Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-01188/USCOURTS-caed-1_05-cv-01188-4/pdf.json

Parties Involved:
Thomas N. Smith
Counter Defendant
Fred Van Dyk
Counter Claimant

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

THOMAS N. SMITH, )

)

)

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Plaintiff, )

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v. )

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FRED VAN DYK, et al., )

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)

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Defendants. )

 )

1:05cv1188 LJO DLB

FINDINGS AND RECOMMENDATION

REGARDING PLAINTIFF’S APPLICATION

FOR DEFAULT JUDGMENT

(Document 27)

Plaintiff Thomas N. Smith (“Plaintiff”) filed the instant application for default judgment

on January 3, 2007. The matter was heard on March 16, 2007, before the Honorable Dennis L.

Beck, United States Magistrate Judge. David Gilmore appeared with and on behalf of Plaintiff,

Thomas N. Smith. Plaintiff was sworn and testified in support of his request for judgement. 

There was no appearance on behalf of Defendant Fred Van Dyk (“Defendant”). The matter was

submitted for findings and recommendation to the District Court judge.

BACKGROUND

Plaintiff filed the instant action on September 19, 2005, seeking damages and declaratory

relief for breach of contract and related causes of action. On December 29, 2006, the Clerk

entered default against Defendant. 

On January 3, 2007, Plaintiff filed the instant application for default judgment.

According to the complaint, Plaintiff’s Declaration in Support of the Application for

Case 1:05-cv-01188-DLB Document 34 Filed 03/21/07 Page 1 of 4
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Default Judgment, and Plaintiff’s testimony at the hearing, Plaintiff and Defendant entered into a

agreement for exchange of automobile and parts in 1998. Plaintiff agreed to deliver numerous

automobiles and parts in exchange for a 1998 Volkswagen Jetta (“Jetta”) worth approximately

$23,000. Defendant represented that he was the true and sole owner of the Jetta. The property

Plaintiff gave to Defendant had a fair market value of over $80,000 at the time the parties entered

into the contract. Plaintiff entered into the agreement willingly because he was attempting to

liquidate assets in anticipation of a move to New Zealand.

Approximately one year later, after spending much of the previous year in New Zealand,

Plaintiff took the Jetta to the Department of Motor Vehicles to pay the licensing fee. He then

learned that the car was leased from Volkswagen of America and that no payments had been

made. 

Plaintiff attempted to contact Defendant, but was unable to find him for almost four

years. In attempting to find him, Plaintiff made numerous trips from New Zealand. During that

time, the Jetta was stored and could not be used because of the status of the title. 

Plaintiff eventually located Defendant, who indicated that he would pay the lease off. He

never made any payments, however, and refused to reimburse Plaintiff. 

In 2004, Defendant contacted the police and indicated that he was the registered owner of

the Jetta. Defendant arranged to have the Jetta repossessed. Plaintiff contends that Defendant

satisfied the lease for $2,500 and sold the Jetta for $3,500, making a $1,000 profit. 

Plaintiff alleges that Defendant knew that his representations were false at the time he

entered into the agreement, and that he made them with the intent to deceive, defraud, and induce

reliance. 

In his application for default judgment, Plaintiff requests general damages in the amount

of $80,000 (the value of the property transferred to Defendant) and punitive damages in the

amount of $25,000. 

DISCUSSION

Rule 55(b) of the Federal Rules of Civil Procedure provides that judgment by default may

be entered as follows:

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(1) By the Clerk. When the plaintiff's claim against a defendant is for a sum

certain or for a sum which can by computation be made certain, the clerk upon

request of the plaintiff and upon affidavit of the amount due shall enter judgment

for that amount and costs against the defendant, if the defendant has been

defaulted for failure to appear and if he is not an infant or incompetent person.

