Case Title: Lee v. Sage Creek Refining Co.

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1997-11-06T00:00:00Z

Document:
Lee v. Sage Creek Refining Co.1997 WY 125947 P.2d 791Case Number: 96-292Decided: 11/06/1997Supreme Court of Wyoming

GENE LEE and GEORGINE Lee, husband and 
wife, 

Appellants (Defendants), 

 

v. 

 

SAGE CREEK REFINING CO., a Wyoming 
corporation, 

Appellee (Plaintiff).

 

Appeal 
from the District Court of Fremont County 

The 
Honorable Nancy Guthrie, Judge

 

 

Representing 
Appellants: 

Joel M. 
Vincent, Vincent & Vincent, Riverton.

 Representing 
Appellee: 

Vance T. 
Countryman, Hooper Law Offices, PC, Riverton.

 

Before TAYLOR, C.J., and 
THOMAS, MACY, GOLDEN and LEHMAN JJ.

THOMAS, Justice. 

[¶1]      The resolution of 
this case turns upon the validity of the contention by Gene Lee and Georgine Lee 
(Lees) that the district court abused its discretion in refusing to set aside 
their default entered by the clerk of the district court pursuant to WYO. R. 
CIV. P. 55(a). The Lees failed to answer or otherwise plead to the Complaint 
filed by Sage Creek Refining Co. (Sage Creek) within the thirty days provided by 
WYO. R. CIV. P. 12(a), after service of process was made upon them in Arizona 
pursuant to the provisions of WYO. R. CIV. P. 4(l)(2). More than thirty days 
after service was completed, Sage Creek applied for entry of default, and an 
Entry of Default was made by the clerk of the district court. The Lees were 
unsuccessful in persuading the district court to set aside the entry of default, 
and after an appropriate hearing on damages, the court entered judgment against 
the Lees in the amount of $26,200.00 plus costs of $3,000.00. A collateral issue 
relates to the impropriety of the theory invoked by the trial court to arrive at 
damages. We hold that the trial court did not abuse its discretion in refusing 
to set aside the default, and the Order providing a judgment in favor of Sage 
Creek against the Lees is affirmed.

 

[¶2]      In the Brief of 
Appellants, the Lees state the issues in this way: 

 

a.

Whether the Trial Court abused its discretion in 
refusing to set aside the Entry of Default.

 

b.

Whether the Trial Court erred as a matter of law in 
awarding any amount as judgment on the claim for breach of the implied covenant 
to provide water and sewer.

 

Sage Creek, in its Brief of 
Appellee, sets forth three issues to be addressed by the 
Court:

Whether the trial of [sic] 
court abused its discretion when it denied the Appellants' motion to set aside 
the entry of default.

Whether the Court abused its discretion by failing to 
give Appellants 3 days notice prior to the entry of 
default.

Whether judgment for the claim for breach of the 
implied covenant to provided [sic] water and sewer is proper as a matter of 
law.

 

[¶3]      In 1970 Sage 
Creek leased property from the Lees for a term of forty years. In a collateral 
agreement, the Lees agreed to provide Sage Creek with water for the leased 
premises from a well located on adjacent property owned by the Lees, and they 
also agreed to permit Sage Creek to place a septic tank on that property. Sage 
Creek took possession of the leased premises and constructed a convenience store 
and gas station there. In the course of that construction Sage Creek installed a 
septic system on the adjacent property.

 

[¶4]      In 1982 the Lees 
leased the property on which the water well and the septic tank were located to 
Sage Creek. The lease of the adjacent property permitted Sage Creek's customers 
and suppliers to drive completely around the convenience store building. The 
lease was for a ten year period, and in the early 1980's, Sage Creek drilled a 
new water well on the property because the existing well went bad. The parties 
intended that the new well would replace the original 
well.

 

[¶5]      After the ten 
year period of the second lease expired, the Lees demanded an additional Three 
Hundred Dollars ($300.00) a month rent from Sage Creek to renew that lease. When 
Sage Creek refused to agree to the additional rent, the Lees threatened to, and 
in fact did, cut Sage Creek's business premises off from access to the water 
well and refused to supply Sage Creek with water.

