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Investors Title Insurance Co. v. Herzig

July 13, 2010


Appeal from the District Court of Ward County, Northwest Judicial District, the Honorable David Nelson, Judge.

The opinion of the court was delivered by: VandeWalle, Chief Justice.

On Appeal


[¶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 the judgment 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 any defenses 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 June 2006, 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 [Southeastern] improperly noticed this action to David Herzig through the attorney for Alphild Herzig. Alphild Herzig is not a defendant to this action and her attorney... is not the attorney for the defendant, David Herzig." Alphild Herzig asserted that she had in fact attempted to comply with discovery and that a $750 a day sanction was harsh and unduly prejudicial.

[¶14] The district court entered an order, dated June 26, 2006, granting sanctions against Alphild Herzig contingent on submission of a checklist to the court to provide a daily sanction for each item not provided. In the order, the court also denied Southeastern's request to "join Alphild Herzig in as a Defendant and Judgment Debtor," held Alphild Herzig in contempt of court, and directed an award of attorney fees in the amount of $5,000. On July 13, 2006, the court entered a "Checklist Order" dated July 7, 2006, identifying various items to be produced by Alphild Herzig and ordering her to pay a total of $1,400 in daily sanctions for items not subsequently produced by either July 31 or August 31, 2006.

[¶15] In August 2006, Alphild Herzig, again through her attorney, moved the district court to release the sanctions, filed a brief in support of the motion, and requested a hearing. Southeastern filed a response to Alphild Herzig's motion. In May 2007, the court entered an order denying Alphild Herzig's motion for release from sanctions. The order indicated that although the brief had requested a hearing, none had been scheduled so the court decided the motion on the brief. Also, in May 2007, Alphild Herzig's attorney filed a motion to withdraw as counsel, which the court granted in June 2007.

[¶16] In February 2008, Alphild Herzig's present attorney filed a notice of appearance, which stated that service of further documents on the attorney constitutes service on Alphild Herzig in this action under N.D.R.Civ.P. 5. In June 2008, Alphild Herzig moved for an order dismissing her as a party in the action and vacating the 2004 order joining her as a party and all subsequent orders issued against her, including the 2006 contempt orders. Alphild Herzig argued that the court lacked subject matter jurisdiction to join her, rendering void the order joining her as a party defendant and all subsequent orders entered against her. Southeastern opposed Alphild Herzig's motion to dismiss. However, before the court ruled on the motion, Alphild Herzig died on June 5, 2008, and a statement acknowledging her death was subsequently filed with the court.

B. Supreme Court No. 20090052 ("2008 Case")

[¶17] In January 2008, Southeastern commenced a separate action in the district court against Alphild Herzig, seeking $735,400 that Southeastern alleged was then owing under 2006 contempt orders entered in the 1998 case. In March 2008, Southeastern moved for summary judgment asserting the action was to recover on the debt from the contempt orders in the 1998 case and there was no way for Southeastern to enforce the orders as a money judgment in the 1998 case "as Alphild is not a party therein."

[¶18] Alphild Herzig subsequently answered and moved to dismiss Southeastern's action, arguing the district court lacked subject matter jurisdiction to join her as a defendant in the 1998 case, rendering the orders entered against her in that action, including the 2006 contempt orders, void. Alphild Herzig alternatively claimed that Southeastern failed to state a claim for relief, arguing there was no actual controversy before the court since Southeastern's claims were not ripe for adjudication in a separate action because no final judgment or order had been entered in the 1998 case adjudicating all of the claims, rights, and liabilities of the parties.

[¶19] Alphild Herzig also contested Southeastern's motion for summary judgment, asserting genuine issues of material fact existed regarding whether Alphild Herzig owed any money under the 2006 contempt orders entered in the 1998 case and, if she did owe money, the amount necessary to compensate Southeastern for her purported contempt. In May 2008, Southeastern responded to the motion to dismiss, and Alphild Herzig replied to Southeastern's response. In June 2008, Alphild Herzig's attorney filed a statement with the court that Alphild Herzig had died on June 5, 2008.

C. Substitution Orders in the 1998 and 2008 Cases

[¶20] After Alphild Herzig's death, Southeastern filed motions in August 2008 in both cases, seeking to substitute someone other than the current personal representative of Alphild Herzig's estate, who had initially been Alphild Herzig's attorney in the 1998 case, but had withdrawn in 2007. Southeastern objected to the substitution of the current personal representative for Alphild Herzig, asserting the personal representative had conflicts of interest. The personal representative responded in both cases, reiterating its previously raised grounds to dismiss or, in the alternative, to substitute the personal representative as a defendant in both cases.

[¶21] After a hearing on January 12, 2009, the district court entered orders in both cases, denying the personal representative's motions to dismiss the claims against Alphild Herzig and naming the personal representative for Alphild Herzig's estate as a substitute defendant. Both the personal representative of the estate and Southeastern appealed from the district court orders.

II. Appealability

[¶22] The personal representative argues that the orders substituting the personal representative as a defendant for Alphild Herzig in both the 1998 and 2008 cases are appealable. Southeastern asserts that while these orders are not generally appealable, they should nonetheless be reviewed now.

