Sleepy Holdings LLC v. Mountain West Title

2016 UT App 62THE UTAH COURT OF APPEALS
SLEEPY HOLDINGS LLC,
Appellant,
v.
MOUNTAIN WEST TITLE AND TIM HERRERA,
Appellees.
Opinion
No. 20140937-CA
Filed March 31, 2016
Fourth District Court, Provo Department
The Honorable Lynn W. Davis
The Honorable Samuel D. McVey
No. 100403357
Jeffrey J. Goulder and Paul A. Christensen, Attorneys
for Appellant
Korey D. Rasmussen and Lindsay K. German,
Attorneys for Appellees
JUDGE J. FREDERIC VOROS JR. authored this Opinion, in which
JUDGE STEPHEN L. ROTH and JUSTICE JOHN A. PEARCE concurred.1
VOROS, Judge:
¶1 Sleepy Holdings LLC challenges the district court’s ruling
excluding untimely disclosed evidence and granting summary
judgment. We affirm.
1. Justice John A. Pearce began his work on this case as a
member of the Utah Court of Appeals. He became a member of
the Utah Supreme Court thereafter and completed his work on
the case sitting by special assignment as authorized by law. See
generally Utah R. Jud. Admin. 3-108(3).
Sleepy Holdings v. Mountain West Title
BACKGROUND2
¶2 In 2007 and 2008, The Lakes at Sleepy Ridge, Inc. and
Cambridge Partners, LLC (collectively, the Lakes) received two
construction loans. Each loan required the Lakes to subordinate
a prior trust deed in favor of the new loans. Mountain West
Title, the Lakes’ escrow agent, recorded trust deeds on the two
construction loans, but failed to record the subordinations. In the
ensuing dispute over the subordinations, the Lakes defaulted on
both construction loans. With the loans in default, the Lakes
could not provide marketable title to potential buyers. One such
buyer had contracted with the Lakes to purchase twenty lots for
a total of $2 million. When the Lakes could not deliver clear title,
the buyer canceled the sale.
¶3 The Lakes assigned its interest in the project to Sleepy
Holdings. In October 2010, Sleepy Holdings sued Mountain
West Title and its owner, Tim Herrera (collectively, Mountain
West), for breach of contract, breach of fiduciary duty, and
negligence. The complaint described the failed $2 million sale
under the heading ‚General Allegations.‛ Sleepy Holdings filed
initial disclosures as required by rule 26(a) of the Utah Rules of
Civil Procedure and the case management order. The initial
disclosures stated that ‚damages are described in the complaint‛
and that ‚additional work will be done in assessing and
computing such damages.‛ The initial disclosures did not
otherwise describe the failed $2 million sale.
¶4 Sleepy Holdings amended its complaint twice in 2011.
The district court then entered a new scheduling order, which
listed June 30, 2012 as the discovery cutoff date. A month after
2. When reviewing a district court’s rulings on a summary
judgment motion, we recite the facts and fair inferences in the
light most favorable to the nonmoving party. Poteet v. White,
2006 UT 63, ¶ 7, 147 P.3d 439.
20140937-CA 2 2016 UT App 62Sleepy Holdings v. Mountain West Title
the discovery cutoff date, Sleepy Holdings’ attorneys
determined that they would need to withdraw from the case.
Five months later, Sleepy Holdings’ new counsel entered an
appearance. In August 2013, more than a year after the discovery
cutoff date, Sleepy Holdings filed its first supplemental
disclosure. It presented damages theories, including what it
called the lost $2 million sale.
¶5 Mountain West moved to strike Sleepy Holdings’ first
supplemental disclosure and ‚to exclude damages not calculated
by the end of the fact discovery cutoff.‛ Mountain West argued
that Sleepy Holdings had filed its supplemental disclosure more
than a year after the June 30, 2012 discovery cutoff date. The
district court struck Sleepy Holdings’ first supplemental
disclosure. Citing Bodell Construction Co. v. Robbins, 2009 UT 52,
215 P.3d 933, the district court reasoned, ‚The Utah Supreme
Court has determined supplemental disclosures regarding
damages filed a mere three weeks after the fact discovery
deadline are prejudicial. This Court can hardly find that
supplemental disclosures filed over a year or more than fifty-two
weeks [after the deadline] are timely.‛ And it found that ‚no
good cause exists to permit the untimely supplemental
disclosures.‛
¶6 Shortly after Sleepy Holdings filed its first supplemental
disclosure, Mountain West moved for summary judgment on the
ground that Sleepy Holdings had failed to produce evidence of
the assignment from the Lakes to Sleepy Holdings. In response
to this motion, Sleepy Holdings filed a second supplemental
disclosure naming witnesses able to testify about the
assignment. Mountain West moved to strike Sleepy Holdings’
second supplemental disclosure as untimely. The court struck
the disclosure.
