Case Title: Ruwart v. Wagner

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1994-08-31T00:00:00Z

Document:
Ruwart v. Wagner1994 WY 82880 P.2d 586Case Number: 93-185Decided: 08/31/1994Supreme Court of Wyoming
C.H. 
RUWART, Jr.; C.H. Brown Motors, Inc.; and Bob Ruwart Motors, 
Inc.,

Appellants 
(Defendants),

v.

Janet 
S. WAGNER and Ernest L. Wagner,

Appellees 
(Plaintiffs).

 

Appeal 
from District Court, Platte County, John T. Langdon, 
J.

 

Representing 
Appellants:

James 
W. Gusea of Gusea, Pattno & White, P.C., Cheyenne, Jon L. Holm, Denver, CO. 

Representing 
Appellees:

William 
R. Jones of Jones, Jones, Vines & Hunkins, Wheatland.

 

Before 
GOLDEN, C.J., and THOMAS, CARDINE,* MACY** 
and TAYLOR, JJ.

* 
Retired July 6, 1994.

** 
Chief Justice at time of oral argument.

GOLDEN, 
Justice.

[¶1]      In this appeal, 
we are called upon to resolve whether a default judgment as to liability but not 
as to damages is appealable; whether the notice requirements of WYO. R.CIV.P. 
55(b)(2) in the context of the entry of default judgment were satisfied under 
the facts presented; and whether reversible errors occurred in the damages trial 
held after the entry of the default judgment as to 
liability.

[¶2]      As explained 
below, we hold that an order granting a default judgment as to liability but 
leaving the determination of damages for a later hearing is not a final, 
appealable order until damages have been determined. We further hold that the 
notice requirements of WYO.R.CIV.P. 55(b)(2) in the context of the entry of 
default judgment were not satisfied under the facts of this case; consequently, 
we reverse and remand for trial. In light of our decision on these two points, 
we need not discuss whether reversible errors occurred in the damages trial. 
When this case is tried following remand, we trust the parties will measurably 
increase their efforts to try the case error free.

[¶3]      Appellants state 
the issues as:

I. 
Whether the granting by the court of sanctions in the form of the dismissal of 
appellants' answer and counterclaim and the awarding of attorney fees and costs 
in the amount of $2,025.07 was appropriate under the circumstances of the 
case.

II. 
Whether the awarding by the court to the appellees of $6,170.00 for fair market 
value of the stolen vehicle was appropriate when, in response to interrogatories 
and at trial, the appellees made it clear to the appellants and the court that 
they were seeking nothing for the fair market value in that such had been fully 
compensated for by insurance proceeds and both sides stipulated that title to 
the vehicle would be delivered to the insurance company.

III. 
Whether the awarding by the court to the appellees of 7% interest on the value 
of the vehicle was appropriate where no evidence was introduced by the appellees 
as to the fair market value and where documents introduced by the appellants 
showed trade-in value as $6,170.00; actual cash value as $4,900.00; and the car 
sold at auction for $5,100.00.

IV. 
Whether the awarding by the court to the appellees of the sum of $6,965.00 for 
loss of use of vehicle was appropriate when such amount exceeds $1,000.00 per 
month; this amount apparently exceeds the value of the stolen vehicle; the 
appellees testified they had access to another vehicle during this time; and in 
the interim the appellees purchased a new vehicle with a 
trade-in.

V. 
Whether the awarding by the court to the appellees of $2,500.00 for the cost of 
obtaining alternate transportation was appropriate when the appellees traded 
personal property for said vehicle rather than paying cash and the appellees 
were allowed to retain ownership of said vehicle.

VI. 
Whether the awarding by the court to the appellees of $5,000.00 in punitive 
damages was appropriate under the circumstances of the case and where no 
evidence was introduced with regard to the assets or net worth of the 
appellants.

[¶4]      Appellees restate 
the issues as:

I. 
Did the court err in granting the sanctions that it did?

II. 
Did the court err in awarding appellees $6,170.00 for the fair market value of 
appellees' Mercury automobile which appellants converted to their 
use?

