JOHN H. MORLEY, JR. v. CONTARINO BROTHERS, INC., DAN GILL et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5803-04T25803-04T2

JOHN H. MORLEY, JR.,

Plaintiff-Appellant,

v.

CONTARINO BROTHERS, INC.,

DAN GILL and GUISEPPE R.

BELFIORE,

Defendants-Respondents.

_________________________________________________

 

Submitted June 7, 2006 - Decided July 20, 2006

Before Judges Weissbard and Winkelstein.

On appeal from Superior Court of New Jersey,

Law Division, Gloucester County, Docket

No. 06-24-2005.

John H. Morley, Jr., appellant pro se.

Sander & Carson, attorneys for respondent

(Mark R. Sander, of counsel and on the brief).

PER CURIAM

Plaintiff John H. Morley, Jr. appeals the dismissal of his suit against defendants Contarino Brothers, Inc., Dan Gill and Giuseppe R. Belfiore, based upon his failure to comply with prior court orders that called for production in discovery of certain personal and corporate tax returns. We reverse.

Plaintiff, as an individual, contracted with C.J. Schmidt & Sons, Inc. (Schmidt) to install fire protection sprinklers at five schools in Deptford (the project). Defendant Contarino had a contract to build the masonry walls for Hessert Construction Group at the project. Plaintiff alleged that on December 14, 2002, defendant Gill, an employee of Contarino, approached him and asked him to stop work; plaintiff refused. Gill followed plaintiff to his staging area and threatened to tear down the pipes if plaintiff did not cease work; plaintiff again refused.

Thereafter, Gill walked away, but found three Contarino employees, including defendant Belfiore who was carrying a shovel; he waved them over and all three men ran at plaintiff and surrounded him. Plaintiff picked up a hammer to defend himself. Belfiore tackled plaintiff and Gill punched plaintiff twice in the temple, while Belfiore punched him once in the left ear. The fight ended before or upon arrival of the police, who had been summoned by another Contarino employee.

The events immediately following were reflected in a December 17, 2002 letter from Kenneth L. Kling, Business Administrator/Secretary of the Deptford Township Board of Education to Charles L. Schmidt, III, President of Schmidt:

In regards to the incident of Saturday, December 14, 2002, it has come to my attention that your subcontractor from John H. Morley, Inc. was out of control and had to be escorted away by the police. There was a meeting on Monday, December 16, 2002, with John Russell - our representative, Vic Lombardi - project manager and Phil Bertolino - site superintendent with Hessert Corporation, and Fred Schmidt of your company and you to discuss this problem.

It was the Board's position at that time that we did not want this person back on the job as a result of this incident. You stated you have a contract with this individual and have to honor the contract, and therefore came up with a proposal to help remedy the situation. Your solution to the problem is to only allow this person on the job site on Mondays through Fridays from 7:00 a.m. to 3:30 p.m. and only when you are on site to supervise this person and take full responsibility for his actions. We feel this is an acceptable solution and will hold you to this. Keep in mind that the subcontractor works for you, and it is your responsibility to keep that person under control. Any further incidents could result in a breach of contract. We are willing to work with you through this problem but not at the expense of the safety of the other contractors on this project.

Plaintiff initially filed suit in late 2004 and filed an amended complaint on April 14, 2005, asserting five causes of action: assault on December 14, 2002 by Contarino employees Gill, Belfiore and Stewart (count one); failure of Contarino to control its servants (count two); contractual inference by Contarino, Gill and Belfiore from December 12, 2002 to January 1, 2004 (count three); delays resulting from Contarino's conduct during the project (count four); and vandalism of plaintiff's property by Contarino, Gill, Belfiore and Stewart during the project (count five). Counts one, two and three only sought punitive damages, while counts four and five sought compensatory and punitive damages.