¶7 In June 2014, the district court judge recused himself and
a new judge stepped in. Sleepy Holdings moved the court to
reconsider and reverse the rulings striking both the first and
second supplemental disclosures. Sleepy Holdings argued that
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‚these Rulings prevent *Sleepy Holdings+ from presenting any
evidence of damages, and from offering affidavit and trial
testimony from three witnesses.‛ The court denied the motion,
stating that ‚*a+ll disclosures should have been made when
due.‛ The court concluded that the original judge ‚properly
exercised his discretion and followed the law in a thorough
ruling on this matter. There is no need to second guess him
when he got it right.‛
¶8 After the district court denied the motion for
reconsideration, Mountain West moved for summary judgment,
arguing that the ‚case should be dismissed due to the absence of
damages.‛ The court granted summary judgment. Sleepy
Holdings timely appeals.
ISSUES AND STANDARD OF REVIEW
¶9 Sleepy Holdings first contends that the district court
abused its discretion when it imposed the sanction of ‚excluding
evidence of damages and then entering summary judgment
against Sleepy Holdings.‛ We review the district court’s
exclusion of initial disclosures for an abuse of discretion. See
Townhomes at Pointe Meadows Owners Ass’n v. Pointe Meadows
Townhomes, LLC, 2014 UT App 52, ¶ 13, 329 P.3d 815.
In applying the abuse of discretion standard to the
district court’s imposition of a particular sanction,
we give the district court a great deal of latitude in
determining the most fair and efficient manner to
conduct court business because the district court
judge is in the best position to evaluate the status
of his [or her] cases, as well as the attitudes,
motives, and credibility of the parties.
Bodell Constr. Co. v. Robbins, 2009 UT 52, ¶ 35, 215 P.3d 933(alteration in original) (citation and internal quotation marks
omitted).
20140937-CA 4 2016 UT App 62Sleepy Holdings v. Mountain West Title
¶10 Sleepy Holdings also contends that the court abused its
discretion by barring a witness from testifying about the
assignment from the Lakes to Sleepy Holdings. This witness was
arguably necessary to establish that Sleepy Holdings had
standing to sue. However, our resolution of Sleepy Holdings’
first claim on appeal moots this second claim.
ANALYSIS
¶11 Sleepy Holdings challenges the district court’s sanctions
order excluding evidence of lost sale damages. Sleepy Holdings
contends that its complaint constituted a sufficient disclosure of
its damages computation and therefore that its disclosure of
damages was timely. But even if it was not, Sleepy Holdings
contends, the district court abused its discretion by imposing the
sanction of barring Sleepy Holdings from presenting any
evidence of its damages.
A. Sleepy Holdings did not timely disclose its damages.
¶12 Rule 26 of the Utah Rules of Civil Procedure requires
litigants to make initial disclosures of certain fact witnesses,
documents, and other information. See Utah R. Civ. P. 26(a)(1)(C)
(2010).3 And rule 26(e)(1) requires a party ‚to supplement at
appropriate intervals [initial] disclosures if the party learns that
in some material respect the information disclosed is incomplete
or incorrect and if the additional or corrective information has
3. Rules 26 and 37 of the Utah Rules of Civil Procedure were
amended in 2011; however, these amendments apply only to
cases filed on or after November 1, 2011, and are therefore not
applicable to this case. See Utah R. Civ. P. 1 advisory committee’s
note to 2011 amendment; see also Townhomes at Pointe Meadows
Owners Ass’n v. Pointe Meadows Townhomes, LLC, 2014 UT App
52, ¶ 13 n.2, 329 P.3d 815. Accordingly, we cite to the 2010
versions of these rules throughout this opinion.
20140937-CA 5 2016 UT App 62Sleepy Holdings v. Mountain West Title
not otherwise been made known to the other parties during the
discovery process or in writing.‛ Id. R. 26(e)(1). Finally, the rule
provides that ‚a party shall, without awaiting a discovery
request, provide to other parties . . . a computation of any
category of damages claimed by the disclosing party.‛ Id.R. 26(a)(1)(C).
