Case Title: S.C. Ryan, Inc. v. Lowe

Citation: 

Docket Number: 87-131

State: wyoming

Court: Wyoming Supreme Court

Date: 1988-04-20T00:00:00Z

Document:
S.C. Ryan, Inc. v. Lowe1988 WY 61753 P.2d 580Case Number: 87-131Decided: 04/20/1988Supreme Court of Wyoming
S.C. RYAN, INC., A 
MONTANA CORPORATION, D/B/A TAYLOR DISTRIBUTING CO., AND NORTHERN TIER DISTRIBUTING 
CO., APPELLANTS 
(APPELLANTS/PLAINTIFFS),

v.

BILL LOWE, INDIVIDUALLY 
AND D/B/A WORLD OF COLOR INTERIORS, APPELLEE 
(APPELLEE/DEFENDANT).

Appeal from the District 
Court, SheridanCounty, James N. Wolfe, 
J.

Clay B. Jenkins 
of Badley & Rasmussen, Sheridan, on briefs, for appellants.

H. Steven Brown 
of Brown, Raymond & Rissler, Casper, on briefs, for appellee.

Before BROWN, C.J., and THOMAS, CARDINE, URBIGKIT 
and MACY, JJ.

CARDINE, 
Justice.

[¶1.]     Appellant S.C. Ryan, 
Inc., a Montana corporation, filed a complaint in 
county court alleging that appellee Bill Lowe owed it a debt of $1,035.31 plus a 
1.5 percent per month service charge. Appellee failed to file a responsive 
pleading within the time permitted, and a default judgment was entered against 
him in the amount of $1,075.90. Appellee then filed a motion to set aside the 
default judgment, an answer, and a motion to dismiss, along with affidavits and 
other documents. Appellant filed counter affidavits, and the court ultimately 
set aside the default and dismissed appellant's complaint. Appellant appealed to 
the district court, which affirmed the county court. Appellant now appeals to 
this court, contending that no grounds existed for setting aside the default and 
that dismissal of its complaint was improper.

[¶2.]     We reverse and 
remand.

[¶3.]     Appellant S.C. Ryan, 
Inc. is a Montana corporation doing business as Taylor 
Distributing Company and Northern Tier Distributing Company. Appellee Bill Lowe 
is "engaged in the business of home interiors," apparently doing business as 
World of Color Interiors, and/or A World of Color, and/or Willor, Inc. Appellee 
purchased floor covering merchandise from appellant on a continuing account. 
Payments on the account were sporadic; and, on November 25, 1986, appellant 
filed an action for judgment on the outstanding balance.

DEFAULT

[¶4.]     The county court 
initially entered a default judgment against appellee after he failed to respond 
to the complaint. Appellee moved to set aside the judgment, his attorney 
explaining that when he received appellant's complaint he was preparing to file 
bankruptcy for appellee's corporation and he inadvertently assumed that the debt 
would be included in the corporate bankruptcy. Appellee also filed affidavits 
purporting to establish that the debt to appellant was a corporate debt. The 
court set aside the default judgment without explanation.

[¶5.]     Rule 55(c), W.R.C.P., 
provides that the court may set aside a judgment by default in accordance with 
Rule 60(b). Rule 60(b) provides:

"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."

Rule 60(b) 
provides courts with the means of relieving a party from the oppression of a 
final judgment or order on a proper showing where such judgment is unfairly or 
mistakenly entered. Kennedy v. Kennedy, Wyo., 
483 P.2d 516 (1971). The rule is remedial and is to be liberally construed, 
Spomer v. Spomer, Wyo., 580 P.2d 1146 (1978), but the movant 
carries the burden of bringing himself within its provisions. Atkins v. 
Household Finance Corporation of Casper, 
Wyoming, Wyo., 581 P.2d 193 
(1978).

[¶6.]     In the present case, 
the county court presumably granted relief under subdivision (b)(1) of Rule 60. 
The granting of relief under this subdivision is a matter of the exercise of 
discretion by the trial court, and appellate review is limited to the question 
of whether the trial court abused its discretion. U.S. Aviation, Inc. v. Wyoming 
Avionics, Inc., Wyo., 664 P.2d 121 (1983). In exercising its 
discretion, the trial court must consider whether the movant has established one 
of the enumerated grounds for relief and whether he has demonstrated a 
meritorious defense. Rule 60(b), W.R.C.P.; U.S. Aviation, Inc., 
supra.

[¶7.]     In support of his 
motion to set aside the default judgment, appellee filed an affidavit in which 
his attorney stated that he failed to realize that the suit was against appellee 
personally. Thus the trial court could have reasonably concluded that appellee's 
failure to answer was the result of mistake or inadvertence. In addition, 
appellee filed affidavits designed to demonstrate that he had a meritorious 
defense to appellant's claim. As discussed below, these affidavits contained 
weaknesses, but they were sufficient to present "more than a bald conclusion" 
that a meritorious defense existed. U.S. Aviation, Inc., supra. We cannot say 
that the trial court abused its discretion by granting relief from the default 
judgment.

DISMISSAL

[¶8.]     Appellee's motion to 
set aside the default judgment was accompanied by a motion to dismiss 
plaintiff's complaint. In the motion to dismiss, appellee asserted that he was 
not personally liable on the debt. Presumably the motion was one to dismiss for 
failure to state a claim under Rule 12(b)(6), W.R.C.P. Two affidavits and other 
documents were filed with appellee's motions, and appellant filed affidavits in 
resistance.

