Water usage dispute

Indiana Case Law

MALLARD`S POINTE CONDO. v. L & L, 64A04-0604-CV-176
(Ind.App. 12-15-2006) MALLARD`S POINTE CONDOMINIUM
ASSOCIATION, INC., Appellant, vs. L & L INVESTORS GROUP,
LLC and, HOMEOWNERS OF MALLARD`S LANDING, INC., Appellees.
No. 64A04-0604-CV-176. Court of Appeals of Indiana.
December 15, 2006.

APPEAL FROM THE PORTER SUPERIOR COURT, The Honorable
William E. Alexa, Cause No. 64D02-0411-CC-10188.

TERRY K. HIESTAND SARAH A. LAWSON Hiestand Law Office
Chesterton, Indiana, ATTORNEYS FOR APPELLANT.

MICHAEL A. LANGER Langer & Langer Valparaiso, Indiana,
ATTORNEY FOR APPELLEES.

OPINION – FOR PUBLICATION

MATHIAS, Judge.

Mallard’s Pointe Condominium Association, Inc. (“Mallard’s
Pointe”) appeals the Porter Superior Court’s order of
default judgment pursuant to Trial Rule 37. We consolidate
and restate the issues that both parties raise on appeal
as:

I. Whether the trial court abused its discretion when it
entered a sanction of default judgment without first
holding a hearing;

II. Whether the trial court abused its discretion when it
denied Mallard’s Pointe’s motion for relief from judgment
under Trial Rule 60(B); and

III. Whether the Appellee, L & L Investors Group, LLC,
(“L & L Investors”) is entitled to appellate attorney’s
fees.

We affirm and remand for a hearing to determine appellate
attorney’s fees.

Facts and Procedural History

Mallard’s Pointe is a property owner’s association
providing fifty-one condominiums with services, including
drinking water. The only sources of such drinking water are
wells that Mallard’s Pointe installed on Lot 49 of the
Mallard’s Landing Subdivision. Lot 49, however, was
subsequently acquired by L & L Investors through a
foreclosure proceeding. After this acquisition, L & L
Investors began negotiating with Mallard’s Pointe to either
buy the property or rent water usage from Lot 49.

When their negotiations stalled, L & L Investors sent a
letter to Mallard’s Pointe on March 31, 2004, expressing
its intent to begin charging the association $1000 monthly
for use of the water wells unless Mallard’s Pointe
immediately bought Lot 49. Mallard’s Pointe did not respond
to this notice, and on June 23, 2004, L & L Investors sent
a written demand for a monthly charge of $1000 for the
water usage. Later, on September 29, 2004, L & L Investors
sent additional correspondence to Mallard’s Pointe advising
that it intended to file a lawsuit unless the parties could
come to a written agreement.

When no written agreement was reached, L & L Investors
filed a complaint against Mallard’s Pointe on November 10,
2004, alleging unjust enrichment for refusing to pay for
the water that Mallard’s Pointe was receiving from Lot 49.
Mallard’s Pointe filed its answer to the complaint and
affirmative defenses on March 8, 2005.

During discovery, Mallard’s Pointe received a notice of
deposition along with a subpoena duces tecum on April 18,
2005. Mallard’s Pointe’s officer appeared at the scheduled
deposition on June 9, 2005, but failed to bring the
subpoenaed documents with him. L & L Investors filed a
motion for order compelling discovery and for attorney’s
fees on July 28, 2005. Mallard’s Pointe’s attorney, Patrick
Lyp (“Lyp”) requested permission to withdraw from his
representation of Mallard’s Pointe, which the trial court
granted on August 11, 2005.

