United States District Court, N.D. Indiana, South Bend Division
MICHAEL MANGANARO; ELIZABETH ANN MANGANARO; and TEN SIXTEEN, LLC, Plaintiffs,
TIMOTHY J. BAILEY; and CARBELLA HOMES, LLC, Defendants.
OPINION AND ORDER
R. Leichty Judge
filed this action against Defendants Timothy Bailey and
Carbella Homes, LLC for fraudulently inducing Plaintiffs to
make investments to Mr. Bailey and Carbella Homes. ECF 1.
Carbella Homes failed to answer, even after the court warned
Carbella Homes of its need to answer. ECF 22. An entry of
default has been made under Rule 55(a) (ECF 30), and
Plaintiffs now bring a motion for default judgment against
Carbella Homes under Rule 55(b)(2) (ECF 33).
court has discretion in granting a motion for default
judgment. See O'Brien v. R.J. O'Brien &
Assocs., Inc., 998 F.2d 1394, 1398 (7th Cir. 1993). A
default judgment is justified when “the defaulting
party has exhibited a willful refusal to litigate the case
properly, ” as shown by “a party's continuing
disregard for the litigation and for the procedures of the
court” and a “willful choice not to exercise even
a minimal level of diligence.” Davis v.
Hutchins, 321 F.3d 641, 646 (7th Cir. 2003). Generally,
all well-pleaded factual allegations of the complaint will be
taken as true and entitle plaintiff to relief. See Wehrs
v. Wells, 688 F.3d 886, 892 (7th Cir. 2012). Beyond the
well-pleaded allegations, the court may also consider several
factors when determining whether to grant a default judgment,
including: (1) the amount of money requested; (2) delays
resulting in prejudice to the plaintiff; (3) material issues
of fact or substantial public importance; and (4) whether the
default is strictly technical. Cameron v. Myers, 569
F.Supp.2d 762, 764 (N.D. Ind. 2008).
determination of liability does not end the default judgment
analysis. Once liability has been determined, the damages
alleged by the plaintiff must still be proven. See
Wehrs, 688 F.3d at 892. An evidentiary hearing is
required to determine damages unless the plaintiff is seeking
a reasonably certain amount that can be ascertained through
documentary evidence or detailed affidavits. Domanus v.
Lewicki, 742 F.3d 290, 304 (7th Cir. 2014) (citing
Dundee Cement Co. v. Howard Pipe & Concrete Prods.,
Inc., 722 F.2d 1319, 1322 (7th Cir. 1983)).
all well-pleaded factual allegations in the complaint as
true, Plaintiffs have established that Carbella Home's
use of their funds was fraudulently induced. Plaintiffs
Michael and Elizabeth Ann Manganaro met Mr. Bailey at a
seminar in Chicago in Spring 2018 for people interested in
acquiring and re-selling distressed real properties. ECF 1,
¶ 7. The Manganaros did not know Mr. Bailey before this
time, nor were they knowledgeable in real estate investing.
Id. ¶ 7-8. Mr. Bailey befriended the Manganaros
and induced them to invest money with him instead of engaging
in “home flipping” themselves. Id.
¶ 10. The Manganaros formed Ten Sixteen, LLC as a
vehicle through which to invest in Mr. Bailey's business,
while Mr. Bailey simultaneously formed Carbella Homes.
Id. For each investment, the Manganaros sent money
by wire transfer to Carbella Homes. Id. ¶ 12.
The funds were advanced in the name of Ten Sixteen but were
the personal property of the Manganaros. Id.
each investment, Carbella provided Plaintiffs with a document
entitled “Promissory Note.” Id. ¶
13. Carbella Homes acquired or improved real estate
properties with these investments with the promise to pay the
Manganaros a specified amount back from any future business
transactions with the properties. Id. In total,
there were nine promissory notes that Carbella Homes sent the
Manganaros, each dealing with a separate property.
Id. ¶ 14. Plaintiffs allege that Carbella Homes
committed securities fraud by failing to abide by their
promise to engage in business transactions involving the
properties. Id. ¶ 22. Additionally, Carbella
Homes failed to make various material disclosures to
Plaintiffs regarding Mr. Bailey's lack of experience in
home flipping and his criminal background. Id.
Plaintiffs seek return of their investments in Carbella
Homes, totaling $1, 116, 491.44. ECF 33, ¶ 4. Plaintiffs
also ask that the court divest Carbella Homes of their title
and interest in the nine properties they acquired with the
Manganaro's money. ECF 33, ¶ 8. Michael Sanganaro
has filed an affidavit supporting all claims. ECF 33, Ex. A.
have met their evidentiary burden for damages. Michael
Manganaro's affidavit lists the unpaid promissory notes
and accumulated properties of Carbella Homes. ECF 33, Ex. A.
Plaintiffs also provided documentation of the promissory
notes. ECF 1, Ex. A. The court is satisfied that this
evidence is sufficient to show the amount requested is
reasonably certain. The collective evidence supports
Plaintiffs' demand for $1, 116, 491.44. ECF 33, ¶ 4,
said, the court GRANTS IN PART the motion for default
judgment against Carbella Homes (ECF 33) and DIRECTS the
clerk to enter judgment in Plaintiffs' favor and against
Carbella Homes in the amount of $1, 116, 491.44, plus the
costs of this action, with post-judgment interest to accrue
by law. While Plaintiffs also ask the court to divest
Carbella Homes of title to any of the properties acquired or
improved through Plaintiffs' investments, the court
declines to do so here. Plaintiffs have not cited any
authority for this court to enter such a judgment, and to do
so here could potentially lead to ...