 

[¶6]      Sage Creek then 
filed the Complaint in this action and a summons was issued, but it was not 
served. Sage Creek sought a temporary restraining order, and counsel for the 
Lees appeared via telephone at a hearing. Not long after that, counsel for Sage 
Creek requested counsel for the Lees to accept service, but counsel for the Lees 
refused, asserting lack of authorization to accept service. Subsequently, 
counsel for the Lees represented them at the deposition of the president of Sage 
Creek. Prior to that deposition, counsel for Sage Creek again requested that 
counsel for the Lees accept service, or at least enter an appearance, but 
counsel for the Lees again refused to accept service and did not enter an 
appearance.

 

[¶7]      On December 7, 
1992 the Lees received copies of the summons and Complaint and the Temporary 
Restraining Order which were served on them in Arizona by certified mail. The 
Lees did not answer, appear, or plead to the Complaint, and on January 29, 1993, 
Sage Creek applied to the clerk of the district court for Entry of Default. 
Default was entered on February 1, 1993, and the Lees then moved to set it aside 
requesting an enlargement of the time to answer. The district court denied that 
motion, and an effort was made to appeal that ruling. This Court dismissed that 
appeal, holding that the order denying a motion to set aside an entry of default 
is not an appealable order. Lee v. Sage 
Creek Refining Co., Inc., 876 P.2d 997 (Wyo. 1994).

 

[¶8]      As styled by the 
district court, a "trial," which constituted the hearing on the application of 
Sage Creek for the entry of a judgment, was conducted on October 31, 1995, 
concluding on January 3, 1996. On May 7, 1996, the trial court entered an Order 
awarding judgment in favor of Sage Creek and against the Lees for $26,200.00, 
with interest at the statutory rate and costs in the sum of $3,000.00. Both 
parties sought to have the district court reconsider that Order, and their 
respective motions were denied. The Lees then took this 
appeal.

 

[¶9]      Seeking reversal 
of the Order, the Lees contend that the district court abused its discretion in 
refusing to set aside the entry of default. Their arguments focus on WYO. R. 
CIV. P. 55(c), which states: "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)." A party must substantiate reasons 
pursuant to WYO. R. CIV. P. 60(b) in order to establish "good cause" for setting 
aside the entry of default. Vanasse v. 
Ramsay, 847 P.2d 993, 999 (Wyo. 1993). The Lees rely upon reasons (1) and 
(6) found in WYO. R. CIV. P. 60(b), which states:

 

On motion, and upon such terms as are just, the court 
may relieve a party or a party's legal representative from a final judgment, 
order, or proceeding for the following reasons: (1) mistake, inadvertence, 
surprise, or excusable neglect; * * * or (6) any other reason justifying relief 
from the operation of the judgment.

 

[¶10]   We review the ruling of a trial 
court on motions presented pursuant to WYO. R. CIV. P. 60(b)(1) and (6) only for 
an abuse of discretion. Vanasse, 847 P.2d  at 996; Carlson v. Carlson, 836 P.2d 297, 301 (Wyo. 1992); U.S. Aviation, 
Inc. v. Wyoming Avionics, Inc., 664 P.2d 121, 126-27 (Wyo. 1983). 
Essentially the resolution of such motions is left to the sound discretion of 
the trial court, as defined in Martin v. 
State, 720 P.2d 894, 897 (Wyo. 1986):

 

Judicial discretion is a composite of many things, 
among which are conclusions drawn from objective criteria; it means a sound 
judgment exercised with regard to what is right under the circumstances and 
without doing so arbitrarily or capriciously.

 

[¶11]   The justification presented by the 
Lees to demonstrate an abuse of discretion is that the trial court "ignored or 
failed to consider prior appearance of record by counsel for the [Lees]." The 
Lees and Sage Creek agree, however, that counsel for the Lees refused to accept 
process for his clients on two occasions. Furthermore, while clearly 
representing the Lees at the hearing on the temporary restraining order and at 
the deposition of the president, counsel for the Lees did not enter a written 
appearance in accordance with UNIFORM RULES FOR DISTRICT COURTS OF THE STATE OF 
WYOMING 102(a)(1)(C). In order to move forward with its litigation, Sage Creek 
proceeded to accomplish service upon the Lees in Arizona by certified mail under 
our rules of civil procedure. The summons advised the Lees that they must answer 
the Complaint within thirty days, but they did nothing, and apparently did not 
even tell their lawyer that they had been served. There is no dispute that Entry 
of Default was accomplished more than thirty days after service of process upon 
the Lees.

