Kelly Broadcasting Co. v. Sovereign Broadcast, Inc.

OPINION

By the Court,

Gunderson, J.:

The dispute in this case arose when respondent Sovereign Broadcast Inc. ceased to operate and manage an AM radio station in Carson City, Nevada, in October, 1971. The appeals are taken from the district court’s entry of default judgment against Sovereign for failure to comply with discovery orders; from a subsequent reduction of the amount of liquidated damages; and from entry of a judgment of dismissal on appellant Kelly Broadcasting Co. Inc.’s claims for unliquidated damages and punitive damages.

Before addressing the merits of the appeal and cross-appeal, we must consider Kelly’s motion to dismiss the cross-appeal and to enter judgment in its favor, tendered on the ground that Sovereign is a dissolved corporation. Sovereign’s counsel acknowledged Sovereign’s dissolution as of October, 1977.

At common law, a legally dissolved corporation is dead. Dissolution terminates the corporation’s existence for all purposes. W. Fletcher, Cyclopedia of the Law of Private Corporations § 8113 (rev.perm.ed. 1979). Nevada has changed the rule by statute. Upon dissolution, directors become trustees of the corporation with full power to wind up the business.¹ NRS 78.590. The directors as trustees are suable for corporate debts. NRS 78.595.

Here, claims based in tort and contract were filed against the dissolved corporation. NRS 78.615 states:

78.615 Abatement of pending actions; substitution of dissolution trustees or receivers. If any corporation organized under this chapter becomes dissolved by the expiration of its charter or otherwise, before final judgment obtained in any action pending or commenced in any court of record of this state against the corporation, the action shall not abate by reason thereof, but the dissolution of the corporation being suggested upon the record, and the names of the trustees or receivers of the corporation being entered upon the record, and notice thereof served upon the trustees or receivers, or if such service be impracticable upon the counsel of record in such case, the action shall proceed to final judgment against the trustees or receivers by the name of the corporation.

Inasmuch as the notices of appeal were filed prior to dissolution, we believe there has been no “final judgment” for purposes of Ch. 78, Nev. Rev. Stats. Therefore, NRS 78.615 applies.

Kelly argues it was Sovereign’s responsibility to suggest dissolution on the record, name the directors as dissolution trustees, and give notice. We do not agree. NRS 78.615 contemplates notice to the trustees (or receivers) or, if not practicable, to the attorney of record. This seems to require action by the party suing the corporation. In any event, it certainly does not permit the party bringing suit to forego giving notice, to have its own claims decided, and to have the claims of its adversary ignored or dismissed. We will deem appellant’s motion as a notice to the corporation’s attorney of record, and turn to the merits of the case.

Appellant Kelly filed this action to recover damages for fraud, malice, negligence, intentional failure to perform a management contract, and conspiracy. It sought cancellation of a contract and of a stock certificate issued to Sovereign. It prayed for actual and punitive damages in excess of one million dollars. Kelly claimed Sovereign breached an agreement to manage the AM radio station; that Sovereign’s officers and employees committed fraud in their dealings with William Cody Kelly; that Sovereign’s officers and agents converted certain equipment belonging to appellant; and that Sovereign’s officers guaranteed to William Cody Kelly that the AM station would make a profit within one year.

1. Sovereign appealed from the entry of a default judgment pursuant to NRCP 37(b)(2)(E). The amended answer was stricken and the court set a hearing to determine the amount of unliquidated damages. The basis for the imposition of sanctions was Sovereign’s failure to complete discovery as ordered. The answers to interrogatories, which Sovereign filed two years late, were unsatisfactory. The trial court noted that Sovereign had intentionally and in bad faith sought to avoid and delay trial, thereby prejudicing appellant’s case.

Sovereign argues on appeal that by striking the amended answer, the lower court denied respondent due process. Because the interrogatories related only to the second and fourth defenses, Sovereign argued that, at most, the court could have denied any right to prove up on those defenses. We do not agree. See Skeen v. Valley Bank of Nevada, 89 Nev. 301, 511 P.2d 1053 (1973). NRCP 37(d) sanctions entry of a default judgment for failure to answer interrogatories. An incomplete or evasive answer is treated as a failure to answer. NRCP 37(a)(3). The question is not whether this court would as an original matter have entered a default judgment as a sanction for violating a discovery rule; it is whether the trial court abused its discretion in so doing. Affanato v. Merrill Bros., 547 F.2d 138, 140-141 (First Cir. 1977); cf. National Hockey League v. Met. Hockey Club, 427 U.S. 639, 642 (1976) (per curiam). See Kerley v. Aetna Cas. & Sur. Co., 94 Nev. 710, 585 P.2d 1339 (1978). We do not find an abuse of discretion in this case.

