his contemplated motion. Crawford entered
his appearance for all Defendants on June 30, 2017, (ECF No. 15), and moved to open
default with respect to Malwa Investors and Singh on July 5, 2017, (ECF No. 16).
The Court rescheduled the hearing. (ECF No. 19.) The day before the hearing,
Crawford notified the Court that he would be unable to attend due to a death in the
family. (ECF No. 20.) He requested a continuance with respect to Malwa and Singh, to
which Patriot agreed. (Id.) But with respect to Philly Wholesale and Kamra, he

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confirmed that he “can offer no defense” and therefore had no objection to Patriot
proceeding with the hearing and submitting the requisite proof of damages in his
absence. (Id.) The Court held the hearing on Patriot’s Motion for Default Judgment
against Philly Wholesale and Kamra on July 26, 2017. (ECF No. 21.) At the hearing,
plaintiff’s counsel presented testimony from State Bank & Trust Co. Vice President
Travis Whiddon regarding the method by which damages were calculated. On August
2, 2017, the Court entered default judgment against Philly Wholesale on count one and
against Saurabh Kamra on count three in favor of State Bank & Trust Co. (ECF No.
24.)
The Court held the hearing on Malwa and Singh’s Motion to Open/Strike
Judgment by Default and on Patriot’s Motion for Default Judgment against Malwa and
Singh on August 21, 2017. (ECF No. 26.) The Court subsequently ordered Malwa and
Singh to permit Patriot to inspect the equipment and provide Patriot with proof that
the equipment is insured and to also provide the Court with a status report by
September 8, 2017. (ECF No. 27.) Patriot thereafter informed the Court that Malwa
and Singh had not made the equipment available for inspection or provided proof that
the equipment was insured, and had also failed to make the August 25, 2017 lease
payment. The Court conducted a supplemental telephonic hearing on the parties’
motions on September 14, 2017. (ECF No. 30.)
II.
State Bank & Trust Co. is a commercial bank and lending institution
headquartered in Atlanta, Georgia. (Compl. ¶ 8.) Patriot is a division of State Bank
that specializes in equipment financing for fueling and convenience stores. (Hr’g Tr. at

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10:18–23, July 26, 2017.) Malwa, as borrower, entered into an equipment finance
agreement with Patriot for a loan to pay for equipment to be used in a convenience
store in Brookhaven, Pennsylvania. (Compl. ¶¶ 9, 11, 13.) To induce Patriot to finance
Malwa’s purchase of the equipment, Singh personally guaranteed the $80,000 loan on
May 6, 2016. (Id. ¶ 10; Ex. P-5.)
In connection with the loan, Malwa purported to contract with Safeway
Developers, Inc. to provide and install the equipment. (Compl. ¶ 14; Ex. P-1.) On May
12, 2016, Patriot submitted to Safeway an “Invoice Request,” indicating that Malwa
had been approved for financing and requesting detailed invoices for the equipment to
be purchased. (Compl. ¶ 45; Ex. P-3.) Safeway submitted to Patriot copies of the
purported invoices. (Compl. ¶¶ 15, 43; Ex. P-2.)
On May 6, 2016, Malwa executed and delivered Equipment Finance Agreement
No. 612865 (“the Agreement”) with Patriot for $80,000, to be paid in sixty monthly
installments of $1,722.85. (Compl. ¶ 44; Ex. P-4.) Under the terms of the Agreement,
Malwa and Singh represented to Patriot that they needed the equipment identified in
the invoices for the operation of their business; they intended to use the loan proceeds
to purchase the equipment; they would use and maintain the equipment only at the
specified business address and would not move it to another location without prior
approval from Patriot; and they would give Patriot a first priority purchase money
security interest in the equipment. (Compl. ¶ 13; Ex. P-4, ¶¶ 1, 5.) The Agreement also
gave Patriot the right to inspect the premises of the purported business and specified
the remedies available to Patriot in the event of a default. (Ex. P-4, ¶¶ 5, 11.)
On May 27, 2016, Singh submitted to Patriot a Delivery and Acceptance

