Schoenholz v. Hinzman

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IN THE SUPREME COURT OF THE STATE OF KANSAS

No. 101,063

RODNEY G. SCHOENHOLZ,
Appellant/Cross-appellee,

v.

JANINE HINZMAN,
Appellee/Cross-appellant.

SYLLABUS BY THE COURT

1.
As a general principle, a statutory remedy will supersede a common-law remedy
so long as the statute provides an adequate substitute remedy.

2.
K.S.A. 58-207 et seq. governs liens on and sales of farm animals that are subject
to bailment arrangements.

3.
The interpretation and application of a statute of limitations is a question of law
over which an appellate court exercises unlimited review. An appellant court's review of
a lower court's conclusions of law is likewise unlimited.

4.
A gratuitous bailment is one in which either the bailor or the bailee is the sole
beneficiary of the bailment.


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5.
In the case of a bailment for an indefinite period, causes of action do not accrue
until the bailor makes a demand for the property.

6.
A gratuitous bailee is not liable for any injury arising from nonfeasance, that is,
from inaction, but may be liable for action that undermines the bailor's property interest.

7.
A gratuitous bailee has no right to recover from the owner the costs of caring for
the property.

8.
The keepers of livery stables and all others engaged in feeding horses, cattle, hogs,
or other livestock shall have a lien upon such property for reasonable or stipulated
charges for such feed and care. K.S.A. 58-207.

9.
Whether the law permits a remedy ordered by the district court is a question of law
over which an appellate court exercises unlimited review.

10.
Courts have inherent equitable powers to fashion remedies and to impose
sanctions.

11.
The award of sanctions, including attorney fees, for discovery violations is
reviewed on appeal using an abuse of discretion standard.
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Review of the judgment of the Court of Appeals in an unpublished opinion filed January 29,
2010. Appeal from Cloud District Court; KIM W. CUDNEY, judge. Opinion filed October 12, 2012.
Judgment of the Court of Appeals affirming in part and reversing in part the district court is affirmed in
part and reversed in part. Judgment of the district court is affirmed in part, reversed in part, and remanded
with directions.

Don W. Noah, of Noah Law Office, P.A., of Beloit, argued the cause, and Mark J. Noah, of the
same firm, was with him on the briefs for appellant/cross-appellee.

William R. Thompson, of Condray & Thompson, LLC, of Concordia, argued the cause and was
on the briefs for appellee/cross-appellant.

The opinion of the court was delivered by

ROSEN, J.: This is an unfortunate story of a business and familial relationship gone
bad. Rodney Schoenholz entered into an oral agreement with his sister, Janine Hinzman,
for the bailment of farm animals and farm equipment on her land. Four years after their
cooperative effort to breed horses broke down, Hinzman sold her farm and the horses.
Schoenholz subsequently retrieved most of his equipment from the farm and sued
Hinzman for conversion and breach of the bailment contract. Hinzman counterclaimed
for the expenses of maintaining the equipment and caring for the horses.

The district court awarded no damages. The Court of Appeals affirmed the rulings
against Schoenholz but found the district court had erred in denying Hinzman
compensation for caring for some of the horses and had abused its discretion in denying
sanctions against Schoenholz. We disagree with the principal parts of the Court of
Appeals' decision and remand the case to the district court for further proceedings.

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The dates and substance of the parties' actions are significant to our analysis. In
1999, Schoenholz and Hinzman orally agreed to operate a joint horse-breeding enterprise.
Schoenholz was to provide breeding horses, and Hinzman was to take care of the horses
on her farm and would promote breeding with her own horses. Schoenholz would store
equipment, including a tractor, and materials on her farm to aid in the enterprise, and the
two would evenly split the proceeds from the sale of the horses.

In August 2002, after an argument about payments, Schoenholz and Hinzman
ended the joint enterprise, and Schoenholz agreed to remove his animals from the farm
by April 2003. As of April 2003, he had removed neither his horses nor his equipment.
He did not remove any of his equipment other than his tractor until 2007. He explained
that he refused to retrieve his property because he had no place to store it.

