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BMO Harris Bank N.A. v. L & O Trucking, LLC

United States District Court, D. Nebraska

April 10, 2019

BMO HARRIS BANK N.A., Plaintiff,
L & O TRUCKING, LLC, Defendant.



         This matter is before the Court on the Motion for Default Judgment, ECF No. 7, filed by Plaintiff BMO Harris Bank N.A (Harris Bank). For the reasons stated below, the Motion will be denied.


         The following facts are those alleged in the Complaint, ECF No. 1, and unchallenged by Defendant L&O Trucking, LLC.

         Under a Loan and Security Agreement dated October 15, 2015, Transportation Truck and Trailer Solutions, LLC, agreed to loan L&O Trucking $133, 963.20, and L&O Trucking promised to make 54 installment payments on the first of each month in the amount of $2, 480.80 beginning on December 1, 2015. ECF No. 1-2, Page ID 8. L&O Trucking also granted Truck and Trailer Solutions a security interest in a 2013 Peterbilt truck. Id. On April 1, 2016, L&O failed to meet its payment obligation.

         In a “Transfer Acknowledgment” dated September 20, 2018, Transportation Truck and Trailer Solutions stated it “acknowledges and confirms that effective as of 12:00 a.m. on December 15, 2015, [it] sells, conveys, assigns, transfers and delivers to [ ] Harris Bank [ ], ” all rights, title, and interest under the Loan and Security Agreement. ECF No. 1-1, Page ID 6.

         On January 22, 2019, Harris Bank filed the Complaint which asserted a breach-of-contract claim against L&O Trucking and sought damages in the amount of $75, 927.13. L&O failed to answer or otherwise defend, and the Clerk of Court entered default in accordance with Rule 55(a) of the Federal Rules of Civil Procedure. ECF No. 6. On March 30, 2019, Harris Bank filed its Motion for Default Judgment under Rule 55(b)(2).


         “The Federal Rules of Civil Procedure commit the entry of a default judgment against a party to the sound discretion of the trial court.” Belcourt Pub. Sch. Dist. v. Davis, 786 F.3d 653, 661 (8th Cir. 2015) (quoting FTC v. Packers Brand Meats, Inc., 562 F.2d 9, 10 (8th Cir. 1977)) (per curiam). It is “appropriate for a district court to enter a default judgment when a party fails to appropriately respond in a timely manner.” Marshall v. Baggett, 616 F.3d 849, 852 (8th Cir. 2010) (citing Inman v. Am. Home Furniture Placement, Inc., 120 F.3d 117, 119 (8th Cir. 1997)). “Upon default, the factual allegations of a complaint (except those relating to the amount of damages) are taken as true, but ‘it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law.'” Murray v. Lene, 595 F.3d 868, 871 (8th Cir. 2010) (quoting 10A Charles Alan Wright et al., Federal Practice and Procedure § 2688 (3d ed 1998)).


         Harris Bank contends the unchallenged facts constitute a legitimate cause of action for breach of contract and that jurisdiction over the claim is appropriate under 28 U.S.C. § 1332(a) (diversity). According to the Return of Service, ECF No. 4, a process server personally served a summons and copy of the Complaint on a “partner” of L&O Trucking at the business's registered address in Clarkson, Nebraska, and venue[1] is proper in this district under 28 U.S.C. § 1391(b)(1).

         Under Texas law, [2] all contracts, including the right to collect a debt, are freely assignable. In Re FH Partners, L.L.C., 335 S.W.3d 752, 761 (Tex. App. 2011) (citations omitted). A plaintiff must establish the following elements to succeed on a breach-of-contract claim: “(1) a valid contract existed between the plaintiff and the defendant; (2) the plaintiff tendered performance or was excused from doing so; (3) the defendant breached the terms of the contract; and (4) the plaintiff sustained damages as a result of the defendant's breach.” Universal Plant Servs., Inc. v. Dresser-Rand Grp., Inc., No. 1-17-555-LV, S.W.3d, 2018 WL 6695813, at *9 (Tex. App. 2018) (quoting West v. Triple B Servs., LLP, 264 S.W.3d 440, 446 (Tex. App. 2008)).

         Where the action is by a secured creditor for recovery of a deficiency following the repossession and sale of collateral, however, the plaintiff must also establish it disposed of the collateral in a commercially reasonable manner. Jantzen v. Am. Nat'l Bank of Tx., 300 S.W.3d 412, 415 (Tex. App. 2009) (“A commercially reasonable disposition of collateral is in the nature of a condition to a creditor's recovery in a deficiency suit.”); see generally Tex. Bus. & Com. Code Ann. § 9.602(7) (providing that debtors and obligors may not waive the rule that collateral be sold in a commercially reasonable manner). Thus, “[a] creditor in a deficiency suit must plead that disposition of the collateral was commercially reasonable.” Id.

         Based on Harris Bank's Motion, it is clear this action is for recovery of a deficiency following the sale of the collateral. See Mot. Default J., Ex. C, ECF No. 7-2, Page ID 40 (accounting for repossession fees and proceeds of the sale in calculating damages). Yet Harris Bank did not allege or otherwise demonstrate in its Motion that the sale was commercially reasonable.[3] Thus, the unchallenged facts in the Complaint do not constitute a legitimate cause of action for a deficiency under Texas law. See Strong v. HSBC Mortg. Servs., Inc., 8:15CV466, 2016 WL 9225263, at *3 (D. Neb. Oct. 24, 2016) (quoting Surtain v. Hamlin Terrace Found., 789 F.3d 1239, 1245 (11th Cir. 2015) (“The standard for determining ‘what constitutes a sufficient basis for the judgment' is ‘akin to that ...

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