FARM FAMILY MUT. INS. v. THORN LUMBER

• Decision Date: 12 March 1998
• Docket Number: No. 24503.,24503.
• Citation: 202 W.Va. 69,501 S.E.2d 786
• Parties: FARM FAMILY MUTUAL INSURANCE COMPANY, Plaintiff below, Appellee, v. THORN LUMBER COMPANY, Defendant below, and Farmer Boy AG, Inc., Defendant below, Appellant.
• Court: West Virginia Supreme Court

501 S.E.2d 786

202 W.Va. 69

FARM FAMILY MUTUAL INSURANCE COMPANY, Plaintiff below, Appellee, v. THORN LUMBER COMPANY, Defendant below, and Farmer Boy AG, Inc., Defendant below, Appellant.

No. 24503.

Supreme Court of Appeals of West Virginia.

Submitted February 17, 1998.

Decided March 12, 1998.

Susan R. Snowden, Martin & Seibert, L.C., Martinsburg, for Appellant.

Stephen L. Gaylock, Law Offices of Michael R. Cline, Charleston, for Appellee.

STARCHER, Justice:

This appeal from the Circuit Court of Berkeley County arises from the entry of a default judgment against the defendant-appellant, Farmer Boy AG, Inc. ("Farmer Boy"), pursuant to West Virginia Rules of Civil Procedure Rule 55 [1959].¹ The plaintiff, Farm Family Mutual Insurance Company ("Farm Family Mutual"), brought a subrogation action against Farmer Boy asserting that Farmer Boy's negligence had resulted in a loss to an insured of Farm Family Mutual. The appeal focuses on whether the circuit court abused its discretion in refusing to set aside a default judgment in favor of appellee Farm Family Mutual on the issue of damages, and in finding that the loss paid by the insurance carrier to its insured was a "sum certain" such that no evidentiary hearing was required to calculate the damages due to the appellee.

After reviewing the record, briefs, and all other matters of record, we conclude that the circuit court abused its discretion in refusing to set aside the damages award. For the reasons set forth below, we reverse and remand the case for reconsideration of Farm Family Mutual's damages.

I. Factual Background

This case began with the renovation of a swine-holding facility. Appellant Farmer Boy installed ventilation, cooling, heating and sprinkling systems on the roof of the facility owned by Berkeley Clean Lean Partnership, and insured by appellee Farm Family Mutual. The renovations overburdened the structure and caused the building to collapse.

Appellee Farm Family Mutual alleges that, as a result of the roof collapse, it paid $135,416.37 to Berkeley Clean Lean Partnership to pay for repairs to the facility. On September 8, 1995, Farm Family Mutual filed this action against Farmer Boy² alleging that Farmer Boy had been negligent in the renovations, and that the negligence proximately caused "property damages to [the] swine holding facility and other damages." The complaint filed by Farm Family Mutual alleged that because of the appellant's negligence, and pursuant to Farm Family Mutual's insurance contract with Berkeley Clean Lean Partnership, it was entitled to judgment in the amount of $135,416.37.

A copy of the complaint was sent by registered mail to Farmer Boy, and signed for and received by an employee for Farmer Boy.³ The complaint appears to have disappeared, and was never acted upon by Farmer Boy or its insurer.

On February 13, 1996, Farm Family Mutual filed a motion for default judgment on all issues against the appellant, stating that Farmer Boy had failed to answer the complaint or to otherwise plead or appear. In support of the motion, the appellee presented an affidavit on the issue of damages from Gary Roman, the Subrogation Manager of Farm Family Mutual, stating that the appellant owed $135,416.37 to Farm Family Mutual.⁴ No bills, invoices, testimony or other evidence were presented to the circuit court. Appellant Farmer Boy did not file any pleadings with the circuit court. However, it appears that at least one representative of Farmer Boy contacted the appellee to make inquiries regarding the lawsuit. It does not appear that the appellee attempted to notify the appellant of the filing of the motion for default judgment.

On September 3, 1996, without an evidentiary hearing on the issue of damages, the circuit court entered an order granting a default judgment to Farm Family Mutual in the amount of $135,416.37. Appellant Farmer Boy subsequently learned of the default judgment, and pursuant to West Virginia Rules of Civil Procedure Rule 60(b) filed a motion to set aside the default judgment. On December 23, 1996 the circuit court found that:

Plaintiff's claim is for a sum certain, being the total of various costs for the replacement and repair of chattels, represented by invoices, bills, and receipts, and thus Plaintiff's damages may be by calculation rendered certain and Plaintiff has supplied an affidavit in support of its default judgment motion attesting to the sum of such calculation and thus an inquiry into Plaintiff's damages was and is not necessary.

