Wade, Gary v. Farmers Insurance Group

• Court: Court of Appeals of Texas
• Decided: June 27, 2002
• Docket: 14-01-00691-CV
• Status: Published

Opinion

Affirmed and Opinion filed June 27, 2002

Affirmed and Opinion filed June 27, 2002.

In The

Fourteenth Court of Appeals

____________

NO. 14-01-00691-CV

GARY WADE, Appellant

V.

FARMERS INSURANCE GROUP, Appellee

On Appeal from the County Civil Court at Law No. 2

Harris County, Texas

Trial Court Cause No. 741,999

O P I N I O N

Appellant Gary Wade challenges a take-nothing judgment the trial court entered against him after striking his pleadings for discovery abuses.  In a single issue, Wade contends the trial court=s imposition of death-penalty sanctions constituted an abuse of discretion.  We affirm.

I.  Factual And Procedural BAckground

Appellee Farmers Insurance Group issued a homeowner=s insurance policy to Wade. During the policy period, Wade suffered substantial damage as a result of theft and filed a claim with Farmers.  Farmers denied the claim and Wade brought suit asserting, among other claims, breach of contract.  Farmers served Wade with interrogatories and requests for production and disclosure.  When Wade failed to respond to these discovery requests, Farmers filed a motion to compel.  Wade failed to file a response to the motion.  On February 6, 2001, the trial court entered an order directing Wade to provide complete discovery responses within thirty days.  The trial court=s order included a warning to Wade that Ain the event that Wade . . . fail[ed] to fully and completely respond to the Requests for Discovery . . . all pleadings filed by Wade . . . in this cause may be stricken.@  Wade did not comply with the trial court=s order.  Farmers then filed a motion asking the trial court to strike Wade=s pleadings and enter judgment against him.  Again, Wade filed no response to Farmers= motion.  On March 28, 2001, the trial court struck Wade=s pleadings and entered a take-nothing judgment against him.  Wade filed a motion for new trial and after notice and a hearing, the trial court denied the motion.

II.  Issue Presented and Standard of Review

In his sole issue, Wade contends the trial court erred in striking his pleadings and entering a take-nothing judgment against him.  We review the trial court=s discovery sanctions for an abuse of discretion.  Bodnow Corp. v. City of Hondo, 721 S.W.2d 839, 840 (Tex. 1986); Cellular Marketing, Inc. v. Houston Cellular Telephone Co., 838 S.W.2d 331, 333 (Tex. App.CHouston [14th Dist.] 1992, writ denied).  The test for abuse of discretion is whether the trial court acted without reference to any guiding rules and principles, or whether the act was arbitrary or unreasonable.  Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241B42 (Tex. 1985); see also White v. Bath, 825 S.W.2d 227, 229 (Tex. App.CHouston [14th Dist.] 1992, writ denied). 

In reviewing a sanctions order, we ordinarily look to the trial court=s formal findings of fact.  McCain v. NME Hospitals, Inc., 856 S.W.2d 751, 756 (Tex. App.CDallas 1993, no writ).  The purpose of a trial court making findings of fact to support its imposition of sanctions is to aid appellate review, to assure judicial deliberation, and to enhance the deterrent effect of the order.  Chrysler Corp. v. Blackmon, 841 S.W.2d 844, 852 (Tex. 1992). Thus, findings of fact in the discovery context should not be treated like findings in nonjury trials.  Id. (citing United States Fidelity & Guar. Co. v. Rossa, 830 S.W.2d 668, 672 (Tex. App.CWaco 1992, writ denied).  On appeal, we are not limited to a review of the sufficiency of the evidence to support the trial court=s findings.  Rossa, 830 S.W.2d at 672.  We review the entire record, including arguments of counsel, written discovery on file, evidence presented to the trial court, and the circumstances surrounding the alleged discovery abuse to determine whether the court abused its discretion in imposing the sanction.  Id.  In the absence of formal findings, we will look to the trial court=s statement in the sanctions order.  Monroe v. Grider, 884 S.W.2d 811, 816 (Tex. App.CDallas 1994, writ denied).  

In TransAmerican Natural Gas Corp. v. Powell, the Texas Supreme Court created a two‑prong analysis to determine if a sanction is just.  811 S.W.2d 913, 9216 n.4 (Tex. 1991).  AFirst, a direct relationship must exist between the offensive conduct and the sanction imposed.@  Id.  This means the sanction must remedy the prejudice caused the innocent party and punish the actual offender, whether that be the party or its counsel.  Id.  This first prong also contemplates a showing by the moving party that it is unable to prepare for trial without the requested discovery.  Chrysler, 841 S.W.2d at 850.  The second prong in determining if a sanction is just is that the sanction must not be excessive.  TransAmerican, 811 S.W.2d at 917.  The Apunishment must fit the crime.@  Id.  Within the second prong, trial courts must consider lesser sanctions before resorting to death-penalty sanctions, for ultimate sanctions violate due process absent a party=s flagrant bad faith or counsel=s callous disregard for the discovery process.  Id. at 918.  A[D]iscovery sanctions cannot be used to adjudicate the merits of a party=s claims or defenses unless a party=s hindrance of the discovery process justifies a presumption that its claims or defenses lack merit.@  Id.  

