Petty v. Weyerhaeuser Co.

• Decision Date: 28 January 1986
• Docket Number: No. 0660,0660
• Citation: 288 S.C. 349,342 S.E.2d 611
• Court: South Carolina Court of Appeals
• Parties: George PETTY, d/b/a Petty's Skate Arena, Respondent, v. WEYERHAEUSER COMPANY and Burris Construction Company, Inc., Defendants, of whom Weyerhaeuser Company is Appellant. . Heard

Page 611

342 S.E.2d 611

288 S.C. 349

George PETTY, d/b/a Petty's Skate Arena, Respondent, v. WEYERHAEUSER COMPANY and Burris Construction Company, Inc., Defendants of whom Weyerhaeuser Company is Appellant.

No. 0660.

Court of Appeals of South Carolina.

Heard Jan. 28, 1986.

Decided March 24, 1986.

Manton M. Grier, Walter W. Theus, Jr., and Clarke W. DuBose, Columbia, for appellant.

Martin S. Driggers, and Edward E. Saleeby of Saleeby, Cox & Bledsoe, P.A., Hartsville, for respondent.

CURETON, Judge:

Appellant Weyerhaeuser Company (Weyerhaeuser) appeals an order of the trial court that refused to allow it to serve a late answer. It also appeals a second order of the trial court that awarded damages of $123,092.02 for defective building materials sold by Weyerhaeuser to Petty. We affirm.

Petty opened a new skating rink in the town of Hartsville, South Carolina on September 20, 1974. After four to six weeks, the particle board floor supplied by Weyerhaeuser started to buckle making it unsuitable for skating. Eventually, the floor required replacement. Petty testified at trial that he opened the rink to overflowing crowds but after the floor deteriorated, customers complained and the crowds shrank. Following the replacement of the floor in July 1975 the rink reopened and business slowly improved, but never to the level he enjoyed during the first three months of operations in 1974. Petty also testified that his operating expenses were "fixed" and were incurred whether or not he operated the business to capacity.

Petty filed suit in February 1976 seeking damages from Weyerhaeuser and a co-defendant Burris Construction Company on the theories of negligence, breach of warranty and strict liability. ¹ Petty attempted to serve Weyerhaeuser by service upon the Secretary of State of South Carolina. The Secretary in turn mailed the summons and complaint to C.T. Corporation System in Greenville, South Carolina. C.T. Corporation System was not the registered agent of Weyerhaeuser but, nevertheless, forwarded the suit papers to Weyerhaeuser at its corporate offices in Tacoma, Washington.

Upon receiving the suit papers, Weyerhaeuser's counsel telephoned Petty's attorney on February 27, 1976 and obtained an indefinite extension of time to respond to the pleadings and to enable him to explore settlement possibilities. Thereafter, Petty's counsel wrote to Weyerhaeuser's counsel with an offer of settlement but received no response to the offer. Ultimately, on August 9, 1976 Petty's lawyer wrote to Weyerhaeuser's counsel advising him of an upcoming term of court and requesting a response "so that we will know whether to demand an answer and start our discovery in this case." The letter ended: "Please let us have some response from you concerning whether you will meet our settlement demand or send us your answer to our complaint within ten (10) days of the date of this letter."

When no response or answer was received from Weyerhaeuser, Petty moved on August 20, 1976 for a default judgment and an order of reference. An order of default was entered and the matter was referred to a referee who, after holding a hearing, recommended entry of a judgment for Petty. The circuit court entered judgment on the recommendation. Weyerhaeuser then moved to set aside the judgment based on improper service. Its motion was denied. In an appeal to the South Carolina Supreme Court, the case was remanded for a determination of whether the judgment should be set aside because Petty's counsel failed to give Weyerhaeuser notice of its motion to declare Weyerhaeuser in default.

Pursuant to the remand from the Supreme Court, Judge Chandler held a hearing and at its conclusion, ruled that the default judgment would be set aside, but reserved for Petty the right to move for an order of default after proper notice to Weyerhaeuser. Thereafter, Weyerhaeuser removed the case to the federal District Court of South Carolina. The district court found that the case had been improvidently removed and remanded it to state court. Petty again moved for a default judgment and an order of reference. Weyerhaeuser also moved for an order holding that it was not in default, or for permission to file a late answer. Judge Chandler held Weyerhaeuser in default, refused it permission to file a late answer, and again, referred the matter to a special referee to assess damages. The referee found Petty entitled to damages of $123,092.02. This sum represents $18,870.52 to replace the floor, $4,221.50 to compensate Petty for time lost in repairing and replacing the floor and $100,000.00 for damage to the business. In an appeal to the circuit court, the referee's findings and recommendations were confirmed in their entirety. Weyerhaeuser appeals only the $100,000.00 award for damage to the business.

