Fu v. Rhodes

Decision Date16 May 2013
Docket NumberNo. 20110081–CA.,20110081–CA.
Citation735 Utah Adv. Rep. 16,304 P.3d 80
PartiesYUANZONG FU, Plaintiff and Appellee, v. Clyde RHODES, Joseph Naso, and Rene Naso Evans, Defendants and Appellants.
CourtUtah Court of Appeals


Randy B. Birch, Heber City, for Appellants.

David J. Hodgson, Midvale, for Appellee.

Judge JAMES Z. DAVIS authored this Opinion, in which Judge STEPHEN L. ROTH concurred. Judge CAROLYN B. McHUGH concurred in part and dissented in part, with opinion.


DAVIS, Judge:

¶ 1 Clyde Rhodes, Joseph Naso, and Rene Naso Evans (collectively, Defendants) appeal from an Order and Judgment, claiming that the trial court abused its discretion by striking their Answer and entering judgment against them as a discovery sanction pursuant to rule 37 of the Utah Rules of Civil Procedure. SeeUtah R. Civ. P. 37(e)(2). In the alternative, Defendants contend that even if the sanction was otherwise appropriate, the trial court erred by entering judgment because Yuanzong Fu's Complaint fails to set forth factual allegations supporting the relief requested. We affirm but remand for a calculation of fees on appeal.


¶ 2 On August 7, 2008, Fu filed his Complaint against Defendants 1 for breach of contract, fraud, negligent misrepresentation, foreclosure, and fraudulent transfer. The claims arise out of four real estate investments Fu made (the Investments) between February and July of 2007. The Investments were each evidenced by a promissory note and were to be repaid in monthly installments and secured by trust deeds against certain real property. The Complaint alleges that the trust deeds were never recorded against the property and that Fu had been repaid only a small fraction of the funds advanced.

¶ 3 Defendants filed their Answer on September 11, 2008. The Answer includes an affirmative defense that [Fu] has failed to state a cause of action against ... Defendants upon which relief can be granted.” On January 12, 2009, the trial court entered a stipulated discovery plan and order, providing that all fact discovery would be completed no later than April 23, 2009. Subsequently, Fu served his first set of interrogatories, requests for the production of documents, and requests for admissions on Defendants. Because Defendants failed to respond to any of the discovery requests, Fu filed a motion to compel.

¶ 4 On May 12, 2009, the trial court granted Fu's motion and warned that [i]f ... Defendants ... fail[ed] to provide all requested discovery within ten days ..., Defendants' Answer [would] be stricken and [Fu would] be entitled to judgment as prayed for in the Complaint.” Defendants responded to Fu's interrogatories within ten days but failed to respond completely to the remaining discovery requests. Rather than seek immediate redress from the trial court, however, Fu apparently reached a compromise with Defendants, which is reflected in a stipulated amended case management order filed on March 15, 2010. The order provides that [f]act discovery, including responses to written discovery and depositions, [was to] be completed no later than May 31, 2010.” (Emphasis omitted.) Despite that new order, the parties' discovery disputes continued.

¶ 5 On June 2, 2010, Fu filed a motion for entry of judgment pursuant to rule 37, alleging that Defendants had “engaged in a deliberate pattern of promising [documents] and then” failing to provide them in an attempt to hinder Fu in taking depositions and prosecuting his case. See generallyUtah R. Civ. P. 37(e)(2)(D) ([T]he court in which the action is pending may impose appropriate sanctions for the failure to follow its orders, including ... dismiss all or part of the action, strike all or part of the pleadings, or render judgment by default on all or part of the action.”). Fu also argued that Defendants failed to provide a full set of bank statements, books and records, tax returns, and proof of alleged payments on the Investments. Defendants disputed these assertions and claimed that they had produced all bank statements, did not understand what the requests for books and records entailed, and did not have any documents evidencing payments to Fu or tax returns for the years requested.

¶ 6 At an August 14, 2010 hearing on the motion for entry of judgment, Defendants claimed to have provided all requested documents within their control, but Fu argued to the contrary. The trial court asked Fu to submit a discovery violations timeline, which he filed on September 2, 2010. On September 20, the trial court granted Fu's motion for entry of judgment. Although the court acknowledged that “in most cases, lesser sanctions are usually sufficient and more appropriate in moving a case along,” it found the more severe sanction of default judgment to be appropriate in this case, stating, [B]ased upon the [D]efendants' continued failures to comply with timely discovery, their failure to comply with the Court's previously entered Order to Compel, and their failure to comply with the Case Management Orders, ... [Fu's] Motion is based on good cause and should be granted.” The trial court instructed Fu to prepare an order memorializing its decision.

