Lexon Ins. Co. v. Cnty. Council of Berkeley Cnty.

• Decision Date: 11 March 2015
• Docket Number: No. 14–0215.,14–0215.
• Citation: 235 W.Va. 47,770 S.E.2d 547
• Parties: LEXON INSURANCE CO., Defendant Below, Petitioner v. COUNTY COUNCIL OF BERKELEY COUNTY, West Virginia, And Berkeley County Planning Commission, Plaintiffs Below, Respondents.
• Court: West Virginia Supreme Court

235 W.Va. 47

770 S.E.2d 547

LEXON INSURANCE CO., Defendant Below, Petitioner

v.COUNTY COUNCIL OF BERKELEY COUNTY, West Virginia, And Berkeley County Planning Commission, Plaintiffs Below, Respondents.

No. 14–0215.

Supreme Court of Appeals of West Virginia.

Submitted Feb. 11, 2015.

Decided March 11, 2015.

Ancil G. Ramey, Steptoe & Johnson PLLC, Huntington, WV, Eric J. Hulett, Steptoe & Johnson PLLC, Martinsburg, WV, Attorneys for the Petitioner.

William J. Powell, Jackson Kelly PLLC, Martinsburg, WV, Albert F. Sebok, Ellen S. Cappellanti, Jackson Kelly PLLC, Charleston, WV, Attorneys for the Respondents.

Opinion

DAVIS, Justice:

In this appeal, Petitioner Lexon Insurance Co. (“Lexon”),¹ defendant below, challenges the entry of default judgment against it in an action filed by Respondents County Council of Berkeley County, West Virginia, and Berkeley County Planning Commission (collectively “Berkeley County”). Because we find that the damages sought in this case are not a “sum certain” as required by West Virginia Rule of Civil Procedure 55(b)(1), default judgment was improperly granted under that rule. In addition, we find that default was improperly entered under the unique circumstances presented herein where the parties failed to follow the Rules of Civil Procedure pertaining to the extension of the time for filing an answer. Accordingly, we reverse the Circuit Court of Berkeley County's order denying Lexon's motion to set aside default judgment and remand this case for further proceedings.

I.FACTUAL AND PROCEDURAL HISTORY

This case arises from two performance bonds issued by Lexon to DLM, LLC (“DLM”).² DLM sought to develop a 255–unit subdivision known as Chandler's Glen in Berkeley County, West Virginia. As part of the approval process for the Chandler's Glen subdivision final plat, Berkeley County's subdivision ordinance required DLM to either complete all of the required site improvements and infrastructure for the project or post bonds guaranteeing future completion. On November 8, 2005, Lexon issued a performance bond in the amount of $1,050,000. This bond guaranteed completion of the site improvements for the Chandler's Glen subdivision. A second performance bond in the amount of $2,388,565.20, which guaranteed completion of the infrastructure for the Chandler's Glen subdivision, was issued by Lexon on February 10, 2006. Both of the bonds issued by Lexon named Berkeley County as the obligee. Upon obtaining the first bond in 2005, DLM began grading the Chandler's Glen subdivision site and installing site improvements. Thereafter, on November 17, 2010, Berkeley County learned that DLM had filed for bankruptcy. DLM had not completed the site improvements and infrastructure for the Chandler's Glen subdivision site. Accordingly, DLM had defaulted under both bonds.

On December 9, 2010, Berkeley County made a demand on Lexon under the $1,050,000 site improvement performance bond. Subsequently, on January 25, 2011, Berkeley County made a demand on Lexon under the $2,388,565.20 infrastructure performance bond. Lexon responded by letter dated February 24, 2011, acknowledging receipt of Berkeley County's demands. Over the following months, Berkeley County and Lexon met on at least two occasions and also exchanged communications in an attempt to resolve the matter. Berkeley County rejected offers made by Lexon to either complete only those portions of the Chandler's Glen subdivision that contained purchased lots, or to settle the matter for an amount that was less than the face value of the two performance bonds. By letter dated October 6, 2011, Berkeley County reiterated its demand for the full proceeds of the two performance bonds.

Having received no response to its letter of October 6, 2011, Berkeley County filed the instant lawsuit, naming Lexon and DLM as defendants, on November 17, 2011. In its complaint, Berkeley County sought “specific performance of the Surety's obligations according to the terms of the subject bonds,” in addition to its “costs and expenses in prosecution of this matter; and, for such other relief as the Court deems appropriate and proper.”

