Celtic Bank Corporation v Image Plus Dental Design, LLC et,al

Filing 14

Memorandum Opinion and Order granting 10 Motion for Entry of Default Judgment against Image Plus Dental Design, L.L.C., Randy J. Winans, and Jennifer Winans. Accordingly, the court will issue a default judgment against Defendants, jointly and severally, in accordance with this opinion and by separate document pursuant to Federal Rule of Civil Procedure 58. (Ordered by Judge Sam A Lindsay on 2/8/2013) (ctf)

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
CELTIC BANK CORPORATION,
Plaintiff,
v.
IMAGE PLUS DENTAL DESIGN, LLC,
RANDY J. WINANS, and JENNIFER
WINANS,
Defendants.

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Civil Action No. 3:12-CV-1110-L

MEMORANDUM OPINION AND ORDER
Before the court is Plaintiff’s Motion for Entry of Default Judgment against Image Plus
Dental Design, L.L.C., Randy J. Winans, and Jennifer Winans (collectively, “Defendants”), filed
July 9, 2012. After careful consideration of the motion, record, and applicable law, the court
grants Plaintiff’s Motion for Entry of Default Judgment.
I.

Factual Background
Celtic Bank Corporation (“Plaintiff” or “Celtic Bank”) filed this action against

Defendants Image Plus Dental Design, LLC, Randy J. Winans, and Jennifer Winans
(collectively, “Defendants”) on April 10, 2012. Plaintiff’s Original Complaint (the “Complaint”)
sets forth the following allegations against Defendants:
7.
On May 30, 2006, Randy J. Winans (“R. Winans”) and Image Plus Dental
Design, L.L.C. (“Image Dental”) jointly executed a promissory note (the “Note”)
in the original principal amount of $1,750,000.00 payable to First National Bank
of Arizona. A true and correct copy of the Note is attached hereto as Exhibit “I”
and is incorporated by reference.
8.
On May 30, 2006, Image Dental additionally executed a Security
Agreement Assignment of Leases and Rents, and Financing Statement
(hereinafter the “Deed of Trust”) thereby securing amounts due and owing under
Memorandum Opinion and Order – Page 1

the Note. A true and correct copy of the Deed of Trust is attached hereto as
Exhibit “2” and is incorporated by reference. The Deed of Trust created a lien on
a tract of Real Property in Dallas County, Texas more fully described in
EXHIBIT “A” to the Deed of Trust.
9.
On May 30, 2006, Jennifer Winans (“J. Winans”) signed an unconditional
guarantee (the “J. Winans Guarantee”) in favor of First National Bank of Arizona,
thereby guaranteeing all amounts due and owing under the Note. A true and
correct copy of the J. Winans Guarantee is attached hereto as Exhibit “3” and is
incorporated by reference.
10.
On May 30, 2006, Image Dental and R. Winans additionally executed a
Commercial Security Agreement (the “Security Agreement”) in favor of First
National Bank of Arizona, thereby further securing all amounts due and owing
under the Note. A true and correct copy of the Security Agreement is attached
hereto as Exhibit “4” and is incorporated by reference.
11.
Bank of Arizona subsequently failed and was placed into an FDIC
Receivership. Ultimately, the FDIC sold the entire loan and assigned all of the
documents encompassing the loan, including but not limited to Exhibits “I”
through “4”, to Celtic. Celtic is the owner and holder of the Note and assignee
and owner of the Unconditional Guarantee herein referenced, the Security
Agreement, and the Deed of Trust.
12.
Thereafter, there was a default under the Note by virtue of the cessation of
monthly installment payments as they became due and owing. By letter of
November 14, 2011, (the “November 14th Letter”) Celtic Bank made demand on
all of the Defendants for the full arrearage amount of $249,644.08 that reflected
unpaid installments for the period of July 2010 through October 2011. A true and
correct copy of the November 14th Letter is attached hereto as Exhibit “5” and is
incorporated by reference.
13.
Thereafter, the Defendants failed to cure the default by paying the
arrearages. Accordingly, by letter dated December 9, 2011, (the “December 9th
Letter”), Celtic served Notice of Acceleration and a Notice of Foreclosure Sale on
all Defendants. A true and correct copy of the December 9th Letter and the
accompanying Notice of Foreclosure Sale that was enclosed are collectively
attached as Exhibit “6” and are incorporated by reference. Thereafter, the
foreclosure sale on the property occurred by trustee’s sale of January 3, 2012, and
the Property was acquired by Celtic Bank as the highest bidder at $200,000.00.
True and correct copies of the Foreclosure Sale Deed and the Trustee’s Sale
Affidavit are collectively attached hereto as Exhibit “7” and are incorporated by
reference.
14.
After all just and lawful offsets, there remains due and owing on the Note
the principal amount of $1,597,672.77 along with accrued interest of $141,540.37
Memorandum Opinion and Order – Page 2

with interest continuing to accrue at the daily rate of $240.75 constituting an
interest rate of 5.5%. Additionally, there are various costs incurred in conjunction
with the preservation in foreclosure on the property in the amount of $48,677.31
constituting, as of March 29, 2012 the total of $1,800,189.75.
15.

