April 7, 2010
DAVID CHAYON AND SUSAN CHAYON, PLAINTIFFS-APPELLANTS,
GREAT NORTHERN INSURANCE COMPANY, DEFENDANT, AND ASTROCARE FIRE AND WATER RESTORATION, INC., DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-9610-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued December 1, 2009
Before Judges Lihotz and Ashrafi.
Plaintiffs David Chayon and Susan Chayon filed this action against their homeowners insurance carrier, defendant Great Northern Insurance Company, d/b/a Chubb Insurance, (Great Northern), and the company hired by Great Northern to perform mold remediation, Astrocare Fire and Water Restoration, Inc. (Astrocare).*fn1 Plaintiffs alleged Great Northern improperly rejected their claim for damages to their real and personal property, and Astrocare negligently remediated a mold condition in the home.
The court ordered dismissal of plaintiffs' complaint after finding they failed to comply with defendants' discovery demands. Plaintiffs appealed. Great Northern filed a defensive cross-appeal challenging as error the trial court's earlier denials of its motions for summary judgment and dismissal.
On March 4, 2009, plaintiffs and Great Northern resolved their dispute through the Civil Appeals Settlement Program. The remaining issues on appeal center on the dismissal of plaintiffs' claims against Astrocare. Following our review of the arguments presented in light of the record and applicable law, we affirm.
Initially, we detail the underlying facts and procedural history. Plaintiffs' home experienced water intrusion through a kitchen greenhouse window, causing significant mold contamination behind the kitchen sink, inside the kitchen walls and on multiple surfaces. Mold was also discovered in the basement, resulting from water leakage through the walls and excessive moisture levels in the concrete slab floor, due to a deficient foundation drainage system.
As a result of the toxic mold levels, the home was not habitable. In November 2003, plaintiffs submitted a claim to Great Northern under the terms of their homeowners policy. Great Northern engaged Astrocare to perform mold remediation in the kitchen, expending "over $600,000" for repair of the premises, replacement of personal property, and payment of plaintiffs' alternative living expenses. Citing policy exclusions, Great Northern denied plaintiffs' claims for repairs to the kitchen window and remediation of the basement contamination. Prior to the completion of work in the kitchen, plaintiffs were asked to repair the defective rotted kitchen window and accompanying cracks in the basement walls. They declined. As a result of this impasse, Astrocare's work efforts ceased.
On November 30, 2004, plaintiffs filed a complaint against Great Northern alleging it failed to comply with the policy's coverage terms. The complaint was amended to add Astrocare, alleging it failed to perform and negligently performed the remediation services, resulting in the spread of mold, causing additional damage to plaintiffs' real and personal property.
On August 21, 2006, Astrocare submitted to plaintiffs' interrogatories and notice to produce documents. Thereafter, plaintiffs submitted similar discovery demands to Astrocare. After their attorney withdrew, a second set of interrogatories and notice to produce were sent by Astrocare directly to plaintiffs. Despite repeated requests, these discovery demands went unanswered. In January 2007, a substitution of counsel was filed by plaintiffs' current attorney.
On January 5, 2007, following the discovery end date, Astrocare filed its first motion to dismiss plaintiffs' complaint for failure to respond to discovery. The trial court entered a case management order on January 26, 2007, requiring plaintiffs to respond to Astrocare's discovery demands by February 15, 2007. Astrocare then adjourned its motion to dismiss to February 16, 2007. Trial was scheduled for May 7, 2007.
On February 1, 2007, plaintiffs provided inspection and remediation reports prepared by their expert, August L. DeVico, REM, CSS, of August Compliance Solutions, Inc. On February 5, 2007, plaintiffs re-sent their original discovery requests to which Astrocare responded by February 13, 2007. In a letter dated March 5, 2007, plaintiffs submitted another summary report from Mr. DeVico; a preliminary engineering report from James Cohen, P.E.; an invoice from Miquel Barahona, for work performed totaling $148,500; a proposal from Elegant Stone; three invoices from Czar Incorporated; an invoice from Bury Brothers, Inc.; and an estimate from Lusitana-Liberty Construction. Finally, plaintiffs asserted all of these individuals or entities were to be considered "as fact and/or expert witnesses whom [sic] may be called to testify at the time of trial." No further explanation of the nature of the testimony was included.
In a letter dated April 4, 2007, Great Northern itemized all discovery received and the outstanding documents. The missing proofs included: (1) verification of ownership of the residence; (2) documents, photographs, contractor receipts and purchase orders for any remodeling, renovating, repairing or refurbishing of the home from 1989 to 2007; (3) proof of payment for any of these items; (4) documents showing the purchase and providing the value of the claimed damaged contents; (5) correspondence with Great Northern regarding the claims; and (6) any claims made to insurance carriers other than Great Northern. Later that month, Great Northern moved to dismiss plaintiffs' complaint for failure to provide this discovery.
