Southern Idaho Production Credit Ass'n v. Astorquia

746 P.2d 985, 113 Idaho 526, 1987 Ida. LEXIS 364

• Court: Idaho Supreme Court
• Decided: November 16, 1987
• Docket: 16658
• Status: Published

Opinions

BAKES, Justice.

Appellants Josephine and Frank Astorquia appeal from a district court order granting summary judgment to respondent Southern Idaho Production Credit Association (SIPCA) as well as the district court’s prior order imposing sanctions on appellants for failure to comply with discovery requests of respondent. Primarily, appellants contend on appeal that the district court abused its discretion in awarding sanctions against them. The sanctions imposed by the district court included striking of appellants’ affirmative defenses and counterclaim against SIPCA. We affirm in part, vacate in part and remand for further findings.

SIPCA loaned money to the Astorquias for farming operations. The loans were secured by mortgages and security interests on real and personal property owned by the Astorquias. The Astorquias defaulted on the loans and SIPCA instituted foreclosure proceedings on January 23, 1983. The Astorquias, through counsel, answered SIPCA’s complaint on May 10, 1983, and filed a counterclaim alleging negligence, misrepresentation, breach of fiduciary duty and emotional distress and humiliation. SIPCA answered the counterclaim in June, 1983. Shortly thereafter, appellants filed for reorganization under Chapter 11 of the bankruptcy act and, as a result, all proceedings by Astorquia’s creditors were stayed by the bankruptcy court for nearly two years.

On April 1, 1985, the automatic stay was lifted by the bankruptcy court to allow SIPCA and other creditors to litigate their claims in state court, presumably to facilitate formulation of a debtor reorganization plan. Once the stay was lifted, other defendants, Jose and Lucia Osa, who were also creditors of Astorquias, commenced their own mortgage foreclosure proceedings against one parcel of property owned by Astorquias on which the mortgage held by Osas was prior to the mortgage of SIP-CA.¹ Osas were granted judgment on June 3, 1985 based on Astorquia’s failure to respond to Osa’s motion for summary judgment seeking foreclosure of their mortgage or to appear at the scheduled hearing on the motion. A sheriff’s sale was held and the Osas are now record owners of that particular piece of property.

After the stay was lifted, SIPCA also proceeded with its foreclosure complaint against appellants and its defense of appellants’ counterclaim. On November 20, 1985, SIPCA sent interrogatories and a request for production of documents relating to the defenses and the counterclaim to appellants’ counsel. When the answers were not forthcoming, SIPCA filed a motion to compel on March 3, 1986. Neither appellants nor their counsel appeared at the May 7, 1986, hearing on the motion to compel, and the motion was granted. The district court ordered Astorquias to answer SIPCA’s interrogatories and respond to the request for the production of documents within 20 days. Appellants did not respond to the court’s order compelling discovery, nor did they appear at depositions which were scheduled for May 14, 1986. SIPCA contacted one of appellants’ counsel the day before appellants’ depositions were to be taken; counsel stated that he did not intend to be present at the depositions.

As a result of appellants’ failure to comply with the discovery requests and order of the district court, SIPCA, on June 5, 1986, filed a motion for sanctions for failure to comply with discovery, pursuant to I.R.C.P. 37(b). The motion requested:

1. An order refusing to allow the Astorquias to offer evidence to support their counterclaim filed in this action, or to oppose the claims of the plaintiff seeking to foreclose its mortgages and security interests.

2. An order dismissing Astorquias’ counterclaim with prejudice.

3. An order striking the answer and affirmative defenses of the Astorquias and entering a judgment by default on the plaintiff’s complaint.

4. An order holding the Astorquias in contempt of court for failure to respond to the request for production and interrogatories in accordance with the court’s previous order.

5. An order directing the Astorquias to pay reasonable expenses, including attorney fees, caused by the failure of the Astorquias to comply with discovery.

