DA 09-0069

IN THE SUPREME COURT OF THE STATE OF MONTANA

2009 MT 400

IN RE THE MARRIAGE OF

JILL M. LUNDSTROM,

Petitioner and Appellant,

and

DIETER SCHOLZ,

Respondent and Appellee.

APPEAL FROM: District Court of the Twentieth Judicial District,

In and For the County of Sanders, Cause No. DR 06-25

Honorable C.B. McNeil, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Michael G. Alterowitz, Alterowitz Law Offices, Missoula, Montana

For Appellee:

Lance Jasper and Katie Olson; Jasper, Smith, Olson, P.C.; Missoula,Montana

Submitted on Briefs: August 26, 2009

Decided: November 24, 2009

Filed:

__________________________________________

Clerk

November 24 2009
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Justice John Warner delivered the Opinion of the Court.

¶1 The Twentieth Judicial District Court, Sanders County, entered a decree dissolving

the marriage of Jill Lundstrom and Dieter Scholz and distributing their marital estate.

Lundstrom appeals from the distribution of the marital estate.

¶2 The issue presented is whether the District Court erred in distributing the marital

estate as a sanction for discovery abuse, without making findings of fact and conclusions of

law considering the requirements of § 40-4-202, MCA.

¶3 Jill Lundstrom and Dieter Scholz were married in September 2004. Lundstrom

petitioned for dissolution of the marriage in March 2006. In September 2006, the District

Court entered a Pretrial Order which required each of the parties to file a list of the property

comprising the marital estate together with the claimed value ofthat property and aproposed

distribution no later than November 24, 2006. This case then commenced an odyssey of

proceedings in the justice and district courts, seeking and resisting petitions for protective

orders; seeking sanctionsfor violations of those orders; petitioning for contempt; appealing

to thisCourt (In re Marriage of Lundstrom v. Scholz, 2007 MT 304, 340 Mont. 83, 172 P.3d

588); substituting counsel for both parties; and substituting the district judge. Finally, in

May 2008, the District Court held a hearing to determine why neither party responded to its

Pretrial Order. At the hearing, Lundstrom’s counsel moved to again postpone the filing of

the required lists. After considering the matter, the District Court gave the parties until July

22, 2008, to respond to its Pretrial Order and scheduled a hearing for that date.
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¶4 At the hearing in July, neither Lundstrom nor her counsel was present. Scholz’s

counsel informed the court he could not respond as required by the Pretrial Order because,

even though he made several requests directly to Lundstrom’s counsel,she had not answered

his discovery requests. The District Court then ordered all discovery to be completed by

December 2008.

¶5 Three weekslater, Scholz again made discovery requests. Again, Lundstromdid not

respond. Scholz’s counsel notified Lundstrom’s counsel she had missed the deadline to

respond to discovery, and advised that if she did not do so in two weeks he would file a

motion to compel. Lundstrom’s counsel did not respond and, as promised, Scholz’s counsel

filed a motion to compel pursuant to M. R. Civ. P. 37(b)(2) and 16(f).

¶6 The District Court granted additional time for Lundstromto respond to the motion to

compel. She did not respond by the extended deadline. The District Court then granted

Scholz’s motion to compel and ordered Lundstrom to respond by November 7, 2008. She

again failed to respond. On November 13, Scholz moved for sanctions against Lundstrom

for her failure to respond to his discovery requests and the District Court’s orders.

Lundstrom did not respond to the motion for sanctions.

¶7 On November 20, 2008, Scholz filed his proposed list of property comprising the

marital estate, his proposed valuation of the property, and his proposed distribution of the

property. He filed a supplemented list on November 26, 2008.

¶8 On December 12, 2008, the District Court granted Scholz’s motion forsanctions. The

sanctions provided, inter alia, that default judgment was entered in favor of Scholz and that
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the property of the parties would be divided and distributed as proposed by him. A hearing

to dissolve the marriage was scheduled for December 23, 2008.

