ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

TERRY CRABTREE, JUDGE

DIVISION II

GREEN MACHINE CORPORATION

APPELLANT

V.

ALLEN ENGINEERING CORPORATION

APPELLEE

CA 00-1433

SEPTEMBER 5, 2001

APPEAL FROM THE GREENE COUNTY CIRCUIT COURT

[NO. CIV 96-17 (B)]

HONORABLE CHARLES DAVID BURNETT, CIRCUIT JUDGE

AFFIRMED

The Greene County Circuit Court granted the appellee, Allen Engineering Corporation, a default judgment against the appellant, Green Machine Corporation, in the amount of $133,386.16. On appeal, appellant presents three arguments: (1) the trial court erred in granting appellee a default judgment on its counterclaim because of insufficient evidence to support the judgment; (2) the trial court erred in granting appellee a default judgment for attorney's fees; and (3) the trial court erred in awarding appellee prejudgment interest at 10% per annum. We affirm.

The case at bar stems from an action filed in the United States District Court for the Central District of California by Chiuminatta Concrete Concepts, Inc. Chiuminatta sued three parties, which included appellant and appellee. In addition to the California action, the parties were involved in a patent infringement suit in the United States District Court for the Eastern District of Pennsylvania. Ultimately, appellant brought an action against appelleein

the Greene County Circuit Court, and it is the Greene County action that is the subject of the present appeal.

Appellant filed a complaint against appellee on January 25, 1996, seeking a judgment for $18,747.03 for saws sold and delivered to appellee. Appellee filed an answer and alleged that it was entitled to set-offs in excess of appellant's claim. On March 15, 1996, appellee filed a counterclaim for $72,213.09 for credit for defective goods and for sums owed under an "Indemnification Agreement." In its counterclaim, appellee credited appellant with the $18,747.03 claim and asked for judgment for the balance of $53,646.97, plus interest, attorney's fees and costs. Appellant filed a timely answer to the counterclaim. On May 26, 1999, appellee filed an "Amended Counterclaim," which asked for judgment against appellant for $72,213.09 and denied appellant credit for the previously admitted amount of $18,747.03. Appellant filed a timely response to the amended counterclaim.

Appellee gave appellant notice that it wanted to take appellant's deposition on July 8, 1999, in Paragould, Arkansas. The deposition did not take place, and appellee requested an order compelling discovery, which was heard by the court on August 27, 1999. The court ordered that the deposition take place in Greene County, Arkansas, on or before October 11, 1999, and awarded appellee $250 in attorney's fees. Appellant filed a motion for instructions on October 20, 1999, due to the parties being unable to schedule the deposition by agreement. Appellee disputed this and asked that appellant's pleadings be struck and asked for attorney's fees. On December 6, 1999, the trial court ordered the deposition to be held in Pennsylvania and all costs of the deposition to be paid by appellant prior to thedeposition including airfare, hotel expense, and attorney's fees of $1,250. The deposition did not take place.

On January 24, 2000, appellee brought its motion to compel before the trial court complaining that appellant failed to follow the court's order on how the deposition was to be conducted. The trial court found that appellant had failed to cooperate in discovery and struck appellant's answer to the counterclaim. Appellee filed a motion for default and asked for a hearing on damages, which was heard by the court on August 29, 2000. The circuit court granted a default judgment to appellee for $105,886.16 for amounts listed in its counterclaim and for prejudgment interest. The trial court also awarded appellee an additional judgment for $27,500 for attorney's fees, which totaled $133,386.16 for a final judgment.

