Case Title: Adel v. Parkhurst

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1984-05-17T00:00:00Z

Document:
Adel v. Parkhurst1984 WY 49681 P.2d 886Case Number: 83-102Decided: 05/17/1984TREVOR ADEL, APPELLANT (DEFENDANT),

v.

VANNIS PARKHURST AND DALE PARKHURST, APPELLEES (PLAINTIFFS).

Supreme Court of Wyoming
TREVOR ADEL, APPELLANT 
(DEFENDANT),

v.

VANNIS PARKHURST AND DALE 
PARKHURST, APPELLEES (PLAINTIFFS).

Appeal from the District 
Court, FremontCounty, Robert B. Ranck, 
J.

Franklin D. 
Bayless and Charles J. Szlenker, Trierweiler, Bayless, Barrett & McCartney, 
Cheyenne, for appellant.

John R. Hursh 
and Holly Brown, Central Wyoming Law Associates, P.C., Riverton, for appellees.

Before ROONEY, C.J., and THOMAS, ROSE, BROWN and 
CARDINE, JJ.

THOMAS, 
Justice.

[¶1.]     In deciding this case 
we must revisit he essentials of proof of punitive damages, in this instance in 
the context of a default judgment. We also must answer a question about our 
jurisdiction to review the judgment in the absence of a motion to set aside the 
default judgment in accordance with Rule 55(c), W.R.C.P., and a motion for 
relief from the judgment pursuant to Rule 60(b), W.R.C.P. The district court 
approved the entry of default made in accordance with Rule 55(a), W.R.C.P., and, 
after denying a Motion to Vacate Entry of Default, held a hearing on damages 
which was conducted pursuant to Rule 55(b)(2), W.R.C.P. The court then entered 
judgment for the plaintiffs (appellees in this court) in which they were awarded 
actual damages in the amount of $1,514.26 and punitive damages in the amount of 
$50,000. We affirm the default judgment, modifying the award of liquidated 
damages, but we reverse the award of punitive damages.

[¶2.]     In his brief the 
appellant summarizes his arguments as follows:

"I. WHETHER THE AWARD OF 
PUNITIVE DAMAGES HEREIN CAN BE SUSTAINED AS PROPER UNDER WYOMING 
LAW.

"II. WHETHER THE AWARD OF 
PUNITIVE DAMAGES HEREIN IS EXCESSIVE IN LAW.

"III. WHETHER THE COURT 
OUGHT TO VACATE A DEFAULT JUDGMENT RENDERED AGAINST A PRO SE DEFENDANT FOR 
FAILURE TO ANSWER WITHIN THE TIME MANDATED BY THE RULES BEFORE HE HAS SECURED 
COUNSEL."

The appellees' 
summary of their arguments in opposition is stated in their brief in this 
way:

"I. THERE CAN BE NO 
APPEAL FROM A DEFAULT JUDGMENT UNLESS THE APPELLANT FIRST MOVES THE TRIAL COURT 
TO SET ASIDE THE JUDGMENT UNDER RULE 55(c) AND RULE 60(b), W.R.C.P. 

"II. THE TRIAL COURT 
PROPERLY AWARDED PUNITIVE DAMAGES.

"III. THE TRIAL COURT'S 
AWARD OF PUNITIVE DAMAGES WAS NOT EXCESSIVE.

"IV. THE TRIAL COURT 
PROPERLY DENIED DEFENDANT'S MOTION TO VACATE ENTRY OF 
DEFAULT."

