Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-04990/USCOURTS-cand-3_05-cv-04990-35/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1331 Fed. Question

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UNITED 

STATES 

DISTRICT 

COURT

For the Northern District of California

UNITED STATES DISTRICT COURT

Northern District of California

SCOTT R. SANDERS

Plaintiff,

v.

FIDELITY MORTGAGE COMPANY et al.,

Defendants.

_____________________________________/

No. C 05-4990 MHP (MEJ)

REPORT & RECOMMENDATION RE

DAMAGES

I. BACKGROUND

On May 5, 2009, the Honorable Marilyn Hall Patel, the presiding judge in this action, issued

a Memorandum & Order regarding Plaintiff’s Motion for Default Judgment. (Dkt. #120.) In her

Order, Judge Patel granted default judgment in favor of Plaintiff and against Defendant Joel

Atwater. However, Judge Patel found that Plaintiff had not submitted sufficient documentation and

testimony regarding his claimed damages to enable the Court to determine the dollar amount it

should award to Plaintiff. (Id. at 6.) Accordingly, Judge Patel referred the matter to the undersigned

to hold an evidentiary hearing on the issue of damages and to make findings of fact and

recommendations regarding the specific amounts that should be awarded. Judge Patel also

instructed Plaintiff that at the hearing, he will need to provide evidentiary support, such as

documents, affidavits, or witness or expert testimony to corroborate his claimed damages. (Id.) 

Further, with respect to each area of damages Plaintiff requested, Judge Patel outlined what evidence

he would need to submit and what questions he would need to address to enable the undersigned to

make a recommendation regarding the proper amount of damages recoverable. 

Following Judge Patel’s Order, on July 31, 2009, Plaintiff filed a second Motion for Default

Judgment (Dkt. #124), and submitted a revised Declaration (Dkt. #123) with supporting documents. 

However, Plaintiff’s materials did not present any discussion addressing the questions Judge Patel

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posed in her Order or any explanation regarding how the documents attached to the revised

Declaration support Plaintiff’s request for damages. As a result, the undersigned issued an Order

continuing the evidentiary hearing to allow Plaintiff an opportunity to marshal and present whatever

evidence he has substantiating his damages and to address Judge Patel’s questions. (Dkt. #125.) In

response, Plaintiff filed a Supplemental Brief (Dkt. #126) and a Supplemental Declaration (Dkt.

#127). On September 24, 2009, the undersigned held an evidentiary hearing regarding Plaintiff’s

damages. Having considered Plaintiff’s written submissions, supporting materials, and the evidence

presented at the hearing, the undersigned now RECOMMENDS as follows. 

II. DISCUSSION

A. Compensatory Damages 

In his Motion for Default Judgment, Plaintiff sought to recover compensatory damages for

his out-of-pocket losses, damage to his credit rating, and for emotional distress. (Dkt. #112 at 2;

Dkt. #120 at 7.) The undersigned will evaluate each category in turn. 

1. Out-of-Pocket Damages

With respect to Plaintiff’s out-of-pocket damages, Judge Patel found that Plaintiff was

entitled to recover the following out-of-pocket damages: the down payment on the house; mortgage

payments; moving costs (both into and out of the house); improvements to the house; maintenance

costs; property taxes; and property insurance premium payments. (Dkt. #120 at 7.) She therefore

instructed Plaintiff to provide to the undersigned evidence documenting these losses. (Id. at 8.) 

Plaintiff indicates that he is seeking $52,070.69 in out-of-pocket damages from Defendant

Atwater, calculated as follows. (Suppl. Decl. at 1; Dkt. #113 ¶23; Dkt. #123 ¶25.) 

First, Plaintiff seeks to recover the $1,000 down payment he made on the house. (Dkt. #123

¶25; Suppl. Decl. ¶5.) To substantiate this expenditure, Plaintiff has submitted a copy of check

drawn on his wife’s checking account and made out to First California Title for $1,000. (Suppl.

Decl. Ex. A.) Because the check does not indicate that Plaintiff is a joint account holder and

Plaintiff has not provided any information indicating that $1,000 was community funds, the

undersigned finds that Plaintiff has not provided sufficient evidence to substantiate his claim that he

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The statement from GMAC indicates that Plaintiff was assessed an $85.00 fee, which he

paid. However, it appears that Plaintiff has added that fee twice when calculating the total amount

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lost $1,000 on the down payment.

