Title: Farrell v. Hursh Agency, Inc.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Farrell v. Hursh Agency, Inc.1986 WY 35713 P.2d 1174Case Number: 85-43Decided: 02/06/1986Supreme Court of Wyoming
NORMAN L. FARRELL AND 
HELEN L. FARRELL, APPELLANTS (DEFENDANTS), SAFEWAY STORES, INC., A CORPORATION, 
AND MALL CENTERS INTERMOUNTAIN, INC., A CORPORATION, (DEFENDANTS), 

 
 
v. 

 
 
HURSH AGENCY, INC., A 
WYOMING CORPORATION, APPELLEE (PLAINTIFF).

 
 
Appeal from the 
DistrictCourtofFremontCounty, Elizabeth A. Kail, and Robert B. Ranck, 
JJ.

 
 
 
 
Representing 
Appellants:

Charles E. Hamilton and 
Eric A. Easton of Hamilton Law Associates, P.C., 
Riverton.

 
 
Representing 
Appellees:

F.M. Andrews, Jr., of 
Andrews and Anderson, P.C., Riverton.

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

* Justice Rose circulated 
the opinion of the court September 6, 1985, and retired November 1, 
1985.

 
 
** Retired November 30, 
1985.

 
 

ROSE, 
Justice.

[¶1.]     This appeal asks 
whether error was committed when the trial court entered a default judgment 
pursuant to Rule 37(b)(2)(C), W.R.C.P., for the reason that the appellants 
failed to comply with the court's discovery orders. Appellants contend the 
default was improperly granted and that the hearing on damages after the default 
judgment was not correctly conducted.

 
 

[¶2.]     We will 
affirm.

 
 

[¶3.]     Appellee Hursh Agency, 
Inc. (Hursh) brought suit against appellants Norman Farrell and Helen Farrell 
and against Safeway Stores, Inc. and the Mall Centers Intermountain, Inc. By 
stipulation of counsel, Safeway Stores, Inc. and Mall Centers Intermountain, 
Inc. were dismissed from the suit. The complaint alleged that Norman Farrell 
breached his fiduciary duty with Hursh in the taking and conversion of various 
real estate and rental commissions when Farrell was the general manager and 
stockholder in Hursh's insurance and real estate business. Hursh also alleged 
that Farrell took corporate opportunity and caused other damage to Hursh by 
acting negligently in not renewing an errors-and-omissions policy for Hursh's 
business.

 
 

[¶4.]     Hursh served the 
Farrells with interrogatories and a request for production of documents on 
February 22, 1983, and the Farrells failed to provide responsive answers to a 
number of the interrogatories. Hursh then moved for an order requiring the 
Farrells to respond to those interrogatories and to produce the Farrells' income 
tax returns for the years 1975 through 1982. An order requiring these responses 
and production was entered by the court on May 10, 1983, and the Farrells 
responded to this order by supplementing their answers to the interrogatories, 
but did not produce the income tax returns as ordered. On June 24, 1983, Hursh 
made a motion for the production of the returns, and on August 4, 1983, moved 
for sanctions pursuant to Rule 37(d), W.R.C.P., because of the Farrells' failure 
to furnish full response to the interrogatory dealing with Norman Farrell's 
annual income and the appellants' failure to produce the requested income tax 
returns. Again on November 30, 1983, Hursh sought an order compelling Norman 
Farrell to produce documents relating to his current financial 
condition.

