H&E Equipment Services, Inc. v. Oak City Contracting, LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NORTH CAROLINA

WESTERN DIVISION

NO. 5:19-CV-361-FL

H&E EQUIPMENT SERVICES, INC, )

)

Plaintiff, )

)

v. )

ORDER

)

OAK CITY CONTRACTING, LLC, and )

DUSTIN CRITTENDEN, )

)

Defendants. )

This matter is before the court on plaintiff’s motion for default judgment. (DE 14).

Defendants failed to respond, and the time for doing so has elapsed. In this posture, the issues

raised are ripe for ruling. For the following reasons, plaintiff’s motion for default judgment is

granted in part and denied in part.

STATEMENT OF THE CASE

Plaintiff commenced this action August 20, 2019, by filing verified complaint. Plaintiff

asserts a breach of contract claim, and alternatively claims of quantum meruit and unjust

enrichment, arising from plaintiff’s provision of commercial construction equipment and related

services. Proceeding on the basis of diversity jurisdiction, plaintiff seeks damages of

$314,734.71,1 as well as prejudgment and post-judgment interest, costs, expenses, and attorneys’

fees.

1 Although plaintiff originally alleged damages of $384,290.32 in its complaint, plaintiff reduced the amount

after receiving partial payment of $69,555.61 from nonparties on October 1, 2019. (See Phair Aff. (DE 15) ¶ 10).

On November 19, 2019, the clerk entered default against defendants upon their failure to

answer. Plaintiff filed the instant motion for default judgment December 12, 2019, relying upon

1) an affidavit of Jennifer Phair (“Phair”), plaintiff’s regional credit manager; 2) Application for

Credit and Contract (“the application”) executed by defendants;2 3) receipt of filing fee; 4) two

invoices from process servers; and 5) affidavit of attorney Jason R. Harris (“Harris”), regarding

the amount of attorneys’ fees incurred.

STATEMENT OF FACTS

The facts alleged in the complaint and accepted as true upon consideration of default

judgment may be summarized as follows. Plaintiff is a Delaware corporation in the business of

renting, selling, and servicing commercial construction equipment. (Pl. Compl. (DE 1) ¶¶ 3,7).

Defendant Dustin Crittenden (“Crittenden”) is the managing member of defendant Oak City

Contracting, LLC (“Oak City”), a North Carolina limited liability company. (Id. ¶¶ 4—5).

In or about December 2015, defendant Oak City executed the application and opened an

account with plaintiff for the purchase of commercial construction equipment and related services.

(Id. ¶ 8). According to the application, defendants planned to make an “estimated monthly

purchase” of $25,000 or more. (Ex. 1 (DE 1-1) at 2; Ex. A (DE 16-1) at 5).3 Moreover, the

application provides “balances beyond 30 days will be subject to a one and one-half percent (1.5%)

finance or interest charge per month (18% per annum) or the highest rate allowable by law.” (Id.).

Finally, the application states that the “[a]pplicant shall be liable for all costs and fees, including

2 Upon receipt of this filing, the court ordered plaintiff to resubmit a legible copy of the contract. Plaintiff

complied January 21, 2020.

3 Page numbers in citations to documents in the record specify the page number designated by the court’s

electronic case filing (ECF) system, and not the page number, if any, showing on the face of the underlying document.

attorney and/or collection agency fees and expenses, incurred in pursuit and/or collection of any

amounts past due, including interest charges.” (Id.).

Defendant Crittenden personally guaranteed defendant Oak City’s account with plaintiff

by executing the guarantee of indebtedness section of the application. (Ex. 1 (DE 1-1) at 4; Ex. A

(DE 16-1) at 6). This section provides, “the undersigned Guarantor(s) . . . does unconditionally

personally guarantee all sums which may be owed by application to H&E . . . including but not

limited to the payment of all costs of collection and attorney’s fees.” Id.

Defendants received certain commercial goods and services from plaintiff, and despite

demand by plaintiff, refused to pay amounts due under the application. (Pl. Compl. (DE 1) ¶ 10—

11).

COURT’S DISCUSSION

A. Standard of Review

Once default has been entered pursuant to Federal Rule of Civil Procedure 55(a), Rule

55(b)(2) authorizes the court to enter default judgment against a properly served defendant who

fails to file a timely, responsive pleading. Upon default, the defendant “admits the plaintiff’s well-

pleaded allegations of facts, is concluded on those facts by the judgment, and is barred from

contesting on appeal the facts thus established.” Ryan v. Homecomings Fin. Network, 253 F.3d

778, 780 (4th Cir. 2001) (quoting Nishimatsu Constr. Co. v. Houston Nat’l Bank, 515 F.2d 1200,

1206 (5th Cir. 1975)). However, “a default is not treated as an absolute confession by the

defendant of his liability and of the plaintiff’s right to recover.” Id. Rather, the court must consider

whether the unchallenged facts support the relief sought. Id.