Second, Plaintiff seeks to recover moving expenses incurred in connection with both the

move into the house and the move out of the house. Plaintiff asserts that he incurred $750 in

expenses when moving into the house (Suppl. Decl. ¶5(c)), and $250 when moving out of the house

(Suppl. Decl. ¶5(I)). Plaintiff, however, indicates that he does not have any receipts substantiating

these amounts. Plaintiff has described the types of expenses he claims he incurred during the move,

including packaging materials, time off of work, and gas and meals for those who assisted him. 

Based on Plaintiff’s statements, the undersigned finds that Plaintiff’s requested amount of $1,000 for

move-in and move-out expenses is reasonable and should be awarded. 

Third, Plaintiff seeks to recover for payments he made on the first and second mortgages. As

to the first mortgage, Plaintiff states that he made payments to Washington Mutual from January

2005 through May 2007 totaling $56,572.61. (Dkt. #123 ¶20 & Ex.2.) Plaintiff has submitted

statements from Washington Mutual, which sufficiently substantiate that he paid $56,572.61 on the

first mortgage. 

With respect to his second mortgage, Plaintiff claims that he made payments totaling

$20,185.05. (Suppl. Decl. ¶¶5(B)(d), 5(B)(e).) More specifically, Plaintiff claims that from January

through August 2005, he paid $5,581.12 to Washington Mutual. The undersigned has reviewed the

Washington Mutual Account Activity Statement from 2005 that Plaintiff submitted (Dkt. #123 ¶20

& Ex. 3.), and finds that Plaintiff has adequately established that he paid $5,581.12 to Washington

Mutual. Additionally, Plaintiff claims that from September 2005 through July 2006, he paid

$9,792.62 on the second mortgage to EMC. (Dkt. #123 ¶20.) However, the statement from EMC 

that Plaintiff has submitted indicates that he only paid $7,560.63. (See Dkt. #123, Ex. 3 at 2-3.)

Plaintiff also claims that from August 2006 through May 2007, he paid $7,043.30 to GMAC. (Dkt.

#123 ¶20.) However, the statement from GMAC Plaintiff submitted indicates that he made

payments totaling $6,958.30.1

 Based on the these figures, the undersigned finds that Plaintiff has

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of payments he made to GMAC. The undersigned’s determination that Plaintiff paid $6,958.30

reflects one-time payment of the $85.00 fee. 

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adequately demonstrated that he paid $20,100.05 on his second mortgage. 

Taken together, Plaintiff made $76,672.66 in mortgage payments on his first and second

mortgages for which he is entitled to recover. 

Fourth, Plaintiff seeks to recover for the homeowners’ association dues he paid. In his

Declarations, Plaintiff proffers conflicting amounts as to the total fees he paid. In his July 28, 2009

Declaration, he indicates that he paid $1,065 from January 2005 through June 2008, (Dkt. #123

¶13.) In his Supplemental Declaration, Plaintiff indicates that he paid $1,225 in HOA dues from

December 2004 through December 2008. (Dkt. #127, Suppl. Decl. ¶5(e).) In support of his claim,

Plaintiff has submitted some checks reflecting payments made, a billing statement from the HOA

from December 2008, and an email from the HOA indicating that he had no outstanding fees as of

March 2009. The undersigned has reviewed these documents, and based on the figures Plaintiff

provided, finds that Plaintiff paid $1225 in HOA fees, which he is entitled to recover. 

Fifth, Plaintiff requests that he be awarded the money he spent on improvements and

maintenance on the house. Although Plaintiff’s Declarations indicate that he is seeking $8,000 for

such expenditures, at the evidentiary hearing, Plaintiff’s counsel clarified that Plaintiff is only

seeking to recover $1,000 for these expenses. Plaintiff also indicated that he does not have any

receipts documenting the expenses. (Suppl. Decl ¶5(d).) According to Plaintiff, he expended this

money on ceiling fans, paint, wallpaper, a garbage disposal, a stove top, wall fixtures, automatic

sprinklers, and landscaping. (Suppl. Decl. ¶5(D).) The undersigned has considered Plaintiff’s

statements regarding the money he expended on improvements and maintenance and based on such

representations, finds that Plaintiff spent at least $1,000, for which he is entitled to recover. 

