Manufacturer In New Jersey Recovers $100,000

Manufacturer In New Jersey Recovers $100,000 Default Judgment For Breach Of Revolving Credit Agreement

Recently, in a lawsuit in New Jersey state court for breach of a revolving credit agreement, I recovered, on behalf of the lender, a custom injection molder in New Jersey, a final judgment by default against the borrower, an import/export company, and the individual guarantor — the import/export company’s president and sole member —  for compensatory damages in the amount of $86,140.88, plus attorneys’ fees, costs and expenses in the amount of $12,294.69, for a total judgment of $98,435.57, with post-judgment interest at a rate of 30%, or $64.40 per day, until the judgment is satisfied in full.

The facts giving rise to this default judgment were as follows.

I was retained by a custom injection molder in New Jersey (the “manufacturer” or “my manufacturer client”) to recover about $68,000 owing, plus interest, under a revolving credit agreement between my manufacturer client as lender, an import/export company (the “import/export company” or the “corporate defendant”) as borrower, and the import/export company’s president and sole member (the “import/export company’s president,” the “corporate defendant’s president,” or “the individual defendant”) as guarantor.  On the manufacturer’s behalf, I brought and prosecuted, in New Jersey state court, a lawsuit against the import/export company and its president.

The defendant company was in the business of purchasing industrial electronics from companies in China and of selling those industrial electronics to companies in the U.S.

I interviewed, in detail, my manufacturer client’s chief executive officer (the “CEO”).  Further, I obtained from the manufacturer, and I reviewed, the revolving credit agreement, correspondence between the manufacturer’s CEO and the import/export company’s president, and other relevant documents.  My interviews of the manufacturer’s CEO, and my review of the relevant documents, tended to show as follows:

• My manufacturer client, the import/export company, and the import/export company’s president entered into a revolving credit agreement providing that, on the import/export company’s request, the manufacturer may make monetary advances to the import/export company of not more than $35,000 each.
• The credit agreement required the import/export company to repay with interest, to my manufacturer client, each advance within 120 days after it was made.
• Under the credit agreement, and at the import/export company’s request, my manufacturer client made two advances, totaling $68,480, to the import/export company.
• The credit agreement required the import/export company to pay the reasonable attorneys’ fees, costs and expenses incurred by my manufacturer client in enforcing the credit agreement.
• The credit agreement included a personal guaranty (the “guaranty”).  By the guaranty, the import/export company’s president absolutely and unconditionally guaranteed repayment, to my manufacturer client, of all advances made by the manufacturer to the import/export company under the credit agreement.
• Under the credit agreement, (i) during the first 120 days after each advance was made, the interest rate on that advance increased incrementally from 5.5% per year to 9.7% per year, (ii) on the 120th day after each advance was made, the interest rate on that advance increased to 15.4% per year, and (iii) every ten days thereafter, the interest rate on that advance increased 0.7% per year (so on the 130th day after the advance was made, the interest rate on that advance increased to 16.1% per year, and so forth).  The credit agreement did not cap the periodic increases in the contract rate of interest.
• In the more than six months since my manufacturer client had made, to the import/export company, the two advances totaling $68,480, the import/export company and its president — in spite of my manufacturer client’s written demands — had failed and refused to repay, to the manufacturer, any portion of the advances or of the interest thereon, except for a minute contribution of $467.89.

On the manufacturer’s behalf, I drafted, filed with the Court, and served on the corporate and individual defendants a complaint stating that the import/export company had breached the revolving credit agreement and that the corporate defendant’s president had breached the personal guaranty included in the credit agreement.

For five months, the import-export company and its president neither answered nor moved as to my manufacturer client’s complaint.

Because of the import/export company’s and its president’s failures to answer or otherwise move as to the complaint, I successfully applied to the Clerk of the Superior Court for entry of defaults against the import/export company and its president.

On the manufacturer’s behalf, I mailed, to the import/export company and its president, copies of the defaults entered against the import/export company and its president, respectively.

Three months after entry of defaults, I drafted and filed with the Court, on the manufacturer’s behalf, requests for entry of final judgment by default against the import/export company and its president, jointly and severally, for $98,435.57.  In support of these requests, I drew up and submitted to the Court (i) an affidavit of the manufacturer’s CEO establishing that the principal and interest due and owing under the credit agreement, as of the date of filing of the manufacturer’s request for entry of final judgment for default, were $86,140.88 and (ii) my own certification attesting that the manufacturer, in prosecuting the lawsuit, had incurred attorneys’ fees, costs and expenses of $12,294.69, and that these attorneys’ fees, costs and expenses were wholly reasonable.

The then-statutory rate of post judgment interest for judgments — such as the default judgment which my manufacturer client sought — in excess of $15,000 was a mere 2.25%.  Consequently, I drafted and submitted to the Court a memorandum of law maintaining that the Court ought to award, to the manufacturer, post judgment interest at the higher rate of interest set forth in the revolving credit agreement, rather than at the lower (2.25%) legal rate of interest.  Because rates of interest must be reasonable, my memorandum of law proposed that the rate of interest set forth in the credit agreement be capped at 30% per year.

The Superior Court granted, in their entirety, my manufacturer client’s requests for relief. As stated, the Superior Court entered a final judgment by default in the manufacturer’s favor and against the import/export company and the import/export company’s president, personally, jointly and severally, for compensatory damages in the amount of $86,140.88, plus attorneys’ fees, costs and expenses in the amount of $12,294.69, for a total judgment of $98,435.57, with post-judgment interest at a rate of 30%, or $64.40 per day, until the judgment is satisfied in full.

If your company wants to bring, or needs a lawyer to defend it in, business litigation and you are located in the New Jersey area, call Attorney David S. Rich at (347) 941-0760.