Diaz Vicente v. Obenauer, Civ. A. No. 89-0520-A.

CourtUnited States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
Writing for the CourtELLIS
Citation736 F. Supp. 679
PartiesGonzalo DIAZ VICENTE, et al., Plaintiffs, v. Davison OBENAUER and S. Davison Obenauer, Defendants.
Docket NumberCiv. A. No. 89-0520-A.
Decision Date25 April 1990

736 F. Supp. 679

Gonzalo DIAZ VICENTE, et al., Plaintiffs,
v.
Davison OBENAUER and S. Davison Obenauer, Defendants.

Civ. A. No. 89-0520-A.

United States District Court, E.D. Virginia, Alexandria Division.

April 25, 1990.


736 F. Supp. 680
COPYRIGHT MATERIAL OMITTED
736 F. Supp. 681
John Thorpe Richards, Jr. and Andrew N. Petrakes, Dunnells Duvall Bennett & Porter, Washington, D.C., for plaintiffs

Jonathan C. Thacher and Todd D. Bunn, Thacher, Swiger & Day, Fairfax, Va., for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

ELLIS, District Judge.

This matter came before the Court on October 18 and 19, 1989 for a bench trial on the merits. Pursuant to a post-trial briefing schedule, the parties submitted Proposed Findings of Fact and Conclusions of Law. The matter is now ripe for disposition and the Court sets forth here its Findings of Fact and Conclusions of Law, pursuant to Rule 52(a), Fed.R.Civ.P.

Jurisdiction and Venue

The Court, pursuant to 28 U.S.C. § 1331 has subject matter jurisdiction over Count 14 of the Second Amended Complaint ("Complaint") as that claim arises under the laws of the United States. See 15 U.S.C. § 78j(b); 17 C.F.R. § 204.10b-5. Jurisdiction exists over the remaining state claims (Counts 1-13, 15-21) by virtue of the doctrine of pendent jurisdiction. See United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). The Court also has jurisdiction over the subject matter of the state claims pursuant to 28 U.S.C. § 1332(a), as the parties are of diverse citizenship and the amount in controversy exceeds the sum of ten thousand (10,000) dollars exclusive of interest and costs.1

Venue is proper in this Court under 28 U.S.C. § 1391(c) because the claims arose in the Eastern District of Virginia.

Parties

Defendant Davison Obenauer is a citizen of California. During the period of time relevant to the causes of action alleged in the Complaint, Davison Obenauer resided and conducted business in the Commonwealth of Virginia. S. Davison Obenauer is the son of Davison Obenauer and a citizen of Virginia. He currently resides in Burke, Virginia.

Plaintiffs Gonzalo Diaz Vicente ("Gonzalo Diaz"), Gloria M. De Diaz, Alberto Mondria, Jorge Simon, Gonzalo Diaz Mondria, Salvador Diaz, Manuel Vidal, Luis Diaz, Francisco Mondria, Hermelinda V. De Mondria, Margarita Reynoso, Begona Suarez, Esteban Alvarez, Ma. Luisa Ruiz De Alvarez, Jose Antonio Diaz, Alejandro Ogarrio, and Maria Luisa Vicente de Diaz2, are citizens and residents of Mexico.

Overview and Proceedings to Date

This multi-count breach of contract, fraud and securities fraud action grows out of plaintiffs' investments in a real estate development project in Chesapeake, Virginia, known as Las Gaviotas-Shangri La ("Las Gaviotas"). Davison Obenauer and his immediate family, including his son, S. Davison Obenauer, managed the development of Las Gaviotas through the Virginia

736 F. Supp. 682
International Development Corporation ("VIDCO") a Virginia corporation they owned and controlled

Plaintiffs in this action seek to recover money loaned or invested in connection with Las Gaviotas on three distinct occasions. First, recovery is sought for $600,000 plaintiffs collectively invested in Las Gaviotas between October 1983 and January 1984 (Counts 1-16, 21). This amount was invested through twelve "Participation Agreements" by which different groups of plaintiffs acquired twelve $50,000 participation interests in Las Gaviotas. Significantly, each Participation Agreement provided (i) that the money invested would be used by VIDCO solely for expenses relating to the development of Las Gaviotas; (ii) that the money invested would be returned to plaintiffs from the proceeds of the project within two and one-half years from the investment date; and (iii) that after repayment of the principal amount invested, plaintiffs would receive additional distributions of the project's net proceeds on a pro-rata basis such that each participant would realize an annualized 35% return on her or his investment. Plaintiffs allege that defendants breached all the Agreements. Thus, each of the Counts Nos. 1 through 12 of the Second Amended Complaint alleges a breach by both defendants of a specific Participation Agreement, with damages of $50,000 plus interest sought on each of the twelve contracts. Count 13 alleges multiple breaches of fiduciary duty by Davison Obenauer and seeks recovery from him of the $600,000 cumulative investment on behalf of all plaintiffs. Counts 14 through 16 also focus on the $600,000 cumulative investment and are based on allegations of fraud under state and federal law by both defendants. Thus, Count 14 asserts a federal 10b-5 securities fraud claim against both defendants and seeks $1,000,000 in punitive damages, as well as $600,000 in compensatory damages. Count 16 seeks the same damages against defendants based on common law fraud. And Count 15 alleges defendants violated Virginia's securities laws, specifically Virginia Code § 13.1-522, and seeks $600,000 plus interest and attorneys fees.