 
 

[¶5.]     On March 12, 1984, 
Hursh again moved for sanctions, this time seeking to dismiss the Farrells' 
counterclaim, and for judgment by default due to the Farrells' failure to 
produce all of their 1975 through 1979 tax returns and their complete failure to 
produce the 1980 through 1982 tax returns. The court responded to this motion by 
entering an order on March 20 directing that the information be provided by 
March 28, 1984, and further admonishing that the appellants' failure to comply 
would result in judgment being entered in favor of Hursh. The Farrells' response 
was to seek a protective order under Rule 26(c), W.R.C.P. It was their position 
that they did not possess the remaining portions of the 1975 through 1979 
returns and that the 1980 through 1982 returns were only necessary to establish 
Hursh's claim for punitive damages and, therefore, the later returns could not 
be compelled until the plaintiff had made "a prima facie showing that punitive 
damages is a viable claim." The Farrells further contended that records relating 
to their current financial condition were also relevant to punitive damages only 
and were therefore not discoverable under the condition of the pleadings at the 
time in question. The court denied the motion for a protective order on April 5, 
1984, and on April 6, 1984 Hursh filed an application for entry of default and 
for judgment based on the Farrells' failure to comply with the order for 
production of March 20, 1984. An entry of default and judgment was filed on 
April 6, 1984.

 
 

[¶6.]     The Farrells moved to 
set aside the default, and their motion was denied, whereupon a number of 
hearings on damages only were held. Following the trial on damages, at which 
both parties presented evidence, the court entered judgment on January 8, 1985, 
against Norman Farrell in the amount of $78,089.01 and against Norman and Helen 
Farrell jointly and severally for $42,500. From this judgment the Farrells 
appeal.1

 
 

[¶7.]     On appeal the Farrells 
raise the following issues:

 
 
"A. Should the Motion For 
Protective Order filed March 23, 1984 have been granted.

 
 
"B. Were the procedures 
mandated under Wyoming Rules of Civil Procedure 55(c) properly 
followed.

 
 
"C. Was the denial of the 
Appellant's Motion To Set Aside Default an abuse of 
discretion.

 
 
"D. Were the Damage 
Hearings correctly conducted."

 
 
Hursh, appellee, agrees 
with this statement of the issues with one exception. Appellee claims that the 
second issue is whether Rule 37(b)(2)(C), not Rule 55(c), was properly followed 
when the judgment in default was entered.

 
 
THE PROTECTIVE 
ORDER

 
 

[¶8.]     The court first ordered 
the appellants to produce the requested documents on May 10, 1983. After a 
number of requests for production and motions for sanctions due to the Farrells' 
failure to satisfactorily produce the various documents, the court, nearly one 
year later, again ordered production. It was only after this last order was 
entered that the Farrells first moved for a protective order under Rule 26(c), 
W.R.C.P.2 Now they claim that the court erred 
in not granting their motion.

 
 

[¶9.]     The rule is that the 
trial court has broad discretion in controlling discovery. Mauch v. Stanley Structures, Inc., 
Wyo., 641 P.2d 1247 (1982). This broad discretion has been applied in the specific area of 
protective orders. Penthouse 
International Ltd. v. Playboy Enterprises, Inc., 663 F.2d 371, 391 (2d Cir. 
1981). Under the facts in the present case and in light of the broad discretion 
allowed the trial court in this area, we cannot say that denying the protective 
order was an abuse of discretion.

 
 

[¶10.]  The trial court could have justifiably 
refused to grant the protective order for the reason that appellants' motion was 
untimely. A motion for a protective order under Rule 26(c) is not timely when it 
is filed after a party has failed to comply with previous orders of the court 
compelling production.

 
 

[¶11.]  When documents are first demanded, a 
party is obligated to produce them unless he asserts a nonfrivolous objection or 
moves for a protective order. Penthouse 
International Ltd. v. Playboy Enterprises Inc., supra. Appellants did 
originally object to the production of any of the returns based on their lack of 
relevancy, forcing Hursh to seek a court order requiring the production of the 
returns, and on May 10, 1983 the court did order production. After a number of 
motions for sanctions due to appellants' failure to respond, the court on March 
20, 1984 ordered that appellants produce the returns or else have default 
entered against them under Rule 37(b)(2)(C), W.R.C.P.3 It was only after this last order 
had been entered - nearly one year after the returns were first ordered produced 
- that appellants sought a protective order. Appellants requested this order 
without complying with, or seeking relief from, the court's first order 
compelling production.