¶13 ‚A plaintiff is required to prove both the fact of damages
and the amount of damages.‛ Stevens-Henager Coll. v. Eagle Gate
Coll., 2011 UT App 37, ¶ 16, 248 P.3d 1025. ‚To establish the fact
of damages, ‘*t+he evidence . . . must give rise to a reasonable
probability that the plaintiff suffered damage.’‛ Id. (alteration
and omission in original) (quoting Atkin Wright & Miller v.
Mountain States Tel. & Tel. Co., 709 P.2d 330, 336 (Utah 1985)).
‚While the standard for determining the amount of damages is
not so exacting as the standard for proving the fact of damages,
there still must be evidence that rises above speculation and
provides a reasonable, even though not necessarily precise,
estimate of damages.‛ TruGreen Cos., LLC, v. Mower Bros., Inc.,
2008 UT 81, ¶ 15, 199 P.3d 929 (citation and internal quotation
marks omitted).
¶14 Even if a plaintiff cannot complete its computation of
damages before future events take place, ‚the fact of
damages . . . and the method for calculating the amount of
damages‛ must be apparent in initial disclosures. Stevens-
Henager, 2011 UT App 37, ¶ 22; see also Bodell Constr. Co. v.
Robbins, 2009 UT 52, ¶ 36, 215 P.3d 933. If ‚factual contentions
about the amount of damages . . . require further investigation or
discovery,‛ the party must ‚undertake that investigation as early
in the litigation process as is practicable.‛ Stevens-Henager, 2011
UT App 37, ¶ 24. And investigation and discovery must be
completed according to the schedule set by the district court. See
id.; see also Bodell, 2009 UT 52, ¶¶ 36–37.
¶15 Here, Sleepy Holdings’ initial disclosures stated that
‚damages are described in the complaint.‛ Sleepy Holdings’
complaint alleged that ‚the Lakes entered into a contract . . .
20140937-CA 6 2016 UT App 62Sleepy Holdings v. Mountain West Title
providing for the sale of twenty (20) lots for the purchase price
of $2,000,000. The circumstances created by defendants’ failure
to obtain and record the subordination documents prevented
said sale from moving forward causing further damage to
plaintiffs.‛ Sleepy Holdings maintains that this statement
constitutes an adequate computation of damages under rule 26.
Sleepy Holdings argues that an ‚arithmetic computation‛ is
unnecessary because ‚$2 million minus 0 equals $2 million.‛
¶16 This argument assumes that the contract price constitutes
the measure of damages for the loss of a bargain. But the
contract price represents only one element of the damage
calculation: ‚Loss of bargain damages are calculated by taking
the difference between the contract price of the property and the
value of the property at forfeiture.‛ Glezos v. Frontier Invs., 896
P.2d 1230, 1235 (Utah Ct. App. 1995) (emphasis omitted). ‚A
property’s sale price is an indication, though inconclusive, of its
fair market value. When there is no decrease in value between
the contract price and the fair market value at forfeiture, the
seller may not recover loss of bargain damages.‛ Id. (citation
omitted). Subject to the qualifications mentioned in the cases
quoted above, this is the sort of ‚computation of . . . damages‛
referred to in rule 26 for a case of this type. See, e.g., Bodell, 2009
UT 52, ¶ 36 (discussing computation where plaintiff ‚disclosed
that its damages ‘constitute the funds advanced, together with
interest at the legal rate, less the payment received’‛).
¶17 Moreover, while Sleepy Holdings’ complaint describes
the $2 million sale, it does not identify the failed sale as damages
or offer a computation or method of calculating the damages as
required by law. We therefore agree with the district court that
Sleepy Holdings’ complaint and initial disclosures failed to
satisfy the requirements of rule 26.
¶18 Finally, Sleepy Holdings did not supplement its
disclosures within the discovery period. Its initial disclosures
stated, ‚It is anticipated that as discovery and litigation proceed,
that additional work will be done in assessing and computing
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such damages and that the ultimate determination and
computation thereof will require expert testimony. Additional
appropriate supplementation of this part of these disclosures
will be made.‛ As explained above, if ‚factual contentions about
the amount of damages . . . require further investigation or
discovery,‛ the party must ‚undertake that investigation as early
in the litigation process as is practicable.‛ Stevens-Henager Coll. v.