[¶3.]     Adel was first 
introduced to the appellee Vannis Parkhurst in Riverton in 1981 by a mutual 
acquaintance. The mutual acquaintance suggested that the Parkhursts use Adel's 
services in connection with the preparation of their federal income tax returns 
because he was a really sharp consultant. The Parkhursts operate an automobile 
parts store in Riverton. A consultation did occur later in 1981 in Riverton 
between the Parkhursts and Adel which resulted in the preparation of an amended 
tax return for Dale Parkhurst for the calendar year 1980. The Parkhursts then 
decided to have Adel, a certified public accountant practicing in Maryland, prepare their 
tax returns for the year 1981. In February of 1982 the appropriate records to 
permit him to prepare the 1981 federal income tax returns were sent by the 
Parkhursts to Adel in Maryland. Adel never did complete these 
returns. When the Parkhursts expressed concern about the due date with respect 
to the filing of their returns an extension for filing was obtained by Adel. He 
also obtained a subsequent extension, but when the returns were not forthcoming 
as that deadline approached, Vannis Parkhurst traveled to Maryland and picked up 
the supporting documents for the preparation of tax returns. Ultimately they 
were prepared by an accountant practicing in the Riverton area who testified 
that he was able to accomplish them in a day's time. Because of the late 
payments due to the extensions, the Parkhursts had to pay penalties and interest 
on the balances of their federal taxes for 1981. The interest and penalties paid 
amounted to $875.38 for Vannis Parkhurst and $659.11 for Dale 
Parkhurst.

[¶4.]     Approximately two 
months after the filing of the federal income tax returns for 1981 the 
plaintiffs instituted this action. They sought recovery upon theories of 
negligence, breach of contract, and misrepresentation. They asserted as actual 
damages the penalties and interest which each had to pay; Vannis Parkhurst's 
expenses for the trip to Maryland ($686.57); lost sales and wages; and 
the cost of telephone calls to Adel ($59.95). In addition each sought exemplary 
damages in the amount of $250,000.

[¶5.]     Initially Adel appeared 
pro se, entered a special appearance, and moved to dismiss for lack of personal 
jurisdiction over him, claiming that the action was brought in Wyoming based only upon a 
single telephone call. The district court responded to that motion by entering 
an ex parte order dismissing the action. The Parkhursts then moved to set aside 
the order entered by the court and advised the court by affidavit of events 
within the State of Wyoming which were more than sufficient under our law to 
justify personal jurisdiction over Adel. See Markby v. St.AnthonyHospital Systems, Wyo., 647 P.2d 1068 (1982). The district court 
then set aside its order dismissing the action and ordered that Adel's answer 
should be filed "not later than noon Friday, February 25, 1983." Adel responded 
by a motion for stay of proceedings and reconsideration of order, again 
asserting his position that there was no justification for personal jurisdiction 
because of the isolated nature of his contacts with Wyoming. No action was 
taken by the court upon this pleading, and after the expiration of the court's 
deadline for Adel's answer the Parkhursts moved for entry of default which the 
clerk of the district court did enter. Adel then obtained Wyoming counsel who filed 
an answer and a motion to vacate entry of default. In the meantime the district 
court had set the matter for hearing on damages. Ultimately the court denied the 
motion to vacate the entry of default and conducted the hearing on damages. 
Following that hearing the court entered its judgment awarding actual damages to 
the Parkhursts of $1,514.26 and $50,000 in punitive damages. Adel has taken his 
appeal from that judgment. 

[¶6.]     The Parkhursts contend 
that this court is foreclosed from a review of the default judgment and must 
affirm the judgment entered because Adel did not seek relief pursuant to Rule 
55(c) and Rule 60(b), W.R.C.P. The rules relied upon provide as 
follows:

[¶7.]     "Rule 55. 
Default.

* * * * * 
*

"(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 aside in accordance with Rule 
60(b)."

"Rule 60. Relief from 
judgment or order.

