McGarvin-Moberly Construction Co. v. Welden

897 P.2d 1310, 1995 Wyo. LEXIS 111, 1995 WL 385534

• Court: Wyoming Supreme Court
• Decided: June 29, 1995
• Docket: 93-238, 93-242
• Status: Published

Opinions

THOMAS, Justice.

Our sole concern in this case is the degree of participation in discovery and trial proceedings that should be afforded to a defendant in a personal injury case founded on negligence when default, but no judgment by default, has been entered against that defendant. After default was entered by the clerk of the trial court, the judge permitted the defendant in default to participate fully in the proceedings as they related to the damage issue. The judge did, however, foreclose that defendant from discovery relating to the issue of fault. Our analysis of the form in which the legislature has cast our comparative negligence statute leads to the conclusion that the issue of fault, as distinguished from liability, is no longer separable from the issue of damages. The two are intertwined to the extent that one cannot defend on the issue of damages without being permitted to participate with respect to the issue of fault. The defendant in default must be permitted to participate in proceedings which address the issue of relative fault because it is a significant factor in any damage award. We affirm the order of the district court permitting the participation of the defendant in default on the issue of damages, but we reverse that aspect of the court’s order denying discovery relating to the issue of fault.

This court granted a Petition for Writ of Review, filed by McGarvin-Moberly Construction Company (McGarvin-Moberly), and it also granted a Petition for Writ of Review Pursuant to W.R.A.P. Rule 13, filed by Billy J. Welden and Josephine R. Welden (Wel-dens), who are plaintiffs in the case. In addition to the petitions and briefs of McGar-vin-Moberly and the Weldens, the defendant who was not in default, Dan A. Hunter, personal representative of the estate of Bertha Pauline Hunter (Hunter), appeared in this court.

McGarvin-Moberly advances the question for consideration in this way:

Where default, but no default judgment, has been entered against one defendant in a multi-defendant comparative fault case, and where that defaulted defendant has “appeared” and complied with the Melehes v. Wilson requirements prior to any default judgment, should the trial court allow the defaulted defendant to present evidence, and argument, as to

A. plaintiffs’ unliquidated damages, and

B. the allocation of fault among all the parties pursuant to the Wyoming comparative negligence statute, W.S. § 1-1-109?

The Weldens state these issues:

A. Under the Wyoming Rules of Civil Procedure, can a defendant “in default for failure to appear” cure the default and participate in discovery and at trial on damage issues, merely by filing a motion to set aside a default that is neither void nor voidable — a motion that was denied by the district court?

B. After entry of a valid default, do the defaulted party’s rights to participate in the litigation terminate (assuming the Court refuses to set the default aside)?

In response to the McGarvin-Moberly Petition for Writ of Review, Hunter states the issue in this way:

The only issue presented is whether the Court erred in allowing McGarvin-Moberly to participate at all after default, and the extent of the participation, if any, whether as to fault, allocation of fault or damages.

This action arose out of a chain collision at a construction site on May 29, 1992. McGar-vin-Moberly was the contractor for a project on Highway 310 between Greybull and Lo-vell. Three or four cars were stopped at the construction site when the Hunter vehicle approached the stopped cars from the rear. The Weldens were in a car at the front or near the front of the line and Mrs. Hunter failed to stop her car. It collided with the last car in the line causing a chain reaction so that the car behind the Weldens rear-ended their vehicle.

In their complaint, the Weldens alleged negligence on the part of Mrs. Hunter, who was driving the Hunter vehicle, and McGar-vin-Moberly. They claimed the negligence of these defendants was the direct and proximate cause of their injuries and damages. McGarvin-Moberly failed to file an answer to the complaint within the twenty days provided in Wyo.R.Civ.P. 12. On the thirty-third day, the clerk of the district court entered default against McGarvin-Moberly for failure to answer in accordance with Wyo.R.Civ.P. 55(a). On the same day the Weldens moved for entry of a default in accordance with Wyo.R.CivP. 55(b)(2).¹

Sixteen days later, McGarvin-Moberly filed an entry of appearance with a motion to set aside the entry of default. McGarvin-Moberly filed its answer to the complaint the same day. After a hearing on the MeGar-vin-Moberly motion to set aside the entry of default, at which Weldens and McGarvin-Moberly appeared, the trial court issued a decision letter in which it found culpable conduct on the part of McGarvin-Moberly’s insurance agent. An order then was entered reflecting the findings of the decision letter, which denied the McGarvin-Moberly motion to set aside the entry of default. McGarvin-Moberly attempted to seek relief from the court’s order by a petition for writ of review filed in this court, but that writ of review was denied.

