United States District Court, W.D. Texas, El Paso Division
NAUTILUS INSURANCE COMPANY a/s/o LARIAT BUILDERS GROUP CORPORATION, Plaintiff,
A BEST AMERICAN ROOFING, LLC, Defendant.
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART MOTION FOR ENTRY OF DEFAULT JUDGMENT
R. MARTINEZ, UNITED STATES DISTRICT JUDGE
day, the Court considered Plaintiff Nautilus Insurance
Company a/s/o Lariat Builders Group Corporation's
[hereinafter "Plaintiff] "Motion for Entry of
Default Judgment" (ECF No. 16) [hereinafter
"Motion"], filed on February 25, 2019; Plaintiffs
"Supplemental Brief in Support of Causes of Action"
(ECF No. 19) [hereinafter "Supplemental Brief], filed on
March 18, 2019; and Plaintiffs "Affidavit in Support of
Claim for Damages" (ECF No. 22) [hereinafter
"Affidavit"], filed on March 28, 2019, in the
above-captioned cause. After due consideration, the Court is
of the opinion that the Motion should be granted in part,
with respect to Plaintiffs negligence claim, and denied in
part, with respect to Plaintiffs breach of warranty claim,
for the reasons that follow.
FACTUAL AND PROCEDURAL BACKGROUND
October 26, 2018, Plaintiff filed its Complaint, bringing
negligence, gross negligence, and breach of warranty claims
against Defendant in connection with the roofing services
that Defendant provided. Compl., ECF No. 1. Plaintiff is an
insurance company that issued a policy of insurance to Lariat
Builders Group Corporation. Id. at 1. Plaintiffs
insured, Lariat Builders Group Corporation, entered into a
contract with Immanuel Baptist Church ("the
Church") to provide certain services, including roof
replacement of the commercial property located at 1201
Hawkins, El Paso, TX. Compl. Ex. A. As a General Contractor,
Plaintiffs insured entered into a Sub-Contractor Agreement
with Defendant, wherein Defendant, as a Sub-Contractor,
agreed to perform roofing services for the Church's
property. Compl. 2; Compl. Ex. A.
alleges that the roofing work commenced on a date prior to
July 7, 2017. Id. On July 7, 2017, heavy rainfall
caused water to enter the Church, "resulting in
subsequent damage to several areas of the church, including
the gym, cafeteria, two classrooms, a chapel and office
areas." Id. According to Plaintiff, the water
damage "was due to [Defendant's failure to properly
secure the roof prior to the rain storm." Id.
at 3. Accordingly, Plaintiff alleges that its insured
"sustained damages and other related expenses in the
amount of $77, 183.13." Id. Plaintiff further
alleges that "[p]ursuant to its policy of insurance with
its insured, [Plaintiff] has paid to its insured, and on
their behalf, in the amount of $77, 183.13 and has become
legally, contractually and equitably subrogated to the rights
of its insureds to the extent of such payments."
Id. at 3. Based on these allegations, Plaintiff
brings claims of negligence, gross negligence, and breach of
warranty against Defendant, seeking damages, interest, costs
of suit, and exemplary damages. Compl. 3-6.
November 19, 2018, Plaintiff served summons on Elena Hart, an
individual designated by law to accept service of process on
behalf of Defendant. Summons Returned Executed, Dec. 20,
2018, ECF No. 5. On January 29, 2019, the Court issued its
"Order to Show Cause," ordering Plaintiff to show
cause as to why Plaintiff had not moved for an entry of
default against Defendant. Order to Show Cause, ECF No. 13.
On January 30, 2019, Plaintiff filed its "Request for
Entry of Default." ECF No. 14. As Defendant failed to
appear or answer the Complaint within the time allowed by
law, the Clerk entered default on February 7, 2019. Entry of
Default by District Clerk, ECF No. 15. On February 25, 2019,
Plaintiff filed its Motion and moved for entry of default
judgment. The Court requested that Plaintiff provide
documents in support of Plaintiffs damages claims and
supplemental briefing citing applicable case law and
demonstrating how Plaintiffs factual allegations support
Plaintiffs causes of action. Order Req. Doc. in Supp. of
Pl.'s Mot. for Entry of Default J., Mar. 14, 2019, ECF
No. 18. Accordingly, on March 18, 2019, Plaintiff filed its
Supplemental Brief. Therein, Plaintiff "respectfully
withdraws its claims of gross negligence and its request for
exemplary damages" due to Plaintiffs inability to engage
in discovery to obtain evidence necessary to support
Plaintiffs gross negligence claim. Suppl. . Br. 4. In
addition, on March 28, 2019, Plaintiff filed its Affidavit,
which details the basis for Plaintiffs damages claim and
provides documents in support of those damages.
must establish three elements to obtain a default judgment:
(1) default; (2) entry of default; and (3) default judgment.
