Wasserburger v. Consolidated Management Corp.

WASSERBURGER, Wayne South d/b/a Construction, Trenching

ern & Hills Appellee,

Plaintiff and

CONSOLIDATED MANAGEMENT

CORPORATION, Defendant, T.

John Garnishee and (# 17884), Appellant

Recovery Associates, Investment

Partnership, Intervenor (# 17908).

Appellant

Nos.

Supreme Court of South Dakota.

Argued Jan.

Decided June Jay

Donald R. Shultz and C. Shultz of Lynn, Jackson, Lebrun, P.C., Shultz & Rap- City, plaintiff id appellee. Stanton,

Thomas W. William May, A. Costello, Porter, Hill, Heisterkamp & Bush- nell, Rapid City, appellant Hughes. Gary Richards,

Lester Nies and R. Rich- ards, Hood, Nies, Brady Spearfish, & appellant Recovery Inv. Associates.

SABERS, Justice. procedural history facts and appear in Wasserburger v. Manage Consolidated Corp., (S.D.1990) ment 459 N.W.2d 561 I). (Wasserburger Additional facts and procedural history appear throughout.

Following this court’s reversal in Was- I, serburger $350,000.00 found the deposit John T. (Hughes) trust account on absolutely unconditionally debtor, judgment Consolidated Man- agement (CMC). Corporation however, longer no of these funds. Prior to this court’s reversal Wasserburger bankruptcy filing I and the CMC, Hughes paid these funds over to Recovery (RIA). Investment Associates appeal, Hughes See I. On following or RIA raise the issues. Whether the trial court: subject jurisdiction lacked matter bankruptcy

based on the filing of CMC. denying Hughes’ erred in and RIA’s

motions for a new trial or notwithstanding the verdict based on Homer, insufficiency Inc., sup- of the evidence to B ros. B.R. (D.C.1984)(citations omitted). port verdict. in refusing 3. erred to conduct an evi- (of Nothing legislative history sec- dentiary hearing to determine wheth- 362) tion counsels that the automatic Hughes person- or should er be stay be a should invoked in manner liable ally for advance would the interest of judgment. party[.] some only third Section 362 will stay against debtor, prop- actions or adjudging 4. erred as a matter of law in erty Clearly, of the debtor’s estate. Hughes personally judg- liable on the [Wasserburger] proceeding against is not ment. debtor, but proceeding rather is by refusing 5. abused its discretion against party.” addition, “some third pleadings allow to amend his [Wasserburger] pro- cannot be to be said assert against cross-claim ceeding against property “the of the es- properly 6. denied RIA’s motions to tate.” compel by various admissions Was- (Citation omitted.) Id. serburger. properly 7. denied RIA’s motions in li- 362(a) stay The automatic of does § prevent Wasserburger mine to from not party, afford as a any third calling various witnesses at trial and protection Wasserburger’s from efforts to introducing various documents and collect the sums is entitled to receive exhibits at trial. as a result of breach properly responsibilities garnishee denied RIA’s motion of for as defendant.

