Homeowners get default judgment vs. contractor

Where homeowners sued a general contractor that failed to construct a house or return a $40,000 deposit, and the general contractor failed to respond to the lawsuit, default judgment was entered on the homeowners’ breach of contract and conversion claims.

Background

On April 24, 2022, Harcharanjit Singh Bhutta and Gurpreet Bhutta sued DRM Construction Corporation and Gurpreet Singh for breach of contract, conversion, fraud and a violation of the Virginia Consumer Protection Act, or VCPA. On Dec. 15, 2022, the clerk entered default against the defendants. On Jan. 18, 2023, the plaintiffs filed a motion for entry of default judgment.

Procedural requirements

The court has subject matter jurisdiction over the controversy on the basis of diversity of citizenship; the court has personal jurisdiction over the defendants based on defendants’ minimum contacts arising out of their business in the forum and venue is proper because a substantial part of the events giving rise to the claim occurred in the forum. Additionally, service of process was properly effected in this case.

Breach of contract

Plaintiffs have properly alleged that DRM owed plaintiffs an obligation to construct the residential dwelling in the manner described in the DRM contract. Plaintiffs have adequately demonstrated that DRM breached that obligation by both failing to construct the residence and failing to return the $40,000 deposit that plaintiffs made in anticipation of the construction.

Further, plaintiffs have properly shown that DRM’s breach of its contractual obligation harmed plaintiffs because DRM’s failure to follow through with the construction resulted in plaintiffs hiring a different construction company to construct their residence at a more expensive price. Additionally, plaintiffs lost their $40,000 deposit.

Conversion

Plaintiffs deposited $40,000 with defendants in anticipation of the construction of their residence. Upon realizing that defendants would not construct the residence, plaintiffs demanded defendants return the deposit several times.

Defendants even acknowledged that plaintiffs were entitled to return of the deposit, yet defendants still refused to return the deposit. Therefore, plaintiffs have properly alleged their right to possess the $40,000 deposit and have demonstrated defendant’s wrongful exercise of control over the deposit, depriving plaintiffs from possessing it.

Fraud

Plaintiffs assert that “Defendants never intended to perform the contract for the construction of Plaintiffs’ residence.” This bare recitation of the legal standard is insufficient factual basis to sustain a fraud claim at default judgment.

The only indication of defendants’ lack of intent to perform is that after they entered into the contract, defendants never engaged in “any of the steps normally associated with a general contractor’s preparation for performance of a residential construction contract, including seeking quotations from subcontractors and materials suppliers”; instead, defendants “made numerous excuses for [their] failure to perform.”

Plaintiffs present no factual allegations from which the court can conclude that defendants possessed an intent not to perform the contract prior to the execution of the DRM contract. The motion for default judgment as to Count Three will be denied without prejudice. Plaintiffs may renew the motion as to this count in the event that they can articulate an actual fraud claim.

VCPA

Plaintiffs failed to articulate how defendants fall within the definition of a “supplier” and how the execution of a construction contract is a “consumer transaction” under the VCPA. Additionally, plaintiffs have not alleged facts to show how defendants’ actions were “willful” to justify the treble damages award they seek.

More importantly, plaintiffs have failed to allege how the defendants’ non-performance of a contract employed the use of “deception, fraud, false pretense, false promise, or misrepresentation.” The motion for default judgment as to Count Four of the complaint is denied without prejudice. Plaintiffs may renew the motion as to this count in the event they amend their pleadings to properly articulate a breach of the VCPA.

Fees and damages

Since plaintiffs have failed to allege sufficient facts to support their VCPA claim and failed to produce any contract that authorized attorney’s fees, plaintiffs are not entitled to an award of attorney’s fees and costs at this stage. Finally, given the rulings above, plaintiffs can, if they so choose, re-plead additional facts in support of their allegations of actual fraud and a violation of the VCPA. As such, the court will withhold a damages calculation at this time.

Plaintiffs’ motion for entry of default judgment granted in part, denied in part.

Bhutta v. DRM Construction Corp., Case No. 3:22-cv-288, April 19, 2023. EDVA at Richmond (Young). VLW 023-3-215. 13 pp.