Court Opinion

ID: 2816097
Source: CourtListenerOpinion
Date Created: 2015-07-09 20:33:03.799226+00
Date Added: 2024-06-11T12:32:18.331228
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                  No. 14-0572
                               Filed July 9, 2015

FOGE INVESTMENTS, L.L.C. and AJR PEAKVIEW, INC.,
     Plaintiffs-Appellants,

vs.

FIRST NATIONAL BANK OF WAHOO, NEBRASKA,
     Defendant-Appellee.
________________________________________________________________

      Appeal from the Iowa District Court for Pottawattamie County, Kathleen A.

Kilnoski, Judge.

      FoGe Investments, LLC, appeals from the district court’s decree in which it

entered sanctions with regard to the counterclaim of First National Bank of

Wahoo, Nebraska. AFFIRMED.

      John O. Haraldson of Sellers and Haraldson, Des Moines, for appellants.

      Thomas O. Ashby of Baird Holm, L.L.P., Omaha, Nebraska, for appellee.

      Heard by Vogel, P.J., and Potterfield and Mullins, JJ.
                                           2

VOGEL, P.J.

       FoGe Investments, LLC, and AJR Peakview, Inc. (together “FoGe”),

appeal from the district court’s decree granting sanctions against it and its

counsel, which included a judgment in favor First National Bank of Wahoo,

Nebraska (First National), as well as monetary sanctions. We conclude that, due

to FoGe’s lack of compliance with the rules of civil procedure, the court did not

abuse its discretion when issuing the sanctions. Consequently, we affirm the

decree of the district court.1

I. Factual and Procedural Background

       Marvin Thomason is the managing member of FoGe and the president of

AJR Peakview. Thomason, through FoGe, purchased property located in Sioux

City, Iowa, and borrowed funds under a 2002 promissory note and secured by a

mortgage to First National. First National is a limited liability company, with its

principal place of business and incorporated in Nebraska.

       In late 2012, FoGe filed several actions against First National in Nebraska

small claims court, based on the underlying note. FoGe was not represented by

counsel, but rather, Thomason attempted to represent the corporations by

proceeding “pro se.”      These claims were consolidated, transferred to district

court, then dismissed for failure to prosecute due to Thomason’s failure to secure

legal counsel. The Nebraska Court of Appeals likewise dismissed Thomason’s

subsequent appeal for want of representation by licensed legal counsel. In May

1
  Following oral arguments, First National filed a motion for our court to take judicial
notice of FoGe’s bankruptcy proceedings, following the close of the record in the current
proceedings. Finding these filings not relevant to the issue before us on appeal, we
deny First National’s motion.
                                         3

2013 Thomason, on behalf of FoGe, filed four claims against First National in

small claims court in Iowa. First National moved for consolidation of the claims

and the case was transferred to district court.

       On June 5, 2013, First National filed an answer and counterclaim to

FoGe’s petition.    The counterclaim requested the court enter a declaratory

judgment ordering FoGe to pay First National’s attorney fees. Thomason, still

attempting to proceed without counsel, filed an answer to First National’s

counterclaim disputing the merits. First National then moved to strike the answer

and compel Thomason to obtain an attorney, pursuant to Hawkeye Bank and

Trust National Assoc. v. Baugh Family Farms, Inc., 463 N.W.2d 22, 25 (Iowa

1990). The district court sustained the motion on July 15, 2013, ordering FoGe

to obtain counsel within thirty days, and further stating “all other motions are

overruled,” thereby denying the motion to strike FoGe’s answer. Attorney Aaron

Rodenburg entered an appearance on behalf of FoGe on September 17, 2013,

but then moved to withdraw on November 25, citing “irreconcilable breakdown of

communication between counsel and Plaintiffs.” An order granting the motion

was filed on December 2. The court further ordered FoGe to obtain new counsel

by December 30, extending the deadline to file any amended pleadings to that

date. On December 29, FoGe obtained the representation of attorney Joseph

Fernandez.

       Through its attorney, FoGe filed a motion captioned: “Application for

Continuance of Trial Date and Trial-Related Deadlines” on January 2, 2014.

Within this motion, FoGe stated:
                                          4

      [G]iven Dr. Ashby’s concession that Wahoo doesn’t incur attorney
      fees, costs or expenses, instead just passing them off onto FoGe
      based on dubious authority, Wahoo should not be heard to
      complain about the attorney fees, costs and expenses it has
      allegedly incurred thus far because thus far Wahoo has treated its
      attorney fees as FoGe’s.