On May 10, 2007, returnable May 11, 2007, Astrocare filed its motion to dismiss plaintiffs' complaint without prejudice for failure to provide discovery. That same day, plaintiffs sent certain responses to Astrocare's interrogatories and document demand and requested the motion be withdrawn.
The court denied Astrocare's motion to dismiss; then, during a second case management conference conducted on June 19, 2007, entered various discovery deadlines, including dates for the exchange of additional expert reports and conducting depositions, and rescheduled trial for December 10, 2007. Plaintiffs submitted another list of alleged expenditures with some documentation, a report from Dominick Paglia, and photographs of the alleged damages. Also, plaintiffs restated their inability, as a result of the mold contamination, to secure an appraisal of their personal property. However, plaintiffs proposed to provide testimony regarding the items and their value to support their claims.
On August 10, 2007, the court granted Great Northern's motion to dismiss plaintiffs' complaint without prejudice for failure to provide the discovery listed in the April 4, 2007 letter. R. 4:23-5(b). Plaintiffs corresponded to defendants on August 23, 2007, in which, among other things, they (1) reiterated their inability to obtain an expert to appraise their personalty until the mold was remediated; (2) asserted they reserved the right to call any party or expert named and use any document provided in discovery; (3) stated they had no additional documents to support their claims for living expenses, or the remodeling, renovating, repairing or refurbishing of the residence; and (4) identified a prior certification attesting to their ownership of the residence since 1980.
A third case management order, filed on October 22, 2007, reinstated plaintiffs' complaint based upon counsel's representations that plaintiffs had complied with the past discovery orders. The court again addressed outstanding discovery, specifically instructing defendants to move to compel more responsive answers to the interrogatories or seek other relief by November 16, 2007. The order required all discovery to be completed by April 7, 2008, and trial was set for June 9, 2008. After the case management conference, plaintiffs sent correspondence copying their two earlier letters transmitting discovery; no new information was provided.
After obtaining an extension, Great Northern moved to dismiss plaintiffs' complaint with prejudice as a result of their continued non-compliance with its discovery demands. Astrocare filed its own motion seeking the same relief.
Plaintiffs opposed the motions, maintaining they had fully complied with the most current case management order. Additionally, plaintiffs argued Astrocare had not obtained permission to file a late motion and that its failure to remediate the mold in the garage prevented an expert's assessment of the damage to the property; therefore, they should be permitted to provide lay opinion testimony as to its value.
The trial court entered an order on December 7, 2007, allowing plaintiffs twenty days to comply with the discovery provisions set forth in the October 22, 2007 order. The new order stated that failure to do so might lead to dismissal of the complaint against Astrocare. In a separate order, Great Northern's motion was granted in part: plaintiffs' complaint was dismissed without prejudice, and they were precluded from submitting proofs to support any alleged damages. Plaintiffs' motion for reconsideration or clarification was denied.*fn2
Prior to trial, Great Northern moved to dismiss all claims with prejudice. Astrocare filed a cross-motion, which also sought dismissal. Plaintiffs' opposition to Great Northern's motion suggested the discovery lapses were limited solely to the value of their contaminated personalty and, further, asserted that all other discovery, including expert reports delineating the cost and extent of mold remediation, had been provided. Plaintiffs opposed Astrocare's cross-motion as untimely and an improper application in response to Great Northern's motion. The court considered oral argument on April 11, 2008.
Great Northern argued plaintiffs failed to vacate the December 7, 2007 order or provide additional discovery. In response to the court's inquiry, Great Northern itemized the discovery deficiencies and restated its demands contained in counsel's April 4, 2007 letter, which included: answers to three damage interrogatories; proof of ownership of the realty; documentary proofs regarding the costs of repair, remodeling, or replacement done in the home; canceled checks evincing the cost of the personal property and the costs paid to contractors; appraisal reports; and photographs.
Astrocare asserted plaintiffs' expert report catalogued the extent of the mold in their home but did not substantiate their asserted claims of negligent performance. Further, Astrocare argued plaintiffs failed to provide necessary, relevant, requested documentation to support their damage claims; specifically, they had never provided certified answers to interrogatories. The responses that were submitted were incoherent, non-responsive, suggested information would be supplied later, or evinced a refusal to answer. Also, plaintiffs supplied only hand-written estimates of "high priced personal items allegedly damaged by mold."
