The Bridges Financial Group Inc v. Beech Hill Co. Inc
| Decision Date | 18 April 2011 |
| Docket Number | Civil Action No. 09-2686 |
| Parties | THE BRIDGES FINANCIAL GROUP, INC., Plaintiff, v. BEECH HILL COMPANY, INC.; THOMAS J. ERNST; THE DOROTHY J. VALGENTI TRUST; DOROTHY J. VALGENTI; MRS. DOROTHY J. VALGENTI; JOANNA VALGENTI ERNST; THE ESSEX & SUSSEX CONDOMINIUM ASSOCIATION, INC.; and UNKNOWN TENANTS OR OCCUPANTS NO. 1-10, Defendants. |
| Court | U.S. District Court — District of New Jersey |
NOT FOR PUBLICATION
Hon. Garrett E. Brown, Jr.
This matter1 comes before the Court upon Plaintiff's motion for default judgment (Doc. No. 87) against Defendant Thomas J. Ernst. Mr. Ernst opposes default judgment and has moved to dismiss the case (Doc. No. 80) pursuant to N.J. Stat. Ann. § 14A:13-20. Previously, by Order of December 10, 2010 (Doc. No. 86), this Court adopted the Report and Recommendation ("R&R") of Magistrate Judge Madeline Cox Arleo (Doc. No. 79) and struck Mr. Ernst's Answer, allowing Plaintiff to seek default judgment. The Court was notified that Mr. Ernst had filed bankruptcy proceedings, and the Court therefore stayed all motions involving Mr. Ernst by Order of March 15, 2011. (Doc. No. 96.) The bankruptcy proceeding was dismissed on March 25, 2011. In re: Thomas John Ernst, Bankr. No. 11-15669-MS, Doc. No. 16 (Bankr. D.N.J. Mar. 25, 2011). Because the dismissal of the bankruptcy proceeding terminates the automatic stay, 11 U.S.C. § 362(c)(2)(B), the Court now considers the parties' motions. This Court considered the parties' submissions and decided the matter without oral argument pursuant to Federal Rule of Civil Procedure 78. For the following reasons, the Court will deny Mr. Ernst's motion to dismiss, and the Court will grant Plaintiff's motion for default judgment.
For the purpose of this motion, the court accepts as true the allegations contained in the complaint with the exception of damages. See, e.g., ComdyneI, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990). According to the Complaint, on or about December 14, 2007, George Fantini and BMA Investments, LLC ("Lenders") made a loan in the amount of $300,000.00 (the "Loan") to Defendants Beech Hill Company, Inc. and Thomas J. Ernst (together with Beech Hill, the "Borrowers"). The Borrowers executed a promissory note (the "Note") for the principal amount of $300,000.00. On or about December 20, 2007, Defendant Dorothy Valgenti executed and delivered a mortgage in favor of Lenders for the principal amount of $300,000.00, which was recorded on December 21, 2008. In addition, on or about December 21, 2007, Defendant, as trustee of the Dorothy J. Valgenti Trust, Dorothy Valgenti, and Defendant Joanna Valgenti executed a second mortgage in favor of Lenders for the principal amount of $300,000.00, which was recorded on May 23, 2008. (Compl. 12-14, 16.)
The Note had a maturity date of ninety (90) days from the date of execution. As of the date of the Complaint, the Note had not been paid. The terms of the Loan provided that should the Borrowers fail "to make any payment, or perform any obligation as and when required by the terms" set forth in the Loan documents, the Borrowers would be in default. In the event of adefault, the holder of the Note would be entitled to acceleration of the outstanding amount due under the Loan. (Compl. ¶¶ 21, 23-24.) On or about April 14, 2009, Lenders assigned all their rights, title, and interest in the Note and mortgages executed as security for the Note to Plaintiff The Bridges Financial Group, a Virginia corporation with a principle place of business in Woodbridge, Virginia. Assignments of the mortgages were recorded on April 22, 2009, in the Monmouth and Morris County Clerks' Offices. (Compl. ¶¶ 1, 19-20.)
