Court Opinion

ID: 613364
Source: CourtListenerOpinion
Date Created: 2011-09-09 13:44:42+00
Date Added: 2024-06-11T12:40:31.727222
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                        File Name: 11a0659n.06
                                                                        FILED
                                   Case No. 08-5561
                                                                     Sep 09, 2011
                      UNITED STATES COURT OF APPEALS             LEONARD GREEN, Clerk
                           FOR THE SIXTH CIRCUIT

WILLIAM M. FLYNN, aka William Michael           )
Flynn,                                          )
                                                )
      Plaintiff-Appellant,                      )
                                                )
             v.                                 )
                                                )
PEOPLE'S CHOICE HOME LOANS, INC.,               )     ON APPEAL FROM THE
and its agents, John and Jane Does 1 thru 50,   )     UNITED STATES DISTRICT
known and unknown to the plaintiff; WELLS       )     COURT FOR THE WESTERN
FARGO BANK, MINNESOTA, N.A., as                 )     DISTRICT OF TENNESSEE
trustee for amortizing residential collateral   )
trust series BC-2008 and its agents, John and   )
Jane Does 1 thru 50, known and unknown to       )
the plaintiff, MICHAEL L. RIDELE, trustee       )
for People’s Choice Home Loans, Inc.,           )
                                                )
      Defendants-Appellees,                     )
                                                )
FAIRBANKS CAPITAL CORPORATION,                  )
and its agents, Joan and Jane Does 1 thru 50,   )
known and unknown to the plaintiff;             )
PRIORITY TRUSTEE SERVICES OF TN,                )
LLC, and John and Jane Does 1 thru 50           )
agents of Priority Services of TN known and     )
unknown to the plaintiff; JOEL A.               )
FREEDMAN; NIKOLE SHELTON;                       )
MADELINE RAMOS; DIONNE SIMMONS;                 )
ALAN RHENEY, agents of Priority Trustee         )
Services of TN, LLC,                            )
                                                )
      Defendants.                               )
_______________________________________         )

BEFORE: BATCHELDER, Chief Judge; BOGGS and WHITE, Circuit Judges.
No. 08-5561, Flynn v. People’s Choice, et al.

        ALICE M. BATCHELDER, Chief Judge. Alleging improprieties in a mortgage and

subsequent foreclosure on his property in Tennessee, William Flynn filed this diversity action against

People’s Choice Home Loans, Inc. (“People’s”), Wells Fargo Bank (“Wells Fargo”), Michael Ridele,

and others. Several of the original defendants were dismissed from the lawsuit for various reasons

and are not part of this appeal, but Flynn won default judgment against People’s, Wells Fargo, and

Ridele. However, the district court awarded Flynn no damages, holding that he failed to prove any

damages. Flynn now appeals. For the following reasons, we AFFIRM the district court.

                                                  I.

        More than two years after Flynn filed his complaint alleging improprieties in a mortgage and

subsequent foreclosure on his property in Tennessee, he moved for default judgment against

defendants People’s, Wells Fargo, and Ridele (collectively, “the defendants”) because they failed

to respond to the complaint or otherwise enter appearances in the district court. The court granted

the motion, entered default judgment against the defendants, and referred the matter to a magistrate

judge for a determination of damages.

        The magistrate judge ordered Flynn to submit any documentation, including affidavits and

other sworn statements, that Flynn wanted the district court to consider in determining an amount

of damages. In response, Flynn filed a three-page memorandum requesting $34.8 million in

damages. The memorandum did not have any attachments.

        Shortly before Flynn filed his memorandum, Wells Fargo finally entered an appearance and

immediately moved to set aside the default judgment. Wells Fargo also responded to Flynn’s request

for $34.8 million in damages, arguing that Flynn had failed to submit proof of any damages.

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No. 08-5561, Flynn v. People’s Choice, et al.

        The magistrate judge issued an order postponing a decision on damages until the district

court ruled on Wells Fargo’s motion to set aside the default judgment. The district court denied the

motion, and the magistrate judge issued a second order instructing Flynn to submit documents in

support of an award of damages. In response, Flynn filed a two-page memorandum requesting $42

million in damages. The memorandum did not have any attachments.

        Wells Fargo responded to Flynn’s memorandum, again arguing that Flynn had failed to

submit proof of any damages.

        The magistrate judge subsequently issued a report recommending that Flynn be awarded no

damages because Flynn had failed to document any damages. Flynn submitted objections to the

report, to which he attached numerous documents purporting to prove damages.