On January 13, FoGe filed a dismissal without prejudice of the consolidated

claims against First National.   On January 14, First National filed a “Notice

Concerning Counterclaim” stating:

      [N]otice of its intent to seek a decree on its Counterclaim. Plaintiffs
      have not responsively pleaded, by a licensed attorney, to the
      Counterclaim. Defendant believes Plaintiffs are in default of the
      Counterclaim and that there [sic] “pro se” Answer to Defendant’s
      Defenses filed on or about June 14, 2013, does not remove such
      default.

FoGe responded by filing the following:

             COME NOW the counterclaim defendants, FoGe
      Investments, L.L.C. and AJR Peakview, Inc., and for their notice
      regarding counterclaim plaintiff, First National Bank of Wahoo,
      Nebraska’s notice concerning counterclaim (and request for
      telephonic hearing), state as follows:
             No.

      The pretrial conference had been previously set by an order filed June 19,

2013. On February 3, 2014, the pretrial conference proceeded as scheduled.

Neither a representative of FoGe nor FoGe’s counsel appeared, though the court

attempted to call counsel. First National was present and requested the court

enter a favorable judgment on its counterclaim and further requested the court

sanction FoGe. FoGe’s counsel returned the district court’s phone call later in

the afternoon.   According to counsel, the court explained to him what had

transpired at the pretrial conference and that the court intended to enter
                                            5

judgment in favor of First National. FoGe’s counsel claimed he had missed the

pretrial as he had been meeting with his client, preparing for trial.

       An affidavit of attorney fees was filed on February 6, 2014, in which

Thomas Ashby, attorney for First National, stated his law firm had incurred

attorney fees in the amount of $26,340.57 defending against FoGe’s many law

suits, all pertaining to the same note and mortgage instruments.                Also on

February 6, the district court entered an order finding: (1) FoGe had failed to file

an answer to First National’s counterclaim; (2) judgment was warranted on First

National’s attorney-fee counterclaim “under the circumstances”; (3) the award of

attorney fees in the amount of $26,340.57 was reasonable; (4) FoGe did not

appear at the pretrial conference and this absence was not substantially justified;

and (5) sanctions in the amount of $500 both to FoGe’s attorney and FoGe were

warranted pursuant to Iowa Rule of Civil Procedure 1.602(5).

       FoGe filed a motion to amend or enlarge or set aside default judgment.2

First National also filed a motion for order nun pro tunc to correct a scrivener’s

error. In January and February 2014, following the motion to amend or enlarge,

several bluntly-worded emails were sent to First National’s counsel from FoGe’s

2
  This motion contained the following: “The court completely abdicated her role as an
Iowa trial judge by assigning it, and got back an ugly pig, which didn’t get prettier when
the lipstick [sic] added the lipstick that is her signature.”
                                            6

counsel.3 These were entered into the record. On March 12, 2014, the district

court heard both motions. In an order filed March 12, 2014, the court denied

FoGe’s motion and granted First National’s motion, after which it entered its

substituted decree to correct the scrivener’s error. The substituted decree did

not contain a finding that FoGe failed to file an answer to First National’s

counterclaim. FoGe appeals.4

II. Standard of Review

       To the extent we are reviewing the interpretation of our rules of civil

procedure, our review is for correction of errors at law. Jack v. P & A Farms,

Ltd., 822 N.W.2d 511, 514–15 (Iowa 2012). However, to the extent the district

court entered judgment in favor of First National as a sanction against FoGe, its

discretion is more narrow. See In re Marriage of Williams, 525 N.W.2d 126, 129

3
   The following are excerpts from the emails:
                 Hey Kids: Peace be to you. I can’t believe that when the Judge
         hands you this case, you’re so incompetent that you can’t even get a 4-
         page slam-dunk decree written correctly. For your assistants’ reading
         pleasure, attached please find my motion to amend or enlarge, together
         with attachments. In the meantime, just to keep yourselves in a fit mental
         condition, maybe you can stare at a wall or do something intellectually
         challenging like that.
                 In other words, he sent me what I told him not to send me: a sh**
         sandwich. I didn’t eat it. Plus, I didn’t get many of the questions I asked
         answered. Moreover, the deadline for eating his solid waste was three
         (3) days ago.
                 Indeed this is just you and me girls talking . . . . If that is not clear
         to you then let me put this in terms that even you cannot misconstrue:
         Answer the questions with substantive answers, without bullsh**, then
         we’ll talk . . . . So, answer these questions fully and completely to my
         satisfaction, or not. If not, I’m happy to walk out of the courtroom in
         Council Bluffs with your hairy a** in my brief case.
4
   The notice of appeal was filed pro se. An order was issued stating that, because the
appellant was a corporation, it needed to be represented by an attorney. First National
filed a motion to dismiss, after which an appearance by an attorney was filed on behalf
of FoGe. Our supreme court then denied First National’s motion to dismiss and allowed
the appeal to proceed. We further note that substantial compliance is all that is required
to render the notice of appeal adequate. See State v. Birch, 306 N.W.2d 781, 782–83
(Iowa 1981).
                                            7