Hinzman stopped using the tractor in 2003, and it sat idle on her farm for more
than 3 years until Schoenholz retrieved it at the end of 2006. Hinzman provided all the
care for the horses, including not only the original horses that Schoenholz had provided
but also the unsold offspring of those horses, from April 2003 until she sold them.

One of Schoenholz' horses, World Ruler, developed health problems and had to be
quarantined. Hinzman initially boarded World Ruler at her daughter's farm, and then
moved the horse to her own farm for a period of 1,260 days after April 2003.

The parties had multiple conversations during which Hinzman complained about
Schoenholz storing his equipment on her farm. During the course of one of these
discussions, when Hinzman asked him to remove the horses and equipment, Schoenholz
struck Hinzman, and he was charged with battery.

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On September 22, 2006, Schoenholz entered into a diversion agreement for the
battery, one condition of which was that he would "remove all of his personal property,
of whatever kind, from the victim's residence . . . within sixty (60) days of the signing of
the diversion." A provision was made that he would "be accompanied by law
enforcement if deemed appropriate by the victim." On August 6, 2007, the State filed a
motion to dismiss the charges with prejudice based on Schoenholz' alleged satisfaction of
the terms of the diversion agreement. The district court granted the motion, even though
Schoenholz had not removed his property from his sister's farm.

Finally, in 2006, Hinzman sold her farm and the horses. In 2007, after Hinzman
had turned the farm over to a new owner, Schoenholz removed his property from the
farm.

On May 3, 2007, Schoenholz filed a petition in district court seeking damages for
horses that were not returned, depreciation of the tractor, and loss of fencing materials, a
bale fork and link, and other farm-related materials. Hinzman filed an answer and
counterclaim for the costs associated with storing Schoenholz' equipment and caring for
his horses. Following unsuccessful motions for summary judgment and sanctions, a trial
was held on January 24-25, 2008. The district court essentially ruled against both parties
on all claims and counterclaims, as well as on requests for sanctions.

The Court of Appeals, in an unpublished opinion, affirmed the district court in
denying Schoenholz' claims but reversed the district court's finding that Hinzman was not
entitled to damages for the care of the horses and in finding that Hinzman was not
entitled to costs for violations of a discovery order. Schoenholz v. Hinzman, No. 101,063,
2010 WL 445693 (Kan. App. 2010) (unpublished opinion).

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Schoenholz filed a petition for review, which this court granted. Hinzman did not
file a petition for review of the issues on her cross-appeal.

Preliminary Discussion of the Law of Farm Bailments and Gratuitous Bailments

Although the parties did not base their claims on or address the statutory scheme,
the Kansas Legislature has enacted several statutes that govern bailments of livestock and
unpaid costs for feeding and caring for that livestock. K.S.A. 58-207 et seq. has been in
effect, with only minor modifications, since 1868.

As a general principle, a statutory remedy will supersede a common-law remedy
so long as the statute provides an adequate substitute remedy. See, e.g., Bair v. Peck, 248
Kan. 824, 838-39, 811 P.2d 1176 (1991). For this reason, we must examine the parties'
claims and counterclaims in light of the statutory requirements, notwithstanding the
parties' arguments that are grounded in the common law.

K.S.A. 58-207 establishes a lien on boarded livestock and allows a bailee of horses
to sell the horses if the bailor fails to pay for their feed and care for 60 days after a
demand is made:

"The keepers of livery stables, and all others engaged in feeding horses, cattle,
hogs, or other livestock, shall have a lien upon such property for the feed and care
bestowed by them upon the same, and if reasonable or stipulated charges for such feed
and care be not paid within sixty (60) days after the same becomes due, the property, or
so much thereof as may be necessary to pay such charges and the expenses of publication
and sale, may be sold as provided in this act: Provided, however, That any lien created
by this act may be assigned." (Emphasis added.)

