Couch v. Williams, 33,649.

• Citation: 365 P.3d 45
• Decision Date: 16 September 2015
• Docket Number: No. 33,649.,33,649.
• Parties: Thomas M. COUCH, Plaintiff–Appellee, v. Christian WILLIAMS, Georgina Williams, and New Mexico Development & Consulting, LLC, Defendants–Appellants.
• Court: Court of Appeals of New Mexico

365 P.3d 45

Thomas M. COUCH, Plaintiff–Appellee,

v.Christian WILLIAMS, Georgina Williams, and New Mexico Development & Consulting, LLC, Defendants–Appellants.

No. 33,649.

Court of Appeals of New Mexico.

Sept. 16, 2015.

Stephen P. Curtis, Attorney at Law, P.C., Stephen P. Curtis, Albuquerque, NM, for Appellee.

Modrall, Sperling, Roehl, Harris & Sisk, P.A., Michael L. Carrico, Emil J. Kiehne, Kevin D. Pierce, Albuquerque, NM, for Appellants.

OPINION

BUSTAMANTE, Judge.

{1} Christian and Georgina Williams (Defendants) appeal the district court's order forfeiting their interest in New Mexico Development and Consulting, LLC, (NMDC) to their co-owner, Thomas M. Couch (Plaintiff). The forfeiture order was imposed by the district court after it entered a default judgment against Defendants as a sanction for discovery abuses. Defendants argue that the district court erred in not holding an evidentiary hearing on the amount of Plaintiff's damages before ordering forfeiture of their interest. Agreeing, we reverse the damages award and remand for a hearing on Plaintiff's damages.

BACKGROUND

{2} The present matter arises from a partnership gone bad. Plaintiff and Defendants were partners in NMDC, which owned a commercial office building in Albuquerque. Plaintiff and Defendants each owned fifty percent of NMDC. In March 2012 Plaintiff filed a petition for an accounting, alleging that Defendant Christian Williams had "appropriated [NMDC] funds for his own use and benefit," and "refused to provide copies of leases to [Plaintiff], ... refused access to [NMDC's] bank account[,] and refused to provide any accounting as to [NMDC's] operations." Plaintiff made other allegations to the effect that Defendants were mismanaging the commercial property and stated that "[i]t is not reasonably practicable to carry on the business of [NMDC] in conformity with [NMDC's] [a]rticles of [o]rganization and [o]perating [a]greement." Plaintiff prayed for an order "requiring Defendants to provide an accounting, for an award of damages as shown by the accounting[,] and for an award of punitive damages as proved at trial, for his costs and attorney[ ] fees[,] and for such other relief which the [c]ourt deems appropriate."

{3} When Defendants did not timely answer the petition, Plaintiff moved for default judgment. Plaintiff also filed a motion for a preliminary injunction and appointment of receiver, accompanied by an affidavit supporting the motions. In the motion and affidavit, Plaintiff alleged that Defendants had incurred approximately $9146 in inappropriate costs to NMDC and tax penalties, as well as "numerous" overdraft and late charges on bank accounts and loans. Plaintiff also alleged that Defendants' mismanagement of the property led to tenant dissatisfaction. Defendants did not respond to these motions. At the hearing on the motions, the district court warned Defendants that it would "not entertain any further late filings in this matter[.]" The district court denied all of Plaintiff's motions and orally ordered the parties to engage in discovery. The district court also told the parties that "[u]ntimeliness will not be tolerated" in discovery.

{4} When Defendants did not respond to Plaintiff's first and second interrogatories and requests for production, Plaintiff filed two motions to compel. After a hearing, the district court granted the motions to compel and ordered Defendants to pay $1070 in attorney fees as a sanction. See Rule 1–037(D) NMRA. The district court noted at the hearing that "I have given Mr. Williams ample opportunity to rectify his course in this case [and] he [is] clearly thumbing his nose at those opportunities, and he [is] thumbing his nose at the court process." The district court's order warned, "Failure of ... Defendants to comply with this [o]rder will be met with severe sanctions, including an [o]rder of [d]efault [j]udgment."

{5} In spite of this order, Defendants failed to provide any discovery to Plaintiff or to pay Plaintiff $1070. Plaintiff moved for sanctions and requested an order requiring Defendants "to turn over ... all documents and records associated with [NMDC];" holding Defendants in contempt of court; and awarding attorney fees and costs. He also requested "such other sanctions as [are] appropriate." Meanwhile, Defendants' counsel moved to withdraw because he "ha[d] not been able to get ahold of Mr. Williams" and Mr. Williams was avoiding him. The district court then scheduled a hearing and included in the notice of the hearing that "Christian and Georgina Williams are to appear in person for this hearing."