(Iowa 1999) (stating a default judgment as a sanction may only be entered due to

“a party’s noncompliance with a court’s discovery orders [because] of willfulness,

fault, or bad faith”); see also Suckow v. Boone State Bank & Trust Co., 314

N.W.2d 421, 425 (Iowa 1982) (noting “the range of discretion is narrowed” when

the sanction is an adverse judgment). We review the imposition of sanctions for

an abuse of discretion. See Breitback v. Christensen, 541 N.W.2d 840, 845

(Iowa 1995).

III. Sanctions

       A. Grant of First National’s Counterclaim

       FoGe first argues the district court improperly ruled favorably on First

National’s counterclaim, asserting the court primarily based its judgment on

FoGe’s failure to appear at the pretrial conference.          FoGe also disputes the

merits of the counterclaim.5 At oral arguments, FoGe further asserted the court

erred when it dismissed its claim with prejudice.6

       Iowa Rule of Civil Procedure 1.602(5) states the district court may enter

sanctions if a party or its attorney:

       [F]ails to obey a scheduling or pretrial order, or if no appearance is
       made on behalf of a party at a scheduling or pretrial conference . . .
       the court, upon motion or the court’s own initiative, may make such
       orders with regard thereto as are just, and among others any of the
       orders provided in rule 1.517(2)(b)(2)–(4). In lieu of or in addition to

5
  FoGe further asserts the court “erroneously abdicated the work to one side in a
dispute” when adopting the proposed order of First National with regard to the default
judgment and sanctions. However, the proposed order is not in the record, and
therefore FoGe has waived this argument, given we have no ability to compare the
orders and therefore reach the merits. See generally Channon v. United Parcel Serv.,
Inc., 629 N.W.2d 835, 866 (Iowa 2001).
6
  This claim was only raised at oral arguments. The district court made no specific ruling
on this issue, and neither FoGe’s brief nor reply brief contained argument with regard to
the court’s purported ruling. Consequently, this issue is waived. See Iowa R. App. P.
6.903(2)(g)(3).
                                           8

       any other sanction, the court shall require the party or the attorney
       representing that party or both to pay the reasonable expenses
       incurred because of any noncompliance with this rule, including
       attorney’s fees, unless the court finds that the noncompliance was
       substantially justified or that other circumstances make an award of
       expenses unjust.

As referenced in the above paragraph, rule 1.517(2)(b)(2)–(4) also governs the

court’s ability to issue its choice of sanctions. It states:

              If a party or an officer, director, or managing agent of a party
       or a person designated under rule 1.707(5) to testify on behalf of a
       party fails to obey an order to provide or permit discovery, including
       an order made under rule 1.515 or rule 1.517(1), the court in which
       the action is pending may make such orders in regard to the failure
       as are just, and among others the following:
              ....
              (2) An order refusing to allow the disobedient party to
       support or oppose designated claims or defenses, or prohibiting
       such party from introducing designated matters in evidence.
              (3) An order striking out pleadings or parts thereof, or staying
       further proceedings until the order is obeyed, or dismissing the
       action or proceeding or any part thereof, or rendering a judgment
       by default against the disobedient party.
              (4) In lieu of any of the foregoing orders or in addition
       thereto, an order treating as a contempt of court the failure to obey
       any orders except an order to submit to a physical or mental
       examination.

Iowa R. Civ. P. 1.517(2)(b)(2)–(4) (emphasis added).

       Within the parameters of these rules, the district court’s entry of a default

judgment as a sanction was proper. FoGe was given the opportunity to protest

the imposition of the court’s sanctions in the hearing on the motion to amend,

enlarge, or set aside the default judgment. Nothing that was made part of that

record convinced the court FoGe’s conduct should be excused such that the

sanctions should be lifted or amended. Specifically, the court stated:

             Well, counsel, in order to overcome the fact that plaintiff did
       not appear at the pretrial conference, I would have to find that there
       was excusable neglect, mistake, etcetera; and I do not find that
                                        9

      there was excusable neglect or mistake in regard to the failure to
      appear for that pretrial conference
              Counsel knew that that conference was set for February 3rd.
      It had been set for months. Counsel knew that the motion to
      continue the trial had been overruled, that we were going to trial
      February 13th. Attendance at the pretrial conference was important
      and should have happened.
              Had this been the first and only time that there had been
      delay, then the sanction of granting the counterclaim might be
      extreme. But the Court has discretion at the point when plaintiff
      failed to appear for that pretrial conference. The sanctions could
      include and did up to granting judgment on the counterclaim at that
      time.
              In my review of the file, I considered the defense, if any,
      raised in the counterclaim. I found that the counterclaim had merit,
      and I granted the counterclaim as a sanction for failure to appear at
      the pretrial conference. This was not a default judgment. It was a
      discretionary entry of judgment against the litigant for failure to
      appear.