 
 

[¶12.]  The timeliness of a motion for a 
protective order is within the discretion of the trial court, and, under these 
circumstances, there is no abuse of discretion in denying the motion as being 
untimely. Jolly v. Superior Court of 
Pinal County, 112 Ariz. 186, 540 P.2d 658, 660 (1975). In Amoco Oil Co. v. Segall, 118 Ill. App.3d 1002, 74 
Ill.Dec. 447, 455 N.E.2d 876 (1983), the appellant, like the Farrells here, 
failed to cooperate in discovery, made no response to a motion to compel, and 
finally moved for a protective order only after an order compelling discovery 
was entered. The court in that case had no problem affirming the trial court's 
refusal to grant the motion for the protective order due to untimeliness. We 
agree that the motion by the Farrells was untimely. There was no abuse in 
discretion in denying the protective order.

 
 
THE ENTRY OF 
DEFAULT

 
 

[¶13.]  Appellants urge that the trial court 
erred in entering default and judgment because it did not follow Rule 55(b), 
W.R.C.P., which provides in part:

 
 
"(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 he has been defaulted for failure to 
appear and if he is not an infant or incompetent person;

 
 
"(2) 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, 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. * * *"4

 
 
They suggest that the 
court failed to provide written notice at least three days prior to any hearing 
on the application for default. They state that there was, in fact, no hearing 
held prior to the entry of the default judgment and that this too was 
error.

 
 

[¶14.]  Appellee, while failing to cite authority 
for its contention, argues that when an entry of default is made under Rule 
37(b)(2)(C), there is no need to comply with the requirements of Rule 55. The 
only authority we can find supporting appellee's position is 6 Moore's, Federal 
Practice § 55.03[1], where it is said, without reference to any case 
law:

 
 
"It can be argued that 
Rule 55 has no application to the use of default judgments as sanctions * * * 
under Rule 37."

 
 
Although the point may be 
argued, the authorities we have found have taken the view that the notice 
provisions of Rule 55 do apply to defaults rendered pursuant to Rule 
37.

 
 

[¶15.]  In Poleo v. Grandview Equities, Ltd., 143 
Ariz. 130, 692 P.2d 309 (1984), the court held that a party whose pleading was 
stricken as a sanction under Rule 37 must be given the notice required by Rule 
55(b)(2) because that party "appeared" in the action. See also Chandos, Inc. v. Samson, 150 W. 
Va. 428, 146 S.E.2d 837 (1966); Muck v. Stubblefield, Colo. 
App., 682 P.2d 1237 (1984).

 
 

[¶16.]  Although we agree with appellants that 
they were entitled to notice, we cannot agree that they did not receive the 
requisite notice. Appellee's motion for sanctions dated March 9, 1984 clearly 
stated that the appellee sought a judgment by default. The court responded on 
March 20, 1984, with an order declaring that appellants either provide the 
requested information "not later than noon, Wednesday, March 28, 1984, or 
judgment will be given to the plaintiff and the hearing will be held on the 
issue of damages." The court found appellants in default and gave Hursh judgment 
on the issue of liability by an order dated April 3, 1984.

 
 

[¶17.]  In Muck v. Stubblefield, supra, the trial 
court entered a default judgment as a sanction less than three days after a 
motion for sanctions had been served on the defendants. However, the trial court 
had indicated in the order compelling discovery, 20 days before the entry of 
default, that it would consider a motion to enter judgment in favor of the 
plaintiff if the defendant failed to comply. Under these circumstances the court 
held that the trial court's order supplied the requisite notice. 682 P.2d  at 
1239. The facts in Muck v. 
Stubblefield, supra, are almost identical to those found in the present 
case.

 
 

[¶18.]  Appellee's motion for the sanction of 
judgment by default and the court's order of March 20, 1984, satisfied the 
purpose of the notice requirement of Rule 55(b)(2).