III. 
Did the court err in awarding the appellees pre-judgment 
interest?

IV. 
Did the court err in awarding $6,965.00 to the appellees for loss of use of 
their automobile?

V. 
Did the court err in awarding the appellees $2,500.00 for their costs in 
obtaining alternative transportation? 

VI. 
Did the court err in awarding the appellees $5,000.00 punitive 
damages?

FACTS

[¶5]      Appellees Janet 
and Ernest Wagner (Wagners) filed suit against appellants C.H. Ruwart, Jr., C.H. 
Brown Motors, Inc., and Bob Ruwart Motors (collectively referred to hereinafter 
as Ruwarts) for conversion in November of 1990. The lawsuit resulted from a 
failed new car purchase that included the trade-in of the Wagners' Mercury. The 
parties dispute whether the purchase deal was rescinded or breached, but agree 
that following the failure to finalize a new car purchase the Wagners' Mercury 
was not returned to them but was, instead, sold. The car was sold without title 
by Colorado Auction, a Denver car auction company, and was later stolen from the 
purchasing Texas car dealership. Colorado Auction kept the proceeds of the sale 
pending the release of the Mercury's title. In their answer to the lawsuit, 
Ruwarts denied conversion and counterclaimed for damages.

[¶6]      At the pretrial 
conference, the court ordered all counsel to negotiate with three potential 
third-party defendants - Wagners' lienholder, Wagners' automobile insurer, and 
Colorado Auction - for release of the lien on Wagners' Mercury, payment into 
court of the sale proceeds from the sale of the Mercury, and settlement with the 
insurer as to the loss proceeds arising from the theft of the Mercury. 
Eventually the Wagners' insurance carrier paid the loss on the stolen Mercury, 
and title was delivered to that insurance carrier. The insurance carrier then 
transferred the title to Colorado Auction in exchange for the sale 
proceeds.

[¶7]      During discovery, 
Ruwarts failed to respond to a second request for interrogatories and production 
of documents. On September 26, 1991, the court ordered Ruwarts to respond to 
discovery requests within 30 days. On November 19, 1991, the Wagners' attorney 
notified the court that although Ruwarts' attorneys had on November 5, 1991, 
promised to comply, there had not been compliance. The Wagners requested a 
hearing on a motion for an order compelling discovery. The court granted the 
motion without a hearing and issued the order on November 23, 1991. This order 
instructed Ruwarts to comply with discovery requests by December 23, 1991. Local 
counsel for Ruwarts submitted the requested documents on December 20, 1991; 
however, Ruwarts' Colorado counsel failed to submit answers to the 
interrogatories. Wagners' attorney did not notify either attorney that the 
interrogatories had not been answered. On January 20, 1992, the Wagners' 
attorney moved for an order granting sanctions under WYO.R.CIV.P. 37 for 
noncompliance with discovery requests. On January 23, 1992, the court, without 
hearing, entered an order which struck Ruwarts' answer and counterclaim 
pleading, granted a judgment of default on the issue of liability and recited 
that the Wagners were entitled to attorney fees and expenses to be determined at 
a hearing. Ruwarts filed a motion to set aside the default judgment on February 
6, 1992, and a hearing on that motion was held on May 19, 
1992.

[¶8]      At the hearing, 
Ruwarts argued that the motion for sanctions contained erroneous information. 
The trial judge agreed to set aside the default judgment if Ruwarts 
satisfactorily responded to the discovery requests by June 15, 1992. Ruwarts 
responded on June 15, 1992; however, on June 29, 1992, the trial judge 
determined that Ruwarts had failed to comply satisfactorily with the court's 
conditions. The court entered its order denying the motion to set aside the 
default judgment on July 28, 1992, and Ruwarts attempted to appeal to this court 
on August 7, 1992. Upon its own motion, this court considered whether it had 
jurisdiction to hear the appeal and dismissed the appeal as untimely because the 
motion was deemed denied at an earlier time. Following a hearing on December 15, 
1992, the trial court entered an order granting attorney fees against Ruwarts on 
January 19, 1993.

