Title: EXOTEX CORP. v. RINEHART

State: wyoming

Issuer: Wyoming Supreme Court

Document:

EXOTEX CORP. v. RINEHART2000 WY 733 P.3d 826Case Number: 97-234Decided: 04/05/2000Supreme Court of Wyoming
 
EXOTEX CORP., a Nevada 
corporation, Appellant(Defendant)v. JAMES H. RINEHART, d/b/a WESTERN 
UNITED REALTY, Appellee(Plaintiff).

Appeal from the District 
Court of Albany County, The Honorable Jeffrey A. Donnell, 
Judge.

Douglas W. 
Weaver, Wheatland, Wyoming, representing 
appellant.Kevin D. Huber of Huber Law Offices, P.C., Laramie, 
Wyoming, representing appellee.

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

* Chief Justice at time of 
expedited conference and retired November 2, 1998.

THOMAS, Justice, delivered the 
opinion of the Court; MACY, Justice, filed a specially 
concurring opinion.

THOMAS, 
Justice.

[¶1] In this 
case, we hold that a default judgment entered by a clerk of court pursuant to 
W.R.C.P. 55(b)(1) is void when the theories of recovery that are pleaded do not 
permit a conclusion that the plaintiff's claim "is for a sum certain, or for a 
sum which can by computation be made certain." The district court denied a 
motion to set aside the default judgment entered by the clerk of court. A 
district court has no discretion to refuse to set aside a void judgment upon 
application for that relief, and we reverse the Order Denying Defendants' 
Motions. The case is remanded to the district for further proceedings in 
accordance with this opinion.

[¶2] The issue 
upon which we decide this case is one we raise on our own motion:1

[¶3] Does a 
district court have any discretion to refuse to set aside a default judgment 
entered by the Clerk of the District Court when the requirements of W.R.C.P. 
55(b)(1) are not satisfied?2

[¶4] On May 3, 
1994, Ronald Brewer, president of Exotex Corporation (Exotex), signed a listing 
contract with Western United Realty (Western). James Rinehart (Rinehart) signed 
the contract on behalf of Western. The agreement provided that Western would 
serve as a broker to sell a parcel of land in Albany County owned by Exotex. In 
return, Western was to receive a commission of six percent of the selling 
price.

[¶5] By its 
terms, the listing contract expired on October 1, 1994. Nonetheless, Rinehart 
continued his efforts to sell Exotex's land, and Brewer allegedly agreed 
verbally to honor the contract terms should Rinehart produce a buyer. Rinehart 
found a buyer who, on January 22, 1997, signed an offer to purchase the parcel 
for $350,000.00. The executed Offer, Acceptance and Receipt Specific Performance 
Contract was amended by deleting Exotex as a seller. The terms of the offer 
specified that it must be accepted no later than 5:00 p.m. that same day. Brewer 
signed his acceptance of the offer the next day. For reasons that are not 
important to this discussion, the sale was never closed. A sale is a 
prerequisite for a claim for a commission under the law of Wyoming, and if there 
is no sale the broker or agent must pursue an action for damages for breach of 
his contract.

[¶6] Rinehart 
filed suit against Exotex and Brewer on April 8, 1997. His complaint stated 
claims for both intentional interference with prospective advantage and quantum 
meruit. He asked for his six percent commission on the $350,000.00 offer 
($21,000.00), plus costs. Brewer was served in his individual capacity in his 
home state of Texas. Service on Exotex was accomplished by serving its 
registered agent in Cheyenne. In apparent accordance with a previous agreement, 
the agent for service sent the summons and complaint to an individual in Nevada 
with the expectation that that person would forward it to Exotex. Seemingly due 
to an oversight, the summons and complaint remained in a file in 
Nevada.

[¶7] At 
Rinehart's request, the clerk of court entered a default against Exotex on May 
1, 1997. On the same day, the clerk of court filed and entered a judgment by 
default in the amount of $21,000.00 plus costs of $55.00. The Judgment by 
Default recites, in pertinent part:

[¶8] This 
Default Judgment is rendered pursuant to Rule 55(b)(i) in that Plaintiff's claim 
against Defendant, Exotex Corp., is for a sum certain in the amount of $21,000, 
as set forth in the prayer for relief together with the incorporated 
contracts.