Prior to filing his amended complaint, plaintiff was deposed on March 15, 2002. At his deposition, plaintiff was asked about revenue for his "company" in 2004. As it appears, plaintiff also does business under a corporate form, John H. Morley, Jr., Inc. Asserting that an accounting for 2004 had not yet been completed, plaintiff responded that he would "not want to estimate" the company's revenue for that year. Following some acrimony between plaintiff and defense counsel, a Superior Court judge (the "deposition" judge) agreed to intervene and rule on the disputed question. After hearing about the nature of the suit and the proposed line of inquiry, the judge determined that the question was appropriate since it dealt "with damages and its going to the damage of lost income." After plaintiff again repeated to the judge that final 2004 figures were not yet available, the judge ascertained that plaintiff was a "Subchapter S" corporation, and repeated his ruling as follows:

It's a proper question. It deals with damages and it asks for information about what income was made for 2004 to determine in comparison to perhaps previous years whether there has been an impact related to this incident, whatever it might be. However, at -- and therefore, if Mr. Morley had the ability to answer it, he should answer it. And he has a continuing obligation to answer it once he gets that information. However, if he can't estimate it, he can't give the information over because he doesn't know it because he hasn't received the information from his accountant, then that is an acceptable answer. At the same time, Mr. Morley should understand that I will put as an order that it is a continuing question, it's a relevant question. Once you come into possession of that information, you are to provide it to [defense counsel]. And you should also understand that if you fail to do that in a timely manner, that you could be precluded from introducing that at the time of trial which would mean that it would limit the possibility of recovering damages for that particular item. And so be mindful that -- that I am ruling it's a relevant question, it's an appropriate question and one that should be answered once you have the information privy to you.

Defense counsel then indicated that he intended to ask plaintiff about prior years' income for the purpose of obtaining a "track record of what the last couple of years have been for income purposes." The judge ruled that such questioning was relevant and that if plaintiff could not remember the income figures, defense counsel could request them, and the returns should be provided within seven days. After the deposition resumed, plaintiff did respond that he could not recall his "company's gross or net incomes . . . for the 2003 year," or, similarly, for 2002. As a result, counsel requested production of such state and federal tax returns for all of the years in question, 2002, 2003, and 2004, within seven days.

Following the deposition on March 22, 2005, plaintiff moved for a "Protective Order," see R. 4:10-3, asserting that at his March 15, 2005 deposition, defense counsel "made an oral supplemental request for the production of [his] Form 1040 U.S. Individual Income Tax Return," to which he had responded by letter of March 17, 2005 to defendants' attorney, stating:

I will not furnish my income tax returns without a written promise from you, your clients and the other partners of your firm that states a)you will not give my Income Tax Returns to anyone not involved with the case at bar and b)all copies of my Income Tax Returns will be destroyed a the conclusion of this case.

Plaintiff's motion sought to preclude counsel, any employee of his firm and defendants from giving his 1040 "to anyone not involved with the case at bar" and to destroy those copies at the conclusion of the case. The motion sought monetary sanctions for any violation. In response, by letter of April 19, 2005, defendants directed the motion judge's attention to the deposition judge's directive and noted their agreement to a consent order limiting distribution of plaintiff's tax returns. The response asserted that the matter had been discussed with plaintiff at a recent deposition of defendants. A proposed order was enclosed.

Without hearing argument, on April 29, 2005, the motion judge signed the proposed order requiring plaintiff to produce his corporate, state and federal tax returns for 2002, 2003 and 2004 with "all schedules and exhibits attached." The judge wrote on the order that counsel could review the returns with defendants but "may not photocopy or give copies to clients without further court order."

On June 3, 2005, defendants moved to dismiss the complaint for failure of plaintiff to provide the tax returns as ordered on April 29, 2005. Counsel certified that he was unable to properly prepare his defense without the records. In reply, plaintiff asserted that defendants had "improperly added John H. Morley, Jr., Inc. to the order signed by the motion judge," that the corporation was not a party to the litigation, and plaintiff should not be compelled to produce tax returns "without strict proof . . . regarding their relevance." He further claimed that his income was not relevant to the counts seeking punitive damages only and that it was for the judge to decide if his yearly income "is somehow relevant to the compensatory damage prayer related to only one construction project." Finally, plaintiff stated that he "ha[d] produced volumes of relevant documents that include information regarding contract amount, line item appropriations, material invoices, time sheets, etc. Attached as Exhibit A are true and correct copies of plaintiff's 2003 and 2004 income tax returns." Indeed, plaintiff did attach his 2002 and 2003 personal state and federal tax returns. Those returns reflected pass-through income from John H. Morley, Inc. which constituted virtually all of plaintiff's reportable income. Without argument, on June 24, 2005, the judge dismissed plaintiff's complaint without prejudice for failing to comply with the March 15, 2005 oral ruling of the deposition judge and the April 29, 2005 order of the motion judge.

