Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_14-cv-01482/USCOURTS-caed-2_14-cv-01482-10/pdf.json

Parties Involved:
Colonial First Business Development, LLC
Defendant
Colonial First Lending Group, Inc.
Defendant
Flagship Financial Group, LLC
Defendant
Devin Jones
Defendant
Diana McMenemy
Plaintiff
Michael McMenemy
Plaintiff

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

Diana McMenemy, an 

individual, and Michael 

McMenemy, an individual,

Plaintiffs,

v.

Colonial First Lending Group, 

Inc., a Utah Corporation; 

Colonial First Business 

Development, LLC, a Utah 

Limited Liability Company; 

Devin Jones, an individual; 

Flagship Financial Group, 

LLC, and DOES 1 through 10

Defendants.

No. 2:14-cv-001482-JAM-AC

ORDER GRANTING PLAINTIFF’S

MOTION FOR ENTRY OF DEFAULT 

JUDGMENT AGAINST DEFENDANT 

COLONIAL FIRST LENDING GROUP, 

INC. AND AWARDING DAMAGES TO 

PLAINTIFF

This is a mortgage fraud case brought by plaintiffs Diana 

McMenemy and Michael McMenemy (“McMenemy”)1 against defendants 

Flagship Group, LLC (“Flagship”), Devin Jones (“Jones”), Colonial 

First Lending Group, Inc. (“Colonial”), and Colonial First 

 

1 Mrs. McMenemy passed away during the course of this litigation, 

and Mr. McMenemy is pursuing the case on behalf of himself and 

Mrs. McMenemy as the executor of her estate.

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Business Development, LLC (“CFBD”) related to real property 

purchased by McMenemy (“Subject Property”). The only defendant 

remaining in this case is Colonial. McMenemy now requests that 

the Court enter default judgment pursuant to Federal Rule of 

Civil Procedure (“Rule”) 55(b)(2) against Colonial and award 

McMenemy damages. For the reasons stated below, the Court grants 

default judgment against Colonial and awards McMenemy $432,005.00 

in damages.

I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

McMenemy initially filed a complaint in state court against 

Flagship only (Doc. #1-1). Flagship removed the case to federal 

court, and McMenemy filed the operative first amended complaint 

(“FAC”), which added Jones, Colonial, and CFBD (Doc. #6). Over 

the course of the litigation, CFBD was dismissed from the case 

(Doc. #40), Flagship was granted summary judgment in its favor 

(Doc. #127), and Jones reached a settlement with McMenemy (Doc. 

#134). Thus, the only remaining defendant is Colonial, and the 

only remaining causes of action are the first cause of action for 

fraud, the third cause of action for breach of fiduciary duty, 

and the fourth cause of action for breach of contract. 

Colonial has not appeared in the case for over a year. 

Colonial was originally represented by an attorney, who filed an 

answer to the complaint (Doc. #21). However, the attorney was 

permitted to withdraw because Colonial was not paying attorneys’ 

fees (Doc. ## 70-71, 87). Colonial’s former attorney informed 

Colonial that, as a corporation, Colonial was required to have 

legal representation or else it would be subject to a default 

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judgment. Winter Decl., Exh. 2, at 2 (Doc. #83-2).

Several months after Colonial’s counsel withdrew, McMenemy

requested an entry of default against Colonial (Doc. #101). The 

clerk denied this request on the basis that Colonial had 

previously appeared (Doc. #103). Since this time, two Court 

orders that were mailed to Colonial were returned as 

undeliverable (Doc. ##103, 107). After each order was returned 

as undeliverable, the clerk set a date for Colonial to file a 

“Notice of Change of Address.” Colonial never filed a notice of 

change of address. Colonial has not appeared in this litigation 

since its counsel withdrew in March 2015. Dwyer Decl. ¶ 2 (Doc. 

#143-1). 

Trial was scheduled for August 8, 2016 (Doc. #142). The 

Court informed McMenemy that the Court would entertain any 

motions for default judgment at that time if Colonial failed to 

appear (Doc. #137). McMenemy twice attempted to serve Colonial 

with copies of the Court’s orders, but both were returned as 

undeliverable. Dwyer Decl. ¶¶ 3-4 (Doc. #143-1). Colonial 

failed to appear on August 8, 2016, and the Court held a hearing 

on McMenemy’s motion for default judgment and damages (Doc. 

#142).

