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BMO Harris Bank N.A. v. In & Out Leasing, LLC

United States District Court, D. Colorado

January 24, 2018

BMO HARRIS BANK N.A., Plaintiff,
v.
IN & OUT LEASING, LLC, IN & OUT CUSTOM HAULING, LLC, and, MATTHEW FROST, Defendants.

          RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          KRISTEN L. MIX, UNITED STATES MAGISTRATE JUDGE.

         This matter is before the Court on Plaintiff's Renewed Motion for Default Judgment [#14][1] (the “Motion”). Pursuant to 28 U.S.C. § 636(b)(1)(B) and D.C.COLO. LCivR 72.1(c), the Motion has been referred to the undersigned for recommendation. See [#15]. Plaintiff seeks entry of default judgment against Defendants In & Out Leasing, LLC, In & Out Custom Hauling, LLC, and Matthew Frost (collectively, “Defendants”). Pursuant to Fed.R.Civ.P. 55(a), the Clerk of Court entered default against Defendants on January 17, 2017. See Entry of Default [#9]. Defendants have not responded to Plaintiff's Complaint [#1] or the present Motion [#14], and the time for doing so has elapsed. The Court has reviewed the Motion, the entire case file, and applicable case law, and is sufficiently advised in the premises. Accordingly, for the reasons set forth below, the Court respectfully RECOMMENDS that the Motion [#14] be GRANTED.

         I. Background

         A. Procedural Background

         Plaintiff BMO Harris Bank N.A. (“Plaintiff”) initiated this breach of contract lawsuit by filing the Complaint [#1] on October 26, 2016, against Defendants In & Out Leasing, LLC (“Borrower”), In & Out Custom Hauling, LLC (“Corporate Guarantor”), and Matthew Frost (“Personal Guarantor”). Compl. [#1] ¶¶ 1-4. Defendants failed to respond to the Complaint. On January 13, 2017, Plaintiff filed a Motion for Entry of Default [#9], to which Defendants failed to respond. The Clerk of Court entered default against Defendants on January 17, 2017. See [#10]. On February 1, 2017, Plaintiff filed an initial Motion for Default Judgment [#11], to which Defendants again failed to respond. On July 14, 2017, the Court ordered Plaintiff to file a supplement that “directs the Court's attention to sufficient proof to support default judgment for money damages.” Minute Order [#13]. On July 26, 2017, in lieu of filing a supplement, Plaintiff filed the present Motion [#14] and attached to it an affidavit and a declaration that provide details with respect to the alleged amount owed. The affiant is Barbi Martin (“Martin”), who is employed by Plaintiff as a litigation specialist, Martin Aff. [#14-2], and the declarant is Aaron Chapin (“Chapin”), who is one of the principal attorneys representing Plaintiff in the present matter. Chapin Decl. [#14-1]. Based on the filing of the Motion [#14], the original Motion for Default Judgment was denied as moot. Minute Order [#16].

         B. Factual Background

         According to the Complaint, [2] on June 23, 2015, Borrower entered into a loan agreement (“First Agreement”) with GE Capital Commercial, Inc. (“GECCI”), in which GECCI agreed to finance the purchase of equipment for Borrower's business and Borrower agreed to pay GECCI $90, 835.68 pursuant to the terms of the First Agreement. Compl. ¶ 10; Agreement [#1-1]. That same day, Corporate Guarantor and Personal Guarantor also entered into personal guaranties with GECCI, which guaranteed full and timely performance of the First Agreement by Borrower. Compl. [#1] ¶¶ 11-12; Exhs. [#1-2, #1-3]. Under these guaranties, a default of the Borrower under the First Agreement is a default of the Corporate Guarantor and Personal Guarantor. Compl. [#1] ¶ 22; Exhs. [#1-2, #1-3]. On October 30, 2015, Borrower entered into a loan agreement (“Second Agreement”) with Transportation Truck and Trailer Solutions, LLC (“TTTS”), in which TTTS agreed to finance the purchase of equipment for Borrower's business, and Borrower agreed to pay TTTS $82, 274.40 pursuant to the terms of the Second Agreement. Compl. [#1] ¶ 13; Agreement [#1-4]. That same day, Corporate Guarantor and Personal Guarantor entered into personal guaranties with TTTS, which guaranteed full and timely performance of the Second Agreement by Borrower. Compl. [#1] ¶¶ 14-15; Exhs. [#1-5, #1-6]. Under these guaranties, a default of the Borrower under the Second Agreement is a default of the Corporate Guarantor and Personal Guarantor. Compl. [#1] ¶ 22; Exhs. [#1-5, #1-6]. Borrower granted both GECCI and TTTS security interests in the equipment, which is referred to collectively as the “Collateral.” Compl. [#1] ¶ 16. On December 1, 2015, GECCI and TTTS transferred and assigned to Plaintiff all of their rights, titles, and interests created under the First and Second Agreements and guaranties. Compl. [#1] ¶¶ 17-18; Exhs. [#1-7, #1-8].