 
 
"The purpose of the 
notice requirement is to protect those parties who, although delinquent in 
filing pleadings within the time periods specified, have indicated a clear 
purpose to defend by entry of their appearance." Bankers Union Life Insurance Co. v. 
Fiocca, 35 Colo. App. 306, 532 P.2d 57, 58-59 
(1975).

 
 
Appellants were 
adequately protected in this case from any surprise in the entry of default. The 
motion for sanctions dated March 9 informed appellants that appellee was then 
seeking judgment by default and the court on March 20 stated that unless 
appellants produced the documents by noon on March 28, judgment would be given 
to the appellee. We hold that this motion and court order constituted sufficient 
notice under Rule 55(b)(2), supra.

 
 

[¶19.]  Appellants also assert that the trial 
court should have conducted a hearing to determine whether to enter the judgment 
by default.

 
 
"Rule 55 does not require 
that testimony be presented as a prerequisite to the entry of a default 
judgment. However, when it seems advantageous, a court may conduct a hearing to 
determine whether to enter a judgment by default." 10 Wright, Miller & Kane, 
Federal Practice and Procedure: Civil 2d § 2688 (1983).

 
 
In the present case the 
trial court had determined that it would enter judgment by default, as a 
sanction, if appellants failed to comply with its order of March 20. When 
appellants failed to comply, the court entered the default judgment. The 
determination of whether a hearing is necessary under Rule 55(b)(2) is also 
within the sound discretion of the trial court. See Dundee Cement Company v. Howard Pipe & 
Concrete Products, Inc., 722 F.2d 1319, 1323 (7th Cir. 1983). There was no 
abuse of discretion when the trial court did not hold a hearing before the entry 
of default as a sanction under Rule 37.

 
 
DENIAL OF MOTION TO SET 
ASIDE DEFAULT

 
 

[¶20.]  Appellants contend that the trial court 
abused its discretion in entering default as a sanction and by refusing to set 
aside the default. Appellants concede that the court has the discretion to 
impose sanctions, including dismissing or defaulting the offending party, for 
failing to make discovery. Zweifel v. 
State ex rel. Brimmer, Wyo., 517 P.2d 493, 498 (1974). Even so, it is 
the appellants' contention that the trial court abused its 
discretion.

 
 

[¶21.]  In contemplating the issue having to do 
with abuse of discretion in the imposition of sanctions, it has been noted that 
the question is not whether the reviewing court would have dismissed the action, 
but whether the trial court abused its discretion in so doing. Margoles v. Johns, 587 F.2d 885 (7th 
Cir. 1978). Appellants say that the district court should have imposed some 
lesser sanction. We have said that the trial court is given discretion with 
regard to sanctions, even to the point of entering a default judgment. Zweifel v. State ex rel. Brimmer, supra. 
Although the sanction of default is clearly not favored, we cannot say that the 
court abused its discretion in entering a default judgment against a party which 
has refused to comply with a court order compelling production of the same 
documents, which had been ordered produced nearly one year earlier. See Jones v. Uris Sales Corporation, 373 F.2d 644 (2d Cir. 1967).

 
 

[¶22.]  The Farrells contend that even after the 
default had been entered as a sanction it should have been set aside under Rules 
55(c) and 60(b)(1), W.R.C.P. Rule 55(c) provides:

 
 
"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)."

 
 
Rule 60(b) provides in 
part:

 
 
"* * * On motion, and 
upon such terms as are just, the court may relieve a party * * * from a final 
judgment * * * for the following reasons: (1) mistake, inadvertence, surprise, 
or excusable neglect * * *."

 
 

[¶23.]  We have previously held 
that:

"Motions brought under 
Rules 55(c) and 60(b)(1) are addressed to the sound discretion of the court in 
which they are brought, and that court's decision will be reviewed only for an 
abuse of its discretion." U.S. Aviation, 
Inc. v. Wyoming Avionics, Inc., Wyo., 664 P.2d 121, 126 
(1983).