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Agreement, confirming that the equipment had been satisfactorily delivered, installed
and inspected by Malwa and its representatives. (Compl. ¶ 47; Ex. P-6.) On May 25,
2016, Patriot advanced Malwa Investors $80,000. (Compl. ¶ 46.)
In August 2016, Patriot, through a third party, inspected the premises at 1100
Powell Road where Malwa purportedly conducted its business. (Compl. ¶¶ 18–19.) The
property was vacant, appeared to be abandoned, and no equipment was visible through
the windows. (Id. ¶ 19; Ex. P-7.) By letters dated September 21, 2016, Patriot’s counsel
demanded that Malwa as borrower, Singh as guarantor, and Safeway as vendor, either
provide written responses confirming the whereabouts of the equipment or refund the
loan proceeds. (Compl. ¶ 21; Ex. P-8.) Safeway provided Patriot with an executed
Certificate of Delivery and Acceptance from Malwa acknowledging receipt of the
equipment. (Id. ¶ 24.) Patriot did not receive any response to the Demand Letter from
Malwa. (Id. ¶ 23.)
Patriot contends that Malwa breached the terms of the Agreement by failing to
use the loan proceeds to purchase the equipment or, if it did purchase the equipment,
failing to install and maintain the equipment at the specified address in accordance
with the Agreement’s terms. (Id. ¶ 50.) Additionally, Malwa has not made the
equipment available for inspection, have not provided assurance that the equipment is
insured, and they failed to make the last lease payment, all required by the Agreement.
(Hr’g Tr. 11:23-13:19, Sept. 14, 2017.)
III.
Pursuant to Rule 55(c), a court may set aside an entry of default “for good cause.”
FED. R. CIV. P. 55(C). The Third Circuit “does not favor entry of defaults,” preferring

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instead for cases to be “decided on their merits.” GE Med. Sys. Info. Techs., Inc. v.
Ansar, Inc., No. 04–2775, 2004 WL 2988513, at *2 (E.D. Pa. Dec. 23, 2004) (quoting
United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 194–95 (3d Cir. 1984)).
Courts should consider the following three factors when deciding whether to set aside
an entry of default or default judgment: (1) whether the plaintiff will be prejudiced; (2)
whether the defendant has a meritorious defense; [and] (3) whether the default was the
result of the defendant’s culpable conduct.’” Budget Blinds, Inc. v. White, 536 F.3d 244,
256 (3d Cir. 2008) (quoting $55,518.05 in U.S. Currency, 728 F.2d at 195).
Relief from a default entry is granted more readily than from a default judgment. Mike
Rosen & Assocs., P.C. v. Omega Builders, Ltd., 940 F.Supp. 115, 120 (E.D. Pa. 1996).
Although Defendants’ Motion is styled as a request to open and/or strike default
judgment, no default judgment has been entered yet and the Court treats the Motion as
one to strike or set aside the entries of default.
A.
Patriot has the burden of demonstrating that its claim “would be materially
impaired because of the loss of evidence, an increased potential for fraud or collusion,
substantial reliance on the entry of default, or other substantial factors.” Dizzley v.
Friends Rehab. Program, Inc., 202 F.R.D. 146, 148 (E.D. Pa. 2001). Delays in a
plaintiff's potential recovery or expenses incurred from litigating the matter on the
merits do not constitute the kind of prejudice the Court should consider in deciding
whether to set aside an entry of default. Ansar, 2004 WL 2988513, at *2. If Patriot is
forced to litigate the claims further, the equipment may not be there to recover after
trial or its value may be significantly impaired. There is no evidence that the