The "invoices, bills, and receipts" identified in the circuit court's order are not in the record, and the parties agree that such evidence in fact was never presented to the circuit court. Appellee Farm Family Mutual simply filed a form affidavit asserting it had a right to the full sum paid to Berkeley Clean Lean Partnership; in the affidavit, the appellee did not "attest[ ] to the sum of such calculation." The circuit court denied Farmer Boy's motion to set aside the default judgment. This appeal followed.⁵

II. Discussion

With respect to a motion to vacate a default judgment, we review the circuit court's decision under an abuse of discretion standard, but with a presumption in favor of the adjudication of cases upon their merits. Syllabus Point 3, Intercity Realty Co. v. Gibson, 154 W.Va. 369, 175 S.E.2d 452 (1970). See also, Evans v. Holt, 193 W.Va. 578, 457 S.E.2d 515 (1995); State ex rel. United Mine Workers of America, Local Union 1938 v. Waters, 200 W.Va. 289, 489 S.E.2d 266 (1997).

A judgment by default may be entered in West Virginia pursuant to the guidelines of West Virginia Rules of Civil Procedure Rule 55 [1959].⁶ We discussed Rule 55 in Coury v. Tsapis, 172 W.Va. 103, 304 S.E.2d 7 (1983), and distinguished between a "default" and a "default judgment" under the rule. "[A] default relates to the issue of liability and a default judgment occurs after damages have been ascertained." 172 W.Va. at 106,304 S.E.2d at 10.

A default, covered by Rule 55(b)(2), "applies to cases where the amount sued for is not a sum certain. In this situation, after a default is entered, a further hearing is required in order to ascertain the damages." 172 W.Va. at 105, 304 S.E.2d at 9. We held in the sole syllabus point of Farley v. Economy Garage, 170 W.Va. 425, 294 S.E.2d 279 (1982) that:

Where a default judgment[⁷] has been obtained under Rule 55(b)(2) of the West Virginia Rules of Civil Procedure, a trial court is required to hold a hearing in order to ascertain the amount of damages if the plaintiff's claim involves unliquidated damages.

(Footnote added.)

Conversely, if the damages sought by the party moving for a default judgment are for a sum certain, or an amount which can be rendered certain by calculation, no evidentiary hearing on damages is necessary and the circuit court may proceed to enter a "default judgment" on all issues in the case.⁸ We held in Syllabus Point 1 of Coury v. Tsapis, supra, that:

Rule 55(b)(1) of the West Virginia Rules of Civil Procedure relates to cases where the amount sued for is a sum certain or which can be rendered certain by computation. Upon a default in this category of cases, the court can enter a judgment not only as to liability but also to the amount due.

The dispute in this case arises over the definition of the term "sum certain," and whether the alleged $135,416.37 loss by Farm Family Mutual is a sum certain or is an amount which may be rendered certain by calculation.

On the one hand, appellee Farm Family Mutual asserts that its damages are clear, and consist of the money Farm Family Mutual expended pursuant to its insurance contract with Berkeley Clean Lean Partnership. Farm Family Mutual contends that all of the damages relate to repairs of the collapsed swine-holding facility—by adding up the bills which were paid by Farm Family Mutual (even though not in the record), the damages may be rendered certain by calculation.

On the other hand, Farmer Boy notes that the original complaint for damages alleged the money was due as a result of Farmer Boy's negligence. Farmer Boy contends that there is no evidence in the record that the damages alleged were actually caused by and are reasonably related to Farmer Boy's negligence. Further, while there is an allegation of a contract and payments between Farm Family Mutual and its insured, there is no evidence that the amount of damages had been liquidated as to Farmer Boy. Farmer Boy therefore argues that the circuit court erred in granting a default judgment on damages without taking evidence, and abused its discretion in refusing to set aside the default judgment as to damages. We agree with Farmer Boy's position.

Other jurisdictions considering the term "sum certain" have suggested that its meaning is similar to "liquidated amount." See Farley v. Economy Garage, 170 W.Va. at 427 n. 5, 294 S.E.2d at 281 n. 5. See generally, 46 Am.Jur.2d Judgments § 291. "`Liquidated' means adjusted, certain, settled with respect to amount, fixed. A claim is liquidated when the amount thereof has been ascertained and agreed upon by the parties or fixed by operation of law." Hallett Construction Co. v. Iowa State Highway Comm'n, 258 Iowa 520, 528, 139 N.W.2d 421, 426 (1966) (citations omitted). The term "sum certain" contemplates a situation where the amount due cannot be disputed. Such situations include actions on money judgments, negotiable instruments, or similar actions where the damages can be determined without resort to extrinsic proof. Interstate Food Processing Corp. v. Pellerito Foods, Inc., 622 A.2d 1189, 1193 (Me.1993), citing Reynolds Securities, Inc. v. Underwriters Bank & Trust Co., 44 N.Y.2d 568, 572-73, 406 N.Y.S.2d 743, 746, 378 N.E.2d 106, 109 (1978). A claim is not for a "sum certain" where its amount is largely a matter of opinion on which qualified persons might fairly and honestly differ. Hallett Construction Co., 258 Iowa at 529, 139 N.W.2d at 427.

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