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K.S.A. 58-208 allows a bailee to sell goods left in the possession of the bailee for
more than 6 months, if there is a lien on the goods and if the bailee properly advertises
the sale:

"Any forwarding merchant, warehouse keeper, stage, express or railway
company, hotelkeeper, carrier, or other bailee not hereinbefore named, having a lien upon
goods which may have remained in store or in the possession of such bailee for six
months or more, may proceed to sell such goods, or so much thereof as may be necessary
to pay the amount of the lien and expenses, according to the provisions of this act:
Provided, That such sale may be advertised and made by any carrier in any city of the
first, second or third class through which its line runs, where, in the judgment of such
carrier, the best price can be obtained for the property to be sold." (Emphasis added.)

K.S.A. 58-209 allows a bailee of livestock and perishable property to dispose of
the property in order to pay for the expenses of maintaining the livestock or other
perishable property 30 days after charges for the upkeep become due:

"If the property bailed or kept be horses, cattle, hogs, or other livestock, or is of a
perishable nature and will be greatly injured by delay, or be insufficient to pay such
charges for any further keeping, the person to whom such charges may be due may, after
the expiration of thirty days from the time when such charges shall have become due,
proceed to dispose of so much of such property as may be necessary to pay such charges
and expenses as herein provided." (Emphasis added.)

K.S.A. 58-211 requires the bailee to provide written notice to the bailor before
disposing of property if the name and residence of the owner is known:

"Before any such property shall be sold, if the name and residence of the owner
thereof is known, notice of such sale shall be given the owner in writing, either personally
or by mail, or by leaving a notice in writing at such person's residence or place of doing
business. If the name and residence is not known, the person having the possession of
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such property shall cause a notice of the time and place of sale, and containing a
description of the property, to be published at least once a week for three consecutive
weeks in a newspaper, if there is one published in the county where such sale is
advertised to take place, and if there is no newspaper published in such county, then the
notice shall be published in some newspaper of general circulation in such county. If the
value of the property does not exceed $100, such notice may be given by written or
printed handbills posted in at least five public places in the township or city where the
bailee resides or the sale is to take place, one of which shall be in a conspicuous part of
the bailee's place of business. Notices given under this section shall state that if the
amount due with storage keeping and sale costs is not paid within 15 days from the date
of mailing, personally giving or posting of the notice (as the case may be), the property
will be sold at public auction." (Emphasis added.)

Hinzman fell within the provisions of these statutes. She had the option of selling
Schoenholz' horses, or shares of horses, but only after she had made a demand for the
reasonable costs of upkeep and only after providing printed notice of the sale. She did not
follow the statutory mandates for disposing of the horses, and, as a consequence, she
incurred certain ongoing responsibilities for taking care of them.

The Statute of Limitations

The interpretation and application of a statute of limitations is a question of law
over which an appellate court exercises unlimited review. An appellate court's review of a
lower court's conclusions of law is likewise unlimited. Smith v. Graham, 282 Kan. 651,
655, 147 P.3d 859 (2006).

Because she did not follow the statutory procedures for selling the horses,
Hinzman remained a bailee even after Schoenholz stopped making contributions to the
upkeep of the bailment property. A gratuitous bailment has been defined as one "in which
either the bailor or the bailee is the sole beneficiary of the bailment." Waggoner v.
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General Motors Corp., 771 P.2d 1195, 1198 (Wyo. 1989). Schoenholz was the only party
benefitting from the bailment arrangement after April 2003, and Hinzman was therefore a
gratuitous bailee from that time on.

The gratuitous bailment was open-ended. It would last until Schoenholz claimed
his property or until Hinzman elected to take the recourse afforded by K.S.A. 58-207 et
seq. In the case of a bailment for an indefinite period, the cause of action does not accrue
until the bailor makes a demand for the property. Jay-Ox, Inc. v. Square Deal Junk Co.,
Inc., 208 Kan. 856, 858, 494 P.2d 1103 (1972). The statute of limitations did not begin to
run until Schoenholz approached Hinzman and told her he wanted his property back.
Until that time, she was a gratuitous bailee of all of Schoenholz' property.

The statute of limitations for oral contracts is 3 years. K.S.A. 60-512. The statute
of limitations for torts involving taking, detaining, or injuring personal property is 2
years. K.S.A. 60-513(2).

