Exotex Corp. v. Rinehart

• Decision Date: 05 April 2000
• Docket Number: No. 97-234.,97-234.
• Citation: 3 P.3d 826
• Parties: EXOTEX CORP., a Nevada corporation, Appellant (Defendant), v. James H. RINEHART, d/b/a Western United Realty, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

3 P.3d 826

EXOTEX CORP., a Nevada corporation, Appellant (Defendant), v. James H. RINEHART, d/b/a Western United Realty, Appellee (Plaintiff).

No. 97-234.

Supreme Court of Wyoming.

April 5, 2000.

Representing Appellant: Douglas W. Weaver, Wheatland, Wyoming.

Representing Appellee: Kevin D. Huber of Huber Law Offices, P.C., Laramie, Wyoming.

Before LEHMAN, C.J., and THOMAS, MACY, GOLDEN, and TAYLOR,¹ JJ. THOMAS, Justice.

In this case, we hold that a default judgment entered by a clerk of court pursuant to W.R.C.P. 55(b)(1) is void when the theories of recovery that are pleaded do not permit a conclusion that the plaintiff's claim "is for a sum certain, or for a sum which can by computation be made certain." The district court denied a motion to set aside the default judgment entered by the clerk of court. A district court has no discretion to refuse to set aside a void judgment upon application for that relief, and we reverse the Order Denying Defendants' Motions. The case is remanded to the district for further proceedings in accordance with this opinion.

The issue upon which we decide this case is one we raise on our own motion:²

Does a district court have any discretion to refuse to set aside a default judgment entered by the Clerk of the District Court when the requirements of W.R.C.P. 55(b)(1) are not satisfied?³

On May 3, 1994, Ronald Brewer, president of Exotex Corporation (Exotex), signed a listing contract with Western United Realty (Western). James Rinehart (Rinehart) signed the contract on behalf of Western. The agreement provided that Western would serve as a broker to sell a parcel of land in Albany County owned by Exotex. In return, Western was to receive a commission of six percent of the selling price.

By its terms, the listing contract expired on October 1, 1994. Nonetheless, Rinehart continued his efforts to sell Exotex's land, and Brewer allegedly agreed verbally to honor the contract terms should Rinehart produce a buyer. Rinehart found a buyer who, on January 22, 1997, signed an offer to purchase the parcel for $350,000.00. The executed Offer, Acceptance and Receipt Specific Performance Contract was amended by deleting Exotex as a seller. The terms of the offer specified that it must be accepted no later than 5:00 p.m. that same day. Brewer signed his acceptance of the offer the next day. For reasons that are not important to this discussion, the sale was never closed. A sale is a prerequisite for a claim for a commission under the law of Wyoming, and if there is no sale the broker or agent must pursue an action for damages for breach of his contract.

Rinehart filed suit against Exotex and Brewer on April 8, 1997. His complaint stated claims for both intentional interference with prospective advantage and quantum meruit. He asked for his six percent commission on the $350,000.00 offer ($21,000.00), plus costs. Brewer was served in his individual capacity in his home state of Texas. Service on Exotex was accomplished by serving its registered agent in Cheyenne. In apparent accordance with a previous agreement, the agent for service sent the summons and complaint to an individual in Nevada with the expectation that that person would forward it to Exotex. Seemingly due to an oversight, the summons and complaint remained in a file in Nevada.

At Rinehart's request, the clerk of court entered a default against Exotex on May 1, 1997. On the same day, the clerk of court filed and entered a judgment by default in the amount of $21,000.00 plus costs of $55.00. The Judgment by Default recites, in pertinent part:

This Default Judgment is rendered pursuant to Rule 55(b)(i) in that Plaintiff's claim against Defendant, Exotex Corp., is for a sum certain in the amount of $21,000, as set forth in the prayer for relief together with the incorporated contracts.

On May 19, 1997, Exotex filed a Motion to Set Aside Judgment. The district court held a motion hearing on June 27, 1997. The lack of authority in the clerk of court to entry a default judgment was never suggested to the district judge. Shortly after the hearing, the district court issued its order denying the motion. Exotex appeals that denial to this Court.

The authority for default judgments is found in W.R.C.P. 55:

(a) Entry. When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules and that fact is made to appear by affidavit or otherwise, the clerk shall enter the party's default.