[¶9]      On April 20, 
1993, the trial court held a hearing on the issue of damages. The Wagners 
offered evidence of actual damages and evidence of Ruwarts' conduct which 
warranted punitive damages, but did not offer evidence of Ruwarts' wealth or 
financial condition. In this regard, Wagners acknowledged the punitive damages 
procedure required a bifurcated process and requested additional discovery 
before the hearing on punitive damages. The trial court determined that was 
unnecessary and awarded the Wagners a total of $21,814.73 in damages, $5000 of 
which were punitive damages. This appeal followed.

DISCUSSION

Default 
Judgment Sanction

Standard 
of Review

[¶10]   Ruwarts' first issue concerning the 
imposition of sanctions raises two questions: whether our previous dismissal of 
their appeal permits those sanctions to now be considered and, if so, whether 
there has been compliance with the notice requirements of WYO.R.CIV.P. 55(b)(2). 
Since both are questions of law, our standard of review neither affords 
deference, nor binds this court, to the trial court's decision. City of 
Laramie v. Hysong, 808 P.2d 199, 202 (Wyo. 1991).

[¶11]   Initially, Wagners argue this 
court's dismissal of Ruwarts' previous appeal prevents consideration of those 
issues in this appeal. We disagree. The timeliness of an appeal of an order is 
only a threshold question of jurisdiction and once that hurdle is passed, 
jurisdiction will be found only if the order is a final, appealable order. This 
court has previously determined that an order which only partially adjudicated a 
party's rights was not an appealable order. Dexter v. O'Neal, 649 P.2d 680, 681 (Wyo. 1982).

[¶12]   Based upon Dexter, Ruwarts' 
appeal would have been dismissed since this court will dismiss an appeal of an 
order denying a motion to set aside default judgment when the extent of damages 
remains undetermined. Dexter, 649 P.2d  at 681. As explained in 
Dexter, an order is appealable only if the final judgment leaves nothing 
for future consideration. Dexter at 681. There is no final order where 
liability has been decided, but the extent of damages remains undetermined. 
Dexter at 681. An adjudication which leaves the amount of damages 
unresolved is only a partial adjudication of a party's rights and, as a partial 
adjudication, it is not final and the appeal must be dismissed. Dexter at 
681.

[¶13]   The present appeal follows a final 
judgment and Ruwarts' arguments concerning the sanctions will be considered. 
Although Ruwarts present several arguments as to why the court erred in denying 
relief from the default judgment, we find the notice argument 
dispositive.

Rule 
55(b)(2) Notice Requirement

[¶14]   Ruwarts argue that the trial court 
erred in ordering default as to liability as a sanction because they were not 
afforded notice before a hearing as required under WYO. R.CIV.PROC. 55(b)(2) and 
were not granted a hearing before default judgment was ordered. The Wagners 
mailed the motion for sanctions on January 20, 1992. The court signed the order 
on January 22, and entered the order of default judgment on January 23, 
1992.

[¶15]   Wagners contend three separate 
notices were given to Ruwarts by (1) the filing of their second interrogatories 
and request for production on September 26, 1991; (2) the order compelling 
discovery on November 21, 1991 and (3) the trial court's June 15, 1992 letter. 
Wagners rely on Farrell v. Hursh Agency Inc., 713 P.2d 1174 (Wyo. 1986) 
to support their assertion that such discovery papers provide the requisite Rule 
55(b) notice. However, Farrell, instructs us that these discovery papers 
are not sufficient notice. Farrell, 713 P.2d  at 
1179.

[¶16]   Rule 55(b)(2) requires written 
notice of an application for default judgment to be served at least three days 
before the hearing on such application.1 The notice is to be served on the 
party against whom a judgment by default is sought if the party has appeared in 
the action. In Farrell, appellants complained the trial court had erred 
in entering a Rule 37 default judgment without hearing and notice under Rule 
55(b) when the requested entry of default judgment was ordered on the same day. 
Farrell, 713 P.2d  at 1179. To resolve the issue, this court reviewed the 
chronology of events. Appellees had moved for an order compelling discovery on 
March 12. Farrell, 713 P.2d  at 1176. In that motion, appellees clearly 
stated they sought a default judgment as sanction should appellants not comply. 
On March 20, the court entered an order compelling discovery which declared that 
failure to comply by March 28 would result in a Rule 37 default judgment. 
Farrell at 1179. The motion for that sanction was made and granted on 
April 6. Farrell at 1179.