We review the trial court=s actions in striking Wade=s pleadings using the factors set out in Transamerican to determine whether the sanctions are just,  and by examining the entire record before us to determine whether the trial court=s findings are supported by the record.  See Transamerican, 811 S.W.2d at 917.

Before proceeding with this analysis, however, we first address Farmers= contention that because Wade failed to file a response to either the motion to compel or the motion to strike, he has waived his right to complain of the trial court=s ruling.  To preserve any error for appellate review, Wade had to present his complaint to the trial court by a motion to amend or correct the judgment, a motion for new trial, or some other similar method.  See Tex. R. App. P. 33.1; Willis v. Willis, 826 S.W.2d 700, 202 (Tex. App.CHouston [14th Dist.] 1992, no writ).  Wade filed a timely motion for new trial, challenging the trial court=s order striking his pleadings and entering judgment against him.  Thus, Wade has preserved his complaint for appellate review.  See Hall v. Lone Star Gas Co., 954 S.W.2d 174, 177 (Tex. App.CAustin 1997, pet. denied); Thomas v. Thomas, 917 S.W.2d 425, 433 (Tex. App.CWaco 1996, no writ) (party against whom sanctions were imposed preserved error by filing motion for new trial).

III.  Analysis of TransAmerican Factors

We now examine the entire record in light of the Transamerican test to determine whether the trial court abused its discretion in striking Wade=s pleadings.

A.  Sanction must bear direct relationship to the offensive conduct.

The first prong of Transamerican requires a direct relationship between the offensive conduct and the sanctions imposed.  811 S.W.2d at 917.  The sanction must remedy the prejudice caused the innocent party and punish the actual offender, whether that be the party or its counsel.  Id.  This first prong also contemplates a showing by the movant that it is unable to prepare for trial without the requested discovery.  Chrysler, 841 S.W.2d at 850.

In this case, the obvious prejudice to Farmers from Wade=s failure to answer discovery was the inability to properly evaluate Wade=s claims and prepare for trial.  Wade contends that he should not have been punished for his failure to comply with Farmers= discovery requests because there is no evidence that he actually had the documents in his possession at the time the request was made.  In support of this contention, Wade relies on this court=s opinion in Butan Valley v. Smith, and argues that a non-responding party cannot be sanctioned for not producing the documents when the record does not show that the requesting party produced any evidence to show that the documents existed and were in the non-responding party=s possession at the time the request was made.  921 S.W.2d 822 (Tex. App.CHouston [14th Dist. 1996, no writ).  Butan Valley is factually distinguishable from this case.  In that case, Butan Valley, a foreign corporation, hired Smith to represent it in a lawsuit.  Id.  Smith later withdrew as counsel and brought suit against Butan Valley for, among other things, breach of contract. Id.  Smith then served Butan Valley with her first request for production.  Unlike Wade, Butan Valley responded to the discovery.  See id.  However, Smith maintained that Butan Valley did not fully respond and filed a motion to compel.  Id.  The trial court granted the motion and ordered Butan Valley to fully produce all documents within ten days to the extent any such documents existed.  Id.  Butan Valley filed another response; although late, the response stated Butan Valley already had produced all the documents that it had in its possession.  Id.   Smith then filed a motion to strike based on Butan Valley=s failure to produce the documents.  After a hearing, the trial court granted Smith=s motion to strike and entered judgment against Butan Valley.  Id.  Butan Valley responded timely to most other discovery requests and filed a motion for rehearing claiming that it had responded to all other discovery requests to the best of its ability.  See id.  This court reversed the trial court=s judgment, holding that (1) the trial court abused its discretion in entering death-penalty sanctions based on the failure to produce documents because Smith failed to satisfy its burden that the documents existed; and (2) the death-penalty sanctions were excessive because the trial court failed to first consider a form of lesser sanctions.  Id.      A party cannot be sanctioned for failing to produce documents when there is no evidence that they exist.  Chrysler Corp., 841 S.W.2d at 850; see also Shamrock Oil Co. v.  Gulf Coast Natural Gas, Inc., 68 S.W.3d 737, 739 (Tex. App.CHouston [14th Dist.] 2001, pet. denied) (stating that because no affidavit or testimony was submitted in support of motion to strike, there was no evidence to show what documents were missing).  Because Farmers was the party seeking sanctions, it was its duty to prove the documents existed.  See Global Services, Inc. v. Bianchi, 901 S.W.2d 934, 937 (Tex. 1995); GTE Communications Systems Corp. v. Tanner, 856 S.W.2d 725, 729 (Tex. 1993).  However, it is Wade=s burden to produce a sufficient record showing the lack of evidence or error by the trial court.  See Walker v. Packer, 827 S.W.2d 833, 837 (Tex. 1992) (holding that without the statement of facts from the evidentiary hearing on the movant=s motion to compel production, the reviewing court could not determine on what basis the trial judge and the special master reached their conclusions); Youngs v. Choice, 868 S.W.2d 850, 853 (Tex. App.CHouston [14th Dist.] 1994, writ denied) (holding that a sufficient record must be brought forward to affirmatively show the error committed by the trial court in imposing sanctions); Johnson v. Whitney Sand and Gravel, Inc., 828 S.W.2d 801, 804 (Tex. App.CWaco 1992, no writ) (holding that a sufficient record is necessary to show that the court abused its discretion in imposing death-penalty sanctions); Adams v. Sadler, 696 S.W.2d 690, 692 (Tex. App.CAustin 1985, writ ref=d n.r.e) (holding that Ato obtain a reversal of a judgment, the appellant must bring up a record that affirmatively shows harmful error was committed@).  Wade failed to appear at the sanctions hearing, failed to bring forward to this court a record of that hearing, and, most significantly, deliberately failed to respond to discovery requests after being instructed to do so.  At the hearing, it is entirely possible that Farmers brought forth evidence that the alleged documents existed and were in Wade=s possession. 