        The district court initially overlooked Flynn’s objections, adopted the magistrate judge’s

recommendation, and entered an order awarding no damages to Flynn. Upon review of Flynn’s

objections a few days later, the district court affirmed its original order and stated that the time had

passed for Flynn to prove his damages. It further noted that even upon review of the documents

submitted by Flynn, he was not entitled to damages. Flynn filed a motion for relief from judgment,

which the district court denied.

        In this timely appeal, Flynn argues that he proved damages against Wells Fargo in his

complaint and in his objections to the magistrate judge’s report. Flynn further argues that Wells

Fargo should not have been permitted to defend itself after entry of the default judgment. Flynn also

moved for the appointment of counsel, claiming that he had mental issues and attaching a document

showing that he had been diagnosed with paranoid schizophrenia. This court granted the motion,

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No. 08-5561, Flynn v. People’s Choice, et al.

and Flynn’s newly appointed counsel filed a supplemental brief arguing that the district court had

abused its discretion by denying an award of damages and by denying Flynn’s motion for relief from

judgment. Wells Fargo filed responsive briefs. People’s and Ridele have never entered appearances

in the district court or in this court.

                                                    II.

        Flynn argues that the district court ignored clear evidence of damages set forth in the record,

that the district court failed to construe the pleadings liberally, and that the district court should have

held a hearing on damages. None of these arguments has merit.

        We review a district court’s determination of damages pursuant to a default judgment for an

abuse of discretion. See Steele v. Voyale Corp., 88 F. App’x 916, 917 (6th Cir. 2004). “Abuse of

discretion is defined as a definite and firm conviction that the trial court committed a clear error of

judgment.” Burrell v. Henderson, 434 F.3d 826, 831 (6th Cir. 2006) (internal quotation marks and

citation omitted).

        “Where damages are unliquidated a default admits only defendant’s liability and the amount

of damages must be proved.” Antoine v. Atlas Turner, Inc., 66 F.3d 105, 110 (6th Cir. 1995)

(internal quotation marks omitted) (citing Kelley v. Carr, 567 F. Supp. 831, 841 (W.D. Mich. 1983)

(“A default judgment on well-pleaded allegations establishes only defendant’s liability; plaintiff must

still establish the extent of damages.”)). After winning default judgment, Flynn was directed to

submit “a Memorandum of Facts and Law and any documentation” that would help the court

determine an appropriate award of damages. Flynn submitted a memorandum alleging he had

suffered “extreme mental anguish, tremendous financial loss, his business, health and almost

                                                    4
No. 08-5561, Flynn v. People’s Choice, et al.

completely lost his wife to a massive heart attack and much more, too numerous to name.” He went

on to request $34.8 million dollars, which was allegedly calculated by using the $10 million damages

claim in his complaint compounded at a rate of 12% over 29 months.1                                 He provided no

documentation whatsoever to support his claim, and apparently believed that, because he won default

judgment, he did not need to do so, despite the plain wording of the magistrate judge’s order.

         Flynn had another chance to prove damages, but his second memorandum—though very

similar to it—was no more informative than his first. Flynn now claimed $42 million in damages,

allegedly calculated using the $10 million damages claim in his complaint compounded at a rate of

12% over 36 months.2 Once again, he submitted no documentation whatsoever to support his claim

of damages, despite the unambiguous wording of the magistrate judge’s order.

         In his objections to the magistrate judge’s report, Flynn finally submitted documentation.

The documentation comprises about 50 pages of receipts and records, including: (1) receipts for

numerous purchases made at Walmart and Lowe’s, which allegedly went towards home

improvement, but upon closer examination, include items such as mayonnaise, milk, and cigarettes;

(2) countless medical bills and records, including bills from a practice specializing in kidney

diseases, a record showing a bulging disc in the spine, and a bill from an infectious diseases

specialist; (3) a form listing every imaginable home furnishing, with checkmarks beside items that

were allegedly stolen or destroyed by Wells Fargo, with a dollar amount listed beside each item,

         1
        W e note that even using the 12% interest rate claimed by Flynn, it is unclear how $10 million can
compound to $34.8 million in 29 months. Flynn did not provide his calculations.

         2
          It is again unclear exactly how Flynn arrived at a figure of $42 million. Flynn claims the figure was
“calculated by professional (bank officers) money lenders, after the Plaintiff sought assistance in the calculations.”