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

(1) By the Clerk. When the plaintiff's claim against a defendant is for a sum certain, or for a sum which can by computation be made certain, the clerk upon request of the plaintiff and upon affidavit of the amount due shall enter judgment for that amount and costs against the defendant, if the defendant has been defaulted for failure to appear and is not a minor or an incompetent person;

(2) By the Court. In all other cases the party entitled to a judgment by default shall apply to the court therefor; but no judgment by default shall be entered against a minor or an incompetent person unless represented in the action by a guardian, guardian ad litem, trustee, conservator, or other such representative who has appeared therein. If the party against whom a judgment by default is sought has appeared in the action the party (or, if appearing by representative, the party's representative) shall be served with written notice of the application for judgment at least three days prior to the hearing on such application. 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.

(c) Setting Aside Default. For good cause shown the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b).

(d) Plaintiffs; Counterclaimants; Cross-Claimants. The provisions of this rule apply whether the party entitled to the judgment by default is a plaintiff, a third-party plaintiff, or party who has pleaded a cross-claim or counterclaim. In all cases a judgment by default is subject to the limitations of Rule 54(c).

The clerk of court has authority to enter a default judgment only when the amount of the claim is a sum certain or one which can be made certain by computation. Any judgment entered without such authority is void as an ultra vires act of the clerk. Wunnicke v. Leith, 61 Wyo. 191, 157 P.2d 274, 278 (1945); LaFountaine v. State Farm Mut. Auto. Ins. Co., 215 Mont. 402, 698 P.2d 410, 412 (1985). In this case, the assumption of all the parties and the district court was that the claim was for a sum certain, or a sum which could by computation be made certain. Close scrutiny of the record, particularly Rinehart's complaint, together with the applicable rules of law, demonstrates that the assumption is erroneous.

Rinehart's affidavit in support of his Application for Judgment by Default assumes that he was owed a commission which was either a sum certain or could be made a sum certain by computation. Our substantive law does not support this assumption, however:

Defendant argues that plaintiff in his petition fails to allege, and in the trial fails to prove, damages for breach or termination of the contract and cites as authority 12 C.J.S., Brokers, § 17:

"The measure of damages to which a broker is entitled in case the principal refuses or fails to comply with his contract with the broker is the damage which actually results from the breach and will compensate him for the injury sustained, not exceeding the contract price for the services which he has performed. If he fails to show damages, he is entitled to recover nothing, or at most only nominal damages, and mere proof of breach of the contract is not proof that any damage was suffered."

15 Am.Jur., Damages § 44:

"As a general rule, the loss or injury actually sustained, rather than the price paid or agreed to be paid on full performance, is the proper measure of damages for breach of a contract, notwithstanding from the nature of the subject matter such damages may be difficult of ascertainment."

and the following cases: Patterson v. Johnson, 187 Iowa 633, 174 N.W. 363; Jacob v. Cummings, 213 Mich. 373, 182 N.W. 115; Mt. Ida School for Girls v. Rood, 253 Mich. 482, 235 N.W. 227, 74 A.L.R. 1325; Poinsettia Dairy Products v. Wessel Co., 123 Fla. 120, 166 So. 306, 104 A.L.R. 216; Perry v. United States, 294 U.S. 330, 55 S.Ct. 432, 79 L.Ed. 912, 95 A.L.R. 1335.

The rules thus stated and borne out by the cited cases are correct statements of the law relating to damages for breach of a broker's contract.

Leet v. Joder, 75 Wyo. 225, 240, 295 P.2d 733, 738 (1956); followed in E & E Min., Inc. v. Flying D Group, Inc., 718 P.2d 58, 62 (Wyo. 1986).

The allegations of the complaint demonstrate that no sale of the property subject to the listing has occurred. Under Leet, Rinehart had the obligation of proving his damages for breach of the listing contract had he injected a theory of breach of contract. The right to the commission, which is what the claim of a sum certain is based on in this case, existed only in the event of a sale.

Rinehart's complaint asserted claims for quantum meruit and intentional interference with prospective advantage. Therefore, to determine whether the clerk of court had authority to enter a default judgment in this case, we must ask whether the damages for these causes of action were a sum certain, or one which could by computation be made certain, pursuant to W.R.C.P. 55(b)(1). The latter is a tort...