Steven D. Johnson, Plaintiff and Appellant
Sandra Mark, as Personal Representative of the Estate of Jeanne H. Johnson, Deceased; Sandra Mark; Stuart Johnson; and Scott Johnson, Defendants Sandra Mark, as Personal Representative of the Estate of Jeanne H. Johnson, Deceased; Sandra Mark; Stuart Johnson, Appellees
Appeal from the District Court of Cass County, East Central Judicial District, the Honorable Steven L. Marquart, Judge.
David A. Garaas, DeMores Office Park, for plaintiff and appellant.
Christopher M. McShane, for defendants and appellees.
[¶ 1] Steven D. Johnson appeals from an order compelling discovery of his federal income tax returns, and from a judgment canceling a contract for deed and dismissing his action for specific performance against Sandra Mark, individually and as personal representative of the estate of Jeanne H. Johnson, and Stuart Johnson and Scott Johnson. We conclude the district court did not abuse its discretion in compelling discovery, in canceling the contract for deed, and in dismissing the action for specific performance. We affirm.
[¶ 2] Jeanne Johnson and her husband farmed in Cass County and had three children: Steven Johnson, Sandra Mark and Stuart Johnson. Scott Johnson is Steven Johnson's son. In the early 1980s, Jeanne Johnson and her husband sold a quarter section of land to Steven Johnson. Jeanne Johnson tracked his payment for the property in a ledger book. Steven Johnson subsequently mortgaged this property and failed to make the payments on the promissory note, resulting in foreclosure. Stuart Johnson then bought that quarter section of land.
[¶ 3] In 1992 Steven Johnson began making payments to Jeanne Johnson for a second quarter section of her property, and she also tracked the payments in her ledger book. In the meantime, Steven Johnson continued to experience financial difficulties and he received loans from Jeanne Johnson, which she entered in the ledger book. In 2008, Jeanne Johnson, with Steven Johnson's knowledge, granted a mortgage on the second quarter section of land to obtain a debt consolidation loan.
[¶ 4] Jeanne Johnson died in 2010, and her will was submitted to the district court for probate. The will, executed in 2008, gave Scott Johnson the farmstead on the second quarter section of land Steven Johnson began making payments for in 1992. The remainder of the estate was given to Mark, Stuart Johnson, and Scott Johnson in equal portions. Steven Johnson filed a claim against the estate, seeking delivery of the title to the second quarter section of property and asserting he had entered into a contract for deed with Jeanne Johnson in 1992. After the personal representative denied the claim, Steven Johnson brought this action seeking specific performance of the contract for deed and delivery of a personal representative's deed to the property. He alleged the contract for deed was based on a series of entries contained on two pages of Jeanne Johnson's ledger book. The defendants denied the existence of a contract for deed and asserted Steven Johnson farmed the property and lived on the farmhouse located on the property under a rental agreement with Jeanne Johnson.
[¶ 5] The defendants moved to compel discovery, seeking Steven Johnson's tax returns for a number of years along with supporting documentation. Steven Johnson responded by moving to disqualify the law firm representing the defendants from participating in the case. The district court granted the motion to compel and denied the motion to disqualify. Steven Johnson moved for summary judgment, asserting a contract for deed existed as a matter of law and he had fully complied with its terms. The defendants also moved for summary judgment, contending, under the statute of frauds, no valid contract for deed existed as a matter of law. Less than a week before the scheduled trial, the court ruled a valid contract for deed existed as a matter of law because the notations in the ledger book identified the subject property, the purchase price of $114, 000, the interest rates, and the final payment date of 2003. The court, however, declined to rule as a matter of law that Steven Johnson had made all of the required payments under the contract for deed, concluding he "is not entitled to the deed unless he fulfilled the terms of the contract, i.e., paying the purchase price no later than 2003." Following the trial, the court found Steven Johnson had failed to pay the property taxes required under the contract and failed to make full payment by the end of 2003. The court canceled the contract for deed without granting Steven Johnson redemption rights and dismissed his action for specific performance.
[¶ 6] The district court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27-05-06. Steven Johnson's appeal is timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, §§ 2 and 6, and N.D.C.C. § 28-27-01.
[¶ 7] Steven Johnson does not challenge the denial of his motion to disqualify the law firm representing the defendants, but argues the district court erred in compelling discovery of his tax returns and related documentation, because they are privileged communications exempt from discovery.
[¶ 8] A district court has broad discretion regarding the scope of discovery, and its discovery decisions will not be reversed on appeal absent an abuse of discretion. Lynch v. New Pub. Sch. Dist. No. 8, 2012 ND 88, ¶ 23, 816 N.W.2d 53. A court abuses its discretion only when it acts in an arbitrary, unreasonable or unconscionable manner, or when its decision is not the product of a rational mental process leading to a reasoned determination. Leno v. K & L Homes, Inc., 2011 ND 171, ¶ 23, 803 N.W.2d 543.
[¶ 9] Steven Johnson relies on 26 U.S.C. § 6103(a) and N.D.C.C. § 57-38-57 to support the argument that his state and federal tax returns and the underlying information are confidential and exempt from discovery. Almost 50 years ago, however, this Court ruled these statutes do not turn state or federal tax returns into "privileged communications, " and tax returns are subject to discovery. See Schriock v. Schriock, 128 N.W.2d 852, 863 (N.D. 1964). Steven Johnson's remaining arguments to support the proposition that these documents constitute privileged communications are without merit.
[¶ 10] Rule 26(b)(1), N.D.R.Civ.P., provides: "For good cause, the court may order the discovery of any matter relevant to the subject matter involved in the action. Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence." The district court reasoned:
The remaining question then is whether the tax returns appear reasonably calculated to lead to the discovery of admissible evidence. There is an issue of whether the payments that Plaintiff made were Contract for Deed payments or were lease payments. The tax returns may very well shed light on this. At the very least, these tax returns, as well as any financial information that was ...