Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-01076/USCOURTS-caed-2_06-cv-01076-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

THE TRAVELERS INDEMNITY COMPANY, No. CIV.S-06-1076 DFL DAD

Successor in Interest by Merger

to Gulf Insurance Company, a

Connecticut corporation,

Plaintiff,

v. FINDINGS AND RECOMMENDATIONS

RICK ARMSTRONG ENGINEERING &

BUILDING CONTRACTOR, INC., a

California corporation; and

RICHARD ARMSTRONG, an individual,

Defendants.

_______________________________/

This matter came before the court on October 13, 2006, for

hearing on plaintiff’s motion for default judgment. Having

considered all written materials submitted with respect to the

motion, and after hearing oral argument, the undersigned recommends

that the motion be granted.

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 Service of the motion is not required. See Fed. R. Civ. P. 1

55(b)(2) (requiring written notice of application for default

judgment be served upon the party against whom judgment is sought

only if that party “has appeared in the action”); Local Rule 5-

135(d)(excusing parties from serving documents submitted to the court

upon “parties held in default for failure to appear”). Nor has there

been any suggestion of any informal contacts necessitating service of

the motion. See Wilson v. Moore & Associates, Inc., 564 F.2d 366,

368-69 (9th Cir. 1977)(“No party in default is entitled to 55(b)(2)

notice unless he has ‘appeared’ in the action. The appearance need

not necessarily be a formal one, i.e., one involving a submission or

presentation to the court. In limited situations, informal contacts

between the parties have sufficed when the party in default has

thereby demonstrated a clear purpose to defend the suit.”). In

addition, at the hearing on this motion the court was advised by

counsel for plaintiff that in the underlying state court action, Mr.

Armstrong represented himself, was aware that this action seeking

reimbursement from him would be filed and expressed his intention not

to respond to the complaint. 

2

PROCEDURAL BACKGROUND

Plaintiff Travelers Indemnity Company initiated this action

for express indemnity, breach of contract and reimbursement by filing

its complaint on May 17, 2006. Plaintiff’s complaint arises out of

its losses stemming from a payment and performance bond naming

defendant Rick Armstrong Engineering & Building Contractor, Inc. as

the principal. Despite being served with process, defendants Rick

Armstrong Engineering & Building Contractor, Inc. and Richard

Armstrong have failed to appear in this action. Pursuant to

plaintiff’s request, the Clerk of the Court entered default against

defendants on July 12, 12006. Plaintiff filed the instant motion,

noticing it to be heard before the undersigned pursuant to Local Rule

72-302(c)(19). James G. Stanley appeared at the hearing on the

motion on behalf of plaintiff. There was no appearance on behalf of

defendants, although they were not served with the motion.1

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3

LEGAL STANDARD

Federal Rule of Civil Procedure 55(b)(2) governs

applications to the court for default judgment. Upon entry of

default, the complaint’s factual allegations regarding liability are

taken as true, while allegations regarding the amount of damages must

be proven. Dundee Cement Co. v. Howard Pipe & Concrete Products, 722

F.2d 1319, 1323 (7th Cir. 1983)(citing Geddes v. United Fin. Group,

559 F.2d 557 (9th Cir. 1977)); see also TeleVideo Sys., Inc. v.

Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987). Where damages are

liquidated (i.e., capable of ascertainment from definite figures

contained in the documentary evidence or in detailed affidavits),

judgment by default may be entered without a damages hearing. See

Dundee, 722 F.2d at 1323. Unliquidated and punitive damages,

however, require “proving up” at an evidentiary hearing or through

other means. Dundee, 722 F.2d at 1323-24; see also James v. Frame, 6

F.3d 307, 310 (5th Cir. 1993).

Granting or denying default judgment is within the court’s

sound discretion, see Draper v. Coombs, 792 F.2d 915, 924-25 (9th

Cir. 1986) (citations omitted), and the court is free to consider a

variety of factors in exercising that discretion, see Eitel v.

McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). The court may

consider such factors as:

(1) the possibility of prejudice to the

plaintiff, (2) the merits of plaintiff’s

substantive claim, (3) the sufficiency of the

complaint, (4) the sum of money at stake in the

action, (5) the possibility of a dispute

concerning material facts, (6) whether the

default was due to excusable neglect, and (7) the

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strong policy underlying the Federal Rules of

Civil Procedure favoring decisions on the merits.