 
 

[¶24.]  The appellants claim "good cause" in 
failing to produce the entire 1976 through 1979 returns because they did not 
have the entire returns. We have no problem with their contention that sanctions 
cannot be imposed for failing to produce something a party does not have. 
However, appellants do not suggest that the other returns were unavailable to 
them. Instead, they argue that they were not required to produce these returns 
since they addressed only the question of punitive damages. As has been noted, 
they refused to produce the returns in issue even though the court had ordered 
them produced and appellants had never sought relief from the order or any of 
the number of requests for production.

 
 

[¶25.]  While it is true that appellants may have 
been pressed for time shortly before the last order requiring production, these 
problems could not excuse the refusal to produce the documents in compliance 
with the court's order one year earlier. The court's harsh sanction of default 
and failure to set aside the entry may have been an abuse of discretion if the 
only order of production was the one on March 20, 1984. However, the appellants 
have not shown such "good cause" as would have justified the court in setting 
aside the entry of default. Furthermore, the appellants have not pointed to any 
such "mistake, inadvertence, surprise or excusable neglect," as is contemplated 
by Rule 60(b)(1), W.R.C.P., and are therefore not entitled to be relieved from 
the default entered as a sanction for their dilatory tactics in failing to 
comply with not only the March, 1984 order, but also the order of May, 1983. 
There was no abuse of discretion in refusing to grant appellants' motion to set 
aside the default.

 
 
THE DAMAGE 
HEARINGS

 
 

[¶26.]  Appellants contend that the judgment must 
be overturned because they were denied a right to jury trial on the issue of 
damages. They base their claim on Rule 55(b)(2), W.R.C.P., and Art. 1, § 9 of 
the Wyoming 
Constitution.5 They also contend that the court 
committed a number of other errors in conducting the damage 
hearings.

 
 

[¶27.]  There was no right to a jury trial. Rule 
55(b)(2) provides in part:

 
 
"If, in order to enable 
the court to enter judgment or carry it into effect, it is necessary to * * * 
determine the amount of damages * * * the court may conduct such hearings * * * 
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."

 
 

[¶28.]  Appellants do not rely on any particular 
statute giving them a right to a jury trial. A number of federal courts have 
held that Rule 55(b) does not itself require a jury trial on the issue of 
damages. Henry v. Sneiders, 490 F.2d 315 (9th Cir. 1974), cert. denied 419 U.S. 832, 95 S. Ct. 55, 42 L. Ed. 2d 57; see 6 
Moore's, Federal 
Practice ¶ 55.07. Article 1, § 9 of the Wyoming Constitution does not require 
that appellants be given a jury trial in this tort action. Matter of GP, Wyo., 679 P.2d 976, 986 
(1984). There is no support for appellants' claim that there was error in 
denying a jury trial on the issue of damages in a default 
case.

 
 

[¶29.]  Appellant Norman Farrell was found liable 
for damages suffered by appellee as a result of Farrell's failure to renew an 
insurance policy needed to protect appellee in various aspects of its business. 
Appellee had contended that Farrell, as its manager in charge of its insurance 
department, was negligent in failing to renew the policy. Appellants contend 
that the trial court committed error in refusing to allow Norman Farrell to 
testify as to the coverage of the errors-and-omissions policy. Mr. Hursh had 
already identified the prior errors-and-omissions policy, read the coverage 
clauses into evidence, and had related all of the facts of the accident along 
with the claim and subsequent loss suffered by appellee. Neither Farrell nor 
Hursh was permitted to give an opinion as to whether the policy would have 
covered the loss. "When terms of a contract are shown without any conflict of 
evidence, interpretation of a contract becomes a question of law for the court." 
Hursh Agency, Inc. v. Wigwam Homes, 
Inc., Wyo., 664 P.2d 27, 31 (1983). It was not error 
for the judge to exclude opinions as to the extent of coverage under the policy. 
This was a question of law to be decided by the judge.