                                                           5
No. 08-5561, Flynn v. People’s Choice, et al.

indicating that the following items were taken from the property: a $7,590 piano; a $4,975 lawn

mower; a $19,750 back hoe; a $14,575 horse trailer; a $15,800 camper; and a $21,395 ski boat. The

total estimated amount of lost personal property indicated on these forms, according to Flynn’s

counsel, is $224,070. Flynn also submitted forms in which he claims that “priceless” fruit trees were

cut down, a “priceless” cemetery was destroyed, and that the “priceless” “ambience” of the property

was destroyed. Finally, he submitted forms showing that the property foreclosed upon was worth

about $120,000 and that he paid $28,645.78 in closing costs.

         The submitted documentation fails to support a claim for damages. As to the Walmart and

Lowe’s receipts, he provides no evidence that any of the items bought were used at the property to

improve it. And as noted above, many of the items were perishable and/or consumable goods that

clearly were not used to improve the home. Accordingly, no damages could be awarded on that

basis.

         As to the medical expenses, he includes both his own and those of his wife, who is not even

a party to this case. He provides no evidence, nor does he even suggest, that the foreclosure of his

property caused the ailments leading to those medical expenses. Indeed, it does not take a medical

degree to know that a property foreclosure cannot cause a ruptured disc in the spine, an infectious

disease, or kidney failure. Accordingly, no damages could be awarded on that basis.

         As to the itemized list of home furnishings, Flynn provided no proof that he actually owned

anything in the list. Moreover, some of the items listed and the values associated with them are

simply unbelievable, and if Flynn wanted damages, for example, for a back hoe worth nearly $20,000

or a $21,395 ski boat, he needed to provide proof of his ownership of those items and of their value.

                                                  6
No. 08-5561, Flynn v. People’s Choice, et al.

Because Flynn provided no proof that he actually owned any of the items listed, the district court

could not award damages on that basis.

        As to the “ambience,” the destroyed trees, and the cemetery, Flynn simply described them

as “priceless,” and he failed to provide any evidence that anything was even destroyed. Accordingly,

no damages could be awarded on that basis.

        Although the evidence of the property value and the closing costs might be Flynn’s best

argument in favor of damages, these claims also fail. He provides no evidence whatsoever that he

had any equity in the property. Moreover, Flynn never actually provides any evidence that the

foreclosure caused any damages. In fact, Flynn admits that the loan was “in arrears.” Accordingly,

no damages could be awarded on that basis.

        In short, Flynn did not even provide a starting point from which the district court might have

been able to determine if he was entitled to any damages. Flynn’s counsel admits that the allegedly

documented damages total only $256,000 plus interest and wholly fails to explain the $42 million

figure claimed by Flynn. Counsel suggests Flynn is entitled to punitive damages, but provides no

basis upon which the difference between $42 million and $256,000 could be attributed solely to

punitive damages.

        In her dissent, our colleague agrees that “Flynn’s documents and claims were overinclusive”

and that “his multi-million-dollar damages figure was preposterous,” but goes on to suggest that the

district court was nevertheless “obligat[ed] to determine Flynn’s true damages.” But the burden of

proof for establishing damages was Flynn’s. It was not the district court’s burden to prove or

disprove whether Flynn owned any of the items for which he claimed damages, nor was it the district

                                                  7
No. 08-5561, Flynn v. People’s Choice, et al.

court’s duty to determine damages when Flynn had given it no credible point from which to start,

despite having multiple opportunities to do so. Indeed, the burden of establishing damages rested

squarely and solely on Flynn, and he failed to carry it. See Antoine, 66 F.3d at 110 (citing Kelley,

567 F. Supp. at 841 (“A default judgment on well-pleaded allegations establishes only defendant’s

liability; plaintiff must still establish the extent of damages.”))

         Because Flynn failed to establish any plausible damages and claimed an enormous figure

($42 million) unsupported by the documentation he provided, Flynn fails to provide any reason

whatsoever that the district court erred, much less the requisite “definite and firm conviction” that

it “committed a clear error of judgment.” See Burrell, 434 F.3d at 831. Therefore, the district court

did not abuse its discretion in denying damages.

         Finally, we briefly address Flynn’s sub-points. The district court did not abuse its discretion

by failing to liberally construe Flynn’s pro se pleadings or by failing to hold a hearing on damages.

Flynn’s pleadings were nearly incomprehensible, and his claim was based on the right to “be treated

equally.” The district court deciphered the pleadings, apparently found that they stated a claim upon

which relief could be granted,3 and gave Flynn two opportunities to specify and prove damages.

Accordingly, it is clear that the district court was sufficiently lenient with Flynn.

