MILLER, J.
On January 18, 2005, plaintiff and respondent Alan Hasso filed a complaint alleging three causes of action against defendants and respondents J.S.B. Financial Corporation (JSB) and OzCorp. (OZ) (collectively "defendants"), as well as other defendants, for fraudulent conveyance of real property, conspiracy to commit a fraudulent conveyance, and negligence.
On appeal, defendants raise three issues: (1) the court abused its discretion in ordering terminating sanctions against them; (2) the court abused its discretion in denying JSB's motion for relief from default; and (3) the court abused its discretion in denying defendants' motion for a new trial. Finding no error, we affirm the judgment in full.
On May 16, 2005, plaintiff filed a motion against JSB for an order deeming admitted plaintiff's first set of requests for admissions and for monetary sanctions.
On June 20, 2005, plaintiff filed his reply to JSB's opposition to plaintiff's motion regarding requests for admissions, set 1. Plaintiff noted that he had served the requests on February 3, 2005; that the responses were due on or before March 5, 2005; and that request for entry of default had been entered on March 7, 2005. It was not until after the default was set aside pursuant to the parties' stipulation on May 11, 2005, that plaintiff filed the discovery motions; JSB did not respond to the discovery requests until the eve of the initial hearing and its responses were unverified.
At the hearing on the motions held on June 27, 2005, the court reiterated that it still had five discovery motions pending. The court noted that the responses to the requests for admissions were unverified and that "Nonverified responses are the equivalent of no responses." Counsel for plaintiff stated that he not received verified responses. The court granted sanctions in the amount of $437 pursuant to Code of Civil Procedure section 2033,
Nevertheless, apparently in deference to JSB's contention that all discovery timelines had been reset once the default was set aside, the court set aside its rulings and continued "these five motions or as much as involve J.S.B. to that date is that as far as the Court is concerned, there is no stipulation regarding dates concerning discovery. [¶] You are ordered to comply with all of the discovery at this time voluntarily to avoid sanctions." "If it's not complied with, verifications, answers, responses, I will hear the motions and I will impose sanctions."
On July 7, 2005, plaintiff filed motions to compel responses to its first set of special interrogatories, and first set of form interrogatories, propounded to JSB. On July 21, 2005, the court continued the hearing of the discovery motions pending a determination of whether Johnson's bankruptcy proceedings stayed proceedings in the current matter. On August 24, 2005, the court tentatively ruled that it no longer had jurisdiction to act in the matter; the bankruptcy court had exclusive jurisdiction over the case. The court noted that five discovery motions had been calendared for that date and seven additional discovery motions had been made in the interim. The court vacated the scheduled hearings on the discovery motions and noted, "I want to advise you if this case remains in state court and we proceed with it, I am going to require you to either agree or the Court will make findings and will order a referee for discovery matters, because right now as we stand, we haven't even begun anything and we have 12 discovery motions on calendar."
On November 14, 2005, the court noted that the bankruptcy trustee had filed for removal of the case to the federal court; the bankruptcy judge granted the request. On December 20, 2005, the case was dismissed without prejudice as to the entire action. On August 4, 2006, the bankruptcy court remanded the matter back to state court. On August 14, 2006, the court set aside its dismissal order of December 20, 2005.
On November 1, 2006, plaintiff requested the appointment of a discovery referee. At a hearing on April 20, 2007, plaintiff's counsel noted defendants had continued to fail to respond to discovery requests, contending discovery had been stayed until the appointment of a discovery referee. The court noted that it had "not made such an order. And the Court fully expects you to proceed with discovery to the extent possible until you get an order from the court . . . ." Nonetheless, after receiving no objection from any party, the court appointed Judge Tully Seymour as discovery referee.
On June 5, 2007, plaintiff served a motion to compel the deposition of the "person most knowledgeable" from JSB. Plaintiff had served notice on May 8, 2007, that the deposition would be taken on May 22, 2007; however, no one on behalf of JSB appeared. Also on June 5, 2007, Judge Seymour served his report on seven discovery motions filed by plaintiff that he heard on May 18, 2007. Counsel for JSB filed opposition to only two of the seven motions, stating that "he had been having difficulty in communicating with his client and that he intended to make a motion to withdraw as counsel."
The first motion concerned plaintiff's efforts to compel responses to his first demand for production of documents, propounded to JSB on February 3, 2005; JSB had yet to respond. The motion was filed May 16, 2005. JSB filed an opposition contending that the discovery request was premature because the stipulation to set aside defendants' default reset the discovery timelines. Judge Seymour concluded that the stipulation did not invalidate the demand for production's service of process or affect its timelines; the demand was valid and JSB had failed to respond. Thus, Judge Seymour recommended the motion be granted, that JSB be ordered to respond without objection within 20 days of the court's order, and that sanctions against JSB be awarded in the amount of $836.30.
The second motion concerned plaintiff's request for an order deeming admitted his first set of requests for admissions propounded on JSB on February 3, 2005. The motion was filed on May 16, 2005. JSB served an unverified response on June 8, 2005; on June 30, 2005, JSB provided a verification. JSB filed an opposition, again contending that the discovery request was premature because the stipulation to set aside defendants' default reset the discovery timelines. Judge Seymour recommended a sanction award in the amount of $837.
The third motion involved plaintiff's request to compel responses to his first set of form interrogatories propounded upon JSB on February 3, 2005. Plaintiff sent JSB a follow-up letter on June 28, 2005, noting the tardiness of the responses, but JSB still failed to respond. JSB filed no opposition to the motion. Judge Seymour recommended the motion be granted, that JSB be ordered to respond without objection within 20 days of the court's order, and that sanctions against JSB be awarded in the amount of $637.
The fourth motion requested responses to plaintiff's first set of special interrogatories propounded to JSB on March 2, 2005; plaintiff had yet to receive a response. JSB filed no opposition. Judge Seymour recommended the court grant the motion, compel responses within 20 days, and award sanctions against JSB in the amount of $800. Finally, Judge Seymour recommend that JSB be required to pay 55 percent of the $2,300 fee for his work with respect to the discovery motions.
