Deutsche Bank National Trust Co. v. Sumner

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No. 101,424

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

DEUTSCHE BANK NATIONAL TRUST CO.
Appellee,

v.

DOUGLAS SUMNER, et al.,
Appellants,

and

BOARD OF COUNTY COMMISSIONERS OF RENO COUNTY, et al.,
Defendants.

DOUGLAS SUMNER and CAROL SUMNER,
Appellants,

v.

AMERIQUEST MORTGAGE COMPANY and
GWENDOLYN CREEL,
Appellees.

SYLLABUS BY THE COURT

1.
One sued to collect a debt may assert, as recoupment or setoff, any counterclaim
for violation of the federal Truth in Lending Act regardless of the applicable 1-year
statute of limitation.

2.
There is nothing in the federal Truth in Lending Act that precludes applying the
equitable principles of estoppel and waiver.

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3.
For equitable estoppel to bar a party's claims, the acts, representations, admissions,
or silence of the party when that party had a duty to speak must have induced the other
party to believe certain facts existed. The other party must also show that it rightfully
relied and acted upon such belief and would now be prejudiced if the party to be estopped
were permitted to deny the existence of such facts. In other words, for equitable estoppel
to apply, the party asserting it must at least show: (1) misrepresentation and (2)
detrimental reliance.

4.
Under the facts of this case, the Sumners should be equitably estopped from
claiming rescission because they acted at all times in a manner inconsistent with
rescission by insisting on prompt consummation of the transactions, accepting the loan
proceeds, making loan payments without protest, and filing a counterclaim to the
foreclosure action seeking to reinstate the transaction.

5.
A party with full knowledge of the facts that accepts the benefits of a transaction
or contract may not subsequently take an inconsistent position to avoid corresponding
obligations or effects. The doctrine of equitable estoppel requires consistency of conduct,
and a litigant is estopped and precluded from maintaining an attitude with reference to a
transaction wholly inconsistent with the party's previous acts and business connection
with such transaction.

6.
Both Kansas appellate courts have recognized the severity of judgment by default
as a sanction for failure to comply with discovery orders, and each court has emphasized
the importance of careful exercise of judicial discretion before imposition of that
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sanction. Dismissal of a lawsuit or claim should only be used as a last resort when other
lesser sanctions are clearly insufficient to accomplish the desired end.

7.
Our Supreme Court has identified the following tests in determining whether the
district court has abused its discretion in granting default judgment for failure to comply
with discovery orders: (1) Does the discoverable material go to a dispositive issue in the
case? (2) Are alternative sanctions sufficient to protect the party seeking discovery
available? and (3) Is the requested information merely cumulative or corroborative?

8.

Applying the factors suggested by our Supreme Court, the dismissal sanction was
appropriate under the facts of this case. First, the depositions of the Sumners went to a
dispositive issue in this case. Second, alternative sanctions were not sufficient to protect
Deutsche Bank from further delay and harassment given the extent and persistence of the
Sumners' conduct. Third, the request to depose the Sumners was not cumulative of other
evidence, but rather critical to understanding and testing the counterclaims made against
Deutsche Bank.

9.
The better practice is for the trial judge to warn the litigants and counsel that a
failure to obey a discovery order may lead to the ultimate sanction of dismissal of claims
before invoking this extreme sanction. Notwithstanding the better practice, such a notice
is not a prerequisite to the dismissal sanction.

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10.
Litigants and counsel may not engage in an obvious pattern of delay and
harassment with impunity in Kansas courts.

Appeal from Reno District Court; TIMOTHY J. CHAMBERS and JOSEPH L. MCCARVILLE, III,
judges. Opinion filed October 29, 2010. Affirmed.

Barry L. Arbuckle, of Wichita, for appellants.

Clayton T. Norkey, of Shook, Hardy & Bacon LLP, of Kansas City, Missouri, for appellees.

Before GREENE, P.J., GREEN and STANDRIDGE, JJ.

GREENE, J.: Doug and Carol Sumner appeal the district court's dismissal of their
claims under the federal Truth in Lending Act (TILA) and the Kansas Consumer
Protection Act (KCPA), which they had filed as counterclaims in response to a
foreclosure action by Deutsche Bank National Trust Company (Deutsche Bank) on their
residence in Hutchinson. They argue that the district court erred in ruling their TILA
claims were barred either by the statute of limitations or equitable estoppel and that the
court erred in dismissing their remaining claims under the KCPA due to discovery abuse.
We hold that some of the Sumners' claims were erroneously dismissed but all were
subject to dismissal as an appropriate discovery sanction. Accordingly, we affirm the
district court.

FACTUAL AND PROCEDURAL BACKGROUND

On September 23, 2004, the Sumners closed on a home loan with Ameriquest
Mortgage Company (AMC) for the principal amount of $180,000 at 9.5% variable
interest secured by a mortgage on their home on Obee Road in Hutchinson, Kansas.
Later, the Sumners would claim that AMC's employee, Gwendolyn Creel, told them the
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loan would be a 30-year fixed rate mortgage with a 6.5% interest rate. The Sumners also
claimed Creel promised to provide insurance on the home as part of the mortgage
package.

