Title: M & A Const. Corp. v. Akzo Nobel Coatings, Inc.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

M & A Const. Corp. v. Akzo Nobel Coatings, Inc.1997 WY 56936 P.2d 451Case Number: 96-227Decided: 04/10/1997Supreme Court of Wyoming

M & A CONSTRUCTION CORP., a 
New York corporation,

Appellant(Plaintiff), 

v. 

AKZO 
NOBEL COATINGS, INC., 

Appellee(Defendant).

Appeal from the District Court, Teton 
County

The Honorable Nancy J. Guthrie, 
Judge

Representing 
Appellant:

Joseph F. Moore and Glenn W. Myers of Moore 
& Myers, Jackson.

Representing 
Appellant:

John L. Gallinger, P.C. and Paula A. Fleck 
of Holland and Hart, Jackson.

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

MACY, Justice.

[¶1]      The district 
court set aside the entry of default against Appellee Akzo Nobel Coatings, Inc. 
and granted a summary judgment against Appellant M & A Construction Corp. M 
& A Construction appeals from those orders.

[¶2]      We 
affirm.

ISSUES

[¶3]      M & A 
Construction presents the following issues on appeal:

I. The Trial 
Court's vacation of the entry of default without finding any specific grounds as 
required by Rule 60(b) on which to base its decision was contrary to 
law.

II. The Trial 
Court's finding that good cause existed to set aside the entry of default was 
unsupported by the evidence because Defendant/Appellee failed to meet its burden 
of proof to show good cause.

III. The Trial 
Court erred when it found that there were no genuine issues of material fact and 
that Defendant/Appellee Akzo was entitled to summary judgment as a matter of 
law.

IV. The Trial Court 
erred when it found that the Evaluation Voucher form dated February 1, 1994 
contained a "release" and that the "release" was clear and 
unambiguous.

FACTS

[¶4]      In 1988 or 1989, 
a wood finish manufactured by Akzo was applied to a house in Jackson which was 
owned by M & A Construction. Andrew DiMarco, the president of M & A 
Construction, and his wife contacted Akzo in 1991 and complained that the stain 
was chipping and flaking. Akzo viewed the house and authorized the restaining of 
the home at no cost to the DiMarcos. Mr. DiMarco executed a document entitled 
"Akzo Woodfinishes Final Release," releasing and discharging Akzo from "any 
action, cause of action, or claim for damages . . . where the damage has been 
sustained as at the date hereof or may be sustained thereafter." The stain was 
reapplied in the summer of 1991.

[¶5]      The DiMarcos 
contacted Akzo in the fall of 1993 and informed it that they were again 
experiencing problems with the stain. Akzo sent forty gallons of a different 
stain to the DiMarcos, and they took delivery of that stain. Mr. DiMarco 
executed another release on February 11, 1994.

[¶6]      As a result of 
the stain's failure, the DiMarcos filed an action on October 19, 1994, in the 
district court, asserting claims against Akzo for strict liability, breach of 
express and implied warranties of fitness, and negligence. After Akzo answered 
the complaint, it filed its first motion for a summary judgment, arguing that 
the terms of the first release barred the DiMarcos' 
claims.

[¶7]      On September 6, 
1995, the DiMarcos requested leave to amend their complaint in order to change 
the name of the plaintiff from the DiMarcos to M & A Construction because M 
& A Construction was the actual owner of the home. The DiMarcos attached a 
copy of the first amended complaint to the memorandum which it submitted in 
support of its motion to amend. The district court granted the DiMarcos' motion 
on September 8, 1995, and stated that the first amended complaint was deemed to 
be filed instanter. The first amended complaint contained revisions in addition 
to the name change. M & A Construction added additional counts and modified 
some of the original counts.

[¶8]      Akzo failed to 
answer the first amended complaint, and M & A Construction requested and 
received an entry of default on October 12, 1995, from the clerk of the district 
court. On that same day, Akzo filed a motion to set aside the entry of default. 
After holding a hearing, the district court found that good cause had been shown 
for vacating the entry of default and ordered Akzo to file an answer. Akzo filed 
its answer, and on November 17, 1995, the district court denied Akzo's first 
motion for a summary judgment.

[¶9]      Akzo filed a 
second motion for a summary judgment on April 29, 1996, arguing that it was 
entitled to be awarded a judgment as a matter of law on the basis of the second 
release. The district court granted Akzo's second motion for a summary judgment, 
and M & A Construction appealed to this Court. 

