Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_12-cv-02077/USCOURTS-caed-1_12-cv-02077-1/pdf.json

Parties Involved:
Harley-Davidson Credit Corp.
Plaintiff
Jerry H. Kutumian
Defendant
Zovinar Development, LLC
Defendant

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

HARLEY-DAVIDSON CREDIT

CORPORATION.,

Plaintiff,

v.

JERRY KUTUMIAN and ZOVINAR

DEVELOPMENT, LLC,

Defendants.

Case No. 1:12-cv-2077 AWI-BAM

FINDINGS AND RECOMMENDATIONS 

GRANTING PLAINTIFF'S MOTION FOR 

ENTRY OF DEFAULT JUDGMENT

(Doc. 9)

On July 8, 2013, Plaintiff Harley-Davidson Credit Corporation (“Plaintiff” or “HarleyDavidson”) filed a Motion for Default Judgment against Defendants Zovinar Development, LLC and 

Jerry Kutumian (collectively “Defendants”). (Doc. 24). The motion was referred to this Court 

pursuant to 28 U.S.C. § 636(b)(1)(B) and Local Rule 302. The Court deemed the matter suitable for 

decision without oral argument pursuant to Local Rule 230(g), and vacated the hearing scheduled for 

August 16, 2013. For the following reasons, Plaintiff’s Motion for Default Judgment should be 

GRANTED IN PART.

BACKGROUND

Defendant Zovinar Development, LLC is a Delaware limited liability company with its 

principal place of business in Fresno, California. Plaintiff’s Complaint (“Compl.”) at ¶ 2, Doc. 1. 

Its sole member is co-defendant Jerry H. Kutumian. Compl. ¶ 3. After Defendants failed to file a 

responsive pleading to Plaintiff’s Complaint, default was entered against Defendant Zovinar on 

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April 29, 2013. (Doc. 16). Default was entered against Defendant Jerry Kutumian on May 8, 2013. 

(Doc. 20). On July 15, 2013, Defendant Jerry Kututmian filed a Notice of Bankruptcy indicating 

that he initiated bankruptcy proceedings on July 3, 2013 with the filing of a Chapter 7 Petition in the 

United States Bankruptcy Court for the Eastern District of California. (Doc. 28). Thereafter, this

Court stayed the suit against Defendant Kutumian pursuant to 11 U.S.C. § 362 (Doc. 28, 30) and 

ordered Plaintiff to file a brief outlining the effect of Defendant Jerry Kutumian’s bankruptcy 

proceeding on Plaintiff’s Motion for Default Judgment. (Doc. 30). Having reviewed Plaintiff’s 

supplemental briefing, the Court concludes that Plaintiff’s Motion for Default Judgment may 

proceed against Defendant Zovinar.1 

The action against Defendants arises out of the breach of a loan agreement. According to the 

complaint, on November 20, 2007, Plaintiff and Zovinar entered into Loan Agreement through 

which Eaglemark Savings Bank extended credit to Zovinar for the purchase of a Cessna 500 aircraft 

to be owned and titled in the name of Zovinar. Compl. ¶ 3. By an Aircraft Secured Promissory Note

(“Promissory Note”) dated November 20, 2007, Eaglemark lent Zovinar the sum of $610,000.00 in 

exchange for Zovinar’s promise to repay the loan with interest in the amount of 6.780% from the 

 

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Pursuant to 11 U.S.C.S. § 362, the filing of the bankruptcy petition operates as an automatic stay of this action 

against debtor Jerry Kutumian. 11 U.S.C.S. § 901(a). However, § 362 does not automatically stay this action as to the 

other, non-bankrupt defendant, Zovinar, LLC. See Ingersoll—Rand Financial Corp. v. Miller Mining Co. Inc., 817 F.2d 

1424, 1427 (9th Cir. 1987). Nonetheless, the stay may apply to a non-bankrupt co-defendant, such as Zovinar, LLC, in

special circumstances where: (1) ‘there is such identity between the debtor and the third-party defendant that the debtor 

may be said to be the real party defendant and that a judgment against the third-party defendant will in effect be a 

judgment or finding against the debtor,’ or (2) extending the stay against codefendants ‘contributes to the debtor’s efforts 

of rehabilitation.’” United States v. Dos Cabezas Corp., 995 F.2d 1486, 1491 n. 3 (9th Cir. 1993) (quoting A.H. Robins 

Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986). Here, the Court ordered Plaintiff to brief whether the special 

circumstances exception should apply to Zovinar, LLC. Upon review the case law, as well as the brief submitted by 

Plaintiff, the Court finds that the stay should not be extended to Zovinar, LLC. Bankruptcy filings by individual 

members of an LLC are not treated as special circumstances that would extend bankruptcy protection to the related LLC. 

