Lawsuit Involving Factoring Company and Contractor (Fraud)
September 20, 2002
Smith, P. J., Eldridge and Ellington, JJ.
The opinion of the court was delivered by: Eldridge, Judge.
Through a tortuous procedural history, the instant case comes to us on appeal from the Superior Court of DeKalb County’s order awarding damages to Factoring Company (“Factoring Company”) on its claim of fraud against Ed Schaner and Michael Whelan (“appellants”), which award arose in connection with a previous order of the superior court wherein the court struck appellants’ answer because of a wilful failure to comply with discovery; the court then entered a default judgment on Factoring Company’s fraud claim. The facts are as follows.
In January of 1996, Factoring Company filed in the Superior Court of DeKalb County an original complaint against the appellants’ corporations, Equity Recovery Services, Inc. and Remedial Labor Solutions, Inc.; also named as defendants were Craftmasters, Inc. and its president Jeffery Teague, along with R. A. Scott Contractors, Inc. and its president Randall Scott. The complaint asserted five causes of action arising out of the financing of a construction project. Answers were filed and discovery commenced. Default judgments were subsequently entered against Craftmasters, Inc., Jeffery Teague, R. A. Scott Contractors, Inc., and Randall Scott as a result of each defendants’ willful failure to respond to discovery.
On March 27, 1997, Factoring Company amended its complaint to add two additional counts of fraud, seeking recovery against Whelan and Schaner, individually. The appellants answered the complaint. Factoring Company moved to reopen discovery, which request was granted on July 3, 1997. The appellants, who are represented by the same counsel, were then served with Interrogatories and Requests for Production of Documents. No response was made to discovery within the requisite period. Counsel for both parties agreed to extend the discovery period for an additional 60 days, until October 30, 1997, and a consent order to that effect was signed by the trial court on August 29, 1997. No response was made to discovery within the 60 days. In addition, appellants made no attempt to reply to Factoring Company’s telephone calls made with regard to compliance with discovery requests. On October 8, 1997, Factoring Company sent the appellants a letter requesting some response by October 11, 1997. No response was made.
On October 22, 1997, Factoring Company filed a motion to compel and/or to strike appellants’ answer and enter default judgment for an intentional failure to comply with discovery requests. The appellants did not respond to Factoring Company’s motion to strike. The appellants did not request a hearing on the issue. *fn1
On December 11, 1997, the trial court entered an order granting Factoring Company’s motion to strike, finding “Appellants Ed Schaner and Michael Whelan willfully refused to answer the Interrogatories and Request for Production of Documents[.]” The trial court signaled its intent that “default shall be entered against these Appellants in amounts to be determined by affidavit submitted by Plaintiff [Factoring Company].” No response to such order was ever filed.
On December 19, 1997, the appellants filed a direct appeal to this Court with regard to the trial court’s December 11 order granting Factoring Company’s motion to strike. Because the order was not a final judgment, the interlocutory appeal procedures were required. *fn2 Appellants’ failure to follow such procedures resulted in the dismissal of their appeal.
Thereafter, on July 9, 1998, Factoring Company submitted an affidavit and accompanying exhibit showing damages in the amount of $717,877.81 and attorney fees in the amount of $30,366.50. On that same day, the trial court issued a default judgment against the appellants on Factoring Company’s claim of fraud under Count IV of its complaint, as well as under Counts VI and VII. *fn3 The court ordered recovery in the amount of $748,244.31, “said sum representing damages for Appellants’ fraud and for Plaintiff’s attorneys’ fees,” along with post judgment interest as provided by law. The appellants did not file a motion to open default judgment. The appellants did not take an appeal from this judgment.
In mid-August 1998, counsel for the appellants filed individual petitions for Chapter 7 bankruptcy on their behalf. Factoring Company filed complaints with the bankruptcy court, seeking to except its debt from discharge because the debt was incurred by the appellants as a result of fraud. *fn4 On March 10, 1999, Factoring Company moved for summary judgment on its complaints, contending that the superior court’s default judgment as to the issue of fraud must be given a preclusive effect in the determination of dischargeability, and so Factoring Company was entitled to summary judgment as a matter of law under U. S. C. § 523 (a) (2).
Before addressing the merits of such motion, the bankruptcy court determined that questions had been raised regarding the facts leading to the entry of the default judgment and held a hearing addressing those matters. *fn5 Relying on its own factual findings pursuant to evidence apparently adduced at the hearing, the bankruptcy court denied Factoring Company’s summary judgment motion on, inter alia, the grounds that the superior court erred in striking appellants’ answer based on a wilful violation of discovery, and thus, entry of default judgment was improper. Contrary to the order of the DeKalb County Superior Court, the bankruptcy court determined that the appellants’ failure to respond to discovery had not been wilful: “the facts leading to the default judgment in the DeKalb County litigation do not reflect a deliberate abuse of the judicial process by appellants Whelan and Schaner.” *fn6 Accordingly, the bankruptcy court refused to give a preclusive effect to the superior court’s default judgment entered on Factoring Company’s fraud claim, thereby leaving appellants’ debt to Factoring Company subject to discharge in bankruptcy.