On June 7, 2007, the court held a hearing on plaintiff's motion to strike defendants' answers to the complaint. The court granted plaintiff's motion as to JSB and struck its answer finding that its corporate status had been suspended.
On June 19, 2007, Judge Seymour issued his second report, regarding five unopposed motions against OZ: On plaintiff's motion for an order deeming admitted his first set of requests for admissions, Judge Seymour recommended the requests be deemed admitted and that sanctions be ordered in the amount of $600. On plaintiff's motion to compel responses to his first set of special interrogatories, Judge Seymour recommended OZ be compelled to answer within 20 days and be sanctioned $600. Judge Seymour recommended that plaintiff's third motion to compel responses to his first set of form interrogatories be granted, that OZ be ordered to respond within 20 days, and be sanctioned $400. On the motion to compel the deposition of Jacobson as an officer of OZ, Judge Seymour recommended that OZ be ordered to produce Jacobson within 15 days of any order of the court, be directed to produce all requested documents, and be sanctioned in the amount of $2,400 jointly against OZ and its counsel.
On June 25, 2007, counsel for JSB served a declaration in opposition to the motions to compel and requests for sanctions. He noted, "A conflict of interest has arisen between my clients and me, making it impossible for me to continue representing their interests, to respond to discovery, or to fully oppose these discovery motions. [¶] . . . I have not been provided by my clients with numerous documents I have requested of them. . . . [¶]. . . My failure to serve discovery responses in this case or to engage in substantive meet and confer with opposing counsel is because of a lack of information, documentation, cooperation, authorization and payment from my clients and is not due to some willful bad faith on my part. My ability to engage in meaningful discovery in this case has been restricted because of my clients' non-participation." Counsel requested that the court forbear in awarding sanctions against him personally.
On July 10, 2007, attorney C. Benjamin Graff, the attorney of record for JSB, OZ, and Harrison (see fn. 7, ante), filed a motion to be relieved as counsel. Graff reiterated that he had received a "lack of cooperation in discovery" from his clients and a "lack of communications with counsel, making it impossible for counsel to function anymore [sic] as attorney of record . . . ." The court granted the motion.
On July 12, 2007, Judge Seymour issued a third report after the hearing on two discovery motions filed against JSB. Judge Seymour recommended JSB be compelled to respond to plaintiff's first set of document demands, and produce the person most knowledgeable at JSB, within 15 days of any order by the court. Judge Seymour also recommended sanctions in the amounts of $1,600 and $1,400, respectively, against JSB.
On July 16, 2007, the court granted a motion by plaintiff to compel responses to judgment debtor interrogatories propounded to both OZ and JSB; defendants were ordered to respond within 30 days and were each sanctioned $240. The order was formalized on July 20, 2007. On July 30, 2007, the court adopted the recommendations contained in Judge Seymour's first, second, and third reports.
On August 30, 2007, Raul Garcia substituted in as attorney for JSB and OZ. Also on August 30, 2007, plaintiff served a motion requesting terminating sanctions against OZ, to be heard by Judge Seymour. Plaintiff alleged OZ had failed to comply with the court's orders compelling responses to discovery. Plaintiff noted that 25 months had elapsed since he first served OZ with the first set of special interrogatories on June 27, 2005, that they included only 22 special interrogatories, that no responses had been received, and that OZ had failed to pay any of the previously ordered monetary sanctions.
On September 11, 2007, defendants filed an ex parte motion to temporarily stay discovery for 30 to 60 days due to attorney Garcia's need to fully apprise himself of the nature and posture of the case. Plaintiff opposed the application. The court referred the matter to Judge Seymour; on September 20, 2007, Judge Seymour denied the application.
On September 24, 2007, defendants filed an ex parte application for an order continuing the scheduled date for a hearing on the motion for terminating sanctions. Plaintiff opposed the request for a continuance, noting that defendants' failure to obtain an attorney after Graff was relieved went against any argument that defendants had insufficient time to prepare responses to discovery or motions concerning discovery. In his opposition, plaintiff attached Judge Seymour's September 19, 2007, order denying defendants' previous letter request for an extension, which stated, "Under normal circumstances the referee would be sympathetic to such a request where a new attorney is coming in to a complicated case and is requesting additional time to prepare. [¶] However, this is not the usual case. The history of this case indicates that the defendant is not meeting its responsibilities to the court and is engaging in obstructive tactics. . . . Graff informed the referee that he was unable to file opposition to earlier motions that were on calendar because his client would not return his calls or cooperate in defending the lawsuit. . . . The order substituting . . . Graff out of the case is dated July 10, 2007. Yet nothing was done to procure new counsel and help him familiarize himself with the case until the last minute." On September 25, 2007, the court denied the application, without prejudice to the filing of a noticed motion.
On October 17, 2007, plaintiff served a second motion for terminating sanctions against OZ, to be heard by Judge Seymour. On November 19, 2007, JSB filed a motion to reinstate its answer to plaintiff's complaint, which had been stricken June 7, 2007. On December 2, 2007, plaintiff served a third motion for terminating sanctions against OZ, to be heard by Judge Seymour; this motion was based on OZ's failure to comply with the court's order regarding scheduling the deposition of Jacobson. On December 5, 2007, plaintiff served a fourth motion for terminating sanctions against OZ, to be heard by Judge Seymour; this motion was based on OZ's refusal to comply with the court's order compelling responses to plaintiff's first set of form interrogatories.
At a hearing on December 5, 2007, the court granted plaintiff's motion to compel further responses by JSB to judgment debtor interrogatories and awarded sanctions in the amount of $440; the court ordered JSB to submit further responses within 30 days.
On December 11, 2007, Judge Seymour issued his report and recommendations on three motions filed by plaintiff, including the two motions for terminating sanctions against OZ.