If the court determines that liability is established, it then must determine the appropriate

amount of damages. See Ryan, 253 F.3d at 780—81. Unlike allegations of fact, allegations of

damages are not deemed admitted upon default. See Fed. R. Civ. P. 8(b)(6) (“An allegation—

other than one relating to the amount of damages—is admitted if a responsive pleading is required

and the allegation is not denied.”); see also Credit Lyonnais Secs. (USA), Inc. v. Alcantara, 183

F.3d 151, 155 (2d Cir. 1999) (“Even when a default judgment is warranted based on a party’s

failure to defend, the allegations in the complaint with respect to the amount of damages are not

deemed true.”).

To make an independent determination regarding damages, the court may conduct an

evidentiary hearing under Rule 55(b)(2)(B), but such a hearing is not required if the damages are

ascertainable from the pleadings. See Anderson v. Found. for Advancement, Educ. and Emp’t of

Am. Indians, 155 F.3d 500, 507 (4th Cir. 1998) (“[I]n some circumstances a district court entering

a default judgment may award damages ascertainable from the pleadings without holding a

hearing.”).

B. Analysis

1. Breach of Contract

As a threshold matter, the court’s jurisdiction is based upon diversity of citizenship;

therefore, the court must “apply the substantive law of the state in which it sits, including the state’s

choice of law rules.” Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581, 599–

600 (4th Cir. 2004) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 79 (1938)). Applying North

Carolina’s choice of law rules, “the interpretation of a contract is governed by the law of the place

where the contract was made.” Tanglewood Land Co. v. Byrd, 299 N.C. 260, 262 (1980).

Furthermore, a contract is made at the place where “the last act was done by either of the parties

essential to a meeting of minds.” Bundy v. Commercial Credit Co., 200 N.C. 511, 515 (1931). In

this case, after completing the application, defendants mailed it to plaintiff’s Raleigh, North

Carolina branch for acceptance. (See Ex. 1 (DE 1-1) at 2). Accordingly, contract was made in

Raleigh, North Carolina, and North Carolina law governs plaintiff’s breach of contract claim.

“The elements of a claim for breach of contract are (1) existence of a valid contract and

(2) breach of the terms of [the] contract.” Wells Fargo Ins. Serv. USA, Inc. v. Link, 372 N.C. 260,

276 (2019). Under the first element, a valid contract requires assent, mutuality, and definite terms.

See Horton v. Humble Oil & Refining Co., 255 N.C. 675, 679 (1961). Moreover, mutuality, or

“[m]utuality of promises means that promises, to be enforceable, must each impose a legal liability

upon the promisor. Each promise then becomes a consideration for the other.” Wellington-Sears

& Co. v. Dize Awning & Tent Co., 196 N.C. 748, 751 (1929). Under the second element, failure

to comply with duties imposed by contract terms constitutes breach. See Sale v. State Highway

Comm’n, 242 N.C. 612, 619 (1955).

Here, plaintiff has sufficiently alleged a claim for breach of contract. The application

attached to plaintiff’s verified complaint evidences a valid contract with definite terms.

Defendants’ signatures therein establish their assent to those terms. Moreover, plaintiff’s promise

to provide goods and services in exchange for defendants’ promises to pay satisfies the mutuality

of promises requirement and consideration. Finally, by failing to pay plaintiff for the goods and

services rendered, defendants failed to comply with the terms of the contact. Accordingly, the

court finds that defendants breached their contract with plaintiff.

2. Damages

Having established defendants’ liability as a matter of law, the court turns to plaintiff’s

assertion of damages. The court finds that it can ascertain damages based on the evidence in the

record and dispenses with need for hearing. See Anderson, 155 F.3d at 507. Here, plaintiff alleges

$314,734.71 in damages due to defendants’ failure to pay for goods and services rendered. (Phair

Aff. (DE 15) ¶ 13). In support, plaintiff proffers the application and sworn affidavit from plaintiff’s

regional credit manager, Phair, attesting to the amount of damages. Moreover, the damages

amount is reasonable, where the contract indicated defendants would make estimated monthly

purchases of at least $25,000 and where the parties executed the contract approximately three years

and eight months before plaintiff commenced this action.4 (Ex. 1 (DE 1-1) at 2; Ex. A (DE 16-1)

at 5). Accordingly, the court finds plaintiff sustained $314,734.71 in damages.

