Opinion
Case No.18-cv-06508-EDL
05-15-2019
BARNES FAMILY COMPANY, INC., et al., Plaintiffs, v. JOSEPH DAVID GRANADE, Defendant.
REPORT AND RECOMMENDATION ON PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT
Re: Dkt. No. 16
Plaintiffs Barnes Family Company, Inc. d/b/a Platinum Chevrolet ("Platinum Chevrolet") and Foreign Automotive d/b/a Manly Honda ("Manly Honda" and, together, "Plaintiffs") move for default judgment against Defendant Joseph Granade, Sr. a/k/a David Granade d/b/a Granade Motor Cars ("Defendant"). The Court lacks full consent from the parties, so it issues this Report and Recommendation. For the reasons set forth below, the Court recommends GRANTING Plaintiffs' motion and entering default judgment for Platinum Chevrolet in the amount of $286,940 and for Manly Honda in the amount of $297,740, which includes attorney's fees and costs as adjusted. The Court directs the Clerk to reassign this case to a District Judge.
I. FACTUAL ALLEGATIONS
For purposes of deciding this motion, the Court accepts all of the factual allegations of Plaintiffs' complaint as true, with the exception of the allegations relating to damages. Plaintiffs are two separate car dealerships operating in Sonoma County, California. Compl., ¶ 1. Defendant is the sole proprietor of the Granade Motor Cars dealership located in Texas. Id., ¶ 2.
In August 2017, Defendant contacted Platinum Chevrolet about purchasing several used vehicles that were in Platinum Chevrolet's used car inventory. Id., ¶ 14. Ultimately, Defendant decided to purchase five vehicles (the "Vehicles") for a total agreed purchase price of $94,100. Id. The sales were made between August 22, 2017 and September 19, 2017. Id., ¶ 16. Following common practice among dealerships in the used car industry, Defendant picked up the Vehicles at Platinum Chevrolet without paying for the Vehicles at that time, based on the standard practice and representation that Defendant would pay for the Vehicles after delivery. Id., ¶ 17. The practice is that title paperwork is not delivered to the purchasing dealership until payment is made. Id., ¶ 18. Defendant never paid Platinum Chevrolet for the Vehicles and, as a result, Platinum Chevrolet never finalized, filed with the California Department of Motor Vehicles, or delivered the title documents to Defendant. Id., ¶¶ 19-20. Subsequently, Defendant made no response to multiple requests for payment from Platinum Chevrolet. Id., ¶ 21.
After taking possession of the Vehicles from Platinum Chevrolet and despite not having title to them, Defendant offered the Vehicles for sale to Manly Honda. Id., ¶ 22. Manly Honda agreed to purchase the Vehicles and paid $97,700 to Defendant for them. Id., ¶ 23. Defendant was unable to deliver title to Manly Honda for the Vehicles. Id., ¶ 24.
Both Plaintiffs have demanded restitution from Defendant, but Defendant has ignored their demands. Id., ¶ 25.
II. PROCEDURAL HISTORY
Plaintiffs filed suit on October 24, 2018, raising the following claims: (1) conversion; (2) trespass to chattels; (3) unjust enrichment; (4) breach of contract; (5) fraud and deceit; (6) intentional fraud; and (7) theft. Plaintiffs served Defendant on December 10, 2018 by leaving copies of the complaint, summons, and other initial case documents with Defendant's son and co-resident at an address in Bulverde, Texas. Plaintiff also mailed these documents to Defendant's Bulverde, Texas address on December 11, 2018.
Defendant did not respond to the complaint after being served. At Plaintiffs' request, the clerk of court entered default against Defendant on January 31, 2019.
III. LEGAL STANDARD
After entry of a default by the clerk, a court may grant a default judgment. See Fed. R. Civ. P. 55. "The district court's decision whether to enter a default judgment is a discretionary one." Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). As a preliminary matter, the court must determine whether it has subject matter jurisdiction over the action and personal jurisdiction over the defendant. See In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). In addition, "the Court must assess the adequacy of the service of process on the party against whom default judgment is requested." Disney Enterprises, Inc. v. Vuong Tran, 2013 WL 1832563, at *1 (N.D. Cal. May 1, 2013). If the Court determines that service was sufficient, it should consider whether the following factors support the entry of default judgment:
(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).
In considering the above factors, the Court takes all factual allegations in Plaintiff's complaint as true, except for those relating to damages. See TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). Relief granted under a default judgment is limited by Federal Rule of Civil Procedure 54(c), in that the judgment "shall not be different in kind of exceed in amount that prayed for in the [complaint]." PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1175 (C.D. Cal. 2002).
