United States District Court, E.D. Arkansas, Northern Division
BMO HARRIS BANK, N.A. PLAINTIFF
MID-ARK UTILITIES & RIG SERVICES, INC., et al. DEFENDANTS
Kristine G. Baker United States District Judge
the Court is an amended motion for default judgment against
defendant Mid-Ark Utilities & Rig Services, Inc.
(“Mid-Ark”), filed by plaintiff BHB Harris Bank,
N.A. (“BHB”) (Dkt. No. 30). Mid-Ark has not
appeared in this action or responded to BHB's motion, and
the time to respond has passed. For the reasons set forth
below, the Court grants BHB's motion for default.
Factual And Procedural Background
Court draws on the factual background already established in
this case. On December 29, 2015, Mid-Ark entered into a Loan
and Security Agreement (the “Agreement”) with BHB
in the total amount of $312, 207.00 for the purchase of
certain Equipment (the “Equipment”) (Dkt. No.
27-4, ¶ 1). Pursuant to the Agreement, Mid-Ark agreed to
make monthly payments for the purchase of the Equipment
beginning on or about March 1, 2016, for a term of 60 months
(Id., ¶ 2). Pursuant to the Agreement, Mid-Ark
was obligated to pay a minimum monthly payment of $5, 203.45
(Id., ¶ 4). Pursuant to Paragraph 5.1 of the
Agreement, Mid-Ark would be in default if the
“Debtor” fails to pay when due any amount owed by
the “Debtor” to BHB under the Agreement
(Id., ¶ 5). Further, pursuant to Paragraph 5.2
of the Agreement, upon default, BHB may “declare the
indebtedness hereunder to be immediately due and
payable.” (Id., ¶ 6). The Agreement was
signed by Mike Penney in his capacity as President of Mid-Ark
(Dkt. No. 27-2, at 10).
about December 29, 2015, Lonnie Graham executed a Continuing
Guaranty (the “Graham Guaranty”) (Dkt. No. 27-4,
¶ 7). Pursuant to the Graham Guaranty, Mr. Graham agreed
to the prompt payment and performance of all obligations,
liabilities, and undertakings of Mid-Ark to BHB
(Id., ¶ 8). Mr. Graham entered into a valid
written contract with BHB to induce BHB to extend credit to
Mid-Ark, whereby he personally guaranteed Mid-Ark's
prompt payment of all amounts owed to BHB, including all of
Mid-Ark's then-existing and future obligations, debts,
and liabilities to BHB (Dkt. No. 27-4, ¶ 9). By
executing the Graham Guaranty, Mr. Graham guaranteed the
repayment of all amounts due under the Agreement and
expressly agreed, and is obligated, to pay BHB's
reasonable attorney fees and cost of any action instituted
upon Mid-Ark's default (Id., ¶ 10). The
Guaranty states that it “is an absolute and
unconditional guarantee of payment and not of
collectability” (Dkt. No. 27-2, at 13). On or about
December 1, 2017, Mid-Ark defaulted under the terms of the
Agreement by failing to make the minimum monthly payment
(Dkt. No. 27-4, ¶ 11). Mr. Graham defaulted on his
contractual obligations by failing to pay said amount upon
Mid-Ark's default (Id., ¶ 12). All of the
Equipment was surrendered to BHB and then sold in a
commercially reasonable manner (Id., ¶ 13).
commenced this action on June 4, 2018, by filing a Complaint
against defendants Mid-Ark, Mr. Penney, and Mr. Graham (Dkt.
No. 30-1, ¶ 4). The Summons and Complaint were served
upon Mid-Ark c/o Newland and Associates, PLLC, their
registered agent, on December 7, 2018 (Id., ¶
5). Mid-Ark has failed to plead or otherwise defend, and the
time within which Mid-Ark may do so has expired and has not
been extended (Id., ¶ 6). In accordance with
Federal Rule of Civil Procedure 55(a), BHB moved for entry of
default as to Mid-Ark on January 9, 2019 (Dkt. No. 24). That
same day, Clerk's Entry of Default was granted (Dkt. No.
requests the entry of default judgment under Federal Rule of
Civil Procedure 55(b)(2). Rule 55(b)(2) provides:
In all other cases, the party must apply to the court for a
default judgment. A default judgment may be entered against a
minor or incompetent person only if represented by a general
guardian, conservator, or other like fiduciary who has
appeared. If the party against whom a default judgment is
sought has appeared personally or by a representative, that
party or its representative must be served with written
notice of the application at least 7 days before the hearing.