The trial court then held a hearing on L & L Investors`
motion for order compelling discovery on September 1, 2005.
Although Lyp had withdrawn from representing Mallard’s
Pointe, he still attended this hearing as an observer. The
next day Lyp addressed a letter to Don Coker (“Coker”), an
employee of Mallard’s Pointe, stating:

When we last spoke in June, you were going to locate any
document responsive to the subpoena issued by Attorney
Langer [L & L Investors` counsel] and forward such to me.
Please be advised that the Court has now ordered all
responsive documents to be forwarded to Mr. Langer. In
addition, the Court has awarded attorneys fees to Mr.
Langer for his time in prosecuting this matter. Over the
last four (4) years I have been trying to impress on the
various Board Presidents and other Board Members the
seriousness of this matter. . . . At this point, it is
vital that all documents responsive to Mr. Langer’s
request be forwarded immediately. I have withdrawn from
this case; however, I would be willing to facilitate the
forwarding of any documents to Mr. Langer.

Appellee’s App. p. 3.

The trial court subsequently entered an order compelling
discovery on September 14, 2005. In its order, the trial
court ordered Mallard’s Pointe to comply and produce
certain records and documents on or before September 22,
2005, and also to pay L & L Investors $751 in attorney’s
fees. The order further stated that “[f]ailure by Mallard’s
Pointe to comply timely shall result in a default being
entered against it on the Complaint filed by Plaintiff.”
Id. at 37. A copy of this order was sent to Mallard’s
Pointe and received on September 8, 2005. Mallard’s Pointe
did not comply with the court’s order by the September 22nd
deadline.

On November 15, 2005, L & L Investors filed a motion for
default judgment against Mallard’s Pointe. That same day,
the trial court granted the motion for default judgment in
the amount of $16,266.67, and additionally ordered
Mallard’s Pointe to pay L & L Investors a monthly sum of
$1000 for water usage from its wells. Mallard’s Pointe did
not deliver the subpoenaed documents to L & L Investors
until December 13, 2005, more than two and a half months
after the trial court’s deadline. Appellee’s App. p. 13.

On December 15, 2005, Mallard’s Pointe filed various
motions, including a motion for relief from judgment and a
motion to correct error. On this date, Terry Hiestand
(“Hiestand”) also filed his appearance with the court on
behalf of Mallard’s Pointe. L & L Investors filed its
response to these claims on January 31, 2006. On February
21, 2006, the trial court held a hearing on Mallard’s
Pointe’s motions, all of which the court subsequently
denied. Mallard’s Pointe now appeals. Additional facts will
be provided as necessary.

Discussion and Decision

I. Hearing on Motion for Default Judgment

Mallard’s Pointe contends that the trial court abused its
discretion by failing to hold a hearing before entering
judgment by default as a discovery sanction under Trial
Rule 37. Trial Rule 37 in pertinent part provides:

If a party or an officer, director, or managing agent of
a party or an organization . . . fails to obey an order to
provide or permit discovery, including an order made under
subdivision (A) of this rule or Rule 35, 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: . . . (c) 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.

Ind. Trial Rule 37(B)(2) (2006).

The appropriate sanction for failing to comply with a trial
court’s discovery order is a matter committed to the sound
discretion of the trial court. Ross v. Bachkurinskiy, 770
N.E.2d 389, 392 (Ind.Ct.App. 2002) (citation omitted). The
trial court is not required to impose lesser sanctions
before imposing the ultimate sanction of dismissal or
default judgment. Nesses v. Specialty Connectors Co., Inc.,
564 N.E.2d 322, 327 (Ind.Ct.App. 1990).

“The rules of discovery are designed to allow a liberal
discovery process, the purposes of which are to provide
parties with information essential to litigation of the
issues, to eliminate surprise, and to promote settlement.”
Hatfield v. Edward J. DeBartolo Corp., 676 N.E.2d 395, 399
(Ind.Ct.App. 1997), trans. denied. Although the rules of
discovery are intended to require “little, if any,
supervision or assistance by the trial court,” when the
goals of this system break down, Indiana Trial Rule 37
provides the trial court with tools to enforce compliance,
including sanctioning litigants for their failure to comply
with discovery orders. Pfaffenberger v. Jackson County
Reg`l Sewer Dist., 785 N.E.2d 1180, 1183 (Ind.Ct.App. 2003)
(citing Hatfield, 676 N.E.2d at 399). We will reverse the
trial court’s decision only if it is clearly against the
logic and circumstances before the court, or when the trial
court has misinterpreted the law. Id. (citations omitted).