For appellant's first point on appeal, he contends that the evidence presented was insufficient to support the default judgment granted to appellee. Rule 55 of the Arkansas Rules of Civil Procedure provides for entry of a default judgment when a party fails to appear or otherwise defend. Meeks v. Stevens, 301 Ark. 464, 785 S.W.2d 18 (1990). Because Rule 55(a) provides that the court "may" grant a default-judgment motion in the event of failure to answer or otherwise defend, we apply an "abuse of discretion" standard in reviewing the granting of a default judgment. Layman v. Bone, 333 Ark. 121, 967 S.W.2d 561 (1998). Default judgments are not favorites of the law and should be avoided when possible. B & F Engineering, Inc. v. Cotroneo, 309 Ark. 175, 830 S.W.2d 835 (1992). Rule 55, as revised in 1990, reflects a preference for deciding cases on the merits rather than ontechnicalities. Id. Because of its harsh and drastic nature, which can result in the deprivation of substantial rights, a default judgment should only be granted when strictly authorized and when the party affected should clearly know it is subject to default if it does not act in a required manner. Southeast Foods, Inc. v. Keener, 335 Ark. 209, 979 S.W.2d 885 (1998). Rule 55(c) provides that the court may, upon motion, set aside a default judgment if the judgment is void. Where the judgment is void, proof of a meritorious defense to the cause of action is unnecessary. Wilburn v. Keenan Cos., Inc., 298 Ark. 461, 768 S.W.2d 531 (1989).

Appellant's complaint and answer to appellee's counterclaim were struck due to appellant's failure to comply with discovery. Accordingly, the allegations set forth in the complaint are taken as true. Appellant cannot now dispute liability to appellee. Appellant does, however, claim that the amount of damages awarded to appellee on its counterclaim is not supported by the evidence. Steven Lee, general manager of Allen Engineering, testified that he keeps the billing records for appellee. Appellant initially argues that Lee was not qualified to testify, as he was not employed by appellee when appellee's counterclaim was filed and thus he has no personal knowledge of the amounts owed or the legal fees incurred. Appellant cross-examined Lee as to his actual knowledge of the matters contained in the business records, but appellant never objected to the trial court that Lee was not qualified to testify on these matters. Error may not be predicated upon a ruling admitting evidence unless there is a timely, specific objection. Bohannan v. Underwood, 300 Ark. 110, 776 S.W.2d 827 (1989). Appellant cannot now complain that Lee was not qualified totestify about appellee's business records. Neither can appellant complain that appellee failed to lay a proper foundation to the introduction of business records as appellant failed to object below. Appellant's failure to object and obtain a ruling on his objections precludes us from reaching the merits of his arguments on appeal. Berry v. St. Paul Fire & Marine Ins. Co., 328 Ark. 553, 944 S.W.2d 838 (1997).

Next, appellant submits that appellee's $40,000 payment in settlement of the Chiuminatta case was made without compulsion and therefore appellant should not be held liable to appellee. In making this argument, appellant attacks liability rather than the measure of damages. This is not appropriate. It is the law in Arkansas that a default judgment establishes liability, but not the amount of damages. Divelbliss v. Suchor, 311 Ark. 8, 841 S.W.2d 600 (1992). A defaulting defendant is entitled to a hearing to determine the amount of damages, and the plaintiff is required to introduce evidence of the damages. Clark v. Michael Motor Co., 322 Ark. 570, 910 S.W.2d 697 (1995). The defendant has the right to cross-examine the plaintiff's witnesses, to introduce evidence in mitigation of damages, and to question on appeal the sufficiency of the evidence to support the amount of damages awarded. Id. The defaulting defendant may not, however, introduce evidence to defeat the plaintiff's cause of action. Polselli v. Aulgur, 328 Ark. 111, 942 S.W.2d 832 (1997). A defendant may also offer proof as to an adjustment of the amount claimed. While a defaulting defendant cannot introduce evidence to defeat plaintiff's cause of action or to avoid it, any evidence that would tend to mitigate or minimize the damages or reduce the amount claimed, even to nominal damages, is admissible on behalf of a defaulting defendant. Kohlenberger v. Tyson's Foods, 256 Ark. 584, 510 S.W.2d 555 (1974).

Appellant may not now argue that it is not liable to appellee for the $40,000 paid in settlement. Appellee sued for that amount in its counterclaim against appellant, pursuant to the indemnification agreement executed by both parties. The striking of appellant's answer to appellee's counterclaim establishes appellant's liability.

Appellant also suggests the indemnification agreement, which formed the basis of appellee's cause of action was never offered into evidence. In fact, however, the indemnification agreement was attached as an exhibit to the motion to dismiss filed by appellant on March 30, 1996. Appellee made the agreement a part of the pleadings and record. Thus, appellant's claim is meritless.

