M & A Const. Corp. v. Akzo Nobel Coatings, Inc.

• Decision Date: 10 April 1997
• Docket Number: No. 96-227,96-227
• Citation: 936 P.2d 451
• Parties: M & A CONSTRUCTION CORP., a New York corporation, Appellant (Plaintiff), v. AKZO NOBEL COATINGS, INC., Appellee (Defendant).
• Court: Wyoming Supreme Court

Page 451

936 P.2d 451

M & A CONSTRUCTION CORP., a New York corporation, Appellant (Plaintiff), v. AKZO NOBEL COATINGS, INC., Appellee (Defendant).

No. 96-227.

Supreme Court of Wyoming.

April 10, 1997.

Joseph F. Moore and Glenn W. Myers of Moore & Myers, Jackson, for appellant.

John L. Gallinger, P.C. and Paula A. Fleck of Holland and Hart, Jackson, for appellee.

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

MACY, Justice.

The district court set aside the entry of default against Appellee Akzo Nobel Coatings, Inc. and granted a summary judgment against Appellant M & A Construction Corp. M & A Construction appeals from those orders.

We affirm.

ISSUES

M & A Construction presents the following issues on appeal:

I. The Trial Court's vacation of the entry of default without finding any specific grounds as required by Rule 60(b) on which to base its decision was contrary to law.

II. The Trial Court's finding that good cause existed to set aside the entry of default was unsupported by the evidence because Defendant/Appellee failed to meet its burden of proof to show good cause.

III. The Trial Court erred when it found that there were no genuine issues of material fact and that Defendant/Appellee Akzo was entitled to summary judgment as a matter of law.

IV. The Trial Court erred when it found that the Evaluation Voucher form dated February 1, 1994 contained a "release" and that the "release" was clear and unambiguous.

FACTS

In 1988 or 1989, a wood finish manufactured by Akzo was applied to a house in Jackson which was owned by M & A Construction. Andrew DiMarco, the president of M & A Construction, and his wife contacted Akzo in 1991 and complained that the stain was chipping and flaking. Akzo viewed the house and authorized the restaining of the home at no cost to the DiMarcos. Mr. DiMarco executed a document entitled "Akzo Woodfinishes Final Release," releasing and discharging Akzo from "any action, cause of action, or claim for damages ... where the damage has been sustained as at the date hereof or may be sustained thereafter." The stain was reapplied in the summer of 1991.

The DiMarcos contacted Akzo in the fall of 1993 and informed it that they were again experiencing problems with the stain. Akzo sent forty gallons of a different stain to the DiMarcos, and they took delivery of that stain. Mr. DiMarco executed another release on February 11, 1994.

As a result of the stain's failure, the DiMarcos filed an action on October 19, 1994, in the district court, asserting claims against Akzo for strict liability, breach of express and implied warranties of fitness, and negligence. After Akzo answered the complaint, it filed its first motion for a summary judgment, arguing that the terms of the first release barred the DiMarcos' claims.

On September 6, 1995, the DiMarcos requested leave to amend their complaint in order to change the name of the plaintiff from the DiMarcos to M & A Construction because M & A Construction was the actual owner of the home. The DiMarcos attached a copy of the first amended complaint to the memorandum which it submitted in support of its motion to amend. The district court granted the DiMarcos' motion on September 8, 1995, and stated that the first amended complaint was deemed to be filed instanter. The first amended complaint contained revisions in addition to the name change. M & A Construction added additional counts and modified some of the original counts.

Akzo failed to answer the first amended complaint, and M & A Construction requested and received an entry of default on October 12, 1995, from the clerk of the district court. On that same day, Akzo filed a motion to set aside the entry of default. After holding a hearing, the district court found that good cause had been shown for vacating the entry of default and ordered Akzo to file an answer. Akzo filed its answer, and on November 17, 1995, the district court denied Akzo's first motion for a summary judgment.

Akzo filed a second motion for a summary judgment on April 29, 1996, arguing that it was entitled to be awarded a judgment as a matter of law on the basis of the second release. The district court granted Akzo's second motion for a summary judgment, and M & A Construction appealed to this Court.

DISCUSSION

A. Default

M & A Construction contends that the district court erred when it vacated the entry of default against Akzo. Specifically, M & A Construction argues that sufficient evidence did not support the district court's ruling that good cause had been shown for setting aside the entry of default and that the district court erred by failing to make express findings to support its ruling.

W.R.C.P. 55 governs entries of defaults:

(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.

....