The Sumners' loan was assigned by AMC to Deutsche Bank in June 2006. The
servicing of the Sumners' loan was later assigned, sold, or transferred from AMC to Citi
Residential Lending, Inc.

In March 2005, AMC began sending the Sumners notices that their account was
overdue, and in July 2005, suit was filed to foreclose on the mortgage. The Sumners filed
individual answers and counterclaims pro se to the petition in September 2005, claiming
slander, slander per se, libel, libel per se, and fraud (these claims were all abandoned
upon the filing of an amended counterclaim). Notably, the answers included a request for
payment of money damages, a count entitled "set-off," and a demand for "an Order
requiring plaintiff to reinstate plaintiff's note and mortgage."

Deutsche Bank replied to Doug Sumner's answer and counterclaim in October
2005, but served the answer only on Doug at his joint address with Carol. She then
moved for default judgment because of Deutsche Bank's failure to answer her separate,
albeit identical, answer and counterclaim. Deutsche Bank's counsel admitted that "[d]ue
to inadvertence and/or excusable neglect," Carol's answer and counterclaim was
"misplaced and Plaintiff failed to timely file its Answer thereto." Deutsche Bank
subsequently filed an answer to Carol's counterclaim, and Deutsche Bank substituted new
counsel in the case.

The Sumners objected to Deutsche Bank's substitution of counsel and belated
answer, and the parties held a telephonic conference on the Sumners' objection. Even
though Carol was not joined in the phone conference, the district court ruled that the
Sumners could file their counterclaims out of time; the Sumners' motion for default
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judgment based on the belated answer to Carol's counterclaim was denied; and the
Sumners' objection to substitution of Deutsche Bank's counsel was also denied.

In June 2006, Doug filed a motion for leave to file an amended answer,
counterclaim, and third-party petition. He requested a hearing be held on June 29, 2006.
The Sumners then filed a motion to continue the requested hearing "for at least ninety
(90) days, and or until such time as this defendant has retained legal representation."
Doug wrote to Deutsche Bank's counsel that "I believe that with counsel, the Court and
yourself will definitely benefit greatly, by fewer delays caused by our no longer moving
pro se in this action." The Sumners eventually retained counsel, who then requested the
scheduled hearing be continued.

Counsel for the Sumners then filed an amended answer with a counterclaim and
cross-claims. The amended filing was made in August 2006; it included a counterclaim
against Deutsche Bank, AMC, and Creel, based on violations of the TILA, and the
KCPA, and sought damages, statutory penalties, rescission, and other relief.

Deutsche Bank responded to the counterclaim with a motion to dismiss, which
was granted by the district court as to the TILA claims because they were filed outside of
TILA's 1-year statute of limitations. The court found that only the Sumners' KCPA
claims survived Deutsche Bank's motion to dismiss.

Mediation was attempted in October 2006. According to the Sumners, the parties
"made progress in the mediation but Ameriquest [AMC] insisted upon an inspection and
appraisal of the house prior to completion of the mediation." The inspection did not take
place as scheduled, in part because Carol wanted to "put the house in better order." After
that, mediation apparently broke down, with the Sumners claiming "Ameriquest has
failed and refused to continue negotiations in good faith and has misled the Sumners
regarding their willingness to negotiate."
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In January 2007, the district court allowed the Sumners' counsel to withdraw from
the case. The Sumners said that it would take them at least 90 days to obtain new counsel,
and in April 2007, Barry L. Arbuckle entered his appearance as the Sumners' new
counsel. Arbuckle subsequently requested an additional 90 days to complete discovery
and a continuance in the trial setting until September 2007. Notably, the Sumners'
previous counsel filed an attorney's lien against the Sumners for $10,897.55.

Deutsche Bank first attempted to depose the Sumners on July 12, 2006. They were
never deposed despite numerous attempts. When they sought to continue their
depositions after the seventh formal notice in March 2008, the district court ordered them
to submit to depositions by March 20, 2008, and to file documentary evidence to support
their most recent alleged inability to be sworn for deposition. These orders went
unheeded.

The perpetual delay caused Deutsche Bank to file a motion to compel discovery
and several motions for sanctions against the Sumners for their failure to comply with
discovery requests. When the court finally ruled on Deutsche Bank's motion for
sanctions, Judge Timothy J. Chambers stated that "[t]he continual course of conduct of
the Defendants [the Sumners] in this case is found by the Court to be willful and
deliberate, interfering in the efficient administration of justice." Chambers wrote:

"It is with reluctance the Court makes its ruling, but after careful consideration of the
appropriate standards to be applied and pursuant to K.S.A. 60-237, the Court grants the
motion for sanctions of the Plaintiff and dismisses with prejudice the remaining claim of
the Defendants as well as granting summary judgment on the claim of the Plaintiff."

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Judge Chambers issued the order imposing sanctions against the Sumners after
they moved to disqualify him, but he later recused himself from the case. Judge Joseph L.
McCarville, III, was assigned to the case after Chambers' recusal.

