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Transportation Alliance Bank Inc. v. Trax Air, LLC

United States District Court, M.D. Florida, Orlando Division

May 31, 2018




         This cause comes before the Court for consideration without oral argument on the following motion:


         FILED: February 1, 2018

         THEREON it is RECOMMENDED that the motion be GRANTED in part and DENIED in part.

         I. Background

         This case stems from the following business loans that plaintiff Transportation Alliance Bank, Inc. (TAB) extended to defendant Trax Air, LLC (Trax):



Principal Amount

Loan 1

February 13, 2015

$134, 319.50

Loan 2

February 13, 2015

$601, 319.50

Loan 3

April 9, 2015

$68, 427.50

Docs. 1 at ¶¶ 8-9, 11; 1-2; 1-4; 1-8 (collectively, the Notes). The Loans and Notes (collectively, the Loan Agreements) state, in relevant part, that failure to make a scheduled payment constitutes default. Docs. 1 at ¶¶ 15-16; 1-1 at 4; 1-2 at 1; 1-3 at 4; 1-4 at 1; 1-7 at 4; 1-8 at 2. The Notes also provide that in the event of default the interest rate would increase to 18% per annum and, at TAB's discretion, TAB may add any unpaid accrued interest to the principal and require immediate payment of the unpaid principal and interest. Docs. 1 at ¶ 20, 22; 1-2 at 1-2; 1-4 at 1-2; 1-8 at 1-2.

         The Loan Agreements are backed by absolute and unconditional guarantees executed by defendants Brian L. Brewer, in his individual capacity, and The Bryan Brewer Revocable Trust (the Brewer Trust)[1] (collectively, the Guarantors). Docs. 1 at ¶ 13; 1-12; 1-13; 1-14; 1-15; 1-16; 1-17. The Loan Agreements are also secured by a commercial security agreement[2] executed by Trax and three aircraft security agreements executed by Trax and defendant Trax Aircraft, LLC (Trax Aircraft). Docs. 1 at ¶¶ 10, 12; 1-5 (the Commercial Security Agreement); 1-9 (the Piper Security Agreement); 1-10 (the Beechcraft Security Agreement); 1-11 (the Cessna Security Agreement).

         TAB alleges that Trax breached the Loan Agreements in late 2015 by failing to make monthly payments on the Loan Agreements. Doc. 1 at ¶ 32. Thus, in November 2015, TAB sent Trax and the Guarantors a letter notifying them that Trax defaulted on the Loan Agreements. Doc. 1 at ¶ 33; 1-18. In that same letter, TAB demanded that Trax and the Guarantors cure the defaults within 10 days of the date of the letter, and informed them that TAB would increase the interest rate to 18% per annum until the defaults were cured. Id.

         TAB alleges that Trax and the Guarantors failed to cure the defaults. Doc. 1 at ¶ 34. Thus, on December 1, 2015, TAB sent Trax and the Guarantors a letter notifying them that TAB was exercising its right to accelerate the Loan Agreements and, as a result, demanded immediate payment of all amounts due and owing under the Loan Agreements. Docs. 1 at ¶ 34; 1-19.

         In February 2016, the parties attempted to rectify the defaults by entering into two separate agreements. First, TAB and the Brewer Trust entered into a pledge agreement, in which the Brewer Trust pledged 100% of its equity interest in Trax as security for the prompt payment and performance of Trax's secured obligations to TAB. Docs. 1 at ¶ 37-38; 1-21 (the Pledge Agreement). Second, TAB, Trax, and the Guarantors entered into an agreement, in which Trax agreed to perform certain obligations, such as making scheduled payments, in exchange for TAB forbearing from exercising its rights and remedies under the Loan Agreements. Docs. 1 at ¶ 35; 1-20 (the Forbearance Agreement). The Forbearance Agreement provided that TAB could terminate the same and exercise any and all of its rights and remedies under the Loan Agreements in the event Trax failed to comply with any of its obligations under the Forbearance Agreement. Docs. 1 at ¶ 36; 1-20 at 3.

         TAB alleges that Trax breached the Forbearance Agreement by, among other things, failing to make scheduled payments. Doc. 1 at ¶ 40. Thus, TAB alleges that the Brewer Trust defaulted on the Pledge Agreement, and that TAB elected to terminate the Forbearance Agreement. Id. at ¶ 41.

         In October 2016, TAB filed a Complaint against Trax, Mr. Brewer, in his individual capacity, and Mr. Brewer and Katherine A. Brewer (collectively, the Brewers) in their capacities as trustees of the Brewer Trust (collectively, Defendants) in relation to defaulted Loan Agreements. Doc. 1.[3] TAB asserted the following claims against Defendants: Count I - breach of contract for the amounts due under the Loan Agreements and related guarantees; Count II - foreclosure of the security interests; and, Count III - fees and expenses for enforcement of the Piper and Beechcraft Security Agreements. Id. at 17-19. TAB requested various forms of relief, including, but not limited to, an award of damages resulting from the breach of the Loan Agreements. Id. at 19-21.

         Trax was served on October 20, 2016. Doc. 21. The Brewers and the Brewer Trust were served on January 24, 2017. Docs. 31; 32; 33. Defendants did not timely respond to the Complaint. Thus, TAB moved for default against Defendants, and the Clerk entered default against Defendants pursuant to Federal Rule of Civil Procedure 55(a). Docs. 25; 37; 38; 39; 40.