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equipment (which is security for the loan) is on site, in good condition, and safe. Patriot
has made numerous unsuccessful attempts to inspect the equipment. Despite the
Agreement and the Court’s September 8, 2017 Order, Malwa and Singh have not
permitted Patriot to inspect the equipment nor have they provided Patriot with proof
that the equipment is insured.
Second, the Court examines whether Malwa and Singh have a meritorious
defense, which is a defense that is not invalid on its face. Emcasco Ins. Co. v. Sambrick,
834 F.2d 71, 74 (3d Cir. 1987). Malwa breached the Agreement by not providing access
to the equipment for inspection. Malwa has also failed to provide assurance that the
equipment is insured or make payment on August 25, 2017, all required by the
Agreement.2 (Hr’g Tr. 11:23-13:19, Sept. 14, 2017.) At the September 14 hearing, (ECF
No. 30), counsel for Defendants stated that he could “offer no credible explanation,
certainly no excuse, as to why the [August 25] payment has not been made.” (Hr’g Tr.
8:2-11, Sept. 14, 2017.) Defendants were not even able to provide Patriot or the Court
with a scheduled date for inspection. (Hr’g Tr. 10:6-18, Sept. 14, 2017.) Neither Malwa
nor Singh have a meritorious defense.
Third, the Court examines whether conduct is culpable. The Summons was
returned executed on November 9, 2016. (ECF No. 3.) Defendants did not file an
answer or response. After numerous attempts by Patriot, Malwa and Singh did not
provide Patriot with the opportunity to inspect the equipment. Defendants conduct is
culpable.
Defendants have breached the Agreement in at least three ways. Georgia courts make a
distinction between “material” and “non-material” breaches where a party seeks rescission of the
contract as a remedy. Forsyth Cty. v. Waterscape Servs., LLC, 694 S.E.2d 102 (Ga. Ct. App. 2010).
Rescission of the Agreement is not at issue here.
2

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IV.
Federal Rule of Civil Procedure 55 governs the entry of default judgment. Three
factors control whether a default judgment should be granted: (1) prejudice to the
plaintiff if default is denied, (2) whether the defendant appears to have a litigable
defense, and (3) whether defendant’s delay is due to culpable conduct. See United
States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 195 (3d Cir. 1984). The Court
must consider and make explicit factual findings as to these three factors. Emcasco
Ins. Co. v. Sambrick, 834 F.2d 71, 74 (3d Cir. 1987). Moreover, before a court can enter
a default judgment, a plaintiff must present evidence of: (1) the court’s basis of personal
jurisdiction over defaulting defendants; (2) proper service of process upon defaulting
defendants; (3) facts necessary to state a cause of action; and (4) the amount claimed in
damages. D’Onofrio v. II Mattino, 430 F. Supp. 2d 431, 436 (E.D. Pa. 2006). “[T]he
factual allegations of the complaint, except those relating to the amount of damages,
will be taken as true.” Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990).
V.
A.
When a court considers personal jurisdiction in the posture of a default
judgment, “although the plaintiffs retain the burden of proving personal jurisdiction,
they can satisfy that burden with a prima facie showing,” and “may rest their argument
on their pleadings, bolstered by such affidavits and other written materials as they can
otherwise obtain.” D’Onofrio, 430 F. Supp. 2d at 437 (quoting Mwani v. bin Laden, 417
F.3d 1, 6 (D.C. Cir. 2005)). A plaintiff presents a prima facie case by “establishing with
reasonable particularity sufficient contacts between the defendant and the forum

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state.” Provident Nat. Bank v. California Fed. Sav. & Loan Ass’n, 819 F.2d 434, 437 (3d
Cir. 1987) (citing Gehling v. St. George’s School of Medicine, Ltd., 773 F.2d 539, 542 (3d
Cir. 1985)). Patriot has done so here.
i.
In its Complaint, Patriot alleges that Malwa is a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania and is thus a citizen of
the Commonwealth. (Compl. ¶ 4.) Patriot also contends that Malwa maintains a
registered office at 8102 West Chester Pike, Upper Darby, PA 19082. (Id.) Indeed, it
was at this address that Patriot was able to serve Malwa’s Authorized Agent, Aman
Kaur. See (Proof of Service, ECF No. 3). Patriot has presented sufficient evidence of
the Court’s personal jurisdiction over Malwa. See Daimler AG v. Bauman, 134 S. Ct.
746, 749 (2014) (“The paradigm all-purpose forums for general jurisdiction are a
corporation’s place of incorporation and principal place of business.”).
ii.
Patriot has also made a prima facie showing of personal jurisdiction over Singh.
The Complaint alleges that Singh is a citizen of and resides in Pennsylvania. (Compl. ¶
5.) See LNV Corp. v. Catalano, No. CV 15-3219, 2015 WL 4941962, at *4 (E.D. Pa. Aug.
19, 2015) (“As for personal jurisdiction, the court has general personal jurisdiction over
the defendants as they are domiciled in the Commonwealth of Pennsylvania.”) (citing
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924 (2011) (“For an
individual, the paradigm forum for the exercise of general [personal] jurisdiction is the
individual's domicile[.]”))

