BMO Harris Bank v. Newtown Elec.

• Decision Date: 16 December 2022
• Docket Number: 3:22-cv-651 (VAB)
• Parties: BMO HARRIS BANK N.A., Plaintiff, v. NEWTOWN ELECTRIC LLC, TIMBER HILL FARM LLC, BARBARA L. GAYDOSH, and GARY M. GAYDOSH Defendants.
• Court: U.S. District Court — District of Connecticut

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BMO HARRIS BANK N.A., Plaintiff, v. NEWTOWN ELECTRIC LLC, TIMBER HILL FARM LLC, BARBARA L. GAYDOSH, and GARY M. GAYDOSH Defendants.

No. 3:22-cv-651 (VAB)

United States District Court, D. Connecticut

December 16, 2022

RULING AND ORDER ON MOTION FOR DEFAULT JUDGMENT

VICTOR A. BOLDEN, UNITED STATES DISTRICT JUDGE

BMO Harris Bank N.A. (“Plaintiff”) has sued Newtown Electric LLC, Timber Hill Farm LLC, Barbara L. Gaydosh (“Ms. Gaydosh”), and Gary M. Gaydosh (“Mr Gaydosh”), (collectively “Defendants”) asserting state law breach of contract claims^[1] and requesting injunctive relief. See Compl. at 9-12, ¶¶ 43-66, ECF No. 1 (May 10, 2022) (“Compl”). Defendants did not appear in this case. BMO Harris Bank N.A. filed a motion for entry of default, see Mot. for Default Entry, ECF No. 11 (July 13, 2022), which the Court granted, see Order, ECF No. 15 (July 18, 2022). BMO Harris Bank N.A. has now filed a motion for Default Judgment. See Mot. for Default Judgement, ECF No. 18 (Aug. 17 2022) (“Mot. for Default J.”).

For the following reasons, BMO Harris Bank N.A.'s motion for default judgment is GRANTED in part and DENIED in Part.

Specifically the Court finds that BMO Harris Bank N.A. is entitled to Default Judgment. But, because BMO Harris Bank N.A. has not provided sufficient documentation from which this Court can determine the damages amount, the Court denies, without prejudice, BMO Harris Bank N.A.'s requested damages amount, or any requested injunctive relief.

BMO Harris Bank N.A. may submit supplemental documentation in support of a renewed motion for Default Judgment. Any supplemental filing must include the following:

• Account statement(s), or other record(s), indicating the original loan amount; the outstanding principal balance, the number payments and total amount paid under each loan agreement;

• Record(s) indicating the effective date of the acceleration interest rate of 18%, the number of days, up to and including the date of the new filing, that BMO Harris Bank N.A. believes it is owed that acceleration interest rate, and the total amount owed in unpaid interest under each loan agreement;

• Record(s) to substantiate any post acceleration fees under each loan agreement;

• Affidavit(s) identifying any collateral, secured by any of the loan agreements at issue in this case, which have been seized, sold, and the proceeds received from those sales;

• Affidavit(s) identifying any collateral, secured by any of the loan agreements at issue in this case, which have been seized but not yet sold, and the status of any pending sales of said collateral;

• Attorney fees attributable to Newtown Electric LLC and Mr. Gaydosh; and

• Attorney fees attributable to Timber Hill Farm LLC and Ms. Gaydosh.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Allegations^[2]

BMO Harris Bank N.A. and Newtown Electric LLC allegedly entered into two loan agreements (“Newtown Electric Loan Agreements”) on August 24, 2018. See Compl. at 3, ¶ 10. Separately, BMO Harris Bank N.A. and Timber Hill Farm LLC allegedly also entered into a loan agreement (“Timber Hill Loan Agreement”) on May 9, 2018. Id. at 4, ¶ 16.

1. The Newtown Electric Loan Agreements

On August 24, 2018, BMO Harris Bank N.A. entered into two loan agreements with Newtown Electric LLC to finance the purchase of two dump trucks. See Compl. at 2, ¶ 9.

The first loan agreement, in the amount of $206,033.40 with an 8.60% interest rate, was secured by a 2019 Peterbilt Model 389 truck and a 2018 Heritage dump body. See Ex. A to Compl., ECF 1-1 (“Loan Agreement One”); Compl. at 3, ¶¶ 10-11. Under Loan Agreement One, Newtown Electric LLC agreed to repay the loan over 86 months in regular installments of $3,268.24 starting on December 1, 2018. See id. at 3, ¶ 11. Mr. Gaydosh, the sole member of Newtown Electric LLC, see Compl. at 2, ¶ 6, executed a continuing guaranty, see Ex. H to Compl. at 1, ECF No. 1-8 (“Loan Agreement One Guaranty”), thereby personally guaranteeing Loan Agreement One.

Under §5.1 of Loan Agreement One, failure “to pay when due any amount owed” is defined as an “Event of Default.” Loan Agreement One at 3, §5.1. “Upon the occurrence of an event of default . . . [BMO Harris Bank N.A.] may . . . (i) declare [Loan Agreement One] to be in default, (ii) declare indebtedness . . . to be immediately due and payable . . . (iv) exercise all of the rights and remedies of a secure party under the Uniform Commercial Code[.]” Id. at 3, §5.2. Newtown Electric LLC also agreed that in the event of a default, it “shall pay to [BMO Harris Bank N.A.] all expenses of retaking, holding, preparing for sale, selling and the like, including . . . reasonable fees of any attorneys retained by Lender, and . . . all other legal expenses incurred by [BMO Harris Bank N.A.].” Id. Newtown Electric LLC further agreed that it would be “liable for any deficiency remaining[,]” with respect to Loan Agreement One, “after any disposition of the Equipment after default.” Id. Loan Agreement One also included an acceleration of interest provision, under which Newtown Electric LLC agreed to “pay lender, upon acceleration of the . . . indebtedness, interest on all sums then owing . . . at the rate of 1 ½ % [one and a half percent] per month[.]” Id. at 3, § 5.3.