While Trial Rule 37 specifically grants the trial court the
authority to sanction a party by default judgment where the
party has failed to obey an order to provide discovery, the
rule is silent on the issue of whether the trial court must
first afford the non-complying litigant a hearing on the
matter. Pfaffenberger, 785 N.E.2d at 1185. Notwithstanding
the rule’s silence, we have previously recognized that
“when a petition for sanctions, such as a motion to dismiss,
is filed, the trial court must ordinarily conduct a hearing
thereon to determine whether one of the enumerated reasons
for not imposing sanctions exists.” Id. (citations
omitted).

In advancing the proposition that the trial court must
first hold a hearing, Mallard’s Pointe relies primarily on
J.C. Marlow Milking Machine Company v. Reichert, 464 N.E.2d
364 (Ind.Ct.App. 1984), trans. denied. In Reichert, we
concluded that Trial Rule 55 was the more specific rule
governing the trial court’s actions when issuing a default
judgment. Id. at 366-67. And, therefore, we held that a
trial court must follow the hearing requirement of Trial
Rule 55 before entering a default judgment as a sanction.
Id.

However, we observe that Reichert, although decided after
Indiana Trial Rule 37 was amended in 1982, was decided
according to the prior version of Trial Rule 37.
Pfaffenberger, 785 N.E.2d at 1186. The present version
provides that the sanction of entry of default judgment is
available upon failure to answer interrogatories so long as
that remedy is “just.” Ind. Trial Rule 37(B)(2). Therefore,
we no longer require strict compliance with the hearing
requirement of Indiana Trial Rule 55. Instead, we evaluate
whether the sanction of an entry of default judgment is
unjust.

We have previously held that the sanction of default
judgment is not unjust where:

(1) the party was given an additional reasonable period
within which to respond and was expressly warned in
advance that default judgment would be entered if he
failed to do so; and (2) no response or request for
additional time was timely made and no reason excusing
timely response is demonstrated.

Burns v. St. Mary Med. Ctr., 504 N.E.2d 1038, 1039
(Ind.Ct.App. 1987); see also Drew v. Quantum Sys., Inc.,
661 N.E.2d 594, 595 (Ind.Ct.App. 1996), trans. denied;
Wozniak v. N. Ind. Pub. Serv. Co., 620 N.E.2d 33, 36
(Ind.Ct.App. 1993), trans. denied.

In this case, Mallard’s Pointe first received a notice of
deposition along with a subpoena duces tecum on April 18,
2005. Almost two months later, Mallard’s Pointe’s officer
appeared at the scheduled deposition on June 9, 2005, but
failed to bring the subpoenaed documents. On September 14,
2005, the trial court then issued an order compelling
Mallard’s Pointe to comply with the discovery request by
September 22, 2005, giving Mallard’s Pointe an additional
eight days to comply. From the April 18th date of the
subpoena duces tecum to the September 22nd court-ordered
date of compliance, Mallard’s Pointe had more than five
months notice of what materials it needed to produce to L &
L Investors. Mallard’s Pointe was also given advance
warning by the trial court that failure to comply with its
order would result in default judgment. In addition to the
court’s warning, in early September, Lyp had written to
Mallard’s Pointe, advising immediate compliance with the
discovery order.

We further note that Mallard’s Pointe did not avail itself
of the opportunity to inform the trial court of any
problems in responding to the discovery requests and did
not request an extension of time within which to respond.
In fact, Mallard’s Pointe did not comply with the discovery
request until December 13, 2005, more than two months after
the trial court’s deadline for compliance. Therefore, we
conclude that the trial court did not abuse its discretion
by entering default judgment against Mallard’s Pointe
pursuant to Indiana Trial Rule 37.

