Bautista Cayman Asset Company v. Sylar Corporation et al

Filing 77

OPINION AND ORDER GRANTING DEFAULT JUDGMENT: For the reasons set forth in this Opinion and Order, the Court GRANTS Plaintiff's Motion for Default Judgment against co-defendant American Tools, Inc. at Docket No. 73 . Judgment shall be entered accordingly. Signed by Judge Raul M. Arias-Marxuach on 12/8/2022. (mrr) Modified on 12/8/2022 to add document to docket entry (gr).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

BAUTISTA REO PR CORP.
Plaintiff
v.

CIVIL NO. 16-3109(RAM)

SYLAR CORPORATION; AMERICAN TOOLS,
INC.; ARMANDO CEPEDA-CHEMBI; his
wife SYLVIA CEPEDA-BENAVIDES; and
the legal conjugal partnership
CEPEDA-CEPEDA
Defendants
OPINION AND ORDER GRANTING DEFAULT JUDGMENT
RAÚL M. ARIAS-MARXUACH, District Judge
This matter comes before the Court on Plaintiff Bautista REO
PR Corp.’s (“Plaintiff” or “Bautista REO”) Motion for Default
Judgment

as

to

co-defendant

American

Tools,

Inc.

(“American

Tools”). (Docket No. 73). Having reviewed the record, the Court
GRANTS Plaintiff’s Motion for Default Judgment at Docket No. 73.
I.
On

December

(“Bautista”)

filed

8,
a

PROCEDURAL BACKGROUND
2016,

Bautista

Complaint

for

Cayman

collection

Asset
of

Company

moneys

and

foreclosure of collateral against American Tools, Inc., Sylar
Corporation, Armando Cepeda-Chembi, Sylvia Cepeda-Benavides and
the

Conjugal

Partnership

“Defendants”). (Docket No. 1).

Cepeda-Cepeda

(collectively

Civil No. 16-3109(RAM)

2

On February 8, 2017, Bautista certified having served summons
and the Complaint on American Tools on January 11, 2017. (Docket
No. 13). Pursuant to Fed. R. Civ. P. 12(a)(1)(A)(i), American Tools
was required to file an answer or responsive pleading on or before
February 1, 2017 (i.e., within 21 days after being served with the
summons and complaint). However, no such answer or responsive
pleading was filed.
On

February

8,

2017,

Bautista

filed

a

Motion

to

Stay

Proceeding Against Guarantor, American Tools, Inc. (“Motion to
Stay”) as Bautista received a notice that American Tools had filed
for bankruptcy under Case Num. 16-08071-BKT11 (the “First American
Tools Bankruptcy Case”) in the United States Bankruptcy Court for
the District of Puerto Rico (the “Bankruptcy Court”). (Docket No.
17). On February 24, 2017, the Court entered an order granting the
Motion to Stay and directing Bautista to inform the Court “if and
when the automatic stay is lifted or no longer in effect due to
the dismissal of the bankruptcy case”. (Docket No. 19).
On August 14, 2017, Partial Final Default Judgment was entered
against co-defendants Sylar Corporation, Armando Cepeda-Chembi,
Sylvia

Cepeda-Benavides

and

the

Conjugal

Partnership

Cepeda-

Cepeda. (Docket No. 51). Therefore, American Tools is the only
remaining co-defendant.

Civil No. 16-3109(RAM)

3

On July 6, 2018, an order dismissing the First American Tools
Bankruptcy Case was entered. On September 11, 2019, American Tools
filed for bankruptcy again in the Bankruptcy Court, under Case
Num. 19-05202-BKT11 (the “Second American Tools Bankruptcy Case”
and together with the First American Tools Bankruptcy Case, the
“American Tools Bankruptcy Cases”). (Docket No. 64 ¶¶ 15-16).
On September 25, 2019, American Tools moved to voluntarily
dismiss the Second American Tools Bankruptcy Case and on October
15, 2019, the Bankruptcy Court dismissed it. Id. ¶ 17. American
Tools obtained neither confirmation of any Chapter 11 plan or any
type of discharge in the American Tools Bankruptcy Cases. Id.
On March 9, 2022, Bautista filed a Motion for Substitution of
Party asking the Court to be substituted by Bautista REO for any
and all purposes. (Docket No. 63).1 The following day, Bautista
filed a Motion for Order Vacating Judgment Staying Case as to
American Tools, Inc. and for Entry of Default Pursuant to Fed. R.
Civ. P. 55(a) (“Motion to Vacate Stay and for Default Entry”).
(Docket No. 66).
On