¶ 7 Defendants filed an objection to the proposed order and a motion to alter and amend the order, which the trial court set for hearing on December 20, 2010. Defendants challenged the proposed sanction as excessive and again claimed that they had fully complied with Fu's discovery requests. After hearing from the parties, the trial court noted, “The argument today is remarkably similar to what we heard at our last hearing. And the Court's unpersuaded that there's anything new or different at this point, and so, ... I'm going to enter the order as proposed by [Fu] at this time.” The trial court entered judgment “against [Defendants], jointly and severally, for breach of contract, common law fraud, and negligent misrepresentation and on the [Investments] in the sum of $235,440, which includes interest, court costs, and attorney fees, and “for fraudulent transfer and foreclosure” relating to nine separate properties. Defendants appeal.


¶ 8 Defendants argue that the rule 37 sanctions the trial court imposed in this case—striking their Answer and entering default judgment—were unduly severe and therefore constituted an abuse of the trial court's discretion. See generallyUtah R. Civ. P. 37(e)(2). “As a general rule, district courts are granted a great deal of deference in selecting discovery sanctions, and we overturn a sanction only in cases evidencing a clear abuse of discretion.” Kilpatrick v. Bullough Abatement, Inc., 2008 UT 82, ¶ 23, 199 P.3d 957.

¶ 9 Defendants also contend that even if it was otherwise appropriate for the trial court to strike their Answer, the trial court erred when it entered default judgment because the facts alleged in the Complaint do not support recovery under the stated legal theories. Defendants concede that this issue was not preserved but assert that supreme court precedent belies the necessity of preserving this type of claim for appeal. See infra ¶ 14. We generally do not consider claims raised for the first time on appeal unless they fall under a recognized exception to the preservation rule. See Strawberry Elec. Serv. Dist. v. Spanish Fork City, 918 P.2d 870, 880 (Utah 1996).

I. Severity of Sanctions

¶ 10 In reviewing a challenge to rule 37 sanctions, we first “consider whether the district court was justified in ordering sanctions” and “then review the type and amount of sanctions for abuse of discretion.” PC Crane Serv., LLC v. McQueen Masonry, Inc., 2012 UT App 61, ¶ 32, 273 P.3d 396. Here, Defendants do not argue that a sanction was unjustified. Instead, they contend that the trial court abused its discretion by “imposing ... the most severe sanction available under Rule 37.” “Even though dismissing an action is ‘one of the most severe of the potential sanctions that can be imposed, it is clear from the language of rule 37 that it is within a trial court's discretion to impose such a sanction.’ Allen v. Ciokewicz, 2012 UT App 162, ¶ 32, 280 P.3d 425 (quoting Morton v. Continental Baking Co., 938 P.2d 271, 274 (Utah 1997)); see alsoUtah R. Civ. P. 37(e)(2). Accordingly, Defendants undertake a significant burden in attempting to show that the trial court abused its discretion in striking their Answer and entering default judgment. To meet that burden, Defendants “must show either that the sanction is based on an erroneous conclusion of law or that the sanction lacks an evidentiary basis.” SFR, Inc. v. Comtrol, Inc., 2008 UT App 31, ¶ 14, 177 P.3d 629 (citation and internal quotation marks omitted). Defendants have failed to identify any error of law, and the record supports the trial court's decision.

¶ 11 The trial court expressly warned Defendants in May 2009 that they were at risk of having judgment entered against them, informing them that if they “fail [ed] to provide all requested discovery within ten days ... [their] Answer [would] be stricken and [Fu would] be entitled to judgment as prayed for in the Complaint.” Not only did they fail to meet this deadline, but they failed to provide the requested discovery even by the extended May 31, 2010 deadline stipulated to in the amended case management order. By the time the trial court entered judgment against Defendants on September 20, 2010, nearly sixteen months had passed since the trial court's initial deadline and the discovery requests were still outstanding. The trial court afforded Defendants two opportunities to be heard before striking their Answer and entering default. Ultimately, while acknowledging the severity of the sanctions imposed, the court found that Fu's motion for entry of judgment was “based on good cause and should be granted” due to [D]efendants' continued failures to comply with timely discovery, their failure to comply with the Court's previously entered Order to Compel, and their...

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    ...to support the judgment.” (internal quotation marks omitted)); Yuanzong Fu v. Rhodes, 2013 UT App 120, ¶ 27, 304 P.3d 80 (McHugh, J., concurring in part and dissenting in part) (“[A] party appealing from a default judgment entered as a result of the failure to appear can challenge the suffi......
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    ...decided unanimously that the district court had not abused its discretion by entering a default. Fu v. Rhodes, 2013 UT App 120, ¶¶ 10–11, 304 P.3d 80.¶ 2 But the court of appeals was divided by a second issue, namely, whether the petitioners could argue for the first time on appeal that Fu'......
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