Sfr, Inc. v. Comtrol, Inc.

• Decision Date: 25 January 2008
• Docket Number: No. 20060915-CA.,20060915-CA.
• Citation: 177 P.3d 629,2008 UT App 31
• Court: Utah Court of Appeals
• Parties: SFR, INC., a Colorado corporation dba QED, Plaintiff, Appellee, and Cross-appellant, v. COMTROL, INC.; United States Fidelity & Guaranty Company; Atlas Electric, Inc.; and Azam Soofi, an individual, Defendants, Appellants, and Cross-appellees.

177 P.3d 629

2008 UT App 31

SFR, INC., a Colorado corporation dba QED, Plaintiff, Appellee, and Cross-appellant, v. COMTROL, INC.; United States Fidelity & Guaranty Company; Atlas Electric, Inc.; and Azam Soofi, an individual, Defendants, Appellants, and Cross-appellees.

No. 20060915-CA.

Court of Appeals of Utah.

January 25, 2008.

Cass C. Butler and Michael D. Stanger, Salt Lake City, for Appellants and Cross-appellees.

Daniel L. Steele and Robert K. Reynard, Salt Lake City, for Appellee and Cross-appellant.

Before Judges BILLINGS, DAVIS, and McHUGH.

OPINION

DAVIS, Judge:

¶ 1 Appellants Comtrol, Inc. and United States Fidelity & Guaranty Company (collectively, Comtrol) argue that the trial court erred by excluding certain evidence as a sanction rather than dismissing SFR, Inc.'s (SFR) lawsuit. Comtrol also asserts that the trial court improperly calculated post-judgment interest by using and compounding an 18 percent rate rather than applying the much lower statutory interest rate, see Utah Code Ann. § 15-1-4(3)(a) (2005). SFR cross-appeals, asserting that the trial court incorrectly calculated its award of attorney fees and the rate of interest to be applied to the fees and costs. SFR also argues that the trial court improperly estopped SFR from recovering against the payment bond an amount of $34,259.43 that SFR allowed Atlas Electric, Inc. (Atlas) to retain. We affirm in part and reverse and remand in part.

BACKGROUND

¶ 2 Granite School District awarded Comtrol a construction contract for the Scott M. Matheson Junior High School (the Project) in Magna, Utah, on March 8, 2000. Comtrol obtained a payment bond for the Project. Comtrol then subcontracted with Atlas for electrical work in the final amount of $1,121,283.79. Atlas in turn purchased almost all of the necessary electrical components from SFR. SFR and Atlas also had an agreement, which provided for, among other things, 18 percent interest on late payments for materials purchased on Atlas's account. At the time, Atlas was also purchasing supplies from SFR for other construction projects.

¶ 3 With the electrical work nearly complete, Atlas left the Project in February 2002 and subsequently went out of business. While Comtrol had paid Atlas the entire amount due under the electrical subcontract, SFR claimed that Atlas still owed $143,189.14 for the materials SFR had supplied Atlas. Comtrol asked in writing for an accounting of this claim. In response, SFR initiated this suit against Comtrol and Atlas on March 29, 2002. Comtrol counterclaimed for an accounting of the amount owed.

¶ 4 After years of discovery and mediation, trial was ultimately set for December 19, 2005. On November 21, 2005, and December 7, 2005, SFR provided Comtrol with checks, allocation instructions, and ship tickets (collectively, the Documents), which Comtrol had earlier requested. SFR admits that the failure to timely produce the Documents was improper.

¶ 5 In response to the late surrender of the Documents, Comtrol filed a Motion for Sanctions or, in the Alternative, Motion in Limine. In the motion, Comtrol "move[d] the [c]ourt pursuant to Rule 37 of the Utah Rules of Civil Procedure for sanctions against [SFR] or in the alternative move[d] for an Order in Limine preventing [SFR]'s use at trial of [the Documents]." In its supporting memorandum, Comtrol noted: "Rule 37 requires that [SFR] be prohibited from introducing [the D]ocuments in evidence. Rule 37 allows, however, for an even stronger sanction for such dilatory behavior, namely, dismissal of [SFR]'s case. Comtrol respectfully submits that such a sanction is warranted here." Comtrol argued that the late production of the Documents was improper but failed to elucidate how Comtrol had been harmed by this withholding other than a conclusory statement that SFR's action had "prejudiced and interfered with [Comtrol's] ability to plan a defense strategy, conduct follow-up written discovery . . ., and prepare expert witnesses."

¶ 6 In subsection D of its supporting memorandum, Comtrol also argued: "If this [c]ourt does not sanction [SFR] by dismissing its complaint, this [c]ourt should at least prevent [SFR] from profiting from its behavior."¹ This argument, however, was separate from and not in support of Corntrol's dismissal argument. Comtrol urged the trial court to "at least sanction [SFR] from profiting from its improper actions . . . regardless of whether or not this [c]ourt allows the use at trial of [the Documents] or not." Importantly, the motion did not state that dismissal was the only proper course of action for the trial court to take. Rather, the motion gave the trial court an option by seeking, at a minimum, "an order prohibiting Plaintiff from using [the Documents] at trial" if the court did not agree that dismissal was warranted.²

¶ 7 After a hearing on December 16, 2005, the trial court granted Comtrol's motion, entering an order prohibiting SFR from using the Documents at trial.³ The following business day, a bench trial ensued. On January 23, 2006, the trial court orally set forth its findings of fact and conclusions of law. The Revised Findings of Fact and Conclusions of Law and the Judgment were filed on June 13, 2006.

