Agio Industries, Inc. v. Delta Oil Co., Inc.

• Decision Date: 15 January 1986
• Citation: 485 So.2d 340
• Parties: AGIO INDUSTRIES, INC. v. DELTA OIL COMPANY, INC., and Pesco, Inc. Civ. 4969.
• Court: Alabama Court of Civil Appeals

Page 340

485 So.2d 340

AGIO INDUSTRIES, INC. v. DELTA OIL COMPANY, INC., and Pesco, Inc.

Civ. 4969.

Court of Civil Appeals of Alabama.

Jan. 15, 1986.

James L. Shores, Jr. of Shores & Booker, Fairhope, for appellant.

David A. Simon of Owen, Ball & Simon, Bay Minette, for appellees.

WRIGHT, Presiding Judge.

Two judgments were entered by the trial court against the defendant, Agio Industries, Inc., a Texas corporation. The first was a default judgment in favor of Delta Oil Company, an Alabama corporation. The second was in favor of Pesco, Inc., also an Alabama corporation, on a cross-claim that had been filed by Agio. The trial court denied Agio's motion to set aside these judgments. Agio appeals.

In 1980 Delta purchased six gasoline pump computers from Pesco. The computers, which were installed by Pesco, had been purchased by Pesco from Agio, the manufacturer. Allegedly, Delta started experiencing problems with the computers almost immediately. After numerous unsuccessful attempts were made to satisfactorily remedy the problems, the computers were removed from operation. Ultimately, Delta filed suit against both Pesco and Agio. The complaint set out two counts. The first count alleged the breach of an express warranty and was directed at both Pesco and Agio. The second count, also directed at both Pesco and Agio, alleged the breach of an implied warranty of fitness for a particular purpose. Both defendants filed answers which generally denied the allegations of liability contained in the complaint. Subsequently, the co-defendants filed cross-claims against each other seeking indemnification against Delta's claim.

In November 1984, Delta filed an amended complaint in which it set out three separate counts. The first count simply re-alleged the express warranty claim against both Pesco and Agio. The second and third counts were directed only against Pesco and alleged their breach of the implied warranties of merchantability and fitness for a particular purpose. Pesco filed an answer generally denying the allegations of the amended complaint. Agio did not file an answer to this amended complaint.

When the case was called for trial in March 1984, with counsel for Agio present, Delta moved for a default judgment against Agio for its failure to answer the amended complaint. The motion was granted. At the same time, Pesco moved for judgment in its favor on the cross-claim Agio had filed against it. This was also granted. After a subsequent hearing to determine damages, final judgment was entered on the Delta claim in the amount of $7,895.64. A motion to set aside these judgments was denied. We review the Delta default judgment first.

The denial of a motion to set aside a default judgment is within the sound discretion of the trial court. Boren v. Roberts, 423 So.2d 208 (Ala.1982). Such a denial may be reversed only if the trial court has abused its discretion. Wade v. Pridmore, 361 So.2d 511 (Ala.1978). However, because court policy favors the determination of cases on their merits, default judgments are not favored. Cockrell v. World's Finest Chocolate Co., 349 So.2d 1117 (Ala.1977). If there is any doubt as to the propriety of a default judgment, the court's discretion must be resolved in favor of the defaulting party. See Boren, supra; Lawler Mobile Homes, Inc. v. Ellison, 361 So.2d 1092 (Ala.Civ.App.1978).

Initially, we note that Agio has pleaded the requisite meritorious defense. See Roberts v. Wettlin, 431 So.2d 524 (Ala.1983). They simply assert that there is no privity of contract between itself and Delta. As only economic loss is claimed by Delta, recovery on any breach of warranty claim requires privity of contract. See Chandler v. Hunter, 340 So.2d 818 (Ala.1976); Wear v. Chenault Motor Co., 52 Ala.App. 382, 293 So.2d 298, cert. denied, 292 Ala. 756, 293 So.2d 301 (1974). See also § 7-2-318, Code of Alabama 1975. We do not decide here whether or not it is possible for Delta to establish the required privity at a trial on the merits.

The trial court's order of judgment asserts that the default judgment was entered because Agio, when the case was called for trial, "was only represented by counsel and ... had no other representative present at said trial and ... had not filed an answer to the plaintiff's last amended complaint." On the narrow facts of this case, we hold that the trial judge has abused his discretion. These findings do not support the default judgment.

It is clear from the record that Agio had actively participated in and defended this case from its inception until the time that the case was called for trial. Numerous motions and discovery requests were filed and responded to by all parties. The only real basis asserted for the finding of default was Agio's failure to respond to Delta's amended complaint.

A review of the pleadings reveals that there was no new claim asserted against Agio in the amended complaint. It simply re-alleged the same express warranty claim that had been alleged in the original complaint. While the better practice is to either answer such a pleading or, in the alternative, move to strike it under Rule 12(f), A.R.C.P., some doubt exists as to whether a response to an amended complaint is always required. The probable answer is that a response is required. See Zeigler v. Baker, 344 So.2d 761 (Ala.1977) ("An amended pleading pro tanta supersedes a pleading which it amends."); Holley v. St. Paul Fire & Marine Insurance Co., 396 So.2d 75 (Ala.1981) (where the court noted that once an amended pleading is interposed, the original pleading no longer performs any function in the case, thus, a ruling on a motion to dismiss a prior complaint is unnecessary); Hawk v. Bavarian Motor Works, 342 So.2d 355 (Ala.1977) (an amended complaint adding a new count must be answered under Rule 8(d), A.R.C.P.). However, no Alabama appellate court has...