IV. DISCUSSION
A. Jurisdiction
Before entering a default judgment, a court has "an affirmative duty to look into its jurisdiction" over the subject matter of the action and the parties involved. Tuli, 172 F.3d at 712. Plaintiffs assert that the Court has diversity jurisdiction over this case and personal jurisdiction over Defendant.
District courts have original jurisdiction over all civil actions where the amount in controversy exceeds $75,000, exclusive of interest and costs, and there is complete diversity of citizenship between the opposing parties. 28 U.S.C. § 1332(a); Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373-74 (1978). The amount in controversy is an estimate of the total amount in dispute, not a prospective assessment of the defendant's liability. See Lewis v. Verizon Commc'ns, Inc., 627 F.3d 395, 400 (9th Cir. 2000).
Here, Plaintiffs allege that they suffered damages of nearly $200,000. They also allege that both Plaintiffs are residents of California and that Defendant is a resident of Texas and/or Colorado. Compl., ¶¶ 1-2, 9. After filing the complaint, Plaintiffs learned through records from the Comal County Clerk in New Braunfels, Texas, that Defendant's business is located in Spring Branch, Texas, and Defendant's home address is in Bulverde, Texas. Crowell Decl., ¶ 2, Exs. A-B. Thus, the parties are diverse and Plaintiffs have established that the Court has subject matter jurisdiction over this case.
The Court also has specific personal jurisdiction over Defendant. Personal jurisdiction is determined by the applicable state personal jurisdiction statute and constitutional principles of due process. See Data Disc, Inc. v. Systems Tech. Assocs., Inc., 557 F.2d 1280, 1286 (9th Cir. 1977). California's long-arm statute is coextensive with a federal due process analysis, and thus the jurisdictional analyses under California law and federal law are the same. Fred Martin Motors, 374 F.3d at 801. Under federal law, "[f]or a court to exercise personal jurisdiction over a nonresident defendant, that defendant must have at least 'minimum contacts' with the relevant forum such that the exercise of jurisdiction 'does not offend traditional notions of fair play and substantial justice." Id. (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). A court may exercise specific jurisdiction over a nonresident defendant if the defendant's contacts with the forum give rise to the cause of action before the court. Doe v. Unocal Corp., 248 F.3d 915, 923 (9th Cir. 2001) (citing Hanson v. Denckla, 357 U.S. 235, 250-3 (1958)). Here, Plaintiffs allege that Defendant took the initiative to contact Plaintiffs, both of whom are located in Sonoma County, California, to buy and sell the Vehicles. Plaintiffs' claims arise out of this forum-directed conduct and the Court has personal jurisdiction over Defendant.
B. Procedural Requirements
Before a court may consider whether to enter default judgment, it must be satisfied that the procedural prerequisites, including adequate service of process, have been met. See, e.g., PepsiCo, Inc. v. California Sec. Cans, 238 F. Supp. 2d 1172, 1175 (C.D. Cal. 2002). Further, a court may not enter a default judgment against an unrepresented minor, an incompetent person, or a person in military service. See Fed. R. Civ. P. 55(b)(2); 50 U.S.C. App. § 521(b)(1).
Federal Rule of Civil Procedure 4 provides that service of the summons and complaint may be effected on an individual within the United States by either following state law where the district court is located or by using the following methods: (1) delivering a copy of the summons and of the complaint to the individual personally; (2) leaving a copy of each at the individual's dwelling or usual place of abode with someone of suitable age and discretion who resides there; or (3) delivering a copy of each to an agent authorized by appointment or by law to receive service of process. Fed. R. Civ. P. 4(e)(1)-(2).
Plaintiffs researched Defendant's company Granade Motor Cars and identified the business address for the company as well as Defendant's home address. Crowell Decl., ¶ 2. A process server attempted to deliver the summons and the complaint at Granade Motor Cars' business address, but the location contained a fenced property with an empty lot and vacant buildings. Id., ¶ 3; Dkt. No. 7 (certificate of service). After that, the process server made substitute service by leaving a copy of the summons and complaint at Defendant's home with Defendant's son and coresident, Dylan Granade, who is a relator in Texas. Crowell Decl., ¶¶ 4,6; Dkt. No. 7. In accordance with California law, Plaintiffs also mailed a copy of the summons and complaint to Defendant's home address. Crowell Decl., ¶ 4; Cal. Code Civ. Proc. § 415.20(b). There are no facts to indicate that Defendant is an unrepresented minor, incompetent person, or a person in the military.
Thus, Plaintiffs have fulfilled the procedural requirements for obtaining default judgment against Defendant.