On December 31, 2007, Judge Seymour issued his report and recommendations on two motions to compel discovery by plaintiff. He recommended granting plaintiff's motion to compel OZ to furnish further responses to plaintiff's second set of requests for admissions and for sanctions in the amount of $1,000. Judge Seymour recommended denying plaintiff's motion to compel further responses by OZ to plaintiff's first set of special interrogatories and denied sanctions. Judge Seymour recommended that OZ be charged for three and one-half hours of his fee, and plaintiff for two hours.
On January 15, 2008, the court heard JSB's motion to reinstate its answer. The court took judicial notice that JSB's corporate status had been reinstated; nonetheless, it noted, "the declaration submitted with the application for relief is devoid of any expl[anation] as to why [JSB] waited a month and a half to retain new counsel after Graff was relieved. Similarly, the declarations failed to explain why relief from the order striking [JSB] was not filed for 5 months from the date of the order and nearly two months after new counsel was retained." Nevertheless, the court continued the motion for further briefing.
On January 23, 2008, Judge Seymour issued his report and recommendation on four motions filed by plaintiff against OZ. Judge Seymour noted that the attorney for OZ had unilaterally shown up at plaintiff's attorney's office for a deposition with his client and a reporter on January 2, 2008, without previously notifying plaintiff. "To the referee this conduct on the part of [OZ's counsel] is reprehensible and casts doubt on his credibility when he claims to have been cooperative in scheduling the deposition." Judge Seymour further observed that "[t]here is a long history of this defendant stonewalling the discovery process" and that OZ and its counsel have "continued to show a disregard for their obligation to provide discovery." "The referee believes that the conduct of [OZ's counsel] in serving a notice of deposition in the name of the plaintiff . . . was in bad faith as well as his failure to meet and confer on the scheduling of Jacobson's deposition." Judge Seymour recommended terminating sanctions and monetary sanctions of $2,400 against OZ and its counsel.
As to plaintiff's request for terminating sanctions against OZ for its refusal to comply with the court's order compelling response to the first set of form interrogatories, Judge Seymour noted that after having been ordered by the court to respond, OZ replied to one of the questions as follows: "`Responding party has not yet completed investigating the facts relating to this action, has not yet completed discovery in this action, and has not yet completed preparation for trial. Consequently, this responding party reserves the right to respond to this interrogatory once he has completed discovery in this action.'" Judge Seymour commented that he was "amazed at the Chutzpa of the defendant and its attorney. After all of this time and the difficulty that plaintiff has had, there is no valid basis for not providing a substantive response. Defendant's argument that the answer it provided . . . is sufficient to meet its obligations is incredible. Defendant's contention that plaintiff must meet and confer regarding his non-answer and file a further motion to compel is obstructionism. There was already a court order requiring defendant to answer. This case has been pending since January 18, 2005; it is in its fourth year. By now the defendant should have been able to figure out what its defense is. [¶] . . . Enough is enough. . . . The cumulative effect of these motions is to convince the referee that the defendant has no intention of following the rules. It would be highly prejudicial to the plaintiff to allow the case to continue in this fashion." Judge Seymour recommended granting terminating sanctions, and monetary sanctions in the amount of $3,000 against OZ and its counsel. Judge Seymour also recommended granting plaintiff's motions to compel responses to its second and third set of interrogatories propounded on OZ; he recommended sanctions in the amounts of $600 and $400 respectively. Judge Seymour recommended OZ be ordered to pay his fee of $1,800.
On January 23, 2008, JSB filed further points and authorities in support of its motion to reinstate its answer to plaintiff's complaint. Plaintiff filed his opposition on January 29, 2008. On February 5, 2008, the court heard the motion; the court deemed JSB's motion one for relief under section 473, subdivision (b), and granted it.
On February 27, 2008, Judge Seymour served a revised recommendation deferring his prior recommendation to issue terminating sanctions regarding the deposition of Jacobsen, to permit defendants to present Jacobsen for the taking of his deposition.
On March 4, 2008, the court adopted Judge Seymour's report and, in particular, Judge Seymour's recommendation to issue terminating sanctions against OZ; it did so despite Judge Seymour's revised recommendation. The court noted: "[OZ] has clearly not responded to Interrogatory 15.1, notwithstanding the Court's order to do so. It is interesting to note that [OZ] has not provided a declaration regarding any anticipated possible date when it would be able and willing to provide the information requested by Interrogatory 15.1." The court granted terminating sanctions against OZ on the latter basis, ordered that it pay sanctions of $3,000 to plaintiff, and deemed the first basis for terminating sanctions moot as a result of its previous ruling.
On March 17, 2008, the court signed a formal order adopting the discovery referee's report and recommendation issued on December 11, 2007.
On May 8, 2008, defendants filed a motion to withdraw their stipulation for the appointment of Judge Seymour as the discovery referee, to disqualify the discovery referee, and to vacate all prior recommendations made by him. Defendants alleged that Judge Seymour had extensive involvement with plaintiff and his counsel in other litigation that Judge Seymour "admitted was the most significant case in which he had ever been involved," but he had not disclosed that involvement in violation of his obligation of disclosure. Plaintiff opposed the motion. At the hearing on the motion on July 24, 2008, the court found that defendants had shown good cause to withdraw their stipulation due to Judge Seymour's failure to disclose his previous involvement as a discovery referee in another case in which plaintiff and plaintiff's counsel were involved. Thus, the court granted defendant's motion to withdraw their stipulation and to disqualify Judge Seymour as the discovery referee. However, while the court noted that the parties conceded Judge Seymour did not satisfy his disclosure requirements, "defendants provide no compelling legal authority or persuasive reason why the Court should vacate all of Judge Seymour's decisions." Indeed, the court noted that the parties had previously challenged some of Judge Seymour's recommendations and that the available procedure of judicial review for all of those recommendations "militates against the wholesale vacation of Judge Seymour's rulings." Therefore, the court denied defendant's motion to vacate all Judge Seymour's prior recommendations.
