Reisinger v. District Builders of Southern Maryland, LLC

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
JOSEPH C. REISINGER,
Plaintiff,
v. Civil Action No. 19-1358 (JEB)
DISTRICT BUILDERS OF SOUTHERN
MARYLAND, LLC, et al.,
Defendants.
MEMORANDUM OPINION
On May 10, 2019, Plaintiff Joseph C. Reisinger filed a Complaint against Defendants
District Builders of Southern Maryland, LLC and Samuel B. Purll, Jr. for improperly taking
money on a canceled construction project. When Defendants failed to appear, the Clerk of the
Court entered default, and Plaintiff now moves for a default judgment of $164,927.52. The
Court will grant Plaintiff’s Motion in part and enter judgment in the amount of $47,463.97.
I. Background
Reisinger invests in real property to take advantage of Internal Revenue Code § 1031
exchanges. See ECF No. 12 (Pl. Mot. Default J.), Exh. 2 (Aff. of Joseph C. Reisinger), ¶¶ 3–4.
This section permits individuals to defer paying taxes on the realized gain from the sale of real
property held for investment purposes, as long as they timely reinvest the proceeds of the sale
into a similar property. Id., ¶ 4; 26 U.S.C. § 1031. Plaintiff’s daughter, Lauren Serrano, lives in
the District of Columbia and manages the properties. Id., ¶ 6. At the time in question, Serrano
also had power of attorney to act on her father’s behalf for matters related to the § 1031
exchanges. Id., ¶ 7.
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In March of 2017, Reisinger entered into negotiations to buy real property located at
1662 R Street in Southeast Washington, D.C., which he planned to use for investment through a
§ 1031 exchange. Id., ¶ 9. Plaintiff then entered into a contract with Defendant District
Builders. Id., ¶ 10. The contract was prepared by the owner of District Builders, Samuel Purll,
and was executed on March 17. Id. It stated that District Builders would renovate the R Street
Property; in exchange, Plaintiff would pay a deposit of $47,463.93 and then a total price of
$189,855.70 once the renovations were completed. See Pl. Mot. Default J. at 3. The contract
also contained a provision that stated, “Customer has seventy-two hours (72) to rescind this
contract from signing.” Pl. Mot. Default J., Exh. 4 (Contract), ¶ 4.7.
Shortly after executing the contract, Plaintiff discovered that he would be unable to
purchase the R Street Property, and he subsequently notified Purll within the 72-hour window
that the contract would be rescinded. See Reisinger Aff., ¶ 12. Although Plaintiff had not paid
the deposit to District Builders, Purll had already purchased the materials needed to conduct the
renovations on the property. See Pl. Mot. Default J. at 4. Despite rescinding the contract for R
Street, Reisinger still wanted to hire Purll and District Builders to renovate another property
located at 1300 U Street, S.E. Id. Purll assured Serrano that the same materials purchased to
renovate R Street could be used at the U Street property. Id.
On March 30, Purll called Serrano and demanded that she pay $28,000 for the materials
purchased for the renovations of R Street. See Pl. Mot. Default J., Exh. 3 (Aff. of Lauren
Serrano), ¶ 7. As Serrano was in labor during their call, she advised Purll to contact her father to
discuss the payment. Id. Purll immediately called Reisinger and demanded the $28,000
payment, which he claimed that Serrano had authorized. See Reisinger Aff., ¶ 17. Plaintiff then
permitted Purll to withdraw that sum from his “qualified intermediary” account held by Old
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Republic Exchange. Id. As prescribed by the IRC and Treasury regulations, the proceeds of
such renovations must be held by a “qualified intermediary,” which is only authorized to make
payments on the taxpayer’s behalf in connection with a property to be acquired as part of the
exchange. Id., ¶¶ 18–20. Old Republic, without knowledge that the contract between Plaintiff
and District Builders had been rescinded, made the funds available to Purll. Id., ¶ 21. Purll,
however, withdrew the full $47,463.97, rather than the $28,000 he had discussed with Reisinger.
