Cate Street Capital, Inc., a Delaware Corporation and Red Desert Reclamation, LLC, a Wyoming Limited Liability Company v. Automation & Electronics, Inc.

2016 WY 26, 368 P.3d 302, 2016 Wyo. LEXIS 27, 2016 WL 743533
Wyoming Supreme Court·Decided February 24, 2016·No. S-15-0146, S-15-0173·Published·Cited by 6 cases

Opinion

DAVIS, Justice.

[T1] CSC Group Holdings, LLC (CSC), Cate Street Capital, Inc. (Cate Street), and Red Desert Reclamation, LLC (Red Desert) appeal from two default judgments in favor of Automation & Electronics, Inc. (A & B). Those judgments made the three Appellants jointly and severally liable on a debt owed by Red Desert to A & F, and set aside as fraudulent a mortgage granted by Red Desert to CSC, thereby allowing A & E to execute on real property to recover on a judgment against Red Desert We affirm.

ISSUE

[12] The three Appellants raise a single issue, which we restate as follows:

*304 In a multiple-plaintiff, multiple-claim suit, did a judgment not certified under W.R.C.P. 54(b) in favor of only plaintiff A & E. deprive the district court of subject matter jurisdiction to allow A & E to amend its complaint so as to add alter ego and fraudulent conveyance claims against Red Desert, CSC, and Cate Street?

FACTS

[T3] Red Desert owned and operated a Sweetwater County facility for treatment and reclamation of water used for hydraulic fracturing in the petrochemical industry. In 2012, it engaged A & E to perform electrical work at the facility through an oral contract, and it also entered into a written credit agreement for materials with Consolidated Electric Distributors, Inc. (CE). All materials were delivered and all work was completed between mid-May and mid-September of 2012, Three months later Red Desert still owed A & E more than fifty-nine thousand dollars, and CE more than twenty-five thousand dollars. In early January of 2018, A & E and CE sued Red Desert in separate actions for the amounts due on their respective contracts, and also sought to establish contractor and materialman liens. 1 The district court consolidated those actions on May 8, 2018.

[T4] In its answer to both complaints, and in summary judgment motions, Red Desert argued that A & E and CE did not properly perfect contractor or materialman liens because they both failed to provide timely written notice of their right to assert such a lien and of Red Desert's right to obtain a lien waiver relating to any payments it had made to them. 2 Nevertheless, in early March of 2014, Red Desert filed a confession of judgment in favor of CE and A & E in the respective amounts of $31,418.97 and $77,401.96, both of which included principal of the respective debt and accrued interest.

[T5] On June 8, 2014, pursuant to a stipulation between A & E and Red Desert, the district court entered judgment against Red Desert in favor of A & E. The judgment declared the latter's contractor's lien statement void but awarded $85,470.29, which included prejudgment interest, attorney fees and costs, with post-judgment interest of 18% per annum. At that point, CE still remained in the action, but the judgment for A & E was not certified as immediately appealable under Rule 54(b).

[T6] On June 16, 2014, A & E filed that judgment as a lien against the treatment plant and associated lands. 3 Three days later it filed a motion for leave to amend its complaint to join CSC and Cate Street as defendants and to add additional allegations that related to Red Desert. A & E alleged that CSC and Cates Street were two closely related entities that used a captive Red Desert as their alter ego to insulate themselves from creditors, and that the mortgage granted by Red Desert to CSC was a fraudulent conveyance designed to serve the same purpose. -It asked that CSC and Cate Street be deemed jointly and severally liable with Red Desert on the stipulated judgment recently entered in its favor, that the mortgage be set aside, and that it be permitted to sell Red Desert's real property to satisfy its judgment. The district court granted the motion to amend; the amended complaint was served, and Red Desert's counsel entered an appearance for all three defendant entities. In their answers, Appellants did not chal *305 lenge the order authorizing the amendment on any procedural grounds.

[17] On July 18, 2014, the district court granted a partial summary judgment against CE, finding that it failed to properly perfect its materialman's lien against Red Desert. On August 15, 2014, CE moved to dismiss the remainder of its claims without prejudice, and the court granted that motion a month later. The motion recited that Red Desert had made itself judgment proof, and that it was not cost-effective for CE .to incur the expense necessary to reduce the remaining claims to an unenforceable judgment, By the time CE's claims were dismissed, all defendants to the claims made by A & E had answered.

[18] To' say that discovery did not go well would be a gross understatement. CSC and Cate Street resisted providing meaningful answers to A & E's interrogatories and requests for production 'of documents aimed at uncovering the extent to which their ownership and financial affairs were comingled with each other and Red Desert. On November 5, 2014, A & E filed a motion to compel CSC to fully and properly respond to its discovery requests. On December 9, the district court found A & E's discovery reasonably calculated to lead to the discovery of admissgible evidence, gave CSC until January 2, 2015, to respond properly, and determined that A & E was entitled to attorney fees related to the motion to compel.

[T9] When CSC failed to respond as ordered, A & E filed a motion for an order which would require it to show cause as to why it had not done so. The motion indicated that CSC's counsel told A & E's attorney that their client did not intend to comply with the order, A & E sought a default judgment and an award of attorney fees as a sanction for CSC's disobedience of the order compelling discovery. 'The motion was set for a hearing on February 18, 2015.

[110] On January 23, 2015, CSC, Cate Street, and Red Desert filed a joint motion seeking a 45-day extension of the time to respond to discovery, noting that all three had discharged the attorneys who had prepared the motion. That same day counsel confirmed that discharge in a motion for leave to withdraw, to which was attached the affidavit of the manager of all three entities, who attested that he had in fact dlscharged their current counsel: >

[T11] On February 18, five days before the scheduled hearing on A & E's motion to show cause, replacement counsel entered their appearance on behalf of the three defendants. Replacement counsel contemporaneously filed a motion to reschedule the show cause hearing set for February 18. The district court denied that motion in no uncertain terms on February 17, noting that CSC had ample time to comply with its order to compel discovery while represented by previous counsel, and had simply not done so.

[T12] At the scheduled hearing, the court ordered CSC to comply with its discovery order by March 8, 2015 or face a default judgment. It also set a hearing on that date for the sole purpose of zevaluatmg CSC's compliance.

[T13] On February 18, the date of the hearing just described, the defendants filed a motion asking the court to reconsider its December 9, 2014 order compelling discovery.

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Cate Street Capital, Inc., a Delaware Corporation and Red Desert Reclamation, LLC, a Wyoming Limited Liability Company v. Automation & Electronics, Inc., 2016 WY 26, 368 P.3d 302, 2016 Wyo. LEXIS 27, 2016 WL 743533 (Wyo. 2016).

2016 WY 26 (Cate Street Capital, Inc., a Delaware Corporation and Red Desert Reclamation, LLC, a Wyoming Limited Liability Company v. Automation & Electronics, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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