C. Eitel Factors
1. Prejudice to Plaintiffs
The first Eitel factor is whether Plaintiffs will suffer prejudice if default judgment is not entered. Without default judgment, Plaintiffs will be without a remedy for Defendant's alleged conversion, breach of contract, and theft. See PepsiCo., 238 F. Supp. 2d at 1177 ("Potential prejudice to Plaintiffs favor granting a default judgment. If Plaintiffs' motion for default judgment is not granted, Plaintiffs will likely be without other recourse for recovery."); Juno Therapeutics, 2018 WL 2021483, at *4 ("Because Plaintiffs have no recourse for injunction if default judgment is not entered, this factor weighs in favor of default judgment."). This factor weighs in favor of granting Plaintiffs' motion for default judgment.
2. Merits and Sufficiency of the Complaint
Under the second and third Eitel factors, the court considers the merits and sufficiency of Plaintiffs' complaint, specifically whether Plaintiffs' complaint "state[s] a claim on which [it] may recover." Pepsico, 238 F. Supp. 2d at 1175; Chanel, Inc. v. Hsiao Yin Fu, 2017 WL 1079544, at *3 (N.D. Cal. Mar. 22, 2017) ("Generally, courts consider the merits of plaintiff's substantive claims and the sufficiency of the complaint together.").
Although Plaintiffs' complaint raises seven separate claims, Plaintiffs only move for default judgment on three of those claims: conversion, breach of contract, and theft. "When an action presents one or more claim for relief . . . , the court may direct entry of a final judgment as to one or more, but fewer than all, claims . . . only if the court expressly determines that there is no just reason for delay." Fed. R. Civ. P. 54(b). Here, given Defendant's lack of participation in this litigation and the sufficiency of the conversion, breach of contract, and theft claims, there is no just reason to delay entry of final judgment as to those three claims. Of course, Plaintiffs may find it most efficient to dismiss their remaining claims.
a. Conversion
"Conversion is the wrongful exercise of dominion over the property of another." Lee v. Hanley, 61 Cal.4th 1225, 1240 (2015) (quoting Welco Elecs., Inc. v. Mora, 223 Cal.App.4th 202, 208 (Cal. Ct. App. 2014)). The elements of the claim are: (1) the plaintiff's ownership or right to possession of the property; (2) the defendant's conversion by a wrongful act or disposition of property rights, interfering with the plaintiff's possession; and (3) damages. Id.; see also PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, 150 Cal.App.4th 384, 395 (Cal. Ct. App. 2007). Money can only be the subject of a cause of action for conversion if there is "a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment." PCO, 150 Cal. Ct. App. At 395.
The complaint sufficiently states a claim against Defendant for conversion of the property of both Plaintiffs. As to Platinum Chevrolet, the complaint alleges that the five Vehicles were in Platinum Chevrolet's used car inventory and that Defendant agreed to purchase them from Platinum Chevrolet. However, Defendant took possession of the Vehicles from Platinum Chevrolet on the representation that he would subsequently pay for them at the agreed-upon price of $94,100, but then failed to do so. Defendant has never paid the $94,100 purchase price or returned the Vehicles. These allegations satisfy the three elements of a conversion claim.
With respect to Manly Honda, the complaint alleges that Defendant purported to sell the Vehicles to Manly Honda for $97,700. Although Defendant delivered physical possession of the Vehicles in exchange for the $97,700 purchase price, Defendant never received title to the Vehicles from Platinum Chevrolet and, thus, was unable to deliver title to the Vehicles to Manly Honda. As a result, Manly Honda paid $97,700 to Defendant for Vehicles it is unable to sell, thereby wrongfully interfering with Manly Honda's property rights to and possession of this specific, identifiable sum of money. These allegations also satisfy the elements of a conversion claim.
Plaintiffs provided declarations from Todd Barnes, the president of Platinum Chevrolet, and Jeffrey Dantzler, the general manager of Manly Honda, establishing that the total purchase price for the Vehicles was $94,100 and $97,700, respectively.
b. Breach of Contract
A breach of contract under California law requires the plaintiff to prove: (1) the existence of a contract; (2) the plaintiff's performance of the contract or excuse for nonperformance; (3) the defendant's breach; and (4) the resulting damage to the plaintiff. Richman v. Hartley, 224 Cal.App.4th 1182, 1186 (Cal. Ct. App. 2014) (citing Cal. Code Civ. Proc. § 437c and Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826, 843 (2001)).