Thereafter, Lexon and Berkeley County entered an informal agreement to extend the time for Lexon to file a response to Berkeley County's complaint. This agreement is reflected in an email from Bruce Maas, counsel for Lexon, to Norwood Bentley, Legal Director for Berkeley County Council. The email, dated December 15, 2011, stated, in relevant part, that “this will confirm that Lexon has an indefinite extension of time to respond to the complaint and that you will give me 15 days notice if this consent is withdrawn.” By subsequent email, dated April 20, 2012, Norwood Bentley advised Bruce Maas that Berkeley County had “decided to go forward and press the litigation which was earlier filed against your client, Lexon.... Will appreciate your answer at your earliest convenience.” This email was followed, on May 9, 2012, by another email that included a copy of the April 20 email and sought to confirm receipt of that email:

I assume you received the notice below on April 20, as it did not come back to me as undeliverable. As you will recall, we had agreed that after notice, you would have 15 days in which to respond with an answer.

I will appreciate your indicating to me that you have received this communication.

Also on May 9, 2012, Berkeley County sent a letter to Bruce Maas via the United States Postal Service, which letter informed Mr. Maas that,

[h]aving sent two electronic mail notices to you concerning Berkeley County's decision to move forward and prosecute the civil action against your client, above referenced, which civil action was earlier served, and about which you and I have had discussion, and having received no response from you, I thought it wise to give you notice via snail mail. Thus, this notice.

As you will recall, we had agreed that you would have fifteen days from the date of notice in which to answer the complaint. My first notice was dated April 20, 2012. Please let me know that you have received this communication and when I might expect your answer.

Having received no response to its communications of April 20 and May 9, Berkeley County, on June 14, 2012, filed a motion for default judgment, pursuant to Rule 55(b)(1) of the West Virginia Rules of Civil Procedure, against Lexon.³ Service of the motion upon Lexon was had by mailing the same to its counsel, Mr. Maas. Thereafter, intermittent settlement negotiations continued between Berkeley County and Lexon. During this time, Berkeley County indicated that it would not encourage the circuit court to rule on its motion for default. Nevertheless, on July 5, 2012, the Circuit Court entered default judgment against Lexon for the sum of $3,438,565.20 (the total face value of the two bonds at issue), plus post judgment interest. Lexon continued to pursue a settlement and failed to immediately appear in the action and move to set aside the default judgment. Instead, Lexon sought Berkeley County's agreement to vacate the default judgment. Berkeley County refused. Lexon obtained local counsel and continued, unsuccessfully, its attempts to get Berkeley County to agree to vacate the default judgment. Finally, on February 22, 2013, Lexon made its first appearance in this action by filing its Motion to Set Aside Default Judgment pursuant to Rule 55(c) of the West Virginia Rules of Civil Procedure. By order entered February 6, 2014, the circuit court denied Lexon's motion. This appeal followed.

II.STANDARD OF REVIEW

In this appeal, Lexon seeks reversal of the circuit court's order denying its motion to set aside default judgment. It is well settled that

“[a] motion to vacate a default judgment is addressed to the sound discretion of the court and the court's ruling on such motion will not be disturbed on appeal unless there is a showing of an abuse of discretion.” Syl. Pt. 3, Intercity Realty Co. v. Gibson, 154 W.Va. 369, 175 S.E.2d 452 (1970) [, overruled on other grounds by Cales v. Wills, 212 W.Va. 232, 569 S.E.2d 479 (2002) ].

Syl. pt. 1, Drumheller v. Fillinger, 230 W.Va. 26, 736 S.E.2d 26, 27 (2012). In other words, “ ‘ “[a]ppellate review of the propriety of a default judgment focuses on the issue of whether the trial court abused its discretion in entering the default judgment.” Syllabus point 3, Hinerman v. Levin, 172 W.Va. 777, 310 S.E.2d 843 (1983).’ Syl. pt. 1, Cales v. Wills, 212 W.Va. 232, 569 S.E.2d 479 (2002).” Syl. pt. 2, Hardwood Grp. v. Larocco, 219 W.Va. 56, 631 S.E.2d 614 (2006). With this standard as our guide, we proceed to evaluate the arguments herein raised.

III.DISCUSSION

In this appeal, Lexon raises several grounds for reversing the circuit court's denial of its motion to set aside the judgment of default entered against it. However, we need address only two issues, the propriety of the default judgment under West Virginia Rule of Civil Procedure 55(b)(1), and the propriety of default in light of the parties' agreement to informally extend the time for Lexon to answer the complaint.⁴ We address these issues in turn.

A. Propriety of Default Judgment Under Rule 55(b)(1)

Lexon first argues that the circuit court erred by failing to set aside the default judgment where it received no notice of hearing, and no hearing was conducted on damages despite the fact that Lexon had a right to elect a method of curing the default of its principal as opposed to paying monetary damages. In essence, Lexon contends that requirements for default judgment under Rule 55(b)(1) were not met. Berkeley County responds that it properly moved for default judgment under Rule 55(b)(1) ; therefore, no notice to Lexon or hearing on damages was required. This is so, argues Berkeley County, because Lexon had refused Berkeley County's demand for performance, which refusal obligated Lexon to pay the full penal sum of its bonds as liquidated damages. We disagree.

Rule 55(b) provides two methods for entering default judgment:

(b

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