[¶17]   This court held in Farrell 
that WYO. R.CIV.P. 55(b)(2) applies to default judgments entered under 
WYO.R.CIV.P. 37. Farrell, 713 P.2d  at 1179. We also held that notice 
satisfying Rule 55(b)(2) is to be provided to avoid unfair surprise and, under 
the circumstances in that case, that purpose was served because the court's 
previous order compelling discovery had admonished the Farrells that failure to 
comply would result in entry of a default judgment. Farrell at 1179. 
Sufficient notice had issued to appellants because the order compelling 
discovery specified that noncompliance would result in a default judgment. 
Farrell, at 1179. Farrell specifically holds that only a court 
order which issues at least three days before a hearing or the entry of a 
default judgment will suffice. Farrell at 1179.

[¶18]   The facts of the present case are 
distinguishable from Farrell because here the court's order compelling 
discovery did not mention sanctions. The June 15, 1992 letter alternatively 
relied on by the Wagners issued after entry of the default judgment order and 
cannot suffice. The Wagners attempted to provide notice to Ruwarts by mailing a 
copy of the motion for Rule 37 sanctions on January 20. However, by mailing the 
notice, the Wagners invoked WYO.R.CIV.P. 6(d). Rule 6(d) grants three additional 
days to the prescribed period,2 causing the notice time period to 
extend past the three-day period mandated by Rule 55(b)(2). The earliest date 
that a default judgment order could be entered was January 27, 1992. The court's 
entry of its order on January 23 did not comply with the notice requirements of 
Rule 55(b)(2), and entry of the default judgment was 
error.

[¶19]   A default judgment which fails to 
comply with WYO.R.CIV.P. 55(b)(2) violates due process and renders the default 
judgment void. All orders arising from a void judgment are invalid. Wunnicke 
v. Leith, 61 Wyo. 191, 157 P.2d 274, 278 (1945). In the present case, the 
subsequent orders arising from the void judgment included an order denying the 
motion to set aside the default judgment, an award of attorney fees, and a 
judgment awarding damages. All of these subsequent orders are void and are 
herewith vacated.

[¶20]   Because the record from the hearing 
to set aside the default judgment indicates the trial court erred in denying 
that motion, our normal procedure of reversing and remanding for a hearing 
following proper notice is not necessary. As explained below, it is clear that 
the Ruwarts have complied with all discovery requests and this case is remanded 
for trial on the merits.

Hearing

[¶21]   During the May 19 hearing on 
Ruwarts' motion to set aside default judgment, the trial court agreed to set 
aside the judgment if Ruwarts complied with all discovery requests to the 
court's satisfaction. In its June 29, 1992 decision letter, the trial court 
listed three discovery compliance deficiencies and denied the Ruwarts' motion to 
set aside judgment. Our review of the record indicates the trial court erred in 
finding any deficiency. Accordingly, we hold that its denial of the motion to 
set aside the default judgment was an abuse of the court's 
discretion.

[¶22]   The sanction of default judgment is 
explicitly permitted under WYO.R.CIV.P. 37(b)(2)(C), which 
permits:

An 
order striking out pleadings or parts thereof, or staying further proceedings 
until the order is obeyed, or dismissing the action or proceeding or any part 
thereof, or rendering a judgment by default against the disobedient 
party.

[¶23]   This court has held that default 
judgment is permitted against one who fails to file answers to interrogatories 
or fails to excuse such failure, Zweifel v. State ex rel. Brimmer, 517 P.2d 493, 498-99 (Wyo. 1974), or fails to produce documents. Farrell, 713 P.2d  at 1180. The trial court is given discretion with regard to sanctions, even 
to the point of entering a default judgment. Farrell, 713 P.2d  at 1180 
(citing Zweifel, 517 P.2d at 498).

