Opinion
06 Civ. 0230 (RMB)(FM).
July 26, 2006
REPORT AND RECOMMENDATION TO THE HONORABLE RICHARD M. BERMAN
I. Introduction
Plaintiff ORIX Financial Services, Inc. ("OFS"), formerly known as Orix Credit Alliance, Inc. ("OCAI"), brings this collection action against defendant Patsy Leachman ("Patsy") pursuant to her unconditional Personal Guaranty ("Guaranty") of the amounts due and owing pursuant to certain equipment sales to Robert Leachman ("Robert") which had been financed by OCAI. Following Robert's payment default, OCAI commenced this action on the Guaranty. On March 7, 2006, after Patsy failed to answer the complaint or otherwise appear, Your Honor directed that a default judgment be entered and referred this matter to me to conduct an inquest regarding the damages, if any, to be awarded to OFS. (Docket No. 10).
The papers submitted by OCAI do not reveal the relationship between Patsy and Robert.
By order dated March 10, 2006, I directed OFS to serve and file its papers in support of inquest damages by May 10, 2006, and gave Patsy until May 24, 2006, to respond. (Docket No. 11). OFS filed its inquest papers on May 3, 2006, and supplemental papers on June 16, 2006. To date, however, Patsy has not submitted any opposition papers or contacted the Court.
For the reasons set forth below, I recommend that OFS be awarded damages in the amount of $444,626.11, plus prejudgment interest in the amount of $480,200.40, or a total of $924,826.51.
II. Standard of Review
In light of Patsy's default, OFS' well-pleaded allegations concerning issues other than damages must be accepted as true.See Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993);Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); Fundex Capital Corp. v. Rochelle, No. 05 Civ. 2972 (RMB)(JCF), 2006 WL 547794, at *2 (S.D.N.Y. Mar. 7, 2006).
Additionally, although a plaintiff seeking to recover damages against a defaulting defendant must prove its claim through the submission of evidence, the Court need not hold a hearing as long as (i) it has determined the proper rule for calculating damages on the claim, see Credit Lyonnais Secs. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999), and (ii) the plaintiff's evidence establishes, with reasonable certainty, the basis for the damages specified in the default judgment. See Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 111 (2d Cir. 1997); Bank of China v. Sub-Zero, Inc., No. 02 Civ. 4457 (RMB)(AJP), 2005 WL 1149780, at *2 (May 16, 2005). Here, both of these requirements have been met.
III. Facts
On the basis of the complaint and OFS' inquest papers, I find as follows:
A. Parties and Jurisdiction
On September 26, 2000, OCAI changed its name to OFS. (Aff. of Yvonne Kalpakoff, Esq., sworn to on Feb. 3, 2006 ("Kalpakoff Aff."), ¶ 12). OFS is a New York corporation with its principal place of business at 600 Town Park Lane, Kennesaw, Georgia. (Id. ¶ 1). Patsy is a citizen of Mississippi. (Id. ¶ 3). Accordingly, because the amount in controversy is substantially more than $75,000, this Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332.
B. Factual Background
On November 15, 1993, Robert, as mortgagor, and OCAI, as mortgagee, entered into a Security Agreement which gave OCAI a purchase money security interest in certain commercial equipment purchased by Robert. (Id. ¶ 6). The Security Agreement provides that:
[the] Mortgagor will fully and faithfully pay, perform and fulfill all of the Mortgage Obligations, with late charges thereon from and after maturity of any unpaid installment of the Mortgage Obligations, whether by acceleration or otherwise, at the rate of 1/15 of 1% per are collected by the Mortgagee in full and if all or any portion of the Mortgage Obligations be referred to an attorney for collection, a reasonable sum (equal to 20% of the unpaid amount of such Mortgage Obligations) as attorneys' fees.
(Kalpakoff Aff. Ex. B).