See J & J Sports Prods. v. Paolilli, 2011 U.S. Dist. LEXIS 143884 (E.D. Cal. Dec. 14, 2011) (default judgment allowed 

to proceed against non-bankrupt LLC formed by debtor); see also Kreisler v. Goldberg, 478 F.3d 209, 212 (4th Cir. 

2007) (Parent LLC’s bankruptcy did not stay proceedings against subsidiary LLC); In re O’Brien, 2011 Bankr. LEXIS 

5067, 2011 WL 6754095 (Bkrtcy.D.Conn. 2011) (LLC bankruptcy does not protect principals); In re Robert F. 

Youngblood Const. Co., 2012 Bankr. LEXIS 1214, 2012 WL 987751 (Bkrtcy. E.D.N.C., 2012)(automatic stay as to LLC 

in bankruptcy does not extend to principals); In re Calhoun, 312 B.R. 380, 383 (Bankr. N.D. Iowa 2004) (denying the 

extension of the automatic stay to a chapter 7 debtor’s limited liability company). Further, even where special 

circumstances are found to exist, the weight of authority holds that it is the bankruptcy court that must extend the 

automatic stay [pursuant to 362(a)], not this court.” Zurich Am. Ins. Co. v. Trans Cal Assocs., 2011 U.S. Dist. LEXIS 

145080, *7 (E.D. Cal. Dec. 15, 2011). Accordingly, Plaintiff’s Motion may properly proceed against Zovinar despite 

the stay of proceedings against individual defendant, Kutumian.

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date of the Promissory Note, and to pay such principal and interest in 180 scheduled consecutive and 

equal installments of $5,408.10 on the 20th day of each month, beginning December 20, 2007, and 

continuing every month until the final installment. See Declaration of Amy Kaffen (“Kaffen Decl.”), 

Ex. 2 (Doc. 24-2 at ¶ 4). That Promissory Note was subsequently assigned to Plaintiff. Kaffen Decl. 

¶ 4. Also on November 20, 2007, Defendant Jerry H. Kutumian executed a personal guaranty of the 

Promissory Note and the Aircraft Security Agreement. Id. at ¶ 6. 

Zovinar later received permission from Plaintiff to sell the Cessna 500 without encumbrances 

and on June 22, 2012, Zovinar sold the aircraft free of Plaintiff’s lien for $80,000.00. Id. at ¶ 8. The 

proceeds of the sale were applied to the obligations owed by Zovinar but were insufficient to satisfy 

the full debt amount. After the sale of the aircraft, Zovinar owed a remaining balance of $520,773.66 

under the Loan Agreement including allowable expenses to Plaintiff. Id. at ¶ 11. 

In a letter dated June 25, 2012, Plaintiff demanded that Zovinar pay the amount due on the 

loan. Id. at ¶ 12. Defendant Kutumian, as a guarantor, was also copied on this demand letter. Id. at 

¶ 13. To date, Zovinar has failed to pay the remaining balance under the terms of the Loan

Agreement. Defendant Kutumian has also failed to cure Zovinar’s default under the Promissory 

Note and the Aircraft Security Agreement pursuant to the terms of the Guaranty. 

Plaintiff filed a complaint on December 21, 2012, against Defendants. (Doc. 1). Zovinar 

was served on March 4, 2013 and its answer was due by March 25, 2013. (Doc. 11). On April 29, 

2013, after Zovinar failed to answer or otherwise defend against this action and upon Plaintiff’s 

request, the Clerk entered default against Zovinar. (Docs. 15, 16). 

Plaintiff now moves for default judgment against Defendant Zovinar in the amount of 

$520,773.66 for breach of contract. (Doc 24-4). Although the complaint lists two additional claims

against Defendant Kutumian, these proceedings are stayed against him pursuant to 11 U.S.C. § 362. 

Zovinar has not opposed this motion or otherwise defended this lawsuit. The Court has reviewed the 

motion, the exhibits and affidavits, and the applicable law, and is sufficiently advised on the issues 

involved.

