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Direct Capital Corp. v. American Tank Co. Inc.

United States District Court, D. New Hampshire

October 26, 2017

Direct Capital Corp.
v.
American Tank Co., Inc. and Lawrence Romero

          REPORT AND RECOMMENDATION

          Andrea K. Johnstone United States Magistrate Judge.

         Plaintiff Direct Capital Corp. ("DCC") brought suit against American Tank Co., Inc. ("ATC") and Lawrence Romero ("Romero") for an award of money damages to satisfy a debt. On June 28, 2017, the Clerk of Court entered default against ATC and Romero for failure to respond to service. See doc. no. 13. DCCs motion for default judgment (doc. no. 14) is now before the court for Report and Recommendation pursuant to Federal Rule of Civil Procedure 55(b)(2). For the reasons that follow, the court recommends that DCC s motion be granted in part and denied without prejudice in part.

         Standard of Review

         After default is entered and when the amount at issue is not a sum certain, "the party must apply to the court for a default judgment." Fed.R.Civ.P. 55(b)(2); see also KPS & Assocs., Inc. v. Designs by EMC, Inc., 318 F.3d 1, 19 (1st Cir. 2003). Before entering a default judgment, the court "may 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) (quoting Quirindongo Pacheco v. Rolon Morales, 953 F.2d 15, 16 (1st Cir. 1992)). The defaulted party is "taken to have conceded the truth of the factual allegations in the complaint . . . ." Ortiz-Gonzalez v. Fonovisa, 277 F.3d 59, 62-63 (1st Cir. 2002) (quoting Franco v. Selective Ins. Co., 184 F.3d 4, 9 n. 3 (1st Cir. 1999)). The defaulted party does not, however, "admit the legal sufficiency of those claims." 10 James Wm. Moore, Moore's Federal Practice § 55.32[1][b] (3d ed. 2013). In other words, before entering default judgment, the court must determine whether the admitted facts state actionable claims. See Hop Hing Procedures Inc. v. X & L Supermarket, Inc., No. CV 2012-1401 (ARR) (MDG), 2013 WL 1232919, at *2 (E.D.N.Y. Mar. 4, 2013); E. Armata, Inc. v. 27 Farmers Market, Inc., No. 08-5212 (KSH), 2009 WL 2386074, at *2 (D.N.J. July 31, 2009).

         Background

         By virtue of its default, defendants concede the following facts alleged in DCC's complaint:

         DCC is a New Hampshire corporation with a principal place of business at 155 Commerce Way, Portsmouth, New Hampshire. See doc. no. 1 ¶ 2. On or about April 23, 2015, DCC financed ATC's purchase of various equipment as set forth in the Master EFA Agreement No. ME00028654 (the "Agreement"). See doc. no. 1 ¶ 5; doc. no. 1-2. Romero executed a personal guaranty of ATC's obligations as guarantor of the Agreement. See doc. no. 1 ¶ 6; doc. no. 1-2. The purchase involved over forty pieces of equipment, including forklifts, welding machines, air compressors and other equipment (the "Equipment"). Doc. no. 1 ¶ 7. Pursuant to the Agreement, ATC granted DCC a first priority, continuing security interest in the Equipment as collateral for an installment payment plan. See doc. nos. 1 ¶ 8, 1-1. The installment payment plan required ATC to remit monthly payments of $4, 231.01 to DCC for a term of 72 months. Id.

         On or about April 29, 2015, the parties amended the terms of the payment schedule pursuant to an addendum. See doc. no. 1 ¶ 9; doc. no. 1-4. On or about April 30, 2015, DCC, through Corporation Service Company as its representative, perfected its security interest in the Equipment by filing a UCC Financing Statement with the Clerk of Court for Iberia Parish, Louisiana. See doc. no. 1 ¶ 10; doc. no. 1-5. On or about May 1, 2015, ATC took delivery of the Equipment at 2804 W. Admiral Doyle Drive, New Iberia, Louisiana 70562. See doc. no. 1 ¶ 11. Beginning on or about May 25, 2015, ATC made the monthly payments due under the Agreement, including additional fees as appropriate. See doc. no. ¶¶ 12-13; doc. no. 1-6. ATC made ten timely monthly payments under the Agreement. See doc. no. 1-6.

         ATC failed to make monthly payments due under the Agreement beginning on or about December 25, 2015. See doc. no. 1 ¶ 13; doc. no. 1-6. On or about February 6, 2016, DCC sent ATC and Romero a letter, which advised ATC of its default under the Agreement. See doc. no. ¶ 14; doc. no. 1-1; doc. no. 1-7. In response, ATC made one full payment and one partial payment, but failed to cure the default. See doc. no. 1 ¶ 15. ATC remained in default as of March 25, 2016, see id., and at the time of the complaint, had defaulted on four monthly payments, see doc. no. 1-6. Romero has taken no action to cure ATCs default, notwithstanding the guaranty he executed on ATCs behalf. See doc. no. 1 ¶ 17.

         Discussion

         DCC brings separate counts against ATC and Romero for breach of contract. DCC seeks $225, 011.97 in damages for the outstanding amount owed to it by defendants under the Agreement, plus an additional award of $11, 340.00 in attorney's fees and $552.51 in costs. The court considers each count in turn before turning to the requests for damages, fees, and costs.

         I. Breach of Contract (ATC)

         Under New Hampshire law, "a breach of contract occurs when there is a failure without legal excuse to perform any promise which forms the whole or party of a contract." Axenics, Inc. v. Turner Constr., Co., 164 N.H. 659, 668 (2013). More specifically, the necessary elements of a breach of contract claim are: "(1) A valid contract; (2) material breach of its terms; and (3) resultant damages to the party having the right to complain that the contract has been broken." Campbell v.CGM, LLC, No. 15-cv-088-JD, 2017 WL 78474, *1 at *6 (D.N.H. Jan. 9, 2017) (internal quotations and citations omitted). Upon review ...


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