Weyerhaeuser submits fifty-five exceptions alleging error on the part of the circuit judge. These exceptions have been restated in three questions in Weyerhaeuser's brief:

(1) Did the lower court err in ruling that Weyerhaeuser is in default, and that such default was not a result of excusable neglect?

(2) Are lost profits recoverable under the "new business rule" for a new business with only three months operating history, in that such lost profits are merely speculative and too uncertain to be recoverable?

(3) Did the lower court err in the methods it used to determine damage to Plaintiff's business?

I.

Pertaining to the issue of default, a motion to be relieved of default is addressed to the discretion of the trial judge. See Em-Co Metal Products, Inc. v. The Great Atlantic & Pacific Tea Co., 280 S.C. 107, 109, 311 S.E.2d 83, 85 (Ct.App.1984). Weyerhaeuser argues that the letter demanding an answer is ambiguous and did not provide him notice that an answer was being demanded by a specific date. The trial court found that the letter was specific enough in "setting a date by which [Weyerhaeuser] would be required to answer." This finding has evidentiary support. We find no abuse of discretion.

Weyerhaeuser also argues that the parties, through their exchange of letters, created a contractual agreement that in effect afforded Weyerhaeuser an indefinite extension of time to answer and that Petty's demand letter was ineffective to terminate that contract. Weyerhaeuser cites the Pennsylvania case of Hahnemann Medical College & Hospital v. Hubbard, 276 Pa.Super. 436, 406 A.2d 1120 (1979) as authority for its argument. The Hubbard court applied principles of contract law in deciding that there had been no agreement between attorneys about an extension of time to answer. The trial judge in addressing this argument said:

This appears to be an attempt at a new theory of law; current South Carolina law construes an extension of time granted by the Plaintiff to be a courtesy.

Counsel for Weyerhaeuser has not brought to our attention any other case that has construed an extension in the fashion suggested. We decline to adopt at this time any theory that would construe an extension of time to answer as anything other than a courtesy from the granting attorney.

Lastly, citing Wright v. Central States, Southeast & Southwest Areas, Health & Welfare Fund, 440 F.Supp. 1235 (D.S.C.1977), Weyerhaeuser argues that under the provisions of the Federal Rules of Civil Procedure 81(c) his answer, filed after the case had been removed to the federal district court, was valid. Rule 81(c) provides inter alia; "In a removed action in which the defendant has not answered, he shall answer ... within five days after the filing of the petition for removal...." We hold that Rule 81(c) does not protect Weyerhaeuser. Here, a default judgment was entered prior to the time the case was removed to the federal court. While it is true, removed actions are governed procedurally by the Federal Rules of Civil Procedure, substantively judgments of state courts remain in force unless vacated by the federal court. Colonial Bank & Trust Co. v. Cahill, 424 F.Supp. 1200 (N.D.Ill.1976). No order was entered in this case setting aside the default. Thus, the default remained in full force and effect as if the case had not been improvidently removed.

II.

We next address Weyerhaeuser's claim that the trial court's award of $100,000.00 as damage to Petty's business is error. During the period covered by the damages award, Petty had gross revenues as follows: 1974--$27,727.97; 1975--$69,810.39; 1976--$81,653.64; 1977--$87,509.85. In awarding damages to the business, the referee found that based on the historical earnings data for 1974, Petty could have reasonably expected to have had gross revenues of $100,000.00 in 1975 if he had not incurred problems with the floor. He further concluded that since Petty experienced a 17% increase of gross revenues in 1976 over his 1975 revenues, that without the defective floor, his gross revenues should have been $115,000.00. Likewise, the referee found that since Petty realized a 7% increase of revenues in 1977 over 1976 revenues that Petty's gross revenues in 1977 should have been $123,050.00. He then concluded that Petty had a loss of gross revenues in 1975 of $30,189.61; 1976 of $33,346.36 and 1977 of $35,540.15. ²...