The same facts that form the basis of Plaintiffs' conversion claims also support their breach of contract claims against Defendant. For each Plaintiff, Defendant entered into a contract to buy or sell the Vehicles for a set sum. Barnes Decl., ¶¶ 4-7, Ex. A (copies of purchase documents); Dantzler Decl., ¶¶ (copies of purchase documents and checks). Plaintiffs fulfilled their obligations under the agreements, either to deliver the Vehicles or pay for their purchase. Plaintiffs allege that Defendant breached the agreements by failing to pay Platinum Chevrolet and delivering Vehicles to without title and ownership.
c. Theft
The third claim on which Plaintiffs move for default judgment is their theft claim. California law creates a private right of action for recovery of treble damages, costs, and attorney's fees for any person who has been injured by criminal theft as defined by statute. Section 496(a) of the Penal Code provides:
Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained, shall be punished by imprisonment in a county jail for not more than one year, or imprisonment pursuant to subdivision (h) of Section 1170. However, if the value of the property does not exceed nine hundred fifty dollars ($950), the offense shall be a misdemeanor, punishable only by imprisonment in a county jail not exceeding one year, if such person has no prior convictions for an offense specified in clause (iv) of subparagraph (C) of paragraph (2) of subdivision (e) of Section 667 or for an offense requiring registration pursuant to subdivision (c) of Section 290.Cal. Pen. Code § 496(a) (emphasis added). "Any person who has been injured by a violation of subdivision (a) . . . may bring an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney's fees." Id., § 496(c). Theft is defined as:
Every person who shall feloniously steal, take, carry, lead, or drive away the personal property of another, or who shall fraudulently appropriate property which has been entrusted to him or her, or who shall knowingly and designedly, by any false or fraudulent representation or pretense, defraud any other person of money, labor or real or personal property, or who causes or procures others to report falsely of his or her wealth or mercantile character and by thus imposing upon any person, obtains credit and thereby fraudulently gets or obtains possession of money, or property or obtains the labor or service of another, is guilty of theft.Cal. Pen. Code § 484(a).
Each Plaintiff seeks three times their damages plus an equal share of attorney's fees and costs. The complaint alleges that Defendant knowingly misrepresented to Platinum Chevrolet that he would pay $94,100 for the Vehicles in exchange for taking possession of the vehicles and that Defendant knowingly misrepresented to Manly Honda that he had and could convey ownership and title to the Vehicles in exchange for the agreed purchase price of $97,700, and that both Plaintiffs relied upon these intentionally false representations in completing the purchase and sale transactions with Defendant. Compl., ¶¶ 54-56. These allegations satisfy the standard § 484(a) for theft by "knowingly and designedly, by any false or fraudulent representation or pretense, defraud any other person of money, labor or real or personal property." According to these allegations of the complaint, Defendant is a person who "buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained." Cal. Pen. Code § 496(a). These allegations also constitute acts by Defendant that include "sell[ing] . . . knowing the property to be so stolen or obtained." Id. The complaint also alleges that Plaintiffs are "person[s] who ha[ve] been injured by a violation of subdivision (a)" of § 496.
Based on these factual allegations, Plaintiffs are entitled to treble damages, attorney's fees, and costs under § 496. See Bell v. Feibush, 212 Cal.App.4th 1041, 1044-48 (2013). Since Bell, some California state courts have declined to apply § 496(c) in the context of a commercial contract dispute, a real estate dispute, a car repair dispute, and an employment dispute over unpaid commissions and other compensation. See Kayne v. Mense, 2016 WL 1178671, at *5 (Cal. Ct. App. March 25, 2016); Nguyen v. Fuke, 2017 WL 2839540, at *4-5 (Cal. Ct. App. July 3, 2017); Younan v. Ibrahim, 2017 WL 2962800, at *5 (Cal. Ct. App. July 12, 2017); Lacagnina v. Comprehend Systems, Inc., 25 Cal.App.5th 955, 969-72 (2018). However, as in Bell, Defendant here is alleged to have not only promised to pay Platinum Chevrolet for the Vehicles knowing he would not do so, but then shortly thereafter sold the Vehicles to Manly Honda even though he knew that he did not have title to them. Plaintiffs also allege that Defendant purchased the Vehicles from Platinum Chevrolet without any intention of paying for the Vehicles. Compl., ¶ 55. Plaintiffs also allege, as in Bell, that they have asked Defendant to make restitution and that Defendant has not done so. In contrast to the cases cited above that have rejected application of § 496(c) in civil cases, Plaintiffs' allegations sound in fraud, rather than simply appearing to be a commercial transaction gone awry, thereby making the civil remedies of § 496 available. Platinum Chevrolet's treble damages are $282,300 and Manly Honda's treble damages are $293,100.