McCarville held a telephone conference on May 23, 2008, to discuss Chambers'
order of sanctions against the Sumners. McCarville noted that Chambers' "conclusions
are supported in the record. They're logical." Chambers' ruling, McCarville stated, "was
not based upon merely what happened in the first part of March of 2008, but it was as a
result of that being more or less the final straw." McCarville adopted Chambers' decision
effectively upholding the grant of summary judgment to Deutsche Bank and dismissing
the Sumners' remaining claims with prejudice, as well Chambers' decision to dismiss the
Sumners' TILA claims.

The Sumners then moved to have McCarville disqualified from the case. The
motion was denied, and the court ordered the foreclosure and sale of the Sumners' home.

The Sumners timely appeal.

DID THE DISTRICT COURT ERR IN DISMISSING THE SUMNERS' PURPORTED CLAIMS FOR
RECOUPMENT AND SETOFF?

The Sumners argue the district court improperly dismissed their claims under the
TILA. In dismissing the TILA claims, the court noted: "Truth in Lending Act claims
have a 1-year statute of limitations. . . . The claims were filed well in excess of the one-
year limitation. Even if the claims related back to the original counterclaim, the claims
would still fall outside the one-year statute of limitations."

Both parties agree that the district court's interpretation of the TILA's statute of
limitations is subject to unlimited review because it involves a question of law. See Law
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v. Law Company Building Assocs., 42 Kan. App. 2d 278, 283-84, 210 P.3d 676 (2009),
rev. granted on other grounds 290 Kan. __ (September 7, 2010).

The Sumners argue their claims for recoupment or setoff are not barred by the 1-
year statute of limitations under the TILA. They rely on 15 U.S.C. § 1640(e) (Supp. III
2009), which states:

"Any action under this section may be brought . . . within one year from the date
of the occurrence of the violation . . . . This subsection does not bar a person from
asserting a violation of this subchapter in an action to collect the debt which was brought
more than one year from the date of the occurrence of the violation as a matter of defense
by recoupment or set-off in such action, except as otherwise provided by State law."

This language "makes it clear that one sued to collect a debt may assert, as
recoupment or set-off, any counterclaim for violation of the Federal Truth in Lending
Disclosure Law regardless of the one year limitation." First State Bank of Crossett v.
Phillips, 13 Ark. App. 157, 161, 681 S.W.2d 408 (1984) (citing United Missouri Bank of
Kansas City v. Robinson, 7 Kan. App. 2d 120, 638 P.2d 372 [1981]). This is consistent
with federal common law, which has long acknowledged that a defense which is termed
recoupment is never barred by a statute of limitations so long as the main action is timely.
United Missouri Bank, 7 Kan. App. 2d at 123. Noting the broad remedial purpose of the
TILA, the United Missouri Bank court concluded that a claim of recoupment is not barred
by the 1-year statute of limitations. 7 Kan. App. 2d at 125. It would certainly circumvent
the TILA and the policy of prompt vindication of contractual rights if a creditor could
simply sit on its claim for a year until the applicable statute of limitations runs on any and
all violations under the TILA. 7 Kan. App. 2d at 125.

Under 15 U.S.C. § 1640(a), if Deutsche Bank violated the TILA's disclosure
requirements, the Sumners could potentially recoup (1) any actual damage sustained and
(2) twice the amount of any finance charge. The Sumners amended counterclaim sought
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to recover statutory damages, actual damages, twice the finance charge, and reasonable
attorney fees based on the TILA disclosure violations. Although the claims may not be
artfully pled, they are set forth in enough detail to be recognized as TILA claims intended
to cut down the debt owed by the Sumners to Deutsche Bank.

We conclude that the Sumners' claims for recoupment or setoff were improperly
dismissed by the district court based on the statute of limitations. These claims should
have survived, at least until the dismissal of their entire action for discovery abuse. We
address that eventuality below.

DID THE DISTRICT COURT ERR IN DISMISSING THE SUMNERS' RESCISSION CLAIMS DUE TO
EQUITABLE ESTOPPEL?

The Sumners next claim that the district court erred in dismissing their TILA
rescission claims due to equitable estoppel. There remains, however, a factual question
whether the Sumners actually sought to rescind the agreement at all. The Sumners claim
they sent a notice of rescission to Deutsche Bank on September 26, 2004. It was not until
May 2006 that the Sumners apparently remembered that they had attempted to rescind
the agreement. Doug wrote to Deutsche Bank's counsel:

"[By the way], I want to thank you for asking for past records. It was during this search
that I found our Notice Of Cancellation Of Transaction to Ameriquest. Coupled with our
claims against Ameriquest Mortgage Company, which also pass through to DEUTCHE,
our TILA claims will no doubt bear fruit."