A little more than a week before the scheduled sanctions hearing, Wade filed a motion to continue the sanctions hearing.  This motion for continuance is not in the record.  The trial court denied the continuance, Wade failed to appear at the hearing, and, as a result, the trial court entered judgment against him.   The trial court imposed sanctions only after Wade failed to heed several warnings.  Apparently, based on the testimony at the hearing on the motion to strike Wade=s pleading, the trial court found enough evidence that Wade engaged in repeated discovery abuse to strike his pleadings.  See Bormaster v. Henderson, 624 S.W.2d 655, 659 (Tex. App.CHouston [14th Dist.] 1981, no writ) (holding that when sitting as trier of fact, judges may believe all, part, or none of the testimony).

Because Wade failed to carry his burden of providing this court with a sufficient record, we cannot hold that Farmers failed to carry its burden to show sanctions were warranted.  See Tex. R. Civ. P. 192.3(b) (stating that a person is required to produce a document that is within the person=s possession).  The record reveals a direct relationship between the abusive conduct and the discovery sanctions, and because Wade failed to produce a sufficient record to show otherwise, the death-penalty sanctions based on this alleged abuse meet the first prong of TransAmerican.

                          B.  Sanction must not be excessive.

The second Transamerican factor requires that the sanction not be excessive.  The three elements to consider in determining whether a sanction is excessive are (1) whether the court considered and/or tested lesser sanctions to see if lesser sanctions would promote compliance and deterrence and discourage further abuse; (2) whether the sanctions are no more severe than necessary to satisfy the legitimate purposes of a sanction (i.e., to secure compliance, to deter others and to punish); and (3) whether the party=s hindrance of the discovery process justifies a presumption that its claims or defenses lack merit.  Butan Valley, N.V. v. Smith, 921 S.W.2d 822, 831 (Tex. App.CHouston [14th Dist.] 1996, no writ) (citing Chrysler Corp., 841 S.W.2d at 849; Transamerican, 811 S.W.2d at 917).

The first and second elements of the second prong of TransAmerican require the trial court to test lesser sanctions before striking a party=s pleadings in order to determine whether they are adequate to secure the compliance of the offender, and that sanctions should be no more severe than necessary to satisfy the legitimate purposes of sanctions for discovery abuse.  The record supports the trial court=s finding that lesser sanctions would not have promoted compliance or have been a more fitting punishment for Wade=s discovery abuse.  The trial court ordered Wade to produce the requested documents and the record shows Wade did not respond even after being informed of the possible consequences of non-compliance.

Texas courts have recognized a distinction between a mere order to compel without a warning and an order to compel with a warning.  Although a mere order to compel does not constitute a lesser sanction, an order to compel that contains a warning that a party=s pleadings will be stricken if the party fails to comply has been held to constitute a lesser sanction.  GTE Mobilnet of South Texas, Ltd. P=ship v. Telecell Cellular, Inc., 955 S.W.2d 286, 298 (Tex. App.CHouston [1st Dist.] 1997, pet. denied) (acknowledging prior holding in Andras v. Memorial Hosp. Sys., 888 S.W.2d 567, 572 (Tex. App.CHouston [1st Dist.] 1994, writ denied), that an order to compel coupled with language that noncompliance will result in dismissal does constitute lesser sanction)); see also Jaques v. Texas Employers= Ins. Ass=n, 816 S.W.2d 129, 131 (Tex. App.CHouston [1st Dist.] 1991, no writ) (holding that if a party failed to comply with an order to compel discovery with the knowledge its pleadings would be stricken for non-compliance, death-penalty sanctions would be appropriate).