Regardless, we believe that Lee's testimony was sufficient to establish that appellee made a $40,000 payment to Chiuminatta in settlement of the patent infringement action. The trial court stated:

He's got a certified copy of the appeal of the order of settlement, so apparently it was entered at some point. I'll accept the witness' testimony that the payment was based upon a settlement and an order of the California Superior Court for whatever district it might have been.

Appellant's counsel made no objection. The trial court determined that Lee's testimony, based on an invoice from appellee, established that appellee made a $40,000 payment to Chiuminatta in settlement of the patent infringement claim for which appellant had indemnified appellee by agreement. The trial court judge did not abuse his discretion by relying on Lee's testimony. In sum, we find appellant's attempt to contest its liability forthe amount owed rather than the amount of damages awarded misplaced.

For appellant's second point on appeal, it maintains that the trial court improperly awarded appellee attorney's fees in the amount of $27,500. A trial court is not required to award attorney's fees and, because of the trial judge's intimate acquaintance with the trial proceedings and the quality of service rendered by the prevailing party's counsel, we usually recognize the superior perspective of the trial judge in determining whether to award attorney's fees. Marcum v. Wengert, 344 Ark. 153, ___ S.W.3d ___ (2001). The decision to award attorney's fees and the amount to award are discretionary determinations that will be reversed only if the appellant can demonstrate that the trial court abused its discretion. Nelson v. River Valley Bank & Trust, 334 Ark. 172, 971 S.W.2d 777 (1998). A grant of attorney's fees is an issue within the sound discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion. Jones v. Abraham, 341 Ark. 66, 15 S.W.3d 310 (2000).

In awarding fees under Ark. Code Ann. § 16-22-308 (Repl. 1999), the trial court has broad discretion on whether to award fees, and its decision will not be reversed absent an abuse of discretion. Marcum, supra. The operative word in this statute is "may," which is usually employed as implying permissive or discretional, rather than mandatory, action or conduct and is construed in a permissive sense unless necessary to give effect to an intent to which it is used. Id. Here, appellant failed to timely object to the amount of attorney's fees awarded, either by contemporaneous objection or a motion to amend the judgment. Therefore, the argument was not preserved for appellate review and will not be consideredfor the first time on appeal. Farm Bureau Mut. Ins. Co. v. David, 324 Ark. 387, 921 S.W.2d 930 (1996). In any event, the trial court did not abuse its discretion in its award of attorney's fees to appellee. The trial court noted that in appellee's original compliant, it had alleged an indemnification provision dated January 13, 1995. The indemnification agreement provides:

THEREFORE, Allen and Green agree as follows:

Based upon this agreement, appellee is entitled to indemnification for its attorney's fees incurred in defending the Chiuminatta patent infringement action. Appellee retained attorneys with expertise in patent law to represent it in the patent infringement actions and to advise it in the case at bar. The suits are closely interconnected and involve many of the same parties and issues. It would be difficult to separate the services provided by the attorneys. Mr. Lee testified about appellee's legal expenses based upon appellee's business records. The trial court believed that the sums expended by appellee in attorney's fees were a direct result of the patent suit filed by Chiuminatta. We believe that appellee providedsufficient evidence to support the amount of legal fees incurred. Therefore, the trial court did not abuse its discretion in awarding $27,500 in attorney's fees.

For appellant's third point on appeal, it claims that the prejudgment interest should have been limited to 6% per annum rather than 10% per annum. However, appellant failed to object at the hearing to the trial court's award of prejudgment interest at 10%. Appellant's counsel even inquired of the trial court as to the applicable rate of interest. After a discussion between the court, appellant's counsel, and appellee's counsel, the trial court ruled that the prejudgment interest rate would be set at 10% per annum. The burden was upon appellant to make its argument below, so that the trial court might have the opportunity to consider it. Jacobs v. Yates, 342 Ark. 243, 27 S.W.3d 734 (2000). Our law is well settled that we will not consider an argument raised for the first time on appeal, and a party cannot change the grounds for an objection or motion on appeal, but is bound by the scope and nature of the arguments made at trial. Id.

The circuit court's award of default judgment, attorney's fees, and prejudgment interest to appellee is affirmed.

Affirmed.

Jennings and Baker, JJ., agree.