Young v. Johnny Ribeiro Bldg., Inc.

• Decision Date: 22 February 1990
• Docket Number: No. 19672,19672
• Citation: 787 P.2d 777,106 Nev. 88
• Parties: Bill YOUNG, Appellant, v. JOHNNY RIBEIRO BUILDING, INC.; John J. D'Atri; Livia J. D'Atri, Respondents.
• Court: Nevada Supreme Court

Page 777

787 P.2d 777

106 Nev. 88

Bill YOUNG, Appellant, v. JOHNNY RIBEIRO BUILDING, INC.; John J. D'Atri; Livia J D'Atri, Respondents.

No. 19672.

Supreme Court of Nevada.

Feb. 22, 1990.

[106 Nev. 89] Patrick James Martin, Reno, for appellant.

Lionel Sawyer & Collins, and M. Kristina Pickering, Reno, for respondent Ribeiro.

Hill, Cassas, deLipkau & Erwin, and Pierre A. Hascheff, Reno, for respondents D'Atri.

OPINION

PER CURIAM:

This is a discovery sanctions case. The district court found that appellant Bill Young (Young) willfully fabricated evidence during discovery. Based on this finding, the court sanctioned Young by dismissing his entire complaint, ordering Young to pay certain of the fees and costs of respondent Johnny Ribeiro Building, Inc. (JRBI), and adopting the accounting proposed by JRBI as the final accounting of Young's and JRBI's interests in the parties' partnership. We affirm the judgment of the district court.

FACTS

Young, JRBI and respondent John J. D'Atri (D'Atri) were partners in a partnership to develop and sell real estate in Reno. Young filed this suit against JRBI, stating causes of action for an accounting and dissolution of the partnership, for breach of JRBI's fiduciary duty as managing partner to keep adequate records, and for breach of contract based on JRBI's failure to build the last 10 out of a promised 35 condominiums. Having no material disputes with Young and having settled his disagreements with JRBI, D'Atri is merely a nominal party to this appeal.

During discovery, Young gave JRBI two of his personal business diaries as supplemental discovery responses. The diaries contained dated handwritten notations by Young. The two most important sets of notations indicated that JRBI had orally guaranteed a profit to the partners of $45,000 per condominium, and that certain advances made by the partners to JRBI were understood to be interest-bearing loans rather than capital contributions, which do not carry interest. Young testified in deposition that he generally made the entries in these diaries nearly contemporaneously with the conversations recorded. Confronted with the suspicious looking nature of some of the notations, Young dissembled, saying he may have added some of the notations up to a year after the alleged conversations. Young denied ever having added any notations during discovery, but JRBI was not convinced.

Informed in chambers of JRBI's suspicion of fabrication, the court offered Young the opportunity to clarify when he made the notations after consulting with counsel. Young never recanted or clarified his original deposition testimony. JRBI brought a motion to dismiss based on the fabrications. After a full evidentiary hearing, the court found that Young had added the two sets of notations to his diaries just before turning the diaries over to JRBI during discovery and that Young had given conflicting accounts in his deposition regarding when he made, or may have made, the entries. Based on these and other facts, the court found that Young had willfully fabricated evidence.

The court sanctioned Young by ordering him to pay JRBI's costs and fees on the motion to dismiss, by dismissing Young's entire complaint with prejudice, and by adopting the final accounting proposed by JRBI as a form of default judgment against Young. Young appeals the final judgment of sanctions, arguing that the severe sanctions were an abuse of discretion and that JRBI's accounting was factually insufficient to constitute a default judgment. JRBI requests sanctions pursuant

to NRAP 38 on the grounds that this appeal is frivolous.

LEGAL DISCUSSION

Young's appeal raises five main issues: whether the court's finding of willful fabrication was supported by substantial evidence; whether the court had authority to impose the sanctions; whether the court abused its discretion in imposing these sanctions, especially the harsh sanction of dismissal with prejudice; whether the accounting adopted by the court was factually sufficient as a default judgment; and whether this court should grant JRBI's request for NRAP 38 sanctions against Young for bringing this appeal.