The second transaction covered in the Complaint concerns the August 1987 $350,000 loan made by Gonzalo Diaz and his late father to VIDCO in connection with the Las Gaviotas project. Davison Obenauer promised to repay this amount plus interest in three months. The Complaint alleges that repayment never occurred. Accordingly, Count 17 alleges breach of contract on behalf of Gonzalo Diaz and the administrator of his father's estate, Maria Luisa Vicente de Diaz, and seeks damages of $350,000 plus interest against both defendants. Count 19 also concerns the $350,000 loan and alleges fraud against Davison Obenauer. This count seeks $200,000 in compensatory damages and $1,000,000 in punitive damages on behalf of Gonzalo Diaz and $150,000 in compensatory damages and $1,000,000 in punitive damages on behalf of the administrator, Maria Luisa Vicente de Diaz.

The third and final transaction covered in the Complaint is a $100,000 loan made by Gonzalo Diaz to Davison Obenauer in January 1988. Plaintiffs allege this loan was also not repaid. Accordingly, Count 18 alleges breach of contract against Davison Obenauer and seeks recovery of the $100,000 loan, and an additional $2,500 contemporaneously loaned to Davison Obenauer, plus interest. And Count 20 alleges fraud against Davison Obenauer growing out of this transaction and seeks $100,000 in compensatory damages and $1,000,000 in punitive damages.

In sum, the Complaint includes 21 counts. Many were disposed of prior to trial by way of summary judgment or default. Davison Obenauer deliberately defaulted and never filed an answer. As a consequence of this default, the Court, on August 3, 1989, entered judgment against Davison Obenauer with respect to each breach of contract claim (Counts 1-12, 17) and awarded plaintiffs total damages of $600,000 plus interest. Gonzalo Diaz Vicente v. Davison Obenauer, et al., Civil Action No. 89-0520-A (unpublished order). As a result of the default, the Court also entered judgment against Davison Obenauer on the remaining claims for fraud,

736 F. Supp. 683
breach of contract, and breach of fiduciary duties (Counts 13-16, 20), but reserved the question of damages for the trial on the merits.3 Final judgment, pursuant to Rule 54(b), Fed.R.Civ.P., was entered on October 20, 1989

Defendant S. Davison Obenauer appeared and filed an answer generally denying liability and specifically denying any role in the alleged fraudulent conduct. On August 3, 1989, the Court granted Summary Judgment for plaintiffs against S. Davison Obenauer on each of the breach of contract claims asserted against him (Counts 1-12, 17). As a result of this Summary Judgment, the Court awarded contract damages against S. Davison Obenauer in the total amount of $950,000 plus interest. This amount represents the $600,000 due under the twelve Participation Agreements, added to the $350,000 due from the defaulted 1987 loan. At the time of trial, therefore, the following claims and issues remained for adjudication:

 S. DAVISON OBENAUER DAVISON OBENAUER
                (Liability & Damages) (Damages only)
                 Count 13
                 (breach of fiduciary duty)
                 (compensatory damages $600,000)
                Count 14 Count 14
                (fed. securities fraud (10b-5)) (fed. securities fraud (10b-5))
                (compensatory damages $600,000) (compensatory damages $600,000)
                (punitive damages $1,000,000) (punitive damages $1,000,000)
                Count 15 Count 15
                (Va. securities fraud) (Va. securities fraud)
                (compensatory damages $600,000) (compensatory damages $600,000)
                Count 16 Count 16
                (common law fraud) (common law fraud)
                (compensatory damages $600,000) (compensatory damages $600,000)
                (punitive damages $1,000,000) (punitive damages $1,000,000)
                Count 19 Count 19
                (common law fraud) (common law fraud)
                (compensatory damages $350,000) (compensatory damages $350,000)
                (punitive damages $1,000,000) (punitive damages $1,000,000)
                 Count 20
                 (common law fraud)
                 (compensatory damages $102,500)
                 (punitive damages $1,000,000)
                Count 21
                (breach of fiduciary duty)
                (compensatory damages $600,000)
                (punitive damages $1,000,000)
                

The bench trial in this matter consumed two days, involved the testimony of six witnesses and the admission into the record

736 F. Supp. 684
of eighty-two exhibits. The bulk of the testimony focused on S. Davison Obenauer's role in the acts and events alleged to constitute fraud, securities fraud and breach of fiduciary duty. In essence, S. Davison Obenauer denies complicity in the acts or events, contending that he was a VIDCO officer and director in name only and that any role he played was merely that of a college-age son dutifully following the directives of his father.