Schedule A to the Security Agreement, which lists the equipment mortgaged, was amended on or about March 20, 1997, to reflect the equipment then being financed by OCAI. (Id. at 3). That same day, OCAI and Robert also entered into a Promissory Note in the amount of $932,935.49 to secure OCAI's financing of the equipment. (See Kalpakoff Aff. ¶ 5). Like the Security Agreement, the Promissory Note states that in the event of nonpayment, a default interest rate of 1/15 of 1% per day shall be applied to the outstanding balance. (Id. Ex. A).
As of that date, the equipment consisted of one Prentice Loader, three Peterbilt Trucks, one Caterpillar Dozer, one Delta Lowboy Trailer, four Caterpillar Skidders, and one Hydro Ax Fellerbuncher. (Id.).
On March 26, 1997, Patsy executed the Guaranty to secure Robert's obligations to OCAI. (Kalpakoff Aff. ¶ 7 Ex. C). The Guaranty provides that "liability hereunder . . . is direct and unconditional and may be enforced without requiring [OCAI] first to resort to any other right, remedy or security and shall survive any repossession of property whether or not such constitutes an election of remedies." (Id. Ex. C).
On June 17, 1998, and February 23 and November 5, 1999, Robert and OCAI entered into agreements which modified the terms and extended the time for repayment of the Promissory Note. (Kalpakoff Aff. ¶¶ 8-10 Exs. D-F). The third extension agreement provided for seven monthly installment payments of $12,000 beginning on December 5, 1999, and a balloon payment of $475,425.88, due on July 5, 2000. (Id. Ex. F). This schedule was based on principal then outstanding in the amount of $518,903.57. (Suppl. Aff. of Yvonne Kalpakoff, sworn to on June 16, 2006 ("Kalpakoff Suppl. Aff."), ¶ 3). In addition to the principal balance, the amounts due under the third extension agreement included an amortized interest payment of $38,402.72 (calculated at 13.5% per annum), late charges on past due payments totaling $1,919.59, and a document preparation fee of $200. (Id.). Thus, the total amount due was $559,425.88. (Id.).
On February 5, 2000, Robert defaulted on the Promissory Note as modified. (Kalpakoff Aff. ¶ 11). Subsequently, between April 11, 2000, and May 30, 2001, Robert made additional payments totaling $32,700, which reduced the outstanding balance to $526,725.88. (Kalpakoff Suppl. Aff. ¶ 4 Ex. A). OCAI then discounted this amount for "unearned interest" in the amount of $6,662.10, resulting in a balance due of $520,063.78. (Kalpakoff Suppl. Aff. ¶ 5). After late charges in the amount of $50 per month were recalculated, the total amount due under the Promissory Note, and hence the Guaranty, was further reduced to $519,163.78. (Id. ¶ 6; Kalpakoff Aff. ¶ 16 Ex. 2).
Following Robert's default, OFS obtained peaceful possession of some of the mortgaged equipment. (Kalpakoff Aff. ¶ 14). On August 29, 2001, OFS conducted a partial sale of the repossessed equipment which resulted in gross proceeds of $25,000. (Id. ¶ 16). On September 28, 2001, a second equipment sale generated an additional $62,000 in gross proceeds, but also led to resale costs in the amount of $12,412.33. (Id.). The net proceeds resulting from this sale therefore were $49,587.67. (Id.; Kalpakoff Suppl. Aff. ¶ 7). After crediting the $74,587.67 in net proceeds from the two sales against the amounts due, the outstanding principal balance on the Promissory Note was reduced to $444,576.11. (Kalpakoff Suppl. Aff. ¶ 7). To this sum, OFS added one further $50 late payment charge following the crediting of the second sale proceeds. (Id.). Accordingly, the outstanding balance under the Promissory Note as of September 28, 2001, was $444,626.11. (Id.; Kalpakoff Aff. ¶ 16 Ex. 2).
The Promissory Note also entitles OFS to recover prejudgment interest on the outstanding balance at the rate of "1/15 of 1% per day." (See Kalpakoff Aff. Ex. A). OFS consequently is entitled to recover prejudgment interest at the rate of $296.42 per day ($444,626.11 x 1% × 1/15), from September 29, 2001 (the day after the second sale), through March 7, 2006 (when the default judgment was entered). (Pl.'s Mem. ¶ 9; Kalpakoff Aff. ¶ 16).