Factoring Company appealed to the District Court for the Northern District of Georgia. That court concluded that, prior to the superior court’s award of damages, the appellants should have been afforded a hearing as required under OCGA § 9-11-55 (a) with respect to unliquidated damages. *fn7 However, the district court reversed the bankruptcy court on the issue of the default judgment: “the state court found Whelan’s and Schaner’s failure to participate in discovery to have been willful, and this court finds no reason to secondguess that determination or attempt to quantify the degree of willfulness[.]” *fn8
Approximately a year later, February 22, 2001, the appellants filed a motion to set aside the superior court’s July 9, 1998 default judgment and damages award based upon a “non-amendable defects appearing in the record.” A hearing was held on June 5, 2001, with regard to such motion. In apparent agreement with the District Court, the superior court concluded that appellants should have been permitted to present evidence in mitigation of unliquidated damages. Accordingly, the court set aside its July 9, 1998 order as to damages and scheduled a trial solely on that issue. The superior court denied the appellants’ motion to set aside the default judgment entered as a result of their wilful violation of discovery.
A bench trial was held on October 21, 2001, with regard to the damages issue. Factoring Company obtained testimony from its president and introduced invoices showing damages in the amount of $717,877.81; Factoring Company elected not to seek attorney fees. The appellants put up no evidence as to damages, claiming “we can’t argue the arithmetic of what Mr. Levy [Factoring Company’s counsel] has said.” On November 1, 2001, the superior court entered judgment on the issue of damages owed to Factoring Company on its claim of fraud and awarded Factoring Company $717,877.81. It is this order that forms the basis for the instant appeal. Held:
By brief, appellants allege seven separate enumerations of error. They, however, make one two-page argument in support of all, without any delineation as to which enumeration of error is being addressed by any particular portion of their single argument. Notwithstanding, and deciphering as best we can, it appears that, without challenging the evidence of record against them, appellants’ sole contention is that the trial court erred in granting Factoring Company’s motion to strike appellants’ answer because of wilful discovery violations without first giving appellants a “properly Noticed Hearing” on the issue of willfulness.
Factoring Company, on the other hand, asserts inter alia that notions of res judicata and waiver preclude this Court’s consideration of appellants’ contention. Pretermitting the correctness of Factoring Company’s assertions, addressing the substance of appellants’ argument may provide a note of finality to an issue that has caused years of litigation. So, addressing appellants’ contention, we find it to be meritless under the facts of this case.
Trial judges have broad discretion in controlling discovery, including imposition of sanctions, and appellate courts will not reverse a trial court’s decision on such matters unless there has been a clear abuse of discretion. *fn9
In this case, the record before us shows that the superior court had entered default judgment against four other named defendants in the instant case based on wilful violations of discovery. The appellants had been noticed with regard thereto. The superior court’s prior experience in this case was thereafter reinforced by the fact that appellants completely failed to respond to discovery within the initial period following discovery requests. When the period for discovery was extended by agreement of the parties, appellants again failed to respond within the discovery period. In addition, appellants failed to respond to telephone calls and letters requesting compliance with discovery. Appellants failed to respond in anyway whatsoever to Factoring Company’s motion to compel and for sanctions based on discovery violations — and there was a month and a half between said motion and the court’s order thereon in which response could have been made. Indeed, appellants failed to even request a hearing on such motion to strike. Appellants failed to file any response whatsoever with regard to the trial court’s order granting the motion to strike and indicating that default judgment would be entered upon proof of damages — and there were seven months between the granting of the motion to strike and entry of the default judgment in which response could have been made. Thereafter, appellants failed to respond to the trial court’s order entering default judgment.
In short, the record shows that not only did the appellants completely fail to comply with discovery, they completely failed to respond to any and all attempts to force them to comply with discovery, including the trial court’s order evidencing the intent to enter default judgment based thereon.
[T]he trial court need not conduct an evidentiary hearing on the issue of willfulness in those cases `where the trial court can otherwise determine willfulness on the part of the party against whom the sanctions are sought.’ Schrembs v. Atlanta Classic Cars, 261 Ga. 182 (402 SE2d 723) (1991). . . . An evidentiary hearing on the issue of willfulness is not necessary in all cases." *fn10
Under the circumstances of this case, and in the absence of any evidence or factually-based argument to the contrary, the failure to hold a “willfulness” hearing prior to striking appellants’ answer as a sanction for discovery violations was not a clear abuse of the trial court’s discretion. *fn11
Appellants’ remaining enumerations of error, not encompassed within the contention asserted above, are unsupported either by argument, by citation of authority, or by facts of record. We will not consider them. *fn12
Judgment affirmed. Smith, P. J., and Ellington, J., concur.
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