[¶24]   Since it is preferred that cases be 
tried on their merits, default judgements are not favored. This court 
recognizes, however, "that the district court must generally be afforded broad 
discretion, both in the mechanisms adopted to control discovery and in its 
selection of appropriate sanctions for violations of its discovery orders. Such 
discretion extends to the use of default judgments." Gooder v. Roth, 788 P.2d 611, 612 (Wyo. 1991). A court does not abuse its discretion if the court 
could have reasonably concluded as it did; however, Rule 37 sanctions cannot be 
imposed for failing to produce that which a party does not have and is 
unavailable to it. Id. 612-13.

[¶25]   Reading the trial court's June 29, 
1992 letter, we see that the court found the following 
deficiencies:

1. 
failure to comply with those discovery demands of plaintiffs specified in the 
court's letter of May 29, 1992:

a. 
no itemization of the "Colorado repair bill";

b. 
inadequate information concerning the radiator damage;

2. 
no explanation of how Colorado Auction disposed of plaintiffs' 
vehicle;

3. 
failure to deposit with the Clerk of Court for funds received by Ruwart's 
"agent" for the sale of plaintiffs' vehicle.

The 
trial court's determination that Ruwarts supplied deficient information and 
documentation concerning the above matters is not supported by the record on 
appeal.

[¶26]   Ruwarts submitted an explanation of 
the Colorado repair bill in response to Wagners' first set of interrogatories, 
but mistakenly created the impression that another document existed by referring 
to the mechanic's bill as "Southwest" Motors. The correct name of the company 
was "Southeast" Motors, a copy of whose bill was provided on December 20, 1991; 
and, as seen in the answer to question No. 8 of the second interrogatories, 
other documentation was furnished from Southeast in response to the first 
interrogatories. Because the Wagners had the actual information, there was no 
deficiency.

[¶27]   Information about the radiator 
damage was supplied several times. In the first set of interrogatories, the 
Wagners requested an explanation of how the total of $364.73 for radiator 
damages was obtained. The record indicates Ruwarts supplied the document 
itemizing repairs to the Oldsmobile radiator on December 20, 1991, specifically 
listing the costs of parts, labor and tax for a total of $364.73. Question No. 6 
of Wagners' second set of interrogatories references the information "furnished 
by Defendants in answer to the first interrogatories" and only asks who 
authorized the repairs in Wagners' name. Ruwarts answered and have submitted the 
repair bill at least twice. We find no deficiency in the information concerning 
the radiator damage.

[¶28]   The trial court's dissatisfaction 
with Ruwarts' explanation of how Colorado Auction disposed of Wagners' vehicle 
is discussed in its May 29, 1992 letter. There the court stated that "it had the 
feeling that through no fault of local counsel, plaintiffs were being 
`stonewalled' by defendants as to the method of transferring ownership of 
plaintiffs' Mercury * * *." While the trial court's concern with the transaction 
is understandable, its conclusion of "stonewalling" is not supported by the 
record since responses were provided to all questions asked by the Wagners. 
Question No. three of the second set of interrogatories specifically asked "Was 
a certificate of title to said Mercury Cougar automobile transferred from the 
Defendant or Defendants to Southeast Motors? If not, how was such transaction 
concluded"? Ruwarts replied that "[n]o certificate of title was transferred and 
the sale at auction was concluded without a title. This is a common practice, 
and the title is normally furnished within a fairly short time after the sale." 
In question No. 9, Ruwarts were asked whether certificate of title was delivered 
to Colorado Auto Auction as well as to the El Paso, Texas dealership. Again, 
Ruwarts responded that certificate of title was not delivered to Colorado 
Auction or the El Paso dealership. Again, we find no 
deficiency.