         Flynn never actually requested a hearing on damages, nor did he ever claim that—until his

supplemental brief was filed in this court—he was improperly denied such a hearing. Nevertheless,

based on what he submitted to the district court in an effort to prove damages (that is, absolutely

        3
          W ells Fargo did not appeal the entry of default judgment, so this court expresses no opinion as to whether
the pleadings stated a claim or supported a judgment of liability.

                                                          8
No. 08-5561, Flynn v. People’s Choice, et al.

nothing to the magistrate judge, and 55 pages of records (discussed above) to the district judge), it

is clear that the district court’s determination that a hearing was unnecessary was not an abuse of

discretion.

        Flynn’s pro se brief raises an argument not addressed by his counsel, namely, that the district

court erred by allowing Wells Fargo to respond to the issue of damages, notwithstanding the entry

of default judgment against Wells Fargo. Flynn is mistaken. See Antoine, 66 F.3d at 111 (“[E]ven

if [the defendant] is bound on the issue of liability, it still has the opportunity to respond to the issue

of damages.”).

        Accordingly, the district court’s denial of a damages award was not an abuse of discretion.

                                                   III.

        Flynn also claims the district court abused its discretion by denying his motion for relief from

judgment under Fed. R. Civ. P. 60(b)(1). Rule 60(b)(1) provides that if a party shows “mistake,

inadvertence, surprise, or excusable neglect,” the court may relieve it from a final judgment. We

review the denial of a motion for relief from judgment for abuse of discretion. Legg v. Chopra, 286

F.3d 286, 294 (6th Cir. 2002).

        Flynn argues that “based on his medical condition [presumably, paranoid schizophrenia] and

the side effects from prescription drugs, his mental state was such that he did not understand the

rules or court orders.” In determining whether relief is appropriate under Rule 60(b)(1), courts

consider three factors: “(1) culpability—that is, whether the neglect was excusable; (2) any prejudice

to the opposing party; and (3) whether the party holds a meritorious underlying claim or defense.

A party seeking relief must first demonstrate a lack of culpability before the court examines the

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No. 08-5561, Flynn v. People’s Choice, et al.

remaining two factors.” Gumble v. Waterford Twp., 171 F. App’x 502, 506 (6th Cir. 2006) (citation

omitted). Here, Flynn fails on the first prong. He did not submit any proof that any medical ailments

or prescription medications affected his mental capacity.4 On that basis alone, the district court could

have reasonably denied the motion. But even if Flynn were able to show that his neglect was

excusable, it would not be an abuse of discretion to deny relief on the basis of the third prong

because Flynn has failed to show that he holds a meritorious underlying claim.

        Accordingly, the district court did not abuse its discretion in denying Flynn’s 60(b) motion.

                                                       IV.

        For the foregoing reasons, we AFFIRM the judgment of the district court.

        4
         He did, however, submit evidence to this court, when requesting counsel, that he suffers from paranoid
schizophrenia. The district court did not have that information when ruling on Flynn’s 60(b) motion.

                                                        10
No. 08-5561, Flynn v. People’s Choice, et al.

        HELENE N. WHITE, Circuit Judge (dissenting). Although this is a close case, I

respectfully dissent from my colleagues’ conclusion that the district court did not abuse its discretion

in denying Flynn damages based on the default judgment he obtained against Wells Fargo.

        As a pro se litigant, Flynn was entitled to liberal construction and active interpretation of his

pleadings. See Franklin v. Rose, 765 F.2d 82, 85 (6th Cir. 1985). The magistrate judge’s first order

to submit evidence of damages directed Flynn to provide the court with “any and all documentation,

including affidavits and other sworn statements” that he wanted the court to consider in assessing

his damages. Flynn’s response to this order restated the requests for relief and damages listed in his

complaint and provided no documentary proof of the claimed damages. It should have been evident

to the court from Flynn’s response that he did not understand what was required of him. The

magistrate judge’s second order to submit proof of damages provided no further instruction to Flynn.

The order merely directed that Flynn submit “any documents, including affidavits, that he want[ed]

the court to consider in assessing damages.” Again, Flynn responded by listing his requested

damages but included no documentary evidence in support. After receiving a second bare response

from Flynn, it should have been even more apparent to the court that Flynn did not understand what

was requested of him.

