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Hill v. Tevogt

Supreme Court of Nebraska

April 22, 2016

JODY A. HILL AND DEAN OWEN THORSEN, APPELLEES,
v.
MARK TEVOGT, APPELLANT

          Appeal from the District Court for Douglas County: J. MICHAEL COFFEY, Judge.

         James D. Sherrets and Jared C. Olson, of Sherrets, Bruno & Vogt, L.L.C., for appellant.

         Brian J. Muench for appellees.

         HEAVICAN, C.J., WRIGHT, CONNOLLY, MILLER-LERMAN, CASSEL, STACY, and KELCH, JJ.

          OPINION

Page 370

         [293 Neb. 430] Connolly, J.

         SUMMARY

         In 2012, Mark Tevogt purchased the interests of Jody A. Hill and Dean Owen Thorsen in a business formed as JGP, LLC. Tevogt financed the purchase by executing a promissory note under which Hill and Thorsen are the payees. Tevogt soon defaulted, and Hill and Thorsen (collectively the plaintiffs) sued him for damages under the promissory note. Tevogt alleged in his answer that the plaintiffs had made misrepresentations and committed

Page 371

fraud. The court overruled the plaintiffs' first motion for summary judgment because of statements Tevogt made in his affidavit about the plaintiffs' failure to inform him of business debts.

         The plaintiffs moved for summary judgment again after Tevogt twice failed to attend his deposition. At a hearing on the motion, the plaintiffs asked the court to sanction Tevogt because he had not given them an opportunity to depose him about the statements in his affidavit. The court sanctioned Tevogt by excluding the statements Tevogt made in his affidavit, and ultimately entered summary judgment for the plaintiffs. Tevogt appeals and argues that the court imposed an unduly harsh discovery sanction. We conclude that the severity of the sanction was an abuse of discretion. We therefore reverse the summary judgment and remand the cause for further proceedings.

         BACKGROUND

         In 2013, the plaintiffs sued Tevogt, alleging that he had defaulted on a promissory note payable to them. The plaintiffs claimed that the unpaid principal was about $120,000. They asked the court to award them damages for the unpaid principal, with interest accruing from the date of default.

         Tevogt listed 12 affirmative defenses in his answer, including " fraud and/or fraud in the inducement." He also included a [293 Neb. 431] " Counterclaim" which set out four causes of action: fraudulent misrepresentation, negligent misrepresentation, fraudulent concealment, and breach of contract. He alleged that the plaintiffs had misrepresented or concealed the financial status of JGP.

         The plaintiffs moved for summary judgment and offered an affidavit that Hill signed in February 2014. Hill averred that Tevogt had defaulted on a promissory note with an unpaid principal of about $120,000 and a default interest rate of 6 percent per year. Hill stated that she and Thorsen did not misrepresent JGP's finances or withhold information from Tevogt. She acknowledged that " there was $65,000.00 due" to an underwriter, but stated that JGP's manager told Tevogt about the shortfall.

         Tevogt offered his own affidavit. He claimed that the plaintiffs told him that " all bills/expenses/accounts were current." He alleged that after he executed the promissory note, he learned that the " account used for holding premiums collected to be paid to the insurer/underwriter" was " approximately $60,000.00 short." Tevogt further stated that the plaintiffs gave JGP's employees large raises and failed to pay income taxes, which he learned " at the 11th hour before the closing."

         The court overruled the plaintiffs' motion for summary judgment. It stated that Tevogt's allegation in his affidavit that the plaintiffs failed to pay income taxes did not create a genuine issue of material fact, because Tevogt knew about the problem before he signed the promissory note. The court was also not impressed by Tevogt's allegation that the plaintiffs gave JGP's employees large raises, because it reasoned that Tevogt could simply reverse the raises. But the court concluded that Tevogt's statements about a shortfall in the underwriting account created a genuine issue of material fact preventing a summary judgment.

         In February 2015, the plaintiffs again moved for summary judgment. They claimed that they had " attempted twice to take [Tevogt's] deposition and [Tevogt] twice failed to appear for said deposition."

          [293 Neb. 432] At the hearing on their motion, the plaintiffs offered an affidavit signed by Hill in February 2015. The affidavit was

Page 372

largely the same as Hill's February 2014 affidavit, but it included more details about Tevogt's relationship with JGP's business manager. Hill stated that Tevogt learned of the underwriting account shortfall before he executed the promissory note.

         The court also received a notice that the plaintiffs sent to Tevogt stating that they intended to depose him on November 4, 2014. The plaintiffs' attorney signed the notice and mailed it to Tevogt's attorney on October 24.

         The November 4, 2014, deposition shows that Tevogt's attorney was present, but not Tevogt himself. The plaintiffs' attorney said that the plaintiffs had tried to contact Tevogt's attorney twice before mailing the notice on October 24. On October 29, the plaintiffs' attorney received a postal notification that the notice of deposition sent to Tevogt's attorney had been forwarded to another address. On November 3, Tevogt's attorney left a message for the plaintiffs' attorney stating that Tevogt was " 'out of the country all week.'" Tevogt's attorney claimed that he had tried to reschedule.

         On December 11, 2014, the plaintiffs tried to depose Tevogt again. Their attorney mailed a notice of deposition to Tevogt's attorney on December 1. Neither Tevogt ...


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