On September 24, 2008, JSB filed opposition to plaintiff's motion for terminating sanctions.
On October 6, 2008, the court held a hearing on the motion for terminating sanctions against JSB. The court noted that the basis for the motion was JSB's failure to provide originally verified responses to plaintiff's first set of interrogatories; JSB had provided only facsimile copies. However, plaintiff "has [now] received verified responses to the special interrogatories. This is not an instance of egregious abuse of discovery. Given the circumstances surrounding JSB's status in this action and the substitution of counsel, and the fact that responses were served less than 60 days after the answer was reinstated, terminating and issuing sanctions would be inappropriate." The court denied terminating sanctions and monetary sanctions.
On November 12, 2008, plaintiff filed another motion for terminating sanctions against JSB for its failure to turn over its internal books and records, citing the following: Plaintiff propounded the original demand for production on JSB on April 23, 2007. When plaintiff did not receive the requested documents, he filed a motion to compel responses on June 5, 2007. After a hearing on the matter, Judge Seymour issued his recommendation on July 12, 2007, that JSB be ordered to produce the subject documents and be monetarily sanctioned. On July 30, 2007, the court entered an order adopting Judge Seymour's recommendation. Plaintiff alleged that he had not received the requested documents.
On January 2, 2009, plaintiff filed documents with the court indicating that no oppositions had been received to plaintiff's (1) motion to compel responses to his third demand for production of documents (filed November 25, 2008); (2) motion to compel responses to his fourth special interrogatories (filing date unknown); (3) motion to compel responses to his fifth special interrogatories (filed November 25, 2008); and the motion for terminating sanctions (filed November 12, 2008).
On January 9, 2009, defendants filed a notice of objections to further proceedings, and request for an order rendering all orders issued after December 20, 2005, null and void, alleging the case had been dismissed on December 20, 2005, when it was removed to the bankruptcy court, and that plaintiff had never refiled his complaint.
On January 13, 2009, the court heard the motion for terminating sanctions and motions to compel. The court denied the motion for terminating sanctions: "Given the fact that JSB has responded to earlier discovery and provided documents, termination and issue sanctions are too harsh. JSB should be able to recompile the documents, if necessary, and serve its responses." Nevertheless, it granted monetary sanctions against JSB and its counsel in the amount of $2,840. The court granted plaintiff's motions to compel responses to the third demand for production of documents, and the fourth and fifth sets of special interrogatories. Plaintiff was awarded sanctions of $1,240 for each motion.
On January 26, 2009, plaintiff filed a motion to compel responses by JSB to his sixth set of special interrogatories.
On January 30, 2009, plaintiff filed another motion for terminating sanctions against JSB. The motion was based upon JSB's failure to comply with the court's prior order to provide documents, without objection, in response to plaintiff's first demand for production of documents (served April 23, 2007)..
On February 23, 2009, the court heard plaintiff's motion for terminating sanctions and to compel responses to his sixth set of interrogatories. The court granted plaintiff's motion to compel responses and awarded plaintiff sanctions in the amount of $240. The court likewise granted plaintiff's motion for terminating sanctions, ordered monetary sanctions against JSB and its counsel in the amount of $2,040, and ordered JSB's answer stricken. The court explained that it had denied plaintiff's prior motion for terminating sanctions based upon JSB's assertion that it had responded to the request for production of documents the day before the previous hearing. Nevertheless, that response stated that JSB "`had no accountant and has no accounting records such as financial reports, financial statements, financial summaries, bank reconciliation statements, ledgers, journals or tax returns.'" The court cited plaintiff's opposition, which argued that, as a corporation in good standing, JSB would have had to have filed tax returns, otherwise it would have had its corporate standing suspended. The court observed, "Interestingly, JSB makes no substantive response in its opposition as to whether or not it has tax returns and whether the response it provided was incorrect in some manner."
On June 2, 2009, plaintiff filed an application for entry of default judgments against both JSB and OZ. On June 5, 2009, default judgments were entered against JSB and OZ in the amount of $3,000,000.
On August 6, 2009, JSB filed a motion seeking to set aside the striking of its answer, essentially requesting relief from the judgment pursuant to section 473. Counsel for JSB alleged that his secretary failed to send out any of the 14 discovery requests propounded by plaintiff to JSB between September 8, 2008, and November 10, 2008 (when she was ultimately fired). Of the documents requested by plaintiff, JSB alleged the only two in existence were tax returns for 2004 and 2005; that tax returns for 2006 and 2007 had only recently, retroactively been filed when it was discovered that JSB had failed to file the returns in those years. "In the present case, JSB['s] sin was that of `omission' by not going to the California Franchise Tax board prior to providing its written responses, to see if any records existed. JSB asserts that its failure to comply with the court's order arose as a result of it's and Counsel's genuine misunderstanding that these records even existed." On August 13, 2009, JSB filed another substitution of attorney.
On September 18, 2009, plaintiff filed opposition to JSB's motion to set aside the striking of its answer. Plaintiff maintained that JSB's motion essentially conceded that none of its officers did any investigation regarding the requested documents until after the court's order granting terminating sanctions. Plaintiff noted that section 473 requires relief be granted only where the party had cured the prior dereliction by attaching the requisite material to the motion for relief; here, JSB had not attached the tax returns to its motion for relief, but promised to produce them only if the court granted the motion. Plaintiff pointed out what he deemed an unreasonable delay in filing the motion: the court granted plaintiff's motion for terminating sanctions on February 23, 2009; thus, JSB had waited more than five months before filing the instant motion. Finally, plaintiff asserted that rather than a request for mandatory relief pursuant to section 473, JSB was actually requesting reconsideration of the court's order pursuant to section 1008. JSB filed its reply on September 30, 2009. On October 1, 2009, after a hearing on the matter, the court denied JSB's motion.