¶9 On December 19, 2008, Lundstrom moved to allow her counsel to withdraw and the

court granted that motion on December 22. Lundstromalso filed a pro se motion to set aside

the default judgment. She attached a statement that her counsel had not informed her of the

pending orders and motionsleading to the default judgment. Lundstromessentially claimed

her attorney had not communicated with her about the progression of her case and

“abandoned” her. She further alleged that Scholz had misrepresented his ownership interest

in real property and business ventures which were a part of the marital estate.

¶10 Lundstrom appeared pro se at the December 23 dissolution hearing and moved to

continue the hearing to allow time for her to retain new counsel. The District Court granted

her motion to continue and the following exchange appears in the record:

COURT: Be sure, when you’re talking to your [new] attorney, that he

or she recognizes you’ve got to do something by the 13th of

January, including filing an appearance and communicating

with [Scholz]’s attorney. Do you understand that?

LUNDSTROM: Yes, sir.

COURT: . . . You’ve got to do something by January 13th. Do you

understand that?

LUNDSTROM: Yes, sir, I do.

COURT: You’re getting extra time because you had an attorney that

blew it.

. . .

COURT: You’ve got to get [an attorney] and have that person get
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their appearance filed. They’ve got to file something

showing a notice ofsubstitution of attorney. They’ve got to

file an appearance on your behalf. And you better tell them

that their nose will be held to the grindstone because there

has already been two years worth of delays. No further

delays will be tolerated. You’ve got to get somebody who is

willing to grab a hold of this file and get with it, get things

done.

LUNDSTROM: So my newest attorney has to file an appearance on my

behalf before January 13th?

COURT: Yes.

LUNDSTROM: And?

COURT: Communicate with [Scholz]’s lawyer. . . . It will be on an

accelerated schedule, as far as your new lawyer is

concerned, because the other side has been delayed for two

years and no further delays will be tolerated. Do you

understand that?

LUNDSTROM: Yes, sir.

¶11 At the hearing on January 13, 2009, Lundstromappeared without counsel and Scholz

appeared with counsel. The District Court stated that although the clerk of court had

received a “faxed” copy of a letter fromthe lawyer that now represents Lundstrom, the letter

was unsigned and not filed, thus no counsel had filed an appearance for Lundstrom as

ordered on December 23, 2008. Scholz testified that the marriage was irretrievably broken

and he wished the marital estate distributed asset forth in his counsel’s proposed findings of

fact and conclusions of law. Scholz did not testify that his proposed distribution of the

marital estate was equitable. Lundstrom, after asserting that her present counsel had agreed

to represent her, declined the District Court’s invitation to cross-examine Scholz.
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¶12 The District Court denied Lundstrom’s motion to set aside her default, found that the

marriage was irretrievably broken, and adopted Scholz’s proposed findings of fact,

conclusions of law and decree distributing the marital estate. The District Court took no

evidence on whether the distribution of the marital estate as proposed by Scholz was

equitable and made no finding that the distribution of the marital estate was equitable.

¶13 In the afternoon of January 13, 2009, the day the District Court entered its decree,

counsel for Lundstrom filed by telefax transmission an appearance and a motion to alter or

amend the judgment. Hard copies of these documents were filed on January 15, 2009. The

motion to alter or amend the judgment set off another round of pleadings and responses.

However, Lundstromwithdrew the motion before the District Court had a chance to rule on

it. Lundstrom instead chose to file a notice of appeal and a request for a stay of the

judgment. The parties briefed the motion and the District Court granted the stay pending

appeal.

¶14 Lundstrom appeals the District Court’s distribution of the marital estate as

inequitable, asserting its findings were clearly erroneous and it did not adhere to the

requirements of § 40-4-202, MCA. Lundstromcontendsthe District Court erred in adopting

Scholz’s proposed property distribution verbatim as a sanction for her violations of the

court’s orders.