continuance of the trial. Id. at provides: 923. SDCL 21-18-12 except We affirm all issues which we Prom the time of the service of the reverse and remand. upon summons he shall plaintiff stand to the liable to the Subject amount Matter Jurisdiction property, credits, of money, and ef- September claims that the possession fects in his or under his con- Chapter 1989 bankruptcy filing of defendant, belonging trol to the or in CMC, the resulting stay automatic of interested, which he shall be to the ex- 362(a)1, deprived U.S.C. the circuit § right therein, tent of or interest therefore, jurisdiction court of the ver of all due or to debts become due to the dict of the is void and unenforceable. defendant, except may such as law protection provided however, § exempt from execution. applies only bankrupt to the debtor and his estate and does stay against statute, actions Under subject this solvent codefendants. personal United States v. Alten the claim of liability to Wasser- provides part: (3) § 1. 11 U.S.C. any property act to obtain of (a) Except provided (b) property of the estate or of in subsection from the estate or of section, petition this 302, estate; filed section to exercise control over of the operates of stay, this title (4) create, as a any perfect, act to or enforce — entities, applicable to all estate; any against property lien of the (1) continuation, the commencement or in- (5) create, any perfect, act to or enforce cluding cess, employment pro- issuance or against property any of the debtor lien to the administrative, judicial, aof or other extent such lien secures claim that proceeding against action the debtor that arose before commencement the case could was or have been commenced before title; under this the commencement of case under this collect, assess, (6) any act to or recover a title, or to recover a claim the debtor claim the debtor that arose before the that arose before the commencement of the title; commencement the case under this title; case under this (7) owing the setoff of debt to the debt- (2) enforcement, against the debtor or or that arose the commencement of estate, against property judgment or a against any the case under this title claim obtained before the commencement of the against the debtor[.] title; case under this Albers, dinating engineer, Rhett stated judgment burger payment for “lawyer John filing CMC. despite bankruptcy affidavit the DWNR officials that CMC officials told the Evidence Insufficiency deposited sum of CMC had RIA claim that the Hughes to pay with John the creditors denying their motions court erred Dakota.” See Wasserbur CMC South notwithstanding the verdict judgment I, ger 459 N.W.2d at 562 additional insufficiency based for new trial representation by concerning details this jury verdict. support the evidence CMC. ruling on a reviewing a trial court’s Accordingly, there is evidence notwithstanding the finding agreement that a the trust was not verdict, must evidence this court view therefore, belonged the to valid and funds verdict, the light a most favorable to record, say From this cannot we CMC. party giving prevailing benefit the trial court abused its discretion in resolving in its favor every inference and grant a trial refusing to new on this issue. Then, without every controverted fact. evidence, if we must decide weighing the Evidentiary Hearing 3. Denial of sup- would have there is evidence which jury returned its verdict After ported or a verdict. did money posses in his Hughes had CMC Bankest, Valentine, v. 451 N.W.2d Inc. money sion, requested a (citations omitted); 732, (S.D.1990) 735-36 against Hughes RIA. Be judgment Dakota, 374 Sabag v. Continental South final would enter a fore the court 349, (S.D.1985). granting or 355 par requested briefing judgment, it trial, denying a the trial court has new (1) including: issues wheth ties on several power and its order discretionary broad could enter a er court a will not be disturbed absent clear show by the circuit Hughes who was ordered Bankwest, ing 451 of abuse of discretion. RIA, (2) to deliver the to court (citation omitted); N.W.2d at 737 Simmons en money judgment could be a whether 631, Falls, 374 N.W.2d City v. Sioux complained who was not against RIA tered (S.D.1985). to “The trial court best able time, Hughes At this against in action. judge product a verdict is the whether hearing to the evidentiary an requested Supreme passion prejudice, liability or RIA to Wasserbur- of himself except will decision Court not disturb its motion, his deter The court denied ger. Simmons, 374 N.W.2d for clear abuse.” evidentiary hearing mining post-trial a omitted). (citation at 632 necessary. After the court held not was Hughes represented to Was- never judgment, for the Hughes personally