For the same reasons, we also conclude that the trial court
did not abuse its discretion in determining the amount of
damages to which L & L Investors was entitled without first
holding a hearing. The trial court’s entry of default
judgment ordered Mallard’s Pointe to pay $16,266.67 as well
as $1000 a month for use of the wells beginning November 9,
2005. Mallard’s Pointe’s fifty-one condominiums have been
receiving water from L & L Investors` property for more than
two years without paying for that usage. L & L Investors
wrote a letter on June 23, 2004, demanding that Mallard’s
Pointe pay $1000 a month for use of this water. Appellee’s
App. p. 6. L & L Investors reiterated this price in
paragraph fifteen of its complaint. Id. at 14. As Mallard’s
Pointe has received and enjoyed twenty-four months` worth
of water supply for all of its buildings, we find no abuse
of discretion in ordering Mallard’s Pointe to pay
$16,266.67 for that usage. We further find no abuse of
discretion in entering default judgment of a monthly rental
rate of $1000 for water use for fifty-one condominiums, a
rate less than $20 per condominium per month.

II. Relief under Trial Rule 60(B)

Mallard’s Pointe next contends that the trial court abused
its discretion in failing to grant its motion for relief
from judgment under Trial Rule 60(B). It contends that
relief should have been granted under Trial Rule 60(B)(3)
for L & L Investors` attorney’s alleged misconduct and also
under Trial Rule 60(B)(8) for L & L Investors` failure to
give three days notice prior to its motion for default
judgment.

Upon a motion for relief from default judgment, the burden
is on the movant to show sufficient grounds for relief
under Indiana Trial Rule 60(B). Ross v. Bachkurinskiy, 770
N.E.2d 389, 392 (Ind.Ct.App. 2002) (citation omitted). We
review the grant or denial of a Trial Rule 60(B) motion for
relief from judgment under an abuse of discretion standard.
Id. The trial court’s discretion is necessarily broad in
deciding whether to vacate a default judgment because any
determination of excusable neglect, surprise, or mistake
must turn upon the unique factual background of each case.
Id. (citation omitted). The trial court must balance the
need for an efficient judicial system with the judicial
preference for deciding disputes on the merits. Id.

First, Mallard’s Point argues that the trial court should
have granted it relief from judgment under Trial Rule
60(B)(3), which provides relief from judgment for fraud,
misrepresentation, or other misconduct by an adverse party.
Mallard’s Pointe contends that L & L Investors` attorney
acted with misconduct as he did not serve Mallard’s Pointe’s
attorney, Hiestand, with its motion for entry of default
judgment.

L & L Investors filed its motion for default judgment on
November 15, 2005. However, we note that while Lyp withdrew
from representing Mallard’s Pointe in August 2005, attorney
Hiestand did not enter his appearance on behalf of
Mallard’s Pointe until December 15, 2005. Therefore, at the
time L & L Investors filed its motion for default judgment,
there was no attorney on record as representing Mallard’s
Pointe.

Indiana Trial Rule 5(A) (2006) provides, in part, “[u]nless
otherwise provided by these rules or an order of the court,
each party and special judge, if any, shall be served with
. . . (2) every written motion except one which may be
heard ex parte.” Trial Rule 5(B) subsequently provides,
“Whenever a party is represented by an attorney of record,
service shall be made upon such attorney.” Id. (emphasis
added). As there was no attorney of record at the time L &
L Investors filed its motion, we conclude that under the
Indiana Trial Rules, L & L Investors was not required to
send a copy of the motion to anybody other than the party,
Mallard’s Pointe. Therefore, L & L Investors` attorney
engaged in no misconduct that would require relief from
default judgment.

Second, Mallard’s Pointe contends that L & L Investors did
not serve it with written notice of the application for
default judgment at least three days prior to the hearing
on its motion, as required under Trial Rule 55(B).
Mallard’s Pointe therefore maintains that because of this
lack of notice, the trial court abused its discretion in
denying its motion for relief from judgment under Trial
Rule 60(B)(8), which allows relief for any other reasons
not enumerated in the rest of the rule justifying relief
from the operation of the judgment.

