Texas Capital Bank v. Fat Cow, LLC

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA

TEXAS CAPITAL BANK f/k/a

TEXAS CAPITAL BANK,

NATIONAL ASSOCIATION

CIVIL ACTION

VERSUS

22-157-SDD-RLB

FAT COW, LLC,

DOUGLAS E. HOSFORD, and

KARRY W. HOSFORD

RULING

Before the Court is a Motion for Default Judgment' filed by Plaintiff, Texas Capital

Bank f/k/a Texas Capital Bank, National Association (“Texas Capital’). Defendants, Fat

Cow, LLC, Douglas E. Hosford, and Karry W. Hosford (“Defendants”) have failed to

respond to the Motion just as they have failed to respond to any pleadings in this case.

For the following reasons, the Motion is GRANTED.

I. BACKGROUND

On August 2, 2018, Defendants took out a loan in the principal amount of

$499,200.00 from Texas Capital.* The record contains the following documents from that

transaction: (1) a note executed by Fat Cow, LLC and Douglas E. Hosford in the principal

amount of $499,200.00 (the “Note”);? (2) a security agreement executed by Fat Cow, LLC,

as Debtor and identifying specific collateral to secure repayment of the Note (the “Security

Rec. Doc. 19.

2 Rec. Doc. 4, p. 3.

3 Rec. Doc. 1-5.

Page 10f6

Agreement”);* (3) a loan agreement executed by Fat Cow, LLC (the “Loan Agreement”);°

and (4) an unconditional guarantee by Karry W. Hosford (the “Guarantee’”).®

The security agreement granted Texas Capital a security interest in the following

described property:

All of Debtor’s [Fat Cow] presently owned and existing and

hereafter acquired and arising (a) accounts, whether or not

earned by performance, instruments, and chattel paper; (b)

inventory; (c) general intangibles; (d) equipment; (e) vehicles,

including without limitation; a 2006 Dodge Van, Vehicle

Identification No. WDOPD7444659196556; (f) replacements,

betterments, substitutions and renewals of, and additions to,

any of the foregoing; (g) proceeds, including without limitation,

condemnation or insurance proceeds, arising out of or with

respect to the foregoing; and (h) all products of the foregoing.’

As further security for the Note, Douglas E. Hosford and Karry W. Hosford granted Texas

Capital a mortgage dated August 3, 2018, affecting immovable property located in St.

Francisville, Louisiana (the “Mortgage’”).®

In late 2021, Fat Cow, LLC stopped making payments to Texas Capital as required

by the Note. On February 9, 2022, Texas Capital declared that an Event of Default existed

under the Note and accelerated the indebtedness of the Defendants, as documented in

correspondence dated February 9, 2022 (the “Default Letter”).9 On March 4, 2022, Texas

Capital filed its Complaint for Enforcement of Promissory Note and Recognition of

Security Interests, seeking: (1) a monetary judgement for the unpaid principal amount of

the Note and accrued interest; (2) a declaration that the Security Agreement and

4 Rec. Doc. 1-6.

5 Rec. Doc. 1-7.

® Rec. Doc. 1-8.

7 Rec. Doc. 1-6, p. 11.

8 Rec. Doc. 1-9.

® Rec. Doc. 1; Rec. Doc. 1-11.

Page 2o0f6

Mortgage are valid, effective, and enforceable; and (3) reasonable attorney's fees and

costs incurred in the enforcement of the Note and collection of the judgement.'°

The record reflects the that Defendants were properly served on March 31, 2022,

and April 3, 2022.'1 To date, Defendants have failed to file a responsive pleading or

otherwise express an intent to contest this suit. On August 8, 2022, Texas Capital sought

preliminary entry of default by the Clerk of the Court.'* The Clerk entered default against

Defendants on August 9, 2022, and Texas Capital filed the instant Motion for Default

Judgment against Defendants on October 19, 2022.19

Texas Capital subsequently informed the Court that the immovable property

subject to the Mortgage was sold in a short sale transaction in November 2022.'4 Texas

Capital attests that it received $325,536.91 in proceeds from the sale.'® Texas Capital

further attests that, after accounting for all payments to date, Defendants owe the

following amounts, excluding attorney’s fees incurred after October 31, 2022:

Principal: $ 102,319.84

Accrued unpaid interest as of March 30, 2023: $ 30,189.00

Late fees: $ 109.75

Total as of March 30, 2023: $ 132,618.59

Texas Capital now moves for entry of a Default Judgment against Defendants for a money

judgment in the amount of $132,618.59 plus per diem interest of $28.03 commencing on

March 31, 2023.'° Texas Capital also seeks:

(1) A judgment in favor of Texas Capital ... for the recognition,

maintenance, and enforcement of the Security Agreement

dated August 2, 2018 ... encumbering Accounts, Vehicles,

12 Rec. Doc. 1; Rec. Doc. 4.

1 Rec. Doc. 6; Rec. Doc. 7; Rec. Doc. 8.

12 Rec. Doc. 15.

13 Rec. Doc. 16; Rec. Doc. 19.

14 Rec. Doc. 21-1, p. 2.

15 Rec. Doc. 21-1, p. 2.

18 Rec. Doc. 21-1, p. 2.

Page 30f6

Equipment, Inventory, Instruments, Chattel Papers and

General Intangibles, and perfected by the filing of a UCC-1

Financing Statement on July 19, 2018 with the Secretary of

State of Mississippi (File No. 20182665835A) and on July 16,

2018 with the Secretary of State of Louisiana (File No. 17-

1451926):

