Investors Title Ins. Co. v. Herzig

• Decision Date: 17 August 2010
• Docket Number: Nos. 20090051, 20090052.,s. 20090051, 20090052.
• Citation: 785 N.W.2d 863,2010 ND 138
• Parties: INVESTORS TITLE INSURANCE COMPANY, Plaintiff v. David F. HERZIG, Southeastern Shelter Corporation, Alphild Herzig, Defendants On Appeal Southeastern Shelter Corporation, Plaintiff, Appellee and Cross-Appellant v. Sheldon Smith, Personal Representative of the Estate of Alphild Herzig, substituted for Alphild Herzig, Deceased, Defendant, Appellant and Cross-Appellee.
• Court: North Dakota Supreme Court

785 N.W.2d 863

2010 ND 138

INVESTORS TITLE INSURANCE COMPANY, Plaintiff

v.David F. HERZIG, Southeastern Shelter Corporation, Alphild Herzig, Defendants

On Appeal

Southeastern Shelter Corporation, Plaintiff, Appellee and Cross-Appellant

v.Sheldon Smith, Personal Representative of the Estate of Alphild Herzig, substituted for Alphild Herzig, Deceased, Defendant, Appellant and Cross-Appellee.

Nos. 20090051, 20090052.

Supreme Court of North Dakota.

July 13, 2010.

Rehearing Denied Aug. 17, 2010.

Robert S. Rau, Minot, N.D., for plaintiff, appellee and cross-appellant.

Arnold V. Fleck, Bismarck, N.D., for defendant, appellant and cross-appellee.

VANDE WALLE, Chief Justice.

[¶ 1] In this consolidated appeal, the personal representative of the estate of Alphild Herzig appealed and Southeastern Shelter Corporation ("Southeastern") cross-appealed from district court orders entered in two related cases. The appealed orders in each case denied the personal representative's motions to dismiss Alphild Herzig as a party, but granted the personal representative's motion to substitute the estate's personal representative for Herzig.

[¶ 2] We affirm the district court's substitution orders in both cases, granting substitution of the personal representative of the Alphild Herzig estate for Alphild Herzig. However, we remand to the district court to determine the amount of remedial sanction necessary to compensate Southeastern under the court's 2006 contempt orders.

I. Facts

[¶ 3] This long-running, tortured and unduly complicated saga involves Southeastern's attempts in North Dakota to collect on a 1989 North Carolina money judgment entered against David Herzig. Since this consolidated appeal involves two underlying cases, we discuss the differing procedural postures leading to the present appeals.

A. Supreme Court No. 20090051 ("1998 Case")

[¶ 4] The 1998 case involves proceedings supplementary to execution of the 1989 North Carolina judgment and was commenced in North Dakota in 1998, after Southeastern instituted proceedings under the Uniform Enforcement of Foreign Judgments Act, N.D.C.C. ch. 28-20.1, by filing the 1989 North Carolina judgment for enforcement against David Herzig. In the North Carolina action, Southeastern was named as a co-defendant with David Herzig, and Southeastern was ultimately awarded a $149,598.13 judgment against David Herzig under its cross claim.

[¶ 5] In April 2002, after apparent unsuccessful initial attempts to collect on thejudgment and upon retention of new counsel, Southeastern moved for a debtor's examination in aid of execution under N.D.C.C. ch. 28-25. In its motion, Southeastern requested an order for the judgment debtor, David Herzig, to appear before the district court to be examined. Southeastern also requested an order compelling David Herzig's parents, Floyd and Alphild Herzig, to produce documents and to testify under oath under N.D.C.C. § 28-25-04. David Herzig responded to Southeastern's motion, challenging, among other things, the underlying North Carolina judgment.

[¶ 6] After a hearing the district court issued a September 2002 order, granting Southeastern's motion. The court acknowledged Southeastern's request under N.D.C.C. § 28-25-04, to compel the examination of Floyd and Alphild Herzig and concluded that Southeastern made a sufficient showing supporting a debtor's examination of David Herzig, Floyd Herzig, and Alphild Herzig. The court stated the Herzigs appeared to have information pertinent to Southeastern's attempt to execute on the judgment, including "alter ego" matters. The court also ordered David Herzig, Floyd Herzig, and Alphild Herzig to provide documents requested by Southeastern in its subpoena duces tecum and required Southeastern to give appropriate notice of examination under N.D.C.C. § 28-25-07. Although it is unclear whether Alphild Herzig was personally served with this order, the record suggests that she was not.