We have already noted that due to the Trial Rule 37
amendments, a trial court is not required to ensure strict
compliance with the hearing requirement of Trial Rule 55 in
entering a sanction of default judgment. Rather, the
applicable standard is whether the entry of default
judgment is just. Here, Mallard’s Pointe was expressly
warned by the trial court that default judgment would be
entered if it failed to comply with the discovery request
by September 22, 2005. Mallard’s Pointe was likewise warned
in writing by its counsel, Lyp, even though Lyp had
withdrawn as its attorney of record. Mallard’s Pointe’s
numerous delays and inaction with regard to the discovery
issues occurred without any explanation whatsoever as to
alleged reasons preventing timely, or even tardy,
compliance. Thus, it was quite reasonable for the trial
court to conclude that Mallard’s Pointe’s instances of
neglect were not “excusable” within the meaning of Indiana
Trial Rule 60(B). See Ross, 770 N.E.2d at 392.

Because we conclude that Mallard’s Pointe has failed to
demonstrate a sufficient reason for setting aside the
default judgment under Trial Rule 60(B)(3) or (8), we need
not decide whether Mallard’s Pointe has presented
sufficient evidence of a meritorious defense. T.R. 60(B)
(2006) (stating that a movant filing a motion for reasons
(1), (2), (3), (4), and (8) under the rule must allege a
meritorious claim or defense). In light of Mallard’s
Pointe’s blatant disregard of the court’s order to comply
with L & L Investors` discovery request, we decline to set
aside the default judgment entered against it.

III. Appellate Attorney’s Fees

L & L Investors submits that it should be reimbursed for
the fees and costs that it has incurred in connection with
this appeal. L & L Investors contends that it is entitled
to the costs of defending this sanction under Indiana Trial
Rule 37(A) (2006). However, we note that Trial Rule 37(A)
involves motions for compelling discovery, which is not at
issue in this case. Rather, the issue is whether we are
permitted to grant L & L Investors attorney’s fees and
costs under Trial Rule 37(B), regarding the sanctions a
court can impose when a party has failed to comply with an
order.

We find the analysis in Georgetown Steel Corp. v. Chaffee,
519 N.E.2d 574 (Ind.Ct.App. 1988), trans. denied,
instructive on this issue. In Georgetown, the appellee
defended an interlocutory appeal contesting the trial
court’s order compelling discovery. We awarded the appellee
appellate attorney’s fees under Trial Rule 37(A), reasoning
that the appellant’s failure to comply with a reasonable
discovery request had generated the appellee’s appellate
fees. Id. at 577. Here, we are confronted with whether we
may likewise grant appellate attorney’s fees under Trial
Rule 37(B). Trial Rule 37(B) in pertinent part provides:

In lieu of any of the foregoing orders or in addition
thereto, the court shall require the party failing to obey
the order or the attorney advising him or both to pay the
reasonable expenses, including attorney’s fees, caused by
the failure, unless the court finds that the failure was
substantially justified or that other circumstances make
an award of expenses unjust.

Ind. Trial Rule 37(B)(2)(3) (2006).

We conclude that the logic in Georgetown also applies to
attorney’s fees provided for under Trial Rule 37(B). Not
only did Mallard’s Pointe fail to comply with the original
discovery request, but it also failed to comply with the
trial court’s order compelling discovery. In both
Georgetown and the instance here, the continuing appellate
expenses were directly related to the original
transgression. See Matter of Guardianship of Posey, 532
N.E.2d 9, 13 (Ind.Ct.App. 1988), trans. denied. “If
appellate expenses were not awardable, then the original
award would be offset [by an appellee’s incurred appellate
costs].” See Georgetown, 519 N.E.2d at 577. “Thus the same
authority that authorized an award of expenses in the trial
court, also contemplates an award of appellate expenses.”
Id. However, the trial court is the more appropriate forum
for the evidentiary hearing necessary to determine the
propriety and amount of such an award, therefore we remand
to the trial court on this issue. Id.

Conclusion

We conclude that the trial court’s entry of default
judgment was just and that the trial court did not abuse
its discretion in refusing to grant Mallard’s Pointe’s
motion for relief from judgment. We further determine that
L & L Investors is entitled to appellate attorney’s fees
for defending the trial court’s sanction.

Affirmed and remanded for proceedings consistent with this
opinion and to determine the appropriate amount of
appellate attorney’s fees to be awarded to L & L Investors.

KIRSCH, C. J., and SHARPNACK, J., concur.