Case Title: Weigel v. Weigel

Citation: 467 N.W.2d 277

Docket Number: 89-918

State: iowa

Court: Iowa Supreme Court

Date: 1991-03-20T00:00:00Z

Document:
467 N.W.2d 277 (1991) Eva Mae WEIGEL, Appellant, v. Philip J. WEIGEL, Appellee. Philip J. WEIGEL, Plaintiff, v. IOWA DISTRICT COURT, Defendant. No. 89-918. Supreme Court of Iowa. March 20, 1991. *278 Ann Fitzgibbons, Scalise, Scism, Sandre & Uhl, Des Moines, for appellant. Daniel P. Ernst, Daniel P. Ernst, P.C., Dubuque, for appellee and plaintiff in certiorari, Philip J. Weigel. Wayne A. Norman, Jr., and Dirk J. Hamel, Norman, Gilloon & Wright, Dubuque, for defendant in certiorari, Iowa Dist. Court. Considered by HARRIS, P.J., and LARSON, SCHULTZ, CARTER and LAVORATO, JJ. LARSON, Justice. Eva Weigel and Philip Weigel were divorced in 1985, and their property was divided by the court's decree. Later, Eva discovered evidence which suggested that Philip had understated his assets to the dissolution court, and she sued him for fraud. The district court dismissed the suit. In a later proceeding, the court imposed sanctions against Eva under Iowa Rule of Civil Procedure 80(a), but refused to order them against her attorneys. Eva appealed from the dismissal of her fraud claim and from the order for sanctions. Philip "cross-appealed" from the denial of his request for sanctions against the law firm. Eva's attorneys, Norman, Gilloon, & Wright, were not parties to the underlying district court proceedings. Philip's challenge to the court's refusal to sanction them should not, therefore, be deemed a cross-appeal. As to that part of the court's order regarding sanctions against the attorneys, we will consider the "cross-appeal" as a petition for a writ of certiorari and grant the writ. See Hearity v. Iowa Dist. Court, 440 N.W.2d 860, 862-63 (Iowa 1989). The arguments of Eva's attorneys, who have appeared as "cross-appellees" in the briefs, will be considered on behalf of the district court, defendant in the certiorari action. We affirm the appeal in part and reverse it in part. We annul the writ of certiorari. A. The procedural issues. Eva raises two procedural matters in connection with the district court's denial of her fraud claim: (1) allowing Philip to respond to requests for admission after the thirty-day period allowed by rule of civil procedure *279 127, and (2) denying her motion for a continuance. As to the late response under rule 127, we have held that, while a party has no right to make a late response, it may be permitted by the court. It is a matter of trial court discretion, and we will not reverse in the absence of an abuse of that discretion. Allied Gas & Chem. Co. v. Federated Mut. Ins. Co., 332 N.W.2d 877, 879 (Iowa 1983). Here, the court allowed the tardy response, in part, because of the court's own inability to rule on objections to the requests for admissions in time to avoid a delay in processing the requests. We believe this was a proper exercise of the court's discretion. The second procedural issue involves the denial of Eva's motion for continuance, which she requested to allow her to complete discovery. The court denied the continuance on the ground that Eva had already had adequate time to conduct discovery. Rulings on motions for a continuance are also discretionary with the trial court, and we will interfere only when there has been a clear abuse of that discretion. In re J.L.L., 414 N.W.2d 133, 135 (Iowa 1987); Countryman v. McMains, 381 N.W.2d 638, 640 (Iowa 1986). We believe the court was within its discretion in denying the continuance. B. The merits of the fraud case. The fraud case was tried in equity, and our review is therefore de novo. We do, however, give weight to the fact-finding of the trial court especially concerning the credibility of witnesses. In re Estate of Kiel, 357 N.W.2d 628, 630 (Iowa 1984). The court found that Eva was not credible, partly because of mental problems and partly because of the bitterness she had expressed toward her former husband. Also, Eva's key witness, an accountant who testified that Philip had secreted cattle, was largely discredited at trial by evidence showing that he had failed to account for the normal culling practices in the cattle business and for the natural mortality among cattle. We agree with the district court that Eva failed to establish her claim of fraud. We therefore affirm that part of the judgment. The district court ordered Eva to reimburse Philip for his attorney fees and costs incurred in his defense of the fraud case as a sanction under Iowa Rule of Civil Procedure 80(a). Eva appealed. Philip's "cross-appeal," which we treat as a petition for writ of certiorari, challenges the court's refusal to sanction Eva's law firm as well.