Id., ¶ 22.
When Plaintiff realized that this had occurred, he demanded that Purll and District
Builders return the money. They refused. See Pl. Mot. Default J. at 5. Purll later responded that
the money had been spent on materials for R Street, and that Reisinger would need to pay an
additional deposit for the work to be done on U Street. Id. Defendants, however, never
performed work on R Street, nor did they submit any receipts, invoices, or order forms showing
that materials were purchased for those renovations. See Pl. Mot. Default J., Exh. 4 (Aff. of
Terry L. Satterfield), ¶¶ 3–4. In any event, Reisinger had not authorized any work given that he
never purchased the property. See Pl. Mot. Default J. at 5-6
On May 10, 2019, Reisinger filed a Complaint in this Court against Defendants alleging
conversion and fraud. See ECF No. 1. He sought economic, non-economic, and punitive
damages. Id., ¶¶ 26-43. Plaintiff achieved service on both Defendants on September 7, 2019.
See ECF No. 7 (Service Affidavit). Twenty-one days passed, and Defendants failed to plead or
otherwise defend, as required by the Federal Rules of Civil Procedure. See Fed. R. Civ. Proc.
12(a)(1)(A). On October 8, Plaintiff sought default against Defendants, which the Clerk entered
on October 9. Reisinger next moved for default judgment. See Pl. Mot. Default J. at 1. After
the Court set a hearing regarding the extent of the non-economic damages sought, Plaintiff filed
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a Notice, see ECF No. 15, withdrawing such request. The Court thus canceled the hearing and
now issues its Opinion.
II. Legal Standard
Obtaining a “[d]efault judgment is a two-step procedure.” Ventura v. L.A. Howard
Constr. Co., 134 F. Supp. 3d 99, 102 (D.D.C. 2015) (citing Lanny J. Davis & Assocs., LLC v.
Republic of Equatorial Guinea, 962 F. Supp. 2d 152, 161 (D.D.C. 2013)). A plaintiff must first
request that the Clerk of the Court enter default against a party who has “failed to plead or
otherwise defend” an action. Id. at 102-03 (quoting Fed. R. Civ. P. 55(a)). When the Clerk
enters default, it establishes the defaulting party’s liability for the well-pleaded allegations in the
complaint. Id. at 103. The plaintiff must then move the court for a default judgment. See Fed.
R. Civ. P. 55(b).
Determining if a default judgment is appropriate is “committed to the sound discretion of
the trial court.” Jackson v. Beech, 636 F.2d 831, 835 (D.C. Cir. 1980). When a defendant is
unresponsive, and his default is clearly willful, as shown by his failure to respond to the
summons and complaint, the entry of default, or the motion for default judgment, then default
judgment may be entered. Hanley-Wood LLC v. Hanley Wood LLC, 783 F. Supp. 2d 147, 150
(D.D.C. 2011). A reviewing district court, however, may still deny an application for default
judgment if the allegations of the complaint are legally insufficient to articulate a valid claim.
Saint-Jean v. D.C. Pub. Sch. Div. of Transp., 815 F. Supp. 2d 1, 4 (D.D.C. 2011).
To guarantee that there is an adequate basis for damages, a plaintiff “must prove his
entitlement to the relief requested using detailed affidavits or documentary evidence on which
the court may rely.” Bricklayers & Trowel Trades Int’l Pension Fund v. Miami Valley Masonry,
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Inc., 288 F. Supp. 3d 257, 259 (D.D.C. 2018) (quoting Ventura, 134 F. Supp. 3d at 103). A
district court may conduct hearings to determine the amount of damages to award. Id.