¶ 8 On October 2, 2006, the trial court filed its Amended Revised Findings of Fact and Conclusions of Law and its Amended Judgment,⁴ finding that SFR had satisfied its burden of proving that it provided items for the Project for which it was not paid by Comtrol and awarding SFR $137,311.49 in principal, less $34,259.43 that SFR allowed Atlas to retain from a Comtrol check issued jointly to SFR and Atlas,⁵ thus resulting in a principal award of $103,052.06. The court applied the 18 percent contract interest rate from the date of the judgment to both the principal and 18 percent prejudgment interest included in the judgment, and 6.37 percent postjudgment interest to the attorneys fees and costs. The trial court also reduced SFR's award of attorney fees and costs by 25 percent under the rationale that SFR had recovered only 75 percent of what it sought at trial.

ISSUES AND STANDARDS OF REVIEW

¶ 9 Comtrol argues that the trial court improperly sanctioned SFR for its discovery violation. We review a trial court's remedy for discovery abuses under an abuse of discretion standard. See Aurora Credit Servs., Inc. v. Liberty W. Dev., Inc., 2006 UT App 48, ¶ 9, 129 P.3d 287.

¶ 10 Comtrol also argues that the trial court improperly determined the postjudgment interest award. "We review the award of post-judgment interest, a question of law, under the correction of error standard." Bailey-Allen Co. v. Kurzet, 876 P.2d 421, 427 (Utah Ct.App.1994).

¶ 11 SFR argues that the trial court improperly decreased SFR's attorney fees award and the interest on that award. "Calculation of reasonable attorney fees is in the sound discretion of the trial court, and will not be overturned in the absence of a showing of a clear abuse of discretion." Dixie State Bank v. Bracken, 764 P.2d 985, 988 (Utah 1988) (citations omitted); see also Chang v. Soldier Summit Dev., 2003 UT App 415, ¶ 13, 82 P.3d 203. Utah courts have repeatedly taken a "flexible and reasoned" approach to determining the winning party. See AK. & R. Whipple Plumbing & Heating v. Guy, 2004 UT 47, ¶ 14, 94 P.3d 270; Mountain States Broad. Co. v. Neale, 783 P.2d 551, 557 (Utah Ct.App.1989). "Essentially, this approach emphasizes the notion that courts should not ignore common sense when deciding which party prevailed.'" J. Pochynok Co. v. Smedsrud, 2007 UT App 88, ¶ 9, 157 P.3d 822 (quoting Whipple, 2004 UT 47, ¶ 11, 94 P.3d 270), cert. denied, 168 P.3d 1264 (Utah 2007).

¶ 12 SFR also argues that the trial court erred by applying the doctrine of estoppel to a joint check, from which SFR allowed Atlas to keep $34,259.43. The application of estoppel is "a classic mixed question of fact and law," one that "is simply stated, . . . [yet is] applicable to a wide variety . . . of fact-intensive circumstances," which "weighs heavily against lightly substituting our judgment for that of the trial court." Department of Human Servs. ex rel. Parker v. Irizarry, 945 P.2d 676, 678 (Utah 1997) (citing State v. Pena, 869 P.2d 932, 939 (Utah 1994)). Thus, we grant "a fair degree of deference when we review the mixed question of whether the requirements of the law of estoppel have been satisfied." Id.

ANALYSIS

I. Discovery Sanctions

¶ 13 "Rule 37(d) of the Utah Rules of Civil Procedure allows a court to impose sanctions against a party for disregarding discovery obligations even when that party has not directly violated a court order specifically compelling discovery." Schoney v. Memorial Estates, Inc., 790 P.2d 584, 585 (Utah Ct.App.1990) (footnote omitted). And the trial court has "broad discretion" to select among "the full range of options" in deciding which sanction to apply to the violator. Hales v. Oldroyd, 2000 UT App 75, ¶ 18, 999 P.2d 588.

¶ 14 Broadly speaking, "[t]o show the trial court abused its discretion in choosing which sanction to impose, [Comtrol] must show either that the sanction is based on an erroneous conclusion of law or that the sanction lacks an evidentiary basis." Wright v. Wright, 941 P.2d 646, 650 (Utah Ct.App.1997) (citing Morton v. Continental Baking Co., 938 P.2d 271, 274-75 (Utah 1997)). Nevertheless, "[t]he extreme sanction of default or dismissal must be tempered by the careful exercise of judicial discretion to assure that its imposition is merited." W W. & W.B. Gardner, Inc. v. Park W. Vill., Inc., 568 P.2d 734, 738 (Utah 1977) (citing Vac-Air, Inc. v. John Mohr & Sons, Inc., 471 F.2d 231, 234 (7th Cir.1973)).

¶ 15 Here, Comtrol asked for dismissal "or in the alternative move[d] for an order in limine preventing [SFR]'s use at trial of [the Documents]." The trial court chose Comtrol's second option—to impose the lesser sanction-and "[t]he choice of an appropriate discovery sanction is primarily the responsibility...