IV. Discussion
A. Breach of Guaranty
Under New York law to establish a prima facie case of breach of a guaranty, the moving party must demonstrate: (1) a guaranty; (2) the underlying debt; and (3) failure of the guarantor to perform under the guaranty. See Fundex Capital Corp., No. 05 Civ. 2922 (RMB)(JCF), 2006 WL 547794, at *2 (citing Buffalo and Erie Reg'l Dev. Corp. v. World Auto Parts, Inc., 761 N.Y.S.2d 893, 894 (4th Dep't 2003); Kensington House Co. v. Oram, 739 N.Y.S.2d 572, 572-73 (1st Dep't 2002); City of New York v. Clarose Cinema Corp., 681 N.Y.S.2d 251, 253 (1st Dep't 1998)). Here, OFS has established all three elements. First, Patsy entered into a Guaranty of Robert's indebtedness to OCAI which, by its terms, is unconditional. Second, the proof submitted by OFS confirms that Robert has defaulted on the payment of his indebtedness in the amount of $924,826.51. Finally, by not making payment in response to this lawsuit, Patsy plainly has failed to honor her Guaranty of that indebtedness. OFS is therefore entitled to recover $924,825.51 from Patsy.
B. Attorneys' Fees
In addition, OFS seeks to recover $2,500 in attorneys' fees. (Pl.'s Mem. ¶ 8). Under the Promissory Note, OFS is entitled to recover "a reasonable sum (equal to 20% of the unpaid amount) as attorneys' fees." (Kalpakoff Aff. Ex. A). Simply applying the percentage formula would result in an extraordinary award of attorneys' fees to OFS. Perhaps for this reason, in its inquest papers, OFS agreed to limit its attorneys' fees to $2,500. (See Pl.'s Mem. ¶ 8; Aff. of William M. Stern, Esq., sworn to on Apr. 25, 2006, ¶ 6). Although $2,500 is undoubtedly a reasonable amount for attorneys' fees in this action, OFS has failed to submit any supporting documentation justifying its request.
Second Circuit precedent requires a party seeking an award of attorneys' fees to support that request with contemporaneous time records that show "for each attorney, the date, the hours expended, and the nature of the work done." New York State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983). Fee applications that do not contain such supporting data "should normally be disallowed." Id.; see also Kingvision Pay-Per-View, Ltd. v. The Body Shop, No. 00 Civ. 1089 (LTS)(KNF), 2002 WL 393091, at *5 (S.D.N.Y. Mar. 13, 2002) (denying attorneys' fees because, even though requested amount of $1,000 was reasonable, detailed documentation was not provided).
Because OFS has failed to provide the Court with any billing records or time sheets, its request for attorneys' fees should be denied for failure to comply with the requirements of Carey.
V. Conclusion
OFS should be awarded damages against defendant Patsy Leachman, pursuant to her Guaranty, in the amount of $924,826.51, consisting of principal in the amount of $444,626.11, plus prejudgment interest from September 29, 2001, through March 7, 2006, in the amount of $480,200.40.
VI. Notice of Procedure for Filing of Objections to this Report and Recommendation
The parties are hereby directed that if they have objections to this Report and Recommendation, they must, within ten days from today, make them in writing, file them with the Clerk of the Court, and send copies to the chambers of the Honorable Richard M. Berman and to the chambers of the undersigned, at the United States Courthouse, 500 Pearl Street, New York, New York 10007, and to any opposing parties. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(e), 72(b). Any requests for an extension of time for filing objections must be directed to Judge Berman. The failure to file timely objections will result in a waiver of those objections for purposes of appeal. See Thomas v. Arn, 474 U.S. 140, 106 S. Ct. 466, 88 L. Ed. 2d 435 (1985); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(e), 72(b).