[¶23] Before we consider the merits of an appeal, we first determine whether this Court has jurisdiction. Brummund v. Brummund, 2008 ND 224, ¶ 4, 758 N.W.2d 735; North Dakota State Elec. Bd. v. Boren, 2008 ND 182, ¶ 4, 756 N.W.2d 784; Sanderson v. Walsh County, 2006 ND 83, ¶ 4, 712 N.W.2d 842. Only judgments and decrees constituting a final judgment and specific orders enumerated by statute are appealable. Mann v. North Dakota Tax Comm'r, 2005 ND 36, ¶ 8, 692 N.W.2d 490; Brummund, at ¶ 5. The right to appeal is governed solely by statute, and we will take notice of the lack of jurisdiction and dismiss an appeal if there is no statutory basis to hear the appeal. Mann, at ¶ 7. This Court utilizes a two-step analysis to evaluate the finality of orders for review:

"First, the order appealed from must meet one of the statutory criteria of appealability set forth in NDCC § 28-27-02. If it does not, our inquiry need go no further and the appeal must be dismissed. If it does, then Rule 54(b), NDRCivP, [if applicable,] must be complied with. If it is not, we are without jurisdiction."

Matter of Estate of Stensland, 1998 ND 37, ¶ 10, 574 N.W.2d 203 (quoting Gast Constr. Co., Inc. v. Brighton P'ship, 422 N.W.2d 389, 390 (N.D.1988) (citations omitted)).

[¶24] The purpose of N.D.R.Civ.P. 54(b) is to facilitate our longstanding policy to discourage piecemeal appeals of multi-claim or multi-party litigation. See Union State Bank v. Woell, 357 N.W.2d 234, 237 (N.D.1984). Under N.D.R.Civ.P. 54(b), the district court is authorized to enter a final judgment adjudicating fewer than all claims of all parties when the court expressly concludes there is no just reason for delay and expressly directs the entry of judgment. See Brummund, at ¶ 5; Choice Fin. Group v. Schellpfeffer, 2005 ND 90, ¶ 7, 696 N.W.2d 504.

[¶25] This consolidated appeal includes appeals from two separate substitution orders in two underlying cases, in which the district court denied dismissal of the cases and ordered substitution of the personal representative of Alphild Herzig's estate. Although the cases are in different procedural postures, in neither case did the parties request certification of the orders under N.D.R.Civ.P. 54(b), nor did the court certify the orders as final. The substitution order in the 1998 case involved post-judgment proceedings supplementary to the execution of the judgment under N.D.C.C. ch. 28-25. In the context of our N.D.R.Civ.P. 54(b) jurisprudence, we conclude post-judgment proceedings are akin to unsupervised probate proceedings for purposes of determining appealability.

[¶26] We have held N.D.R.Civ.P. 54(b) is applicable in probate proceedings. See Matter of Estate of Erickson, 368 N.W.2d 525, 528 (N.D. 1985); First Trust Co. of North Dakota v. Conway, 345 N.W.2d 838, 841-42 (N.D. 1984). Under N.D.C.C. § 30.1-02-06.1, the rules applicable to appeals in equity cases govern the right to appeal probate orders. Matter of Estate of Sorenson, 406 N.W.2d 365 (N.D. 1987). "Once jurisdiction is established under [N.D.C.C. § 28-27-02], Rule 54(b)'s separate requirements must also be met, if applicable. Parties in probate cases bear the duty of requesting a Rule 54(b) order or certification if they seek an appeal." Id. (citation omitted).

[¶27] "[I]n an unsupervised administration, 'each proceeding before the court is independent of any other proceeding involving the same estate,' although 'petitions for formal orders of the court may combine various requests for relief in a single proceeding if the orders sought may be finally granted without delay.'" Matter of Estate of Starcher, 447 N.W.2d 293, 295 (N.D. 1989) (quoting N.D.C.C. § 30.1-12-07). Thus, in an unsupervised administration, finality "requires a concluding order on each petition." Estate of Starcher, 447 N.W.2d at 295; see also Matter of Estate of Stuckle, 427 N.W.2d 96 (N.D. 1988) (Meschke, J., concurring).

[¶28] "In an unsupervised administration, an order determining some, but not all, of one creditor's claims against an estate is not appealable without a Rule 54(b) certification." Estate of Starcher, 447 N.W.2d at 296 (citing Estate of Stuckle, supra); see also Estate of Stensland, 1998 ND 37, ¶ 14, 574 N.W.2d 203 ("Sometimes, an order in an unsupervised probate can be appealable without a N.D.R.Civ.P. 54(b) certification, unless the order decides some, but not all, of one person's disputes in an estate."). In Matter of Starcher, at 296, this Court held that a "workable reconciliation of Rule 54(b) and the 'separate proceeding' provisions of an unsupervised administration is to treat a determination of all of one creditor's claims against an estate as a separate proceeding which does not need a Rule 54(b) certification." (emphasis in original).

[ΒΆ29] In the context of post-judgment proceedings, a judgment creditor may engage in multiple "separate proceedings" in the district court over the life of a judgment, in efforts to pursue discovery and collect on the judgment. Where a judgment creditor or debtor has raised multiple issues relating to a post-judgment proceeding, an appeal from an order resolving some, but not all, of the issues is premature without N.D.R.Civ.P. 54(b) certification. However, where an order resolves all issues in a separate post-judgment proceeding, N.D.R.Civ.P. 54(b) ...

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