[¶9] On May 19, 
1997, Exotex filed a Motion to Set Aside Judgment. The district court held a 
motion hearing on June 27, 1997. The lack of authority in the clerk of court to 
entry a default judgment was never suggested to the district judge. Shortly 
after the hearing, the district court issued its order denying the motion. 
Exotex appeals that denial to this Court.

[¶10] The 
authority for default judgments is found in W.R.C.P. 55: 

(a) Entry. 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.

(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 the defendant has been defaulted for 
failure to appear and is not a minor or an incompetent 
person;

(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 
a minor or an incompetent person unless represented in the action by a guardian, 
guardian ad litem, trustee, conservator, or other such representative who has 
appeared therein. 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. 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.

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

(d) Plaintiffs; 
Counterclaimants; Cross-Claimants. The provisions of this rule apply whether the 
party entitled to the judgment by default is a plaintiff, a third-party 
plaintiff, or party who has pleaded a cross-claim or counterclaim. In all cases 
a judgment by default is subject to the limitations of Rule 
54(c).

[¶11] The clerk 
of court has authority to enter a default judgment only when the amount of the 
claim is a sum certain or one which can be made certain by computation. Any 
judgment entered without such authority is void as an ultra vires act of the 
clerk. Wunnicke v. Leith, 61 Wyo. 191, 157 P.2d 274, 278 (1945); LaFountaine v. 
State Farm Mut. Auto. Ins. Co., 215 Mont. 402, 698 P.2d 410, 412 (1985). In this 
case, the assumption of all the parties and the district court was that the 
claim was for a sum certain, or a sum which could by computation be made 
certain. Close scrutiny of the record, particularly Rinehart's complaint, 
together with the applicable rules of law, demonstrates that the assumption is 
erroneous.

[¶12] Rinehart's 
affidavit in support of his Application for Judgment by Default assumes that he 
was owed a commission which was either a sum certain or could be made a sum 
certain by computation. Our substantive law does not support this assumption, 
however:

[¶13] Defendant 
argues that plaintiff in his petition fails to allege, and in the trial fails to 
prove, damages for breach or termination of the contract and cites as authority 
12 C.J.S., Brokers, § 17:

"The measure of damages 
to which a broker is entitled in case the principal refuses or fails to comply 
with his contract with the broker is the damage which actually results from the 
breach and will compensate him for the injury sustained, not exceeding the 
contract price for the services which he has performed. If he fails to show 
damages, he is entitled to recover nothing, or at most only nominal damages, and 
mere proof of breach of the contract is not proof that any damage was 
suffered."

[¶14] 15 
Am.Jur., Damages § 44:

"As a general rule, the 
loss or injury actually sustained, rather than the price paid or agreed to be 
paid on full performance, is the proper measure of damages for breach of a 
contract, notwithstanding from the nature of the subject matter such damages may 
be difficult of ascertainment."

and the 
following cases: Patterson v. Johnson, 187 Iowa 633, 174 N.W. 363; Jacob v. 
Cummings, 213 Mich. 373, 182 N.W. 115; Mt. Ida School for Girls v. Rood, 253 
Mich. 482, 235 N.W. 227, 74 A.L.R. 1325; Poinsettia Dairy Products v. Wessel 
Co., 123 Fla. 120, 166 So. 306, 104 A.L.R. 216; Perry v. United States, 294 U.S. 330, 55 S. Ct. 432, 79 L. Ed. 912, 95 A.L.R. 1335.

[¶15] The rules 
thus stated and borne out by the cited cases are correct statements of the law 
relating to damages for breach of a broker's contract.

[¶16] Leet v. 
Joder, 75 Wyo. 225, 240, 295 P.2d 733, 738 (1956); followed in E & E Min., 
Inc. v. Flying D Group, Inc., 718 P.2d 58, 62 (Wyo. 1986).