liable Department of serburger, Dakota South indicating of Proof Hughes filed an Offer (DWNR), or Water and Natural Resources present to at the he intended the evidence special prosecutor any to Fuller that such hearing. requested place agreement trust until after he was Hughes claims the trial court erred was with the summons served hearing deter- evidentiary denying an requests, Despite repeated 1989. court’s liability. He contends that the mine agree signed purported copy of the trust evidentiary hearing “deprived an denial of Fuller, was never furnished to Was- ment significant property without due of a serburger, Judge [him] Moses at the hear not, of process does process of law.” “Due tempo ing Wasserburger’s motion for a course, every defendant in require that the because, rary restraining according hearing actually on the case civil Hughes presented jury, evidence Connecticut, 401 U.S. merits.” Boddie agree signed lost trust or “misfiled” 371, 378, L.Ed.2d (16) 91 S.Ct. approximately sixteen ment (1971). any to cite Hughes has failed Additionally, representatives months. two CMC, authority requiring post-trial applicable secretary-treasurer, Johnie T. Patton, manager hearing. permit- was project evidentiary and the and coor- . liability belong- his argue ted to and brief the issue of his under control court, but, ing most under SDCL 21-18-12.2 [CMC]” liability already part, determined Pleadings Amendment of as discussed in sections SDCL 21-18-12 Against RIA proof, In his offer of judgment, Before the of final specify failed to new or additional evi- filed a plead motion amend his hearing. requiring dence ings to assert a cross-claim evidentiary an hear- Whether to conduct was that RIA The basis had ing question was a within the discretion of “fully participated proceedings in the the trial court and this court will over- designation improper Interve- an of discre- turn its decision absent abuse enrichment, “unjust nor” and conversion tion. has not shown abuse of proposed similar basis.” The cross-claim that discretion. that, theory premised on the personal liability liable, adjudged personally RIA should Hughes claims court that the trial over in indemnity be liable be erred, law, finding him as a matter Hughes had cause released funds personally severally judg on the and liable 24, following July RIA the 1989 order. Wasserburger. ment in favor of Hughes’ motion was denied. argues personally cannot that he be held motion, denying Hughes’ the trial garnished liable because he disbursed the held Wasserburger court that because did pursuant Judge funds to order. Davis’ make RIA a under not defendant SDCL 21- Although Judge ordered Circuit Davis 18-35, Hughes remedy. was without a RIA, the to release funds to clearly error. 21-18-44 SDCL 15-26A-3, Wasserburger SDCL had the provides garnishment that in proceedings, right appeal the order. In order to provisions relating proceed- “all of law himself, protect prior releasing the issue; ings in civil including actions at ex- funds, Hughes provided should have Was- parties, amination the amendments and serburger filing with written notice of the proceedings relief default or taken If, thereafter, Wasserburger the order. appeals provisions enforcing and and all for appeal sixty failed to within the days, time judgments, applicable shall be thereto.” appeal for expired would have and 21-18-44. SDCL court further could have released the funds to RIA with noted the time for to amend out incurring personal liability. 15- SDCL his answer cross-claim RIA had 26A-6. “A notice of long passed. since This conclusion gives party power to a running to set 15-6-15(b) also in error. SDCL allows an may time after which his adversary time, pleadings any amendment “at appeal[.]” Kallstrom v. Marshall Bever judgment[.]” even It after is evident that ages, Inc., 647, (S.D.1986) 397 N.W.2d upon the two conclusions of law which the (citation omitted). Hughes’ trial court based its denial of mo- When garnished released the tion were error. funds, at he acted his own risk. Wasser- 15-6-15(b) provides part: SDCL burger appealed the order and was re- it versed this court. The later deter- plead- When issues not raised mined that at time was served are ings by express implied tried con- 31, with parties, they summons on sent shall be treated 1989, he had in his respects they and control in all as if had been raised $350,000 “absolutely which was uncon- pleadings. in the Such amendment of ditionally” pleadings may of CMC. as be necessary to garnishee, personally stood liable to them cause to conform the evidence Wasserburger for the amount of “in may raise these issues be made 2. See text of SDCL 21-18-12 in section 1. served, trial, time, RIA filed and facsimile any any party at