The Weldens then filed a Written Objection to Any Further Appearance in This Action by Defaulting Defendant McGarvin-Moberly and, later, filed a motion to bar further participation in the ease by McGar-vin-Moberly. The court held a hearing on that motion and ruled McGarvin-Moberly would be allowed “to participate fully in the discovery process and on issues concerning proximate cause and damages, and to participate in the jury trial on those same issues.” The Weldens then asked the trial court to reconsider and vacate its ruling and, following additional arguments, the trial court issued a decision letter in which it stated McGarvin-Moberly could participate in the discovery process at trial concerning the issue of damages only. Hunter then requested the trial court to clarify the ruling from the bench as incorporated in its decision letter. The court conducted a telephone conference and entered an Order on Defendant McGar-vin-Moberly’s Further Participation, which provided:

NOW, THEREFORE, IT IS HEREBY ORDERED that Plaintiffs’ Motion to Bar Defendant McGarvin-Moberly from further participating in this case is hereby DENIED to the extent that Defendant McGarvin-Moberly shall be permitted to participate in the discovery process and at trial solely on the issue of Plaintiffs damages.

IT IS FURTHER HEREBY ORDERED that the default entered against Defendant McGarvin-Moberly established McGarvin-Moberiy’s liability to each of the Plaintiffs.

IT IS FURTHER HEREBY ORDERED that Plaintiffs’ Motion to Bar Participation and To Strike is GRANTED to the extent that Defendant McGarvin-Moberly shall be prohibited from participation in the discovery process and at trial (or in the absence of trial at the W.R.C.P. Rule 55 damages hearing) on issues of said Defendant’s liability to Plaintiffs, proximate cause, allocation of fault and apportionment of damages.

Following Petitions for Writ of Review in this court, we consolidated those and granted them.

As the trial court correctly discerned, there is a difference between an entry of default under Wyo.R.Crv.P. 55(a) as compared to a default judgment under Wyo. R.Civ.P. 55(b). A defendant who is in default still may contest the issue of unliquidated damages. In Vanasse v. Ramsay, 847 P.2d 993, 996-97 (Wyo.1993) (quoting Spitzer v. Spitzer, 777 P.2d 587, 592 (Wyo.1989) (emphasis added)), we spoke to the distinction between default and a default judgment:

The distinction between an entry of default and a default judgment must here be recognized. Entry of default is normally a clerical act which may be performed by the clerk of court, and it does not constitute a judgment. The entry of default generally forecloses the party found to be in default from making any further de-fense or assertion with respect to liability or an asserted claim. Although the entry of default generally establishes the fact of liability according to the complaint, it does not establish either the amount or the degree of relief.

The default judgment, on the other hand, in addition to the fact of liability, defines the amount of liability or the nature of the relief. This is generally done separately from the entry of default. Only in those situations where the damages sought are liquidated and claimed in the complaint may the court grant relief without further proceedings.

In Vanasse, 847 P.2d at 1000, we also articulated the purpose to be served by a default judgment:

We note that:

[T]he default judgment must normally be viewed as available only when the adversary process has been halted because of an essentially unresponsive party. In that instance, the diligent party must be protected lest he be faced with interminable delay and continued uncertainty as to his rights. The default judgment remedy serves as such a protection. Furthermore, the possibility of a default is a deterrent to those parties who choose delay as part of their litigative strategy. (Emphasis added.)

H.F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 691 (D.C.1970). See also, Chandler Leasing Corp. v. UCC, Inc., 91 F.R.D. 81, 83 (1981); United Bank of Kuwait PLC v. Enventure Energy, 755 F.Supp. 1195, 1205 (S.D.N.Y.1989). Default judgments provide a deterrent to delay in judicial proceedings. Byrd v. Keene Corp., 104 F.R.D. 10, 11 (1984). We agree with the view of the Tenth Circuit, which stated:

[A] workable system of justice requires that litigants not be free to appear at their pleasure. We therefore must hold parties and their attorneys to a reasonably high standard of diligence in observing the courts’ rules of procedure. The threat of judgment by default serves as an incentive to meet this standard.