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LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure 55(b)(2), a plaintiff can apply to the court for a 

default judgment against a defendant that has failed to plead or otherwise defend against the action. 

FED. R. CIV. P. 55(b)(2). “Upon default, the well-pleaded allegations of a complaint relating to 

liability are taken as true.” Dundee Cement Co. v. Howard Pipe & Concrete Products, Inc., 722 F.2d 

1319, 1323 (7th Cir. 1983); TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 

1987). Thus, “[a]t the time of entry of default, the facts alleged by the plaintiff in the complaint are 

deemed admitted.” 10 J. Moore, MOORE’S FEDERAL PRACTICE § 55.11 (3d ed. 2000).

Factors which may be considered by courts in exercising discretion as to the entry of a 

default judgment include: (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 strong policy underlying the Federal Rules of Civil Procedure 

favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986).

Although well-pleaded allegations in the complaint are admitted by a defendant’s failure to 

respond, “necessary facts not contained in the pleadings, and claims which are legally insufficient, 

are not established by default.” Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261, 1267 (9th Cir. 

1992) (citing Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978)); accord DIRECTV, Inc. v. 

Huynh, 503 F.3d 847, 854 (9th Cir. 2007) (“[A] defendant is not held to admit facts that are not wellpleaded or to admit conclusions of law” (citation and quotation marks omitted)). 

DISCUSSION

A. Service of Process and Jurisdiction 

As a preliminary matter, the Court must first “assess the adequacy of the service of process 

on the party against whom default is requested.” Bd. of Trustees of the N. Cal. Sheet Metal Workers 

v. Peters, No. C-00-0395 VRW, 2000 U.S. Dist. LEXIS 19065, at *2 (N.D. Cal. Dec. 29, 2000). 

Service may be effected upon a corporation in the United States “by delivering a copy of the 

summons and of the complaint to an officer, a managing or general agent, or any other agent 

authorized by appointment or by law to receive service of process.” FED. R. CIV. P. 4(h)(1)(B). 

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On March 4, 2013, Plaintiff properly served Zovinar with the complaint and summons via its 

managing agent Robin Brooks in Delaware. See Declaration of Linda Wong (“Wong Decl.”) at ¶ 2 

(Doc. 24-1); (Doc. 11-1). Zovinar’s answer was due by March 25, 2013. Id. Zovinar failed to 

answer and on April 29, 2013, the clerk entered default. (Doc. 16). The Court finds that service was 

proper in this case.

Additionally, the Court must also assess whether it may exercise jurisdiction over this action. 

In re Tuli, 172 F.3d 707, 712 (9th Cir.1999). The allegations in the complaint are sufficient to 

establish subject matter jurisdiction in this Court pursuant to 28 U.S.C. § 1332(a)(1). Plaintiff and 

Defendant are citizens of different states: Plaintiff is a corporation, incorporated in and with its 

principal place of business in Nevada. Compl. ¶ 4. Zovinar is a corporation, organized and 

incorporated in Delaware with its principal place of business in Fresno, California. Compl. ¶ 5. The 

amount in controversy exceeds $75,000 exclusive of interest and costs. The Court finds that 

jurisdiction is proper in this case.

B. The Eitel Factors

Having considered the Eitel factors as discussed below, the Court finds that default judgment

is appropriate as to Plaintiff’s claims against Zovinar.

1. Substantive Merits and the Sufficiency of the Complaint

The Court considers the merits of Plaintiff’s substantive claims and the sufficiency of the 

complaint together because of the relatedness of the two inquiries. As seen below, the Court finds 

that Plaintiff’s breach of contract claim has been sufficiently plead and has substantive merit. These 

two factors thus weigh in favor of granting Plaintiff’s motion. See Danning, 572 F.2d at 1388; 

PepsiCo, Inc., 238 F. Supp. 2d at 1175.

i. Breach of Contract 

Plaintiff’s sole claim against Zovinar is for breach of contract. In California, to establish a 

breach of contract claim, a plaintiff must plead: (1) the existence of contract; (2) plaintiff’s 

performance or excuse for non-performance; (3) defendant’s breach; and (4) damage to plaintiff 

resulting from the breach. Craigslist, Inc. v. Naturemarket, Inc., 694 F.Supp.2d 1039, 1059 (N.D. 

Cal. 2010).