(2) A judgment in favor of Texas Capital ... for the recognition,

maintenance and enforcement of the Mortgage dated August

3, 2018 ... encumbering the real property and improvements

described therein, and recorded on August 14, 2018 as File

No. 121421 in Mortgage Book 262, Page 352, in the official

records of West Feliciana Parish, Louisiana; and

(3) A judgment in favor of Texas Capital ... awarding reasonable

attorney’s fees and costs in an amount to be set by separate

motion pursuant to Rule 54(d) of the Federal Rules of Civil

Procedure and Rule 54(b) of the Local Rules of the Middle

District of Louisiana.'”

ll. LAW

“When a party against whom a judgment for affirmative relief is sought has failed

to plead or otherwise defend ... the clerk must enter the party’s default.”'® Once an entry

of default has been made, a plaintiff may apply for a judgment based on such default.'9

A default judgment is a “drastic remedy” resorted to by courts only in extreme situations,

and it is not required even if the non-movant is technically in default.2°

In determining whether a default judgment should be entered against a defendant,

courts have developed a two-part analysis.2' First, the court must consider whether the

entry of default judgment is appropriate under the circumstances.*? The factors relevant

to this inquiry include: (1) whether material issues of fact are at issue; (2) whether there

Rec. Doc. 19, p. 5-6.

18 Fed. R. Civ. P. 55(a).

18 New York Life Ins. Co. v. Brown, 84 F.3d 137, 141 (5th Cir. 1996).

0 Lewis v. Lynn, 236 F.3d 766, 767 (5th Cir. 2001).

21 Wilmington Tr., Nat'l Ass’n v. Batonhotel, LLC, No. CV 16-719-SDD-RLB, 2017 WL 2125754 at *2 (M.D.

La. May 16, 2017).

22 Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir.1998).

Page 4o0f6

has been substantial prejudice; (3) whether the grounds for default are clearly

established; (4) whether the default was caused by a good faith mistake or excusable

neglect; (5) the harshness of a default judgment; and (6) whether the court would itself

be obligated to set aside the default on the defendant’s motion.*° Second, the court must

assess the merits of the plaintiff's claim and find sufficient basis in the pleadings for the

judgment.”4

lil. ANALYSIS

Considering the relevant factors in Lindsey, the Court finds that default judgment

is appropriate. First, there are no material issues of fact in dispute due to Defendants’

failure to respond.** Second, Defendants’ non-responsiveness has prejudiced Texas

Capital’s interests by effectively bringing the adversary process to a halt. Third, default

was properly entered by the Clerk of the Court. To date, Defendants have not filed any

answer, responsive pleadings, or otherwise made an appearance before the Court,

despite having received proper service of the summons and complaint.” Plaintiff has

demonstrated these facts by affidavit.2” Fourth, there is no evidence before the Court that

Defendant's failure to file an answer or otherwise respond is attributable to a “good faith

mistake or excusable neglect.”@6 Fifth, Defendant’s failure to defend the instant lawsuit for

over 12 months mitigates the harshness of the default judgment. Finally, based on the

23 Id.

*4 Taylor v. City of Baton Rouge, 39 F.Supp.3d 807, 813 (M.D. La.2014); Nishimatsu Const. Co., Ltd. v.

Hous. Nat’! Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) (default judgment may only lawfully be entered on

the well pleaded facts with sufficient allegations to support the judgment).

25 Nishimatsu, 515 F.2d at 1206 (“The defendant, by his default, admits the plaintiffs well pleaded

allegations of fact.”).

26 See Fed. R. Civ. P. 55(a) (the clerk of the court must enter a party’s default “[W]hen 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’).

27 Rec. Doc. 15-2, Jf] 5-10.

28 See Taylor, 39 F.Supp.3d 807 at 814.

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facts known to the Court, there is no “good cause” for setting aside the default if challenged

by Defendants.”° The Court therefore finds that default judgment is appropriate.

Next, the Court must “assess the merits of the plaintiff's claims and find sufficient

basis in the pleadings for the judgment.”°° The Court has thoroughly reviewed the exhibits

and affidavits provided by Texas Capital in support of the Motion along with the applicable

law and jurisprudence. Texas Capital has established that Defendants are liable for: (1)

the outstanding principal balance of the Note, including the aggregation of all additional

accrued amounts, plus all per diem interest that has accrued since March 31, 2023; (2)

enforcement of the Security Agreement dated August 2, 2018; (3) enforcement of the

Mortgage dated August 3, 2018; and (4) reasonable attorney's fees and costs incurred by

Texas Capital.

IV. CONCLUSION

For the reasons set forth above, Plaintiff's Motion for Default Judgment*' is hereby

GRANTED.

IT IS SO ORDERED.

Signed in Baton Rouge, Louisiana, this 5th day of July, 2023.

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA

29 Id.

30 fg, at 813.

31 Rec. Doc. 19.

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