Hudson Diesel, Inc. v. Kenall

• Court: Wisconsin Court of Appeals
• Writing for the Court: MYSE
• Citation: Hudson Diesel, Inc. v. Kenall, 535 N.W.2d 65, 194 Wis.2d 531 (Wis. App. 1995)
• Decision Date: 02 May 1995
• Docket Number: No. 94-2416,94-2416
• Parties: HUDSON DIESEL, INC., Plaintiff-Appellant-Cross Respondent, v. Richard L. KENALL, Martin W. O'Connell, Jerry E. Harrington, Eugene E. Berg, Roger R. Evenson and Duane P. Razink, Defendants-Third Party Plaintiffs-Respondents-Cross Appellants, d Edina Realty, Inc., and Roger Hetchler, Third Party Defendants.

Page 65

535 N.W.2d 65

194 Wis.2d 531

HUDSON DIESEL, INC., Plaintiff-Appellant-Cross Respondent, v. Richard L. KENALL, Martin W. O'Connell, Jerry E. Harrington Eugene E. Berg, Roger R. Evenson and Duane P Razink, Defendants-Third Party Plaintiffs-Respondents-Cross Appellants,^d Edina Realty, Inc., and Roger Hetchler, Third Party Defendants.

No. 94-2416.

Court of Appeals of Wisconsin.

Submitted on Briefs April 10, 1995.

Opinion Released May 2, 1995.

Opinion Filed May 2, 1995.

For the plaintiff-appellant-cross respondent the cause was submitted on the briefs of Daniel P. Murray and B.J. Hammarback of Hammarback Law Offices, S.C., River Falls.

For the defendants-third party plaintiffs-respondents-cross appellants the cause was submitted on the briefs of Catherine R. Quiggle of Rodli, Beskar, Boles, Krueger, S.C., River Falls.

Before CANE, P.J., LaROCQUE and MYSE, JJ.

MYSE, Judge.

Hudson Diesel, Inc. (Hudson) appeals an order dismissing its complaint for discovery violations. Hudson contends the trial court erred by dismissing the complaint because: (1) the discovery violations were inadvertent, not egregious; (2) it had a justifiable excuse for the violations; (3) the information that it failed to furnish was incidental to the principal issue in dispute; and (4) it was not given an opportunity to cure the defect. Because we conclude the facts do not support a finding that Hudson's conduct was intentional or egregious, that the information Hudson failed to supply was peripheral to the principal issue in the case and that less severe sanctions were readily available to cure the violation, we reverse the trial court's order dismissing the complaint.

Additionally, Hudson appeals and the defendants cross-appeal the trial court's order denying their respective motions for summary judgment. Because we conclude that the trial court properly denied the motions based on its finding that disputed issues of material fact existed, we affirm the trial court's order.

The facts giving rise to this action stem from a real estate purchase agreement between Hudson and the defendants. The defendants own a parcel of land located in St. Croix County. In 1989, the defendants listed the parcel for sale with Roger Hetchler, a real estate agent for Edina Realty. Hudson submitted an offer to purchase the property and paid earnest money to Edina Realty in the amount of $10,000. The defendants submitted a counter-offer, which Hudson accepted.

Hudson made its offer to purchase the defendants' property with the intent to resell part of the property. To that end, Hudson listed a portion of the property for sale with Edina Realty. A third party, Charter Oaks, subsequently approached Hudson regarding purchase of the property. Charter Oaks indicated it was interested in purchasing the property; however, it could not close on a purchase from Hudson within the time Hudson was required to close its purchase from the defendants. To facilitate the purchase to Charter Oaks, Hudson requested and obtained an amendment to the original purchase agreement.

The amended purchase agreement extended Hudson's closing date to April 15, 1991, required Hudson to pay an additional $40,000 in earnest money and required Hudson to pay the entire balance of the $390,000 purchase price on the date of closing. Hudson subsequently paid the additional earnest money to Edina Realty, which disbursed the money to the defendants. Under the terms of the contract, the $50,000 earnest money was nonrefundable.

Hudson subsequently learned that Charter Oaks would be unable to purchase the parcel of property. The defendants telephoned Hudson to determine whether it still intended to proceed with the sale. Hudson informed the defendants that it would be unable to confirm its intentions until the closing date. Over the course of the thirty days preceding the closing date, the defendants called Edina Realty on three occasions to determine whether Hudson intended to follow through with the purchase. On each occasion, Edina Realty informed the defendants that Hudson's purchase decision would not be made until the closing date.