III. Analysis
Reisinger asserts that Defendants committed the intentional torts of conversion and
intentional misrepresentation. See Pl. Mot. Default J. at 7. As relief, he first requests that the
Court award him $47,463.97 in economic damages for the total amount Defendants withdrew
from his Old Republic account. Id. at 9. (As the number of cents changes in different pleadings,
the Court will apply the figure used most often — viz., $47,463.97.) He also asserts that because
Defendants committed fraud, he is entitled to $82,463.79 in punitive damages. Id. at 10–11. The
Court will look at each category separately.
A. Economic Damages
As a threshold matter, Plaintiff maintains that Defendants’ actions satisfy the elements of
conversion and fraudulent misrepresentation. See Pl. Mot. Default J. at 9. This is because they
improperly took $47,463.97 of his money. Id. In the District of Columbia, conversion is an
unlawful exercise of ownership, dominion, and control over the property of another and the
denial or repudiation of his right to such property. Cong. Hunger Ctr. v. Gurey, 308 F. Supp. 3d
223, 228–29 (D.D.C. 2018) (quoting Dukore v. Dist. of Columbia, 970 F. Supp. 2d 23, 34
(D.D.C. 2013)). Similarly, the elements of fraudulent misrepresentation are “(1) a false
representation or willful omission of a material fact; (2) knowledge of the falsity; (3) an intention
to induce reliance; and (4) action taken in reliance on the representation.” Howard v. Riggs Nat’l
Bank, 432 A.2d 701, 706 (D.C. 1981).
As stated in Reisinger’s affidavit, on March 30, 2017, Purll called him and not only
improperly demanded $28,000 but also intentionally mispresented his previous conversation
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with Serrano. See Reisinger Aff., ¶ 17. Defendants then withdrew the $28,000 they had
fraudulently induced Plaintiff into agreeing to, as well as an additional $19,463.97, from his Old
Republic account. Id., ¶ 22. This Court, consequently, will award Plaintiff $47,463.97 in
economic damages.
B. Punitive Damages
Plaintiff also believes that he is entitled to recover punitive damages for Defendants’
fraudulent misrepresentation. He asserts that “[u]nder D.C. law, punitive damages can be
awarded if the defendant’s actions are accompanied by ‘fraud, ill will, reckless, wantonness,
oppressiveness, willful disregard of the plaintiff’s rights, or other circumstances tending to
aggravate the injury.’” Pl. Mot. Default J. at 10 (citing Remeikis v. Boss & Phelps, Inc., 419
A.2d 986, 992 (D.C. 1980)). The standard that Plaintiff cites here, however, is not complete.
In the District of Columbia, to recover punitive damages for intentional
misrepresentation, there is a more stringent standard, and a plaintiff is required to show
aggravating circumstances beyond mere fraud. See Essroc Cement Corp. v. CTI/D.C., Inc., 740
F. Supp. 2d 131, 147 (D.D.C. 2010) (citing BWX Elecs. Inc. v. Control Data Corp., 929 F.2d
707, 713 (D.C. Cir. 1991)). Fraud by itself is insufficient to yield an award of punitive damages.
Id.; see Dist. Cablevision L.P. v. Bassin, 828 A.2d 714, 725–26 (D.C. 2003) (“[I]n the absence of
‘gross fraud’ or comparable wrongdoing, proof of even intentional misrepresentation may not
suffice to justify punitive damages.”).
In this case, Reisinger has shown that Defendants intentionally misrepresented their
previous phone conversation with Serrano and then fraudulently took out $47,463.97 from his
Old Republic account. See Reisinger Aff., ¶ 22. What Plaintiff has failed to do, however, is to
show that Defendants’ actions rise to the level of “gross fraud” or comparable wrongdoing to
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sufficiently justify awarding punitive damages. The Court will thus deny this category of
damages.
IV. Conclusion
The Court accordingly, will grant Plaintiff’s Motion for Default Judgment in part and
award him $47,463.97. A contemporaneous Order so stating will issue this day.
/s/ James E. Boasberg
JAMES E. BOASBERG
United States District Judge
Date: March 12, 2020
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