II. OPINION

A. Analysis

1. Default Judgment

Eastern District of California Local Rule 183(a) states 

that “[a] corporation or other entity may appear only by an 

attorney.” This rule coincides with the California rule that “a 

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corporation cannot represent itself in a court of record . . . 

in propia persona.” Caressa Camille, Inc. v. Alcoholic Beverage 

Control Appeals Bd., 99 Cal. App. 4th 1094, 1101 (2002). 

Default judgment is the appropriate remedy when a party fails to 

comply with local rules requiring representation by counsel. 

Employee Painters’ Tr. v. Ethan Enters., Inc., 480 F.3d 993, 998 

(9th Cir. 2007) (upholding default judgment against a 

corporation that violated a local rule that required 

corporations to be represented before the court). 

Here, Colonial has not retained counsel since its initial 

counsel withdrew from representation. This failure violates 

Local Rule 183. Colonial has been adequately warned about the 

consequences of failing to retain counsel in this case, Winter 

Decl., Exh. 2, at 2, yet has made no effort to retain counsel or 

otherwise defend the case. In accordance with Employee 

Painters’ Trust, the Court therefore grants McMenemy’s motion 

for default judgment against Colonial. Upon entry of default 

judgment, the Court must assume that the factual allegations in 

the FAC are admitted by Colonial. Geddes v. United Fin. Grp., 

559 F.2d 557, 560 (9th Cir. 1977). 

2. Damages

Once default judgment has been entered, the Court must 

determine the appropriate amount of damages. “Where damages are 

liquidated (i.e., capable of ascertainment from definite figures 

contained in the documentary evidence or in detailed affidavits), 

judgment by default may be entered without a damages hearing. 

Unliquidated and punitive damages, however, require ‘proving up’ 

at an evidentiary hearing or through other means.” Microsoft 

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Corp. v. Nop, 549 F. Supp. 2d 1233, 1235–36 (E.D. Cal. 2008).

McMenemy seeks $71,577.002 for the payment he made at the 

closing of escrow; $54,210.00 for thirty payments made on his 

property loan; lost wages of $301,000.00 for 2012 through 2014; 

$500,000.00 in emotional pain and suffering; and punitive 

damages. Mot. at 5-6. McMenemy introduced evidence and 

testified in support of these requests at the damages hearing. 

a. Liquidated Damages

McMenemy paid $71,577.37 as a deposit for the purchase of 

the Subject Property. Exhibit (“Exh.”) #1. McMenemy provided 

the Court with the three checks he paid to Placer Title between 

June and August 2008. Exh. #2. The three checks total

$71,577.37. This amount is a liquidated damage derived from 

definite terms, and McMenemy is entitled to recover his requested 

$71,577.00 in damages for his deposit payments for the purchase 

of the Subject Property.

The $54,210.00 requested for thirty monthly payments made on 

the property loan is also a liquidated damage that McMenemy is 

entitled to recover. Exhibit 3 contains an annual escrow account 

disclosure statement for McMenemy’s loan for the purchase of the 

Subject Property. Page P 691 of Exhibit 3 states that the total 

monthly loan payment was $1,810.35. This same figure is stated 

on P 694 of Exhibit 3, which is an escrow analysis of McMenemy’s 

mortgage. McMenemy testified during the hearing that this amount 

was off by three dollars and that his actual monthly loan payment 

was $1,807. Exhibit 4 is a Mortgagor’s Information 

 

2 McMenemy incorrectly wrote “$72,577” in his motion but 

clarified during the hearing that he actually seeks $71,577.00.

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Statement/Payment Breakdown signed by McMenemy, which states that 

his monthly payment would be $1,807.89. McMenemy testified that 

he made monthly payments on this loan from September 1, 2008, to 

February 2011. Thirty payments of $1,807.00 total to $54,210.00. 

McMenemy is entitled to recover $54,210.00 in liquidated damages 

to recover the payments he made on his loan. 

b. Lost Income Damages

McMenemy also seeks lost wages of $301,000.00. McMenemy 

testified that Defendants’ fraudulent activity forced him into 

foreclosure, which forced him to move from the Subject Property, 

which forced him to leave a higher paying job at Linear 

Technology (“Linear”) for a lower paying job at Schweitzer 

Engineering Laboratories (“Schweitzer”). In 2011, McMenemy 

worked as an electrical engineer Linear, where he made

$201,670.00 in base pay, bonus, and stock options. Exh. ## 5, 7. 