Prior to this discovery, none of the communications between the parties and none
of the pleadings filed in this litigation referenced the Sumners' September 26, 2004,
rescission letter. The claimed letter of rescission is written, signed, and dated by Doug
and Carol Sumner. There is no corroborating evidence that the letter was actually sent to
AMC or that it was even written in 2004. The only copy of the rescission letter in the
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record is one that the Sumners sent to their counsel after they claimed to have found it in
their archives. Most importantly, the Sumners certainly did not act at any time consistent
with an attempt to rescind the transaction in their subsequent communications with Creel
or in their initial pleadings in this litigation.

In any event, the Sumners argue on appeal that the district court improperly found
that equitable estoppel precluded them from pursuing their TILA claims for rescission.
The application of equitable estoppel rests within the sound discretion of the district
court. Shaffer v. City of Topeka, 30 Kan. App. 2d 1232, 1236, 57 P.3d 35 (2002).
"Judicial discretion is abused when judicial action is arbitrary, fanciful, or unreasonable.
If reasonable persons could differ as to the propriety of the action taken by the trial court,
then it cannot be said that the trial court abused its discretion. [Citation omitted.]" Unruh
v. Purina Mills, 289 Kan. 1185, 1202, 221 P.3d 1130 (2009).

After the Sumners moved to have the original dismissal of their TILA claims
reconsidered, the district court found that equitable estoppel barred their claim:

"The Truth in Lending and all rescission-related claims are further barred by the doctrines
of equitable estoppel and waiver, the Court having found that Wilson v. Homeowners
Loan Corp., 263 F.Supp.2d 1212 (E.D. Mo. 2003) to be persuasive authority and that the
Sumners have admitted demanding disbursement of their loan proceeds after allegedly
sending a rescission notice."

Indeed, in Wilson v. Homeowners Loan Corp., 263 F. Supp. 2d 1212, 1219 (E.D.
Mo. 2003), the court noted: "[T]here is nothing in the TILA that precludes applying the
equitable principles of estoppel and waiver."

For equitable estoppel to bar their claims, the Sumners, by their acts,
representations, admissions, or silence when they had a duty to speak, must have induced
Deutsche Bank to believe certain facts existed. See Cosgrove v. Young, 230 Kan. 705,
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717, 642 P.2d 75 (1982). Deutsche Bank must show that it rightfully relied and acted
upon such belief and would now be prejudiced if the Sumners were permitted to deny the
existence of such facts. See 230 Kan. at 717. In other words, for equitable estoppel to
apply, "the party asserting it must at least show: (1) misrepresentation; and (2)
detrimental reliance." 230 Kan. at 718.

Deutsche Bank argues that the Sumners committed several acts that induced its
belief that the Sumners sought to enforce the mortgage contract. First, the Sumners sent
e-mails "and made several phone calls insisting that the loan be funded, all after their
alleged rescission[.]" On September 30, 2004—4 days after allegedly rescinding the
mortgage—Doug Sumner e-mailed Creel and said:

"I tried to get back to you several times yesterday, as you know. . . .
"By now, you know what the exact amount of funds are available. Please let me
know, and when I can verify completion of the wire transfer. . . .
"Please do not leave me hanging."

Then, on October 1, 2004, Doug e-mailed Creel again: "Have not heard from your
ins[urance] agent. Is the 14,854.48 the amount they will be wiring to our business
account?" Later on October 1 in another e-mail, Doug asked Creel if the loan
disbursement would hit their bank account that day; Doug said: "I do NOT want to be a
pest. So, tell me plainly, is this going to hit our account today, or not?" Doug sent another
e-mail on October 20, 2004, saying: "Your 'gal' still has not contacted us concerning the
homeowners ins[urance]. Please have her get with us right away. This was part of our
agreement with you and Ameriquest. . . . So, I want to getthis [sic] taken care of, . . .
pretty please?"

The record does not show that either of the Sumners contacted Creel or AMC to
discuss or confirm their rescission, nor does it contain a mention of any attempt to rescind
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the transaction until Doug says he "found" their rescission notice 2 years after sending it.
Further, as Deutsche Bank notes, the Sumners "accepted the proceeds, made loan
payments without protest, and voluntarily acted in accordance with normal protocol for a
non-rescinded loan." Finally, the Sumners original answers and counterclaims sought to
reinstate the mortgage transaction. These acts no doubt induced Deutsche Bank to
believe that the Sumners had no interest whatsoever in rescinding the transaction.

Based on the acts by the Sumners, Deutsche Bank rightfully relied on its belief
that no rescission was sought by the Sumners, thus closing the transaction and disbursing
the loan proceeds. Deutsche Bank argues it would be prejudiced if the Sumners were now
permitted to assert their rescission claim. We agree with Deutsche Bank, that "a party
with full knowledge of the facts, [that] accepts the benefits of a transaction or contract,
may not subsequently take an inconsistent position to avoid corresponding obligations or
effects," citing Levi Strauss & Co. v. Sheaffer, 8 Kan. App. 2d 117, 650 P.2d 738 (1982).
In Levi Strauss, this court held: "'"The doctrine of equitable estoppel requires consistency
of conduct, and a litigant is estopped and precluded from maintaining an attitude with
reference to a transaction involved wholly inconsistent with his previous acts and
business connection with such transaction." [Citations omitted.]'" 8 Kan App. 2d at 122.

