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Can Capital Asset Servicing, Inc. v. Walker

United States District Court, W.D. Texas, Austin Division

May 30, 2019




         Before the Court is Plaintiff Can Capital Asset Servicing, Inc.'s (“Can Capital”) Motion for Default Judgment. (Dkt. 12). Having considered Can Capital's motion, the record, and the relevant law, the Court finds that the motion should be granted.

         I. BACKGROUND

         Can Capital alleges the following facts in its complaint. (Dkt. 1). In 2013, WebBank, Inc. loaned $150, 000.00 to Defendant Central Park Imaging Center, Ltd. (“Central Park Imaging”). (Id. ¶ 8). Central Park Imaging's President, William Alfred Walker (“Walker”), personally guaranteed the loan. (Id. ¶ 12; Loan Agreement, Dkt. 12-2, at 1). In doing so, Walker “unconditionally guarant[eed] . . . the prompt payment to [WebBank and its assigns] of all amounts owed by [Central Park Imaging].” (Loan Agreement, Dkt. 12-2, at 11). WebBank assigned the loan to Can Capital a week after executing the agreement. (Compl., Dkt. 1, ¶ 9). Central Park Imaging made on-time payments for over two years, but stopped in December 2015, leaving an outstanding balance of $79, 395.91. (Id. ¶¶ 13, 15). Can Capital filed this action against Central Park Imaging, seeking damages for their breach of the loan agreement. (Id. at 4-6).

         Can Capital served both defendants on December 19, 2017, (see Dkt. 5), but neither has appeared. It has since executed a settlement agreement with Central Park Imaging. (See Dkt. 8). Meanwhile, the Clerk of the Court entered default against Walker on January 10, 2019, (Dkt. 11), and Can Capital now moves for default judgment against him. (Dkt. 12). Walker has not appeared; Can Capital's motion is unopposed.


         Under Rule 55 of the Federal Rules of Civil Procedure, federal courts have the authority to enter a default judgment against a defendant that has failed to plead or otherwise defend itself. Fed.R.Civ.P. 55(a)-(b). That said, “[d]efault judgments are 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). A party is not entitled to a default judgment simply because the defendant is in default. Ganther v. Ingle, 75 F.3d 207, 212 (5th Cir. 1996). Rather, a default judgment is generally committed to the discretion of the district court. Mason v. Lister, 562 F.2d 343, 345 (5th Cir. 1977).

         In considering Can Capital's motion, the Court must determine: (1) whether default judgment is procedurally warranted, (2) whether the Can Capital's complaint sets forth facts sufficient to establish that it is entitled to relief, and (3) what form of relief, if any, Can Capital should receive. United States v. 1998 Freightliner Vin #: 1FUYCZYB3WP886986, 548 F.Supp.2d 381, 384 (W.D. Tex. 2008); see also J & J Sports Prods., Inc. v. Morelia Mexican Rest., Inc., 126 F.Supp.3d 809, 813 (N.D. Tex. 2015) (using the same framework).

         A. Procedural Requirements

         To determine whether entry of a default judgment is procedurally warranted, district courts in the Fifth Circuit consider six factors: “[1] whether material issues of fact are at issue, [2] whether there has been substantial prejudice, [3] whether the grounds for default are clearly established, [4] whether the default was caused by a good faith mistake or excusable neglect, [5] the harshness of a default judgment, and [6] whether the court would think itself obliged to set aside the default on the defendant's motion.” Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998).

         On balance, the Lindsey factors weigh in favor of entering a default judgment against Walker. Because Walker has not filed a responsive pleading, there are no material facts in dispute. See Nishimatsu Const. Co., Ltd. v. Hous. Nat. Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) (“The defendant, by his default, admits the plaintiff's well-pleaded allegations of fact.”). Walker's failure to appear and respond has ground the adversary process to a halt, prejudicing Can Capital's interest in pursuing its claim for relief. See J & J Sports, 126 F.Supp.3d at 814 (“Defendants' failure to respond threatens to bring the adversary process to a halt, effectively prejudicing Plaintiff's interests.”) (citation and quotation marks omitted). The grounds for default are established: Walker was properly served and has failed to appear and participate at all, much less timely file a responsive pleading. There is no indication that the default was caused by a good faith mistake or excusable neglect. Although a default judgment in this case is not insignificant-Can Capital seeks over $100, 000 in damages and attorney's fees-the Court is not aware of any facts that would obligate it to set aside the default if challenged by Walker. The Court therefore finds that default judgment is procedurally warranted.

         B. Sufficiency of Can Capital's Complaint

         Default judgment is proper only if the well-pleaded factual allegations in Can Capital's complaint establish a valid cause of action. Nishimatsu Constr. Co., 515 F.2d at 1206. By defaulting, a defendant “admits the plaintiff's well-pleaded allegations of fact.” Id. In determining whether factual allegations are sufficient to support a default judgment, the Fifth Circuit employs the same analysis used to determine sufficiency under Rule 8. Wooten v. McDonald Transit Assocs., Inc., 788 F.3d 490, 498 (5th Cir. 2015). A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The factual allegations in the complaint 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).” Wooten, 788 F.3d at 498 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). While “detailed factual allegations” are not required, the pleading must present “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

         Can Capital asserts against Walker a claim for breach of contract. (Compl., Dkt. 1, at 4-5). In Texas, the elements of a breach-of-contract claim are: “(1) formation of a valid contract; (2) performance by the plaintiff; (3) breach by the defendant; and (4) the plaintiff sustained damages as a result of the breach.” USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 501 n.21 (Tex. 2018). Can Capital alleges as follows. Walker executed a personal guaranty for “the prompt payment to [Can Capital] of all amounts owed” by Central Park Imaging. (Compl., Dkt. 1, ¶ 12). Can Capital performed its obligations by loaning Central Park Imaging the agreed-upon amount of money. (Id. ¶ 8). Walker breached his personal guaranty by refusing to make payments owed by Central Park Imaging after the company stopped making the payments owed under the loan agreement. (Id. ¶ 23). Can Capital has been damaged by failing to receive the unpaid sum. (Id. ΒΆ 15). Can Capital has supported these allegations with an affidavit from its associate general counsel, a copy of the loan agreement ...

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