In the middle of 2012, after the foreclosure on the Subject 

Property, McMenemy left Linear and started working for 

Schweitzer. McMenemy’s income for 2012, which was partly derived 

from his employment at Linear and partly from his employment at 

Schweitzer, was $132,053.00. Exh. ## 5, 8. In 2013, McMenemy 

made $100,562.00, and in 2014, McMenemy made $106,642.00. Exh. 

## 5, 9-10. McMenemy submitted reasonable projections for his 

salary, bonus, and stock options between 2012 and 2014 had he 

remained at Linear. Exh. 5. The difference between McMenemy’s 

projected total income from 2012 to 2014 had he remained at 

Linear and the actual income he received during this time period 

from Schweitzer totals $301,218.57. Exh. 5. The Court awards 

McMenemy $301,218.00 in lost wages.

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c. Emotional Distress Damages

McMenemy also seeks $500,000.00 in emotional pain and 

suffering damages. McMenemy testified that the loss of the 

Subject Property was crushing and that he felt foolish for having 

been subjected to what he called “a con.” McMenemy testified 

that he suffered depression and anxiety, though he admitted that 

he was never treated for these conditions and that they were not 

debilitating. McMenemy did not provide the Court with any case 

law regarding why emotional distress damages may or should be 

awarded. McMenemy simply argued that he is seeking “garden 

variety” emotional distress damages.

McMenemy is permitted to recover emotional distress damages 

under his first and third causes of action for, respectively,

fraud and breach of fiduciary duty. Crisci v. Sec. Ins. Co. of 

New Haven, Conn., 66 Cal. 2d 425, 433–34 (1967)(“[A] plaintiff 

who as a result of a defendant’s tortious conduct loses his 

property and suffers mental distress may recover not only for the 

pecuniary loss but also for his mental distress.”); Pepitone v. 

Russo, 64 Cal. App. 3d 685, 688 (1976) (“[T]he fraudulent breach 

of fiduciary duty is a tort, and the faithless fiduciary is 

obligated to make good the full amount of the loss of which his 

breach of faith is a cause.”). The amount of such damages “can 

be established by testimony or inferred from the circumstances.” 

Sanders v. Fid. Mortg. Co., 2009 WL 1246686, at *5 (N.D. Cal. May 

5, 2009). 

McMenemy testified that he suffered emotional distress, but 

did not provide the Court with any guidance as to how the 

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emotional distress he suffered can or should be valued at 

$500,000.00. An instructive and relevant authority on this issue

is Hernandez v. Madrigal, 2011 WL 6936364 (E.D. Cal. Dec. 30, 

2011). In Hernandez, the Court granted default judgment against 

the mortgage company defendant that allegedly stripped the 

relevant property of its equity through deceit and fraud. Id. at 

*1. The Hernandez court approved an award of $75,000.00 in 

emotional distress damages, reasoning that “[c]ases awarding 

damages for emotional distress of this type have awarded a wide 

range, from $5,000 to $125,000.” Id. at *4 (citing Olsen v. Cty. 

of Nassau, 615 F. Supp. 2d 35, 46 (E.D.N.Y. 2009), for the 

proposition that “garden variety emotional distress claims, which 

are confined to plaintiff’s testimony and not medically 

corroborated, are limited to between $30,000 and $125,000.”). 

Given that McMenemy never sought treatment for his distress; that 

the distress was not debilitating; and that McMenemy has failed 

to cite any authority for the appropriate amount of emotional 

distress damages, the Court will only award $5,000.00 in 

emotional distress damages to McMenemy.

d. Punitive Damages

Finally, McMenemy seeks punitive damages under California 

Civil Code Section 3294(a). “[P]unitive damages should only be 

awarded if the defendant’s culpability, after having paid 

compensatory damages, is so reprehensible as to warrant the 

imposition of further sanctions to achieve punishment or 

deterrence.” State Farm Mut. Auto. Ins. Co. v. Campbell, 538 

U.S. 408, 419 (2003). Here, there is no evidence that Colonial 

acted with malice or that its actions were so reprehensible that 

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the Court must impose further sanctions. The Court denies 

McMemeny’s request for the imposition of punitive damages against 

Colonial.

III. ORDER

For the reasons set forth above, the Court enters default 

judgment against Colonial and awards McMenemy $432,005.00 in 

damages.

IT IS SO ORDERED.

Dated: August 16, 2016

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