[1] Although this rule is quite new to Iowa procedures, Federal Rule of Civil Procedure 11 is similar, and we look to federal cases interpreting rule 11 to aid us in our interpretation of rule 80(a). Mathias v. Glandon, 448 N.W.2d 443, 445 (Iowa 1989). While we have adopted a deferential scope of review in sanction cases, see id. at *280 445, the extent of that discretion has not been a matter of agreement among appellate courts. In many federal courts under rule 11, for example, the appellate court has applied what has been referred to as a "three-tiered" review in which some matters are reviewed under substantial evidence standards and others reviewed de novo. 5A C. Wright & A. Miller, Federal Practice and Procedure § 1337, at 135 (1990) [hereinafter Wright & Miller]. In a recent case, the Supreme Court rejected this three-tiered approach and adopted a broad view of trial court discretion as to all facets of the sanction proceeding. Cooter & Gell v. Hartmarx Corp., 496 U.S. ___, 110 S. Ct. 2447, 110 L. Ed. 2d 359 (1990). In Cooter, the Court went so far as to hold that a district court's conclusions as to the legal sufficiency of the pleading, ordinarily reviewed de novo, is to be reviewed under an abuse-of-discretion standard. Id. at ___, 110 S. Ct. at 2458, 110 L. Ed. 2d at 379. The Court stated: Id. (citations omitted). The Court explained the rationale for this view: Id. (citation omitted). We adopt the broad abuse-of-discretion standard enunciated in Cooter and apply it to all facets of the review. Of course, we will still correct erroneous application of the law in the exercise of that discretion. See id. at ___, 110 S. Ct. at 2459, 110 L. Ed. 2d at 380. Under sanction rules such as rule 80(a), a signer must certify: (1) that he has read the petition, (2) that he has concluded after reasonable inquiry into the facts and law that there is adequate support for the filing, and (3) that he is acting without any improper motive. Iowa R.Civ.P. 80(a); Wright & Miller § 1335, at 57-58. These are referred to as the "reading, inquiry, and purpose elements." Id. at 58; see also Iowa Code § 619.19 (1989) (adopts similar certification requirements for parties as well as attorneys). The "inquiry" element requires that the signer Wright & Miller § 1335, at 59 (footnotes omitted). The "reasonableness" of the attorney's inquiry into the facts and law Century Prods., Inc. v. Sutter, 837 F.2d 247, 250-51 (6th Cir.1988); see also Cooter, 496 U.S. at ___, 110 S. Ct. at 2460, 110 L. Ed. 2d at 381. The reasonableness of the attorney's judgment must be viewed as of the time the paper in question was filed, not with hindsight gained through hearing the evidence at trial. Mathias, 448 N.W.2d at 447; see also Century Prods., Inc., 837 *281 F.2d at 251; Golden Eagle Distrib. Corp. v. Burroughs Corp., 801 F.2d 1531, 1536-37 (9th Cir.1986); Fed.R.Civ.P. 11 advisory committee's note, 97 F.R.D. 165, 169 (1983); Wright & Miller § 1335, at 61. The conduct of counsel is measured by an objective, not a subjective, standard. Mathias, 448 N.W.2d at 445; Wright & Miller § 1335, at 62. The test is "reasonableness under the circumstances," Golden Eagle Distrib. Corp., 801 F.2d at 1536; advisory committee's note, 97 F.R.D. at 198, and the standard to be used is that of a reasonably competent attorney admitted to practice before the district court. Zaldivar v. City of Los Angeles, 780 F.2d 823, 830 (9th Cir.1986). At the time Eva's fraud suit was filed, her attorneys' inquiry had revealed the following facts. Eva believed, through her own experience with Philip's cattle business, that Philip had understated his assets in the dissolution case by "hiding" cattle. And, after the dissolution, Eva found evidence concealed in various places around the farm and under the mat in the trunk of a car which supported that suspicion. An accountant reviewed Philip's cattle records and advised Eva and her attorneys that Philip had understated his assets by several hundred thousand dollars. Eva's attorneys contend that this was a reasonable factual basis for filing the fraud suit, and the district court apparently agreed. We believe that, under the principles discussed above, this was a proper exercise of the court's discretion. As to the attorneys' inquiry into the legal basis for the suit, Philip contends that the prior dissolution hearing had disposed of Eva's claim concerning Philip's alleged hiding of assets and that issue was therefore res judicata. The attorneys responded that the fraud case was not precluded by the prior dissolution action because, under Iowa Rule of Civil Procedure 252(b), a final judgment may be modified if it was procured by fraud. See In re Marriage of Heneman, 396 N.W.2d 797, 800 (Iowa App. 1986). The trial court did not express a view on the preclusion issue but apparently rejected it. It stated: Under this reasoning, the court denied sanctions against Eva's attorneys, and we believe this also was within its discretion. The