DISCUSSION

A. Default

[¶10]   M & A Construction contends 
that the district court erred when it vacated the entry of default against Akzo. 
Specifically, M & A Construction argues that sufficient evidence did not 
support the district court's ruling that good cause had been shown for setting 
aside the entry of default and that the district court erred by failing to make 
express findings to support its ruling.

W.R.C.P. 55 
governs entries of defaults:

(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.

. . . 
.

(c) Setting 
aside default. - For good cause shown the court may set aside an entry of 
default. . . .

Akzo argues that the clerk of the district 
court should not have entered the default against it because it had otherwise 
defended the case under W.R.C.P. 55(a) by filing a motion for a summary judgment 
and by actively defending the case. In First Southwestern Financial Services 
v. Laird, 882 P.2d 1211, 1214 (Wyo. 1994), we quoted Rashidi v. 
Albright, 818 F. Supp. 1354, 1355-56 (D.Nev. 1993), aff'd, 39 F.3d 1188 (9th Cir. 1994) (citations omitted) as follows:

"Failure to 
`otherwise defend' presumes the absence of some affirmative action on the part 
of a defendant which would operate as [a] bar to the satisfaction of the moving 
party's claim. In this context, it is generally held that challenges to matters 
such as service, venue and the sufficiency of the complaint preclude a default 
even if pursued in the absence of a responsive pleading. It is undisputed that a 
motion challenging a complaint for failure to state a claim upon which relief 
can be granted falls squarely within the ambit of the phrase `otherwise 
defend.'"

In the Rashidi case, the federal 
district court expressly stated that filing a motion for a summary judgment was 
a means of otherwise defending a case. 818 F. Supp.  at 
1356.

The court stated: "[C]learly a summary 
judgment motion which speaks to the merits of the case and demonstrates a 
concerted effort and an undeniable desire to contest the action is sufficient to 
fall within the ambit of `otherwise defend.'" Id.

[¶11]   In this case, Akzo answered the 
original complaint and then filed its first motion for a summary judgment. While 
that motion was pending, M & A Construction sought and received permission 
to amend its complaint. The parties acknowledged that Akzo's first summary 
judgment motion applied to the amended complaint. The issues were, therefore, 
effectively joined for resolution by Akzo's summary judgment motion. See 
Lantz v. Bowman, 881 P.2d 1079, 1081 (Wyo. 1994). Even though Akzo did 
not file its answer to the amended complaint in a timely fashion, it actively 
and vigorously defended the case, and the entry of default should not have been 
recorded against it.

[¶12]   Furthermore, even if the default 
had been properly entered, good cause existed for the district court to set 
aside the entry of default. A district court has broad discretion in deciding 
whether to set aside an entry of default. First Southwestern Financial 
Services, 882 P.2d  at 1215. We will not disturb the district court's 
decision on appeal "`unless appellant demonstrates that the trial court abused 
[it's discretion] and was clearly wrong.'" Vanasse v. Ramsay, 847 P.2d 993, 996 (Wyo. 1993) (quoting Claassen v. Nord, 756 P.2d 189, 193 (Wyo. 
1988)).

[¶13]   The party who is seeking to have an 
entry of default vacated must establish that he is entitled to such relief. 
Carlson v. Carlson, 836 P.2d 297, 301 (Wyo. 1992). The reasons for 
setting aside a judgment under W.R.C.P. 60(b) are relevant in determining 
whether good cause has been shown for vacating an entry of default. 
Vanasse, 847 P.2d  at 999. Those reasons include "(1) mistake, 
inadvertence, surprise, or excusable neglect . . . or (6) any other reason 
justifying relief from the operation of the judgment." W.R.C.P. 60(b). This 
Court has adopted a three-factor test to be applied in determining whether a 
motion under W.R.C.P. 60(b) should be granted. Vanasse, 847 P.2d  at 998. 
We have also ruled that the factors may be applied to determine whether good 
cause has been shown under W.R.C.P. 55(c). First Southwestern Financial 
Services, 882 P.2d  at 1215; Vanasse, 847 P.2d  at 998. The three factors we 
consider are:

"1. Whether the 
plaintiff will be prejudiced; 2. Whether the defendant has a meritorious 
defense; and 3. Whether culpable conduct of the defendant led to the 
default."

Carlson, 836 P.2d  at 301-02 (quoting Amernational 
Industries, Inc. v. Action-Tungsram, Inc., 925 F.2d 970, 976 (6th Cir.), 
cert. denied, 501 U.S. 1233, 111 S. Ct. 2857, 115 L. Ed. 2d 1024 
(1991)).