March

10,

2022,

the

case

was

transferred

to

the

undersigned. (Docket No. 65). On September 7, 2022, the Court
granted both Bautista’s Motion for Substitution of Party, thereby

1

The basis of this motion was that on January 3, 2022, Bautista and Bautista
REO executed a Distribution and Contribution Agreement whereby Bautista REO
acquired all the rights, title, and interests in the loan and collateral
documents that are object of the litigation in the captioned case.

Civil No. 16-3109(RAM)

4

substituting it with Bautista REO as Plaintiff in this case, and
it’s Motion to Vacate Stay and for Default Entry. (Docket Nos. 68
and 69). The Clerk of the Court issued Entry of Default against
American Tools on September 9, 2022. As of today, American Tools
has failed to answer the Complaint or otherwise file any pleading
in this case. In compliance with this Court’s order, Bautista REO
filed a Motion for Default Judgment on September 16, 2022. (Docket
No. 73).
II.

APPLICABLE LAW

A. Default Judgment
Pursuant to Fed. R. Civ. P. 55(b)(1), “a plaintiff ‘must apply
to the court for a default judgment’ where the amount of damages
claimed is not a sum certain.” Vazquez-Baldonado v. Domenech, 792
F. Supp. 2d 218, 221 (D.P.R. 2011) (quoting Fed. R. Civ. P. 55(b)).
In the case at bar, Plaintiff seeks a certain amount of damages,
namely the amount of $3,776,848.24, consisting of $1,650,022.23 of
principal in connection with the Loan Agreement and the Guaranty,
and $2,126,826.01 of interest and other charges, as of September
16, 2022.
“The default of a defendant constitutes an admission of all
facts well-pleaded in the complaint.” Metro. Life Ins. Co. v. Colon
Rivera, 204 F. Supp. 2d 273, 274 (D.P.R. 2002) (collecting cases).
See also Franco v. Selective Ins. Co., 184 F.3d 4, 9 n. 3 (1st

Civil No. 16-3109(RAM)

5

Cir. 1999) (“[a] party who defaults is taken to have conceded the
truth of the factual allegations in the complaint”). However,
following entry of default, the court may independently “examine
a

plaintiff's

complaint,

taking

all

well-pleaded

factual

allegations as true, to determine whether it alleges a cause of
action.” Ramos-Falcon v. Autoridad de Energia Electrica, 301 F.3d
1, 2 (1st Cir. 2002) (citing Quirindongo Pacheco v. Rolon Morales,
953 F.2d 15, 16 (1st Cir.1992)).
III. FINDINGS OF FACT2
Accordingly, the Court makes the following findings of fact:
1. On February 27, 2015, the Office of the Commissioner of
Financial Institutions closed the operations of Doral Bank
(“Doral”) and named the Federal Deposit Insurance Corporation
(“FDIC”) as receiver. (Docket No. 1 ¶ 10).
2. On March 27, 2015, Bautista executed an agreement with the
FDIC through which it acquired certain assets of Doral & Doral
Mortgage

LLC,

including,

among

others,

the

credit

relationships between Doral, Doral Mortgage LLC, and American
Tools. Id. ¶ 11.
3. On December 30, 2009, Sylar Corporation (“Sylar”) executed a
loan agreement (the “Loan Agreement”) with Doral. Through the

2

References to a Finding of Fact shall be cited as follows: (Fact ¶ _).