[¶17] The 
allegations of the complaint demonstrate that no sale of the property subject to 
the listing has occurred. Under Leet, Rinehart had the obligation of proving his 
damages for breach of the listing contract had he injected a theory of breach of 
contract. The right to the commission, which is what the claim of a sum certain 
is based on in this case, existed only in the event of a 
sale.

[¶18] Rinehart's 
complaint asserted claims for quantum meruit and intentional interference with 
prospective advantage. Therefore, to determine whether the clerk of court had 
authority to enter a default judgment in this case, we must ask whether the 
damages for these causes of action were a sum certain, or one which could by 
computation be made certain, pursuant to W.R.C.P. 55(b)(1). The latter is a tort 
theory for which damages must be established and for which the claim cannot be 
for a sum certain, or a sum which could by computation be made 
certain.

[¶19] A leading 
treatise explains the concept of a "sum certain" in this 
way:

[¶20] The term 
"sum certain" contemplates a situation where the amount due cannot be disputed. 
Such situations include actions and money judgments, negotiable instruments, or 
similar actions where the damages sought can be determined without resort to 
extrinsic proof. Examples of cases which are properly treated as claims for 
amounts which are certain or capable of being made certain by computation 
include such claims as actions based on life insurance policies, actions for the 
recovery of deposits, actions for the face amount of notes, and claims based on 
other liquidated sums. The "sum certain" requirement is clearly met where the 
claim is for liquidated or statutory damages and clearly not met where the claim 
is for unliquidated damages.

[¶21] 46 
Am.Jur.2d Judgments § 291 (1994). Similarly, "[t]he claim is not for a `sum 
certain' where its amount is largely a matter of opinion on which qualified 
persons might fairly and honestly differ." 46 Am.Jur.2d Judgments § 
291.

[¶22] 
Intentional interference with prospective advantage is a tort claim. The damages 
available in such a case include lost profits. W. Page Keeton et al., Prosser 
and Keeton on the Law of Torts § 130 at 1006 (5th ed. 1984). "In tort actions, 
`lost profits' means the expected gains from transactions which the injured 
party expected to complete had it not been for the tort." 22 Am.Jur.2d Damages § 
624 (1988). Thus, the appropriate measure of damages could be the commission 
Rinehart would have earned had the sale closed as he expected less his expenses. 
That amount is not ascertainable by simply taking six percent of the agreed sale 
price. Therefore, a clerk of court has no authority under the Wyoming Rules of 
Civil Procedure to enter a default judgment on such a 
claim.

[¶23] We find 
ample authority for the proposition that damages in an action for quantum 
meruit, or unjust enrichment, are not a sum certain:

[¶24] The 
measure of recovery under the doctrine of unjust enrichment is the value of such 
benefits as the plaintiff proves are actually received by the defendant. See 
McDougal v. Hunt, 146 Me. 10, 13, 76 A.2d 857, 860 (1950). The amount of benefit 
to the defendant is a question of fact. Accordingly, we hold that the plaintiffs 
claim against Prince was for an amount which was subject to determination by the 
court pursuant to M.R. Civ. P. 55(b)(2) and consequently, was not a sum certain 
or one which could be made certain by computation. The Clerk of Courts exceeded 
his power and the resulting default judgment is void. See Dowing v. O'Brien, 
Me., 325 A.2d 526, 528 (1974).

[¶25] Steel 
Service Center v. Prince Macaroni Mfg. Co., 438 A.2d 881, 882 (Me. 1981). See 
also Society of New York Hospital v. Tyszkiewicz, 70 Misc.2d 592, 334 N.Y.S.2d 189, 191 (1972) rev'd on other grounds, 74 Misc.2d 178, 344 N.Y.S.2d 720 (1973) 
(a quantum meruit claim precludes the entry of judgment without a judicial 
assessment). We are satisfied that in the absence of a sale, Rinehart could have 
no better claim for a sum certain under a quantum meruit theory than he could 
have for breach of the contract which he did not allege.