(2) By the Court. In all other cases the party entitled to a judgment by default

shall apply to the court therefor; but no judgment by default shall be entered

against an infant or incompetent person unless represented in the action by a

general guardian, committee, conservator, or other such representative who has

appeared therein. If the party against whom judgment by default is sought has

appeared in the action, the party (or, if appearing by representative, the party's

representative) shall be served with written notice of the application for judgment

at least 3 days prior to the hearing on such application. If, in order to enable the

court to enter judgment or to carry it into effect, it is necessary to take an account

or to determine the amount of damages or to establish the truth of any averment

by evidence or to make an investigation of any other matter, the court may

conduct such hearings or order such references as it deems necessary and proper

and shall accord a right of trial by jury to the parties when and as required by any

statute of the United States.

“Upon default, the well pleaded allegations of the complaint relating to liability are taken

as true.” Dundee Cement Co. v. Highway Pipe and Concrete Products, 722 F.2d 1319, 1323 (7th

Cir. 1983); Televideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917 (9th Cir. 1987). Thus, “[a]t

the time of entry of default, the facts alleged by the plaintiff in the complaint are deemed

admitted.” 10 J. Moore, Moore's Federal Practice §55.11 (3d ed. 2000). 

The facts of this case are relatively simple. Plaintiff entered into an agreement based

upon Defendant’s fraudulent misrepresentations. Plaintiff tried to locate Defendant in an attempt

to remedy the situation, but was unable to do so. Some years later Defendant, in a brazen display

located the Jetta and arranged to have it repossessed. Plaintiff testified that Defendant then made

a profit by paying off the lease at a discount and selling the vehicle. 

In his application, Plaintiff requests $80,000 in damages, an amount that represents his

estimate of the fair market value of the property transferred to Defendant. He also requests

$25,000 in punitive damages insofar as Defendant’s conduct was fraudulent and willful. 

“A plaintiff who contracts in reliance on the fraud of a defendant may either elect through

contract remedy restitution based upon rescission and damages . . . or both restitution and

consequential damages.” Arthur L. Sachs, Inc. v. City of Oceanside, 151 Cal.App.3d 315, 322

(1984). The Court finds that the facts of this case support Plaintiff’s argument for restitution. 

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Plaintiff relied on Defendant’s fraudulent misrepresentations and is therefore entitled to be

returned to the status quo prior to entering into the contract. Accordingly, Plaintiff is entitled to

$80,000, the approximate fair market value of the property given to Defendant, as restitution. 

Additionally, the Court finds that punitive damages in the amount of $25,000 should be awarded

based on Defendant’s fraudulent conduct. Horn v. Guaranty Chevrolet Motors, 270 Cal.App.2d

477, 484 (1969) (although punitive damages are generally not recoverable in contract actions,

they may be awarded where fraudulent conduct is involved).

RECOMMENDATION

For the reasons discussed above, the Court RECOMMENDS to:

1. GRANT Plaintiff’s application for default judgment in favor of Plaintiff and

against Defendant;

2. AWARD Plaintiff restitution in the amount of $80,000; and

3. AWARD Plaintiff punitive damages in the amount of $25,000. 

This Findings and Recommendation is submitted to the Honorable Lawrence J. O’Neill,

United States District Court Judge, pursuant to the provisions of 28 U.S.C. section 636 (b)(1)(B)

and Rule 72-304 of the Local Rules of Practice for the United States District Court, Eastern

District of California. Within thirty (30) days after being served with a copy, any party may file

written objections with the court and serve a copy on all parties. Such a document should be

captioned “Objections to Magistrate Judge’s Findings and Recommendations.” The Court will 

then review the Magistrate Judge’s ruling pursuant to 28 U.S.C. § 636 (b)(1)(c). The parties are 

advised that failure to file objections within the specified time may waive the right to appeal the

District Court’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

IT IS SO ORDERED. 

Dated: March 21, 2007 /s/ Dennis L. Beck 

3b142a UNITED STATES MAGISTRATE JUDGE

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