The Sumners rely on Semar v. Platte Valley Federal S & L Ass'n, 791 F.2d 699,
706 (9th Cir. 1986), and Rachbach v. Cogswell, 547 F.2d 502, 505 (10th Cir. 1976).
Neither case has application to these facts. In fact, these cases are so clearly inapplicable
that neither case merits further discussion by this court.

The Sumners also argue that Deutsche Bank's alleged unclean hands should
preclude it from claiming estoppel. As proof of Deutsche Bank's unclean hands, the
Sumners rely on a class action allegedly pending or resolved in Alameda County,
California. The Sumners claim this case established misconduct by AMC on a nationwide
scale between 1999 and 2005. The Sumners cite to a journal entry in that case but did not
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provide it to the district court or to this court. At one point, the Sumners' counsel told the
court:

"I've got a copy of that journal entry, but judge, I shouldn't have to do that. I've given the
court the case number, the county, I'm sure the court has better research facilities than I
do. That's there for you to see what Ameriquest, this innocent plaintiff, has done to
people throughout this country. If you were to do a computer search, Your Honor, you
would find literally scores of cases all around the country dealing with Ameriquest over
these same types of activities."

To the extent the Sumners expect this court to consider the alleged class action,
they were obligated to include such evidence in the record. Moreover, the Sumners have
never indicated whether they were members of the purported class, whether the class was
certified, whether liability was established, and whether principles of collateral estoppel
would apply. For all these reasons, we decline to consider the argument. See Adams v.
Via Christi Regional Med. Center, 270 Kan. 824, 838, 19 P.3d 132 (2001). ("An
appellant . . . has the duty to designate a record sufficient to establish the claimed
error. Without an adequate record, the claim of alleged error fails.").

We conclude that the district court did not err in applying equitable estoppel and
barring the Sumners' rescission claims under TILA.

DID THE DISTRICT COURT ERR IN DISMISSING THE SUMNERS' CLAIMS DUE TO DISCOVERY
ABUSE?

Finally, the Sumners argue on appeal that the district court erred in dismissing the
Sumners' remaining counterclaims due to discovery abuse under K.S.A. 60-237.
Generally, we review a district court's imposition of discovery sanctions for an abuse of
discretion. Canaan v. Bartee, 272 Kan. 720, 726, 35 P.3d 741 (2001). The factual
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predicate for the court's imposition of its sanction award and the basis for the court's
ultimate conclusion is best stated in the district court's order:

