Associated Mtg. Invest. v. G.P. Kent Const. Co., Inc.

• Decision Date: 02 April 1976
• Docket Number: -II,No. 1243,1243
• Citation: 15 Wn.App. 223,548 P.2d 558
• Court: Washington Court of Appeals
• Parties: ASSOCIATED MORTGAGE INVESTORS, a Massachusetts Business Trust, Respondent, v. G. P. KENT CONSTRUCTION CO., INC., a Washington Corporation, et al., Appellants, Sparkman & McLean Company, a Washington Corporation, et al., Respondents, Byco Construction Co., Inc., et al., Defendants.

Page 223

15 Wn.App. 223

548 P.2d 558

ASSOCIATED MORTGAGE INVESTORS, a Massachusetts Business Trust, Respondent, v. G. P. KENT CONSTRUCTION CO., INC., a Washington Corporation et al., Appellants Sparkman & McLean Company, a Washington Corporation, et al Respondents Byco Construction Co., Inc., et al., Defendants.

No. 1243,--II.

Court of Appeals of Washington, Division 2.

April 2, 1976.

Philip P. Malone, Poulsbo, for appellants.

John H. Strasburger, of Short, Cressman & Cable, Seattle, for respondent Associated Mortgage.

PEARSON, Judge.

Defendants appeal from the entry of a default judgment and an order refusing to vacate the judgment. The order of default was entered shortly before trial on the merits of plaintiff's action against defendants seeking to foreclose a deed of trust. ¹ The order recites that defendants failed to comply with an earlier discovery order requiring them to fully answer plaintiff's written interrogatories and pay costs of $300 on or before noon, September 26, 1973.

The sole issue on appeal is whether or not the trial court properly exercised its discretion under CR 37 in imposing a default judgment sanction against defendants for refusal to comply with a discovery order, or whether that sanction was so severe as to constitute either an abuse of discretion or a deprivation of defendants' constitutional rights. For the reasons stated below, we believe the judgment should be affirmed.

Plaintiff's action to foreclose the deed of trust against the defendants also sought a deficiency judgment against G. P. Kent Construction Company and its two personal guarantors, the defendants Gregg P. Kent and Margaret G. Kent.

The underlying transaction was a loan agreement which was executed by the corporate and individual defendants in favor of Sparkman and McLean Company. The loan agreement was evidenced by a negotiable note and secured by the above-mentioned deed of trust covering land owned by the corporate defendant. The loan agreement required the lender to disburse funds upon a fixed construction schedule, which was triggered by the defendants' request. The purpose of the loan was to enable defendant, G. P. Kent Construction Company, to develop its land into residential home sites.

The three documents were executed in July, 1969. Almost immediately the note was negotiated and the deed of trust assigned to plaintiff, who, by virtue of those acts, became the secured lender. ² The documents also demonstrate that the principal borrower was G. P. Kent Construction Company, and Gregg P. Kent and Margaret Kent were personal guarantors on the note and deed of trust.

Plaintiff's amended complaint, filed July 2, 1973, alleged the secured note to be in default in the principal sum of $254,773.04, together with 8 percent interest per annum from February 28, 1971. (The maturity date on the note was January 2, 1971.) The complaint requested a decree of foreclosure, deficiency judgment after foreclosure sale, costs, and attorney's fees.

Defendants' answer was in the nature of a general denial of any delinquency on their part. In addition, defendants asserted the following matters as affirmative defenses or in support of a $141,022 counterclaim against plaintiff: (1) that torrential rains (an act of God) forced the 'total and prolonged cessation of construction activities' and temporarily prevented them from timely performance; (2) that plaintiff consented to extensions of time under the loan agreement; (3) that in violation of the extension agreement plaintiff wrongfully refused to advance funds ($102,044.96) after the loan's maturity date; and (4) that part of the delay in performance was occasioned by plaintiff's delay in finalizing the agreements. The individual defendants also alleged they had signed the personal guaranties under duress. This answer was filed April 17, 1973, almost 9 1/2 months after the amended complaint was filed. ³