The second loan agreement, in the amount of $217,000.00 with an 8.69% interest rate, was secured by another 2019 Peterbilt Model 389 truck and a 2018 J&J dump body. See Ex. B to Compl., ECF 1-1 (“Loan Agreement Two”); Compl. at 3, ¶¶ 12-13. Under Loan Agreement Two, Newtown Electric LLC agreed to repay the loan over 86 months in regular installments of $3,404.51 starting on October 1, 2018. See id. at 3, ¶ 13. Mr. Gaydosh likewise executed a continuing guaranty under this agreement, see Ex. H to Compl. at 2, ECF No. 1-8 (“Loan Agreement Two Guaranty”), thereby personally guaranteeing Loan Agreement Two.

Under §5.1 of Loan Agreement Two, failure “to pay when due any amount owed” is defined as an “Event of Default.” Loan Agreement Two at 3, §5.1. “Upon the occurrence of an event of default . . . [BMO Harris Bank N.A.] may . . . (i) declare [Loan Agreement Two] to be in default, (ii) declare indebtedness . . . to be immediately due and payable . . . (iv) exercise all of the rights and remedies of a secure party under the Uniform Commercial Code[.]” Id. at 3, §5.2.

Newtown Electric LLC also agreed that in the event of a default, it “shall pay to [BMO Harris Bank N.A.] all expenses of retaking, holding, preparing for sale, selling and the like, including . . . reasonable fees of any attorneys retained by [BMO Harris Bank N.A.], and . . . all other legal expenses incurred by [BMO Harris Bank N.A.].” Id. Newtown Electric LLC further agreed that it would be “liable for any deficiency remaining[,]” with respect to Loan Agreement Two, “after any disposition of the Equipment after default.” Id. Loan Agreement Two also included an acceleration of interest provision, under which Newtown Electric LLC agreed to “pay lender, upon acceleration of the . . . indebtedness, interest on all sums then owing . . . at the rate of 1 ½ % [one and a half percent] per month[.]” Id. at 3, § 5.3.

BMO Harris Bank N.A. perfected its security interests in both dump trucks by recording its liens with the Connecticut Department of Motor Vehicles. See Compl. at 3-4, ¶ 14; Ex. C to Compl., ECF No. 1-3 (May 10, 2022). The Newtown Electric Loan Agreements were subsequently modified on May 27, 2020, allowing for a three-month deferment and a corresponding extension of the maturity date. See Ex. D to Compl., ECF No. 1-4 (May 10, 2022) (“Newtown Electric Modification Agreements”).

On April 13, 2022, BMO Harris Bank N.A. sent a “Notice of Default and Acceleration” to Newtown Electric LLC informing it that the Newtown Electric Loan Agreements are in default. See Ex. J to Compl. at 1, ECF No. 1-10 (May 10, 2022) (“Newtown Electric Notice of Default”). BMO Harris Bank N.A. informed Newtown Electric LLC that, as a result of the alleged defaults, BMO Harris Bank N.A. elected to exercise its rights under the Newtown Electric Loan Agreements, and to accelerate the debts. Id. As of April 13, 2022, according to BMO Harris Bank N.A., “the accelerated balance due” under the Newtown Electric Loan Agreements was “$302,569.37, representing all principal, interest, taxes due and late fees.” Id.

BMO Harris Bank N.A. requested that “all Equipment[s] securing the Agreement[s] be surrendered immediately.” Id.

Also, on April 13, 2022, BMO Harris Bank N.A. sent a “Notice of Default Respecting Guaranty” to Mr. Gaydosh, see Ex. J to Compl. at 3, ECF No. 1-10 (May 10, 2022) (“Newtown Electric LLC Guarantor Notice”), reiterating that Mr. Gaydosh, as guarantor, had “absolutely and unconditionally guaranteed the obligations” of Newtown Electric LLC under the guaranty agreement signed on August 24, 2018. Id. In light of the alleged defaults, BMO Harris Bank N.A. indicated that it had elected to accelerate the debts under the Newtown Electric Loan Agreements, resulting in a combined “accelerated balance due as of . . . $302,569.37, representing all principal, interest, taxes due and late fees.” Id. BMO Harris Bank N.A. also noted that as a guarantor, Mr. Gaydosh “will be responsible for all additional fees, costs and expenses, including without limitation, attorney's fees, accruing after this date.” Id.

2. The Timber Hill Farm LLC Loan Agreement

On May 9, 2018, BMO Harris Bank N.A. entered into a loan agreement with Timber Hill Farm LLC to finance the purchase of a dump truck. See Ex. E to Compl., ECF No. 1-5 (May 10 2022) (“Loan Agreement Three”). Loan Agreement Three, in the amount of $212,310.21 with an 8.29% interest rate, was secured by a 2019 Peterbilt Model 389 truck and a 2018 J&J dump...