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DiMarco Constructors, LLC v. Sinacola

January 4, 2006

DIMARCO CONSTRUCTORS, LLC PLAINTIFF,
v.
SINACOLA, INC., DEFENDANT.



The opinion of the court was delivered by: David G. Larimer United States District Judge

DECISION AND ORDER

INTRODUCTION

Plaintiff DiMarco Constructors, LLC ("DiMarco") commenced this diversity action against Sinacola, Inc. pursuant to 28 U.S.C. §§ 2201 and 2202 and Fed. R. Civ. P. 57 seeking declaratory relief regarding the parties' rights and obligations in connection with a construction subcontract agreement. (Dkt. #1). Sinacola has been properly served with process*fn1 but has failed to appear or to answer the complaint. On August 11, 2005, the Clerk of the Court entered the default of Sinacola. (Dkt. #4).

DiMarco now moves for default judgment pursuant to Fed. R. Civ. P. 55. (Dkt. #5). DiMarco seeks a declaratory judgment and a judicial determination of the balance due its subcontractor, Sinacola.

FACTUAL ALLEGATIONS IN THE COMPLAINT

According to the complaint, in May 2003, DiMarco entered into a contract with Wal-Mart Stores, Inc. for the construction of a Wal-Mart Superstore in Adrian, Michigan. On May 9, 2003, DiMarco entered into a Subcontract Agreement ("the Agreement") with Sinacola to perform certain site and demolition work in connection with the project. The original contract price was $871,000. The parties agreed to certain change orders and extras and, therefore, the total amount due on the contract was $902,304.50. To date, DiMarco has paid Sinacola $754,713.55. The parties apparently agree that DiMarco owes Sinacola additional money on the contract. There is great disagreement, though, as to what that amount should be.

DiMarco alleges in the complaint that Sinacola has taken the position that DiMarco owes a balance of $388,673.04. DiMarco asserts, however, that $241,755.45 of the $388,673.04 is for work that has been disapproved by DiMarco and/or Wal-Mart as work that was covered by the parties' original Agreement.

DiMarco also claims that pursuant to the Agreement, it is entitled to assert certain so-called "backcharges" as an off-set against any balance due Sinacola. These backcharges are occasioned because of Sinacola's alleged failure to pay its own subcontractors and suppliers, thus subjecting DiMarco to liability. DiMarco claims that by virtue of these defenses and off-sets, it is only obligated to pay Sinacola $45,916.38.

The complaint requests declaratory relief from the Court that: (1) the Agreement is enforceable; (2) that DiMarco is entitled to backcharge Sinacola for payments made by DiMarco to unpaid subcontractors and suppliers; and (3) that Sinacola is not entitled to additional compensation for claimed "extra" work that is within Sinacola's scope of work and which has not otherwise been approved or authorized by DiMarco or Wal-Mart.

MOTION FOR DEFAULT JUDGMENT

DiMarco now moves for default judgment and judicial determination that it is obligated to pay Sinacola "no more than $45,916.38" under the Agreement. (Dkt. #5, Peartree Aff., ¶16). In the alternative, DiMarco requests a hearing to ascertain the parties' respective rights and obligations, and in particular, the balance due to Sinacola.

After examining DiMarco's application and the evidence submitted, I find that DiMarco has failed to establish its entitlement to default judgment in the manner or amount requested. A hearing on damages is necessary at which DiMarco may present further proof regarding the relief requested.

Fed. R. Civ. P. 55(b) provides in pertinent part that:

(b) Judgment. Judgment by default may be entered as follows:

(2) By the Court. In all other cases the party entitled to a judgment by default shall apply to the court therefor; * * * 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.

The Clerk has entered Sinacola's default and DiMarco has shown that it is entitled to judgment against Sinacola based on its failure to respond to the allegations asserted in the complaint. However, the Court cannot take at face value that DiMarco is entitled to the judgment that it seeks. Rather, "judgment against a defaulting party should be granted only after careful examination of the moving party's claim by the district court. . . . Indeed, a defendant's default does not in itself warrant a court in entering a default judgment because there must be a sufficient basis in the pleadings for the judgment entered." Bianco v. Seaway Indus. Services, Inc., 2004 WL 912916, *1 (W.D.N.Y. Apr. 01, 2004) (internal citations and quotations omitted); see also Enron Oil Corp. v. Masonori Diakuhara, 10 F.3d 90, 95-96 (2d Cir.1993). The Court, therefore, must evaluate the merits of the underlying claim and the relief sought. See Wagstaff-el v. Carlton Press Co., 913 F.2d 56, 57 (2d Cir.1990). Furthermore, the Second Circuit cautions that "defaults are generally disfavored and are reserved for rare occasions," and when there is doubt as to the propriety of default relief, "the doubt should be resolved in favor of the defaulting party." Enron Oil Corp., 10 F.3d at 96.

Based on the evidence DiMarco presented, I do not believe that default judgment in the manner requested by DiMarco should be entered. There are too many issues of fact regarding the alleged backcharges, and the record is not altogether clear that DiMarco is entitled to all of the requested relief under Section 18 of the Agreement. See Bianco, 2004 WL 912916, at *2 (denying default judgment where plaintiffs did not present sufficient evidence that they were entitled to certain consequential damages and attorneys fees under the enforcement provisions of a collective bargaining agreement that allowed them to recover delinquent contributions to various employee benefit funds); see also Van Limburg Stirum v. Whalen, 1993 WL 241464, at *4 (N.D.N.Y.1993)("A 'default is not treated ...


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