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B.
The Court must also ensure there is sufficient proof of service before granting a
default judgment. Gold Kist, Inc. v. Laurinburg Oil Co., Inc., 756 F.2d 14, 19 (3d Cir.
1985). Under Federal Rule of Civil Procedure 4(h)(1)(B), a plaintiff may effectuate
service on a corporation in a judicial district of the United States “by delivering a copy
of the summons and of the complaint to an officer, a managing or general agent, or any
other agent authorized by appointment or by law to receive service of process.” FED. R.
CIV. P. 4(h)(1)(B). Patriot, through a third-party, served Malwa Investors’ Authorized
Agent Aman Kaur in Upper Darby, Pennsylvania on November 2, 2016. (ECF No. 3.)
Federal Rule of Civil Procedure 4(e) permits service to an individual—other than a
minor, an incompetent person or a person whose waiver has been filed—within a
judicial district of the United States by “delivering a copy of [the summons and
complaint] to an agent authorized by appointment or by law to receive service of
process.” FED. R. CIV. P. 4(e)(2)(C). Patriot, through a third-party, served Singh’s
Authorized Agent Aman Kaur in Upper Darby, Pennsylvania on November 2, 2016.
(ECF No. 3.)
C.
Taking the alleged facts as true, Patriot has stated causes of action against
Malwa for breach of contract and against Singh for breach of guaranty. When a federal
court sits in diversity jurisdiction over a civil proceeding, it must apply the substantive
law of the state where it sits to resolve the claims, including its choice of law rules. See
Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938); Berg Chilling Sys., Inc. v. Hull Corp.,
435 F.3d 455, 462 (3d Cir. 2006). The Court accordingly must apply Pennsylvania

10

choice of law rules to determine the law that applies to the contracts. See Berg, 435
F.3d at 462; Xerox Corp. v. Bentley, 920 F. Supp. 2d 578, 579 (E.D. Pa. 2013).
Pennsylvania courts generally give effect to express choice of law provisions in
contracts. See, e.g., Howard Savs. Bank v. Cohen, 607 A.2d 1077, 1078 (Pa. Super. Ct.
1992); Smith v. Commonwealth Nat’l Bank, 557 A.2d 775, 777 (Pa. Super. 1989); see
also RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187(1) (“The law of the state chosen
by the parties to govern their contractual rights and duties will be applied.”). Here, the
Agreement states that it “shall be governed by and construed in accordance with the
laws or Georgia or the laws of the home state of assignee.” (Ex. P-4, ¶ 14.) Because
Patriot did not subsequently assign its rights under the Agreement to any third parties,
Georgia law governs.
i.
Patriot has stated a breach of contract claim against Malwa. “The elements for
a breach of contract claim in Georgia are the (1) breach and the (2) resultant damages
(3) to the party who has the right to complain about the contract being broken.” Norton
v. Budget Rent A Car Sys., Inc., 705 S.E.2d 305, 306 (Ga. Ct. App. 2010) (quoting
Kuritzky v. Emory Univ., 669 S.E.2d 179 (Ga. Ct. App. 2008)). Under the Agreement,
Malwa Investors promised to make monthly payments of $1,722.85 and maintain the
equipment at the specified address absent Patriot’s prior approval. (Ex. P-13, ¶¶ 2, 5,
11.) The Agreement states: “You will be in default if any or all of the following occurs:
(a) if you do not pay any payment or other sum due to us or our assigns when due, (b) if
you do not perform any other obligation or warranty herein within five (5) days after we
made demand therefore . . . .” (Id. ¶ 11.) Malwa breached the Agreement by failing to