[¶9.]     Rule 12(b), W.R.C.P., 
provides:

"If, on a motion * * * to 
dismiss for failure of the pleading to state a claim upon which relief can be 
granted, matters outside the pleading are presented to and not excluded by the 
court, the motion shall be treated as one for summary judgment and disposed of 
as provided in Rule 56 * * *."

The order 
dismissing appellant's complaint clearly demonstrates that the trial court 
relied on matters outside the pleadings when it found that "Willor, Inc. was a 
corporation in good standing." Accordingly, we will treat the motion as one for 
summary judgment. See Wyoming Insurance Department v. Sierra Life Insurance 
Company, Wyo., 
599 P.2d 1360 (1979).

[¶10.]  Summary judgment is appropriate only if 
there is no genuine issue of material fact and the movant is entitled to 
judgment as a matter of law. Rule 56, W.R.C.P. A fact is material if proof of 
that fact would have the effect of establishing or refuting one of the essential 
elements of a claim or defense. Johnson v. Soulis, Wyo., 
542 P.2d 867 (1975).

[¶11.]  In S-Creek Ranch, Inc. v. Monier & 
Company, Wyo., 
509 P.2d 777, 783 (1973), we stated the following general principle of agency 
law:

"An agent of an 
undisclosed principal is subject to all liability, expressed or implied, created 
by the contract in the same manner as if he were the 
principal."

The application 
of this rule in the context of a corporate officer's liability for a corporate 
debt is discussed in 3A W. Fletcher, Cyclopedia of the Law of Private 
Corporations § 1118 (Rev. 1986):

"[W]here an agent or 
officer enters into a contract with a third party on behalf of the corporation, 
and the third party is not aware of the existence of the corporation and no 
disclosure is made to him, the agent is personally liable on the contract * * *. 
To avoid personal liability on a contract to be entered into on behalf of his 
principal, where agency and identity of the principal are unknown, the agent has 
a duty to disclose both the fact that he is acting in a representative capacity 
and the identity of his principal, and the party dealt with is not required to 
discover or make inquiries to discover such facts. On the other hand, the agent 
is not liable where actual knowledge is shown, whether the agent himself makes 
the disclosure or the other party acquires the knowledge from some other source. 
Express notice of the agency relationship is not required. If the facts and 
circumstances surrounding the transaction affirmatively demonstrate that the 
contracting party should have been aware that he was dealing with a corporation, 
the officer will not be held personally liable for the contract. Whether the 
fact of agency and the name of the principal were disclosed or known to the 
third party so as to protect the agent from personal liability on the 
transaction is essentially a question of fact, and disclosure may be shown by 
circumstance surrounding the transaction and by the course of dealing between 
the parties. The officer claiming the agency relationship has the burden of 
proof on the issue." (Footnotes omitted.)

Applying these 
principles to the present case, appellee was entitled to summary judgment only 
if he demonstrated the absence of a genuine issue of material fact concerning 
appellant's knowledge that it was dealing with a corporation. Appellee failed to 
make this showing.

[¶12.]  The affidavits filed by appellee, 
stripped of conclusory statements and irrelevant information, showed only that 
appellee, as president of a corporation named Willor, Inc., might have made 
payment to appellant by means of corporate checks and might have provided 
financial statements to appellant which reflected doing business as a 
corporation. In paragraph six of appellee's affidavit he 
stated:

"[D]uring the course of 
business, all accounts of Taylor Distributing Company were paid by means of 
corporate checks. * * * [A]ttached hereto are copies of those checks showing 
payment of the account from the accounts of the corporation. Examination of the 
attached checks clearly reveals the status as a 
corporation."

The corporate 
checks alluded to were not, in fact, attached to the affidavit and do not appear 
in the record. In any event, the use of corporate checks to pay on an account 
billed to an individual does not conclusively establish knowledge of corporate 
status but is merely one fact which might tend to show such knowledge. Jensen v. 
Alaska Valuation Service, Inc., Alaska, 688 P.2d 161 (1984). 

[¶13.]  In paragraph ten of his affidavit, 
appellee stated:

"Since the time of 
incorporation of Willor, Inc., your Affiant, as President of Willor, Inc., has 
provided financial statements to creditors from time to time and has always 
reflected doing business as a corporation."

Appellee's 
attorney stated in his affidavit:

"That as information has 
been provided to your Affiant, all statements for payment were made with 
corporate checks and any financial statements that may have been requested by 
Plaintiff and therefore provided by Defendant were financial statements of the 
corporation, Willor, Inc. dba World of Color Interiors."

The statement of 
appellee's attorney demonstrates upon its face that it was not made upon 
personal knowledge and should therefore not be considered on a motion for 
summary judgment. Apperson v. Kay, Wyo., 546 P.2d 995 (1976); Rule 56(e), W.R.C.P. Moreover, the combined statements of 
appellee and his attorney do not show that appellant ever requested or received any 
of the financial statements referred to. They only demonstrate that such 
statements were sent "to creditors" and that appellant "may have" received 
them.

[¶14.]  Appellee did not demonstrate that there 
was no genuine issue of material fact and that he was entitled to judgment as a 
matter of law. As a result, we need not discuss appellant's affidavits in 
resistance, as appellant had no obligation to respond. Matthews v. Wyoming 
Department of Agriculture, Wyo., 719 P.2d 216 
(1986).

[¶15.]  Reversed and remanded.