[¶14]   The district court's decision to 
vacate the entry of default in this case was warranted under W.R.C.P. 60(b). 
While Akzo could have avoided this entire problem by filing a timely answer to 
the first amended complaint, it apparently did not believe that an answer was 
necessary. Akzo had otherwise defended the case by filing its motion for a 
summary judgment, and it believed that the only difference between the original 
complaint and the first amended complaint was in the name of the plaintiff. 
However, the body of the complaint was, in fact, changed significantly, and an 
answer was required. The district court was also surprised that the first 
amended complaint contained such drastic changes. We conclude, therefore, that 
Akzo's failure to file an answer to the first amended complaint was the result 
of mistake and excusable neglect.

[¶15]   The district court's decision to 
set aside the entry of default was also authorized under the three-factor test. 
M & A Construction was not prejudiced by the district court's decision; it 
was aware from the original answer and the summary judgment motion that Akzo 
generally denied its allegations. Since Akzo filed its motion to set aside the 
entry of default on the same day that the entry was filed, M & A 
Construction could not have relied upon the entry of default to its 
detriment.

[¶16]   Akzo had a meritorious defense as 
it was eventually successful in obtaining a summary judgment against M & A 
Construction. In fact, M & A Construction admitted at the hearing on the 
motion to set aside the entry of default that Akzo had a meritorious defense. 
Additionally, the evidence in the record does not suggest that Akzo engaged in 
culpable conduct. Akzo vigorously defended the case, and it also filed its 
motion to set aside the entry of default on the same day that it was entered. 
The district court, therefore, properly exercised its discretion when it granted 
Akzo's motion to set aside the entry of default.

[¶17]   M & A Construction also argues 
that the order granting Akzo's motion to set aside the entry of default must be 
reversed because the district court did not make specific findings to support 
its ruling that good cause had been shown. M & A Construction does not 
direct us to authority which supports its assertion that a district court is 
required to make express findings, and neither W.R.C.P. 55 nor W.R.C.P. 60 
requires that such findings be made. See Best v. State, 769 P.2d 385, 389 
(Wyo. 1989); see also Haefele v. Meijer, Inc., 165 Mich. App. 485, 418 N.W.2d 900, 903-04 (1987) (per curiam). We conclude, therefore, that, while our 
appellate review of the order would have been facilitated by express findings, 
the failure to make such findings on the record was not reversible error. See 
Best, 769 P.2d  at 389.

B. Summary 
Judgment

[¶18]   M & A Construction contends 
that the district court erred by granting a summary judgment in favor of Akzo. 
The district court found that the second release was clear and unambiguous and 
that no genuine issues of material fact existed. The district court, therefore, 
granted Akzo's second motion for a summary judgment, releasing Akzo from further 
obligation to M & A Construction. M & A Construction argues that the 
release was not clear and unambiguous and that, in any event, the release lacked 
consideration. M & A Construction also contends that the release was invalid 
because Akzo fraudulently induced it into signing the 
document.

[¶19]     Summary judgment is appropriate when no 
genuine issue as to any material fact exists and when the prevailing party is 
entitled to have a judgment as a matter of law. Roitz v. Kidman, 913 P.2d 431, 432 (Wyo. 1996); see also W.R.C.P. 56(c). We examine the record from 
the vantage point most favorable to the party who opposed the motion, and we 
give that party the benefit of all favorable inferences which may fairly be 
drawn from the record. JCI v. TL By TL (Paternity of TS), 917 P.2d 183, 
185 (Wyo. 1996). We evaluate the propriety of a summary judgment by employing 
the same standards and by using the same materials as were employed and used by 
the lower court. Scott v. Scott, 918 P.2d 198, 199 (Wyo. 1996). We do not 
accord any deference to the district court's decisions on issues of law. 
Koopman By and Through Koopman v. Fremont County School District, 911 P.2d 1049, 1052 (Wyo. 1996).

[¶20]   The second release was signed by 
Mr. DiMarcos and stated:

[¶21]  "A release discharges another from an 
existing or asserted duty, claim or obligation, and it bars recovery thereon." 
Kelliher v. Herman, 701 P.2d 1157, 1159 (Wyo. 1985). Releases, or exculpatory 
agreements, are contractual in nature. Milligan v. Big Valley Corporation, 754 P.2d 1063, 1065 (Wyo. 1988); Kelliher, 701 P.2d  at 1159. We will, therefore, 
scrutinize the release in this case in accordance with our traditional standard 
for construing contracts.