The district court found that the statute of limitations for both Schoenholz' contract
and tort claims began to run in April 2003, the date Hinzman gave him to remove his
horses and equipment from her farm. On that date, according to the district court, the
bailment contract expired. This conclusion was erroneous. A bailment relationship
remained in effect because Hinzman still voluntarily retained possession of Schoenholz'
property. The statute of limitations did not begin to run until Hinzman sold the property
in 2006. Schoenholz filed suit on May 3, 2007, well within the limitation periods for both
contract and tort claims.

The Court of Appeals affirmed the district court's ruling with respect to the statute
of limitations. The Court of Appeals stated that it was reviewing the district court's
finding of "abandonment" under a substantial competent evidence standard. It held that
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Schoenholz "abandoned" his property for over 3 years without just cause, exceeding the
limits of the statutes of limitations.

As the Court of Appeals correctly noted, abandonment is a question of fact. See
Rodgers v. Crum, 168 Kan. 668, 673, 215 P.2d 190 (1950). The Court of Appeals also
correctly noted that an appellate court reviews findings of fact to determine whether those
findings are supported by substantial competent evidence. See, e.g., In re Adoption of
J.M.D., 293 Kan. 153, 171, 260 P.3d 1196 (2011). It erred, however, when it inexplicably
relied on a factual finding that the district court rejected. The district court explicitly
determined that Schoenholz did not abandon his property. He merely relinquished
possession, and he remained the owner of the horses when Hinzman sold them.

Abandonment is the voluntary relinquishment of ownership, so that something
ceases to be the property of any person and becomes the subject of appropriation by the
first taker. Rodgers, 168 Kan. at 672-73. Abandonment requires an intent by the owner to
give up the rights of ownership in the property. See In re Estate of Sauder, 283 Kan. 694,
714, 156 P.3d 1204 (2007); Herron v. Whiteside, 782 S.W.2d 414, 416 (Mo. App. 1989)
(abandonment of property requires intent plus an act); Conway et al. v. Fabian et al., 108
Mont. 287, 306, 89 P.2d 1022 (1939) (in determining abandonment intention is first and
paramount factual inquiry).

The record on appeal supports the district court's finding that Schoenholz did not
abandon his property, and the record does not support the inappropriate reweighing of the
evidence by the Court of Appeals. Schoenholz testified that he intended to retrieve his
property whenever he could find a place to store his equipment and board his horses. That
he made minimal—or no—effort to carry out the retrieval does not undermine his
intention to preserve his ownership rights in the property.

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This is significant, because the finding that he did not abandon his property
preserves Schoenholz' conversion claims. He still owned the horses in 2006 when
Hinzman sold them, and the cause of action arose at that time, meaning that Schoenholz'
action in tort was not barred by the statute of limitations.

The Conversion Claim

It is apparent from the record that Hinzman acted in good faith, shouldered a
substantial responsibility for caring for Schoenholz' property, and attempted to return his
property to him before she sold the horses. It is the rule in this state, however, that when a
bailee converts property under his or her care, the bailee is answerable for the conversion,
"'no matter how good his intentions or how careful he has been.'" Lipman v. Petersen,
223 Kan. 483, 485, 575 P.2d 19 (1978) (quoting 8 Am. Jur. 2d, Bailments § 109, pp.
1007-08); see also Loomis v. Imperial Motors, Inc., 88 Idaho 74, 396 P.2d 467 (1964)
(where bailee tenders return of property and return of property is refused, bailee becomes
gratuitous bailee, meaning bailment is for sole benefit of bailor; and bailee may be liable
for gross negligence).

That Schoenholz may have acted in a manner that frustrated Hinzman's efforts to
rid herself of the horses is not relevant here. It is likewise irrelevant that Hinzman may
have acted in good faith and in the belief that she was operating within her legal rights.
Statutory provisions do not distinguish between debtors with clean hands and those
without. Redmond v. Kester, 284 Kan. 209, 218, 159 P.3d 1004 (2007). If the bailee acted
intentionally, "'it is immaterial that the bailee may have mistakenly believed that he was
acting within his legal rights.'" Lipman, 223 Kan. at 485 (quoting 8 Am. Jur. 2d,
Bailments § 109, pp. 1007-08).