The district court granted only part of the relief requested by SIPCA. The court allowed appellants’ answer to stand and required SIPCA to prove its entire claim, but struck the appellants’ pleadings which were the subject of the discovery requests, ie., the appellants’ affirmative defenses and counterclaim relating to the appellants’ money damages claim for misrepresentation, breach of fiduciary duty, etc. It was those allegations to which SIPCA’s discovery requests were directed. The trial court further found that the failure of appellants to supply the information requested in the discovery impaired SIPCA’s ability to defend against those pleadings.

Thereafter, SIPCA moved for summary judgment establishing by affidavit that Astorquias had indeed borrowed the money, signed the notes and mortgages, and were in default in their payments under the terms of the notes and mortgages. Astorquias did not seriously contest SIPCA’s motion for summary judgment of foreclosure of their notes and mortgages, but merely filed a motion to reconsider the imposition of sanctions and a motion for a Rule 54 certification of the order granting sanctions. The district court denied appellants’ motions for reconsideration and granted SIPCA’s motion for summary judgment. The order granting summary judgment was certified for appeal under I.R.C.P. 54, and Astorquias have appealed.

Appellants raise no issue on appeal concerning the order granting summary judgment on the foreclosure. Their appeal assigns error only to the order granting sanctions. Thus, the sole issue raised on appeal is whether it was appropriate for the trial court to dismiss the appellants counterclaim and strike their affirmative defenses for failure to comply with the discovery requests and orders.

In Devault v. Steven L. Herndon, 107 Idaho 1, 684 P.2d 978 (1984) we were faced with circumstances similar to those of the present case. In Devault we held that the imposition of sanctions pursuant to I.R.C.P. 37(b) was a matter entrusted to the sound discretion of the trial court. In reviewing on appeal a trial court’s exercise of its discretionary powers, we have consistently held that such will not be overturned absent a manifest abuse of that discretion. See Quick v. Crane, 111 Idaho 759, 770, 727 P.2d 1187, 1198 (1986); Devault v. Steven L. Herndon, supra. An appellant bears the burden in establishing an abuse of trial court discretion. To establish such an abuse, an appellant must show that the trial court’s findings are clearly erroneous and that it did not properly identify and apply the law to the facts found. Shelton v. Diamond International Corp., 108 Idaho 935, 703 P.2d 699 (1985); Avondale on Hayden, Inc. v. Hall, 104 Idaho 321, 658 P.2d 992 (Ct.App.1983). Appellants argue that the sanctions were too severe under the particular circumstances of this case. Specifically, they assert that the failure to comply with the discovery orders of the district court is entirely attributable to conduct of their attorneys, i.e., it was not their fault.

The record is clear that all of the discovery requests, notices of depositions, and the notice of hearing on the motion to compel discovery were properly served on appellants’ counsel as required by the Idaho Rules of Civil Procedure. Appellants nevertheless argue that they were never personally informed by their attorneys of: (1) SIPCA’s requests for information concerning the counterclaim (ie., the interrogatories); (2) the scheduling of hearings on the discovery requests; or, (3) the scheduling of their depositions. Under such circumstances, they argue, lesser sanctions should have been resorted to first. In short, the argument is that the sanctions imposed by the trial court unjustly visit the sins of the attorneys upon the heads of their clients. Appellant’s argument is without merit. This Court held in Devault, supra, that it is no excuse that the failure to comply with court orders is the fault of a litigant’s attorney. “[L]itigants freely choose their attorneys and cannot avoid the consequences of the attorney’s actions.” Devault, 107 Idaho at 2, 684 P.2d at 979. The Court stated the policy underlying its holding as follows.

“ ‘In upholding the district court’s [sanctions], we recognize that the result may well penalize Appellant more than his counsel. However, ... [i]n recognizing the relative hardship upon Appellant as distinguished from counsel, it must be kept in mind that district courts cannot function efficiently unless they can effectively require compliance with reasonable rules. Absence of meaningful power to require that compliance would make for disorder and preclude effective judicial administration at the trial court level.’ ” 107 Idaho at 2-3, 684 P.2d at 979-980, quoting Chism v. National Heritage Life Ins. Co., 637 F.2d 1328, 1332 (9th Cir.1981) (emphasis added).

