UMB Bank, N.A. v. Ad Lucem Inc.

Background

UMB Bank, N.A., described in the opinion as “Marquette,” sued Ad Lucem Inc., Christopher Carey Jr., and Alejandro Gil. UMB Bank was the successor by merger to Marquette Commercial Finance, a division of Marquette Transportation Finance, LLC. UMB alleged that the defendants breached a financing agreement and related contracts, converted property in which UMB had a security interest, and owed more than $400,000 in damages, interest, and attorneys’ fees.

On September 28, 2018, Marquette and Ad Lucem entered a revolving credit and security agreement. Marquette agreed to advance funds in exchange for the assignment of accounts arising from Ad Lucem’s sales and services. The agreement generally barred Ad Lucem from collecting assigned accounts unless Marquette authorized it. It also gave Marquette a security interest in Ad Lucem’s accounts and other assets. Carey and Gil separately signed personal guaranties of Ad Lucem’s obligations.

Marquette later notified Ad Lucem that it intended to terminate the agreement, and the parties extended the termination date twice. In early March 2020, Marquette learned that Ad Lucem was attempting to collect assigned accounts directly. Marquette sent notices of default and demanded immediate payment from Ad Lucem, Carey, and Gil. Carey then told Marquette that Ad Lucem was shutting down. Marquette alleged that Cable & Wireless Jamaica, Ltd. had already paid Ad Lucem $61,362.20 on four invoices that had been assigned to Marquette.

The Clerk entered default after the defendants were served and failed to respond or appear. The defendants also did not respond to the motion for default judgment or appear at the hearing.

Court’s analysis

For a default judgment, the court treats the complaint’s factual allegations as true, except allegations about the amount of damages. The court must still determine whether those facts establish a valid legal claim and whether the requested damages and other relief are supported.

The court concluded that UMB’s allegations established legitimate claims for breach of contract and conversion under Minnesota law. The agreements contained Minnesota choice-of-law provisions. The court found that UMB adequately alleged the formation of the agreements, its performance or satisfaction of required conditions, and the defendants’ breaches. It also found that the allegations supported a conversion claim because the defendants allegedly collected payments on assigned accounts and failed to remit the proceeds to UMB, interfering with UMB’s property interest.

The court found that UMB had supported its requested damages with a declaration and related records. UMB sought $379,352.81 in damages, contractual interest at 5.5% per year, and $18,931.05 in attorneys’ fees and costs. The court noted that the requested interest calculation of $58.51 per day was too high; applying 5.5% to the outstanding balance produced a daily rate of $57.16. The court found the requested fees and costs reasonable.

The court also addressed UMB’s request for a declaration concerning its accounts and collateral. It found an actual and immediate dispute because UMB alleged that the defendants had directed account debtors to pay them instead of UMB and might further convert the collateral. The court therefore found that UMB was entitled to a declaration that its rights were superior to the defendants’ rights to the extent of UMB’s perfected security interests. UMB withdrew its separate request for injunctive relief.

Order

The court granted UMB Bank, N.A.’s motion for default judgment. It ordered that UMB recover from the defendants jointly and severally:

- $379,352.81 in damages; - $15,385.70 in pre-judgment contractual interest; and - $18,931.05 in attorneys’ fees and costs.

The court also declared that UMB’s rights in the accounts and collateral under the September 28, 2018 revolving credit and security agreement and related agreements were superior to the defendants’ rights to the extent of UMB’s perfected security interests. The court directed that judgment be entered accordingly.