On this appeal from the June 24, 2005 order, plaintiff has filed a pro se brief raising the following arguments:

A. THE TRIAL COURT COMMITTED REVERSIBLE ERROR WHEN IT DISMISSED THE COMPLAINT AFTER PLAINTIFF'S INCOME TAX RETURNS WERE PRODUCED.

B. PLAINTIFF'S INCOME TAX RETURNS ARE NOT ADMISSIBLE DEFENSE EVIDENCE REGARDING THE TORT CLAMS OF ASSAULT, FAILURE TO CONTROL SERVANT AND CONTRACTUAL INTERFERENCE WHEREIN PUNITIVE DAMAGES ARE PRAYED FOR.

C. PLAINTIFF'S INCOME FROM OTHER SOURCES IS NOT RELEVANT TO AND NOT ADMISSIBLE DEFENSE EVIDENCE REGARDING COMPENSATORY DAMAGES RELATED TO ONLY ONE CONSTRUCTION PROJECT.

FINANCIAL FACTS RELATED ONLY TO THE CONSTRUCTION PROJECT AT BAR ARE RELEVANT AND THEREFORE ADMISSIBLE DEFENSE EVIDENCE.

D. THE DEFENDANTS ARE NOT PREJUDICED BY THE PRECLUSION OF PLAINTIFF'S INCOME TAX RETURNS.

E. THE INCOME TAX RETURNS OF A NON PARTY TO THE LITIGATION CAN NOT BE COMPELLED AND THE FAILURE OF A NON PARTY TO PRODUCE CAN NOT BE THE CAUSE TO DISMISS THE CASE.

Before addressing plaintiff's argument, we set out the fundamental governing principles. Rule 4:10-2(a) provides for discovery of:

any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the party seeking discovery. . . . It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.

Thus, the first question to be answered is whether the tax returns of plaintiff's corporation, John H. Morley, Jr., Inc., as well as his personal returns, are relevant to defendants' defense. Defendants asserted below, and both the deposition judge and the motion judge agreed, that the material sought bore on plaintiff's claim for "lost income." However, as we read the complaint, plaintiff's claim was that defendants' conduct "caused [him] to incur five hundred (500) man hours of labor in excess of the man hours estimated for the Project." His other claim for compensatory damages was that defendants' conduct "caused [him] to replace fabricated pipe, repurchase sprinkler heads, remove damaged pipe and sprinkler heads and re-install re-fabricated pipe and sprinkler heads."

We fail to discern how these claims, in particular the excess labor claim, would be disproved or impugned by the amount of plaintiff's income over the period of years in question, 2002, 2003 and 2004. Rather, plaintiff's claim is that he lost the monetary value of the 500 extra hours required as a result of defendants' conduct. How much he made in the three years, indeed whether he made much or little and whether his income increased or decreased from year to year, has no bearing on that issue nor does it "appear reasonably calculated to lead" to discovery of admissible evidence. As plaintiff states, his "income from other projects," as reflected on his tax returns, "has no connection" to his claim against defendants arising solely from the Deptford project. We do not consider plaintiff's affirmative response to the deposition judge's question whether "it" (apparently the compensatory damage claim) "relate[s] to the impact on your company's business and income," as dispositive.

In any event, before the trial court plaintiff appeared to only contest the order as it related to his corporate tax returns, that is, he did not object to production of his individual returns and, indeed, supplied the returns for 2002 and 2003. His only objection to 2004 was that it had not yet been prepared. A review of the returns produced shows that they reflect plaintiff's income from his subchapter S corporation.