"The present foreclosure action has now been on file for well over two years with
the depositions of the Defendants still not having been taken by Plaintiff's counsel. The
depositions were first scheduled in July of 2006. The Sumners sought continuances of
their respective depositions with Plaintiff's counsel agreeing to reschedule the
depositions.
"The depositions were rescheduled on March 19 and 20, 2007. The day before
the depositions, the Sumners indicated by fax they were not going to appear and failed to
do so.
"The depositions were next set March 29 and 30, 2007. The Defendant's filed
motions for continuance of the depositions. The Court did not grant the motions. Counsel
for the Plaintiff drove to Hutchinson from Kansas City and spent one night in a local
hotel/motel with neither Defendant appearing for their respective deposition.
"The depositions were rescheduled for August 23 and 24, 2007. The day before
the depositions, counsel for the Defendants indicated the Defendants would not appear
for the depositions. Counsel for the Defendants indicated the Defendant had been called
out of State on a business emergency and that counsel had failed to formally advise the
Defendants of the date of the depositions.
"The depositions were rescheduled for March 6, 2008. Defendant Doug Sumner
appeared at the deposition under the influence of a prescription drug. This Court was
contacted by telephone where it was indicated to the Court by Defendants' counsel that
Mr. Sumner was unable to testify truthfully in response to questions propounded by
Plaintiff's counsel. The depositions were continued.
"The depositions were reset to March 18 and 19, 2008. On March 14, 2008,
counsel for the Sumners filed a motion for continuance of the March 18 and 19
depositions. It was indicated Mr. Sumner remained on pain medication for a tooth
extraction occurring on March 5, 2008. It was indicated the dentist was on vacation and
an affidavit could not be provided before March 16, 2008. Also, it was indicated Mr.
Sumner needed to be out of State for work related activities. As of March 19 the affidavit
has not been supplied the Court, neither has the report from Mr. Sumner's treating
physician as to the effect of Mr. Sumner's medications.
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"Initially, both Defendants appeared in this action pro se. The Petition was
originally filed in July of 2005. In June of 2006 Elizabeth Carson entered her appearance
as legal counsel on behalf of the Defendants.
"In February 2007 Elizabeth Carson was allowed to withdraw as counsel for the
Defendants. The Court notes that the Defendants made accusations against Ms. Carson
that if had been made by legal counsel the Court would have been compelled to file an
ethics complaint against the individual making the claims.
"Present counsel for the Defendants entered his appearance initially in April of
2007. Mr. Sumner has indicated the Court's previous statements in regards to the positive
effect of the Sumners obtaining counsel and not proceeding pro se. The Court's
comments were directed to having the assistance of counsel in seeing the matter was
proceeded with in a timely matter. The situation has not improved with the entry of
appearance of counsel. As the Court has previously indicated, the Sumners have
experience in pro se litigation having in excess of thirty entries in the Court's computer
system. The Sumners have been involved in litigation as both plaintiff and defendants
including the filing of a medical malpractice action pro se.
"The Sumners have represented themselves in four previous foreclosure actions
involving the same property. In each of the cases the Sumners filed extensive pleadings
on their own behalf.
. . . .
"In 98 C 292 the Sumners filed counterclaims alleging lack of service, fraud,
extortion and forced insurance coverage among other claims. Counsel for the Plaintiff
sought sanctions when he flew to Wichita and the Sumners did not appear for properly
noticed depositions. In 99 C 334 the Sumners filed counterclaims alleging extortions,
fraud, libel, slander, [and] forced insurance coverage among other claims. The Sumners
sought and obtained recusal of Judge Rome and Judge Lyle. In 02 C 516 the Sumners
alleged lack of service and fraud among other claims.
"In 03 CV 412 the Sumners counterclaimed alleging lack of service, fraud, and
forced insurance among other claims. The Sumners, as in one of the earlier foreclosure
cases, sought default judgment on their counterclaims when counsel, as in the previous
case, indicated no notice of the counterclaims was attempted by the Sumners.
"The present action was filed in July of 2005. The court file now contains four
volumes. In their original answers and counterclaims the Sumners allege failure of the
Plaintiff to maintain insurance, slander, libel per se, and fraud among other claims.
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"In August of 2006 Ms. Carson filed an amended answer and counterclaim on
behalf of the Sumners in essence starting the case over again. The relationship between
Ms. Carson and the Sumners deteriorated to the point Ms. Carson was allowed to
withdraw which necessitated more delay. Ms. Carson withdrew January 31, 2007.
"Mr. Arbuckle entered his appearance in April 2007. The Court has continued the
trial of the matter after indicating the trial would not be continued to allow the Sumners
and counsel to prepare. As of March 19, 2008 the Defendants' depositions have not been
taken.
"The Court in this opinion lists primarily the efforts dealing with the taking of the
depositions of the Defendants. The Plaintiff's various motions for sanctions and renewal
of motions for sanctions list out difficulties in proceeding in general.
"K.S.A. 60-237 allows sanctions to be ordered for failing to comply with
discovery. In addition to findings of contempt, assessment of costs and attorney fees, the
Court is authorized to dismiss claims of a party or to render judgment by default against
the noncompliant party.
"The Court is aware of the consideration that must be given before sanctions of
dismissal and or granting of summary judgment are ordered. Default judgment as a
sanction should be imposed only as a last resort when lesser sanctions are clearly
insufficient to accomplish the desired end. CANAAN v. BARTEE, 272 Kan. 720 (2001).
The following tests are identified in determining whether the district court has abused its
discretion in granting a default judgment for failure to comply with discovery orders: (1)
whether the discoverable material goes to a dispositive issue in the case; (2) whether
alternative sanctions sufficient to protect the party seeking discovery were available; and
(3) whether the requested information was merely cumulative or corroborative. SUPRA.
"The Court finds the actions of the Defendants demonstrate a deliberate course of
delay. The Court finds based upon the cross-claims and various allegations made by the
Defendants at various junctures throughout the course of litigation that the discoverable
material sought goes to the dispositive issues of the case. The Court finds alternative
sanctions sufficient to protect the Plaintiff are not available and the requested information
is not cumulative or corroborative. The Court does note Defense Counsel has now filed a
motion to quash subpoenas against the Defendants that require their presence at their
depositions.
"The Court finds the failure to comply with discovery is not a result of inability,
nor reckless indifference or negligence. The continual course of conduct of the
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Defendants in this case is found by the Court to be willful and deliberate, interfering in
the efficient administration of justice.
"The Court finds under the unique facts of this case including repeated attempts
by the Court during the course of the litigation to accommodate the Sumners that lesser
sanctions would not be appropriate. It is with reluctance the Court makes its ruling, but
after careful consideration of the appropriate standards to be applied and pursuant to
K.S.A. 60-237, the Court grants the motion for sanctions of the Plaintiff and dismisses
with prejudice the remaining claim of the Defendants as well as granting summary
judgment on the claim of the Plaintiff."

We begin our analysis by examining K.S.A. 60-237(b)(2), which provides in
material part:

"If a party . . . fails to obey an order to provide or permit discovery . . . , the judge
before whom the action is pending may make such orders in regard to the failure as are
just, and among others the following:
. . . .
"(C) An order striking out pleadings or parts thereof, or staying further
proceedings until the order is obeyed, or dismissing the action or proceeding or any part
thereof, or rendering a judgment by default against the disobedient party."