On October 20, 2009, defendants filed a motion for new trial. Defendants contended the court had abused its discretion in granting terminating sanctions because defendants' failure to produce the tax documents was not willful, and that the documents would not have provided plaintiff an "automatic victory." Defendants maintained the unearthing of the tax returns qualified as newly discovered evidence pursuant to section 657, such that the court was required to grant them a new "trial." Moreover, defendants argued the damage award was excessive. Plaintiff filed opposition on December 2, 2009; defendants replied on December 9, 2009. On December 14, 2009, after a hearing on the matter, the court denied defendants' motion for new trial.
Defendants argue that the court erred in granting terminating sanctions against them. Moreover, defendants contend the court abused its discretion in failing to vacate Judge Seymour's recommendations after he was disqualified. We hold the court acted within its discretion.
Terminating sanctions are authorized for misuses of the discovery process, which include failing to respond or to submit to an authorized method of discovery (§ 2023.010; Liberty Mutual Fire Ins. Co. v. LcL Administrators, Inc. (2008) 163 Cal.App.4th 1093, 1101.) "The question before us `"is not whether the trial court should have imposed a lesser sanction; rather, the question is whether the trial court abused its discretion by imposing the sanction it chose."' [Citations.]" (Liberty, at pp. 1105-1106.) Obstinacy or recalcitrance in failure to produce documents or provide proper written answers to discovery justifies the imposition of terminating sanctions. (Reedy v. Bussell (2007) 148 Cal.App.4th 1272, 1292-1293.) However, "[t]he sanction of dismissal or the rendition of a default judgment against the disobedient party is ordinarily a drastic measure which should be employed with caution. [Citations.]" (Deyo v. Kilbourne (1978) 84 Cal.App.3d 771, 793 (Deyo), superseded by statute on other grounds in Guzman v. General Motors Corp. (1984) 154 Cal.App.3d 438, 444.) "Dismissal is not authorized when it is established that the failure to comply has been due to inability, and not to the willfulness or bad faith, or any fault of the party previously ordered to comply. [Citations.]" (Deyo, at p. 794.)
Despite the policy favoring trial on the merits, an order granting a terminating sanction is still a matter within the court's broad discretion, subject to reversal only for manifest abuse exceeding the bounds of reason. (Reedy v. Bussell, supra, 148 Cal.App.4th at p. 1293.) In making such an order, the court considers the totality of the circumstances: whether the party's actions were willful; whether the propounding party will suffer detriment; and the number of formal and informal attempts to obtain the discovery. (Lang v. Hochman (2000) 77 Cal.App.4th 1225, 1246.) Such an order will be affirmed despite the availability of a lesser sanction, where there is no indication such lesser sanction would be effective. (Reedy, at p. 1293; see also Lang, at pp. 1245-1246.)
Here, plaintiff clearly established that JSB's failure to comply with the motion to compel production of its tax returns was not due to its inability to do so; rather, overwhelming evidence establishes that JSB's refusal to produce the requisite documents was the product of willful bad faith. Plaintiff propounded the original demand for production on JSB on April 23, 2007. When plaintiff did not receive the requested documents, he filed a motion to compel on June 5, 2007. After a hearing on the matter, Judge Seymour issued his recommendation on June 12, 2007, that JSB be ordered to produce the subject documents and be monetarily sanctioned. On July 30, 2007, the court entered an order adopting the discovery referee's recommendation. After receiving no response, plaintiff sent JSB a reminder letter on October 31, 2008. As of November 12, 2008, plaintiff had not yet received the documents; thus, he filed his fourth motion for terminating sanctions against JSB on that date.
The court explained it had denied plaintiff's prior motion for terminating sanctions against JSB based on the latter's assertion that it had responded to the request for production of documents the day before the previous hearing. The response stated that JSB "`had no accountant and has no accounting records such as financial reports, financial statements, financial summaries, bank reconciliation statements, ledgers, journals or tax returns.'" Plaintiff argued that, as a corporation in good standing, JSB would had to have filed tax returns, otherwise, JSB would have had its corporate standing suspended. The court observed, "Interestingly, JSB makes no substantive response in its opposition as to whether or not it has tax returns and whether the response it provided was incorrect in some manner."
Indeed, subsequent events reflect that at least two of the documents requested by plaintiff, tax returns for 2004 and 2005, were in existence and were not produced earlier solely due to JSB's failure to conduct any investigation into the matter until after the court issued the terminating sanction. Likewise, two more documents, tax returns for 2006 and 2007, which did not exist when originally requested, were retroactively filed; thus, if JSB had made even the slightest investigation into the matter when the request was first propounded, it would have discovered the oversight and should have acted promptly to correct the matter. The sheer number of formal and informal requests by plaintiff for the documents, the number of court orders compelling the proper production of the documents, the denial of a previous motion for terminating sanctions as to that exact same request, and JSB's failure to make even a cursory investigation into the matter until after the court had issued a terminating sanction, strongly reflect that no lesser sanction would have compelled JSB to respond properly. Indeed, nearly six months after the order granting terminating sanction, when JSB filed its motion to reinstate its answer, JSB had still failed to produce the documents—it did not even attach the tax returns to the motion to reinstate.