After Wade failed to respond to the motion to compel, and prior to striking Wade=s pleadings, the trial court issued an order compelling Wade to comply with the discovery order and produce the documents requested within thirty days.  Wade contends an order compelling compliance, even with a statement that noncompliance would result in dismissal, does not constitute a lesser sanction within the meaning of Texas Rule of Civil Procedure 215.  Wade again cites to Butan Valley, in support of this contention.  Although the order in Butan Valley had similar language to the language contained in the order at issue, this court did not expressly hold that an order with an admonishment is not enough, by itself, to show that the trial court failed to consider lesser sanctions.  921 S.W.2d at 831.  Instead, this court found that the facts in that case led to the conclusion that lesser sanctions would have provided a punishment more fitting the offense and probably would have promoted compliance.  Id.  Smith=s discovery request was for Butan Valley to produce a certain witness for a second deposition.  Id.  Butan Valley failed to comply with this request and the court then entered a motion compelling Butan Valley Ato produce and make available for deposition, Osama A.O. Alkasabi . . .@  Id.  Smith alleged that she needed this deposition to explain Butan Valley=s malpractice counterclaim.  Id.  Butan Valley never produced Osama for a second deposition, and the trial court, finding that Butan Valley had failed to comply with the discovery order, struck Butan Valley=s pleadings and entered judgment for Smith.  Id.  On appeal, this court disagreed with the trial court and found that Butan Valley=s actions did not reflect a total refusal to produce a certain witness for a deposition or comply with certain discovery requests.  Id.  In fact, Butan Valley already had produced Osama for one deposition, and in response to the motion for entry of judgment, offered to make Osama available again, stating that it would fly him in from Florida at its expense.  Id.  This court also found that because Smith=s reason for taking the second deposition stemmed from the malpractice counterclaim, filed after Osama=s first deposition, the trial court could have let Butan Valley go to trial on all of its causes of action except the malpractice claim.  Id. at 831.  Thus, this court ultimately held that the facts did not warrant death-penalty sanctions because the trial court had other options which would have promoted compliance.  Id.

Unlike the conduct in Butan Valley, the conduct in this case is sufficient to warrant death-penalty sanctions.  Wade did not make any attempt to comply with the trial court=s orders or attend the hearings, even after receiving a warning.  Because the first order contained a warning to Wade that his pleadings might be stricken for failure to comply with the order, and the record supports the trial court=s finding that lesser sanctions had been tested before the trial court=s imposition of death-penalty sanctions, the first and second elements of Transamerican=s second prong are satisfied.  See GTE Mobilnet of South Texas, Ltd. P=ship, 955 S.W.2d at 298.

The third element of the second prong states that a death-penalty sanction should not be imposed unless the sanctioned party=s conduct justifies a presumption that its claims lack merit or it would be unjust to permit the party to present evidence regarding the substance of the position that is the subject of the withheld discovery.  Transamerican, 811 S.W.2d at 918.  The discovery requested by Farmers was materially related to the issues of Wade=s causes of actions for breach of the duty of good faith and fair dealing, breach of contract, and violations of the Texas Insurance Code.  Under his insurance policy, Wade was required to notify the police in case of loss by theft, provide the insurance company with all records and documents requested, and submit to an examination under oath and sign and swear to it, in order to recover for a loss to covered property caused by peril.  Wade failed to answer all interrogatories and provide, as requested, all relevant records and documents pertaining to the theft, including the police reports.  Wade sought both actual and treble damages, but has not provided any documents in support of these damages.  Wade=s repeated failure to respond to Farmers= request supports the  presumption his conduct was motivated by a desire to keep Farmers from learning about the true nature and extent of his claims. This conduct justifies the presumption that his claims lacked merit.  Because Wade=s deliberate hindrance of the discovery process justifies the conclusion that his claims lacked merit, dismissal of his claims did not violate his rights to due process.  See id. at 917.  Thus, the third element of Transamerican=s second prong has been satisfied. 

We hold the trial court did not abuse its discretion in striking Wade=s pleadings as a discovery sanction.  We overrule Wade=s sole issue and affirm the trial court=s judgment.

/s/        Kem Thompson Frost

Justice

Judgment rendered and Opinion filed June 27, 2002.

Panel consists of Chief Justice Brister and Justices Anderson and Frost.

Do Not Publish C Tex. R. App. P. 47.3(b).