[¶26] Despite 
the pleadings of the parties, we do not perceive this case as one involving an 
abuse of discretion. Indeed, this is a case in which the district court had no 
discretion; the district court erred by refusing to set aside a judgment entered 
by the clerk of court without any authority to enter it. In DMM v. DFH, 954 P.2d 976, 978 (Wyo. 1998), we said:

[¶27] When a 
judgment is attacked pursuant to Rule 60(b)(4), however, there is no question of 
discretion in granting or denying relief - either the judgment is void, or it is 
valid. Id [State ex rel. TRL by Avery v. RLP, 772 P.2d 1054, 1057 (Wyo. 1989)]. 
Once that determination is made, the trial court must act accordingly. Id. "A 
judgment is not void merely because it is erroneous. It is void only if the 
court that rendered it lacked jurisdiction of the subject matter, or of the 
parties, or if it acted in a manner inconsistent with due process of law." 
WRIGHT, MILLER & KANE, FEDERAL PRACTICE AND PROCEDURE: CIVIL 2ND § 2862, at 
326-29 (1995) (footnotes omitted); see also, In Interest of WM, 778 P.2d 1106, 
1110 (Wyo. 1989).

[¶28] To the 
same effect are Sandstrom v. Sandstrom, 880 P.2d 103, 106 (Wyo. 1994); In 
Interest of WM, 778 P.2d 1106, 1110 (Wyo. 1989); and Lawrence-Allison and 
Associates West, Inc. v. Archer, 767 P.2d 989, 993 (Wyo. 1989). Entry of a 
judgment without proper authority constitutes a violation of due process of law, 
and such a judgment is void. We cannot recognize any measure of discretion to 
refuse to set aside a void judgment.

[¶29] The clerk 
of court had no authority to enter default on either of Rinehart's claims for 
relief. Therefore, the default judgment is void, and we reverse the district 
court's refusal to set it aside.

MACY, Justice, specially 
concurring.

[¶30] I agree 
that the default judgment entered against Exotex Corp. should be set aside. I do 
not, however, agree with the rationale the majority utilized to justify its 
decision and, consequently, specially concur.

[¶31] W.R.C.P. 
55(b)(1) provides that the clerk may enter a default judgment when the 
plaintiff's claim is for a sum certain or for a sum which can, by computation, 
be made certain. The majority concludes that the clerk did not have authority to 
enter a default judgment in this case because Rinehart's claim was not for a sum 
certain. I disagree with that conclusion.

[¶32] The 
majority quotes from Leet v. Joder, 75 Wyo. 225, 295 P.2d 733, 738 (1956), to 
justify its decision. The portion of the Leet case quoted by the majority states 
that, when a listing contract is breached by the principal, a broker is entitled 
to recover only the damages he actually incurred as a result of the principal's 
breach. The majority indicates that, under Leet, Rinehart was required to prove 
his actual damages and he could not simply present a claim for his commission. 
The majority concludes, therefore, that Rinehart's claim was not for a sum 
certain.

[¶33] The 
majority ignores the remainder of the Leet decision. What the majority neglected 
to point out is that the Leet decision goes on to state that, if a broker has 
performed the contract by providing a purchaser for the property, he may 
institute an action on the listing contract to recover his commission. Leet, 295 P.2d  at 738-39. We discussed the Leet decision in E & E Mining, Inc. v. 
Flying "D" Group, Inc., 718 P.2d 58 (Wyo. 1986). In that case, we stated that, 
when the broker has performed his obligation under a listing contract, he is not 
limited to a suit for his actual damages. 718 P.2d  at 62. The broker may sue on 
the contract to recover his commission. Id.