Plaintiffs conceded they had not responded to the damage interrogatories, inadvertently believing Great Northern had waived responses in favor of receipt of documents. Additionally, plaintiffs admitted they could not produce an expert report or other documents regarding the value of their contaminated personalty. However, they rejected Great Northern's other assertions and maintained they had provided all proofs "in their possession." Counsel argued,
I've provided those things, except for the personal property and even though --even that, there's been a list previously provided. It's just not an updated appraisal.
So, I mean, there obviously is either a discrepancy on what [Great Northern's Counsel] thought was satisfactory to him, but as I previously pointed out, these items -- and I attached a whole list of those items to my prior opposition of what I gave them, not to mention everything that the carrier has had for years based upon the original admission of this claim. So --
I can only produce what I have and what the clients have. And if it satisfies a burden of proof and it's only a matter of credibility, that's my argument. My argument is they're saying its not satisfactory to them. What I'm saying is, it satisfies their document demand and if it lacks the substance that they wanted, well, that's an issue for them on cross-examination of either my clients, the experts, the various contractors that provided those documents, and that I'm relying upon, that's what I'm saying.
The court requested Great Northern to supply correspondence "reciting all outstanding discovery" along with an explanation of "why and to what extent it continues to be outstanding." Astrocare's motion was determined to be dependent on the disposition of Great Northern's motion.
In its post-motion submission, Great Northern again itemized those items outstanding since April 2007. It further explained the difficulty with plaintiffs' contentions expressed at oral argument, stating Plaintiffs now allege that they do not "possess" documents responsive to the outstanding requests. A review of requests "c" and "d" above for "cancelled checks, receipts, or credit cards relating to the payment for... the contents" and "receipts, appraisals, invoices and/or photographs proving the one-time existence and value of the contents at issue in the claim" proves this position is without merit. Between September 21, 2005 and November 1, 2005, plaintiff submitted seven separate lists related to personal property allegedly damaged by mold.... By way of example, on September 30, 2005, plaintiffs submitted a list of items with a purported value of $107,600. It is not readily apparent why plaintiffs could not provide a single complete list of the allegedly damaged items.
Plaintiffs' inventory of items contains many high ticket items. Undoubtedly, assuming the items exist, there are cancelled checks or credit card statements which will substantiate these purchases and will assist in establishing their actual existence and value.
One of the interrogatories that plaintiffs have refused to answer seeks the identification of all persons involved in remodeling, renovating, repairing, altering, and/or refurbishing the property from 1989 to 2007.... It has not been answered[.]
It is evident that this interrogatory could lead to the discovery of admissible evidence. Assuming repairs or renovations were made, to the home prior to the November 2003 claim, the individuals involved may have knowledge of pre-existing conditions which would effect plaintiffs' rights under the General Northern policy. Such individuals may have knowledge regarding the condition of plaintiffs' property and contents prior to the loss at issue.
The court's June 5, 2008 bench opinion addressed the posture of the discovery dispute and noted plaintiffs' failure to file a motion to vacate or submit additional discovery within ninety days of the order dismissing their complaint without prejudice. The court stated:
It appears to the [c]court that the plaintiffs have, indeed, an obligation to produce this documentation under the terms of the policy in order to receive the benefits of the policy and to comply with the cooperation clauses, which is [sic] a material provision of the policy, and a breach of which could substantiate a forfeiture of coverage on the part of the insured.
The requests that have been made appear to the [c]court to be reasonable and relevant. The [c]court has made repeated attempts by virtue of its case management order, by virtue of its orders, to obligate the plaintiffs to produce requested materials relevant to their various damage claims in this lawsuit and they have not done so.
The plaintiffs have never served fully responsive answers. They've never filed a motion to reinstate their complaint.
The court granted Great Northern's motion to dismiss plaintiffs' complaint with prejudice, pursuant to Rule 4:23-5(a)(2). Astrocare's cross-motion to dismiss with prejudice was similarly granted. Plaintiffs sought reconsideration, which was denied. Plaintiffs' appeal ensued.