There is apparently no dispute that the district court had made specific orders for
the Sumners to provide or permit discovery. In its telephonic hearing on March 6, 2008,
the court ordered that the Sumners file a formal motion to continue the depositions and
include "an affidavit provided from the dentist indicating what he believes the effects of
the medication are, and if he believes there's any time between now and the end of the
month in which Mr. Sumner will not be required to be on medication." The court also
ordered that the depositions "be reset according to Mr. Norkey's schedule at a location of
his choice prior to the end of discovery, which is still set on March 20th . . . ." Before the
telephone conference ended, the court reiterated its order that "the Sumners will make
19

themselves available for a deposition at a location of Mr. Norkey's choosing within that
45 day period [before discovery was to close]." None of these orders was obeyed.

Where the evidence shows that a party has acted in deliberate disregard of
reasonable and necessary court orders and the party is afforded a hearing and an
opportunity to offer evidence of excusable neglect, the imposition of a stringent sanction
will not be disturbed. Shay v. Kansas Dept. of Transportation, 265 Kan. 191, 194, 959
P.2d 849 (1998). Both Kansas appellate courts have recognized the severity of judgment
by default as a sanction for failure to comply with discovery orders, and each court has
emphasized the importance of careful exercise of judicial discretion before imposition of
that sanction. Dismissal of a lawsuit should only be used as a last resort when other lesser
sanctions are clearly insufficient to accomplish the desired end. See Burkhart v. Philsco
Products Co., 241 Kan. 562, 576-77, 738 P.2d 433 (1987); Field v. Stauffer Publications,
Inc., 2 Kan. App. 2d 323, 327-29, 578 P.2d 1138, rev. denied 225 Kan. 843 (1978).

Our Supreme Court has identified the following factors in determining whether the
district court has abused its discretion in granting default judgment for failure to comply
with discovery orders: (1) Does the discoverable material go to a dispositive issue in the
case? (2) Are alternative sanctions sufficient to protect the party seeking discovery
available? and (3) Is the requested information merely cumulative or corroborative?
Canaan, 272 Kan. at 727; Hawkins v. Dennis, 258 Kan. 329, 341, 905 P.2d 678 (1995);
see also Wenger v. Wenger, 239 Kan. 56, 59-61, 716 P.2d 550 (1986) (counterclaims
dismissed and default judgment entered for continued failure to make discovery); Binyon
v. Nesseth, 231 Kan. 381, 383-85, 646 P.2d 1043 (1982) (default judgment entered after
repeated unsuccessful attempts to force defendant to comply with discovery orders).

The United States Court of Appeals for the Tenth Circuit has outlined five factors
to be considered before ordering dismissal as a sanction under parallel Rule 37 of the
Federal Rules of Civil Procedure. That court discussed the need for the aggravating
20

factors to outweigh the judicial system's strong predisposition to resolve cases on their
merits to justify dismissal as an appropriate sanction:

"Before choosing dismissal as a just sanction, a court should ordinarily consider a
number of factors, including: '(1) the degree of actual prejudice to the defendant; (2) the
amount of interference with the judicial process; . . . (3) the culpability of the litigant,'
Ocelot Oil Corp. v. Sparrow Indus., 847 F.2d 1458, 1465 (10th Cir.1988) (quoting Meade
[v. Grubbs], 841 F.2d [1512,] 1521 n. 7 (10th Cir.1988)); (4) whether the court warned
the party in advance that dismissal of the action would be a likely sanction for
noncompliance, see, e.g., Willner v. University of Kansas, 848 F.2d 1023, 1030 (10th
Cir.1988) (per curiam), cert. denied, 488 U.S. 1031, 109 S.Ct. 840, 102 L.Ed.2d 972
(1989); [In re] Standard Metals, 817 F.2d [625,] 629 [10th Cir. (1987)]; Moon v.
Newsome, 863 F.2d 835, 837 (11th Cir.), cert. denied, 493 U.S. 863, 110 S.Ct. 180, 107
L.Ed.2d 135 (1989); Spiller v. U.S.V. Labs., Inc., 842 F.2d 535, 538 (1st Cir.1988); and
(5) the efficacy of lesser sanctions. See Ocelot Oil, 847 F.2d at 1465; Meade, 841 F.2d at
1520; Taylor v. Medtronics, Inc., 861 F.2d 980, 986 (6th Cir.1988). 'Only when the
aggravating factors outweigh the judicial system's strong predisposition to resolve cases
on their merits is dismissal an appropriate sanction.' Meade, 841 F.2d at 1521 n. 7
(citations omitted)." Ehrenhaus v. Reynolds, 965 F.2d 916, 921 (10th Cir. 1992).

The court recognized that "[t]hese factors do not constitute a rigid test; rather, they
represent criteria for the district court to consider prior to imposing dismissal as a
sanction," and also that the district court "should ordinarily evaluate these factors on the
record." 965 F.2d at 921.

Applying the factors suggested by our Supreme Court, we are convinced the
dismissal sanction was appropriate. First, we note that the depositions of the Sumners
went to a dispositive issue in this case. Second, alternative sanctions were not sufficient
to protect Deutsche Bank from further delay and harassment given the severity and
persistence of the Sumners' misconduct. Third, the request to depose the Sumners was not
21

cumulative of other evidence, but rather the depositions were critical to understanding
and testing the counterclaims made against Deutsche Bank.

