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United States Small Business Administration v. Azarel Inc.

United States District Court, D. New Jersey

August 25, 2014

AZAREL INC., d/b/a Tokyo Sushi, JUNG KIM, and HWA SUP KIM, Defendants.


KEVIN McNULTY, District Judge.

This matter comes before the Court on the unopposed motion of Plaintiff United States Small Business Administration ("SBA" or "Receiver"), as the Court-appointed Receiver for Hanam Capital Corporation ("Hanam"), for default judgment against Defendants, Azarel Inc., Jung Kim, and Hwa Sup Kim, pursuant to Fed.R.Civ.P. 55(b)(2). Docket No. 10 ("P1. Br."). This action arises from a commercial loan that Hanam made to Azarel, on which Azarel defaulted. SBA appears only in its capacity as receiver for Hanam (and the Plaintiff is sometimes referred to herein as "SBA/Hanam"). For the reasons set forth below, I will enter a default judgment in the amount of $68, 605.34, plus post-judgment interest from this date at the appropriate rate pursuant to 28 U.S.C. § 1961.


Defendant Azarel is a New York corporation with its principal place of business in Staten Island, New York. Azarel operates a restaurant, Tokyo Sushi, in Staten Island. Compi. ¶¶ 15-17. Defendant Youn Jung Kim is a domiciliary of Westfield, New Jersey. Id. ¶ ¶¶ 18-19. Defendants Hwa Sup Kim and Youn Jung Kim are the owners and managers of Tokyo Sushi. Id. ¶ 31; P1. Br, Stern Aff. ¶ 13.

Hanam is a corporation organized under New York law that was licensed as a Small Business Investment Company ("SBIC") by the SBA on May 6, 1987. Compl. ¶¶ 8, 9. SBICSs, pursuant to the Small Business Investment Act ("SBIA"), 15 U.S.C. § 661 et seq., are intended to "improve and stimulate the national economy and small business in particular, by stimulating and supplementing the flow of capital and loan funds" that small businesses "need for sound financing of their operations and growth." Id. ¶ 10.

This action is ancillary to the receivership proceedings, United States of American v. Hanam Capital Corporation, Civ. No. 12-6994, currently pending before me. On November 30, 2012, I entered a Consent Order in that action that placed Hanam into receivership and appointed the SBA as Receiver. Civ. No. 12-6994, Docket Nos. 2, 3. Accordingly, this Court has subject matter jurisdiction of this action pursuant to the Small Business Investment Act, 15 U.S.C. § 661, et seq. The Court has personal jurisdiction over the Defendants pursuant to 28 U.S.C. §§ 754 and 1692. The Consent Order imposed a blanket judicial stay and injunction of all civil actions concerning Hanam or its assets. On August 26, 2013, however, I issued an Order Partially Lifting the Blanket Judicial Stay for a Limited Purpose that allowed the Receiver to pursue Hanam's claims against the Defendants named in this action in order to liquidate Azarel's debt to Hanam.

SBA, as Receiver for Hanam, is seeking a money judgment based on a commercial loan made by Hanam to Defendant Azarel. On February 21, 2008, Hanam made a commercial loan to Azarel (the "Loan") in the principal sum of $50, 000. Compl. ¶ 32. Azarel, as borrower and payor, made, executed, and delivered to Hanam, as lender and payee, a promissory note (the "Note"), to evidence the Loan, and a Loan Agreement that, along with the Note, governs and specifies the terms and conditions for the Loan and its repayment. Id. ¶¶ 33-34, Exhs. A, B. At the same time, to further secure the Loan, Azarel executed and delivered a Security Agreement dated February 21, 2008, pursuant to which Azarel granted Hanam a first priority security interest and lien in and against all assets and properties of Azarel. Id. ¶ 35, Exh. C. Pursuant to the Security Agreement, Azarel authorized the filing of a UCC-1 Financing Statement with the New York State Department of State on February 21, 2008 (filing number XXXXXXXXXXXXXXX) and a UCC Continuation filed with the New York State Department of State by the SBA, as Receiver, on February 19, 2013 (filing number XXXXXXXXXXXXXXX). Id. ¶ 36, Exh. D.