N.Y.Life Ins. Co. v. Brown, 84 F.3d 137, 141 (5th
default occurs when "a defendant has failed to plead or
otherwise respond to the complaint within the time required
by the Federal Rules." Id. The clerk of the
court will enter an entry of default when default is
established by affidavit or otherwise. Id. (citing
Fed.R.Civ.P. 55(a)). After the clerk's entry of default,
"a plaintiff may apply for a judgment based on such
default. This is a default judgment” Id.
has not appeared. Consequently, the Clerk of the Court
entered default. See Entry of Default by District
Clerk, Feb. 7, 2019, ECF No. 15. Therefore, the Court must
determine whether default judgment is appropriate.
have developed a two-part analysis in determining whether a
default judgment should be entered against a defendant.
See, e.g., Ins. Co. of the W. v. H&G Contractors,
Inc., No. C-10-390, 2011 WL 4738197, at *2-3 (S.D. Tex.
Oct. 5, 2011). First, the Court must consider whether the
entry of default judgment is appropriate under the
circumstances. See Lindsey v. Prive Corp.,
161 F.3d 886, 893 (5th Cir. 1998). The Court looks to the
following factors to determine whether a default judgment is
 whether material issues of fact are at issue,  whether
there has been substantial prejudice,  whether the grounds
for default are clearly established,  whether the default
was caused by a good faith mistake or excusable neglect, 
the harshness of a default judgment, and  whether the
court would think itself obliged to set aside the default on
the defendant's motion.
the Court must assess the merits of the plaintiffs claims and
find sufficient basis in the pleadings for the judgment.
See Nishimatsu Const Co. v. Hous. Nat'l Bank,
515 F.2d 1200, 1206 (5th Cir. 1975). "The defendant, by
his default, admits the plaintiffs well-pleaded allegations
of fact. . . ." Id. Although the defendant may
be in default, "[t]he defendant is not held to admit
facts that are not well-pleaded or to admit conclusions of
law." Id. A complaint is
"well-pleaded" and suffices to support a default
judgment if the allegations satisfy the requirements of
Federal Rule of Civil Procedure 8. Woolen u. McDonald
Transit Assocs., Inc., 788 F.3d 490, 498 (5th Cir.
2015). Specifically, the factual allegations "need only
'be enough to raise a right to relief above the
speculative level, on the assumption that all the allegations
in the complaint are true (even if doubtful in
fact).'" Id. (quoting Bell Ail. Corp.
v. Twombly, 550 U.S. 544, 555 (2007)).
"'[D]etailed factual allegations' are not
required, but the pleading must present 'more than an
accusation."' Id. (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009)).
Fifth Circuit has often cautioned that "[d]efault
judgments are a drastic remedy, not favored by the Federal
Rules and resorted to by courts only in extreme
situations." Lewis v. Lynn, 236 F.3d 766, 767
(5th Cir. 2001) (quoting Sun Bank of Ocala v. Pelican
Homestead & Savings Ass'n, 874 F.2d 274, 276
(5th Cir. 1989)). Indeed, such orders are "available
only when the adversary process has been halted because of an
essentially unresponsive party." Sun Bank of
Ocala, 874 F.2d at 276 (quoting H.F. Liver more
Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d
689, 691 (D.C. Cir. 1970)). Thus, as the decision to enter a
default judgment lies within the discretion of the district
judge, a "party is not entitled to a default judgment as
a matter of right, even where the defendant is technically in
default." Lewis, 236 F.3d at 767 (quoting
Ganther v. Ingle, 75 F.3d 207, 212 (5th Cir. 1996)).