[¶ 7] In October 2002, Southeastern filed a notice of a 2000 North Carolina default judgment that Southeastern obtained against David Herzig, entered in a North Carolina action commenced in 1999, purportedly to renew the 1989 judgment. In March 2003, Southeastern moved the court for sanctions, to compel discovery, and for contempt against David Herzig. In its brief in support of this motion, in addition to David Herzig's alleged lack of compliance with discovery, Southeastern asserted that Floyd Herzig had died and various attempts to serve Alphild Herzig had been unsuccessful. David Herzig responded to this motion in April 2003, asserting in part that Southeastern had attempted to serve Alphild Herzig by serving David Herzig's attorney, that David Herzig's attorney had never represented Alphild Herzig, and that it was not David Herzig's fault Southeastern could not serve Alphild Herzig. A hearing on the request for sanctions was held in December 2003.

[¶ 8] Almost seven months later, in July 2004, the district court, apparently on its own motion, entered an order under N.D.R.Civ.P. 19, joining Alphild Herzig to the action. In its order, the court stated that David Herzig asserted at the December 2003 hearing that Alphild Herzig should be made a party to the action, and the court agreed. The court found that Alphild Herzig's interest in the judgment against her son was "material and substantial" if Southeastern established David Herzig was the "alter ego" of numerous corporations in which Alphild Herzig is an owner or shareholder. The court concluded Alphild Herzig had a material interest in the action and should be joined "as a party defendant." In August 2004, an affidavit of personal service was filed, stating Alphild Herzig had been personally served with the court's "Order on Rule 19(a), Joinder of Party." In October 2004, Alphild Herzig's attorney filed a notice of appearance in the action on Alphild Herzig's behalf, which asserted the notice was "not intended to and does not waive anydefenses available to the above defendant including all defenses under [N.D.R.Civ.P. 12(b) ]."

[¶ 9] In January 2005, Southeastern moved the district court for an order sanctioning Alphild Herzig's failure to comply with Southeastern's request for production and subpoena duces tecum, compelling Alphild Herzig to fully answer Southeastern's discovery, and directing the award of attorney fees under N.D.R.Civ.P. 33, 34, and 37. Alphild Herzig, through her attorney, filed a response to Southeastern's motion arguing that a party's failure to respond to only some of the interrogatories, or a party's evasive or incomplete answers to interrogatories are properly addressed under N.D.R.Civ.P. 37(a) and (b), rather than N.D.R.Civ.P. 37(d). Alphild Herzig argued that before the court imposed sanctions for a party's failure to answer interrogatories, a party must first violate a discovery order, stating "that while Southeastern may bring its motion to compel discovery under Rule 37(a) and request sanctions, they do not allow for sanctions to be entered against Alphild in this instance." Alphild Herzig's response also asserted Southeastern had neither offered any proposal to resolve the discovery dispute, nor attempted to resolve the dispute regarding Alphild's prior responses and answers to the discovery before seeking court action.

[¶ 10] After an April 2005 hearing, the district court issued an order that, on stipulation of counsel, withheld granting Southeastern's motion for sanctions for 20 days to give Alphild Herzig time to respond to the discovery requests and that, at the expiration of 20 days, either party could request further hearing on Southeastern's motion. In late May 2005, Southeastern filed a renewed motion for sanctions and to compel discovery under N.D.R.Civ.P. 33, 34, and 37. The renewed motion sought to sanction Alphild Herzig for her asserted failure to comply with Southeastern's request for production of documents and subpoena duces tecum, to compel her to answer Southeastern's discovery, and to award Southeastern attorney fees.

[¶ 11] In June 2005, Alphild Herzig, through her attorney, resisted Southeastern's motion, asserting that she had submitted supplemental answers to Southeastern's interrogatories and requests for production of documents, that her objections under N.D.R.Civ.P. 26 were in good faith, that she did not have material and information Southeastern was requesting, and that Southeastern was requesting she answer discovery for the true party in the case, David Herzig. Alphild Herzig also asserted, "Southeastern fails to understand that Alphild is not a party to this case and she should not be subjected to the continual harassment of Southeastern." She asserted that she had done her best to provide the information and that Floyd Herzig, who died in 2003, had been in a greater position to provide information. Notwithstanding the July 2004 order, she asserted: "The Court has already determined that Alphild is not a party to this case and as such she should not be subjected to the continual displays of contempt asserted upon her by Southeastern." In August 2005, Alphild Herzig made a motion to seal the record, which was opposed by Southeastern. The district court entered an order in March 2006, sealing an affidavit of Alphild Herzig.

[¶ 12] In March 2006, the district court issued an order compelling additional discovery from Alphild Herzig. In June2006, Southeastern brought another motion to compel discovery under N.D.R.Civ.P. 33, 34, and 37. Southeastern sought an order sanctioning Alphild Herzig $750 a day for failure to comply with the court's prior order directing answers and production of documents, compelling Alphild Herzig to fully answer discovery as ordered by the court, joining Alphild Herzig to the action as a defendant and judgment debtor, and holding Alphild Herzig in contempt of court, and directing her to pay attorney fees.

[¶ 13] Alphild Herzig resisted Southeastern's motion stating, "It is brought to the Court's attention that [...