Finally, we do not look at JSB's failure to produce the documents at issue in this specific discovery request in a vacuum. Indeed, we look at the "totality of the circumstances," which further reinforces the trial court's decision to issue terminating sanctions. (Lang v. Hochman, supra, 77 Cal.App.4th at p. 1246.) Here, as recounted in our procedural history, JSB's failures to respond to discovery requests were legion. Even when JSB did respond to discovery requests, it often responded improperly, i.e., with unverified responses, untimely responses, or denials of the existence of documents that patently existed. JSB refused to respond to discovery requests issued prior to its default, even after plaintiff had stipulated to setting aside that default, on the contention that the stipulation had completely reset all discovery matters. The court noted, "as far as the Court is concerned, there is no stipulation regarding dates concerning discovery. [¶] You are ordered to comply with all of the discovery at this time voluntarily to avoid sanctions." Later, when JSB asserted that discovery had been stayed until the appointment of a discovery referee, the court quickly dispensed with this argument, stating: "the court made [no] such . . . order. And the Court fully expects you to proceed with discovery to the extent possible until you get an order from the court . . . ." Despite the order, JSB compounded its bad faith by arguing to Judge Seymour, in direct contravention of the court's direction, that discovery had been stayed by the stipulation. Like the court, Judge Seymour concluded the stipulation did not invalidate the request's service of process or affect its timelines; the demand was valid and JSB had failed to respond.
Counsel for JSB made it abundantly clear that his client completely refused to participate in discovery. JSB waited months to obtain counsel despite knowing of Graff's intent to be relieved. After it acquired new counsel, JSB twice filed for extensions of time to respond to discovery. In denying the latter request, Judge Seymour noted, "the defendant is not meeting its responsibilities to the court and is engaging in obstructive tactics." Thus, JSB's failure to meet its discovery obligations was the product of calculated efforts to stall the progress of the case and, hence, were clearly within the broad discretion of the court to issue terminating sanctions.
Defendants note one court held "it was an abuse of discretion to strike an answer where the plaintiff was unable to find copies of tax returns . . . ." (Deyo, supra, 84 Cal.App.3d at p. 794, fn. 28.) However, here it was not that JSB was unable to find copies of its tax returns, but that it simply did not look for them even after a motion to compel their production had been granted. Indeed, JSB did not look for the tax returns until after a motion for terminating sanctions, for its failure to produce them, had been denied.
Further, JSB argues that the "penalty imposed by a sanction . . . should be appropriate to the dereliction and should not exceed that which is required to protect the interest of the party which is owed discovery. [¶] `Where a motion to compel has previously been granted, the sanction should not operate in such a fashion as to put the prevailing party in a better position than he would have had if he had obtained the discovery sought and it had been completely favorable to his cause.' [(Deyo, supra, 84 Cal.App.3d at p. 793)]." Here, however, we simply have no way of knowing whether the terminating sanctions put plaintiff in a better position—production of the documents very well could have established JSB's liability. Moreover, it is clear from this record that JSB's intransigence on discovery matters would have prohibited any other resolution of the lawsuit. The court acted well within its broad discretion in issuing the terminating sanctions against JSB.
Similarly, the court's order granting terminating sanctions against defendant OZ was well within its discretion. Like JSB, OZ was the object of numerous motions to compel discovery. Many of these motions were unopposed, signifying OZ had no substantive reason for failing to respond. When Judge Seymour considered the first five unopposed motions to compel discovery filed against OZ, he recommended granting all of them, along with monetary sanctions and the fees for his services. Judge Seymour recommended granting another two later-filed motions to compel against OZ, along with monetary sanctions and costs. Still later, Judge Seymour recommended granting another four motions to compel discovery requests against OZ.
Between August 30, 2007, and December 5, 2007, plaintiff filed two separate motions for terminating sanctions against OZ for its failure to comply with orders after motions to compel discovery. Judge Seymour castigated OZ and its counsel for its "reprehensible" manner of responding to an order compelling the taking of a deposition. Judge Seymour noted that OZ and its counsel lacked credibility as to its claims that it had attempted to comply. Judge Seymour further observed: "There is a long history of this defendant stonewalling the discovery process. The defendant and its new counsel were given the benefit of the doubt based on their representations that defendant's prior attorney had not communicated with it. Defendant and its new counsel were on notice that the referee and the court had given them a second chance to demonstrate their good faith by cooperating with the discovery process. They failed to avail themselves of this reprieve and continued to show a disregard for their obligation to provide discovery." Judge Seymour expressly found that OZ and its counsel had acted in bad faith, and consequently recommended terminating sanctions.
As to plaintiff's second motion for terminating sanctions against OZ, for failure to properly respond to form interrogatories, Judge Seymour stated that he was "amazed at the Chutzpa of the defendant and its attorney" in failing to respond substantively to form interrogatory No. 15.1. Judge Seymour characterized OZ's contention, that another meet and confer was required, as yet another attempt at "obstructionism." "There was already a court order requiring defendant to answer. This case has been pending since January 18, 2005; it is in its fourth year. By now the defendant should have been able to figure out what its defense is. [¶] . . . Enough is enough. . . . The cumulative effect of these motions is to convince the referee that the defendant has no intention of following the rules. It would be highly prejudicial to the plaintiff to allow the case to continue in this fashion." Judge Seymour recommended granting terminating sanctions.
The court adopted the discovery referee's report and, in particular, the discovery referee's recommendation to issue terminating sanctions. The court noted: "[OZ] has clearly not responded to Interrogatory 15.1, notwithstanding the Court's order to do so. It is interesting to note that [OZ] has not provided a declaration regarding any anticipated possible date when it would be able and willing to provide the information requested by Interrogatory 15.1." The court granted terminating sanctions against OZ.
OZ, represented by the same attorneys as JSB, demonstrated that it willfully engaged in obstructionist policies in an effort to stall or grind the proceedings to a standstill. OZ's initial counsel, as discussed above, stated that defendants refused to comply with his efforts to respond to the discovery requests. Indeed, Judge Seymour explicitly characterized OZ as acting in "bad faith" and "stonewalling." This is precisely the type of situation envisioned for the issuance of terminating sanctions. It is difficult, if not impossible, to think of a lesser sanction that had not already been attempted, which would have resulted in OZ fulfilling its discovery obligations. OZ, like its codefendant, engaged in a pattern of refusing to comply with the most minimal of its discovery obligations, such that the court acted well within its broad discretion in issuing terminating sanctions.