Cessna Fin. Corp. v. Bielenberg Masonry Contracting, Inc., 715 F.2d 1442, 1444-45 (10th Cir.1983) (citations omitted).

The provision in the rules for default judgment encourages diligence on the part of the parties and encourages them to hear and argue the case on the merits. We prefer decisions on the merits when the rules justify avoiding default. Claassen v. Nord, 756 P.2d 189 (Wyo.1988).

The application of Wyo.R.Civ.P. 55 becomes complex and difficult in a situation such as this where we find multiple defendants in a negligence action, only one of whom is in default. The Weldens and Hunter contend the entry of default has the same effect on a defendant in default as would the failure of the plaintiff to meet an applicable statute of limitations. They contend the right of the party in default to participate must be terminated, and the only remedy which would justify further participation by the defendant in default in the case is through a motion to set aside the default. They argue, after this court denied McGar-vin-Moberly’s Petition for Writ of Review seeking to reverse the ruling of the district court on its motion to set aside the default, it had no remaining right to defend in the case. McGarvin-Moberly asserts the other parties fail to perceive the distinction between a “default” and a “default judgment,” and reliance upon “default judgment” cases is inappropriate to explain the effect and scope of a “default.”

We have noted the appearance of McGarvin-Moberly and its attempt to have the entry of default set aside. Wyo.R.Civ.P. 55(b)(2) justifies the ruling by the trial court permitting McGarvin-Moberly to defend on the issue of damages, and it is clear the ruling of the district court was correct. In Vanasse,. 847 P.2d at 997, we said the “default judgment, on the other hand, in addition to the fact of liability, defines the amount of liability or the nature of relief.” Even though McGarvin-Moberly has been adjudged liable by virtue of the entry of default, the damage aspect of the case has not been resolved, and the jury will determine the nature of relief, the amount of damages, and the percentage of fault attributable to Weldens, Hunter and McGarvin-Moberly.

McGarvin-Moberly’s situation is distinguishable from those cases in which no appearance occurred until after the entry of the default judgment. Weldens and Hunter rely upon Vanasse; Melehes v. Wilson, 774 P.2d 573 (Wyo.1989); Midway Oil Corp. v. Guess, 714 P.2d 339 (Wyo.1986); Hochhalter v. Great W. Enterprises, Inc., 708 P.2d 666 (Wyo.1985); U.S. Aviation, Inc. v. Wyoming Avionics, Inc., 664 P.2d 121 (Wyo.1983); and Booth v. Magee Carpet Co., 548 P.2d 1252 (Wyo.1976). In each case, the appearance occurred after the default judgment. While appearance after entry of default, but before default judgment, does not save a defendant from being in default, that defendant is entitled to three days written notice of an application to the court by the plaintiffs for entry of judgment based on default. Wyo.R.Civ.P. 55(b)(2).

The United States Court of Appeals for the Eighth Circuit said the notice requirement enables the defendant in default to appear at the subsequent hearing or trial on the question of damages and to protest the amount to be assessed against him. Peitzman v. City of Illmo, 141 F.2d 956 (C.C.A. 8th Cir.1944), cert. denied, 323 U.S. 718, 65 S.Ct. 47, 89 L.Ed. 577, reh’g denied, 323 U.S. 813, 65 S.Ct. 112, 89 L.Ed. 647 (1944). A Michigan court stated the proposition in this way:

If a defaulted party has a mandatory constitutional right to be notified of the proceeding, he must have a corresponding right to be heard at the proceeding. To interpret the section otherwise would be to make the notice requirement a mockery.

Am. Central Corp. v. Stevens Van Lines, Inc., 103 Mich.App. 507, 303 N.W.2d 234, 236-237 (1981).