11

make a monthly lease payment at the time it was due and by not providing access to
the equipment for inspection. Malwa has also failed to provide assurance that the
equipment is insured and make the last lease payment as required by the Agreement.
(Hr’g Tr. 11:23-13:19, Sept. 14, 2017.) As a result, Patriot, the party with the right to
complain under the Agreement, has suffered damages. (Compl. ¶ 50; H’rg Tr. 12:17-20.
Aug. 21, 2017.)
ii.
Patriot has also stated a breach of guaranty claim against Singh. “The contract
of suretyship or guaranty is one whereby a person obligates himself to pay the debt of
another.” Lynchar, Inc. v. Colonial Oil Indus., Inc., No. A17A0391, 2017 WL 2361144,
at *4 (Ga. Ct. App. May 31, 2017) (quoting GA. CODE ANN. § 10-7-1)). The Guaranty,
signed and executed by Singh on May 6, 2016, states that “[t]he undersigned hereby
irrevocably absolutely and unconditionally guarantees to Creditor full and prompt
payment and performance when due of each and every obligation of Debtor under the
Agreement.” (Ex. P-5, ¶ 1.) The Guaranty also provides that it is “a Guaranty of
payment, not collection, and the undersigned acknowledges and agrees that his/her
liability shall be absolute and unconditional and continuing, and shall be joint and
several, and in the event of a default, Creditor shall have no obligation whatsoever to
pursue the Debtor or any other obligors or guarantors or any equipment or other
collateral before pursuing the undersigned under this Guaranty.” (Id. ¶ 11.)
“A personal contract of guaranty must be in writing and must satisfy all of the
requisites of the [S]tatute of [F]rauds.” Id. (quoting Sysco Food Svcs. v. Coleman, 489
S.E.2d 568 (Ga. Ct. App. 1997)); see also GA. CODE ANN. § 13-5-30(2) (2010). Under the

12

Statute of Frauds, a promise to answer for another’s debt is only enforceable against
the promisor if it identifies the debt, the principal debtor, the promisor and the
promisee. Cmty. Magazine, LLC v. Color Xpress, 756 S.E.2d 564, 566 (Ga. Ct. App.
2014). The Guaranty does so here. First, it clarifies that the term “Agreement”
references Agreement 6122865 between State Bank & Trust Co. d/b/a Patriot as
“Creditor” and Malwa Investors as “Debtor.” (Ex. P-5.) It then identifies the promisor,
promisee and debt: “The undersigned hereby irrevocably absolutely and unconditionally
guarantees to Creditor full and prompt payment and performance when due of each
and every obligation of Debtor under the Agreement.” (Id. ¶ 1.) The Guaranty thus
satisfies the Statute of Frauds.
Under Georgia law, the Court must strictly construe an alleged guaranty
contract in favor of the guarantor, and the guarantor’s liability may not be extended by
implication or interpretation. See Cmty. Magazine, LLC, 756 S.E.2d at 566; Caves v.
Columbus Bank & Tr. Co., 589 S.E.2d 670, 676 (Ga. Ct. App. 2003). However, Georgia
law is also “clear that creditors are entitled to summary judgment in a suit on an
unconditional guaranty when the guarantor has waived all of his defenses.” Core
LaVista, LLC v. Cumming, 709 S.E.2d 336, 340 (Ga. Ct. App. 2011) (citing Brookside
Communities v. Lake Dow North Corp., 603 S.E.2d 31 (Ga. Ct. App. 2004)). Singh did
so here. See (Ex. P-14, ¶ 2 (“The undersigned hereby waives . . . (ii) any and all
defenses otherwise available to a guarantor or accommodation party.”)). And in any
event, Singh’s counsel has represented that he does not have any litigable defense. See
Hr’g 17:3-18:23, Sept. 14, 2017. Singh unconditionally guaranteed Malwa Investors
“full and prompt payment and performance” under the Agreement with Patriot and