        Upon receiving the magistrate judge’s report and recommendation, Flynn realized that he had

not provided what the court required. In his objections to the report and recommendation, Flynn

offered his apologies to the court for failing to properly comply with the court’s orders and explained

that he had misinterpreted the Federal Rules of Civil Procedure to mean that the relief requested in

the complaint would be automatically awarded to him by virtue of the default judgment. Flynn

                                                   11
No. 08-5561, Flynn v. People’s Choice, et al.

attached to his objections fifty-five pages of what he believed to be documentary proof of his

damages, including receipts for household goods and an itemized list of furniture and fixtures lost

in the foreclosure with estimated values.1

        It is unclear from the district court’s orders adopting the magistrate judge’s recommendation

to deny damages and denying the motion for reconsideration to what extent the court reviewed the

attachments accompanying Flynn’s objections. Bearing in mind Flynn’s status as a pro se litigant

and his attempts to explain his reasons for failing to satisfactorily respond to the magistrate judge’s

orders, the district court should have evaluated the evidence submitted in the attachments in

conjunction with the allegations and exhibits in Flynn’s complaint. These materials provided a

starting point from which the court should have assessed Flynn’s damages.

        Flynn provided evidence of the nature and value of personal property he alleged was lost in

the foreclosure. Flynn submitted copies of store receipts for the purchase of items for which he

could legitimately have claimed damages, including construction supplies, tools, kitchen

implements, furnishings, and electronics. He also submitted an itemized list of property that he

alleged had been in or around the house, including furniture, tools, equipment, and vehicles, along

with estimated values. That list included the notation that “[t]he prices shown are from the best of

my memory under penalty of perjury,” followed by Flynn’s wife’s name. Although not proof certain

of Flynn’s damages, these documents provided evidence that the district court should have

        1
       In his motion for relief from judgment, Flynn again explained to the court that he had
misunderstood the procedure for proving damages and directed the court’s attention to the
attachments to his objections.

                                                  12
No. 08-5561, Flynn v. People’s Choice, et al.

considered in making a determination of damages. The majority’s observation that Flynn’s receipts

included items, such as food, that could not have been used to improve the house indicates that the

receipts were overinclusive; it does not undermine the legitimacy of other items listed on the

receipts. The additional observation that the itemized list of property provided no evidence of

Flynn’s ownership of anything on the list is similarly problematic. The list did not disprove

ownership either and, indeed, the district court provided no explanation why ownership could not

be inferred from presence of the items in the house owned by Flynn and by Flynn’s wife’s attestation

as to her personal memory of the prices of each item. Proof of ownership could have been provided

by testimony or by further evidentiary proffers during a hearing. The district court could have then

made an evaluation of the evidence, or Wells Fargo could have conducted cross-examination or

introduced its own evidence in rebuttal.

        Further, Flynn’s complaint and attachments provided statements of his ownership in the

property and its value, as well as copies of checks for a down payment and mortgage payment. It

is well established that the owner of real property is competent to attest to the value of his or her

property. See State ex rel. Smith v. Livingston Limestone Co., Inc., 547 S.W.2d 942, 943 (Tenn.

1977) (“In most states, and in Tennessee, the owner of real property is held to be qualified, by reason

of his ownership alone, to give an opinion in evidence of the value of his land.”); Airline Const. Inc.

v. Barr, 807 S.W.2d 247, 254-55 (Tenn. Ct. App. 1990); see also 7 Fed. Proc., L. Ed. § 14:81 (“The

opinion testimony of a landowner as to the value of the land is admissible without further

qualification, and in testifying as to the value of the property the owner is entitled to the privileges

                                                  13
No. 08-5561, Flynn v. People’s Choice, et al.

of a testifying expert. The landowner's testimony can be tested through cross-examination or

independent evidence refuting the owner's estimate . . . .”).

        That Flynn’s documents and claims were overinclusive and his multi-million-dollar damages

figure was preposterous did not relieve the court of the obligation to determine Flynn’s true damages.

Accordingly, the district court should have scheduled a hearing to determine Flynn’s damages with

more certainty and to provide Wells Fargo the opportunity to refute Flynn’s claims with evidence

or through cross-examination.

        Certainly, the district court has wide discretion under Federal Rule of Civil Procedure 55(b)

to decide whether a hearing is necessary to determine damages pursuant to a default judgment. See

Vesilgaj v. Peterson, 331 F. App’x 351, 354-55 (6th Cir. 2009) (unpublished); Fustok v.

ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989). However, the court, in viewing the

totality of the circumstances, should have been more tolerant of Flynn’s attempts to comply with its

orders. Thus, I would remand the case to the district court for further consideration of the issue of

Flynn’s damages, as well as to address Wells Fargo’s arguments raising Frow v. De La Vega, 82

U.S. 552 (1872), in the first instance.

                                                 14