         On April 10, 2016, Borrower failed to make payments due to Plaintiff. Compl. [#1] ¶¶ 21, 24. He has failed to make all subsequent payments due under the First and Second Agreements. Id. Corporate Guarantor and Personal Guarantor have also failed to make payments despite demand by Plaintiff. Id. ¶ 25. After Defendants defaulted on their loans and guaranties, Plaintiff repossessed the Collateral. Compl. [#1] ¶¶ 32-33. On August 25, 2016, Plaintiff received the net proceeds from the sale of the Collateral. Martin Aff. [#14-2] ¶ 18. Pursuant to the First and Second Agreements, Borrower must pay: the principal amount due and owing, minus the net proceeds of the sale of the Collateral; interest on unpaid amounts at a default rate of eighteen percent per annum; late fees and other costs; all costs related to retaking, holding, preparing for sale, and selling the Collateral; and attorney's fees and costs. Martin Aff. [#14-2] ¶¶ 26, 27-29.

         II. Analysis

         Pursuant to Fed.R.Civ.P. 55, default may enter against a party who has failed to appear or otherwise defend the case brought against him. Default was entered against Defendants on January 17, 2017, because Defendants failed to respond to the Complaint and all subsequent documents filed by Plaintiff. See [#10]; see also Fed. R. Civ. P. 55(a); Mrs. Condies Salad Co., Inc. v. Colorado Blue Ribbon Foods, LLC, 858 F.Supp.2d 1212, 1218 (D. Colo. 2012). However, before proceeding with the entry of judgment, the Court must determine whether it has jurisdiction, whether the allegations of the Complaint constitute a legitimate claim for relief, and whether damages can be ascertained. Reg'l Dist. Council v. Mile High Rodbusters, Inc., 82 F.Supp.3d 1235, 1241 (D. Colo. 2015).

         A. Jurisdiction

         When a plaintiff seeks default judgment against a defendant who has failed to appear or otherwise defend, the Court must first determine whether it has jurisdiction over the subject matter and the parties. Dennis Garberg & Assocs., Inc. v. Pack-Tech Int'l Corp., 115 F.3d 767, 771 (10th Cir. 1997). “Whether jurisdiction exists must be determined from the facts alleged in the Complaint, without regard to conclusory allegations of jurisdiction.” Procom Supply, LLC v. Langner, No. 12-cv-00391-MSK-KMT, 2012 WL 4856724, at *2 (D. Colo. Oct. 11, 2012) (citing Groundhog v. Keeler, 442 F.2d 674, 677 (10th Cir. 1971)). “The party seeking the exercise of jurisdiction in his favor ‘must allege in his pleading the facts essential to show jurisdiction.'” Penteco Corp. Ltd. P'ship-1985A v. Union Gas Sys., Inc., 929 F.2d 1519, 1521 (10th Cir. 1991) (quoting McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936)).

         1. Subject Matter Jurisdiction

         Plaintiff asserts that subject matter jurisdiction in this case is based on diversity of citizenship of the parties. Compl. [#1] ¶¶ 1-4. Federal courts have diversity jurisdiction over civil matters where the amount in controversy exceeds $75, 000 and the parties are citizens of different states. 28 U.S.C. § 1332(a). The Complaint [#1] alleges that the amount due and owing as of October 5, 2016, not including attorney's fees and expenses or costs of collection, was $88, 463.81. Compl. [#1] ¶ 34. Accordingly, the amount satisfies the jurisdictional requirement.

         Plaintiff asserts that the parties are of diverse citizenship. Compl. [#1] ¶ 5. Plaintiff alleges that it is a “national banking association with its main office, as set forth in its articles of association, located in Chicago, Illinois.” Compl. [#1] ¶ 1. For the purposes of diversity jurisdiction, a national bank is a citizen of the state designated in its articles of association as the location of its main office. Wachovia Bank ...


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