{6} Defendants appeared at the hearing by telephone. Although he did not request it in the motions for sanctions, at the hearing Plaintiff argued for default judgment and forfeiture of Defendants' "membership interest in [NMDC]." Defendants' counsel conceded that sanctions were appropriate and argued "for a sanction that is reasonable in the [district c]ourt's opinion." He argued that default judgment was unreasonable because there was no "verification" of the figures presented by Plaintiff and "there [was] no noticing it." At the conclusion of the hearing, the district court observed that its previous orders had been "[t]otally ignored" and that there had been a "complete and absolute violation of [its] discovery order[.]" The district court ordered Defendants to provide all documents requested by Plaintiff within a week and to pay $5000 to Plaintiff for contempt of court. It stated, "Absent [compliance with its order, it would] take [Plaintiff] up on his proposal, which is a forfeiture of [Defendants'] interest in [NMDC]."

{7} Defendants provided Plaintiff with a password-protected QuickBooks file but did not provide the password and did not provide any other documents. Plaintiff then moved for a default judgment declaring Defendants' interest in NMDC forfeited, which was granted. Plaintiff concedes that "there was no evidence in the record at the time of the entry of [d]efault [j]udgment concerning the value of [NMDC]."

{8} Defendants then filed a motion for reconsideration, citing NMSA 1978, Section 39–1–1 (1917), and including an affidavit by Mr. Williams in which he averred that his "equitable interest in [NMDC] is approximately $500,000 to $600,000." Defendants made several arguments for why the default judgment was improper, including that the district court failed to hold a hearing on damages. Plaintiff's response to the motion disputed Mr. Williams's valuation of NMDC, arguing that each party's equity interest in NMDC was approximately $122,000. Plaintiff also argued that, in addition to the amounts allegedly embezzled by Defendants, he suffered a loss of $24,000 in income as a result of Defendants' mismanagement of NMDC. The district court declined to consider Defendants' evidence of the value of NMDC because it was not "newly discovered evidence" under Rule 1–060(B)(2) NMRA, and denied the motion for reconsideration. Defendants appealed.

DISCUSSION

1. Scope of Appellate Review

{9} We first define the scope of our review. Plaintiff argues that "the original [d]efault [j]udgment cannot be the subject of th[is] appeal [ ] because the [n]otice of [a]ppeal was filed more than [thirty] days after entry of the [d]efault [j]udgment." He argues that the only issue before this Court is the district court's denial of Defendants' motion for reconsideration. We disagree because Plaintiff's premise conflicts with the rules of appellate procedure. Rule 12–201(D)(1) NMRA states that

[i]f any party timely files a motion under Section 39–1–1..., or files a motion under Rule 1–060(B)... that is filed not later than thirty ... days after the filing of the judgment, the full time prescribed in this rule for the filing of the notice of appeal shall commence to run and be computed from the filing of an order expressly disposing of the last such remaining motion.

{10} Defendants' motion for reconsideration was filed within thirty days of the filing of the judgment. See § 39–1–1 ; Rule 12–201(D)(1). Consistent with Rule 12–201(D)(1), the period for filing of the appeal commenced upon the district court's denial of that motion. In other words, the filing of the motion for reconsideration tolled the period in which the appeal could be filed. State v. Romero, 2014–NMCA–063, ¶ 6, 327 P.3d 525 ("[T]he pendency of a timely-filed motion for reconsideration generally has the effect of suspending the finality of the preceding judgment."); see Grygorwicz v. Trujillo, 2009–NMSC–009, ¶ 8, 145 N.M. 650, 203 P.3d 865 (" Rule 12–201(D) provides that if a party makes a post-judgment motion directed at the final judgment pursuant to Section 39–1–1, the time for filing an appeal does not begin to run until the district court enters an express disposition on that motion."). Since the appeal was filed within thirty days of the district court's entry of an order denying the motion for reconsideration, it is also timely.

{11} Plaintiff also argues that because the motion for reconsideration was filed "too late to be considered under Rule 1–059 [NMRA ], ... it must have been filed pursuant to Rule 1–060."¹ He appears to argue further that the appeal should be dismissed because Defendants have failed to address whether their motion met the requirements for relief from the judgment under Rule 1–060(B). This too is incorrect.

{12} Plaintiff's argument rests on a false dilemma: Plaintiff maintains that because motions filed within ten days of the judgment are deemed to be motions pursuant to Rule 1–059(E), any motion filed beyond that period must perforce be pursuant to Rule 1–060. But the cases cited in support of this position state only what happens when a motion is filed within ten days, not what happens when they are filed after that. For example, in Albuquerque Redi–Mix, Inc. v. Scottsdale Insurance Co., the Supreme Court held that "a motion challenging a judgment, filed within ten days of the judgment, should be considered a Rule 1–059(E) moti...