Additionally, appellants were not entirely without fault. The record indicates that appellants had some knowledge of both SIPCA’s discovery attempts and of their counsel’s inability to meet his obligations of representation. In the affidavit supporting respondents’ motion for sanctions, the attorney for SIPCA indicates that appellants were informed of SIPCA’s interrogatories and requests for production of documents via their bankruptcy attorney who on behalf of appellants requested “some additional time within which to respond to the Interrogatories and, further, to develop [a] settlement proposal.” The record further reflects that the reason given by appellants’ bankruptcy counsel for needing the additional time was that “they [the Astorquias] were having some difficulty getting together all the answers to the interrogatories.” A request for additional time was apparently granted by SIPCA even though the time for responding to its discovery requests had passed.² Nothing in the record contradicts the statements contained in the affidavit of SIPCA’s attorney.³ Indeed, the supplemental affidavit of Frank Astorquia, submitted in opposition to the motion for sanctions, clearly indicates that he had knowledge that his attorneys had been less than careful in attending to his case. Mr. Astorquia states that “shortly after” his counsel informed him that his associate would be handling the defense and counterclaim against SIPCA, “a number of problems started to develop in [his] case. There seemed to be ongoing problems with things being filed on time, etc.” Yet, despite this knowledge, Mr. Astorquia states that he “had very limited contact with [his counsel] during this time.” Id. at 133.

Mr. Astorquia’s lack of attention to his legal problems could have been inferred by the trial court from the foreclosure proceedings initiated by the Osas. Neither Mr. Astorquia nor his counsel appeared at those proceedings and for all intents and purposes the summary judgment of foreclosure obtained by the Osas was a default judgment. Whatever the reasons may have been for counsels’ failure to appear at that those proceedings, at a minimum the foreclosure, sale and subsequent dispossession of his property should have provided Mr. Astorquia with ample notice that his attorneys were neglecting his interests. His belated attempts in the present case, over a year later, to cast fault for repeated neglectful behavior solely on the heads of his attorneys were justifiably less than well received by the trial court.

The district court did not impose the most severe sanctions which it might have considered, such as jailing the appellants for contempt, or striking all the appellants’ pleadings and entering a default judgment for SIPCA, as was the case in Sierra Life Ins. Co. v. Magic Valley Newspapers, 101 Idaho 795, 623 P.2d 103 (1980).⁴ Rather, the district court only “[took] away those defenses which [were] ... affected by [Astorquias’] refusal to disclose,” as the court in Sierra Life Ins. Co. v. Magic Valley Newspapers, supra at 799, 623 P.2d 103, suggested was an appropriate remedy. In this case, the district court struck only the Astorquias’ pleadings which were the subject of the discovery requests, i.e., the counterclaim and affirmative defenses. The district court found that SIPCA would be prejudiced if it had to go to trial and defend against claims of fraud, negligence, breach of fiduciary duty and intentional infliction of emotional distress and humiliation, when the Astorquias had refused to respond to SIPCA’s request for discovery related to the Astorquias’ factual basis for those claims.

On appeal appellants argue that the district court should have first resorted to lesser sanctions before imposing the sanctions which it did. It is suggested that the court could have imposed costs and attorney fees against either Astorquia, or against his attorney of record. It is further suggested that the court could have stayed the proceedings further until the discovery order was obeyed.

Regarding the assessment of costs and attorney fees, the trial court made no specific finding that these sanctions would not have been adequate, even though there is a statement in the record by appellants’ new counsel that “[t]here may be, I think the court has sanctions with costs and other things that can be incurred. My client doesn’t have any money, quite frankly.” The court never made any specific findings whether or not the assessment of costs and attorney fees against either the appellants or their former attorney would have been inadequate, and such a specific finding is necessary in order to sustain the more serious sanctions imposed in this case.