upon motion of transmission, requests its first for admis- judgment[.] after even sions, interrogatories, and first first set amend- Although allow the decision to requests production of documents for the discretion pleadings is within ment of telephonic pretrial At Wasserburger. court, tried when issues are the trial 11, 1991, July conference moved if consent, they treated as implied shall be requiring an order Wasser- trial court for Id.; pleadings. they had raised responses July on burger produce Cordell, 420 N.W.2d Beyer v. granted. motion 1991. RIA’s omitted). (S.D.1988) (citations “The test allowing amendment under SDCL for responses to served his 15-6-15(b) opposing party whether the requests July 12, discovery these amendment; i.e., by the prejudiced will be RIA moved the court one late. litigate opportunity to did he have a fair request every for an order that admis- issue, could have offered response be deemed sion and insufficient case had been evidence additional Wasserburger’s respons- admitted because Beyer, 420 issue.” tried the different timely re- were “not served” those es omitted). (citations at stating lack information or sponses days a few July of reason failure to admit knowledge as a Davis, hearing Judge RIA made a with deny to state that he had made a failed intervention, alleging an inter inquiry and that the information reasonable trust in the located est readily by him was known obtainable intervened, conducted and account. RIA deny. enable him to admit or insufficient to discovery, responded pre-trial filed were denied. Both motions limine, in and post-trial motions motions that the denial of it’s mo- argues RIA statements, closing and presented opening matter law as a of tions reversible error called, and wit examined cross-examined as an of discretion. or reversible abuse nesses, appeal. eventually this and initiated 15-6-36(a) part: provides in SDCL The record indicates that RIA more proceedings. in spectator a mere these than of an admission is Each matter which fact, vigorously participated in RIA requested separately be set forth. shall proceedings. oppor RIA had a fair these unless, admitted within The matter is liability tunity litigate to the issue of request, thirty days after service by prejudiced an would not have been longer or time or such shorter within pleadings asserting a amendment to allow, may party to as the court denial cross-claim. The court’s request is serves whom the directed an Hughes’ motion was abuse discretion. requesting the admission party ruling to allow stand To the trial court’s to objection or addressed written answer approve windfall to would a substantial matter, party byor signed by the fact in that re RIA view of attorney[.] As to RIA. between turned RIA, we reverse and remand pleadings to to to allow amend give lack of answering party may not An assert a cross- conform to the evidence to as a knowledge reason information or remand, On this deter claim deny unless he states admit or failure to ruling will on the record. mination inquiry made reasonable has asserting prevent RIA from set- does known or readi- information and that the counterclaims, any, or offs to by him is insufficient ly obtainable may require additional evi deny. to admit or enable him dence. added.) (Emphasis Compel to Admissions Motion Wasserburger’s re- RIA that had asserts by the time set sponses served within approximately On June earlier, order, it day one weeks the start of the trial court’s five and half assertion, arrangements depose would made its RIA cites this court to SDCL 15-6-37(b)(2)(B). Blair Hull and Jim Brown and “such other discovery develop.” witnesses as would party obey If ... fails order argument preju- that it We find RIA’s provide permit discovery, or day delay by diced the one without merit. pending may court which the action is limited, discovery If it was not due to regard make such orders in to the failure delay, but day the one rather RIA’s own just, among are others the follow- commencing delay conducting dis- ing: court, covery. The trial 15—6— SDCL (B) An refusing order to allow the dis- 36(a), every refused RIA’s to deem party oppose obedient request for an admission admitted. This designated defenses, pro- claims refusal court does not consti- hibiting introducing him designat- tute reversible error as a matter law or matters in ed evidence^] judicial as an abuse of discretion. added). 15-6-37(b)(2)(B) (emphasis SDCL Additionally, argues every RIA an- designed compel This statute “is pro comply swer which failed with statu- promote, duction evidence rather tory language 15-6-36(a) in SDCL was in- stifle, finding process.” than the truth therefore, sufficient and should have been Kovarik, Magbuhat deemed admitted the trial court. RIA (S.D.1986), (S.D. modified, 445 N.W.2d 315 made this motion trial. (citation 1989) omitted) (emphasis origi 15-6-36(a) provides SDCL in part: nal). severity “The of the sanction must be If the court determines that an answer tempered with equi consideration of the comply requirements does not with the ties.” Id. rule, may this it either matter is admitted or that an amended 15-6-37(b)(2)(B) provides SDCL a trial may, answer be served. The court what, court with determining discretion in orders, lieu of these determine that final if any, impose. sanctions to RIA has failed disposition request be made at a to show an abuse of that discretion. The pretrial designated conference or at a requested sanctions greatly out- prior trial. time weigh severity Wasserburger’s ac- was, all, He added.) only tions. after (Emphasis motion, day In one late denying the responding discovery to the judge determined order. that it was “not timely talking “Less drastic discovery about alternatives should on the be em- day ployed imposed are trial” and that “the sanctions matter was placed party’s on the calendar and set hinder court we were and thus very objective matters defeat the litigation, these should have of the by, namely handled [previously].” court seek the truth those who provides statute knowledge the trial court with have Magbuhat, of the facts.” required discretion. It is not (citation omitted). to order that 382 N.W.2d at 45 See the matters be deemed admitted. exer- also Aberle v. Ringhausen, 494 N.W.2d cising judicial discretion, its (S.D.1992). the trial court (“[I]t 179 is say difficult to found the untimely. Because we any delay pursuit [RIA’s] [its] discretion, find no abuse of trial court we cause action was occasioned [Wasser- do not disturb its denial of RIA’s motion. burger’s] nonresponse the discovery or- See Duncan Pennington v. Cnty. Housing 183.) der.” Id. at Auth., (S.D.1986). 382 N.W.2d 425 8. Motion Continuance

