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On the Move, Inc v. Trucknology

April 28, 2011

ON THE MOVE, INC.,
PLAINTIFF,
v.
TRUCKNOLOGY, INC., THE BRONX
RENTAL CORP., TRUCK MAXX MOVING, INC., AND EUGENE GREENBAUM, DEFENDANTS.



The opinion of the court was delivered by: Deborah A. Batts, U.S.D.J.

TO THE HONORABLE

REPORT AND RECOMMENDATION

The plaintiff, On The Move, Inc. ("OTM"), brought this action asserting breach of contract and related claims against the defendants Trucknology, Inc. ("Trucknology"), The Bronx Truck Rental Corp. ("Bronx Truck"), Truck Maxx Moving, Inc. ("Truck Maxx"), and Eugene Greenbaum. Upon the withdrawal of the defendants' counsel, the corporate defendants were ordered to retain new counsel, and Mr. Greenbaum was required to retain counsel or advise the Court that he would be proceeding pro se. When the defendants failed to respond, a default judgment was entered, and the case was referred to me for an inquest on damages.

Background

OTM is a truck leasing company based in Michigan. (Amended Complaint ("Am. Compl."), ¶ 1; Tr. at 3).*fn1 Between 2002 and 2006, OTM executed a series of lease agreements (the "Lease Agreements") separately with Trucknology and Bronx Truck, both New York corporations. (Am. Compl., ¶¶ 2, 3, 9; Plaintiff's Exhibit 1 ("Pl. Exh. 1")). At the same time the lease agreements were signed, Mr. Greenbaum, a New York domiciliary and the principal of all the defendant corporations, executed an unconditional personal guaranty for each of Trucknology and Bronx Truck's obligations under the Lease Agreements. (Am. Compl., ¶¶ 5, 12, 34, 37; Lease Agreement Package, attached as Exh. 1 to Am. Compl. ("Lease Agreement Package"), at 15; Pl. Exh. 1).*fn2

Pursuant to their respective Lease Agreements, Trucknology and Bronx Truck leased certain trucks (the "Leased Trucks") that OTM owned in exchange for their payment of monthly lease charges (the "Lease Charges"). (Am. Compl., ¶¶ 9, 10, 13; Lease Agreement Package at 1; Pl. Exh. 1). The Lease Agreements also required Trucknology and Bronx Truck to pay the remaining lease-end value (the "Remaining LEV Amount") of the Leased Trucks, which is the difference between a truck's lease-end value as stated in the Lease Agreement and the amount that truck is ultimately sold for at auction at the end of the lease term. (Am. Compl., ¶ 13; Lease Agreement Package at 2; Pl. Exh. 1; Tr. at 7-8). In addition to the payment of the Lease Charges and the Remaining LEV Amounts, the Lease Agreements required Trucknology and Bronx Truck to pay for the insurance coverage expenses (the "Insurance Expenses") of the Leased Trucks. (Am. Compl., ¶ 13; Lease Agreement Package at 1; Pl. Exh. 1; Tr. at 4-5). OTM paid for and provided insurance coverage for each of the Leased Trucks through its own insurance policy, and Trucknology and Bronx Truck were required to reimburse OTM. (Am. Compl., ¶ 13; Tr. at 4-5). Certain other trucks that Trucknology and Bronx Truck owned were not under lease with OTM but were insured through OTM's insurance policy (the "Un-Leased Trucks"); Trucknology and Bronx Truck were also required to reimburse OTM for those insurance costs. (Am. Compl., ¶¶ 14-15; Pl. Exh. 4; Tr. at 4-5, 17-19).

For some time, Trucknology and Bronx Truck met their obligations under the Lease Agreements. However, beginning in November 2006, Trucknology and Bronx Truck stopped making payments under the Lease Agreements or for the Insurance Expenses of the Un-Leased Trucks. (Am. Compl., ¶¶ 16, 17, 19). OTM repeatedly notified Trucknology, Bronx Truck, and Mr. Greenbaum of the defaults and demanded payment of the outstanding amounts. (Am. Compl., ¶¶ 16, 20). When payment was not forthcoming, OTM filed the instant action. In April 2008, pursuant to an ex parte order of seizure, OTM seized the Leased Trucks that were in Trucknology and Bronx Truck's possession and sold these trucks at auction. (Ex Parte Order of Seizure and Temporary Restraining Order dated April 10, 2008; Tr. at 11).

Discussion

A. Jurisdiction

This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(1) because the plaintiff is a Michigan corporation while each of the defendants is a New York domiciliary, and the amount in controversy exceeds $75,000. Because each of the defendants is a New York domiciliary, the Court has personal jurisdiction pursuant to New York Civil Practice Law and Rules ("CPLR") § 301.

B. Liability

When a defendant defaults, all factual allegations in the complaint except those relating to damages must be accepted as true. Union of Orthodox Jewish Congregations of America v. American Food & Beverage Inc., 704 F. Supp. 2d 288, 290 (S.D.N.Y. 2010). Here, the Amended Complaint establishes the defendants' liability for breach of contract.

1. Lease Charges, LEV, and Insurance Expenses The parties agreed that the Lease Agreements would be governed by Michigan law. (Lease Agreement Package at 3; Pl. Exh. 1).

Under that law, a breach of contract claim is established by demonstrating the existence of the contract, its terms, and a subsequent breach resulting in the plaintiff's injury. See In re Brown, 342 F.3d 620, 628 (6th Cir. 2003); Webster v. Edward D. Jones & Co., L.P., 197 F.3d 815, 819 (6th Cir. 1999); Bundy v. Federal National Mortgage Association, No. 10-12678, 2011 WL 977531, at *8 (E.D. Mich. Feb. 25, 2011); Feyz v. Mercy Memorial Hospital, Nos. 285880, 289226, 2010 WL 23692, at *6 (Mich. Ct. App. Jan. 5, 2010). According to the Amended Complaint, Trucknology and Bronx Truck were contractually obligated under their respective Lease Agreements to pay the plaintiff the Lease Charges, Remaining LEV Amounts, and Insurance Expenses of the Leased Trucks. (Am. Compl., ¶ 13). Trucknology and Bronx Truck breached the Lease Agreements by failing to make such payments beginning in November 2006. (Am. Compl., ¶ 16). Trucknology and Bronx Truck were also obligated to pay the plaintiff for the Insurance Expenses of the Un-Leased Trucks. (Am. Compl., ¶¶ ...


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