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When a bailee makes an unauthorized disposition of the bailor's property, the
bailor may have a cause of action for conversion:

"An absolute and unqualified refusal by the bailee to return or redeliver the
property to the bailor, made in derogation of the bailor's title or right to possession,
constitutes actionable conversion. Furthermore, the bailee cannot qualify his or her duty
to return the bailed property by prescribing conditions not implied by law or
contemplated by the parties in the contract of bailment without being guilty of
conversion. A bailee is not guilty of conversion, however, where his or her refusal to
redeliver the property to the bailor is qualified by the conditions that are reasonable and
not inconsistent with the bailor's rights, provided that the reason for the refusal to return
the item is immediately communicated to the bailor. For example, a refusal to return
bailed property is justified when it is accompanied by a demand for payment of charges
for which the bailee has a lien." 8A Am. Jur. 2d Bailments, § 75, pp. 598-99.

Because Hinzman did not utilize the statutory mechanism to sell the horses, she
had no legal right to refuse delivery of the horses to Schoenholz when he demanded
them. He therefore had a claim for conversion, and the district court and the Court of
Appeals erred by rejecting that claim.

Damages for Unjust Enrichment

Hinzman counterclaimed for the costs associated with caring for the horses after
April 2003. The district court denied the counterclaim, noting that Hinzman never
requested payment from her brother, failed to mitigate damages, and was barred by the
statute of limitations from seeking recovery for her expenses. Hinzman challenged these
conclusions in her cross-appeal. The Court of Appeals reversed, holding that Hinzman
had proven the elements of unjust enrichment and she was entitled to damages for the 3
13



years preceding the filing of her counterclaim. Unjust enrichment is not, however, a
theory appropriate to this case, which is governed by a statutory remedial scheme.

In bailments at common law, a gratuitous bailee has no right to recover from the
owner the costs of caring for the property. Hartford Ins. Co. v. Overland Body Tow, Inc.,
11 Kan. App. 2d 373, 376-77, 724 P.2d 687 (1986) (quoting 8 Am. Jur. 2d, Bailments §
25, p. 757). K.S.A. 58-207, however, establishes a statutory lien on boarded livestock:

"The keepers of livery stables, and all others engaged in feeding horses, cattle,
hogs, or other livestock, shall have a lien upon such property for the feed and care
bestowed by them upon the same." (Emphasis added.)

The statute does not appear to require the keeper to take any action other than
feeding and caring for the livestock in order to create the lien. Cf. K.S.A. 58-201
(requiring registration of mechanic's lien within 90 days of parting with possession of the
subject property).

Hinzman may have therefore possessed a lien on the horses for the expenses
associated with maintaining them. The purpose of an action in tort is to restore the
plaintiff to the position that he or she would have occupied had the injury not occurred.
Arche v. United States of America, 247 Kan. 276, 281-82, 798 P.2d 477 (1990). In the
present case, the purpose of Schoenholz' conversion action is to compensate him for the
value of the horses he would have received back from Hinzman when he demanded them.
If Hinzman had a lien on those horses for the costs of feeding and caring for them, that
amount could potentially be applied to offset any damages that Schoenholz can prove
based on the conversion of his horses.

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Neither party in this action has cited to Kansas law relating to this subject matter.
On remand, it remains for the parties to argue and the district court to determine the
existence and value of any claimed lien on the horses and whether the fact that other
duties proscribed under the statute were not followed impacts the efficacy of any such
lien.

Damages for the Tractor

Schoenholz sought damages for the alleged deterioration of the tractor that he left
sitting out in the open on Hinzman's farm. The district court found that the parties created
an implied bailment of the tractor in 1999 when Hinzman accepted the use of the tractor
on her farm and allowed Schoenholz to leave the tractor on her premises. The court then
noted a legal presumption that the bailee is at fault if bailment property is damaged while
in the exclusive possession and control of the bailee. The court found that the tractor
suffered damage between 1999 and 2006 and that the tractor was not used after the spring
of 2003 by either party. The district court concluded, however, that there was no evidence
of when the damage occurred to the tractor and the statute of limitations barred any
recovery for the deterioration. The Court of Appeals agreed that the statute of limitations
had run for any negligence claim with respect to the tractor.