      Additionally, as part of its written ruling, the district court held FoGe and

counsel should be sanctioned because: “Plaintiffs and plaintiffs’ counsel failed to

appear at the pretrial conference.    The absence of plaintiffs and/or plaintiffs’

counsel was not substantially justified and this court is not aware of other

mitigating circumstances for the failure to appear.” Imposing the sanction of the

default judgment was well within the court’s discretion based on this conduct,

given FoGe failed to obey a pretrial order without good cause. See Iowa R. Civ.

P. 1.602(5). Moreover, the rules also permit the specific sanction of the default

judgment.   See Iowa R. Civ. P. 1.517(2)(b)(3).     Consequently, we affirm the

district court’s order granting, as a sanction against FoGe, First National’s

counterclaim.

      B. Monetary Sanctions

      FoGe’s final argument asserts the district court abused its discretion when

ordering monetary sanctions against FoGe’s counsel and FoGe. Specifically, it
                                          10

argues its one-time absence at the pretrial conference did not warrant the

ordered sanctions.

       We do not agree.      As noted previously, Iowa Rule of Civil Procedure

1.602(5) allows the district court to impose sanctions when a party is absent from

a pretrial conference.    FoGe does not dispute that it did not appear at the

February 3 conference and the district court did not find the absence either

“substantially justified” or supported by “other mitigating circumstances.”

Furthermore, rule 1.602(5) allows sanctions against a party as well as the party’s

attorney. See id. (“In lieu of or in addition to any other sanction, the court shall

require the party or the attorney representing that party or both to pay the

reasonable expenses incurred (emphasis added)). Consequently, under Rule

1.602(5), the district court was well within its discretion when sanctioning FoGe

and counsel for failure to appear.7

       FoGe further disputes the adequacy of First National’s affidavit

establishing the requested attorney fees, as well as the jurisdictional authority

under our case law to enter such a sanction.

       As an initial matter, FoGe is correct that an affidavit of attorney fees must

be filed so the district court may determine the proper amount of attorney fees.

See Van Sloun, 778 N.W.2d at 183 (“[W]e have consistently held that such an

affidavit is a prerequisite to taxation of attorney fees as cost” and the lack of an
7
  We further note that one of the goals of sanctions “is to maintain a high degree of
professionalism in the practice of law.” See Christenson, 541 N.W.2d at 845. Contrary
to FoGe’s version of the facts, the record is replete with instances of FoGe’s
unprofessional conduct including, but not limited to, the expletives used in the email
communications with opposing counsel, the condescending tone of all communications
with the court and opposing counsel, and the pursuit of several meritless claims. Given
FoGe’s misconduct, we cannot say the district court abused its discretion when
sanctioning FoGe and its counsel. See id.
                                          11

affidavit “limits [the district court’s] authority to tax attorney’s fees to those cases

where the affidavit has been filed.” (Internal citation omitted)). However, that

prerequisite has been met here. First National’s counsel filed an affidavit on

February 6, 2014, which is present in the record. The district court noted this in

its order and further stated it found the calculation of these fees to be reasonable.

Consequently, FoGe’s argument in this regard is without merit.

       Furthermore, we do not agree with FoGe’s contention the district court did

not have the jurisdictional authority to order FoGe to pay attorney fees incurred

while First National was litigating FoGe’s suit in Nebraska. A district court has

jurisdiction to rule on declaratory judgments when its jurisdiction has been

properly invoked. See City of Des Moines v. Des Moines Police Bargaining Unit

Ass’n, 360 N.W.2d 729, 730 (Iowa 1985). Here, the district court had jurisdiction

to enter a ruling on the declaratory judgment, specifically with regard to whether

FoGe was responsible for paying attorney fees. See id. at 730–31. This was a

ruling in which the district court reviewed the record and found First National had

incurred $26,340.57 in attorney fees. Though some of these expenses occurred

while it was defending FoGe’s suits in Nebraska, it was all related to the

consolidated law suits on the loan documents, over which the district court had

obtained jurisdiction. See id. at 730. Consequently, the court properly ordered

FoGe to pay all attorney fees associated with First National’s defense against

FoGe’s suits as part of the imposition of sanctions.

       For these reasons, we affirm the district court’s decree imposing sanctions

against FoGe and its counsel.

       AFFIRMED.