FINDINGS OF FACT

A. Investments under Participation Agreements

In October 1983, Davison Obenauer was seeking $2,000,000 in venture capital for use by VIDCO in acquiring, developing and selling the Las Gaviotas project in Chesapeake, Virginia. In this connection, Davison...

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45 practice notes
  • Mirkin v. Wasserman, No. S020465
    • United States
    • United States State Supreme Court (California)
    • September 9, 1993
    ...516 F.2d 251, 260; see also Green v. Wolf Corporation, supra, 406 F.2d 291, 303 & fn. 18; Diaz Vicente v. Obenauer (E.D.Va.1990) 736 F.Supp. 679, 695; Baumel v. Rosen (4th Cir.1969) 412 F.2d 571, Page 116 [858 P.2d 583] Punitive damages can be justified only as a deterrent measure or as ret......
  • Chiste v. Hotels.Com L.P., Nos. 08 Civ. 10676 (CM)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • November 15, 2010
    ...parties ‘intended to create a fiduciary relationship,’ the court may not create one.” Id. at 549, at *14 ( quoting Vicente v. Obenauer, 736 F.Supp. 679, 695 (E.D.Va.1990)). As was the case with Lamattina, Chiste's relationship with each of Expedia and Priceline was a business relationship g......
  • Carlucci v. Han, No. 1:12cv451 (JCC/TCB).
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
    • August 7, 2012
    ...Ute Citizens of Utah v. United States, 406 U.S. 128, 155, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972); see also Diaz Vicente v. Obenauer, 736 F.Supp. 679, 694 (E.D.Va.1990) (holding that plaintiff who purchased worthless securities was entitled to damages equal to the amount invested on Virginia c......
  • Intern. Bancorp v. Societe Des Baines De Mer, No. CIV.A.01-115-A.
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
    • March 25, 2002
    ...S.E.2d 33, 34 (1993) (holding that Virginia applies the lex loci delicti, the law of the place of the wrong); Diaz Vicente v. Obenauer, 736 F.Supp. 679, 690 (E.D.Va.1990) ("The rule of lex loci delicti is well-settled in Virginia; the place of the injury supplies the governing law in tort a......
  • Request a trial to view additional results
45 cases
  • Mirkin v. Wasserman, No. S020465
    • United States
    • United States State Supreme Court (California)
    • September 9, 1993
    ...516 F.2d 251, 260; see also Green v. Wolf Corporation, supra, 406 F.2d 291, 303 & fn. 18; Diaz Vicente v. Obenauer (E.D.Va.1990) 736 F.Supp. 679, 695; Baumel v. Rosen (4th Cir.1969) 412 F.2d 571, Page 116 [858 P.2d 583] Punitive damages can be justified only as a deterrent measure or as ret......
  • Chiste v. Hotels.Com L.P., Nos. 08 Civ. 10676 (CM)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • November 15, 2010
    ...parties ‘intended to create a fiduciary relationship,’ the court may not create one.” Id. at 549, at *14 ( quoting Vicente v. Obenauer, 736 F.Supp. 679, 695 (E.D.Va.1990)). As was the case with Lamattina, Chiste's relationship with each of Expedia and Priceline was a business relationship g......
  • Carlucci v. Han, No. 1:12cv451 (JCC/TCB).
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
    • August 7, 2012
    ...Ute Citizens of Utah v. United States, 406 U.S. 128, 155, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972); see also Diaz Vicente v. Obenauer, 736 F.Supp. 679, 694 (E.D.Va.1990) (holding that plaintiff who purchased worthless securities was entitled to damages equal to the amount invested on Virginia c......
  • Intern. Bancorp v. Societe Des Baines De Mer, No. CIV.A.01-115-A.
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)
    • March 25, 2002
    ...S.E.2d 33, 34 (1993) (holding that Virginia applies the lex loci delicti, the law of the place of the wrong); Diaz Vicente v. Obenauer, 736 F.Supp. 679, 690 (E.D.Va.1990) ("The rule of lex loci delicti is well-settled in Virginia; the place of the injury supplies the governing law in tort a......
  • Request a trial to view additional results

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