 

[¶12]   The Lees seek to adopt by analogy 
the requirement in WYO. R. CIV. P. 55(b)(2) that a party or his attorney, who 
has made an appearance, is entitled to notice before a default judgment is 
entered. The Lees argue that the same notice should be required for the entry of 
default under WYO. R. CIV. P. 55(a). The clear language of WYO. R. CIV. P. 
55(a), provides: "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." We hold that this language negates the Lees' contention. The 
rule language makes no reference to any entitlement to notice by virtue of an 
appearance, and we do not choose to amend the rule by this opinion. The Lees 
admit that they were properly served under the Wyoming Rules of Civil Procedure, 
and under the clear language of the rule neither an appearance nor 
representation by counsel for the Lees is relevant to the entry of 
default.

 

[¶13]   The arguments submitted by the Lees 
are not sufficient to persuade us of mistake, inadvertence, surprise, or 
excusable neglect as provided in WYO. R. CIV. P. 60(b)(1). Furthermore, we do 
not perceive in these circumstances, any other reasons that would justify relief 
from the operation of the judgment, as provided in WYO. R. CIV. P. 60(b)(6). 
There is nothing in this record that appears to present the extraordinary 
circumstances required by Vanasse, 
847 P.2d  at 998, to justify relief under this "catch all" phrase. We conclude 
that the Lees did not demonstrate good cause under WYO. R. CIV. P. 55(c) to set 
aside the Entry of Default in the trial court, and under the circumstances, we 
can discern no abuse of discretion.

 

[¶14]   In their second argument, the Lees 
address the theory adopted by the trial court in awarding damages for breach of 
the implied covenant to provide water and a location for a septic system. The 
Complaint filed by Sage Creek alleged in pertinent part:

 

5. In addition to the parties' lease agreement, 
Defendants agreed to provide Plaintiff with water for the leased premises from a 
well located on adjacent property owned by Defendants, directly north of the 
leased premises, and additionally, agreed with Plaintiff to allow Plaintiff to 
put its septic tank on this adjacent property which Plaintiff did shortly after 
the lease was executed.

 

6. Defendants provided Plaintiff with water from its 
well for Plaintiff's business for many years and Plaintiff continues to use the 
septic system to the present time.

 

* 
* *

 

8. During the early 1980's, the water from 
Defendants' then existing well went bad, and Plaintiff, who had by then leased 
this additional property adjacent to the 1970 lease, at its expense caused a new 
well to be drilled on said adjacent leased property, which also serves 
Defendants; it being the parties' intention and agreement that this newly 
drilled well would replace Defendants' original well.

 

9. The Defendants, after said second lease expired in 
August, 1992, and upon Plaintiff's refusal to agree to a substantially increased 
rental rate, in breach of their original agreement and in furtherance of a 
conspiracy between them to force Plaintiff out of its business, have threatened 
to, and as of November 11, 1992 have cut Plaintiff's business off from access to 
water from said well and are refusing to supply Plaintiff with 
water.

 

* 
* *

 

14. That, in the alternative, Defendants, by 
permitting Plaintiff to expend money to drill a new well on Defendants' property 
granted Plaintiff an implied easement in said well for at least the balance of 
the forty-year original lease agreement.

 

[¶15]   The allegations in a complaint are 
admitted when a default is entered. 
Zweifel v. State ex rel. Brimmer, 517 P.2d 493, 499 (Wyo. 1974); Miller v. Tony and Susan Alamo 
Foundation, 748 F. Supp. 695, 697 (W.D.Ark. 1990) (relying upon federal 
rules of civil procedure). "Upon entry of a default judgment, facts alleged to 
establish liability are binding upon the defaulting party. . . ." Danning v. 
Lavine, 572 F.2d 1386, 1388 (9th Cir. 1978). Since we hold that the entry of 
default was proper, the allegations relative to the grounds for awarding damages 
are deemed admitted. The admitted allegations include both breach of contract 
and an implied covenant to supply water and sewer services. Consequently, no 
error occurred when the trial court adopted the admitted theory of damages in 
awarding judgment.

 

[¶16]   In summary, our holding is that 
there was no abuse of discretion by the trial court when it entered default 
against the Lees. Because theories upon which damages were calculated are 
included in facts alleged in the Complaint, which were deemed admitted by the 
default, they appropriately can be sustained on appeal.

 

[¶17]   The Order, pursuant to which the 
trial court awarded judgment against the Lees in favor of Sage Creek, is 
affirmed.