Indeed, even to the extent the court could be held to have abused its discretion in issuing terminating sanctions as to OZ's failure to substantively respond to interrogatory 15.1, it is difficult to determine the harm OZ suffered. Another motion for terminating sanctions against OZ was simultaneously pending. That motion concerned OZ's failure to provide Jacobsen for his deposition years after the deposition was initially requested; years after the court granted an order compelling the deposition; and after the court had previously denied terminating sanctions on the same issue. The court ruled that the motion was moot due to its granting of terminating sanctions on the first motion; however, even if the court had denied the first motion, there is no showing here that the court would not have issued precisely the same ruling as to the latter motion. Indeed, "Dismissal may be appropriate where a party refuses to appear for scheduled depositions. [Citations.]" (Deyo, supra, 84 Cal.App.3d at p. 795, fn. 29.)
Defendants contend the court abused its discretion in denying their motion to vacate all the recommendations issued by Judge Seymour prior to the court's disqualification of him. Thus, defendants effectively argue that all the court's orders based on Judge Seymour's recommendations should, likewise, be vacated. We disagree.
Defendants cite only North Beverly Park Homeowners Assn v. Bisno (2007) 147 Cal.App.4th 762, 768, for their contention that the disqualification of Judge Seymour rendered all his recommendations per se void. North Beverly Park is readily distinguishable. First, North Beverly Park involved the disqualification of a judge empowered to render enforceable orders; the disqualified judge had entered a permanent injunction against the defendants, which was affirmed on appeal. (Id. at p. 765.) Here, Judge Seymour was a discovery referee empowered only to issue unenforceable recommendations. The trial court's orders granting plaintiff's motions were separate, enforceable actions rendered entirely within the trial court's discretion, wherein it could accept or reject Judge Seymour's recommendations in total or in part. In fact, the trial court here disregarded at least one of Judge Seymour's recommendations when it determined to proceed with plaintiff's motion for terminating sanctions, despite Judge Seymour's revised recommendation to wait to allow OZ to comply with the motion to compel Jacobson's deposition. As the court found, the available procedure of judicial review for all of those recommendations "militates against the wholesale vacation of [Judge Seymour's] rulings." The trial court effectively reviewed Judge Seymour's recommendations and issued its own orders based on its own determinations, necessarily rendering vacation of the recommendations unnecessary.
Second, Judge Seymour's disqualification had nothing to do with any overt bias or suspect dealings with plaintiff or his counsel. Rather, Judge Seymour was disqualified for his failure to disclose that he had acted as a discovery referee in another case involving plaintiff and his counsel. Although such a basis certainly entitled defendants to withdraw their stipulation to Judge Seymour's appointment and supported his disqualification from handling further matters in the case, it hardly impugned the neutrality or validity of his recommendations. (See U.S. v. Murphy (1985) 768 F.2d 1518, 1541 [judicial acts taken before disqualification motion may not be set aside unless litigant shows actual impropriety or prejudice].) Indeed, Judge Seymour issued recommendations in favor of defendants. Moreover, as discussed above, the record reflects ample supportive evidence for Judge Seymour's recommendations against defendants, and the court's subsequent adoption of them and granting the orders at issue. Thus, the court acted within its discretion in denying defendants' request to vacate all of Judge Seymour's recommendations.
JSB contends that the court abused its discretion in denying its motion for relief from default. We disagree.
"Section 473, subdivision (b), authorizes the trial court to relieve a party from a default judgment entered because of the party's or his or her attorney's mistake, inadvertence, surprise, or neglect. The section provides for both mandatory and discretionary relief. Mandatory relief is available `whenever an application for relief is made no more than six months after entry of judgment, is in proper form, and is accompanied by an attorney's sworn affidavit attesting to his or her mistake, inadvertence, surprise, or neglect . . . .' [Citation.] `[I]f the prerequisites for the application of the mandatory provision of section 473, subdivision (b) exist, the trial court does not have discretion to refuse relief.' [Citation.] Thus, to the extent that the applicability of the mandatory relief provision does not turn on disputed facts, but rather, presents a pure question of law, it is subject to de novo review. [Citation.] Where the facts are in dispute as to whether or not the prerequisites of the mandatory relief provision of section 473, subdivision (b), have been met, we review the record to determine whether substantial evidence supports the trial court's findings. [Citation.] Evidence is substantial when it is of `"`ponderable legal significance,'"' reasonable, credible, and of solid value. [Citation.]" (Carmel, Ltd. v. Tavoussi (2009) 175 Cal.App.4th 393, 399.)
Where the mandatory relief provisions do not apply, a trial court's order denying relief is reviewed under the abuse of discretion standard. "[A] trial court order denying relief under section 473, subdivision (b) is `"scrutinized more carefully than an order permitting trial on the merits."' [Citation.] `Because the law favors disposing of cases on their merits, "any doubts in applying section 473 must be resolved in favor of the party seeking relief from default [citations]."' [Citation.] But . . ., `[a] motion to vacate a default and set aside judgment (§ 473) "is addressed to the sound discretion of the trial court, and in the absence of a clear showing of abuse . . . the exercise of that discretion will not be disturbed on appeal." [Citations.] Moreover, all presumptions will be made in favor of the correctness of the order, and the burden of showing abuse is on the appellant. [Citation.]' [Citations.]" (Hearn v. Howard (2009) 177 Cal.App.4th 1193, 1200.)
In Jerry's Shell v. Equilon Enterprises, LLC (2005) 134 Cal.App.4th 1058, 1069, the reviewing court considered "whether section 473(b) provides relief where counsel chooses not to respond to discovery in a timely fashion or to oppose a motion for terminating sanctions, and the case is dismissed." In Jerry's Shell, the appellant ignored discovery requests and the trial court's order compelling discovery. (Id. at p. 1073.) The reviewing court explained that if it found trial counsel's actions were subject to mandatory relief, then it "would be rewarding and encouraging [trial counsel's] wholly improper conduct." (Id. at p. 1074.) The appellate court concluded, "A party cannot justly be permitted to seek relief under section 473(b) from sanctions imposed for deliberate failure to respond to discovery or oppose discovery motions." (Ibid.) Therefore, the reviewing court affirmed the denial of the appellant's motion for relief. (Ibid.) "Lack of diligence may be deemed willful in the sense that the party understood his obligation, had the ability to comply, and failed to comply. [Citation.]" (Deyo, supra, 84 Cal.App.3d at p. 787.) "Indeed, the party on whom interrogatories were served has the burden of showing that the failure was not willful. [Citation.]" (Id. at p. 788.)