court did, however, order sanctions against Eva herself. The court's rationale in applying sanctions against Eva is briefly stated in its sanction order: In the court's earlier ruling in the fraud case, it expressed a similar observation: *282 None of our cases interpreting rule 80(a) have dealt with sanctions imposed upon clients. Although Hearity, 440 N.W.2d at 862, mentioned an initial claim for sanctions against a client, none was ordered by the district court, and we did not discuss that issue on appeal. One of the primary goals of rule 80(a) and similar rules is to maintain the high degree of professionalism in the practice of law. See Wright & Miller § 1334, at 56 (rule "reminds attorneys that their role as an advocate does not supersede their role as an officer of the court"). It has also been noted that one purpose of federal rule 11 is "to deter conduct that does not meet a certain level of professionalism...." Id. at 57. These expressions of principle suggest that sanction rules such as rule 80(a) are aimed primarily at attorney conduct. At this point, we should note substantial differences between federal rule 11 and Iowa rule 80(a) as they respect sanctions against parties. Federal rule 11 prescribes duties of "signers" to investigate the facts and the law in connection with proposed actions, while Iowa rule 80(a) imposes such duties only on "counsel." While Iowa Code section 619.19 (1989) imposes objective duties of investigation upon clients as well as counsel, that section has not been implicated in this case. The differences between Iowa's rule 80(a) and federal rule 11 are illustrated by the recent Supreme Court case of Business Guides, Inc. v. Chromatic Communications Enters., Inc., ___ U.S. ___, ___, 111 S. Ct. 922, 929, 112 L. Ed. 2d 1140, 1153 (1991), which held that "signers" who are required by federal rule 11 to make legal and factual inquiries prior to filing, include clients as well as counsel. Rule 80(a), of course, imposes the duties of investigation only upon "counsel." As already noted, the district court ruled, in denying sanctions against Eva's attorneys, that the fraud suit was justified under the law and the facts. Nevertheless, the court sanctioned Eva. But may a party be sanctioned for filing a proper lawsuit because her motives were improper? It has been noted that Wright & Miller § 1335, at 88 (footnotes omitted). In Zaldivar, 780 F.2d at 830, the court discussed the question of sanctioning a client who had brought a proper lawsuit. In that case, the district court had imposed sanctions on the client because it found the client had brought the action for improper motives. The court of appeals reversed on the ground that "the subjective intent of the pleader or movant to file a meritorious document is of no moment. The standard is reasonableness." Id. A similar rule has been followed in other cases. See, e.g., Jennings v. Joshua Indep. School Dist., 877 F.2d 313, 320 (5th Cir.1989) (complaint which meets "well-grounded" requirement of rule 11 cannot be the subject of sanctions regardless of plaintiff's subjective intent); National Ass'n of Gov't Employees, Inc. v. National Fed'n of Fed. Employees, 844 F.2d 216, 223-24 (5th Cir.1988) (same). We believe this rule is sound. As a practical matter, if the rule were otherwise, actions such as dissolutions would provide endless work for courts in sorting out the sanctions possible in such emotionally charged and often acrimonious actions. While a party who intentionally misleads an attorney or who knows for other reasons that the action is improper may be subjected to sanctions, see Wright & Miller § 1335, at 88, there is no showing that Eva believed any of the evidence was false or that the action was otherwise improper. We believe that sanctioning Eva solely for her improper motives in filing the lawsuit was an erroneous application of the law, Cooter, 496 U.S. at ___, 110 S. Ct. at 2459, 110 L. Ed. 2d at 380. Accordingly, we reverse the district court's entry of judgment *283 against Eva for the attorney fees and costs under rule 80(a) and remand for dismissal of the action as it pertains to sanctions. As to the certiorari action challenging the refusal of the court to sanction Eva's attorneys, we annul the writ. The cost of printing the appendix, which we find to be overinclusive, shall be paid by Eva pursuant to Iowa Rule of Appellate Procedure 15(b). The balance of the costs shall be paid one-half each by Eva and Philip. APPEAL AFFIRMED IN PART AND REVERSED IN PART; WRIT ANNULLED. [1] While it is not raised as an issue in this case, we note that, under Federal Rule of Civil Procedure 11, sanctions may not be applied against the signer's firm, but only the individual signing attorney. Pavelic & LeFlore v. Marvel Entertainment Group, 493 U.S. 120, ___, 110 S. Ct. 456, 460, 107 L. Ed. 2d 438, 445 (1989).