All conditions precedent have been fulfilled.

Pl.’s Orig. Compl. ¶¶ 7-14.
Plaintiff states that after all offsets the amount as of March 29, 2012, remaining due is
$1,597,672.77, along with prejudgment interest at the rate of 5.5% on the principal ($240.75 per
diem) until the date judgment is issued by the court. Celtic Bank also seeks $48,677.31 for
various costs incurred in conjunction with the preservation and foreclosure of real property
collateral. Celtic Bank further seeks reasonable attorney’s fees in connection with this action
and the foreclosure in an amount of at least $50,000. Plaintiff further contends that by virtue of
the execution of the “Note” and Unconditional Guarantee, the foreclosure sale, and various costs
incurred, all Defendants are jointly and severally liable for the relief Plaintiff seeks. Pl.’s Orig.
Compl. ¶¶ 17-18.
On July 9, 2012, the clerk’s office entered entries of default against all Defendants. The
entries all stated that the Original Complaint had been served on each Defendant and that each
failed to answer or otherwise defend within the time permitted under law. The entries also
reflect that Plaintiff has, through affidavit or otherwise, established this failure as to each
Defendant.

Memorandum Opinion and Order – Page 3

II.

Discussion
A.

Liability

The record reflects that Defendants were duly served and that they have not answered or
otherwise defended this action. Further, no Defendant is a minor, a member of the United States
Armed Services, or an incompetent person.
Based on the allegations of the Complaint, which are well-pleaded and accepted as true
by the court, the exhibits attached to the Complaint, and the Amended Affidavit of Brian Zern
and exhibits attached thereto, the court determines that Defendants failed to make the required
monthly installments on the Note and therefore defaulted. Further, the court determines that
Defendants failed to cure the default and that Celtic Bank is entitled to recover appropriate
damages for the deficiency as set forth in Count 1 of the Complaint.
B.

Damages and Prejudgment Interest

By way of its Proposed Default Judgment, Plaintiff seeks damages from Defendants,
jointly and severally, for the principal amount of $1,597,672.77 and all accrued prejudgment
interest of $162,726.37 through June 18, 2012, which is at a rate of 5.5% per annum ($240.75
per diem); and from this date at a rate of $240.75 per day until judgment is entered. Plaintiff also
seeks costs incurred in conjunction with its preservation and foreclosure of property collateral in
the amount of $65,147.11. Further, Celtic Bank seeks $10,000 as reasonable attorney’s fees
incurred in the preservation of the real property collateral and the foreclosure on such property,
and it seeks $8,000 in attorney’s fees and cost for prosecuting this action. The court will address
the issue of attorney’s fees in the following section.
While Celtic Bank is entitled to damages, prejudgment interest, costs incurred in
conjunction with the foreclosure and collateral property, and attorney’s fees and certain
Memorandum Opinion and Order – Page 4

expenses, the court disagrees with the amount of recovery requested in Plaintiff’s Proposed
Default Judgment. The court agrees that the principal amount is $1,597,672.77, and this is the
amount on which the court will compute prejudgment interest.
This is a diversity case, and prejudgment interest is calculated under state law in diversity
cases. Boston Old Colony Ins. Co. v. Tiner Assocs. Inc., 288 F.3d 222, 234 (5th Cir. 2002). In
Texas, a claim for prejudgment interest may be based upon general principles of equity or an
enabling statute. Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549, 552 (Tex. 1985).
Under both the common law and the Texas Finance Code, prejudgment interest begins to accrue
on the earlier of: (1) 180 days after the date a defendant received written notice of a claim, or (2)
the date suit is filed. Tex. Fin. Code Ann. § 304.104 (West 2006). Prejudgment interest stops
accruing on the date prior to entry of judgment and is computed as simple interest.

Id.