Plaintiff filed this action on June 2, 2009, to: (1) foreclose on the two mortgages securing the Note; (2) seek possession of the mortgaged property; and (3) receive a monetary judgment for all sums owed under the Loan. (Compl. ¶¶ 33, 36, 38.) Mr. Ernst filed an Answer and numerous affirmative defenses on May 11, 2010. During the course of discovery, Mr. Ernst served numerous incomplete, confusing, and non-responsive discovery responses upon Plaintiff, prompting Plaintiff to seek relief before the Hon. Madeline Cox Arleo, U.S.M.J., who presided over discovery proceedings. As more fully detailed in Magistrate Judge Arleo's Report and Recommendation (R&R) of November 12, 2010, Mr. Ernst failed to comply with discovery orders of May 5, 2010, June 30, 2010, and he failed to attend or seek an adjournment of an in-person settlement conference on August 10, 2010. This pattern of recalcitrance prompted Magistrate Judge Arleo to enter an order to show cause on August 11, 2010, requiring Mr. Ernst to show cause why sanctions should not be imposed pursuant to Federal Rules of Civil Procedure 16(f) and 37 no later than August 25, 2010. Mr. Ernst did not timely respond to the order to show cause, but requested an adjournment of the order to show cause, citing a family illness. The Court granted the adjournment, and held a hearing on the order to show cause on September 13, 2010. For the third time, the Court ordered Mr. Ernst to provide fully responsive answers to outstanding written discovery, and the Court awarded Plaintiff's counsel reasonable attorneys'fees (later assessed to be $1,601.50) as sanctions for Mr. Ernst's failure to attend the August 10, 2010 settlement conference.2 (See R&R at 3-5.) Magistrate Judge Arleo specifically instructed Mr. Ernst that this was his "final opportunity" to adhere to the discovery orders, and that the Court would permit Plaintiff to move to dismiss if he did not do so. (Doc. No. 63 (Letter Order of September 14, 2010).) Mr. Ernst filed documents purporting to be discovery responses on September 20, 2010.
On Plaintiff's motion to strike, Magistrate Judge Arleo reviewed the September 20 submissions, and found portions of them "not only inadequate but uncomprehensible." (R&R at 8.) After weighing the factors set forth in Poulis v. State Farm Fire & Casualty Co., 747 F.2d 863, 868 (3d Cir. 1984), Magistrate Judge Arleo recommended striking Mr. Ernst's Answer, concluding that he was responsible for his non-responsive filings and failure to appear, that his misconduct prejudiced Plaintiff, that he had demonstrated a history of dilatoriness, that his misconduct was willful, and that lesser sanctions would not be effective. (See id. at 8-13.) Despite notice that he had 14 days to file objections to the R&R, Mr. Ernst did not file any objections, and this Court adopted Magistrate Judge Arleo's R&R and struck Mr. Ernst's Answer by Order of December 10, 2010.
Pursuant to this Court's December 10 Order, the Clerk of the Court entered default against Mr. Ernst, and Plaintiff now moves for default judgment. Mr. Ernst opposes default judgment on the grounds that Plaintiff violated New Jersey's business reporting requirements set forth in N.J. Stat. Ann. § 14A:13-20. During the discovery and R&R period, Mr. Ernst has alsofiled additional documents, styled as motions or "petitions," that seek dismissal of Plaintiff's claims under a variety of legal theories, and on the basis of a number of factual allegations, some of which were not included in Mr. Ernst's Answer. (See, e.g., Doc. No. 61, 72, 77.) Previously, this Court denied similar informal "motions" (see Doc. Nos. 50, 51) asserting usury and standing defenses by Order of October 5, 2010. (Doc. Nos. 67-68.)
Default judgment is governed by Federal Rule of Civil Procedure 55. Rule 55(a) provides, in relevant part, as follows: "When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." Fed. R. Civ. P. 55(a). "Thereafter, the plaintiff may seek the Court's entry of default judgment under either Rule 55(b)(1) or Rule 55(b)(2)." Doug Brady, Inc. v. N.J. Bldg. Laborers Statewide Funds, 250 F.R.D. 171, 177 (D.N.J. 2008) (citation omitted). "The district court has the discretion to enter default judgment, although entry of default judgments is disfavored as decisions on the merits are preferred." Super 8 Motels, Inc. v. Kumar, No. 06-5231, 2008 U.S. Dist. LEXIS 28066, at *7 (D.N.J. Apr. 1, 2008) (citing Hritz v. Woma Corp., 732 F.2d 1178, 1181 (3d Cir. 1984)).
Before entering default judgment, the court "must make explicit factual findings as to: (1) whether the party subject to default has a meritorious defense, (2) the prejudice suffered by the party seeking default, and (3) the culpability of the party subject to default." Doug Brady, 250 F.R.D. at 177 (). "In weighing these factors, district courts must remain mindful that, like dismissalwith prejudice, default is a sanction of last resort." Id. (citing Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863, 867-68 (3d Cir. 1984)).
Accepting the facts alleged to be true, Plaintiff has stated a claim for moneys owed under the Note. The Court concludes that entry of default judgment against Mr. Ernst is appropriate in this case. He has not proffered a meritorious defense to Plaintiff's claims for amounts owed under the Note, and his numerous informal motions and petitions for relief are not well-founded.
With regard to Mr. Ernst's most recent claim that Plaintiff failed to comply with N.J. Stat. Ann. § 14A:13-20, the Court notes that this defense does not appear in Mr. Ernst's Answer (see Doc. No. 483), and Mr. Ernst fails to explain how this statute applies to the loan agreement entered into by the parties. This statute provides in pertinent part:
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