As with the horses, Hinzman allowed Schoenholz to keep his tractor on her farm.
Although the tractor was not the subject of a lien statute as the horses were, she did not
forfeit her status as a bailee simply because Schoenholz did not retrieve or maintain his
tractor. Her bailee status did not, however, oblige her to take positive steps to keep the
tractor in the same condition in which Schoenholz left it.

A gratuitous bailee is not liable for any injury arising from "nonfeasance," that is,
from inaction. Maddock v. Riggs, 106 Kan. 808, 190 P. 12 (1920). Hinzman was not
15



under a special duty to service the tractor and move it to some sheltered place different
from where her brother had left it. She was therefore not liable for any loss in value that
the tractor may have suffered. While the district court erred in finding that the statute of
limitations barred recovery, we affirm the conclusion that Schoenholz was not entitled to
damages to the tractor as having been right for the wrong reason. See State v. Graham,
277 Kan. 121, 133, 83 P.3d 143 (2004) (reason given by district court for its ruling is
immaterial if the result is correct).

The Order to Reclaim the Bale Fork and Link

Schoenholz contends that the law does not permit the remedy ordered by the
district court. This is a question of law over which this court exercises unlimited review.
See Board of Sedgwick County Comm'rs v. City of Park City, 293 Kan. 107, 113, 260
P.3d 387 (2011).

The district court held that the bale fork and link taken by Hinzman from the farm
in the apparent mistaken belief that it belonged to her was still Schoenholz' property. The
court ordered Schoenholz to take possession of the bale fork and link within 30 days of
the date of the order.

Schoenholz argues that the district court erred in setting a 30-day limit on his right
to recover possession of the bale fork and link. He contends there is no statutory authority
for relief conditioned on a 30-day execution of the relief. He does not argue that it is
impractical to obtain the bale fork and link within the 30-day period.

The Court of Appeals held that the 30-day execution order lay within the inherent
equitable powers of the district court to prevent abuse of judicial process. This was a
correct determination. See, e.g., Alpha Med. Clinic v. Anderson, 280 Kan. 903, 926, 128
16



P.3d 364 (2006) (courts have inherent powers to impose sanctions for bad-faith conduct,
irrespective of statutory provisions). The limitation on the time to retrieve the bale fork
and link is not unreasonable and recognizes Schoenholz' recalcitrance in retrieving his
property and in obeying court orders.

Schoenholz' Motion for Sanctions

Schoenholz moved for sanctions in the district court based on certain mistakes
made by counsel for Hinzman, including service of subpoenas in Nebraska and
statements made in pleadings with which the district court later disagreed. The district
court denied the relief, and the Court of Appeals affirmed, noting that Schoenholz had
failed to designate any portion of the record in support of his argument, citing Supreme
Court Rule 6.02(d) (2011 Kan. Ct. R. Annot. 39).

The award of sanctions, including attorney fees, for discovery violations is
reviewed using an abuse of discretion standard. Canaan v. Bartee, 276 Kan. 116, 135, 72
P.3d 911, cert. denied 540 U.S. 1090 (2003). Assuming Schoenholz' assertions of
impropriety on the part of opposing counsel to be true, we do not discern any willful
behavior on the part of that counsel sufficient to require the district court to award
sanctions.

Hinzman's Request for Attorney Fees

During discovery, Hinzman twice requested copies of Schoenholz' state and
federal tax returns for the years 2000 through 2006. Both times, Schoenholz refused to
provide the returns, arguing that they contained confidential information and were
irrelevant to the action. The district court then granted Hinzman's motion to compel
production, but Schoenholz nevertheless refused to produce them. It was finally revealed
17



on the day of the trial that he did not file any tax returns for the years that Hinzman had
requested them. She then asked the court to award her $2,000 as a sanction. The district
court denied the request, holding that the returns were not material to the substantive
issues, although Schoenholz' lack of candor went to the credibility of his testimony. The
Court of Appeals found the denial of the motion to constitute an abuse of discretion and
remanded for imposition of attorney fees.