         TAB now moves for default judgment against Trax, Mr. Brewer, in his individual capacity, and the Brewers, in their capacities as trustees of the Brewer Trust. Doc. 55 (the Motion). TAB argues that the allegations in the Complaint and the evidence presented in support of the Motion demonstrate that it is entitled to default judgment against Defendants. Docs. 55 at 2; 55-1 at 4-11.[4] TAB requests the following relief: 1) an award of $553, 883.34 in unpaid principal, $297, 877.61 in unpaid, accrued interest, and an interest rate of 18% per annum on the amounts due and owing; 2) an award of attorney fees, costs, and expenses incurred in connection with bringing this case; 3) an award of attorney fees, costs, and expenses incurred in connection with the enforcement and execution of the judgment rendered by the Court; 4) recognition that TAB is the holder and owner of the Loan Agreements and related financial instruments (e.g., guarantees and security agreements); and 5) reserving all rights, claims, and causes of action TAB may bring to enforce TAB's interest in the collateral described in the Commercial Security Agreement and the Pledge Agreement. Doc. 55-1 at 18-19.

         II. Standard of Review

         The Federal Rules of Civil Procedure establish a two-step process for obtaining default judgment. First, when a party against whom a judgment for affirmative relief is sought fails to plead or otherwise defend as provided by the Federal Rules of Civil Procedure, and that fact is made to appear by affidavit or otherwise, the Clerk enters default. Fed.R.Civ.P. 55(a). Second, after obtaining clerk's default, the plaintiff must move for default judgment. Fed.R.Civ.P. 55(b). Before entering default judgment, the court must ensure that it has jurisdiction over the claims and parties, and that the well-pled factual allegations of the complaint, which are assumed to be true, adequately state a claim for which relief may be granted. See Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975).[5]

         A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). This standard does not require detailed factual allegations, but does demand “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Thus, the “complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570). To state a plausible claim for relief, a plaintiff must go beyond merely pleading the “sheer possibility” of unlawful activity by a defendant and offer “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). If a plaintiff fails to meet this pleading standard, then the plaintiff will not be entitled to default judgment.

         If the plaintiff is entitled to default judgment, then the court must consider whether the plaintiff is entitled to the relief requested in their motion for default judgment. If the plaintiff seeks damages, the plaintiff bears the burden of demonstrating entitlement to recover the amount of damages sought in the motion for default judgment. Wallace v. The Kiwi Grp., Inc., 247 F.R.D. 679, 681 (M.D. Fla. 2008). Unlike well-pled allegations of fact, allegations relating to the amount of damages are not admitted by virtue of default; rather, the court must determine both the amount and character of damages. Id. (citing Miller v. Paradise of Port Richey, Inc., 75 F.Supp.2d 1342, 1346 (M.D. Fla. 1999)). Therefore, even in the default judgment context, “[a] court has an obligation to assure that there is a legitimate basis for any damage award it enters[.]” Anheuser Busch, Inc. v. Philpot, 317 F.3d 1264, 1266 (11th Cir. 2003); see Adolph Coors Co. v. Movement Against Racism and the Klan, 777 F.2d 1538, 1544 (11th Cir. 1985) (explaining that damages may be awarded on default judgment only if the record adequately reflects a basis for an award of damages). Ordinarily, unless a plaintiff's claim against a defaulting defendant is for a liquidated sum or one capable of mathematical calculation, the law requires the district court to hold an evidentiary hearing to fix the amount of damages. See Adolph Coors, 777 F.2d at 1543-44. However, no hearing is needed “when the district court already has a wealth of evidence from the party requesting the hearing, such that any additional evidence would be truly unnecessary to a fully informed determination of damages.” See S.E.C. v. Smyth, 420 F.3d 1225, 1232 n.13 (11th Cir. 2005); see also Wallace, 247 F.R.D. at 681 (“a hearing is not necessary if sufficient evidence is submitted to support the request for damages”).

         III. Analysis

         A. Jurisdiction

         TAB alleges that the Court has diversity jurisdiction over this case. Doc. 1 at ¶ 5. A federal court has diversity jurisdiction over civil actions where there is complete diversity of citizenship among the opposing parties and the amount in controversy exceeds $75, 000.00, exclusive of interest and costs. 28 U.S.C. § 1332(a).

         TAB is a Utah corporation with its principle place of business in Utah. Doc. 1 at ¶ 5. The Brewers are citizens of Florida. Docs. 1 at ¶¶ 2-3; 55-21 at ¶ 8. The Brewers are also the sole trustees of the Brewer Trust, Docs. 1 at ¶ 3; 55-21 at ¶ 9; 55-22 at 1, and, as a result, the Brewer Trust is a citizen of Florida. Hemenway v. Peabody Coal Co., 159 F.3d 255, 257 (7th Cir. 1998) (explaining that the citizenship of a trust is determined by the citizenship of its trustees) (citing Navarro Sav. Ass'n v. Lee, 446 U.S. 458 (1980)). The Brewer Trust is the sole member of Trax. Docs. 1 at ¶ 5(a); 55-21 at ¶¶ 10-11. Thus, Trax is a citizen of Florida. Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir. 2004) (“[A] limited liability company is a citizen of any state of which a member of the company is a citizen.”). Therefore, in light of the ...

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