* * * * * 
*

"(b) Mistakes; inadvertence; excusable neglect; 
newly discovered evidence; fraud, etc. - On motion, and upon such terms as 
are just, the court may relieve a party or his legal representative from a final 
judgment, order, or proceeding for the following reasons: (1) mistake, 
inadvertence, surprise, or excusable neglect; (2) newly discovered evidence 
which by due diligence could not have been discovered in time to move for a new 
trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or 
extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the 
judgment is void; (5) the judgment has been satisfied, released, or discharged, 
or a prior judgment upon which it is based has been reversed or otherwise 
vacated, or it is no longer equitable that the judgment should have prospective 
application; or (6) any other reason justifying relief from the operation of the 
judgment. The motion shall be made within one (1) year after the judgment, 
order, or proceeding was entered or taken. A motion under this subdivision (b) 
does not affect the finality of a judgment or suspend its operation. This rule 
does not limit the power of a court to entertain an independent action to 
relieve a party from a judgment, order, or proceeding as provided in sections 
3-3801 [§ 1-16-401], 3-3805 [repealed, § 1, ch. 188, Laws 1977], and 3-3810 [§ 
1-16-408], W.C.S. 1945, or to grant relief to a party against whom a judgment or 
order has been rendered without other service than by publication as provided in 
section 3-3802 [§ 1-16-402], as amended. Writs of coram nobis, coram vobis, 
audita querela, and bills of review and bills in the nature of a bill of review, 
are abolished, and the procedure for obtaining any relief from a judgment shall 
be by motion as prescribed in these rules or by an independent 
action."

[¶8.]     The Parkhursts rely 
upon the holding of this court in Robison 
v. Sales and Use Tax Division, State Tax Commission, Wyo., 524 P.2d 82 
(1974), and the discussion of the failure to urge a position in connection with 
a motion to set aside a default judgment found in U.S. Aviation, Inc. v. Wyoming Avionics, 
Inc., Wyo., 664 P.2d 121 (1983). We agree with the general contention of 
nonreviewability of a default judgment entered in accordance with the provisions 
of Rule 55, W.R.C.P., in the absence of an appropriate motion for relief 
pursuant to Rule 60(b), W.R.C.P. In the absence of such a motion there is 
nothing before the district court which would suggest to it in any way that the 
default judgment was not entered in accordance with law. Even when an 
appropriate motion for such relief is filed the district court is called upon to 
exercise its discretion. In the absence of an adequate showing of a meritorious 
defense presented to the district court in connection with an appropriate motion 
for relief, the policy of attaching finality to judgments entered in accordance 
with proper procedure would control and there could be found no abuse of 
discretion. Gifford v. Casper Neon Sign 
Co., Inc., Wyo., 639 P.2d 1385 (1982). In this instance Adel did file a 
Motion to Vacate Entry of Default and an Answer at the same time. The motion did 
not justify relief for any of the grounds found in Rule 60(b), W.R.C.P., and did 
not otherwise manifest good cause in accordance with Rule 55(c), W.R.C.P. 
Furthermore, the answer did not articulate a meritorious defense other than by 
conclusory allegations which were not in any manner 
verified.

[¶9.]     We therefore apply the 
provisions of Rule 55(b)(2), W.R.C.P., which reads as 
follows:

"(b) Judgment - Judgment by default may be 
entered as follows:

* * * * * 
*

"(2) By the Court. - In 
all other cases the party entitled to a judgment by default shall apply to the 
court therefor; but no judgment by default shall be entered against an infant or 
incompetent person unless represented in the action by a general guardian, 
guardian ad litem, trustee, or other such representative who has appeared 
therein. If the party has appeared in the action, he (or, if appearing by 
representative, his representative) shall be served with written notice of the 
application for judgment at least 3 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."

The Arizona 
Court of Appeals, upon which this court relied in deciding Robison v. Sales and Use Tax Division, State 
Tax Commission, supra, has said:

"A default is a judicial 
admission of the plaintiff's right to recover, though not of the amount of the 
recovery when the claim is unliquidated. Reed v. Frey, 10 Ariz. App. 292, 458 P.2d 386 (1969); 6 Moore's Federal Practice, § 55.07; 49 C.J.S. Judgments § 
201c; 10 Wright & Miller, Federal Practice and Procedure, § 2688." Southern Arizona School for Boys, Inc., v. 
Chery, 119 Ariz. 277, 580 P.2d 738, 743 (1978).