Sixth, Plaintiff requests that the Court award him $2,453.55 for property taxes he paid on the

house. (Suppl. Decl ¶5(F).) Plaintiff has submitted property tax bills, which the undersigned has

reviewed and finds that they substantiate the requested amount of $2,453.55. (Dkt. #123 ¶20 & Ex.

5.) 

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Finally, Plaintiff seeks to recover $2,274.48 that he claims he expended on property

insurance premiums on the house. (Suppl. Decl. ¶5(G).) Plaintiff has submitted statements

reflecting the amounts paid. (Dkt. #123 ¶20 & Ex. 4.) The undersigned has reviewed the statements

and considered the premium amounts for the months for which Plaintiff does not have statements,

and finds that Plaintiff has sufficiently established that he paid $2,274.28 in property insurance, for

which he is entitled to recover. 

Taken the foregoing figures together, Plaintiff shown that he is entitled to $84,625.49 in outof-pocket damages. However, Plaintiff also acknowledges that this amount must be reduced by the

amount of corresponding expenses he would have incurred had he not purchased the house through

Defendant Atwater. In his Declaration, Plaintiff indicates that had Defendant Atwater not defrauded

him, he would have continued to rent an apartment at a rate of $800 a month. (Dkt. #123 ¶25.) 

Because Plaintiff would have incurred at least $33,600 in rent during the time he lived in the house

he purchased, this amount should be offset against the total amount of his out-of-pocket damages,

reducing the total to $51,025.49. Accordingly, the undersigned RECOMMENDS that the Court

award Plaintiff $51,025.49 in out-of-pocket damages. 

2. Damage to Credit Rating

In his Supplemental Declaration, Plaintiff indicates that he is no longer seeking to recover for

damage to his credit rating. (Suppl. Decl. ¶¶4, 6.) Accordingly, this issue is moot.

3. Emotional Distress

In his Supplemental Declaration, Plaintiff indicates that he is seeking $55,000 in damages for

his emotional distress. (Suppl. Decl. ¶4.) In support of this amount Plaintiff indicates that, as a

result of his dealings with Defendant Atwater relating to the purchase of the house, his relationship

with his wife became severely strained. (Dkt. #123 ¶24.) Plaintiff also states that, as a result the

stress he experienced in connection with the house, he had to see a therapist, who prescribed an antidepressant. (Id.) When his condition worsened, he again saw the therapist and was prescribed a

second anti-depressant, as well as a prescription for sleeping pills. (Id.) He indicates that he

incurred co-payments of over $120 for the office visits and prescriptions. 

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Aside from the foregoing statements, Plaintiff has not submitted any other documentary

evidence regarding the amounts he paid out in pursuing medical care or any medical evidence of his

symptoms. As a result, the undersigned must base the appropriate amount of emotional distress

damages strictly on Plaintiff’s statements in his Declarations and his counsel’s description at the

evidentiary hearing. Like Judge Patel, the undersigned finds that Plaintiff’s representations

regarding the emotional distress he suffered to be credible, particularly in light of the circumstances

of this case. However, Plaintiff has not presented any explanation as to how he arrived at the

$55,000 figure he requests. Considering Plaintiff’s description of the distress he suffered as a result

of his dealings with Defendant Atwater, the undersigned finds that an award of $25,000 is

reasonable. The undersigned therefore RECOMMENDS that the Court award $25,000 to

compensate Plaintiff for his emotional distress. 

4. Compensatory Damages Already Awarded Against Other Defendants

Finally, Judge Patel noted in her Order that Plaintiff’s compensatory damages award against

Defendant Atwater must be offset against any compensatory damages that have already been

awarded to Plaintiff against any other defendants in this case. (Dkt. #120 at 8-9.) In his

Declaration, Plaintiff indicates that he obtained a judgement of non-dischargeability in bankruptcy

court for $52,325.69 against Defendant Coker dba Fidelity Mortgage Company and Pacific Home

Brokers. (Dkt. #123 ¶28 & Ex.6.) However, Plaintiff states that he has not received any money

from that judgment. (Id.) Because Plaintiff has not recovered any of his compensatory damages

from Defendant Coker, there is no basis to reduce the amount of his compensatory damages. 