13

breached the Guaranty by failing to assure the same, causing Patriot to suffer damages.
(Compl. ¶¶ 58–60.)
D.
Finally, a plaintiff seeking default judgment must present evidence of the
amount claimed in damages. Rainey v. Diamond State Port Corp., 354 F. App’x 722,
724 (3d Cir. 2009). “When a plaintiff prevails by default, he or she is not automatically
entitled to the damages they originally demanded.” Rainey, 354 F. App’x at 724 (citing
Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990)). “Rather, defaults are
treated as admissions of the facts alleged, but a plaintiff may still be required to prove
that he or she is entitled to damages sought.” Id. 431 F.3d at 165). District courts must
conduct an inquiry in order to ascertain the amount of damages with “reasonable
certainty.” Bricklayers & Allied Craftworkers v. WaterControl Servs., Inc., No. 09-3935,
2012 WL 3104437, at *7 (E.D. Pa. July 30, 2012) (quoting Credit Lyonnais Sec. (USA),
Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999)). In short, the Court must ensure
that there is a basis for the damages specified in the default judgment. See Trickel v.
Disc. Gold Brokers, Inc., No. 3:14-1916, 2016 WL 4435699, at *6 (M.D. Pa. Jan. 5, 2016)
(citing Transatlantic Marine Claims Agency, Inc., v. Ace Shipping Corp., Div. of Ace
Young Inc., 109 F.3d 105, 111 (2d Cir. 1997)). In performing this task, “[t]he district
court has considerable latitude in determining the amount of damages.” Trickel, 2016
WL 4435699, at *6 (quoting Jones v. Winnepesaukee Realty, 990 F.2d 1, 4 (1st Cir.
1993)).
The Agreement provides that “[i]f any part of a payment is late, you agree to pay
a late charge of 15% of the payment which is late or if less, the maximum charge

14

allowed by law.” (Ex. P-4, ¶ 11.) The Agreement further provides that in the event of
default:
[Y]ou shall be required to pay us or our assigns the entire unpaid balance of the
Agreement, including accrued but unpaid periodic payments, plus all late
charges and costs, plus an amount equal to the present value of the entire
unpaid balance of the total periodic payments hereunder discounted at three
percent (3%) per annum as of the date of default, plus interest thereafter at the
rate of eight percent (8%) per annum, plus any other sums and or damages, all
of which shall be immediately due and payable.
(Id.)
Patriot has submitted documentation and presented testimony in support of the
damages requested, composed of (i) the unpaid balance, (ii) post-default interest at the
rate of eight percent (8%) per annum and (iii) attorneys’ fees and costs. See (Ex. P-10).
The Court addresses each in turn.
i.
The unpaid balance, calculated by subtracting the security deposit ($1,722.85)
from the principal balance as of August 17, 2017 ($62,964.45), is $61,241.60 (Ex. P-10;
Hr’g Tr. at 8:4–24, Aug. 21, 2017.)
ii.
As mentioned above, the Agreement also provides for post-default interest at the
rate of eight percent (8%) per annum. (Ex. P-4, ¶ 11.) At this rate, $17.91 of postdefault interest accrues per day. Multiplying that figure by 20 days (from August 25,
2017 to September 14, 2017), the post-default interest due totals $358.20. (Ex. P-10.)
This is a valid and enforceable liquidated damage clause. See, e.g., MMA Capital Corp.
v. ALR Oglethorpe, LLC, 785 S.E.2d 38, 41–42 (Ga. Ct. App. 2016) (upholding an 8%

15

post-default interest provision as a reasonable non-penalty); In re Cliftondale Oaks,
LLC, 357 B.R. at 886–87 (collecting cases).
iii.
Without specifying any particular amount or percentage, the Agreement
provides for “attorneys’ fees and court costs.” (Ex. P-4, ¶ 11.) Under Georgia law,
attorneys’ fees are calculated using statutorily mandated percentages. See GA. CODE
ANN. § 13-1-11 (2010). Section 13-1-11, titled “Validity and enforcement of obligations
to pay attorney’s fees upon notes or other evidence of indebtedness,” states:
(a) Obligations to pay attorney’s fees upon any note or other evidence of
indebtedness, in addition to the rate of interest specified therein, shall be
valid and enforceable and collectable as a part of such debt if such note or
other evidence is collected by or through an attorney after maturity, subject
to the following provisions:
....
(2) If such note or other evidence of indebtedness provides for the payment of
reasonable attorney’s fees without specifying any specific percent, such
provision shall be construed to mean 15 percent of the first $500.00 of
principal and interest owing on such note or other evidence of indebtedness
and 10 percent of the amount of principal and interest owing thereon in
excess of $500.00.
Id.
Here, the principal is $62,964.45, and interest owing thereon, $358.20, totaling
$63,322.65.