2. The district court entered an oral award for liquidated damages on August 2, 1976. The court’s written order was not filed with the clerk until October 14, 1976. Thereafter, pursuant to motion by Sovereign, the district court deleted an award of $10,000 as attorneys’ fees and reduced the award of liquidated damages to $18,126.59.

Absent a statute or contract authorizing such an award, attorney’s fees may not be recovered by a party to litigation. Guild v. First Nat’l Bank of Nev., 95 Nev. 621, 600 P.2d 238 (1979). Attorney’s fees may be awarded where the plaintiff has not recovered more than $10,000. NRS 18.010(2)(a). Here, the court awarded plaintiff over $10,000. As no contract allowed payment of attorneys’ fees, the court did not err in refusing such an award.

3. On respondent’s motion, the trial court deleted from the default judgment items which had been omitted from the prayer of the amended complaint; however, the court allowed recovery for other items set forth in Para. VIII, §§ (a) and (f), even though they also had been omitted from the prayer.²

Appellant, having failed to include the amounts set forth in Paragraph VIII, ordinarily would not be entitled to amend his prayer once default judgment had been entered. NRCP 54(c).³ In this case, the trial court entered respondent’s default because respondent willfully failed to comply with an order of the court. Respondent had filed a counterclaim in the action and was represented by counsel. Evidence to support the items set forth in Para. VIII, §§ (a) and (f) had been presented at trial. Under these circumstances, the trial court did not err in allowing recovery for items (a) and (f); nor did it err in deleting other items. Cf. Sarlie v. E. L. Bruce Co., 265 F.Supp. 371, 377 (S.C.N.Y. 1967).

4. Where a default judgment is neither for a sum certain, nor for a sum which can by computation be made certain, the plaintiff must prove up his damages. NRCP 55(b); 6 Moore’s Federal Practice ¶55.03[2] (2d ed. 1976); 10 Wright & Miller, Federal Practice and Procedure: Civil § 2688, 284 (1973). The record certainly did not mandate any finding of further damages, actual or punitive. Appellant contends, however, that because he pleaded damages “in excess of $10,000,” he is entitled to a minimum of $10,000 lost profits, $10,000 punitive damages, and $10,000 reimbursement for monies expended in managing the station after Sovereign breached its contract. We do not agree.

To justify a money judgment, the amount as well as the fact of damage must be proved by substantial evidence. The law does not permit arriving at the amount by pure conjecture. Alper v. Stillings, 80 Nev. 84, 389 P.2d 239 (1964). Cf. Knier v. Azores Constr. Co., 78 Nev. 20, 368 P.2d 673 (1962).

In order to award punitive damages, the trial court must find substantial evidence of malice in fact. Village Development Co. v. Filice, 90 Nev. 305, 526 P.2d 83 (1974). A plaintiff is never entitled to punitive damages as a matter of right; their allowance or denial rests entirely within the discretion of the trier of fact. Nevada Cement Co. v. Lemler, 89 Nev. 447, 451, 514 P.2d 1180, 1182 (1973).

Other contentions of error are without merit and need not be addressed.

Affirmed.

Mowbray, C. J., and Batjer, J., concur.

1 But see NRS 78.600 and NRS 78.605 which allow a creditor or stockholder to petition the district court to either continue the dissolution trustees or appoint receivers to settle unfinished business. Cf. Robt. Pierce Co. v. Sherman Gardens, 82 Nev. 395, 419 P.2d 781 (1966) where the dissolved corporation was plaintiff.

2 Para. VIII of the amended complaint reads:

“(a) Test equipment plaintiff purchased in 1970 that was overvalued by defendant’s officers and subsequently converted by them...................................................................$1,787.00

“(f) Balance due plaintiff corporation from the sale of an AM Transmitter....................................................................................... 2,600.00”

3 NRCP 54(c) provides:

“Demand for Judgment. A judgment by default shall not be different in kind from or exceed in amount that prayed for in the demand for judgment, except that where the prayer is for damages in excess of $10,000 the judgment shall be in such amount as the court shall determine. Except as to a party against whom a judgment is entered by default, every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief in his pleadings.”