We find the reasoning of Jerry's Shell v. Equilon Enterprises, LLC, supra, to be persuasive, and adopt it herein. JSB cannot be granted mandatory relief when it was informed of the multiple discovery requests and court orders, but deliberately chose not to respond or even investigate them. JSB's original attorney asserted that JSB declined to even communicate with him regarding discovery matters, completely negating his ability to respond. JSB was found to be engaged in "obstructive tactics." The facts at issue simply do not demonstrate any "mistake, inadvertence, surprise, or neglect," such that JSB would be entitled to mandatory relief pursuant to section 473, subdivision (b). Rather, the facts reflect a failed strategy of deliberately refusing to abide by discovery protocols.
Indeed, as the court below reasoned, "the Court does not believe [section 473] relief is warranted. . . . [T]here was no showing that the investigation could not have been done in the years prior to the original discovery motion and the motion for terminating sanctions. The original request for discovery was served in 2007. It was not until after the motion for terminating sanctions was granted that Jacobson undertook any investigation into the filing of tax returns. JSB failed to meet its discovery obligations, failed to investigate after a motion to compel, and only undertook an investigation into the filing of tax returns after its answer had been stricken."
Finally, the court found JSB's motion untimely; the motion for terminating sanctions was heard on February 23, 2009, and the motion for relief from default was not filed until August 5, 2009, nearly a six-month delay. The court's ruling was within its discretion.
Defendants contend the court abused its discretion in denying their motion for new "trial." We disagree.
Pursuant to section 657, "The verdict may be vacated and any other decision may be modified or vacated, in whole or in part, and a new or further trial granted on all or part of the issues, on the application of the party aggrieved [for reasons] materially affecting the substantial rights of such party" such as newly discovered evidence, excessive damages, and/or an error in law occurring at the trial and objected to by the "aggrieved" party. "[A] trial judge is accorded a wide discretion in ruling on a motion for new trial and . . . the exercise of this discretion is given great deference on appeal. [Citations.]" (City of Los Angeles v. Decker (1977) 18 Cal.3d 860, 871-872.) "[I]t is our duty to review all rulings and proceedings involving the merits or affecting the judgment as substantially affecting the rights of a party [citation], including an order denying a new trial. In our review of such order denying a new trial, as distinguished from an order granting a new trial, we must fulfill our obligation of reviewing the entire record, including the evidence, so as to make an independent determination as to whether the error was prejudicial. [Citations.]" (Id. at p. 872)
There is some disagreement over whether a party, particularly one against whom a default judgment has been entered, may file a motion for new "trial" where no trial has occurred. In Jacuzzi v. Jacuzzi Bros., Inc. (1966) 243 Cal.App.2d 1, 23-24, the court held a court could grant relief similar to that requested in a new trial motion where judgment had been entered based upon sanctions for failing to answer interrogatories. Likewise, in Misic v. Segars (1995) 37 Cal.App.4th 1149, 1154, the court held that the "`defendant can attack the default judgment in the trial court by motion for new trial on the ground of "excessive or inadequate" damages or "because the verdict or decision is against the law[.]"'" Similarly, in Don v. Cruz (1982) 131 Cal.App.3d 695, 704, the court saw "no reason to preclude a defaulting party from seeking a new trial (or, more precisely, a new judgment hearing) on the ground that damages are excessive as a matter of law when the same contention may be urged on direct appeal from the default judgment."
However, in Devlin v. Kearney Mesa AMC/Jeep/Renault, Inc. (1984) 155 Cal.App.3d 381, 385-386, the court held that "`A defendant against whom a default has been entered is out of court and is not entitled to take any further steps in the cause affecting plaintiff's right of action; he cannot thereafter, until such default is set aside in a proper proceeding, file pleadings or move for a new trial or demand notice of subsequent proceedings.'" (Italics added.) Correspondingly, the court in Smith v. Superior Court (1976) 64 Cal.App.3d 434, exposited the decision in Jacuzzi v. Jacuzzi Bros., Inc., supra, and found that the motion filed in that case was not a motion for new trial in title or form, was never regarded by counsel or the court as such, and could not have been one "since the case had not been tried"; thus, it concluded that Jacuzzi does not support consideration of a new trial motion in a case where a defendant's default has been entered. (Smith, at p. 437.)
Nevertheless, regardless of whether a motion for new trial was the proper vehicle for seeking reconsideration of the court's order, we discern no abuse of discretion in the court's denial of defendants' motion. Defendants' motion for new trial was premised on three bases: excessive damages, error of law in granting the motions for terminating sanctions, and newly discovered evidence (the 2004 & 2005 tax returns). As to the latter basis, we hold that JSB failed to exercise the requisite "reasonable diligence in discovering and producing" the allegedly new evidence. (Doe v. United Airlines, Inc. (2008) 160 Cal.App.4th 1500, 1506.) As noted above, JSB failed to even investigate the existence of the tax returns until after terminating sanctions had been granted. As to the first basis, we note defendants contended the real property at issue in this case was worth no more than $1,000,000. However, as plaintiff demonstrated in his opposition to the motion, defendants averred in their cross-complaint in this same action that the property was "worth in excess of $5,000,000."
The judgment is affirmed. Respondent is awarded his costs on appeal.
We concur:
McKINSTER, Acting P. J.
CODRINGTON, J.