Eagle Gate Coll., 2011 UT App 37, ¶ 24, 248 P.3d 1025. And that
investigation must be completed according to the schedule set
by the district court. See id.; see also Bodell, 2009 UT 52, ¶¶ 36–37.
But Sleepy Holdings did not supplement its initial disclosures
until August 2013, more than a year after the close of discovery.
Those supplemental disclosures, like the complaint, include no
computation of damages as required by law. But even if they
did, we see no abuse of discretion in the district court’s ruling
those supplemental disclosures untimely. They indisputably
were.
B. The sanctions provision of rule 26, not rule 16, applies.
¶19 Sleepy Holdings contends that, even if its supplemental
disclosures were untimely, ‚the sanctions imposed were an
abuse of discretion.‛ The district court ruled that Sleepy
Holdings violated rule 26(a)(1)(C) and imposed the mandatory
sanctions under rule 37(f). Sleepy Holdings argues that the
district court should instead have applied the discretionary
sanctions found in rule 16(d).
¶20 Rule 16 governs pretrial conferences, scheduling, and
management conferences. See Utah R. Civ. P. 16. Rule 16(d) ‚is
the source of the district court’s authority to sanction a party for
producing untimely discovery under a scheduling order.‛
Coroles v. State, 2015 UT 48, ¶ 20, 349 P.3d 739. The sanctions for
rule 16 violations appear in rule 37(b)(2). If a party fails to obey
an order entered under rule 16(b) or to obey a discovery order,
‚unless the court finds that the failure was substantially
justified,‛ the court ‚may‛ impose a sanction, including
‚prohibit[ing] the disobedient party from supporting or
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opposing designated claims or defenses or from introducing
designated matters in evidence.‛ Utah R. Civ. P. 37(b)(2) (2010);
see also Coroles, 2015 UT 48, ¶ 19. The key word here is may: ‚rule
16(d) leaves the decision of whether to sanction a party to the
broad discretion of the district court.‛ Coroles, 2015 UT 48, ¶ 22.
¶21 The district court did not rely on rule 16, but on rule 26,
which governs initial disclosures and discovery. Rules 26(a) and
26(e) require the parties to make initial disclosures and to
supplement those disclosures as necessary. The sanctions for
rule 26(a) and 26(e) violations appear in rule 37(f). When a party
fails to timely make or supplement initial disclosures, rule 37(f)
mandates that the district court exclude the untimely disclosure
unless the failure to disclose is harmless or the non-disclosing
party shows good cause for its non-disclosure:
If a party fails to disclose a witness, document, or
other material as required by Rule 26(a) or Rule
26(e)(1), . . . that party shall not be permitted to use
the witness, document or other material at any
hearing unless the failure to disclose is harmless or
the party shows good cause for the failure to
disclose.
Utah R. Civ. P. 37(f) (2010). ‚The sanction of exclusion is
automatic and mandatory unless the sanctioned party can show
that the violation of rule 26(a) was either justified or harmless.‛
Dahl v. Harrison, 2011 UT App 389, ¶ 22, 265 P.3d 139; see also
Bodell Constr. Co. v. Robbins, 2009 UT 52, ¶ 35, 215 P.3d 933 (citing
Utah R. Civ. P. 37(f)).
¶22 We agree with the district court that rule 26 applies here.
As explained above, the court sanctioned Sleepy Holdings for
failure to make and supplement the initial disclosures required
by rules 26(a) and 26(e). The district court’s ruling repeatedly
cites rule 26; it never mentions rule 16.
20140937-CA 9 2016 UT App 62Sleepy Holdings v. Mountain West Title
¶23 Sleepy Holdings urges us to follow Coroles. But Coroles
did not interpret—or even mention—rule 26. The plaintiff in
Coroles ‚violated the district court’s scheduling order.‛ Coroles,
2015 UT 48, ¶ 21. ‚Rule 16‛—not rule 26—‚authorizes a district
court to set discovery deadlines.‛ Id. ¶ 23. Coroles did not
purport to address what sanctions apply when a party fails to
timely make or timely supplement initial disclosures under rules
26(a) or 26(e); in fact, it never mentions initial disclosures or rule
26. Thus, Coroles does not control here.
C. The rule 26 violation was not harmless.
¶24 As explained above, the district court did not abuse its
discretion in ruling that Sleepy Holdings failed to disclose its
damages computation. Further, the district court properly ruled
that this rule 26 violation implicated the sanctions found in rule
37(f). ‚Accordingly, the proper inquiry is whether the district
court abused its discretion in determining that the *plaintiff’s+
failure to disclose was not harmless and that good cause did not
excuse its failure.‛ Townhomes at Pointe Meadows Owners Ass’n v.