However, should Plaintiff receive any payment from Defendant Coker in satisfaction of his

judgment against him, Plaintiff’s compensatory damage award against Defendant Atwater should be

reduced accordingly. 

5. Compensatory Damages Recommendation

In sum, with respect to compensatory damages, the undersigned RECOMMENDS that the

Court award Plaintiff $51,025.49 in out of pocket damages and $25,000 for emotional distress, for a

total of $76,025.49 in compensatory damages. 

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B. Punitive Damages

In her Order, Judge Patel found that Plaintiff had established by clear and convincing

evidence that he is entitled to punitive damages. (Dkt. #120 at 9.) She therefore instructed the

undersigned to consider and make recommendations on the appropriate amount of punitive damages

to award. Plaintiff requests an award of $25,000 in punitive damages. (Suppl. Decl. ¶4.) The

question, then, is whether this amount is reasonable. 

Under California law, when assessing punitive damages, courts are to consider: (1) the

degree of reprehensibility of the defendant’s conduct; (2) the amount of compensatory damages

awarded to the plaintiff; and (3) the wealth of the defendant. Neal v. Farmers Ins. Exchange, 21

Cal. 3d 910, 928 (1978); see also Harrell v. Kepreos, No. CIV S-06-0849, 2008 WL 619117, at *4

(E.D. Cal. Mar. 4, 2008).

With respect to the first factor, as Judge Patel highlighted in her Order, Defendant Atwater

made a series of misrepresentations to Plaintiff, including that he could secure a loan for Plaintiff

that he could afford and which did not have a pre-payment penalty. After the loan payments

exceeded what he had represented to Plaintiff, Defendant Atwater assured Plaintiff that he could

refinance his loans into one consolidated loan that would reduce the monthly payments by half, at no

cost to Plaintiff. Defendant Atwater, however, never delivered on this representation. Defendant

Atwater also falsified information on Plaintiff’s loans applications without Plaintiff’s knowledge and

misrepresented other material terms of the loans to Plaintiff. As a result of Defendant Atwater’s

conduct, Plaintiff was unable to afford the monthly payments on the two loans and ultimately

defaulted on the loans. Throughout this period, Plaintiff experienced emotional distress and his

relationship with his wife became strained. These facts demonstrate the reprehensibility of

Defendant Atwater’s conduct and support the need for punitive damages to deter him from similar

conduct in the future. 

As to the second factor, as indicated above, the undersigned recommends that the Court

award $76,025.49 in compensatory damages. Plaintiff’s requested amount of punitive damages is

thus less than the amount of his compensatory damages and is not excessive in relation to his actual

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damages. 

Looking at the final factor, which focuses on the defendant’s financial condition, Plaintiff

has not submitted any evidence regarding Defendant Atwater’s financial status. The California

Supreme Court has indicated that evidence of a defendant’s financial condition is a prerequisite to an

award of punitive damages in order to ensure that the award will actually serve to deter the

defendant’s conduct. Adams v. Murakami, 54 Cal. 3d 105, 119 (1991). Without such information,

the undersigned cannot determine whether the amount of punitive damages Plaintiff seeks exceeds

the amount necessary to properly punish and deter Defendant Atwater from future misconduct. See

id. at 110. Consequently, because Plaintiff has not met his burden of producing evidence on this

factor, the undersigned RECOMMENDS that the Court DENY WITHOUT PREJUDICE

Plaintiff’s request for an award of $25,000 in punitive damages and GRANT Plaintiff leave to

marshal evidence relating to Defendant Atwater’s financial condition and move for reconsideration

of the proper amount of punitive damages that should be awarded. 