We will consider the discovery issue in detail because the record discloses acts of
dishonesty on the part of Schoenholz and a lack of candor with both the district court and
the appellate courts on the part of Schoenholz' attorney.

On September 7, 2007, Hinzman served on Schoenholz a request for production of
documents, including state and federal tax returns for the years 2000-2006. Schoenholz
objected to the request because the returns "contain confidential information and for the
further reason that no accounting is requested from the Plaintiff and nothing on his tax
returns could be material to evidence in this lawsuit."

On November 15, 2007, Hinzman served a second request for production,
repeating the request for tax records. Responding to the second request, Schoenholz,
through counsel, objected to furnishing any information from his tax returns because
"they contain confidential information and would not provide any proof or lead to any
admissible evidence in this case. Further, Plaintiff does not have possession of this
information and has been unable to reacquire possession of any of his returns since the
filing of this lawsuit."

Hinzman then filed a motion to compel production of the documents. The motion
listed a number of reasons why the tax records were relevant. These included: showing
the initial costs of some of the horses, whether Schoenholz had sold any of the horses, the
18



depreciation on the tractor, the expenses for supplies such as fencing, feed, etc., and
whether Schoenholz in fact lacked the space and resources to relocate the horses and
equipment when he may have purchased more horses and may have paid rent for a lot to
store other personal property belonging to him.

The district court granted the motion to compel production in part. The court
stated:

"Mr. Schoenholz, they have made an early request for discovery of your income tax
returns and have showed that those documents are relevant. You will be required to take
the steps necessary to get those documents produced to the Defendant in this case. . . .
[T]he Court finds that those [tax] documents are relevant . . . . Mr. Schoenholz is
ordered compelled to produce. Mr. Condray, if you can come up with another
suggestion on how to find those documents, I will entertain the same, but we're not
going to delay the trial date at this point in time."

The pretrial order reiterated that the plaintiff "shall produce tax returns for the
years 1999 through 2006 inclusive." Hinzman's counsel then sent Schoenholz' counsel
information about how attorneys could gain electronic access to tax records with the
consent of their clients.

Schoenholz' counsel informed the court immediately before the trial began:

"Well, we, I thought, made a showing at the hearing on that that we simply don't have
them, and it was my understanding that the Court's last comment was the IRS just doesn't
move that speedy, and we're here, and we—we feel that we made a showing if they're not
in our possession, there's not much else we can do, and the Court did not order us to give
releases."

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He went on to tell the court:

"The same person Mr. Schoenholz left his taxes with is the one that's prepared his
returns for all this time. He doesn't have anything because of the request that was made
by IRS to check this. He took them all there.
"I haven't gone up there. I understand he has. I did try to find this fellow in the
telephone book. The number that I started with, that is not a working number.
. . . .
"We feel that at this late date there's really nothing that we can do, it's going to
get tax returns for this trial [sic]."

The district court then examined counsel on why he did not seek the returns
directly from the IRS through a waiver of confidentiality by his client:

"THE COURT: Mr. Noah, why did you or your client not attempt to obtain the
returns from the IRS?
"MR. NOAH: No, I didn't. I — (interrupted)
"THE COURT: Why?
"MR. NOAH: Why? We weren't ordered to, Your Honor. I didn't understand we
were supposed to get them. I understood when I left this hearing that it was too late, and
we were not ordered to give releases or do anything else. Now, if I'm in error, if I was
wrong with that, then it's my fault. I understood that it was simply too late and that was a
dead letter when I left here.
. . . .
"THE COURT: I don't know how my ruling could have been any more plain that
Mr. Schoenholz is ordered to, compelled to produce."