Pointe Meadows Townhomes, LLC, 2014 UT App 52, ¶ 14, 329 P.3d
815.
¶25 On appeal, Sleepy Holdings does not contend that the
district court erred in failing to find that good cause excused its
failure to disclose. But Sleepy Holdings does contend that its
failure to disclose did not harm Mountain West, or at least that
Mountain West could have mitigated any harm. Specifically,
Sleepy Holdings points to the fact that Mountain West, after
filing its motion for sanctions, struck the scheduled deposition of
the witness Sleepy Holdings had designated pursuant to rule
30(b)(6) of the Utah Rules of Civil Procedure.
¶26 Pursuant to rule 37(f), the district court ruled that Sleepy
Holdings had failed to disclose its damages computation as
required by rule 26, that Sleeping Holdings had not shown good
cause for the failure to disclose, and that the violation was not
harmless. Accordingly, the court concluded that Sleepy
20140937-CA 10 2016 UT App 62Sleepy Holdings v. Mountain West Title
Holdings would not be permitted to use any damages
computation at trial. In so ruling, the court relied on the Utah
Supreme Court’s decision in Bodell Construction Co. v. Robbins,
2009 UT 52, 215 P.3d 933. In Bodell, the supreme court held that
the district court did not abuse its discretion in finding that the
plaintiff’s new damage theories disclosed three weeks after the
end of fact discovery were untimely. The court also held that
permitting the plaintiff to prove damages at trial would
prejudice the defendant, who could no longer conduct discovery
to rebut those damage theories. See id. ¶ 37. The district court
here stated that if the supreme court ‚has determined
supplemental disclosures regarding damages filed a mere three
weeks after the fact discovery deadline are prejudicial[, t]his
Court can hardly find that supplemental disclosures filed over a
year or more than fifty-two weeks are timely.‛
¶27 Sleepy Holdings has not shown an abuse of discretion on
the part of the district court. First, Sleepy Holdings’ argument
assumes that the opportunity to depose a knowledgeable
witness after the discovery cutoff mitigates any harm caused by
a plaintiff’s failure to disclose its damages computation early in
the litigation. We do not believe this proposition is self-evident.
True, Mountain West might, as Sleepy Holdings suggests, have
simply proceeded with the deposition. But Sleepy Holdings has
not proffered what testimony would have been given.
Consequently, we cannot know how much detail Sleepy
Holdings would have supplied for its damages computation—
after all, Sleepy Holdings maintains on appeal that the $2 million
figure alleged in its complaint constitutes an adequate
computation of damages. Furthermore, had the deposition
suggested additional avenues of discovery, Mountain West
would be at a disadvantage in exploring them, as the discovery
cutoff had by that time passed. And, as in Bodell, ‚*t+hough the
district court could have reopened fact discovery to allow
[further discovery on the damages issue], the court was not
obligated to do so.‛ See Bodell, 2009 UT 52, ¶ 37. This is especially
true, as the district court here noted, considering that the
20140937-CA 11 2016 UT App 62Sleepy Holdings v. Mountain West Title
discovery cutoff had passed a year earlier, not a mere three
weeks as in Bodell.
¶28 ‚Trial courts have broad discretion to manage *their+
docket[s] and set firm deadlines for motion practice.‛ State v.
Gonzalez, 2015 UT 10, ¶ 48, 345 P.3d 1168 (alterations in original)
(citation and internal quotation marks omitted). The district
court’s sanctions ruling, while perhaps not the only permissible
one under the circumstances, nevertheless fell well within the
limits of its discretion. In short, the court did not act
unreasonably in ruling that a deposition of a rule 30(b)(6)
witness giving unproffered testimony a year after the passing of
the discovery cutoff did not necessarily mitigate the harm of
Sleepy Holdings’ failure to make or supplement an initial
disclosure of its damages computation. We therefore affirm the
district court’s sanctions order.
¶29 Our affirmance of the district court’s sanctions order
prevents Sleepy Holdings from proceeding to trial. Accordingly,
our ruling renders the second issue on appeal, concerning the
admissibility of certain potential trial testimony, moot.
CONCLUSION
¶30 The judgment of the district court is affirmed.
20140937-CA 12 2016 UT App 62