Also contemporaneous with the making of the Loan, Defendants Youn Jung Kim and Hwa Sup, jointly and severally, made, executed, and delivered a Guaranty dated February 21, 2008, in favor of Hanam. Id. ¶ 37, Exh. E.

The Loan Agreement sets forth certain "Events of Default, " the occurrence of which would constitute a default under the note. Exh. B ("Loan Agreement") Article XIV. The Note provides for a 15.25% interest rate per annum, Compi. ¶ 38, as well as late charge of $25 or 5%, whichever is greater, for any payment of principal or interest made more than ten days after the due date. Id. ¶ 39; Exh. A ("Note") at 1-2. A default interest rate of 7% per annum above the 15.25% face rate is also provided for in the Note. Note at 2.

According to SBA/Hanam, since November 19, 2012, no monthly installment on the loan has been paid when due or paid in the sum required. Each nonpayment of a required monthly installment constitutes a default under the Note. Stern Aff. ¶¶ 20, 26. According to the Complaint, all outstanding principal, accrued interest, and fees under the Loan became immediately due and payable on maturity, which was March 1, 2012. Compi. ¶ 46. Around November 12, 2012, Hanam received a partial payment, which was credited on the account of Azarel's outstanding loan balance. Id. ¶ 48. That payment was the last one received. By letter dated December 21, 2012, SBA notified Azarel and its president, Youn Jung Kim, that the SBA had been appointed Receiver of Hanam and that payments due to Hanam should be made payable to SBA, as Receiver. Id. ¶ 52. Thereafter, on March 1, 2013, SBA served written notice of default and demand on Azarel and Youn Jung Kim and requested the payment of all unpaid principal, interest, fees, and expenses on or before March 19, 2013. Id. ¶ 53. On April 24, 2013, the SBA served another written notice on Youn Jung Kim and Hwa Sup Kim at their residence requesting that all due amounts be paid by May 10, 2013. Id. ¶ 54-56. Despite these notifications, no further payments have been made.

The Complaint asserts three causes of action: (1) Breach of Payment under the Promissory Note; (2) Breach of Payment under the Loan Agreement; and (3) Breach of Payment under the Guaranty. SBA/Hanam requests that the Court enter a judgment in the amount owed on the loan, in the amount of $64, 299.51, which includes: (1) $36, 595.67 outstanding principal balance; (2) $489.23 in late charges, representing five percent of those monthly installment payments that became due and remained unpaid for more than ten days; (3) $11, 329.89 in unpaid interest that accrued from February 19, 2010, through February 19, 2012 (741 days) at a rate of 15.25% per annum (a per diem rate of $15.29); (4) $15, 884.72 in unpaid default interest that accrued from March 1, 2012 through the date of filing of the Complaint, February 11, 2014 (712 days), at the default interest rate of 22.25% per annum (default per diem rate of $22.31); and (5) $22.31 per day thereafter. P1. Br. at 2. They also request that the Court adjudge Azarel, Youn Jung Kim, and Hwa Sup Kim to be jointly and severally liable, and direct each Defendant to pay Plaintiff the whole of the remaining debt and fees due and owed.

The Complaint was filed on February 11, 2014. Docket No. 1. The Summons and Complaint were served upon Defendants Youn Jung Kim and Hwa Sup Kim on February 24, 2014, Docket Nos. 6, 7, and upon Azarel, Inc. on March 19, 2014, Docket No. 5. Pursuant to Fed.R.Civ.P. 12(a)(1), Defendants had 21 days to respond to the Complaint; their time to respond expired on March 17, 2014 and April 9, 2014. Defendants have not answered, moved, or otherwise responded to the Complaint. At Plaintiff's request, the Clerk of Court entered default against the Defendants on April 22, 2014. On June 13, 2014, Plaintiff filed this motion for default judgment against the Defendants. Docket No. 10.


A. Legal Standard for Entry of ...

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