Eitel, 782 F.2d at 1471-72 (citing 6 Moore’s Federal Practice, ¶ 55-

05[2], at 55-24 to 55-26). 

ANALYSIS

According to the complaint, defendants are in the

construction business and entered into a public works construction

contract with the City of Stockton for a project known as the

"Charter Way Beautification Project, Phase 2." Plaintiff, through

its predecessor Gulf Insurance Company (“Gulf”), issued a statutory

performance and payment bond for that contract naming Rick Armstrong

Engineering & Building Contractor, Inc. as principal, Gulf as surety,

and the City of Stockton and subcontractors, laborers, material men

and suppliers as obligees. A copy of the bond is attached to the

complaint. In consideration of plaintiff’s execution of the bond,

defendants executed a General Indemnity Agreement ("GIA") dated March

12, 2001. A copy of the GIA is also attached to the complaint.

In October 2003, plaintiff received a payment bond claim

from Odyssey Landscaping Company, Inc. (“Odyssey”) on the bond issued

by Gulf on the project. Odyssey, a subcontractor on the Stockton

project, subsequently filed a complaint against Gulf and others in

San Joaquin County Superior Court. Plaintiff defended itself and

litigated the claim which ultimately settled. Plaintiff demanded

reimbursement from defendants under the terms of the GIA and

defendants refused. This action resulted.

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5

Weighing the factors outlined in Eitel v. McCool, 782 F.2d

at 1471-72, the undersigned has determined that default judgment

against defendants is appropriate. Defendants have made no showing

that their failure to respond to the complaint is due to excusable

neglect. There is no reason to doubt the merits of plaintiff’s

substantive claim, nor is there any apparent possibility of a dispute

concerning the material facts underlying the action. Plaintiff seeks

a relatively small amount of damages as provided in the contract.

Plaintiff’s complaint is also sufficient. Because each of these

factors weigh in plaintiff’s favor, the undersigned, while

recognizing the public policy favoring decisions on the merits, will

recommend that default judgment be granted.

After determining that entry of default judgment is

warranted, this court must next determine the terms of the judgment. 

The allegations of the complaint, the bond itself, the GIA and the

declarations on file demonstrate that Gulf paid Odyssey $86,000

pursuant to the settlement agreement reached in the state court

action. They also show that Gulf recovered the contract balance of

$30,407.06 from the City of Stockton. Moreover, Gulf paid $2,276.18

to a business known as California Pacific Curb on its payment bond

claim, which was not the subject of litigation. Finally, plaintiff

has shown “loss adjusting expenses” related to the handling of the

bond claim and the litigation initiated by Odyssey in the amount of

$17,022. Therefore, plaintiff is entitled to recover its total loss

of $74,891.12 (i.e., $86,000 - $30,407.06 + $2,276.18 + $17,022 =

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$74,891.12). The undersigned will recommend that the district court

grant default judgment as requested.

Finally, plaintiff’s moving papers establish attorney fees

incurred in this action in the amount of $3,000. Plaintiff’s claimed

fees are reasonable and plaintiff has demonstrated that it is

entitled to such fees in the first instance per the terms of the GIA

attached to the complaint. Therefore, the undersigned will further

recommend that plaintiff’s request for attorney fees be granted. 

CONCLUSION

Accordingly, IT IS HEREBY RECOMMENDED that:

1. Plaintiff’s motion for default judgment be granted; and

2. The district court enter the default judgment of

defendants in favor of plaintiff in the amount of $77,891.12

($74,891.12 + $3,000).

These findings and recommendations are submitted to the

United States District Judge assigned to the case pursuant to the

provisions of 28 U.S.C. § 636(b)(l). Within ten days after being

served with these findings and recommendations, any party may file

written objections with the court and serve a copy on all parties. 

Such a document should be captioned “Objections to Findings and

Recommendations.” The parties are advised that failure to file

objections within the specified time may waive the right to appeal

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the District Court's order. Martinez v. Ylst, 951 F.2d 1153 (9th

Cir. 1991).

DATED: October 13, 2006.

DAD:th

Ddad1\orders.civil\travelers1076 .default.judg

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