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Crestmark v. Hooven-Dayton Corp.

United States District Court, E.D. Michigan, Southern Division

May 9, 2019

Crestmark, Plaintiff,
v.
The Hooven-Dayton Corporation and Che International Group, L.L.C., Defendants.

          ORDER GRANTING MOTION FOR ENTRY OF DEFAULT JUDGMENT

          Sean F. Cox United States District Court Judge

         Plaintiff sued Defendants for breach of contract. After being properly served, Defendants failed to answer Plaintiff's complaint. The Clerk entered defaults against Defendants. Plaintiff now moves for a default judgment in the amount of $1, 043, 870.90. For the reasons below, the Court will grant Plaintiff's motion.

         BACKGROUND

         Plaintiff Crestmark provides loans to small and mid-size companies. Compl. ¶ 7. On July 7, 2016, Crestmark and Defendant Hooven-Dayton Corporation (“Hooven”) entered into a loan and security agreement. Id. at ¶ 8. Under the loan agreement, Crestmark agreed to advance, and Hooven agreed to repay, the principal amount of $5, 600, 000, plus expenses, fees, costs of collection, and interest. Id. at ¶ 9. Defendant Che International Group, L.L.C., (“CIG”) guarantied the loan. Id. at ¶ 10. Hooven's debt was also secured by a promissory note, which CIG also guarantied. Id. at ¶ 11.

         Under the terms of the loan, Hooven agreed to make payments to Crestmark, to maintain a loan balance in accordance with the terms set forth in the loan documents, and to maintain a specific debt service ratio. Id. at ¶ 16. Hooven breached all of these conditions. Id. at ¶ 18.

         On January 13, 2017, Crestmark notified Hooven and CIG of Hooven's breach. Id. at ¶ 22. On May 11, 2017, Crestmark, Hooven, and CIG entered into a letter forbearance agreement. Id. at ¶ 23. In the first forbearance agreement, Hooven admitted that it was in default and that it owed $4, 867, 549.58, and waived all defenses. Id. at ¶ 26, 27. CIG expressly reaffirmed its guaranty. Id. at ¶ 25.

         On February 7, 2018, the parties entered into a second forbearance agreement. Id. at ¶ 29. Hooven and CIG reaffirmed their default and CIG's guaranty, and waived all defenses. Id. at ¶ 30-32. Hooven also agreed to obtain a commitment for alternate financing on or before April 15, 2018, and that it would pay the full amount due no later June 30, 2018. Id. at ¶ 33.

         Hooven failed to obtain alternate financing or pay the debt. Id. at ¶ 34. On April 10, 2018, the parties entered into a surrender agreement, under which Hooven and CIG agreed that they remained in default and that the amount due was $3, 320, 753, not including fees and expenses. Id. at ¶ 35. Hooven acknowledged that it had ceased conducting business activities and agreed to assist Crestmark in liquidating its collateral. Id. at ¶ 36.

         On May 15, 2018, Crestmark conducted a U.C.C. foreclosure sale of Hooven's collateral. Id. at ¶ 38. The sale generated $1, 305, 000. Id. Crestmark acquired other of Hooven's personal property by submitting a credit bid for $1, 000, 000. Id. The auctioneer's fee was $155, 000. Id.

         After the application of the above amounts, the amount due and owing by Hooven to Crestmark after the U.C.C. foreclosure sale was $1, 025, 727, not including fees and interest. Id. at ¶ 39. Hooven and CIG have failed to pay this amount. Id. at ¶ 40-42.

         On December 11, 2018, Crestmark filed a verified complaint, alleging breach of contract against Hooven and breach of guaranty against CIG. (ECF No. 1). On December 19, 2018, Crestmark served the complaint and summons on the registered agent of Hooven and CIG. (ECF Nos. 10, 11). Neither Defendant responded and, on January 15, 2019, the Clerk of the Court entered default against both Defendants. (ECF Nos. 15, 16). Crestmark served the Clerk's entry of default on both Defendants. (ECF No. 17).

         On January 24, 2019, Crestmark requested that the Clerk enter a default judgment against Defendants. (ECF No. 18). The Clerk denied this request because “[t]he sum certain amount could not be made certain by computation by the Clerk.” (ECF No. 20).

         Thereafter, Crestmark filed this motion for default judgment, requesting a judgment in the amount of $1, 043, 870.90. (ECF No. 21). Crestmark served Defendants with notice of the Court's intention to hear oral arguments on this motion. (ECF No. 24). The Court heard oral ...


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