Schoenholz subsequently testified under oath regarding the returns. He informed
the district court that a Mr. Underfeldt in Crete, Nebraska, prepared his returns, and
Schoenholz did not have any of his tax information or returns in his own possession. He
proceeded to testify that he filed returns for the years 1999-2006.
20




Schoenholz testified about various measures he had taken to obtain his tax
materials: he had gone directly to Underfeldt's office, which was closed; he had
contacted "various people" who might know where Underfeldt was; and he had left his
contact information with some people who told him they would let him know if they
found out where Underfeldt was.

Schoenholz testified that he went to Underfeldt's office every year to provide the
information for his taxes, and sometimes he went back to pick up his records "when they
would get done preparing the returns." Schoenholz' attorney then told the court that he
himself had made a series of telephone calls trying to find Underfeldt, concluding,
"Maybe he died."

During a recess in the trial testimony and at the court's direction, Schoenholz'
attorney called a number provided by Hinzman's attorney and requested that the IRS fax
the missing tax returns to the courthouse. The IRS immediately sent an account transcript
showing that Schoenholz had failed to file any returns for the years 2000-2006. In
response to questions about this transcript, Schoenholz initially testified that he had filed
returns and written checks to the IRS.

The following colloquy between Hinzman's counsel and Schoenholz then took
place:

"Q. So, Mr. Schoenholz, we've been going at this about three or four months now
trying to get your tax returns.
"A. Uh-huh.
"Q. And it's all been kind of a waste of time, hasn't it?
21



"A. Basically, yes, but still don't do anything for the case one way or the other. I
mean, hers didn't her, hinder her."

The district court, while conceding that Schoenholz had misled the court by
claiming he had filed tax returns, declined to impose sanctions.

Hinzman raised the issue of fees as discovery sanctions on cross-appeal. The
Court of Appeals cited K.S.A. 2008 Supp. 60-237(b)(2)(E), in effect at the time of the
trial, which set out various sanctions for failure to comply with discovery orders. The
section concluded:

"[T]he judge shall require the party failing to obey the order or the attorney advising such
party or both to pay the reasonable expenses, including attorney fees, caused by the
failure, unless the judge finds that the failure was substantially justified or that other
circumstances make an award of expenses unjust." (Emphasis added.)

The Court of Appeals found that Schoenholz had clearly violated the district court
order and had then made misrepresentations to the court under oath. It was therefore an
abuse of discretion to deny Hinzman's request for attorney fees.

In his appellate briefs, counsel for Schoenholz avoids discussing the fact that his
client had lied about filing the tax returns and that he himself had represented to the
district court that he had tried to retrieve the returns but did not think he was under any
obligation to obtain copies directly from the IRS. His client and he stalled on the subject
for some 4 months, although it was possible to obtain the necessary information
electronically within a couple of hours on the morning of the trial. On review,
Schoenholz' counsel again fails to mention that his client lied about the returns and that
he did not attempt to get the returns from the IRS.

22



K.S.A. 2008 Supp. 60-237(b)(2) required a district court to order a party to pay
expenses, including attorney fees, when that party failed to obey a discovery order. The
only exceptions to this requirement were when the failure was substantially justified or
when other circumstances made the sanction unjust.

Schoenholz lied repeatedly under oath about the existence of his tax returns. His
attorney violated the district court's express orders and then neglected to inform the Court
of Appeals or this court that his client's dishonesty was even at issue. Under these
circumstances, we agree with the Court of Appeals that the district court abused its
discretion by refusing to award attorney fees. The district court was required by statute to
impose the sanction of fees. Nothing in the record suggests that the disobedience of the
court order by Schoenholz or his attorney were justified, and the imposition of the
sanction is just.

The Court of Appeals went on to award Hinzman attorney fees in the amount of
$2,000. Hinzman does not provide a citation to the record of an affidavit of attorney fees.
If the affidavit is in the record, this court is unable to locate it. The question of attorney
fees is therefore remanded to the district court for determining the amount of fees to be
awarded.

The judgment of the Court of Appeals is affirmed in part and reversed in part. The
judgment of the district court is affirmed in part, reversed in part, and remanded with
directions.