A number of other courts have arrived at the same determination holding that, in the assessment of damages following entry of default, a defaulting defendant has the right to participate in the proceedings and introduce affirmative evidence on its own behalf in mitigation of damages. J & P Constr. Co. v. Valta Constr. Co., 452 So.2d 857 (Ala.1984); Dungan v. Superior Court in and for Pinal County, 20 Ariz.App. 289, 512 P.2d 52 (1973); Kohlenberger, Inc. v. Tyson’s Foods, Inc., 256 Ark. 584, 510 S.W.2d 555 (1974); Har-bour Tower Dev. Corp. v. Seaboard Equip. Co., 179 So.2d 405 (Fla.Ct.App.1965); Pittman v. Colbert, 120 Ga. 341, 47 S.E. 948 (1904); Stewart v. Hicks, 182 Ind.App. 308, 395 N.E.2d 308 (1979); Greer v. Ludwick, 100 Ill.App.2d 27, 241 N.E.2d 4 (1968); Howard v. Fountain, 749 S.W.2d 690 (Ky.Ct.App.1988); Bissanti Design/Build Group v. McClay, 32 Mass.App.Ct. 469, 590 N.E.2d 1169 (1992); Lindsey v. Drs. Keenan, Andrews & Allred, 118 Mont. 312, 165 P.2d 804 (1946); Evans v. Bowlin, 9 Mo. 406 (1945); Gallegos v. Franklin, 89 N.M. 118, 547 P.2d 1160, cert. denied, 89 N.M. 206, 549 P.2d 284 (1976); Napolitano v. Branks, 128 A.D.2d 686, 513 N.Y.S.2d 185 (1987); St. Louis & San Francisco R.R. Co. v. Zumwalt, 31 Okla. 159, 120 P. 640 (1912); Bashforth v. Zampini, 576 A.2d 1197 (R.I.1990); Adkisson v. Huffman, 225 Tenn. 362, 469 S.W.2d 368 (1971); Northeast Wholesale Lumber, Inc. v. Leader Lumber, Inc., 785 S.W.2d 402 (Tex.Ct.App.1989); Synergetics By and Through Lancer Indus., Inc. v. Marathon Ranching Co., 701 P.2d 1106 (Utah 1985); Midwest Developers v. Goma Corp., 121 Wis.2d 632, 360 N.W.2d 554 (Ct.App.1984).

In the context of this body of law, we must account for the effect of our statutory provisions relative to contributory negligence. The statute provides, in pertinent part:

(a) Contributory negligence shall not bar a recovery in an action by any person or his legal representative to recover damages for negligence resulting in death or in injury to person or property, if the contributory negligence of the said person is not more than fifty percent (50%) of the total fault. Any damages allowed shall be diminished in proportion to the amount of negligence attributed to the person recovering.

(b) The court may, and when requested by any party shall:

(i) If a jury trial:

(A) Direct the jury to find separate special verdicts determining the total amount of damages and the percentage of fault attributable to each actor whether or not a party; and

(B) Inform the jury of the consequences of its determination of the percentage of fault.

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(c) The court shall reduce the amount of damages determined under subsection (b) of this section in proportion to the amount of fault attributed to the person recovering and enter judgment against each defendant in the amount determined under subsection (d) of this section.

(d) Each defendant is liable only for that proportion of the total dollar amount determined as damages under paragraph (b)(i) or (ii) of this section in the percentage of the amount of fault attributed to him under paragraph (b)(i) or (ii) of this section.

Wyo.Stat. § 1-1-109 (1988) (emphasis added).²

The identifiable damage factors under this statute are: (1) the total amount of damages and (2) the percentage of fault attributable to each actor. The formula requires the court to reduce the amount of damages in proportion to the amount of fault attributed to the person recovering and then to apportion those damages in its judgment with respect to the amount of fault attributed to each defendant. While our pertinent authorities antedate significant adjustments to the statutory formula, this clearly is a jury function. Tate v. Mountain States Tel. & Tel. Co., 647 P.2d 58 (Wyo.1982); Bd. of County Comm’rs of Campbell County v. Ridenour, 623 P.2d 1174, reh’g denied, 627 P.2d 163 (Wyo.1981).

Both the Weldens and Hunter espouse a rule that, in effect, would deprive McGarvin-Moberly of the statutory formula and result in liability on the part of McGarvin-Moberly for the entire amount of damages the Wel-dens might establish. While the approach of the adverse parties is understandable, we cannot recognize such a rule.

The United States District Court for the Eastern District of New York has spoken to this problem in the context of unliquidated damages in this way:

While a default judgment constitutes an admission of liability, the quantum of damages remains to be established by proof where (as here) the amount is not liquidated and is not susceptible of mathematical computation. The defendant may appear and offer proof regarding the amount of damages.