The court may conduct hearings or make referrals--preserving
any federal statutory right to a jury trial--when, to enter
or effectuate judgment, it needs to:
(A) conduct an accounting;
(B) determine the amount of damages;
(C) establish the truth of any allegation by evidence; or (D)
investigate any other matter.
Fed. R. Civ. P. 55(b)(2). Federal Rule of Civil Procedure 55
contemplates a two-step process for the entry of default
judgments. Fraserside IP L.L.C. v. Youngtek Sols.
Ltd., 796 F.Supp.2d 946, 951 (N.D. Iowa 2011) (citation
and internal quotation marks omitted). First, pursuant to
Rule 55(a), the party seeking a default judgment must have
the Clerk of Court enter the default by submitting the
required proof that the opposing party has failed to plead or
otherwise defend. Id. Second, pursuant to Rule
55(b), the moving party may seek entry of judgment on the
default under either subdivision (b)(1) or (b)(2) of the
rule. Id. Entry of default under Rule 55(a) must
precede a grant of default judgment under Rule 55(b).
of a default judgment . . . [is] committed to the sound
discretion of the district court. Default judgments, however,
are not favored by the law.” United States v.
Harre, 983 F.2d 128, 130 (8th Cir. 1993) (internal
citation omitted). Once a defendant is in default, the
factual allegations of the complaint, “except those
relating to the amount of damages, will be taken as
true.” 10A Charles A. Wright, et al.,
Federal Practice and Procedure § 2688.1 (4th
ed. 2018) (West) (citations omitted). However, the court must
ensure that the “unchallenged facts constitute a
legitimate cause of action” prior to entering final
judgment. See Murray v. Lene, 595 F.3d 868, 871 (8th
Cir. 2010) (quoting 10A Charles A. Wright, et al.,
Federal Practice and Procedure § 2688 (3d
determining whether to enter default judgment, the Court may
the amount of money potentially involved; whether material
issues of fact or issues of substantial public importance are
at issue; whether the default is largely technical; whether
plaintiff has been substantially prejudiced by the delay
involved; and whether the grounds for default are clearly
established or are in doubt. Furthermore, the court may
consider how harsh an effect a default judgment might have;
or whether the default was caused by a good-faith mistake or
by excusable or inexcusable neglect on the part of the
10A Charles A. Wright, et al., Federal Practice
& Procedure, § 2685 (4th ed. 2018) (West)
(citations omitted) (collecting cases). “Default
judgment for failure to defend is appropriate when the
party's conduct includes willful violations of court
rules, contumacious conduct, or intentional delays. On the
other hand, default judgment is not an appropriate sanction
for a marginal failure to comply with time
requirements.” Ackra Direct Mktg. Corp. v.
Fingerhut Corp., 86 F.3d 852, 856 (8th Cir. 1996)
(internal citations and quotation marks omitted).
Clerk entered default pursuant to Federal Rule of Civil
Procedure 55(a) as to Mid-Ark (Dkt. No. 25). Then, BHB
initially moved for default judgment against Mid-Ark on
February 6, 2019, pursuant to Rule 55(b)(2) (Dkt. No. 26).
This Court denied that motion without prejudice on September
3, 2019 (Dkt. No. 29). In its order, the Court explained that
it denied BHB's motion for default judgment against
Mid-Ark because the representations made in the motion did
not square with the representations made in BHB's motion
for summary judgment against Mr. Graham (Id., at 7).
The Court noted that, as an initial matter, BHB in its
complaint sued Mid-Ark, Mr. Penney, and Mr. Graham each for
the amount of $199, 398.26 plus BHB's attorneys'
fees, legal expenses, and other costs (Dkt. Nos. 1; 29, at
7). In support of its motion for summary judgment against Mr.
Graham, BHB produced the Agreement executed by Mid-Ark for
the purchase and financing of the Equipment and the affidavit
of Kimberly Mundt, a litigation specialist for BHB (Dkt. No.
26-2). Ms. Mundt stated that BHB requested a default judgment
against Mid-Ark in the amount of $199, 398.26 (Id.,
at 3). One of the submitted documents, titled “LOAN