Transp. All. Bank, Inc. v. Peewee's Hauling, Inc.

Decision Date29 July 2020
Docket NumberCase No.: 2:18-cv-499-FtM-66MRM
PartiesTRANSPORTATION ALLIANCE BANK, INC., Plaintiff, v. PEEWEE'S HAULING, INC., PEEWEE'S SERVICES CORP., MARLOWE F. VARGAS, SHANNON GEORGE and VICTOR GEORGE, Defendants.
CourtU.S. District Court — Middle District of Florida

TRANSPORTATION ALLIANCE BANK, INC., Plaintiff,
v.
PEEWEE'S HAULING, INC., PEEWEE'S SERVICES CORP., MARLOWE F. VARGAS,
SHANNON GEORGE and VICTOR GEORGE, Defendants.

Case No.: 2:18-cv-499-FtM-66MRM

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA FORT MYERS DIVISION

July 29, 2020


REPORT AND RECOMMENDATION

Before the Court are two motions in which Plaintiff Transportation Alliance Bank, Inc. ("TAB") seeks default judgment against Defendants Victor George ("V. George"), PeeWee's Hauling, Inc. ("PHI"), PeeWee's Services Corp. ("PSC"), Marlowe F. Vargas, and Shannon George ("S. George") (all but V. George, collectively the "PeeWee Defendants"). (Docs. 101, 116). Because TAB seeks to hold all Defendants jointly and severally liable for its damages arising from facts set forth in its Fourth Amended Complaint (the "Complaint") (Doc. 86), the Undersigned consolidates the motions and addresses them both here. For the reasons set forth below, the Undersigned recommends that TAB's Motions (Docs. 101, 116) be GRANTED IN PART and DENIED IN PART.

PROCEDURAL BACKGROUND

The Undersigned begins with a procedural summary. TAB first moved for a clerk's default against the PeeWee Defendants after it filed its Third Amended Complaint. (Docs. 39, 41). The PeeWee Defendants then, through counsel, answered the Third Amended Complaint

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causing the Court to deny TAB's motion as moot. (Doc. 58). Later, TAB filed the Complaint at issue naming V. George along with the PeeWee Defendants. (Doc. 86).

While the PeeWee Defendants answered the Complaint, V. George did not and TAB moved for a clerk's default against V. George. (Docs. 95, 97). The Court granted that motion and the clerk entered a default against V. George. (Doc. 99). As a result, TAB moved for default judgment against V. George before it obtained a clerk's default against the remaining PeeWee Defendants. (Doc. 101).

But after the PeeWee Defendants answered the Complaint, their counsel sought to withdraw and the Court granted leave. (Docs. 100, 102). In doing so, the Court required the corporate Defendants (PHI and PSC) to retain counsel pursuant to M.D. Fla. R. 2.03(e) no later than March 2, 2020. (Doc. 102 at 3).1 The Court also required Vargas and S. George either to retain new counsel or file the appropriate notices representing they intended to proceed pro se. (Id.). Relevantly, the Court admonished the PeeWee Defendants that failure to comply with the order may subject them to default or other sanctions. (Id.).

Despite these directions, the PeeWee Defendants failed to comply at all with the Court's order. TAB, as a result, moved for the entry of a clerk's default against the PeeWee Defendants and sought sanctions in the form of striking their Answer. (Doc. 104). The Undersigned issued a Report and Recommendation recommending that TAB's motion be granted in full. (Doc. 106). The presiding United States District Judge adopted the Report and Recommendation, granted the entry of a clerk's default, and struck the PeeWee Defendants' Answer. (Doc. 109). TAB then moved for default judgment against the PeeWee Defendants. (Doc. 116).

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FACTUAL BACKGROUND

A review of the factual allegations of TAB's Complaint (Doc. 86) is necessary. TAB and PHI—with PHI acting through its President, S. George—executed a Promissory Note (the "Note") for $193,661 in favor of TAB. (Id. at 3).2 To secure the Note, the parties also executed a Commercial Security Agreement granting TAB an interest in a tractor truck acting as collateral for the Note. (Id.). The parties reaffirmed their obligations under the documents under a Business Loan Agreement. (Id.). Finally, S. George and TAB executed a Commercial Guaranty making S. George liable for any default by PHI on the Note. (Id. at 4). These documents constitute the "loan" agreement. (See id.).

As part of the loan and to induce TAB to extend credit to PHI, PHI agreed to register TAB's security interest in the truck as a lien on the Florida title to the truck after PHI acquired the truck. (Doc. 86 at 4). In fact, the parties executed a Power of Attorney authorizing TAB as its lawful attorney-in-fact to act for PHI in applying for an original or duplicate title certificate and to register, transfer, or record a lien on the title. (Id. at 3).