If we apply the Tenth Circuit factors here, we remain convinced that the dismissal
sanction was appropriate. First, we note that Deutsche Bank had suffered significant
prejudice due to the delays in deposing the Sumners, including the inability to obtain
relief on the foreclosure action for more than 2 years and the enormous cost of prolonged
and vigorous litigation throughout this period. Second, we consider the failure of the
Sumners to make themselves available to be deposed after at least eight genuine attempts
over this period as a significant interference with the judicial process. Third, we deem the
Sumners to be culpable for the delays; counsel may share some of this culpability, but the
Sumners were culpable in the first instance. Fourth, the only factor weighing in favor of
the Sumners was the district court's failure to issue a specific warning to the Sumners that
their failure to obey the discovery orders would result in a dismissal. Fifth, we agree with
the district court in concluding that lesser sanctions would not serve to adequately protect
Deutsche Bank from further delay and harassment.

The Sumners argue on appeal that dismissal was not appropriate because they did
not have the ability to comply with the court's orders because their dentist was out of
town and the need for medication continued until the court's deadline for discovery
completion. The problem with this argument is that the Sumners conduct between March
6 and 20, 2008, must be viewed in context with their conduct throughout the litigation.
As the district court noted, the Sumners had exhibited a "deliberate course of delay"
throughout the litigation, and the conduct in March 2008 must be viewed as the
proverbial "straw that broke the camel's back." Of particular interest, however, is that the
order to provide the dentist's affidavit has never been obeyed, not only during the dentist's
alleged vacation, but at any time thereafter. Because of this noncompliance, the Sumners
have also never supported their excuse for failure to comply with the court's order for
their depositions prior to March 20, 2008.
22

The Sumners also argue on appeal that dismissal was not appropriate because they
were not afforded a hearing on the matter. Yet, this court has confirmed within the record
on appeal that the Sumners were afforded not one but several hearings on the matter,
beginning with Judge Chambers' telephone conference on March 6, 2008, and ending
with the final hearing before Judge McCarville on August 8, 2008. Moreover, the
Sumners submitted numerous briefs and affidavits in opposition to the original sanctions'
motion filed by Deutsche Bank, all of which went to the underlying failure of the
Sumners to submit to depositions.

Finally, the Sumners argue that the dismissal sanction was an abuse of discretion
because it sought to penalize rather than accomplish the objects of discovery. We
disagree. From our extensive review of the entire record of proceedings in the district
court, it is abundantly clear that the Sumners' litigation conduct was based upon a
deliberate strategy to delay the foreclosure action. They remained in the residence that
was the subject of this action from February 2005 until late 2008 without a single
payment on their mortgage obligations. As partially reflected in this court's factual
statement above, they filed motions, objections, extensions, requests for continuances,
requests for hearing, motions to revise journal entries, and requests for reconsideration,
often in duplicate for Doug and Carol, until the record exceeded, 2000 pages, and yet
never submitted to a deposition within the court-imposed discovery period to explain and
be tested on their claims of numerous TILA violations and KCPA violations including
misrepresentations, deceptive trade practices, and associated statutory violations. As only
one example of their conduct, the Sumners consumed scores of pages in the record in the
attempt to have the court revise a journal entry to reflect a purported error in a single digit
of a phone number recited in the order. And to top off this conduct, in furtherance of their
delay tactics, they sought to disqualify every judge assigned to their case, both in this
action and in previous foreclosure actions. We agree with Judge McCarville, who
suggested that the Sumners "have chosen by their voluntary acts not to allow the claims
in the case to be decided on the merits." Frankly, after our review of the record on
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appeal, we believe that the sanction of dismissal may not have been severe enough to
match the misconduct.

Having concluded that there was no abuse of discretion here, we note that the
better practice is for the trial judge to warn the litigants and counsel that a failure to obey
a discovery order may lead to the ultimate sanction of dismissal of any claims before
invoking this extreme sanction. Although such a warning was not offered here, our
evaluation of all other potential factors supports the court's sanction order and such a
notice is not a prerequisite to the dismissal sanction. See Ecclesiastes 9:10-11-12, Inc. v.
LMC Holding Co., 497 F.3d 1135, 1149-50 (10th Cir. 2007); Archibeque v. Atchison,
Topeka & Santa Fe Ry. Co., 70 F.3d 1172, 1175 (10th Cir. 1995).

We take a page from the United States Court of Appeals for the Second Circuit in
stating that we intend our decision today in this case as a sharp warning that litigants and
counsel may not engage in an obvious pattern of delay and harassment with impunity in
Kansas courts. See Peart v. City of New York, 992 F.2d 458, 463 (2d Cir. 1993).

In summary, we hold that the district court erroneously dismissed the Sumners'
TILA disclosure claims for recoupment or setoff, but even if those claims had survived as
a matter of law, they were clearly subject to dismissal thereafter, along with the other
remaining claims, due to the discovery abuse of the Sumners.

Affirmed.