The items of 
liquidated damages pleaded in the complaint are:

I.R.S. penalties and 
interest expense

for Vannis Parkhurst 
                                                                        
$875.38

I.R.S. penalties and 
interest expense

for Dale Parkhurst                                                                 
659.11

Expenses incurred for 
trip to

Maryland by Vannis 
Parkhurst                                                         
686.57

Telephone calls by Vannis 
Parkhurst

to Adel                                                                                                
50.95___

$2,272.01

[¶10.]  The district court assessed compensatory 
damages for the appellees in the amount of only $1514.26. Because our 
examination of the record and our application of the appropriate rule with 
respect to liquidated damages discloses that this amount should be $2272.01, we 
affirm the default judgment for compensatory damages but order that it be 
modified to reflect the correct amount. Robert W. Anderson Housewrecking and 
Excavating, Inc., v. Board of Trustees, School District No. 25, Fremont County, 
Wyoming, Wyo., 681 P.2d 1326 (1984); Burk v. Burzynski, Wyo., 672 P.2d 419 
(1983); Albin Elevator v. Pavlica, 
Wyo., 649 P.2d 187 (1982); and Douglas 
Reservoirs Water Users Association v. Cross, Wyo., 569 P.2d 1280 
(1977).

[¶11.]  We have a different result with respect 
to the punitive damages. Beginning with Cosgriff Brothers v. Miller, 10 Wyo. 
190, 68 P. 206, 98 Am.St.Rep. 977 (1902), and continuing through Cates v. Eddy, Wyo., 669 P.2d 912 
(1983), this court has recognized that punitive damages are an implement of 
public policy. It is not the purpose of punitive damages to compensate the 
plaintiff; instead punitive damages are awarded as a punishment to the defendant 
and with the purpose of deterring others from such conduct in the future. See 
also Sears v. Summit, Inc., Wyo., 616 P.2d 765 (1980); Danculovich v. 
Brown, Wyo., 593 P.2d 187 (1979); Combined Insurance of America v. Sinclair, 
Wyo., 584 P.2d 1034 (1978); Town of 
Jackson v. Shaw, Wyo., 569 P.2d 1246 (1977); Petsch v. Florom, Wyo., 538 P.2d 1011 
(1975); Condict v. Hewitt, Wyo., 369 P.2d 278 (1962); and Hall Oil Co. v. 
Barquin, 33 Wyo. 92, 237 P. 255 (1925). The Parkhursts rely upon an asserted 
rule that well pleaded factual allegations in a complaint are taken as true in 
instances in which a default judgment is entered. Zweifel v. State ex rel. Brimmer, Wyo., 
517 P.2d 493 (1974); and 10 Wright, Miller and Kane, Federal Practice and 
Procedure, § 2688, p. 444 (1983). The Parkhursts contend that the allegations in 
their complaint support the award of punitive damages by the court in opposition 
to Adel's contentions that the punitive damages in this instance were not 
properly awarded because the record does not establish misconduct which would 
justify punitive damages and the damages awarded do not bear a reasonable 
proportion to the amount of the actual damages.

[¶12.]  The proposition relied upon by the 
Parkhursts is not an appropriate method for the implementation of public policy. 
Consistently with the purposes of punishment and deterrence this court has 
identified the factors justifying an award of punitive damages 
as:

"(a) the financial 
condition or wealth of the defendant;

"(b) the activity of the 
defendant causing the harm; and

"(c) the nature and 
extent of the injury suffered." Cates v. 
Eddy, supra, at 921 (1983)

and

"* * * the nature of the 
tort; the amount of the actual damages; and the wealth of the defendant. * * *" 
Sears v. Summit, Inc., supra, at 
772.

These factors 
are substantially the same, and in both instances one factor which must be 
considered is the financial condition or wealth of the defendant. To the same 
effect are Town of Jackson v. Shaw, 
supra; Hall Oil Co. v. Barquin, 
supra; and McIntosh v. Wales, 21 Wyo. 
397, 134 P. 274 (1913). This court has even required a bifurcated trial for the 
purpose of establishing the factor of wealth or financial condition so that it 
would not have an impact upon a jury's consideration of liability. Cates v. Eddy, supra; Condict v. Condict, Wyo., 664 P.2d 131 
(1983); and Campen v. Stone, Wyo., 
635 P.2d 1121 (1981).