(c) Setting aside default.--For good cause shown the court may set aside an entry of default....

Akzo argues that the clerk of the district court should not have entered the default against it because it had otherwise defended the case under W.R.C.P. 55(a) by filing a motion for a summary judgment and by actively defending the case. In First Southwestern Financial Services v. Laird, 882 P.2d 1211, 1214 (Wyo.1994), we quoted Rashidi v. Albright, 818 F.Supp. 1354, 1355-56 (D.Nev.1993), aff'd, 39 F.3d 1188 (9th Cir.1994) (citations omitted) as follows:

"Failure to 'otherwise defend' presumes the absence of some affirmative action on the part of a defendant which would operate as [a] bar to the satisfaction of the moving party's claim. In this context, it is generally held that challenges to matters such as service, venue and the sufficiency of the complaint preclude a default even if pursued in the absence of a responsive pleading. It is undisputed that a motion challenging a complaint for failure to state a claim upon which relief can be granted falls squarely within the ambit of the phrase 'otherwise defend.' "

In the Rashidi case, the federal district court expressly stated that filing a motion for a summary judgment was a means of otherwise defending a case. 818 F.Supp. at 1356. The court stated: "[C]learly a summary judgment motion which speaks to the merits of the case and demonstrates a concerted effort and an undeniable desire to contest the action is sufficient to fall within the ambit of 'otherwise defend.' " Id.

In this case, Akzo answered the original complaint and then filed its first motion for a summary judgment. While that motion was pending, M & A Construction sought and received permission to amend its complaint. The parties acknowledged that Akzo's first summary judgment motion applied to the amended complaint. The issues were, therefore, effectively joined for resolution by Akzo's summary judgment motion. See Lantz v. Bowman, 881 P.2d 1079, 1081 (Wyo.1994). Even though Akzo did not file its answer to the amended complaint in a timely fashion, it actively and vigorously defended the case, and the entry of default should not have been recorded against it.

Furthermore, even if the default had been properly entered, good cause existed for the district court to set aside the entry of default. A district court has broad discretion in deciding whether to set aside an entry of default. First Southwestern Financial Services, 882 P.2d at 1215. We will not disturb the district court's decision on appeal " 'unless appellant demonstrates that the trial court abused [it's discretion] and was clearly wrong.' " Vanasse v. Ramsay, 847 P.2d 993, 996 (Wyo.1993) (quoting Claassen v. Nord, 756 P.2d 189, 193 (Wyo.1988)).

The party who is seeking to have an entry of default vacated must establish that he is entitled to such relief. Carlson v. Carlson, 836 P.2d 297, 301 (Wyo.1992). The reasons for setting aside a judgment under W.R.C.P. 60(b) are relevant in determining whether good cause has been shown for vacating an entry of default. Vanasse, 847 P.2d at 999. Those reasons include "(1) mistake, inadvertence, surprise, or excusable neglect ... or (6) any other reason justifying relief from the operation of the judgment." W.R.C.P. 60(b). This Court has adopted a three-factor test to be applied in determining whether a motion under W.R.C.P. 60(b) should be granted. Vanasse, 847 P.2d at "1. Whether the plaintiff will be prejudiced; 2. Whether the defendant has a meritorious defense; and 3. Whether culpable conduct of the defendant led to the default."

                998.   We have also ruled that the factors may be applied to determine whether good cause has been shown under W.R.C.P. 55(c).  First Southwestern Financial Services, 882 P.2d at 1215;  Vanasse, 847 P.2d at 998.   The three factors we consider are
                

Carlson, 836 P.2d at 301-02 (quoting Amernational Industries, Inc. v. Action-Tungsram, Inc., 925 F.2d 970, 976 (6th Cir.), cert. denied, 501 U.S. 1233, 111 S.Ct. 2857, 115 L.Ed.2d 1024 (1991)).

The district court's decision to vacate the entry of default in this case was warranted under W.R.C.P. 60(b). While Akzo could have avoided this entire problem by filing a timely answer to the first amended complaint, it apparently did not believe that an answer was necessary. Akzo had otherwise defended the case by filing its motion for a summary judgment, and it believed that the only difference between the original complaint and the first amended complaint was in the name of the plaintiff. However, the body of the complaint was, in fact, changed significantly, and an answer was required. The district court was also surprised that the first amended complaint contained such drastic changes. We conclude, therefore, that Akzo's failure to file an answer to the first amended complaint was the result of mistake and excusable neglect.

The district court's decision to set aside the entry of default was also authorized under...