Regarding appellants’ suggestion that a further stay of proceedings would have been a more appropriate sanction until the discovery order was obeyed, the trial court specifically found that SIPCA had been prejudiced by appellants’ previous failure to respond to the discovery requests and orders. However, the trial court made no specific finding that further delay would have additionally prejudiced SIPCA, although had he done so there would have been evidence to sustain such a finding. Interest was accruing at the rate of over $200,000 per year on the outstanding principal balance, and the collateral security for the nearly $2,000,000 loan, both real and personal property, was depreciating and disappearing from the premises. However, the trial court should have made specific findings regarding whether or not the alternate sanction of staying the proceedings until the discovery order was complied with would have been an inadequate sanction.

Accordingly, we remand this matter to the trial court for more detailed findings regarding whether there are lesser sanctions which would adequately compel appellants’ compliance with the court’s discovery orders and protect SIPCA. We do not imply that the trial court’s sanction of dismissal was improper under the facts of this case. We only hold that before ordering the drastic remedy of dismissal of defenses and counterclaim, a trial court must consider lesser sanctions, and that if dismissal is nevertheless ordered, appropriate findings of fact must be made. See Boudwin v. Graystone Ins. Co., Ltd., 756 F.2d 399, 401 (5th Cir.1985) (trial court must explain why lesser sanctions would be inadequate). Here, the trial court did not do so. Since the trial court required SIPCA to prove its claim on the foreclosure proceedings, and allowed the appellants to contest the amount of the claim, the summary judgment may stand. However, in regard to the counterclaim and affirmative defenses being stricken, we vacate and remand with instructions to the trial court to consider lesser sanctions and, if striking the counterclaim and affirmative defenses is still found to be the proper course of action, to provide more detailed findings of fact and conclusions of law by stating his reasons why the sanction of striking the counterclaims and affirmative defenses is proper, and lesser sanctions are ineffective.

Affirmed in part, vacated in part, and remanded. No costs or attorney fees allowed.

SHEPARD, C.J., and DONALDSON * and HUNTLEY, JJ., concur.

1 . The parcel of property was mortgaged to SIP-CA but subsequent to the creation of Osa’s mortgage. As junior mortgagee, SIPCA’s interest in the property was subject to foreclosure by the Osa proceedings saving only SIPCA’s right of redemption. Osas do not claim any interest in the remaining real property subject to SIPCA's liens.

2 . The date for answering the interrogatories was February 15, 1986. In fact, when appellants' bankruptcy counsel requested additional time to respond, SIPCA had already filed a motion to compel discovery which was noticed for a hearing on March 10, 1986. The request for additional time from appellants’ bankruptcy counsel was made prior to the hearing date. SIPCA agreed to the request for more time, and the hearing date on the motion to compel was rescheduled, at SIPCA's request, and heard on May 5, 1986.

3 . The affidavits of appellant Frank Astorquia, submitted in opposition to SIPCA's motion for sanctions, makes no mention of the interrogatories, but only avers that he did not know about the scheduling of his deposition or the hearings relating to the motion to compel discovery. The latter averment is inferentially controverted by statements in the affidavit of SIPCA’s attorney.

4 . In Sierra Life Ins. Co. v. Magic Valley Newspapers, supra, the Court was faced with a situation in which the defendants answered the interrogatories and other discovery requests, and appeared and submitted themselves to depositions, but refused to disclose the names of confidential informants whose names were not used in any of the articles. The defendants based their refusal to disclose the names of the confidential informants on their claim of constitutional privilege under the first amendment of the United States Constitution. The defendants did not ignore the discovery requests and court order compelling discovery, as was done in this case, but appeared in response to each request and asserted the limited constitutional privilege, otherwise responding to all of the questions and discovery requests made. The trial court in the Sierra Life case struck all of the pleadings, including "those defenses which [were] not affected by [their] refusal to disclose," ante at 799, 623 P.2d 103, and entered a default judgment against all of the defendants. At the time the court issued its order granting sanctions in Sierra, the individual defendant reporters, High and Lazarus, were no longer employed by the corporate defendant Magic Valley Newspaper, and the newspaper and its publisher defendant William E. Howard alleged that they did not know the names of the informants and thus had no ability to comply with the court’s order. The district court in Sierra Life nevertheless refused to limit the sanctions only to High and Lazarus on the ground that he did not want to "make them martyrs to the unbelievers."