PHI was to purchase the truck from Nuss Truck Group, Inc. ("Nuss") and record TAB's security interest on the title as a lien. (Doc. 86 at 4). S. George, V. George, and Vargas began negotiating with Nuss and informed Nuss of TAB's interest arising from the loan. (Id.). And when Nuss transferred title to PHI, TAB was in fact listed as the lienholder on the transfer form. (Id.). However, after receiving the first title with TAB's interest, the three then requested a duplicate transfer title from Nuss that did not include TAB as a lienholder. (Doc. 86 at 4).

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Defendants then enacted a scheme to conceal TAB's interest in the collateral. To begin, PHI registered the duplicate transfer title from Nuss—the one that omitted TAB's lien interest in the collateral—with the State of Florida. (Doc. 86 at 4). Then, PHI acting through Vargas, applied for a certificate of title with Florida's Department of Highway Safety and Motor Vehicles but intentionally failed to disclose TAB's lien information despite the certificate requesting this information specifically. (Id. at 5). The Department issued PHI a certificate of title that did not name TAB as a lienholder. (Id. at 6). TAB represents that it was around this time that PHI defaulted on the loan and S. George failed to repay the Note amount. (See id. at 8).

After becoming delinquent on the Note, TAB represents that PHI and the PeeWee Defendants created a new corporate entity: PSC. (Doc. 86 at 6). PSC shares the same principal address and mailing address with PHI and Vargas, the current President of PHI, is also PSC's Chief Financial Officer. (Id.). PHI then, without informing TAB or its counsel, transferred the collateral to PSC in violation of the parties' loan agreement. (Id.). During the transfer, PHI once again acting through Vargas applied for another certificate of title and again failed to list TAB's security interest in the truck on that title. (Id. at 7). Once PHI obtained this title, free from any reference to TAB's interest, PHI transferred the title to PSC. (Id.).

TAB alleges Defendants orchestrated this plot to avoid repaying the loan. (Doc. 86 at 8). As S. George, V. George, and Vargas had negotiated with Nuss for the original title containing TAB's security interest, the three were certainly aware of TAB's interest as a result of the loan and also knew that PHI was in default for delinquent payments because of their positions with PHI. (Id.). They then went to great lengths to erase any documentation of TAB's interest in the collateral on the truck's title. (Id.). As PHI and PSC shared the same executive officer, PSC was also aware of TAB's interest in the collateral, lack of title documentation notwithstanding. (Id.).

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Moreover, TAB alleges PSC was not a bona fide purchaser because it did not pay fair market value for the truck to PHI. (Id.). TAB now believes the truck is in danger of destruction or concealment and does not know the exact location of the collateral but believes that because both PSC and PHI are in Collier County, Florida, there is reason to believe the truck is also in Collier County. (Id.).3

As a result of its delinquent payments and unauthorized transfer of collateral, PHI has defaulted on the Note. (Doc. 86 at 9). S. George has also defaulted under the Commercial Guaranty by failing to make good PHI's debt obligations. (Id.). TAB argues that because of these defaults, and Defendants' fraudulent scheme, all are jointly and severally liable for the principal amount of the loan, applicable late fees, and accrued interest under the agreement. (Id.; see also id. at 16).

LEGAL STANDARD

The Court may enter a default judgment against a properly served defendant who fails to defend or otherwise appear pursuant to Federal Rule of Civil Procedure 55(b)(2). Cohan v. Sparkle Two, LLC, 309 F.R.D. 665, 666 (M.D. Fla. 2015); see also Directv, Inc. v. Griffin, 290 F. Supp. 2d 1340, 1343 (M.D. Fla. 2003). The effect of the entry of a default is that all factual allegations in the complaint are taken as true, save for the amount of unspecified damages. Cohan, 309 F.R.D. at 666 (citing Buchanan v. Bowman, 820 F.2d 359, 361 (11th Cir. 1987)). "[I]f liability is well-pled in the complaint, it is established by the entry of a default." Id.

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Default judgment, however, may only be entered "if the factual allegations of the complaint, which are assumed to be true, provide a sufficient legal basis for entry of a default judgment." Id. (citing Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)).4 While the Court "must accept well-pled facts as true, the court is not required to accept a plaintiff's legal conclusions." De Lotta v. Dezenzo's Italian Rest., Inc., No. 6:08-cv-2033-ORL-22-KRS, 2009 WL 4349806, at *2 (M.D. Fla. Nov. 24, 2009) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Defendants are not held to admit facts that are not well-pled or to admit conclusions of law. Nishimatsu, 515 F.2d at 1206.

To be well-pled, a complaint does not need detailed factual allegations, but a complaint must provide the grounds for entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); Iqbal, 556 U.S. 678. This standard—derived from motions to dismiss pursuant to Fed. R. Civ. P. 12(b)(6)—is "equally applicable to a motion for default judgment." Cohan, 309 F.R.D. at 667. Thus, a complaint requires more than labels and conclusions, and "a formulaic recitation of the elements of a cause of action will not do." Iqbal, 556 U.S. at 678. A complaint will not suffice if "it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Id. "The well-pled allegations must nudge the claim 'across...

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