We "normally defer to a trial court's disposition of discovery matters" unless there has been an abuse of discretion. Connolly v. Burger King Corp., 306 N.J. Super. 344, 349 (App. Div. 1997); see also St. James AME Dev. Corp. v. Jersey City, 403 N.J. Super. 480, 484 (App. Div. 2008) (stating whether to grant a motion to reinstate a complaint lies within the sound discretion of the trial court). In our examination of a court's exercise of discretionary authority "to manage the conduct of cases and to make rulings, even those with substantive effect, that stem from procedural considerations or reflect the manner in which the parties have litigated the case," Cosme v. Borough of E. Newark Tp. Comm., 304 N.J. Super. 191, 202 (App. Div. 1997), certif. denied, 156 N.J. 381 (1998), we reverse only when the exercise of discretion was "manifestly unjust" under the circumstances. Union County Imp. Auth. v. Artaki, LLC, 392 N.J. Super. 141, 149 (App. Div. 2007)(citing Gittleman v. Cent. Jersey Bank & Trust Co., 103 N.J. Super. 175, 179 (App. Div. 1967), rev'd on other grounds, 52 N.J. 503 (1968)). "[I]t is not the appellate function to decide whether the trial court took the wisest course, or even the better course" as we do so not substitute our judgment for that of the trial court. Gittleman, supra, 103 N.J. Super. at 179; see also Abtrax Pharms., Inc. v. Elkins-Sinn, Inc., 139 N.J. 499, 517 (1995); Calabrese v. Trenton State College, 162 N.J. Super. 145, 151-52 (App. Div. 1978), aff'd, 82 N.J. 321 (1980).
On appeal, plaintiffs first suggest Astrocare's use of a cross-motion in response to Great Northern's motion to dismiss was procedurally improper. Moreover, they maintain the motion was untimely. We agree that Astrocare's application was improperly labeled a "cross-motion"*fn3 for the likely purpose of having it heard on the same return date as Great Northern's motion. Also, the motion was filed beyond the deadline stated in the case management order. However, we disagree that the court's consideration of Astrocare's request for relief was an abuse of discretion.
Great Northern was granted permission to file its motion out of time. Astrocare capitalized on this fact and filed its own request. Certainly plaintiffs do not dispute the court's power to relax the time frame stated in a prior order, as a trial court is permitted to dispense with its own requirements "if adherence to [them] would result in an injustice." See R. 1:1-2. When Great Northern filed its motion, the case had been pending for almost three and one-half years. Trial was imminent and the discovery deadlock needed to end. Defendants' motions to dismiss brought the matter to a head. The court afforded plaintiffs ample time to respond prior to rendering its determination. We perceive no prejudice to plaintiffs by the court's determination to review and resolve these issues.
Next, plaintiffs urge reversal of the orders of December 7, 2007 and June 8, 2008, insisting they had complied with the prior case management orders and "provided hundreds of documents to defendant Great Northern, many of which were supplied as far back as 2005 all the way through 2007, and all of those documents were provided to defendant Astrocare after [its] appearance in the case." Plaintiffs characterize the dispute as dissatisfaction with the quantum of proofs provided.
"Discovery rules are designed 'to further the public policies of expeditious handling of cases, avoiding stale evidence, and providing uniformity, predictability and security in the conduct of litigation.'" Abtrax Pharms., supra, 139 N.J. at 512 (citing Zaccardi v. Becker, 88 N.J. 245, 252 (1982)). They "'eliminate, as far as possible, concealment and surprise in the trial of lawsuits to the end that judgments rest upon real merits of the causes and not upon the skill and maneuvering of counsel.'" Ibid. (quoting Oliviero v. Porter Hayden Co., 241 N.J. Super. 381, 387 (App. Div. 1990)). "If discovery rules are to be effective, courts must be prepared to impose appropriate sanctions for violations of the rules." Ibid.
Plaintiffs carried the burden of proving both the alleged breach of contract by Great Northern and Astrocare's negligence in complying with the scope of work outlined by Great Northern.
Plaintiffs' assertion that they had supplied the documents "available" to them begs the question as to the scope of their obligations.
We have not been provided with plaintiffs' complaint, and the record on appeal does not permit a substantive review of the quality of plaintiffs' proofs, as the record contains only transmittal letters listing documents given to defendants and brief answers to interrogatories. We do note the correspondence supplied contains no descriptive nature of the lists of invoices, reports or estimates attached, and otherwise does not identify their relevance to the litigation. Also, nothing reflects any expert reports addressing Astrocare's alleged negligence.
The cited discovery failures were more far-reaching than depicted by plaintiffs. The dispute was not merely about the value of the lost personalty trapped in their garage. The underlying document requests tested plaintiffs' compliance with their contractual obligations under the homeowners policy. On numerous occasions, during motion hearings and case management conferences, the trial court examined the discovery provided by plaintiffs and determined it to be deficient and unresponsive. In entering the order under review, the trial judge's opinion stated "plaintiffs had never served fully responsive answers."
The court repeatedly ordered plaintiffs' compliance with requests found reasonable and relevant to Great Northern's defense to plaintiffs' suit, which implicated plaintiffs' compliance with the insurance policy's cooperation clause.