On the date of closing, Hudson informed Edina Realty that it intended to close on the sale and made arrangements for the closing to take place at Firstar Bank, f/k/a First National Bank. Hudson arrived at the bank at approximately 3:30 p.m. and remained there until approximately 5:30 p.m. Hudson alleges that it had over $400,000 in cash in its possession, a fact the defendants contest, and that it was prepared to close the transaction. The defendants, however, did not appear, nor did they tender the deed as required by the purchase agreement. Consequently, Hudson filed a complaint against the defendants alleging breach of contract and seeking to recover the $50,000 in earnest money plus damages. Hudson then amended its complaint to include a cause of action for fraud and a request for punitive damages. The defendants responded by filing a third-party complaint against Edina Realty, Roger Hetchler and Hudson's credit manager, Bernard Seidling. ¹ The trial was scheduled for August 1, 1994.

On May 20, 1994, the defendants served Hudson with interrogatories and requests for production of documents. The defendants' discovery requests were designed to determine whether Hudson did in fact have sufficient financial resources on the day of closing to tender performance of the contract. On June 1, both Hudson and the defendants filed motions for partial summary judgment. Hudson's summary judgment motion sought a determination that a contract existed between the parties, that the defendants breached the contract and that Hudson was entitled to a return of its $50,000 earnest money. Conversely, the defendants' summary judgment motion sought dismissal of Hudson's fraud and punitive damage claims on the ground that there was no evidence to support these claims. The trial court granted that part of Hudson's motion seeking a determination that a contract existed between the parties. However, it denied the remainder of Hudson's motion and the defendants' motion, finding that there were disputed issues of material fact that precluded summary judgment.

As of July 20, 1994, the defendants had not received a response to their discovery request. Accordingly, the defendants filed a motion seeking an order to require Hudson to respond. Three days later, Hudson provided the defendants with some sixty-four pages of documentation in an effort to satisfy the defendants' discovery request. The defendants' attorney, however, determined that the documentation was inadequate and wrote a letter to the trial court informing the court that Hudson's response was unacceptable. On July 26, a hearing was held on the defendants' discovery motion. At the hearing, the trial court concluded that Hudson did indeed fail to comply with discovery. As a sanction for Hudson's discovery violation, the defendants proposed that Hudson be limited to the documents it submitted in attempting to establish that it had sufficient financial resources on the day of closing to tender performance of the contract. Additionally, the defendants requested that the trial court instruct the jury that the defendants requested authorization forms from Hudson and that Hudson failed to comply. The trial court granted the defendants' request and entered an order imposing the proposed sanctions.

Soon after the trial court granted the order, the defendants discovered that the tax returns they requested from Hudson were incomplete and that certain forms were entirely omitted. As a result, the defendants filed a motion to dismiss Hudson's complaint notwithstanding the remedial sanction the trial court previously ordered. The defendants argued that they were unaware the tax returns were incomplete at the time they proposed the initial sanctions and that Hudson's failure to furnish all of the appropriate tax forms was egregious conduct warranting dismissal. Additionally, the defendants sought dismissal on the grounds that Hudson served subpoenas duces tecum on several defendants requiring them to appear with documents that were rendered inadmissible under the trial court's previous order.

In response to the defendants' motion, Hudson noted that the subpoenas were served prior to the trial court's order. The trial court accepted Hudson's explanation and denied the defendants' request for dismissal on this basis. As to its failure to provide the defendants with the complete tax forms, Hudson argued that it was an inadvertent mistake. Hudson further argued that its failure to provide these forms did not prejudice the defendants' ability to defend the claim. The trial court, however, concluded that Hudson's failure to supply the tax forms was an egregious violation of discovery procedures and dismissed the complaint. Hudson appeals.

Under §§ 805.03 ² and 804.12(2)(a)3, STATS³., the trial court has discretion to dismiss a complaint for a discovery violation. We review a trial court's decision to dismiss a complaint under the erroneous exercise of discretion standard. Taylor v. State Highway Comm'n, 45 Wis.2d 490, 494-95, 173 N.W.2d 707, 711 (1970). We will affirm the trial court's exercise of discretion unless it fails to properly apply the law or makes an unreasonable determination under the existing facts and circumstances. Erbstoeszer v. American Cas. Co., 169 Wis.2d 637, 644, 486 N.W.2d 549, 552 (Ct.App.1992).

Because dismissal of a complaint terminates the litigation without regard to the merits of the claim, dismissal is an extremely drastic penalty that should be imposed only where such harsh measures are necessary. Trispel v. Haefer, 89 Wis.2d 725, 732, 279 N.W.2d 242, 245 (1979). In Johnson v. Allis Chalmers Corp., 162 Wis.2d 261, 273, 470 N.W.2d 859, 865 (1991), our supreme court held that dismissal is appropriate only where the noncomplying party's conduct is egregious or in bad faith and without a clear...