United States District Court, S.D. Texas, Houston Division
MEMORANDUM OPINION AND ORDER
H. Miller, United States District Judge.
before the court is plaintiff People's United Equipment
Finance Corp.'s (“People's United”)
motion for default judgment against defendant Ricky Dean
Freeman. Dkt. 10. Based on a review of the complaint, motion,
record evidence, and applicable law, the court is of the
opinion that the motion should be GRANTED.
United sued third-party guarantors to collect unpaid amounts
due under a financing agreement between People's United
and Forest Energies, LLC. (“Forest”). Dkt. 1. On
January 8, 2016, Forest executed and delivered a promissory
note to People's United for $590, 940.00. Dkt. 1, Ex. 1.
The note required Forest to repay People's United in
monthly installments. Id. Additionally, the note and
corresponding loan documents provided for acceleration of all
indebtedness if Forest defaulted. Id.
January 8, 2016, Freeman and defendant Lenn Waters Morris
each signed and delivered guaranties of Forest's
obligations to People's United. Dkt. 1, Ex. 2.
Both provide that each defendant “agrees to be directly
and unconditionally liable to [People's United], without
reduction by reason of any claim, defense, setoff, [or]
counterclaim . . . for the due payment and performance of
[the obligations of Forest to People's United.]”.
Id. The guaranties included terms that limited the
defendants' release until the obligations of Forest to
People's United had been fully paid and performed with
interest. Id. The guaranties further stipulated that
the defendants would pay People's United's reasonable
attorneys' fees, together with any and all court costs
and expenses, in enforcing the guaranties. Id.
defaulted by not making required payments. Dkt. 1 ¶ 17.
Then, on November 18, 2016, Forest filed Chapter 11
bankruptcy, an act which constitutes a default under the
loan. Id. ¶ 19. After the defaults,
People's United exercised its option to accelerate
Forest's unpaid balance, $487, 015.64. Id.
¶ 20. This balance is further subject to continuing
interest according to the loan contract. Id., Ex. 1.
the security agreement with Forest, People's United had a
security interest in Forest's equipment. Dkt. 10, Ex. 1.
On April 4, 2017, People's United sold the equipment at a
public sale for a gross price of $257, 000, which
People's United contends was the reasonable market value
of the equipment. Id. People's United asserts
that it credited Forest the net proceeds derived from the
sale. Id. Now, People's United argues the
aggregate balance due is $249, 063.09. Id.
December 14, 2016, People's United sued Freeman and
Morris for the outstanding balance of the notes, along with
interest, attorneys' fees, and costs of court. Dkt. 1. On
December 20, 2016, Freeman was properly served with process.
Dkt. 5. Freeman's deadline to answer or otherwise respond
was January 10, 2017. See Fed. R. Civ. P. 12(a).
Morris has not yet been served with process. Freeman was
informed of his deadline for responding and the consequences
of failing to do so. Dkts. 3, 5. To date, Freeman has not
answered or responded to this lawsuit. Dkt. 10.
August 2, 2017, People's United filed a motion for
default judgment against Freeman. Id. Pursuant to
the Local Rules of the Southern District of Texas,
People's United served this motion for default judgment
upon the defendants via certified mail, with return receipt
requested. Id.; see also S.D. Tex. L.R.
5.5. People's United has filed a military affidavit for
Freeman that complies with the Service members' Civil
Relief Act, 50 U.S.C App. § 521. Dkt. 10, Ex. 3.
Legal Standard and Analysis
Federal Rule of Civil Procedure 55(a), “[w]hen 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.” Fed.R.Civ.P. 55(a). Under Rule
55(b)(2), a party may apply for the court to enter a default
judgment, and the “court may conduct hearings or make
referrals-preserving any federal statutory right to a jury
trial-when, to enter or effectuate judgment, it needs to: (A)
conduct an accounting; (B) determine the amount of damages;
(C) establish the truth of any allegation by evidence; or (D)
investigate any other matter.” Fed.R.Civ.P. 55(b)(2).
Rule 4 of the Federal Rules of Civil Procedure requires the
plaintiff to serve a copy of the summons and complaint on the
defendant. Fed.R.Civ.P. 4(c)(1). Under Local Rule 5.5, a
motion for default judgment must be served upon the defendant
via certified mail, return receipt requested. S.D. Tex. L.R.
default judgment is a “drastic remedy, not favored by
the Federal Rules[, ] and resorted to by courts only in
extreme situations.” Sun Bank of Ocala v. Pelican
Homestead & Sav. Ass'n, 874 F.2d 274, 276 (5th
Cir. 1989). “The Federal Rules of Civil Procedure are
designed for the just, speedy, and inexpensive disposition of
cases on their merits, not for the termination of litigation
by procedural maneuver.” Id.
has failed to plead or otherwise defend against this lawsuit.
Further, People's United has properly served Freeman with
this lawsuit under the Federal Rules of Civil Procedure and
with this motion for default judgment under the Local Rules.
Dkt. 5; Dkt. 10. Given Freeman's failure to answer the
complaint in a timely manner, the court may enter default
against Freeman, accept all well-pleaded facts in
People's United's complaint as true, and award the