In this regard, the information sought strikes to the heart of plaintiffs' damage claims. Plaintiffs' knowledge of a possible pre-existing condition in the premises was relevant to Great Northern's assessment of plaintiffs' representations when seeking coverage. As to plaintiffs' claim of mold contamination to their personalty, defendants were justified in seeking some verification that plaintiffs, in fact, owned the property for which compensation was sought. Astrocare's liability for the scope of work to be performed is derived from Great Northern's agreed coverage.
"[W]hen the plaintiff[s'] disregard of a court order impairs 'the defendant's ability to present a defense on the merits,' the defendant will be deemed to have suffered irreparable prejudice." Gonzalez v. Safe and Sound Security Corp., 185 N.J. 100, 116 (2005) (quoting State v. One 1986 Subaru, 120 N.J. 310, 315 (1990)); see also Rule 4:23-2(b)(3) (permitting dismissal of an action for a party's failure "to obey an order to provide or permit discovery"). The judge had previously identified the questions plaintiffs needed to answer and provided a reasonable opportunity for them to respond. Adedoyin v. Arc of Morris County Chapter, Inc., 325 N.J. Super. 173, 182 (App. Div. 1999). Only when there was no compliance did the court grant the motion to dismiss without prejudice. As an incentive to secure plaintiffs' future compliance, the judge restricted proposed verbal proofs on the extent of their damages. Following our review of the record, we determine no basis to challenge the court's conclusion that plaintiffs failed to make "full disclosure of relevant evidence" in compliance with the discovery demands. Abtrax Pharms., supra, 139 N.J. at 522. Accordingly, we reject plaintiffs' suggestion that the relief granted to Great Northern was improper. We discern no abuse of discretion with the court's measured approach.
Turning to the June 8, 2008 order invoking the ultimate sanction of dismissal with prejudice, under Rule 4:23-5(a)(2), the remedy is a drastic one, which must be employed sparingly and ordered only when no lesser sanction will suffice. See Westphal v. Guarino, 163 N.J. Super. 139, 145-46 (App. Div.), aff'd o.b., 78 N.J. 308 (1978). Generally, its use is reserved for "'those cases in which the order for discovery goes to the very foundation of the cause of action, or where the refusal to comply is deliberate and contumacious.'" Abtrax Pharms., supra, 139 N.J. at 517 (quoting Lang v. Morgan's Home Equip. Corp., 6 N.J. 333, 338-39 (1951)).
Once plaintiffs' complaint and proofs regarding damages had been dismissed without prejudice, they were required to take steps to remedy the discovery deficiencies, pursuant to Rule 4:23-5(a)(1). Rule 4:23-5(a)(2) provides:
[t]he motion to dismiss [the complaint] or suppress [the answer] with prejudice shall be granted unless a motion to vacate the previously entered order of dismissal or suppression without prejudice has been filed by the delinquent party and either the demanded and fully responsive discovery has been provided or exceptional circumstances are demonstrated. (Emphasis added).
See also Cooper v. Consol. Rail Corp., 391 N.J. Super. 17, 22-23 (App. Div. 2007) (affirming dismissal with prejudice where plaintiff did not provide requested discovery between the order of dismissal without prejudice and the time of hearing the motion to dismiss with prejudice and presented no exceptional circumstances).
We are at a loss to understand why certain information was not produced by plaintiffs. Certainly, a copy of the deed to their residence, verifying their ownership, easily could have been obtained from the county clerk's office. Similarly, ownership of the claimed damaged art and artifacts should have been verifiable by insurance riders or documents from sellers, no matter how longstanding plaintiffs' ownership.
The trial court had leniently granted plaintiffs several opportunities to resolve these lapses. Its efforts to impose alternative sanctions rather than an outright dismissal were unsuccessful in prodding plaintiffs to provide the proofs necessary to support its claims. Plaintiffs' contention that they should be permitted to testify as to the items they own and their value rings hollow in the face of the proofs demanded, including an expert report establishing Astrocare's negligence. Plaintiffs' were fully "informed by a judicial determination and not the subjective view of either party." St. James AME, supra, 403 N.J. Super. at 486.
Plaintiffs took no action to restore their complaint once it was dismissed without prejudice. After the December 7, 2007 order was entered, and it became clear plaintiffs were not supplying additional information beyond what had already been deemed inadequate, the court appropriately dismissed their complaint. A party entitled to discovery may move for dismissal with prejudice sixty days following entry of such an order. R. 4:23-5(a)(2). Plaintiffs' inaction left the court no alternative.
Based on these facts, we find no abuse of discretion in the motion judge's conclusion to dismiss all claims asserted by plaintiffs against all defendants.