Fifteen percent of the first $500 is $75; ten percent of the remaining

$62,822.65 is $6,282.265. The proper amount of attorneys’ fees under § 13-1-11(a)(2) is
therefore $6,357.27.
iv.
In sum, Patriot has proven with reasonable certainty the following damages:
$1,722.85 retention of security deposit, $61,241.60 unpaid balance, $35.20 in post-

16

default interest and $6,357.27 in attorneys’ fees. Malwa and Singh are thus jointly and
severally liable for a total of $69,679.92 in damages.
V.
Patriot has presented sufficient evidence of the Court’s personal jurisdiction over
the defaulting defendants, proper service of process upon the defaulting defendants, the
facts necessary to state a cause of action and the appropriate amount of damages.
D’Onofrio, 430 F. Supp. 2d at 436. The Court will now turn to the three factors that
control whether a default judgment should be granted: (1) prejudice to the plaintiff if
default is denied, (2) whether the defendant appears to have a litigable defense, and (3)
whether defendant’s delay is due to culpable conduct. See $55,518.05 in U.S. Currency,
728 F.2d at 195.
First, Patriot would be prejudiced if default judgment were denied since it has
presented sufficient evidence that Defendants breached the Agreement, caused
monetary injury and offered no defense in the matter. See Summit Tr. Co. v. Paul Ellis
Inv. Assoc., LLC, No. 2:12-6672, 2013 WL 3967602, at *4 (E.D. Pa. Aug. 2, 2013); Doe v.
Simone, No. 12-5825, 2013 WL 3772532, at *5 (D.N.J. July 17, 2013). Second, defense
counsel has represented that Malwa and Singh do not have a meritorious defense. See
Hr’g Tr. 17:3-18:23, Sept. 14, 2017.
Finally, Defendants’ delay is due to culpable conduct. Patriot sent Demand
Letters to both Malwa and Singh in September 2016 requesting that they make the
equipment available for inspection. Patriot did not receive any response to this letter.
(Compl. ¶¶ 21, 23; Hr’g Tr. 12:17-13:11, Aug. 21, 2017.) Patriot tried to perform an
inspection on the equipment and found a building which appeared to be vacant. (P-7;

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Hr’g Tr. 13:12-14:11, Aug. 21, 2017.) The investigators were not able to go inside the
building to look and confirm whether or not the equipment was located there as
required by the equipment finance agreement. (Id. at 14:12-19.) In May 2017, counsel
for Defendants contacted Patriot’s counsel and represented that Patriot would be able
to inspect the equipment. (Id. at 32:22-33-7.) As of the August 21, 2017 hearing, the
equipment had not been made available for inspection. (Id. at 14:12-19.) Counsel for
Malwa and Singh indicated that Singh was in India, but that his sister had the key for
the building. (Id. at 17:9-15.) The Court did not enter default judgment after the
hearing on August 21, 2017. Instead, the Court gave Malwa and Singh another chance
to allow Patriot to inspect the equipment. On August 23, 2017, the Court ordered the
Defendants to “permit Plaintiff to inspect the equipment” and provide Patriot with
proof that equipment is insured. (ECF No. 27.) Patriot provided the Court with a
status report on September 8, 2017, stating Defendants had not made the equipment
available for inspection. Finally, during the September 14 supplemental hearing (ECF
No. 30), counsel for Defendants stated he could offer no explanation or excuse as to why
the August lease payment was not made. (Hr’g Tr. 8:2-11, Sept. 14, 2017.)
An appropriate order follows.
BY THE COURT:

/s/ Gerald J. Pappert
GERALD J. PAPPERT, J.

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