For their fees and costs, Plaintiffs provide declarations from their attorneys that they have billed 38 hours so far and expect to bill 3 more hours in conjunction with the hearing on this motion. At an hourly rate of $220, attorney's fees would be $9,020. Crowell Decl., ¶ 11. However, Plaintiffs' counsel did not appear for the hearing on their motion, so the Court subtracts $660, representing 3 hours of time, from that total and only recommends award $8,360 in attorney's fees. Plaintiffs have also incurred total costs of $920 (a $400 filing fee and $520 to investigate and serve Defendant). Id. Each Plaintiff seeks to recover half of the total attorney's fees and costs, which would be $4,640. These fees and costs are reasonable.
Thus, the Court concludes that Platinum Chevrolet is entitled to default judgment in the amount of $286,940 and Manly Honda would obtain default judgment in the amount of $297,740.
3. Amount of Money at Stake
Under the fourth Eitel factor, the court should consider "the amount of money at stake in relation to the seriousness of Defendant's conduct." PepsiCo, 238 F. Supp. 2d at 1176. A large amount of claimed damages weighs against an entry of default judgment. Eitel, 782 F.2d at 1472. To determine if an amount is reasonable, the court considers the plaintiff's "declarations, calculations, and other documentation of damages." Truong Giang Corp. v. Twinstar Tea Corp., 2007 WL 1545173, at *12 (N.D. Cal. May 29, 2007). Considering the serious misconduct alleged in the complaint, the amount of money at stake - either approximately $192,000 for damages alone or approximately $585,000 for trebled damages - is not an excessive or unreasonable amount of money. This factor weighs in favor of granting default judgment.
4. Likelihood of Dispute over Material Facts
The fifth Eitel factor asks the court to consider the likelihood of a dispute regarding the material facts. Where a defendant "has not appeared at all . . . the absence of the possibility of a dispute concerning material facts is often easier to infer." Solaria Corp. v. T.S. Energie e Risorse, S.R.I., 2014 WL 7205114, at *3 (N.D. Cal. Dec. 17, 2014) (citing Ploom, Inc. v. Iploom, LLC, 2014 WL 1942218, at *2 (N.D. Cal. May 12, 2014)). "[T]here is little possibility of dispute concerning material facts because (1) based on the entry of default, the Court accepts all allegations in Plaintiff[s'] Complaint as true and (2) Defendant has not made any effort to challenge the Complaint or otherwise appear in this case." W. Reserve Life Assur. Co. of Ohio v. Canul, 2012 WL 844589, at *3 (E.D. Cal. Mar. 12, 2012). Accordingly, this factor weighs in favor of default judgment.
5. Excusable Neglect
The sixth Eitel factor asks the court to consider whether a defendant's default resulted from excusable neglect. Eitel, 782 F.2d at 1472. "Where a defendant '[was] properly served with the Complaint, the notice of entry of default, as well as the papers in support of the instant motion,' this factor favors entry of default judgment." Pearson v. Nationstar Mortgage, LLC, 2016 WL 5496268, at *6 (C.D. Cal. Sept. 26, 2016) (quoting Shanghai Automation Instrument Co. Ltd. v. Kuei, 194 F. Supp. 2d 995, 1005 (N.D. Cal. 2001)). Defendant was properly served and has still not appeared in this case. Accordingly, there is no evidence of excusable neglect.
6. Policy Favoring Decision on the Merits
Although courts prefer to issue judgments on the merits, a defendant's failure to answer a complaint "makes a decision on the merits impractical, if not impossible." PepsiCo, 238 F. Supp. 2d at 1177. Termination of a case before hearing the merits is allowed when a defendant fails to defend an action. Id. This factor is at least neutral or weighs in favor of entering default judgment against Defendant.
In conclusion, all of the Eitel factors taken together weigh in favor of entering default judgment against Defendant.
V. CONCLUSION
For the reasons discussed above, the Court recommends GRANTING Plaintiffs' motion and entering default judgment for Platinum Chevrolet in the amount of $286,940 and for Manly Honda in the amount of $297,740 since there is no just reason for delay. Since Plaintiffs' motion only sought default judgment on three of their seven claims, the case survives as to the remaining four claims, unless Plaintiffs dismiss them.
Any party may serve and file specific written objections to this recommendation within fourteen (14) days after being served with a copy. See 28 U.S.C. § 636(b)(1)(C); Fed. R. Civ. P. 72(b); Civil Local Rule 72-3. Failure to file objections within the specified time may waive the right to appeal the District Court's order.
IT IS SO ORDERED. Dated: May 15, 2019
/s/_________
ELIZABETH D. LAPORTE
United States Magistrate Judge