On June 25, 1973 plaintiff served on defendants and filed written interrogatories designed to ascertain what evidence defendants had to support the above-mentioned allegations of their answer and counterclaim. No timely objections or answers were made to these interrogatories. Partial and incomplete answers were furnished some 6 weeks later (August 6, 1973). At that time the trial date was less than 2 months away (October 2, 1973). Plaintiff then filed a motion which sought to require complete answers to be filed by September 14, 1973, and upon failure to comply, the motion requested an order adjudging defendants to be in default. The motion also sought attorney's fees as terms. This motion was heard by the trial court on September 13, 1973, and resulted in an order dated September 14, 1973. This order required defendants to file full and complete answers to plaintiff's interrogatories prior to September 21, 1973, to the extent of their present ability to do so. The order also required defendants to pay $300 on or before September 21, 1973. Finally the order provided:

ORDERED that in the event that said defendants fail to comply with the terms of this Order on or before September 21, 1973, plaintiff shall be entitled to move for an Order of Default to be heard on the regular motion calendar at 9:30 a.m. on September 24, 1973.

Defendants failed to comply with this order and a hearing on plaintiff's motion for default was held by the court on September 24, 1973. This hearing resulted in an oral order requiring defendants to file the requisite answers and pay $300 attorney's fees to plaintiff by noon, September 26. The court tentatively scheduled a hearing at 1:30, September 26, 1973, and indicated its intention to order a default if defendants failed to meet the noon deadline.

The record shows that the deadline was not met. However, plaintiff's counsel orally agreed with defense counsel to delay entering the default for one day upon defense counsel's assurance that the supplemental answers would be provided by the end of the day (September 26, 1973).

It developed that unverified supplemental answers to the interrogatories were served on plaintiff's counsel on the afternoon of September 26. Believing those answers to be evasive and incomplete, plaintiff's counsel formally notified defendants' counsel on the morning of September 27, 1973 that he would present an order of default to the trial court at 1:30 p.m. the same day. The proposed order was in fact entered at 1:30 p.m. on that date, with no attorney appearing for the defendants. Subsequently, the default judgment was entered on October 1, 1973. On October 19, 1973, after a hearing, the court entered an order refusing to set aside the default judgment. ⁴

We have reviewed the answers and supplemental answers to the interrogatories. We agree that many of them are so vague or incomplete as to render it difficult, if not impossible, for plaintiff to properly prepare for trial on most of the issues raised by the answer and counterclaim. ⁵ Therefore, we reject defendant's contention that the court's orders of September 14 and 24, 1973, were substantially satisfied.

On appeal, defendants do not urge that the answers or supplemental answers to the interrogatories were complete or that the interrogatories were not material, nor does any satisfactory explanation appear--either in the record, in the briefs, or in oral argument--as to why complete answers were not made.

Rather, defendants argue, (1) the sanctions were unjust as a matter of law, and lesser sanctions authorized by CR 37 would have been sufficient; (2) there was no deliberate and willful refusal to make discovery, so as to justify an order of default; (3) the default judgment was an unconstitutional deprivation of defendants' property without due process of law; and (4) even if the default judgment was justified, it should have been vacated because the October 2, 1973 trial date was subsequently continued by the court to mid-December, 1973.

We address the constitutional question first. It seems clear that there is a constitutional due process limitation to grant of a default judgment as a contempt sanction imposed for violation of a discovery order. See Pioche Mines Consol. Inc. v. Dolman, 333 F.2d 257 (9th Cir. 1964), Cert. denied 380 U.S. 956, 85 S.Ct. 1081, 13 L.Ed.2d 972 (1965). However, this limitation is not applicable in this case.

The issue of due process is involved if the sanction is imposed against a defendant as a summary punishment for contempt in refusal to obey the court's discovery order. Mitchell v. Watson, 58 Wash.2d 206, 361 P.2d 744 (1961); Lawson v. Black Diamond Coal Mining Co., 44 Wash. 26, 86 P. 1120 (1906); Hovey v. Elliott, 167 U.S. 409, 17 S.Ct. 841, 42 L.Ed. 215 (1897). But it is not a denial of due process where the order setting forth the prospective sanction is made for the purpose of compelling discovery and where defendant is allowed a reasonable time to comply with the order. Unger v. Los Angeles Transit Lines, 180 Cal.App.2d...