[¶29]   The final deficiency, failure to 
deposit funds with the Clerk of Court, cannot be grounds for default judgment 
because Rule 37 sanctions cannot be imposed for failing to produce that which a 
party does not have available to it. Farrell, 713 P.2d  at 1180. It was 
established at the pretrial conference that the auction sale of the Mercury had 
produced a check payable to Southeast Motors, which Colorado Auction was holding 
until it received title to the vehicle. Although not under order to do so, 
Ruwarts' Colorado counsel agreed to attempt to get the check from Colorado 
Auction. Ruwarts were never informed by the court that failure to have the money 
deposited with the clerk of court would result in default judgment. At the 
hearing to set aside default judgment, the court was informed that Ruwarts' 
attorneys had not been able to convince Colorado Auto Auction to deliver its 
draft to the court. Since Ruwarts did not have the check and could not obtain 
the check, the failure to deposit it with the court cannot be grounds for 
sanctions.

[¶30]   Because all discovery requests have 
been complied with, we remand for trial on the merits.

Attorney 
Fees

[¶31]   Ruwarts complained that attorney 
fees were awarded which did not relate to sanctions. As we stated earlier, the 
attorney fees' award is vacated because it was an order arising from a 
proceeding subsequent to a void judgment and, therefore, invalid. But in 
reviewing the record, we noted that part of the fees related to the order 
compelling discovery. Rule 37(a)(4) permits such an award, however, these fees 
also are vacated because the court did not make the requisite award following 
its issuance of the order compelling discovery. See WYO.R.CIV.P. 6(c)(2) 
(motion is deemed denied if not determined within 90 days after filing). The 
court has the discretion not to award expenses if "the court finds that the 
opposition to the motion was substantially justified or that other circumstances 
make an award of expenses unjust." WYO.R.CIV.P. 37(a)(4).

Damages

[¶32]   Although our reversal for a trial 
on the merits precludes a discussion of the damages issues, we direct the 
parties' attention to previous decisions of this court regarding punitive 
damages and trust those decisions will be followed at trial. The parties are 
directed to Campen v. Stone, 635 P.2d 1121, 1127 (Wyo. 1981) where this 
court held that an award of punitive damages must follow a bifurcated procedure 
and to Adel v. Parkhurst, 681 P.2d 886, 892 (Wyo. 1984) where this court 
stated that an award of punitive damages cannot be sustained in the absence of 
evidence of a defendant's wealth or financial condition.

[¶33]   Reversed and remanded for 
proceedings consistent with this opinion.

CARDINE, 
J., files a dissenting opinion in which TAYLOR, J., 
joins.

CARDINE, 
Justice, dissenting, with whom TAYLOR, Justice, 
joins.

[¶34]   Because reversal, remand and 
retrial with attendant costs, expenses and attorney fees is so cost prohibitive 
in this kind of a case and such a burden on the parties, especially on 
individual plaintiffs, and because the facts and law applicable will support 
this proposed disposition and both parties would be better served by this case 
being concluded by our opinion, I must dissent from the opinion of the court. 

[¶35]   I would, therefore, propose that 
the opinion of the court be that:

a) 
The entry of default judgment be affirmed;

b) 
The sanction order for attorney fees, after deduction of $706.39 for the months 
of August, September and October be affirmed;

c) 
The award to plaintiffs for loss of use of $6,965.00 be 
affirmed;

d) 
The $6,170.00 paid for car purchased be disallowed;

e) 
The $2,500.00 for the Lincoln automobile be disallowed; 
and

f) 
The $5,000.00 punitive damage award be disallowed for failure of required 
proof.

Footnotes

1  By the Court. - In all other cases the party entitled to a judgment by 
default shall apply to the court therefor; * * * 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.

WYO.R.CIV.P. 55(b)(2).

2  Additional time after service by mail. - Whenever a party has the right 
or is required to do some act or take some proceedings within a prescribed 
period after the service of a notice or other paper upon the party, and the 
notice or paper is served upon the party by mail or by delivery to the clerk for 
service, three days shall be added to the prescribed period, provided however, 
this rule shall not apply to service of process by registered or certified mail 
under Rule 4(l)(2).

WYO.R.CIV.P. 6(d).