I. The court's finding of willful fabrication of evidence.

The court's finding of willful fabrication is supported by substantial evidence. Based on chemical and microscopic examination of the two sets of diary notations, JRBI's forensic expert Albert Lyter testified that it was his opinion, to a reasonable scientific probability, that Young had written the entries in question with a different pen than the one used to make the original entries. Lyter further concluded that Young had added the entries during discovery soon before turning over the diaries to JRBI. Additionally the highlighter which Young had used to call JRBI's attention to the entries smeared only the words which Lyter found to have been added during discovery. The words which were part of the original entries were not smeared. Young testified in deposition that he generally made the entries in the diaries nearly contemporaneously with the reported events and he denied having added any entries during discovery. If true, this testimony would greatly increase the probative value of the diaries. Coupled with Young's deposition testimony, the late-added diary entries constitute fabrication of evidence. The court further had substantial evidence on which to conclude that the fabrication was willful. Given the rather strong evidence that the entries were belatedly added, Young's failures to recant his denials and to clarify his other patently misleading testimony regarding the timing of the entries in the face of the court's admonition to do so are strong indications of willfulness.

II. The sources of authority for the discovery sanctions.

Two sources of authority support the district court's judgment of sanctions. First, NRCP 37(b)(2) authorizes as discovery sanctions dismissal of a complaint, entry of default judgment, and awards of fees and costs. Generally, NRCP 37 authorizes discovery sanctions only if there has been willful noncompliance with a discovery order of the court. Fire Insurance Exchange v. Zenith Radio Corp., 103 Nev. 648, 651, 747 P.2d 911, 913 (1987). The court's express oral admonition to Young to rectify any inaccuracies in his deposition testimony suffices to constitute an order to provide or permit discovery under NRCP 37(b)(2). Second, courts have "inherent equitable powers to dismiss actions or enter default judgments for ... abusive litigation practices." TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 916 (9th Cir.1987) (citations omitted). Litigants and attorneys alike should be aware that these powers may permit sanctions for discovery and other litigation abuses not specifically proscribed by statute.

III. Statement and application of the standards governing imposition of the discovery sanctions of dismissal and entry of default judgment.

Where the discovery sanctions are within the power of the district court, this court will not reverse the particular sanctions imposed absent a showing of abuse of discretion. Kelly Broadcasting v. Sovereign Broadcast, 96 Nev. 188, 192, 606 P.2d 1089, 1092 (1980). Even if we would not have imposed such sanctions in the first instance, we will not substitute our judgment for that of the district court. Id. Where the sanction is one of dismissal with prejudice, however, we believe that a somewhat heightened standard of review should apply. First, fundamental notions of due Having stated the pertinent abuse of discretion standard of review, we must now apply it. The court's money sanction was patently proper. Based on the rules just stated, we further hold that the district court did not abuse its discretion in imposing the more severe sanctions of dismissal and entry of default judgment. First, all of the claims dismissed related to the fabricated evidence. All these claims were designed to establish Young's interest in the partnership. The fabricated diary entries were highly relevant to the determination both of Young's profit share and any contract damages based on JRBI's failure to build the last 10 condominiums. Contrary to Young's contentions, the entries were also relevant to Young's cause of action for an accounting. Second, we cannot conclude that the sanctions were manifestly unjust. The court treated Young fairly, giving him a full evidentiary hearing and offering him the opportunity to clarify his testimony, which Young failed to do. Additionally, the order of dismissal did not operate to forfeit all of Young's return on his partnership investment. At oral argument, counsel for Young and JRBI stipulated that Young had made capital contributions to the partnership in the amount of about $12,500. Young has since received a return on his investment amounting to at least $240,000. Moreover, the district court's order permits Young to share equally with the other parties in any partnership assets remaining after JRBI satisfies its judgment for fees and costs from Young's share.

process require that the discovery sanctions for discovery abuses be just and that the sanctions relate to the claims which were at issue in the discovery order which is violated. Wyle v. R.J. Reynolds Industries, Inc., 709 F.2d 585, 591 (9th Cir.1983). Second, while...