Default Judgment Factors
deciding whether default judgment is appropriate in this
case, the Court first considers the six factors outlined in
Lindsey. The Court finds that these factors all
weigh in favor of a default judgment.
no material issues of fact exist because Defendant failed to
respond or plead. Second, Defendant does not incur
substantial prejudice because it failed to contest any of the
allegations. The Court accepts Defendant's silence as an
admission that Plaintiffs allegations are true. See
Nishimatsu Const, 515 F.2d at 1206 (noting that a
"defendant, by his default, admits the plaintiffs
well-pleaded allegations of fact"). Since Defendant
admits the allegations against it, it does not face any
prejudice. Conversely, substantial prejudice exists against
Plaintiff given that Defendant's silence has halted the
adversarial process. For example, Plaintiff was unable to
obtain discovery from Defendant. See Suppl. Br. 4
(withdrawing gross negligence claim and request for exemplary
damages in light of Plaintiffs inability to engage in
discovery). Third, Plaintiffs service and Defendant's
failure to appear establish grounds for default judgment.
Fourth, Defendant has failed to claim the presence of a good
faith mistake or excusable neglect. Fifth, the lack of any
apparent defenses or excuses for Defendant's default
makes this a reasonable default judgment. Nothing about the
circumstances of this request or the amount claimed makes
this judgment particularly "harsh." Sixth, and
finally, while the entry of the default judgment is extreme
and not favored by the Federal Rules, the Court is unaware of
good cause to set aside the default given Defendant's
failure to answer or otherwise respond. Consequently, the
Lindsey factors weigh in favor of default. See
Lindsey, 161 F.3d at 893.
Court recognizes that "a defendant's default does
not in itself warrant the court in entering a default
judgment." Nishimatsu Const., 515 F.2d at 1206.
Rather, "[t]here must be a sufficient basis in the
pleadings for the judgment entered." Id. The
Court finds that this requirement is satisfied for Plaintiffs
negligence claim but is not satisfied for Plaintiffs breach
of warranty claim for the following reasons.
Plaintiffs Status as Subrogee
is an insurance company and brings this action as subrogee of
its insured, Lariat Builders Group Corporation. See
Compl. 1. "Insurers may have either
'contractual' subrogation rights, which arise from
contract language, or 'equitable' subrogation rights,
which exist in equity to prevent the insured from receiving a
double recovery to the insurer's detriment."
Concierge Nursing Centers, Inc. v. Antex Roofing,
Inc., 433 S.W.3d 37, 44 (Tex. App. 2013) (citing
Fortis Benefits v. Cantu, 234 S.W.3d 642, 647 (Tex.
2007)). "Either way, 'the principle of subrogation
provides that once an insured is made whole from his damages,
the insurer that has paid for the insured's covered
losses is entitled to the insured's rights and remedies
against a third party for the covered losses.'"
Id. (quoting Osborne v. Jauregui, Inc., 252
S.W.3d 70, 78 (Tex. App. 2008)). "Generally, rights
conferred by subrogation are entirely derivative of the
subrogor's interests, to which the subrogee merely
succeeds." Id. at 45 (quoting Guillot v.
Hix, 838 S.W.2d 230, 232 (Tex. 1992)). "When an
insurer pays out on its insured's loss, it becomes a
'pro tanto owner' of the cause of action. This means
that the insurer receives 'the rights of its insured to
the extent of payments made under the insurance
contract."' Id. (internal citations
omitted) (first citing Thoreson v. Thompson, 431
S.W.2d 341, 347 (Tex. 1968); and then citing Warwick
Towers Council of Co-Owners ex rel. St. Paul Fire &
Marine Ins. Co. v. Park Warwick, L.P., 298 S.W.3d 436,
440 (Tex. App. 2009); and then quoting Rushing v.
Int'l Aviation Underwriters, Inc., 604 S.W.2d 239,
243 (Tex. Civ. App. 1980), writ refused NRE (Dec.
17, 1980)). Accordingly, "the insurer as subrogee does
not own the entire claim as if the claim were wholly
transferred by an assignment; it has only the right to
recover an amount equal to its payment under the insurance
policy." Id. (citing Rushing, 604
S.W.2d at 244).
Plaintiff alleges that "[p]ursuant to its policy of
insurance with its insured, [Plaintiff] has paid to its
insured, and on their behalf, in the amount of $77, 183.13
and has become legally, contractually and equitably
subrogated to the rights of its insureds to the extent of
such payments." Id. at 3. Accordingly,
accepting Plaintiffs well-pleaded allegations as true,
Plaintiff has sufficiently pleaded its status as subrogee of
its insured, Lariat Builders Group Corporation. Plaintiffs
status as subrogee is further supported by the copy of its
insurance policy with the insured. See Aff. Ex. D.
Therefore, Plaintiff is the "pro tanto" owner of