C. Disgorgement Pursuant to California Unfair Business Practices Law

In her Order, Judge Patel found that Plaintiff had established Defendant Atwater’s actions

violated California business law, and therefore California’s unfair competition law, such that

Plaintiff could disgorge Defendant Atwater of any money Plaintiff paid him in connection with his

unlawful business practices. (Dkt. #120 at 10.) Toward this end, Judge Patel directed Plaintiff to

prepare and provide evidence as to what money he paid Defendant Atwater in connection with his

provision of real estate services. (Id.) To guide Plaintiff, the Court explained that the settlement

statement that Plaintiff submitted was insufficient to establish the amount he paid to Defendant

Atwater. (Id.) Specifically, the Court noted that although Plaintiff alleged that the statement

demonstrates that he paid $9,875 to Pacific, line 702 of the settlement statement indicates that the

commission was paid from the seller’s funds, not Plaintiff’s funds. (Id.) Additionally, the Court

noted that although Plaintiff alleges that he paid $6,800 to Fidelity, the documents Plaintiff

submitted only reflect that Plaintiff paid Fidelity a loan origination fee, a processing fee, and a

broker underwriting fee, totaling $4,100. (Id. at 10-11) Finally, Judge Patel noted that even if

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Plaintiff could establish the total amount he paid to Pacific and Fidelity, Plaintiff must provide

evidence corroborating his allegations that Defendant Atwater was paid all but $500 of this amount. 

(Id. at 11) 

Reviewing the documents Plaintiff filed after Judge Patel issued her Order, Plaintiff has resubmitted the same evidence Judge Patel previously reviewed. Specifically, in his July 28

Declaration, Plaintiff alleges that according to the settlement statement attached to his Declaration,

Pacific received a broker’s commission in the amount of $9,875 and Fidelity received $6,800 in

connection with the making of his loans, for a total of $16,675. (Dkt. #123 ¶¶12,27; Suppl. Decl.

#7) Plaintiff has not offered any explanation addressing the questions Judge Patel previously posed

regarding these amounts. Thus, as an initial matter, Plaintiff has not substantiated his allegations

that he paid $16,675 to Pacific and Fidelity. 

Moreover, as indicated above, in order to seek disgorgement of fees paid to Defendant

Atwater, Plaintiff has the burden of establishing that Defendant Atwater actually was paid those

fees. As he did in his Motion for Default Judgment, Plaintiff alleges Defendant Coker stated that

Defendant Atwater received all but $500 of the $16,675 in fees and commissions that he paid. 

Plaintiff, however, has not provided any other information about the statement from Defendant

Coker, such as when he made the statement, to whom he made it, or the context or setting in which

he made the statement. Without such information, the undersigned cannot assess the reliability of

the proffered statement. Aside from this statement, Plaintiff has not provided any other evidence to

corroborate his allegation that Defendant Atwater was paid all $500 of the fees he paid to Defendant

Coker and/or Fidelity or Pacific. As a result, the undersigned finds that Plaintiff has failed to

sufficiently establish the amount of money he paid Defendant Atwater in connection with his

unlawful business practices. The undersigned therefore RECOMMENDS that the Court DENY

Plaintiff’s request for disgorgement of $16,175 from Defendant Atwater. 

D. Costs

In her Order, Judge Patel found that Plaintiff, as the prevailing party in this action, is entitled

to recover costs. (Dkt. #120.) In March 2009, Plaintiff’s counsel filed a declaration stating that, at

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that time, Plaintiff had incurred $1,313.98 in costs. (Dkt. #114.) Having reviewed counsel’s

declaration, the Court finds that Plaintiff has sufficiently established that he is entitled to $1,313.98

in costs. However, Plaintiff has not filed any amended declaration updating this figure since March

2009, and the Court is unable to determine whether any expenses were incurred after that date. The

undersigned therefore RECOMMENDS that the Court grant Plaintiff $1,313.98 in costs. 

III. CONCLUSION

Based on the undersigned’s consideration of Plaintiff’s Declarations and supporting

documents and evidence presented at the hearing, the undersigned RECOMMENDS as follows:

Plaintiff should be awarded $76,025.49 in compensatory damages and $1,313.98 in costs. 

Plaintiff’s request for an award of $25,000 in punitive damages should be DENIED WITHOUT

PREJUDICE. Plaintiff’s requests for disgorgement of fees paid to Defendant Atwater should be

DENIED.

Pursuant to Fed. R. Civ. P. 72(b)(2) a party may serve and file objections to this Report and

Recommendation fourteen (14) days after being served.

IT IS SO ORDERED.

Dated: January 7, 2010 _______________________________

Maria-Elena James 

Chief United States Magistrate Judge 

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