7. Motions in Limine Finally, RIA asserts the trial RIA asserts that court’s denial the trial court of its motions for continu erred in denying its motions in limine ance is reversible as a error matter of law prevent Wasserburger from calling various or as abuse of again, discretion. Once introducing witnesses and alleges docu various it prejudiced was Wasser- ments and at exhibits trial. burger’s failure respond discovery to its

263 duty Ordinarily, garnishee’s is to again, we timely manner. Once requests in strictly of the comply with the orders part discretion on find no abuse of v. City County court. Honolulu Snyder, v. trial court. Olesen Kam, 349, (1965); 402 P.2d 683 48 Haw. (S.D.1979). RIA's ar- 732-33 Co., 124 Physicians’ Casualty Savard by Wasser- prejudiced it gument that was (1933); 38 C.J.S. Neb. N.W. responding to day delay in burger’s one (1943). Pursuant Garnishment § merit. discovery simply without Order, Judge July Davis’ except which we We affirm all issues strictly compliedand released the entrusted remand as stated therein. reverse and However, consequence as a funds to I, reversal in CMC of our MILLER, C.J., and WUEST true than RIA has been declared the rather AMUNDSON, JJ., concur. I have of those funds. owner being expressed, earlier now seeks to avoid HENDERSON, J., specially. concurs $350,000,rely- personally held liable for ing upon court’s mandate. a circuit HENDERSON, (specially concur- Justice trial, jury instructed as to At ring). and that RIA’s claim to the funds issue 4 as writing This is directed to entrusted to RIA. returned the liability. personal on his raised Furthermore, Hughes had in his control issue, it Digesting the treatment of this property belonging to CMC. proce- on appears that we decide this issue pertinent 2 and 3 are the Instructions Judge Davis’ declaration for dure. Was liability as- address the instructions which (a) Hughes to release the fund an Order by refer- are attached hereto and pect and blush, (b) I assumed Judgment? At first special A verdict part made a hereof. ence Order, Hughes if did not it was an and is also at- submitted to provide a written notice part by reference made a tached hereto and Order; however, if it was a filing of the verdict, According special hereof. to the running, he had judgment, to set the time only asked a notice of serve of CMC. account contained adversary. It seemed to me that our you find in the instructions will Nowhere decision, concerning legal point, this all Hughes relinquished the funds notice that responsibility. hinged procedural How- solely upon Judge Davis. ever, Hughes’ camped brief down on the Hughes failed to was omitted. information liable be- premise that was not pending appeal final retain the funds relied the direction of a cause he in the in- place this information failed to money the judge circuit court to release could by proper request. This structions question. Nevertheless, saving grace. been his have argument, At oral counsel possible in the instructions whereas defects that relied strongly advocated to, objected the trial court was were not effect, In upon Judge Davis’ court order. Hughes’ possible errors. not advised not be in violation of the court that he dare object to one instruction which counsel did contempt or he could be held germane point. to this A can was not brought out Therefore, court. As Justice Sabers only on the instructions. act argument, the court order was re- oral legal it the did not have before Nonetheless, counsel, al- versed. concept/alternative that is statement, though agreeing to that ex- and di- duty bound to follow the order at the time pressed opinion, that relied on it judge. my rectives on, it was re- preserve appellate its and that later rec- did not advances, particularly namely issue has point versed. This ord on the that and to troubling. So I went to the record was exonerated. To advance this level, Hughes garnishment quiet my point appellate trou- at should the law on in- placed the court order into the bled countenance. structions, to, by request Recovery or at least tried Investment previ- Associates Hogg ed instruction. v. First National ously present intervened in the action for Aberdeen, (S.D. Bank N.W.2d 921 purpose obtaining the return of the 1986); Cave, Inc., Schmidt v. Wildcat 261 $350,000.00 by Hughes. held T. John The (S.D.1977); accord: Weaver v. intervenor by claims that the funds held Boortz, (S.D.1981)(Issues 301 N.W.2d 673 T. belonged John Recovery In- presented preserved not briefed or are not vestment Associates pur- and held for the appeal.) Hughes personally remains pose paying defendant, creditors of the liable. Management Corporation, Consolidated