Whether a written 
instrument is ambiguous is a question of law for the courts to decide. When 
determining whether a contract is ambiguous, we apply well-established 
principles which were summarized in Amoco Production Co. v. Stauffer Chemical 
Co. of Wyoming, 612 P.2d 463 (Wyo. 1980):

"Our basic purpose 
in construing or interpreting a contract is to determine the intention and 
understanding of the parties. If the contract is in writing and the language is 
clear and unambiguous, the intention is to be secured from the words of the 
contract. And the contract as a whole should be considered, with each part being 
read in light of all other parts. The interpretation and construction is done by 
the court as a matter of law.

"If the contract is 
ambiguous, resort may be had to extrinsic evidence. An ambiguous contract `is an 
agreement which is obscure in its meaning, because of indefiniteness of 
expression, or because a double meaning is present.' Ambiguity justifying 
extraneous evidence is not generated by the subsequent disagreement of the 
parties concerning its meaning."

Carlson v. Water 
Unlimited, Inc., 822 P.2d 1278, 1281 
(Wyo. 1991) (quoting Amoco, 612 P.2d  at 465 (citations 
omitted)).

Brockway v. Brockway, 921 P.2d 1104, 1106 (Wyo. 1996) (some citations 
omitted).

[¶22]   M & A Construction argues that 
the release was ambiguous because it did not contain the word "release" and it 
used vague language such as "peeling on residence in Jackson, Wyoming." M & 
A Construction also contends that the typed language in the "Notes" section 
which stated, "the following change is accepted," rendered the agreement vague 
and uncertain.

[¶23]   We conclude that the agreement was 
not ambiguous and that the clear intent of the exculpatory language in the last 
paragraph was that M & A Construction, in settlement of its dispute with 
Akzo, waived and released any claims that it had against Akzo. The "peeling on 
residence in Jackson, Wyoming" language simply explained the nature of the 
problem which Akzo was attempting to remedy and the typed language which stated 
that "the following change is accepted: 20 gal's Rubbol BL22 (Putty)[;] 20 gal's 
Rubbol BL33 (Putty)" merely referred to the types of materials which were being 
supplied.

[¶24]   In support of its argument that the 
release lacked consideration, M & A Construction points to the language in 
the last paragraph of the agreement which stated: "I understand and agree that 
Akzo is providing this Product solely as a good will gesture and that Akzo has 
not indicated that previous material sold to me or my agent was defective." M 
& A Construction contends that, since the material was supplied as a good 
will gesture, no consideration was given for the release. We disagree with M 
& A Construction's contention. Akzo was simply stating that, by supplying 
the new products to M & A Construction, it was not admitting that the 
previous products were defective. The next sentence in the agreement clearly 
stated that Akzo was giving the new products to M & A Construction in 
exchange for its agreement to release Akzo from any 
claims.

[¶25]   M & A Construction also 
contends that the release was void because Akzo fraudulently induced M & A 
Construction into signing it by stating that M & A Construction only needed 
to wash the residence with a garden hose before applying the new products when, 
in fact, the old stain had to be stripped from the house before the new products 
could be applied.

Fraud is 
established when a plaintiff demonstrates, by clear and convincing evidence, 
that (1) the defendant made a false representation intended to induce action by 
the plaintiff; (2) the plaintiff reasonably believed the representation to be 
true; and (3) the plaintiff relied on the false representation and suffered 
damages.

Jurkovich v. Tomlinson, 905 P.2d 409, 411 (Wyo. 1995). See also Lavoie 
v. Safecare Health Service, Inc., 840 P.2d 239, 252 (Wyo. 
1992).

[¶26]   Mr. DiMarco admitted in his 
affidavit that he questioned the veracity of Akzo's representation that the 
house could be prepared by simply washing it with a garden hose. He 
averred:

After getting the 
Rubbol product home, I went to the Color Center to inquire about the Rubbol 
product, because I did not know anything about it and because I was suspicious 
of the preparation instructions given to me by [an Akzo employee] in light of 
the extent of the peeling problem.

As a result of Mr. DiMarco's admission, M 
& A Construction failed to establish that it was fraudulently induced into 
signing the release. M & A Construction did not satisfy the last two 
elements of its fraud claim because Mr. DiMarco did not reasonably believe 
Akzo's statement and, therefore, did not rely upon it in entering into the 
agreement. 

[¶27]   Since the release was clear, did 
not lack consideration, and was not procured by fraudulent inducement, it was 
valid and barred M & A Construction's claims. The district court, therefore, 
properly granted a summary judgment in favor of Akzo.

CONCLUSION

[¶28]   The district court did not abuse 
its discretion when it vacated the entry of default against Akzo, and it 
properly granted a summary judgment against M & A 
Construction.

[¶29]   
Affirmed.