Civil No. 16-3109(RAM)

6

Loan Agreement, Doral provided to Sylar a credit facility in
the principal amount of $1,730,000.00. (Docket No. 9-1).
4. Pursuant to the Loan Agreement, in the event of any default
with the terms, obligations or covenants under the Loan
Agreement, Doral may take any action in law or equity to
collect any and all of Sylar’s obligations or indebtedness
under the Loan Agreement. Id. at 11.
5. The principal amount due under the Loan Agreement is evidenced
by a promissory note in the amount of $1,730,000.00 issued by
Sylar to the order of Doral Mortgage LLC (the “Promissory
Note”). (Docket No. 9-2).
6. On December 30, 2009, American Tools executed a Continuing
and

Unlimited

Guarantee

(the

“Guaranty”)

to

jointly

and

severally guarantee to Doral the payment of all of the
obligations under the Loan Agreement, authenticated under
affidavit number 2,000 of Notary Public Gadiel O. Rosario
Rivera, thereby making American Tools a joint guarantor of
Sylar’s obligations under the Loan Agreement. (Docket No. 96).
7. American Tools and the rest of the co-defendants in the
captioned case defaulted on their obligations under the Loan
Agreement as they failed to pay the amounts due therein under

Civil No. 16-3109(RAM)

7

the terms and conditions of the Loan Agreement. (Docket No.
1 ¶ 22).
8. As a result, on September 6, 2016, Bautista sent a letter
(the “Letter”) to Defendants to the addresses provided for
notices under the Loan Agreement. The Letter detailed the
various events of default under the Loan Agreement including,
but not limited to, Defendants’ failure to pay and satisfy
the amounts of principal and interest when due under the Loan
Agreement. (Docket No. 1-7).
9. Therefore, all of the obligations under the Loan Agreement
are immediately and automatically due, owed, and payable.
10. On January 3, 2022, Bautista, Bautista Cayman Holding Company
and Bautista REO entered into a certain Distribution and
Contribution Agreement pursuant to which all rights, title
and

interests

in

the

loan

and

collateral

documents

in

connection therewith that are object of this litigation were
transferred to Bautista REO. (Docket No. 63).
IV.

DISCUSSION

Per the terms of the Guaranty executed on December 30, 2009,
American Tools is jointly and severally liable for all of the
obligations under the Loan Agreement. (Fact ¶ 6).

American Tools,

along with the co-defendants, defaulted on their obligations under
the Loan Agreement by failing to pay the amounts required by the

Civil No. 16-3109(RAM)

8

terms and conditions of the Loan Agreement. Id. Moreover, American
Tools breached its repayment obligation with Bautista REO under
the Puerto Rico Civil Code and the Puerto Rico Mortgage Law.
In accordance with the above, and pursuant to Fed. R. Civ. P.
55(b)(1), as of September 16, 2022, Bautista REO is entitled to
judgment as a matter of law against American Tools, and the other
co-defendants, for the amount of $3,776,848.24, consisting of
$1,650,022.23 of principal in connection with the Loan Agreement
and the Guaranty, and $2,126,826.01 of interest and other charges,
which will continue to accrue interest daily until indefeasible
payment in full. (Docket No. 73-1).
American

Tools

is

further

forbidden

from

alienating,

transferring or further encumbering any real property or personal
property or from causing others to alienate, transfer or further
encumber any personal property owned by American Tools, outside of
the ordinary course of business, pending the outcome of this
lawsuit.
Pursuant to 28 U.S.C. § 1961, the aforementioned amounts will
accrue interest from the date of this judgment, at a rate equal to
the weekly average 1-year constant maturity Treasury yield, as
published by the Board of Governors of the Federal Reserve System,
for the calendar week preceding the entry of judgment. Interest

Civil No. 16-3109(RAM)

9

shall be computed daily until the date of payment and compounded
annually.
V.

CONCLUSION

In light of the above, the Court GRANTS Plaintiff’s Motion
for Default Judgment against co-defendant American Tools, Inc. at
Docket No. 73. Judgment shall be entered accordingly.
IT IS SO ORDERED.
In San Juan Puerto Rico, this 8th day of December 2022.
S/ RAÚL M. ARIAS-MARXUACH
United States District Judge