[¶13.]  In this case the court proceeded to hold 
a hearing with respect to damages in accordance with Rule 55(b)(2), W.R.C.P., 
which states:

"* * * 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."

As a product of 
that hearing the court concluded that the Parkhursts were not entitled to 
damages for the claimed lost sales and wages included in their complaint. The 
court did, however, award punitive damages in the amount of $50,000, taking 
pains to advise this court by a statement on the record that "it doesn't even 
shock the conscience of this Court [the district court] even a tiny bit." See Town of Jackson v. Shaw, 
supra.

[¶14.]  We pause to note that the Parkhursts did 
not provide the written notice of their application for judgment three days 
prior to the hearing on their application as provided in Rule 55(b)(2), 
W.R.C.P., although at that juncture there was ample appearance by Adel. Adel 
does not complain of this failure to furnish notice in accordance with the rule, 
and since he did appear by counsel at and participate in the hearing no 
prejudice could be asserted. Nevertheless the due process implications of the 
failure to give notice under the circumstances (Gomes v. Williams, 420 F.2d 1364 (10th 
Cir. 1970)) serve to distinguish the punitive damage award from the usual 
situation in which review of a default judgment is eschewed in the absence of a 
motion for relief under Rule 60(b), W.R.C.P. The justification for denying 
review set forth in Robison v. Sales and 
Use Tax Division, State Tax Commission, supra, is not controlling when a 
hearing is conducted by the court, pursuant to a notice required by our rules, 
and, even though in default, a party appears and participates. Under those 
circumstances the contentions of the party are made known to the district court, 
and if an erroneous disposition then follows review should be and is 
available.

[¶15.]  Despite our language in Sears v. Summit, Inc., supra, at 772, in 
which we said:

"It is proper to 
introduce evidence of a defendant's wealth when punitive damages are requested. 
And while this court has never held that such proof is mandatory [citation], we 
believe that evidence of a defendant's wealth should be introduced when punitive 
damages are requested * * *,"

We now hold that 
in the absence of evidence of a defendant's wealth or financial condition an 
award of punitive damages cannot be sustained. The Parkhursts argue that this 
should not be a fatal error in view of the default which Adel permitted. The 
burden, however, is upon those seeking more than mere nominal damages to prove 
their damages. Albin Elevator Company v. 
Pavlica, Wyo., 649 P.2d 187 (1982); Downing v. Stiles, Wyo., 635 P.2d 808 
(1981); and National Bank of Lovell v. 
Moncur, Wyo., 624 P.2d 765 (1981). The requirement of Rule 55(b)(2), 
W.R.C.P., of a hearing with respect to damages which are not liquidated is 
consistent with the rule of those cases. The default permitted by a defendant 
does not concede the amount demanded for unliquidated damages. Pope v. United States, 323 U.S. 1, 65 S. Ct. 16, 102 Ct.Cl. 846, 89 L. Ed. 3 (1944), and other cases cited in 10 Wright, 
Miller and Kane, Federal Practice and Procedure, § 2688, p. 450, n. 20 (1983). 
In our view this rule must include punitive damages. Indeed the public policy 
nature of the award places in question the jurisdiction of the district court to 
award relief in the form of punitive damages in the absence of proof of the 
wealth or financial condition of the defendant. See State v. District Court, 33 Wyo. 281, 
238 P. 545 (1925). A failure of foundational proof places the entry of a 
judgment for punitive damages beyond the power or authority of the court. Purington v. Sound West, 173 Mont. 106, 
566 P.2d 795 (1977).

[¶16.]  The case is reversed as to the award of 
punitive damages. It is affirmed with respect to the default judgment for 
liquidated damages, but it is remanded to the district court for the purpose of 
correcting the judgment to award $2,272.01 to the Parkhursts.