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According to the complaint, Plaintiff entered into a written loan agreement with Zovinar, in 

which Plaintiff agreed to lend Zovinar $610,000.00 in exchange for Zovinar’s promise to repay the 

loan with interest. Pursuant to the Loan Agreement, Plaintiff extended credit to Defendants, and 

accordingly Defendant purchased its aircraft. Thereafter, Zovinar sold the aircraft but the sale was 

insufficient to satisfy all amounts due. Compl. ¶ 15. After Zovinar failed to make additional 

payments on the loan, Plaintiff sent Zovinar a demand letter detailing the amount due. Despite the 

demand, Zovinar has failed to pay the remaining amount owed. Compl. ¶¶ 16-19. 

Plaintiff has alleged the existence of an agreement and Plaintiff’s performance of that 

agreement by furnishing the loan. Plaintiff has also alleged Zovinar’s breach of the agreement by 

failing to make payments pursuant to the Loan Agreement, resulting in damage to Plaintiff. Compl. 

¶¶ 11-25. Plaintiff has sufficiently stated a breach of contract claim.

2. Possibility of Prejudice to Plaintiff

Eitel requires that the Court consider whether the plaintiff would suffer prejudice if default 

judgment is not entered, and such potential prejudice to the plaintiff militates in favor of granting a

default judgment. See PepsiCo, Inc., 238 F. Supp. 2d at 1177. Here, Plaintiff would face prejudice 

if the Court did not enter a default judgment. Absent entry of a default judgment, Plaintiff would be 

without recourse for recovery given Zovinar’s failure to participate in this litigation in any fashion. 

Accordingly, this Eitel factor favors the entry of default judgment.

3. The Sum of Money at Stake in the Action

Under the fourth factor cited in Eitel, “the court must consider the amount of money at stake 

in relation to the seriousness of defendant’s conduct.” PepsiCo, Inc., 238 F. Supp. 2d at 1177; see

also Philip Morris USA, Inc. v. Castworld Prods., Inc., 219 F.R.D. 494, 500 (C.D. Cal. 2003).

Here, Plaintiff seeks total damages of $520,773.66. This represents the amount unpaid by 

Zovinar of $534,158.60 in principal, $24,408.56 in past-due interest, and $38,193.50 in expenses, 

less a credit amount of $80,000 that resulted from the sale of the aircraft. Wong Decl. ¶ 8. Although 

the sum of money at stake is significant, the requested damages are well supported by the evidence. 

Here, Plaintiff is requesting the amount that is owed on the loan and allowable expenses. Given that 

the amount at stake is proportionate to the harm and there are documents supporting the amount 

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requested this factor does not weigh against the entry of default judgment. See Truong Giang Corp. 

v. Twinstar Tea Corp., 2007 U.S. Dist. LEXIS 100237, 2007 WL 1545173, at *12 (N.D. Cal. May 

29, 2007) (When the sum of money at issue is reasonably proportionate to the harm caused by the 

defendant’s actions and supported by proper documentation and evidence in the record, default 

judgment is appropriate).

4. The Possibility of a Dispute Concerning Material Facts

The facts of this case are relatively straightforward, and Plaintiff has provided the Court with 

well-plead allegations and declarations with exhibits in support. Here, the Court may assume the 

truth of well-plead facts in the complaint following the clerk’s entry of default and, thus, there is no 

likelihood that any genuine issue of material fact exists. Zovinar’s failure to file an answer in this 

case or a response to the instant motion further supports the conclusion that the possibility of a 

dispute as to material facts is minimal. See, e.g., Elektra Entm’t Group Inc. v. Crawford, 226 F.R.D. 

388, 393 (C.D. Cal. 2005) (“Because all allegations in a well-pleaded complaint are taken as true 

after the court clerk enters default judgment, there is no likelihood that any genuine issue of material 

fact exists.”).

5. Whether the Default Was Due to Excusable Neglect

Upon review of the record before the Court, the Court finds that the default was not the result 

of excusable neglect. See PepsiCo, Inc., 238 F. Supp. 2d at 1177. Given the supporting 

documentation submitted by Plaintiff, there is no evidence that Defendant’s failure to participate in 

the litigation is due to excusable neglect. Plaintiff served Zovinar with the summons and complaint

through its managing agent Robin Brooks on March 5, 2013. Zovinar is a corporate entity and 

accordingly is not an infant or incompetent person. Zovinar thus had notice and opportunity to 

appear in this litigation before Plaintiff moved for default judgment. Accordingly, this Eitel factor 

favors the entry of a default judgment.

