United States District Court, E.D. Virginia, Alexandria Division
In re OSAMA M. EL-ATARI, Debtor.
QTRAX, INC, Defendant KEVIN R. McCARTHY, TRUSTEE,
ELLIS, III, United States District Judge
matter is before the Court on a Report and Recommendation
("R&R") from the United States Bankruptcy Court
for the Eastern District of Virginia, recommending that
plaintiff/trustee's motion for default judgment be
granted. As there is no objection to the R&R, the
findings and conclusions of the Bankruptcy Court will be
adopted and the motion for default judgment will be granted.
action relates to a Chapter 7 bankruptcy filed by debtor
Osama El-Atari. Specifically, plaintiff/trustee Kevin
McCarthy initiated the instant proceeding pursuant to 11
U.S.C. § 542 against defendant Qtrax, Inc., seeking
turnover of amounts originally owed to the bankruptcy estate
pursuant to a promissory note. In this regard, the complaint
alleges that defendant executed and delivered a promissory
note worth $1, 630, 000.00 to the debtor, which note the
debtor subsequently assigned to a bank. In turn, that bank
released its interest in the promissory note to
plaintifCtrustee. Accordingly, plaintiff/trustee, as the
note-holder, now has the right to enforce that note.
Importantly, the promissory note provides, inter
[a]ll costs, expenses and expenditures including ... the
complete legal costs incurred by [the Noteholder] in
enforcing this Note as a result of any default by the
Borrower, will be added to the principal then outstanding and
will immediately be paid by the Borrower. In the case of the
Borrower's default and the acceleration by [the
Noteholder] of the amount due, all amounts under this Note
will bear interest at the rate of 18 percent per annum from
the date of the demand until paid.
Ex. 1. The promissory note also provides for payment of all
costs, including legal fees, incurred in enforcing the note.
August 10, 2010, plaintiff/trustee demanded from defendant
full payment of the promissory note. Five years later, on
September 24, 2015, defendant made one payment in the amount
of $30, 000.00. As defendant has not otherwise made any
payments, defendant is in default. Moreover, on August 9,
2016, defendant waived the effect of any statute of
limitations with respect to defendant's default until
August 9, 2017. Thus, as of November 12, 2016, defendant owed
plaintiff/trustee and the bankruptcy estate $1, 630, 000.00
in principal, $1, 803, 750.00 in interest, $803.84 in per
diem interest from November 12, 2016, and all costs incurred
by the Trustee in this Adversary Proceeding.
November 17, 2016, plaintiff/trustee filed this action, and
on the following day, November 18, the Bankruptcy Court
issued a summons and notice of pretrial conference. A review
of the docket sheet confirms that on November 21, 2016 both
the complaint and summons were properly served on defendant
via first class mail, pursuant to Rule 7004(b)(1),
Fed.R.Bankr.P. Defendant's Answer was therefore due on
December 19, 2016. See Rule 7012(a), Fed.R.Bankr.P.
("If a complaint is duly served, the defendant shall
serve an answer within 30 days after the issuance of the
summons ...."). Defendant did not file an Answer or
otherwise appear in this action. Yet, on January 9, 2017
defendant paid plaintiff/trustee $5, 000.00. Thereafter, on
March 9. 2017, plaintiff/trustee filed a motion for default
judgment, seeking turnover of $1, 630, 000.00 in principal,
$1, 900, 010.00 in interest, per diem interest of $803.84
from March 7, 2017, and $350.00 in filing fee costs incurred
by plaintiff/trustee in this proceeding.
March 9, 2017, defendant was served with notice that a
hearing on the motion for default judgment was scheduled for
April 18, 2017. The notice of hearing date also provided that
"[u]nless a written response and supporting memorandum
are filed and served by the date specified, the Court may
deem any opposition waived, treat the Motion as conceded, and
issue an order granting the requested relief without further
notice or hearing." See Case No. 16-01204-BFK,
Doc. 12. Defendant did not file a response, and on June 12,
2017 the Bankruptcy Court submitted an R&R, recommending
that the motion for default judgment be granted (1) because
jurisdiction exists over this matter, (2) because defendant
was properly served but failed to respond or appear in this
action, and (3) because the complaint sought a sum certain.
Any objections to the R&R were due on June 27, 2017.
See Rule 9033(b), Fed.R.Bankr.P. (providing that
objections to an R&R must be filed within 14 days of
service). The parties filed none.
review of the record and R&R in this matter confirms that
the Bankruptcy Court correctly concluded that jurisdiction
exists over this matter pursuant to 28 U.S.C. § 1334(b),
that defendant is in default, and that the complaint seeks a
sum certain to which plaintiff/trustee. In this respect, the
R&R correctly determined that plaintiff/trustee should be
awarded a money judgment against defendant in the amount of
$1, 630, 000.00 in principal, $1, 900, 010.00 in interest,
per diem interest of $803.84 from March 7, 2017, and $350.00
in filing fee costs.
for good cause, and there being no objection, It is hereby
ORDERED that the R&R is ADOPTED IN FULL.
further ORDERED that the motion for default judgment is
further ORDERED that JUDGMENT is entered for
plaintiff/trustee against defendant in the amount of $1, 630,
000.00 in principal, $1, 900, 010.00 in interest, per diem
interest of S803 .84 &om March 7, 2017. and $3S0.00 in
filing fe costs. Interest on the principal amount of the
Judgment will acrue post-Judgment at the statutory rate. See
28 U.S.C. § 1961.
Clerk is directed to send a copy of this Order to al counsel
of record and defendant, to enter judgment for
pwn1iff/1rustee punuant to Rule ...