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Southern Bank & Trust Co. v. Priyam, LLC

United States District Court, E.D. Virginia, Norfolk Division

November 19, 2014

SOUTHERN BANK & TRUST COMPANY, Plaintiff,
v.
PRIYAM, LLC, et al., Defendants.

MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION

DOUGLAS E. MILLER, Magistrate Judge.

This action to enforce a promissory note and commercial guaranties comes before the court on Plaintiff's Motion for Default Judgment under Rule 55 of the Federal Rules of Civil Procedure. The matter was referred to the undersigned United States Magistrate Judge pursuant to 28 U.S.C. § 636(b)(1)(B) and Rule 72(b) of the Federal Rules of Civil Procedure. For the reasons set forth below, the undersigned recommends that the motion be GRANTED IN PART, and that default judgment be entered against Defendants Vijay Patel, Pradip Shah, Vijay Shah, and Priyam, LLC.

I. STATEMENT OF THE CASE

A review of the pleadings, declarations and attached exhibits in the case establishes the following facts. On April 21, 2005, Defendant Priyam, LLC executed a Promissory Note for $4, 125, 000.00 in favor of the Bank of the Commonwealth. See (ECF No. 1-1, at 1). Defendants Vijay Patel, Pradip Shah, and Vijay Shah separately executed Commercial Guaranties on April 21, 2005. See (ECF. Nos. 1-4, 1-5, 1-6). Vijay Shah signed one Guaranty on his own behalf (ECF No. 1-6, at 3) and executed the Guaranties of Pradip Shah and Vijay Patel by power of attorney. (ECF No. 1-4, at 3; ECF No. 1-5, at 3). While Defendants Vijay Patel and Vijay Shah agreed to guarantee $2, 062, 500.00 of Priyam's indebtedness, Pradip Shah agreed to guarantee fifty percent (50%) of Priyam's indebtedness not to exceed $2, 062, 500.00.

On January 20, 2009, Priyam entered into a Change in Terms Agreement. (ECF No. 1-2). This Change Agreement reflected the Note's then-existing Principal of $3, 730, 392.96 and modified the monthly payment amounts, the monthly payment dates, and the maturity date. Id.

Bank of the Commonwealth was placed into receivership on September 22, 2011 and no longer exists. Plaintiff Southern Bank and Trust Company ("Southern") purchased, and is the successor in interest to, the original lender's Note. (Compl. ¶ 10, ECF No. 1, at 3). On November 14, 2013, Southern issued a Notice of Default to Priyam and the individual guarantors for wfailure to make timely payments" on the Note. (ECF No. 1-3, at 1). Defendants did not make payment as demanded.

On May 30, 2014, Southern filed the present action. (ECF No. 1). In the Complaint, Southern sought judgment for the outstanding principal, interest, and reasonable attorney's fees and collection expenses. Specifically, Southern sought judgment against Defendants Priyam, Vijay Shah, and Vijay Patel in the amount of $859, 369.3 9 in principal and $150, 253.74 in interest through May 30, 2014 and accruing at the Note's default rate of 10.75% thereafter. (Compl. ¶¶ 14, 26, 32). Southern sought judgment against Defendant Pradip Shah in the amount of $429, 684.70 in principal and $75, 126.87 in interest through May 30, 2014 and accruing at 10.75% thereafter. (Compl. ¶ 20; Hill Decl., ECF No. 9-1).[1]

Southern properly served its Complaint and Summons on Pradip Shah, Vijay Shah, and Vijay Patel on June 6, 2014, and filed proof of service on June 10, 2014. (ECF No. 4). Southern properly served Priyam on June 10, 2014, with proof of service filed on June 16, 2014. (ECF No. 5). All four Defendants failed to file a timely Answer or otherwise respond to the Complaint. On July 16, 2014, Southern filed its Motion for Entry of Default. (ECF No. 6). In accordance with Rule 55(a) of the Federal Rules of Civil Procedure, the Clerk entered default on the record on July 21, 2014. (ECF No. 7).

Pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure, Southern filed its Motion for Default Judgment against the Defendants on September 18, 2014. (ECF No. 8). Southern seeks to recover the same principal, interest, and reasonable attorneys' fees and collection expenses identified in the Complaint. (ECF No. 9). In support of its motion, Southern submitted declarations verifying the outstanding principal and interest payments and summarizing the incurred and expected attorneys' fees and collection expenses. (Decl. of James C. Hill, ECF No. 9-1; Decl. of Jeffrey Gray, ECF No. 9-2). Specifically, Southern seeks $81, 484.50 for incurred fees and costs and $30, 000.00 for anticipated collection fees and costs. (Gray Decl., ECF No. 9-2, at 5-6).

II. ANALYSIS

Plaintiffs may file - and courts may appropriately enter - a default judgment when defendants have "failed to plead or otherwise defend" against an action, and an affidavit or other filing demonstrates that failure. Fed.R.Civ.P. 55(a). Southern properly served its Complaint and Summons on P. Shah, V. Shah, and V. Patel on June 6, 2014, and on Priyam on June 10, 2014. The defendants' responsive pleadings were due within twenty-one days of service, or June 27 and July 1, 2014, respectively. Fed.R.Civ.P. 12(a)(1)(A). Having received no response, Southern filed its Motion for Entry of Default, which the Clerk properly entered on July 21, 2014. Fed.R.Civ.P. 55(a).

If a defendant fails to deny in a required responsive pleading any substantive allegation in the complaint, that allegation is considered admitted. Fed.R.Civ.P. 8(b)(6); see also Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001). Southern filed a well-pleaded complaint that included a statement of the court's jurisdiction, a statement of the claim entitling it to relief, and a demand for relief. Fed.R.Civ.P. 8(a).[2] The Defendant's default thus establishes the facts alleged against them. Specifically, the admitted facts establish that the Defendants - all Virginia residents - are party to the Note and Guaranties which were all executed in Virginia, and that Southern's status as a North Carolina corporation establishes complete diversity of citizenship. The amount in controversy exceeds $75, 000.00. Therefore, the court considers whether Southern's well-pleaded factual allegations state a claim upon which the court can grant relief. See, e.g., Joe Hand Promotions, Inc. v. Citibars, Inc., 2:11cv58, 2012 WL 503212, at *3 (E.D. Va. Feb. 8, 2012) (citing Anderson v. Found. for Advancement, Educ. & Emp't of Am. Indians, 155 F.3d 500, 506 (4th Cir. 1998)).

A. Judgment on the Note

Under Virginia Code § 8.01-27, a civil action may be maintained "upon any note or writing by which there is a promise, undertaking, or obligation to pay money, " so long as the note is signed by the party to be charged or its agent.[3] Va. Code Ann. § 8.01-27. Signatures are ...


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