 
 

[¶30.]  Appellants' claim that there was no 
evidence to support the breach of fiduciary duty in Norman Farrell's purchase 
and sale of property in Riverton goes to the issue of liability. This was 
settled by the default judgment.

 
 

[¶31.]  The court entered judgment for $42,500 
under Count IV of the complaint to compensate Hursh for its share of the profit 
(plus interest) lost by Farrell's taking of a corporate opportunity. The lost 
profit was a result of the purchase and resale of property by appellants, when 
they knew or should have known, that this was an opportunity of the appellee. 
The evidence on this count established the purchase price, sale price and 
payments made on the sale.

 
 

[¶32.]  As to the damages under this count, 
appellants contend that the damages allowed were too high because the court 
awarded appellee the loss of profits on the deal, without properly calculating 
the profit. The evidence disclosed the purchase price, paid by Norman Farrell, 
and the price for which he later sold the property. Appellants claim that Hursh 
should have also attempted to establish Farrell's expenses in this transaction. 
They claim that in establishing the profit in this transaction Hursh was 
required to also establish Farrell's expenses; and, since Hursh never produced 
evidence as to Farrell's expenses, the court did not properly calculate the 
damages under this count. If appellants wished to claim that the profit from the 
sale was actually less than the amount appellee claimed, then it was incumbent 
on appellants to introduce sufficient evidence supporting their claim. Hursh 
presented evidence sufficient to justify the trial court's finding of damages 
under this count. See Chittim v. Armco 
Steel Corp., Wyo., 407 P.2d 1015 
(1965).

 
 

[¶33.]  Finally, appellants claim the admission 
of one of appellee's exhibits was error. We need not consider whether the 
admission was error because the exhibit in question was merely cumulative of 
other evidence properly admitted. "[I]n a trial by court without a jury where 
there is sufficient, competent evidence without that claimed to be erroneously 
admitted to sustain a judgment such admission is not a ground for reversal." In re Shreve, Wyo., 
432 P.2d 271, 273 (1967).

 
 

[¶34.]  There was no error in the entry of the 
default judgment nor in the conduct of the hearings on 
damages.

 
 

[¶35.]  Affirmed.

1 The Farrells originally 
attempted to appeal from the entry of default judgment before the hearings 
determining damages. This first appeal was dismissed by this court as not being 
an appeal from a final order under Rule 1.05, W.R.A.P., because the order fixed 
only liability and not damages.

 
 

2 Rule 26(c), W.R.A.P., 
provides in part:

 
 
"(c) Protective orders. - Upon motion by a 
party or by the person from whom discovery is sought, and for good cause shown, 
the court in which the action is pending * * * may make any order which justice 
requires to protect a party or person from annoyance, embarrassment, oppression, 
or undue burden or expense * * *."

 
 

3 Rule 37(b)(2)(C), 
W.R.C.P., provides in part:

 
 
"(b) Failure to comply 
with order.

 
 
"(2) * * * If a party * * 
* fails to obey an order to provide or permit discovery * * * the court in which 
the action is pending may make such orders in regard to the failure as are just, 
and among others the following:

 
 
* * * * * 
*

 
 
"(C) 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; * * 
*"

4 Rules 37(b)(2)(C) and 
55(b), W.R.C.P. are similar to the corresponding federal rules and to the rules 
of the other states relied upon in this part of the opinion. Authority 
interpreting such rules aids in our application of the Wyoming rules. Hicklin v. State, Wyo., 535 P.2d 743, 748, 
79 A.L.R.3d 1050 (1975).

 
 

5 Article 1, § 9 of the 
Wyoming Constitution provides:

 
 
"The right of trial by 
jury shall remain inviolate in criminal cases. A jury in civil cases and in 
criminal cases where the charge is a misdemeanor may consist of less than twelve 
(12) persons but not less than six (6), as may be prescribed by law. A grand 
jury may consist of twelve (12) persons, any nine (9) of whom concurring may 
find an indictment. The legislature may change, regulate or abolish the grand 
jury system."