6. The Strong Policy Favoring Decisions on the Merits

“Cases should be decided upon their merits whenever reasonably possible.” Eitel, 782 F.2d 

at 1472. However, district courts have concluded with regularity that this policy, standing alone, is 

not dispositive, especially where a defendant fails to appear or defend itself in an action. PepsiCo, 

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Inc., 238 F. Supp. 2d at 1177; see also Craigslist, Inc. v. Naturemarket, Inc., 694 F. Supp. 2d 1039, 

1061 (N.D. Cal. Mar. 5, 2010). Accordingly, although the Court is cognizant of the policy favoring 

decisions on the merits—that policy is unavailable here because Zovinar has not responded. This 

factor does not weigh against entry of default judgment.

Upon consideration of the Eitel factors, the Court concludes that Plaintiff is entitled to the 

entry of default judgment against Zovinar. The Court therefore recommends that Plaintiff’s Motion

for Default Judgment should be GRANTED. 

C. Damages

A party’s default conclusively establishes that party’s liability; however it does not establish 

the amount of damages. Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977) (per 

curiam). Therefore, the Court must consider the question of damages separately. Entry of a default 

judgment for money is appropriate if “the amount claimed is a liquidated sum or capable of 

mathematical calculation.” Davis v. Fendler, 650 F.2d 1154, 1161 (9th Cir.1981) (no hearing is 

necessary when documents show that the judgment amount is based upon a definite figure); see also 

Fed. R. Civ. P. 55(b)(2) (the district court has the discretion to conduct or refuse a hearing on default 

judgment).

Plaintiff has established through exhibits that on November 20, 2007, Defendant Zovinar

signed a promissory note for an aircraft loan in the amount of $610,000.00. Promissory Note, Ex. A, 

Doc. 24-2. Plaintiff has also established, by way of Amy Kaffen’s declaration in support of the 

motion for default judgment, that as of July 8, 2013, Defendant Zovinar owed to Plaintiff: 

$534,158.60 in principal; past-due interest in the amount of $24,408.56; $400.00 in late charges; and 

allowable expenses including a State of California Tax Lien in the amount of $3,613.00, and a 

mechanic’s lien settlement in the amount of $38,193.50, less a credit in the amount of $80,000.00 for 

the sale of the aircraft. Wong Decl. ¶ 11. The total amount of damages is $520,773.66. Plaintiff has 

therefore established, independently of the complaint, the amount of damages owed as a result of the 

default judgment.

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CONCLUSION

Based on consideration of the declarations, pleadings, and exhibits to the present application, 

the Court RECOMMENDS as follows: 

1. Plaintiff’s Motion for Default Judgment against Defendant ZOVINAR 

DEVELOPMENT, LLC be GRANTED IN PART; 

2. Judgment be entered in favor of Plaintiff HARLEY-DAVIDSON CREDIT 

CORPORATION and against Defendant ZOVINAR DEVELOPMENT, LLC, in the amount of 

$520,773.66 in total damages. 

3. These proceedings are stayed against JERRY H. KUTUMIAN, an individual, 

pending the resolution of the bankruptcy proceeding. Plaintiff shall file a status report no later than 

February 13, 2014, outlining the status of the bankruptcy proceeding against this defendant, as well 

as its intentions regarding dismissal of claims. Failure to timely file the status report may result in 

the imposition of sanctions.

These findings and recommendations are submitted to the district judge assigned to this 

action, pursuant to Title 28 of the United States Code section 636(b)(1)(B) and this Court’s Local 

Rule 304. Within fifteen (15) days of service of this recommendation, any party may file written 

objections to these findings and recommendations with the Court and serve a copy on all parties. 

Such a document should be captioned “Objections to Magistrate Judge’s Findings and 

Recommendations.” The district judge will review the magistrate judge’s findings and 

recommendations pursuant to Title 28 of the United States Code section 636(b)(1)(C). 

The parties are advised that failure to file objections within the specified time may waive the 

right to appeal the district judge’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

IT IS SO ORDERED.

Dated: August 19, 2013 /s/ Barbara A. McAuliffe _

UNITED STATES MAGISTRATE JUDGE

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