3. Quantum Meruit and Unjust Enrichment

Under North Carolina law, “[q]uantum meruit operates as an equitable remedy based upon

a quasi contract or a contract implied in law which provides a measure of recovery for the

reasonable value of services rendered in order to prevent unjust enrichment.” Ron Medlin Constr.

v. Harris, 364 N.C. 577, 580 (2010) (internal quotation omitted). “Quantum meruit is not an

appropriate remedy when there is an actual agreement between the parties.” Ron Medlin Constr.,

364 N.C. at 580 (internal quotation omitted). Accordingly, having found that the parties entered

into a valid contract, which defendants breached, the court denies plaintiff’s claims for quantum

meruit and unjust enrichment.

4. Attorneys’ Fees

Plaintiff also seeks attorneys’ fees. A federal court sitting in diversity applies state law

when determining whether to award attorneys’ fees. See Alyeska Pipeline Serv. Co. v. Wilderness

Soc., 421 U.S. 240, 259 n.31 (1975). Under North Carolina law, “a successful litigant may not

recover attorneys’ fees, whether as costs or as an item of damages, unless such a recovery is

expressly authorized by statute.” Stillwell Enter. v. Interstate Equip. Co., 300 N.C. 286, 289

4 The application was executed December 8, 2015, and plaintiff commenced this action August 20, 2019,

approximately three years and eight months later. If defendants made monthly purchases of $25,000 for three years

and eight months, they would have paid plaintiff $1,100,000.

(1980). Authorizing recovery of attorneys’ fees in this context, N.C. Gen. Stat. § 6-21.2 provides,

“[o]bligations to pay attorneys’ fees” arising out of any “evidence of indebtedness” “shall be valid

and enforceable.” Regarding the amount of attorneys’ fees recoverable, the statute states “[i]f such

note, conditional sale contract or other evidence of indebtedness provides for the payment of

reasonable attorneys’ fees by the debtor, without specifying any specific percentage, such

provision shall be construed to mean fifteen percent (15%) of the ‘outstanding balance’ owing on

said note, contract or other evidence of indebtedness.” N.C. Gen. Stat. § 6-21.2(2). Importantly,

this statute also includes the following notice provision:

[a party seeking attorneys’ fees] shall, after maturity of the obligation by default or

otherwise, notify . . . [the debtor] that the provisions relative to payment of

attorneys’ fees in addition to the “outstanding balance” shall be enforced and that

such [debtor] has five days from the mailing of such notice to pay the “outstanding

balance” without the attorneys’ fees.

Id. § 6-21.2(5). Finally, N.C. Gen. Stat. § 6-21.2 does not authorize recovery of attorneys’ fees

against a guarantor of indebtedness unless the guaranty contract specifically provides for such

recovery. See EAC Credit Corp. v. Wilson, 281 N.C. 140, 187 (1972).

Here, the application authorizes recovery of attorneys’ fees by requiring defendant Oak

City to pay “all costs and fees, including attorney and/or collection agency fees and expenses,

incurred in pursuit and/or collection of any amounts past due.” (Ex. 1 (DE 1-1) at 2; Ex. A (DE

16-1) at 5). Moreover, the guarantee of indebtedness section obligates defendant Crittenden to

“guarantee all sums which may be owed by application to H&E . . . including but not limited to

the payment of all costs of collection and attorney’s fees.” (Ex. 1 (DE 1-1) at 4; Ex. A (DE 16-1)

at 6). Since the application does not specify the attorneys’ fee percentage, Section 6-21.2(2) sets

the rate at 15%, which is $47,210.20. In support this award, plaintiff proffers affidavit of Harris,

plaintiff’s counsel, attesting that Harris charged plaintiff at least $47,210.20 in legal fees. (See

Harris Aff. (DE 15-5) ¶ 4).

However, plaintiff fails to allege that it 1) provided the requisite notice of its intent to

enforce the attorneys’ fees provision and 2) allowed defendants five days to pay the outstanding

balance without attorneys’ fees, as required by N.C. Gen. Stat. § 6-21.2(5).5 North Carolina courts

“strictly construe[ ]” this requirement. In re Shangra-La, Inc., 167 F.3d 843, 851 (4th Cir. 1999);

see also ITT-Industrial Credit Co. v. Hughes, 594 F.2d 384, 387 (4th Cir. 1979) (“[T]the federal

courts have consistently required a strict compliance with state statutory notice provisions in

connection with the attempted recovery of attorney’s fees.”). Indeed, merely filing a complaint

seeking attorneys’ fees does not satisfy N.C. Gen. Stat § 6-21.2(5). See ITT-Industrial Credit Co.,

594 F.2d at 387 (filing a claim in bankruptcy does not satisfy the notice provision); Blanton v.

Sisk, 70 N.C. App. 70, 75 (1984) (“[T]he serving of the complaint upon the defendants seeking to

recover attorneys’ fees does not satisfy the requirements of G.S. 6-21.2(5).”).