¶15 This Court reviews a district court’s imposition of sanctions for an abuse of

discretion. Stevenson v. Felco Industries, Inc., 2009 MT 299, ¶ 17, 352 Mont. 303, 216 P.3d

763 (imposing sanctions for failure to comply with scheduling order under M. R. Civ.P.16);
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Menholt v. State, Dept. of Revenue, 2009 MT 38, ¶ 6, 349 Mont. 239, 203 P.3d 792

(imposing sanctions for discovery violations under M. R. Civ. P. 37(d)).

¶16 M. R. Civ. P. 37(b)(2) allowsthe court to impose sanctionsfor failure to comply with

an order to compel discovery responses. M. R. Civ. P. 16(f) allows the imposition of

sanctions for a failure to follow a scheduling order. This Court generally affords a district

court deference in the imposition ofsanctions because the trial judge is in the best position to

know if a party callously disregards the rights of their opponents and other litigants seeking

their day in court. Menholt, ¶ 6 (citingXu v. McLaughlin Research Inst. for Biomedical Sci.,

Inc., 2005 MT 209, ¶ 17, 328 Mont. 232, 119 P.3d 100). The trial judge is also in the best

position to determine what sanction is appropriate. Xu, ¶ 17. We have held undersomewhat

similar circumstances that a default judgment may be an appropriate sanction for a party’s

refusal to comply with discovery. In re Marriage of Massey, 225 Mont. 394, 398, 732 P.2d

1341, 1344 (1987) (followed in Xu, ¶ 20).

¶17 Lundstrom failed to adhere to both the Scheduling Order and the Order to Compel.

When the District Court generously gave Lundstrom an additional three weeks to retain

counsel, it warned her twice it would not tolerate any further delays. Again, Lundstrom

failed to retain counsel and instead asked for yet another delay. The District Court did not

abuse its discretion in imposing sanctions on Lundstrom.

¶18 Nonetheless, the imposition of sanctions does not negate the requirement of M. R.

Civ. P. 52(a) to enter specific findings of fact justifying the distribution of a marital estate.

Nor does the imposition ofsanctions relieve a district court of its obligation to comply with
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the requirements of § 40-4-202, MCA, to equitably apportion between the parties the

property and assets belonging to either or both and to considerseveral factorsin distributing

a marital estate equitably. A district court must make findings of fact and enter conclusions

oflaw which reflect why it distributed a marital estate in a certain manner and these findings

must not be clearly erroneous. See In re Marriage of Swanner-Renner, 2009 MT 186, ¶ 36,

351 Mont. 62, 209 P.3d 238.

¶19 On its face, the property distribution in this case appearsto be inequitable. By way of

example: a home on Rock Creek Road worth $340,000 was distributed to Scholz while

Lundstrom was ordered to pay a debt of $260,000 secured by a mortgage on the home;

Scholz was distributed a tract ofland with a value of $565,000 while Lundstromwas ordered

to pay a debt of $90,000 attached to such property; and, Scholz was distributed an ice

business worth $397,503 while Lundstromwas ordered to pay $90,000 debt associated with

the business. While it is within the realm of possibility that it is equitable for Scholz to

receive the properties and Lundstrom be required to pay the debts associated with them,

nothing in the record supports such a distribution.

¶20 The imposition of sanctions against Lundstrom appears justified. However, we

conclude that the District Court’s findings of fact underlying the distribution of the marital

estate are clearly erroneous because they are not based on substantial evidence in the record.
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¶21 The judgment of the District Court is reversed. This matter is remanded for

reconsideration of appropriate sanctions and an equitable distribution of the marital estate

consistent with the requirements of § 40-4-202, MCA.

/S/ JOHN WARNER

We Concur:

/S/ MIKE McGRATH

/S/ JAMES C. NELSON

/S/ W. WILLIAM LEAPHART

/S/ BRIAN MORRIS