While we have alluded to the general standards for discovery, special rules govern the production of tax returns, which may be discovered only for "'good cause.'" Campione v. Soden, 150 N.J. 163, 189-90 (1997) (quoting Ullmann v. Hartford Fire Ins. Co., 87 N.J. Super. 409, 415 (App. Div. 1965)). Because disclosure of such materials is "a highly sensitive endeavor," a taxpayer is not required to produce such materials "absent a 'strong need' for information contained in the return." Id. at 190 (quoting Ullman, supra, 87 N.J. Super. at 415). Unless disclosure serves some "'substantial purpose,'" a trial court should refrain from ordering it. Ibid. (quoting Ullman, supra, 87 N.J. Super. at 415-16).

In Campione, the plaintiff suffered severe injuries in a car accident. Id. at 168-69. At trial, the plaintiff's psychiatrist opined that the plaintiff's loss of income resulting from his inability to partake in his business, which the plaintiff testified had been busy before the accident, contributed to his psychiatric problems. Id. at 169. The trial court rejected the defendants' request for the plaintiff's business' income tax returns, which they sought to prove that the business had never been successful. Ibid. The trial court concluded that because the plaintiff had neither presented the jury with a value for his business nor leveled a claim for lost earnings or lost wages, the income tax returns were not discoverable. Ibid. The Court agreed, concluding that there was no "strong need" or "substantial purpose" for the returns, and thus affirmed the trial court's decision to deny the defendants' discovery request. Id. at 190. So too here. We conclude that defendants did not demonstrate a "strong need" for plaintiff's tax returns, at least beyond those already produced. As a result, the order under review, which dismissed the complaint based on failure to provide those returns, was improvidently entered.

We also note, however, that even if the returns were properly subject to discovery, a dismissal of the entire complaint was not required. The tax returns were said to be relevant to plaintiff's claim for compensatory damages, and even there only arguably as to count four. Three of the five counts only sought punitive damages. No argument was offered before the trial court nor has any been made on appeal, concerning how the returns bear on the exemplary damage claims, and we see no connection.

Beyond this, the motion judge did not appear to consider sanctions short of dismissal of the entire complaint, even if it was "without prejudice." Rule 4:23 confers broad discretion upon the trial courts to dole out sanctions tailored to specific discovery violations, with the caveat that those sanctions "must be just and reasonable." Conrad v. Robbi, 341 N.J. Super. 424, 441 (App. Div.), certif. denied, 170 N.J. 210 (2001). Dismissal, the ultimate sanction, should be employed only in cases where the delinquent party displays a willful, refractory resistance to the court's mandates and the opposing party's requests. Abtrax Pharms., Inc. v. Elkins-Sinn, Inc., 139 N.J. 499, 514 (1995); see also Familia v. Univ. Hosp. of N.J., 350 N.J. Super. 563 (App. Div. 2002) (reaffirming that to the extent possible, claims should be addressed on the merits, rather than disposed of based on discovery violations). Recently, the Court set forth malleable guidelines for trial judges to apply in deciding what sanction fits a particular discovery violation:

the court has available to it, along with dismissal, where warranted, discovery-type sanctions such as orders to compel, the award of reasonable expenses incurred in obtaining the certification, and counsel fees. See R. 4:23-1 to -5 . In each case, the court should assess the facts, including the willfulness of the violation, the ability of plaintiff to produce the certification, the proximity of trial, and prejudice to the adversary, and apply the appropriate remedy. That methodology provides judges with discretion to choose a response that is proportionate to the procedural stimulus; saves for trial the meritorious claims of truly injured victims; and allows dismissal of cases in which a plaintiff cannot or will not supply a certification or in which a plaintiff's conduct has irremediably prejudiced the defendant.

[Casinelli v. Manglapus, 181 N.J. 354, 365 (2004).]

Thus, trial courts possess considerable leeway in handling discovery violations. It does not appear that the motion judge exercised any of the available discretion short of ending plaintiff's case.

Reversed.

 

Although it was alleged that Stewart participated in the assault, he was not named as a defendant.

These counts also made a generalized claim for "any other amount the Court deems just and proper."

(continued)

(continued)

14

A-5803-04T2

July 20, 2006