However, there is no “time limit on filing the requisite notice.” In re Shangra-La, Inc., 167

F.3d at 851. In fact, “notice may be given during the course of the proceedings.” Id. (citing

Binning’s Inc. v. Roberts Constr. Co., 9 N.C. App. 569 (1970)). Therefore, the court denies

plaintiff’s request for attorneys’ fees without prejudice, and allows plaintiff leave to file a motion

to alter the judgment to reflect the addition of the requisite information for an award of attorneys’

fees, within 28 days from the date of this order.

5. Costs

5 Plaintiff’s complaint states “[d]espite demand by Plaintiff, Defendants have wrongfully refused to pay

amounts due on the account in an amount presently totaling $384,290.32, exclusive of interest, costs, expenses and

attorneys’ fees.” (Pl. Compl. (DE 1) ¶ 11). However, this allegation does not specify whether plaintiff’s demand

included notice of its intent to pursue attorneys’ fees or whether the demand allowed defendants five days to pay the

outstanding balance without attorneys’ fees.

Plaintiff seeks a total of $625.00 in costs for the following expenses: 1) $400.00 for filing

fee, 2) $150.00 for service of process, and 3) $75.00 for service of process. In support, plaintiff

proffers two invoices from process servers, filing fee receipt, and the application, which provides

“[a]pplicant shall be liable for all costs and fees, including attorney and/or collection agency fees

and expenses, incurred in pursuit and/or collection of any amounts past due, including interest

charges.” (Ex. 1 (DE 1-1) at 2; Ex. A (DE 16-1) at 5).

Unlike attorneys’ fees, “costs are assessed against the unsuccessful litigant as a matter of

course.” Flint v. Haynes, 651 F.2d 970, 973 (4th Cir. 1981). Indeed, Federal Rule of Civil

Procedure 54(d)(1) provides in pertinent part, “[u]nless a federal statute, these rules, or a court

order provides otherwise, costs—other than attorney’s fees—should be allowed to the prevailing

party.” Accordingly, where plaintiff attaches documentation for the expenses, plaintiff has

demonstrated good cause for the taxation of costs, and the court awards plaintiff $625.00.

6. Interest

Plaintiff also seeks pre-judgment and post-judgment interest. According to the United

States Court of Appeals for the Fourth Circuit, “state law applies to questions involving

prejudgment interest in diversity cases.” United States v. Dollar Rent A Car Sys. Inc., 712 F.2d

938, 940 (4th Cir. 1983). Turning to North Carolina law, pre-judgment interest is calculated from

the date of breach, “at the rate of interest provided in the contract, or at the legal rate if the parties

have not agreed on their own rate.” Craftique, Inc. v. Stevens and Co., 321 N.C. 564, 569 (1988);

N.C. Gen. Stat. § 24-5(a) (“In an action for breach of contract, except an action on a penal bond,

the amount awarded on the contract bears interest from the date of breach.”). Here, however,

plaintiff fails to allege the date of defendants’ breach. As such, the court cannot calculate pre-

judgment interest, and plaintiff’s request for such interest must be denied without prejudice. The

court allows plaintiff leave to file a motion to alter the judgment to reflect the addition of the

requisite information for an award of pre-judgment interest, within 28 days from the date of this

order.

Post-judgment interest in diversity actions is calculated at the federal, rather than state,

rate. Forest Sales Corp. v. Bedingfield, 881 F.2d 111, 113 (4th Cir. 1989). Here, plaintiff may

recover post-judgment interest under 28 U.S.C. § 1961. See 28 U.S.C. § 1961 (“Interest shall be

allowed on any money judgment in a civil case recovered in a district court.”). This statute

provides, in pertinent part, “interest shall be calculated from the date of the entry of the judgment,

at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the

Board of Governors of the Federal Reserve System, for the calendar week preceding [sic] the date

of the judgment.” 28 U.S.C. § 1961(a).

CONCLUSION

Based on the foregoing, plaintiffs’ motion for default judgment (DE 14) is GRANTED IN

PART and DENIED IN PART. The court GRANTS plaintiff’s motion for default judgment (DE

14) as to plaintiff’s breach of contract claim against defendants, and awards $314,734.71 in

damages and $625.00 in costs. The clerk is DIRECTED to enter judgment for plaintiff in these

amounts. Defendants are jointly and severally liable for the total amount of damages and costs. It

is further ORDERED that post-judgment interest on amounts awarded shall accrue at the rate

specified in 28 U.S.C. § 1961.

The court DENIES plaintiff’s motion as to quantum meruit and unjust enrichment and

DENIES WITHOUT PREJUDICE plaintiff’s request for attorneys’ fees and pre-judgment interest

for reasons stated herein. The court allows plaintiff leave to file a motion to alter the judgment to

reflect the addition of attorneys’ fees and pre-judgment interest, within 28 days from the date of

this order.

SO ORDERED, this the 25th day of March, 2020.

( Bie W. FLANAGAN

nited States District Judge

1]