Prejudgment interest is awarded to compensate fully the injured party, not to punish the
defendant, and is considered compensation allowed by law as additional damages for lost use of
the money due between the accrual of the claim and the date of judgment. See Johnson &
Higgins, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 528 (Tex. 1998).
The court agrees that the rate of 5.5% applies to prejudgment interest in this case;
however, it is unclear from the record when Defendants received written notice of Plaintiff’s
claim. The court does not consider the letter of November 14, 2011, to constitute notice of a
claim; however, the court does consider the letter of December 9, 2011, to Defendants as a notice
of claim. This is so because the letter specifically makes demand for the full outstanding balance
of the loan, interest due and other costs and expenses chargeable to Defendants in connection
with the loan. As the date the lawsuit was filed is less than 180 days, the court determines that
prejudgment interest is calculated from the date this action was filed on April 10, 2012, to the
Memorandum Opinion and Order – Page 5

date of entry of the judgment. Therefore, the amount of prejudgment interest on $1,597,672.77
is $74,630.95, not the $162,726.37 amount requested by Celtic Bank.* Thus, Celtic Bank is
entitled to a total of $1,672,303.72 as principal and prejudgment interest.
Celtic Bank also seeks $65,147.11 for various costs and expenses incurred in conjunction
with the preservation and foreclosure on the collateral property. This amount is documented by
affidavit, and the court will allow recovery of $65,147.11 along with prejudgment interest at the
rate of 5.5% from the date of the filing of this action to the date of judgment. Recovery on these
costs and expenses totals $68,190.28 ($65,147.11 + $3,043.17 prejudgment interest).
C.

Attorney’s Fees and Expenses

With respect to attorney’s fees, Celtic Bank has produced documentation that it incurred
attorney fees and paralegal fees of $14,023.50 and related expenses of $2,569.26 for a total of
$16,592.76 in connection with preserving the real estate collateral in a lawsuit for unpaid taxes.
The court has reviewed the documentation and the affidavit of Mr. Andrew F. Emerson and
concludes that the attorney’s fees requested are reasonable and that services rendered were
necessary with respect to the lawsuit involving the unpaid taxes. The court will allow recovery
of $16,592.76 along with prejudgment interest at the rate of 5.5% from the date this action was
filed until the date of judgment. Thus, the total amount to be recovered by Celtic Bank is
$17,367.85 ($16,592.76 + $775.09 prejudgment interest).

*

Celtic Bank does not explain or set forth its methodology for seeking substantially more than
this amount of prejudgment interest on the principal of $1,597,672.77. The court also notes that the
record is not clear in some instances as to how other damages were computed. In those instances where
the basis for an amount sought was unclear, the court did not make an award; however, in instances where
the amount was specifically stated or the court could make reasonable inferences, the court allowed the
amount requested by Celtic Bank.
Memorandum Opinion and Order – Page 6

Celtic Bank also seeks attorney’s fees for the time expended on the prosecution of this
action. Although Celtic Bank did not provide the court with any time records relating to the
amount of time expended and the services rendered, the court is able to review the docket sheet
and determine which documents were filed in this case. The court has granted default judgment
in a number of cases and is familiar with what it takes to present a proper motion for default
judgment.

Based on its experience in setting fees in other similar cases, a review of the

documents filed in this case, and Mr. Emerson’s affidavit, the court determines that the requested
fee of $8,000 constitutes a reasonable request and will allow Celtic Bank to recover $8,000, as it
reflects a reasonable charge for the reasonable and necessary services rendered to prosecute this
action. No prejudgment interest will be allowed on this amount.
D.

Postjudgment Interest

Celtic Bank requests postjudgment interest at the highest lawful rate. With respect to an
award of postjudgment interest, federal law applies on “any judgment in a civil case recovered in
a district court . . . including actions based on diversity of citizenship.” Travelers Ins. Co. v.
Liljeberg Enters., Inc. 7 F.3d 1203, 1209 (5th Cir. 1993) (citation and internal quotation marks
omitted). A court awards postjudgment interest pursuant to 28 U.S.C. § 1961. Accordingly,
postjudgment interest will accrue on the judgment at the applicable federal rate, which is
currently .15 percent per annum.
III.

Conclusion
For the reasons herein stated, the court grants Plaintiff’s Motion for Entry of Default

Judgment. Accordingly, the court will issue a default judgment against Defendants, jointly and
severally, in accordance with this opinion and by separate document pursuant to Federal Rule of
Civil Procedure 58.
Memorandum Opinion and Order – Page 7

It is so ordered this 8th day of February, 2013.

_________________________________
Sam A. Lindsay
United States District Judge

Memorandum Opinion and Order – Page 8