only met, if certain conditions were that such conditions were not met and APPENDIX

therefore, funds were returned John Hughes pursuant T. to the terms of the INSTRUCTION NO. up trust set purpose. for that brought by plaintiff, is action Wayne Wasserburger, d/b/a Southern Construction, Trenching Hills & which INSTRUCTION NO. 3 plaintiff garnishment seeks of a sum of actions, In civil party who asserts the satisfy entered affirmative of an issue prove must

this court in plaintiff favor of the issue preponderance of the evidence. against defendant, Consolidated Man- agement Corporation. By preponderance of the evidence is as, meant such evidence weighed when plaintiff The claims that he judg- has a opposed it, with that has more convinc- defendant, ment Consolidated ing force and from which it results that the Management Corporation which remains greater probability of truth lies therein. plaintiff unsatisfied. gar- has initiated the event that the evidence evenly bal- proceedings against nishment John T. you anced so that Hughes, say are unable to attorney the former the defen- dant, Management Consolidated the evidence Corpora- on either side of an issue defendant, tion. The Hughes, John T. by preponderates, is, greater has the con- affidavit, answering has admitted that the vincing force, your finding upon then plaintiff judgment against obtained a issue must party who had client, Management Consolidated Corpora- proving action, burden of it. In this tion, 8,1988, July was entered on but plaintiff proving has the burden of has denied that funds were held in his following issue: trust account on behalf of Consolidated garnishee, That the John T. Management Corporation, alleging instead at the time he garnish- was served with the that the sum was held trust for summons, ee was indebted to prop- or had Recovery Associates, Investment and that erty, personal, real or in his such were to be disbursed to credi- funds under his belonging absolutely tors control Management Consolidated Corpo- ration only unconditionally defendant, certain conditions to said were Consoli- after met. Management dated Corporation. PRIMEAUX, Roscoe Petitioner $350,000.00 deposit in the Was Appellant, (John Hughes) garnishees’ T. trust account absolutely and uncondi- Warden, LEAPLEY, South Walter defendant, tionally Con- Penitentiary, Dakota State Corporation? Management solidated Appellee. No. (Insert “no”). “yes” or YES Supreme of South Dakota. Court July, Dated this 22nd Argued Nov. 23, 1993. Decided June

Case Details

Case Name: Wasserburger v. Consolidated Management Corp.

Court Name: South Dakota Supreme Court

Date Published: Jun 2, 1993

Citation: 502 N.W.2d 256

Docket Number: 17884, 17908

Court Abbreviation: S.D.