⅜ $ # ⅝ ⅜ ⅜

We believe that any rationale strong enough to justify allowing a defendant who has defaulted to appear and offer proof with respect to the amount of damages would equally justify allowing such defendant discovery with respect to the amount of damages. There would be little point in allowing a defendant to contest the amount of damages if the defendant is not permitted adequately to prepare for the hearing on damages. We therefore hold that Rule 26(b)(1) authorizes a defendant who has defaulted to conduct discovery regarding the amount of unliquidated damages in preparation for an inquest on damages under Rule 55(b)(2).

Clague v. Bednarski, 105 F.R.D. 552, 553 (E.D.N.Y.1985) (citations omitted).

More than 100 years ago, the Supreme Court of the United States offered this wisdom:

[I]f the suit should be decided against the complainant on the merits, the bill will be dismissed as to all the defendants alike— the defaulter as well as the others. If it be decided in the complainant’s favor, he will then be entitled to a final decree against all. [Where the charge is joint fraud.] But a final decree on the merits against the defaulting defendant alone, pending the continuance of the cause, would be incongruous and illegal.

Frow v. De La Vega, 82 U.S. 552, 554, 15 Wall. 552, 21 L.Ed. 60 (U.S.Tex.1872).

The Supreme Court of the United States noted the absurdity of conflicting rulings resulting in a holding of no fraud by anyone and a holding that the defaulting defendant was guilty of fraud. We perceive a parallel absurdity under our comparative negligence statute in which the jury potentially could find more than fifty percent fault on the part of a plaintiff and, yet, the ruling would be that a defaulting defendant is responsible for all of the damages.

The interests of Hunter and McGarvin-Moberly are disparate as they relate to the percentage of fault, but that is the second factor with respect to individual responsibility, the first being the amount. In order to defend the question of damages, McGarvin-Moberly must be able to defend on the question of the percentage of fault attributable to each actor. The right to defend under our modern rules would be hollow absent the right of participation and discovery.

The sanction attached to the ruling relating to the default of McGarvin-Moberly is not insignificant. That ruling forecloses a cross-claim by McGarvin-Moberly against Hunter; a third-party complaint by McGar-vin-Moberly against S & L Industrial (a subcontractor on the project); and prevents McGarvin-Moberly from arguing it was not hable because it was not guilty of negligence. The Weldens do not have to prove duty or breach of duty with respect to McGarvin-Moberly, and the jury will be instructed it should answer “yes” to the question “did McGarvin-Moberly’s negligence constitute a proximate cause of the damages and injuries to the Weldens?”

We uphold the ruling of the district court that McGarvin-Moberly is entitled to appear and defend the question of damages. Because, by our comparative negligence statute, the question of fault is inextricably intertwined with the amount of damages that may be awarded against any defendant, we perceive the trial court’s initial ruling that McGarvin-Moberly could “participate fully in the discovery process and on issues concerning proximate cause and damages * * * ” was the correct ruling. We affirm the order of the trial court from which these petitions for review were sought except for that aspect of the order denying McGarvin-Moberly discovery regarding fault.

The order of the district court is reversed in part, and the case is remanded for further proceedings in accordance with this opinion.

1 . Wyo.R.CivP. 55 (emphasis added) provides, in pertinent part, as follows:

(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.

(b) Judgment. — Judgment by default may be entered as follows:

(1) By the Clerk. — When the plaintiff’s claim against a defendant is for a sum certain, or for a sum which can by computation be made certain, the clerk upon request of the plaintiff and upon affidavit of the amount due shall enter judgment for that amount and costs against the defendant, if the defendant has been defaulted for failure to appear and is not a minor or an incompetent person;

(2) By the Court. — In all other cases the party entitled to a judgment by default shall apply to the court therefor; * * 4 If the party against whom a judgment by default is sought has appeared in the action the party (or, if appearing by representative, the party's representative) shall be served with written notice of the application for judgment at least three days prior to the hearing on such application. If, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearings or order such references as it deems necessary and proper and shall accord a right of trial by jury to the parties when and as required by any statute.

(c) Setting aside default. — For good cause shown the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b).

(d) Plaintiffs; counterclaimants; cross-claimants. — The provisions of this rule apply whether the party entitled to the judgment by default is a plaintiff, a third-party plaintiff, or party who has pleaded a cross-claim or counterclaim. In all cases a judgment by default is subject to the limitations of Rule 54(c).

2 . Wyo.Stat. § 1-1-109 was superseded in 1994 by an amendment that substantially changed the format of the statute, but the amendment does not affect the result of this case. The application of the formula is the same under either version of the statute.