[¶34] The 
majority insists that a broker earns his commission only when a sale is 
finalized. Wyoming law does not, however, support the majority's position. The 
Wyoming Supreme Court has held that a broker is entitled to his commission when 
he has found a purchaser who is ready, willing, and able to purchase the 
property according to the seller's terms, even if the sale is not consummated. 
See Hill v. Hamilton, 368 P.2d 957, 959-60 (Wyo. 1962); Gerritsen v. Draney, 351 P.2d 667, 673-74 (Wyo. 1960). Other authorities agree with this statement of the 
law:

[¶35] Apart from 
stipulations in the broker's contract to the contrary, the right to compensation 
by a broker who has procured a person ready, willing, and able to purchase the 
property on the terms specified by the employer is not lost by a failure of 
completion of the transaction because of the employer's default or refusal to go 
through with the deal. In other words, when a real estate broker produces a 
purchase offer for the exact amount and in keeping with the other terms 
specified in a listing agreement, the owner is not bound to the purchase offer 
if he or she, for whatever reason, does not want to sell to that offeror; 
however, in such a case, the broker is entitled to a commission for his or her 
performance of the listing agreement.

12 Am.Jur.2d Brokers § 
248 at 890-91 (2d ed. 1997).

[¶36] Rinehart 
was entitled to sue for his commission after he procured a purchaser who was 
ready, willing, and able to purchase Exotex's property according to Exotex's 
terms. The record clearly sets out the sales price and the commission 
percentage. Rinehart's claim for his commission was, therefore, a claim for a 
sum certain. Under these circumstances, I believe that the clerk had authority 
to enter the default judgment.

[¶37] In my 
opinion, Exotex's assertion that the district court abused its discretion when 
it refused to set the default judgment aside pursuant to W.R.C.P. 55(c) and 
W.R.C.P. 60(b) is the dispositive issue in this case. W.R.C.P. 55(c) 
states:

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

[¶38] W.R.C.P. 
60(b) states in pertinent part:

(b) Other 
reasons. - 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; (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.

[¶39] Exotex 
maintains that it was entitled to relief from the default judgment pursuant to 
W.R.C.P. 60(b)(6). W.R.C.P. 60(b)(6) is known as the "catch-all" clause, and, 
under that provision, a judgment may be set aside for "any other reason 
justifying relief from the operation of the judgment." Vanasse v. Ramsay, 847 P.2d 993, 998 (Wyo. 1993). A defaulting party is entitled to be relieved from a 
default judgment under the catch-all clause only when extraordinary 
circumstances are present. Id. In U.S. Aviation, Inc. v. Wyoming Avionics, Inc., 
664 P.2d 121, 127 (Wyo. 1983), this Court recognized that "the purpose of Rule 
60(b)(6) is to provide courts with the power to vacate judgments whenever such 
action is appropriate to accomplish justice." 

[¶40] In the 
case at bar, the undisputed essential facts disclose that: (1) Exotex was not a 
party to the sales agreement with Pronghorn Construction; (2) Rinehart was aware 
that Exotex had been deleted as a seller in the sales agreement; (3) when the 
sales agreement was executed, there was no written contract obligating Exotex to 
pay a sales commission to Rinehart; and (4) Exotex owned only a small portion of 
the property which had been included in the sales 
agreement.

[¶41] I would 
hold that Exotex was entitled, under W.R.C.P. 60(b)(6), to be relieved from the 
default judgment which was entered in favor of Rinehart because good cause 
existed for setting aside the entry of default. Extraordinary circumstances were 
present in this case which justify relieving Exotex from the default judgment. 
Exotex should not, under any circumstances, be obligated to pay Rinehart's 
commission on the entire sale because it owned only a small portion of the land 
which was included in the sales agreement. A judgment which is so obviously 
unfair and unjust should not be allowed to stand. It is appropriate to vacate 
the default judgment pursuant to W.R.C.P. 60(b)(6) to accomplish justice in this 
case.

FOOTNOTES

1 The issue raised in the 
Appellant's Brief is:

Did the district 
court err when it denied the Motion to Set Aside the Default Judgment entered 
against defendant Exotex?

This Issue 
Presented for Review is found in the Appellee's Brief:

1. Did the trial 
court abuse its discretion in denying the Defendant/Appellant's Motion to Set 
Aside Judgment pursuant to Wyo.R.Civ.P. 60(b)?

2 Since the question is 
one of subject matter jurisdiction, we may raise it on our own motion at any 
time. Brunsvold v. State, 864 P.2d 34, 36 (Wyo. 1993).