Opinion
No. A08-2220.
Filed October 13, 2009.
Appeal from the District Court, Hennepin County, File No. 27-CV-06-8739.
Donald S. Arbour, Arbour Law Firm, (for respondent).
Jack E. Pierce, Tracy J. Halliday, Pierce Law Firm, P.A., (for appellant).
Considered and decided by Toussaint, Chief Judge; Shumaker, Judge; and Hudson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2008).
UNPUBLISHED OPINION
This is an appeal from an October 29, 2008 order finding appellant Luther Allan Crofton, an officer of defendant Sandra Crofton Construction Company, in constructive civil contempt of court for violating court orders requiring Crofton Construction to satisfy a stipulated judgment in favor of respondent Elliot Callan, Inc. Judgment was entered on the order on October 31, 2008. Because the record supports a finding that appellant was in contempt and the district court's finding of respondent's damages and because appellant's contempt adjudication and the requirement that he pay respondent's damages were not procedurally defective, we affirm.
FACTS
When respondent sued Crofton Construction in 2006, appellant was a principal of Crofton Construction. In July 2007, the parties stipulated that respondent would receive a $400,000 judgment against Crofton Construction and that respondent would not immediately enforce its judgment on the condition that Crofton Construction not dispose of its assets outside of the normal course of business and cooperate in respondent's collection of its judgment.
Disputes between the parties prompted the district court to issue an August 27, 2007 order ruling that respondent was entitled to collect its judgment immediately because Crofton Construction had not satisfied its obligations. The disputes continued, and the district court issued a September 19, 2007 order requiring Crofton Construction to respond to respondent's postjudgment discovery and to disclose the location of assets disposed of since July 30, 2007. The order also stated that Crofton Construction's failure to make the required disclosures meant Crofton Construction had to appear at an October 15, 2007 hearing to show cause why Crofton Construction should not be held in contempt of court. This order was initially stayed, but an amended order issued September 21, 2007 lifted the stay. In early October, appellant sent respondent's attorney an e-mail stating that, for payment in advance, he would disclose any information he had regarding the location of Crofton Construction vehicles leased to persons in default on their leases.
The parties' disputes continued, and, on October 17, 2007, the sheriff returned an execution on the judgment unsatisfied. Respondent then sought appointment of a receiver for Crofton Construction. The district court issued a November 1, 2007 order appointing a receiver over Crofton Construction, forbidding appellant from acting or purporting to act on Crofton Construction's behalf, and directing Crofton Construction and appellant to cooperate with the receiver's attempts to liquidate sufficient Crofton Construction property to satisfy the judgment.
In September 2007, appellant opened a new Crofton Construction bank account and a new account in his own name and used both accounts to transact Crofton Construction business without the knowledge of respondent. When the receiver asked appellant to disclose all Crofton Construction-related accounts, appellant did not fully disclose these accounts. Eventually, to get Crofton Construction-related information, the receiver asked the banks and the entity that kept Crofton Construction's books, rather than asking appellant.
In May 2008, respondent filed a memorandum of law seeking to have appellant held in contempt of court for not cooperating with the receiver and respondent's attempts to collect the judgment. After a two-day evidentiary hearing and the subsequent receipt of written submissions from the parties, the district court issued an October 29, 2008 order that terminated the receivership, ordered respondent to pay the $30,194 in receiver's fees, found appellant in contempt of court for violating the court's orders and awarded respondent a $30,194 judgment against appellant under Minn. Stat. § 588.11 (2008). Judgment on the order was entered October 31, 2008.
DECISION I.
Appellant argues that the record does not support finding him in contempt. A district court has "inherently broad discretion" to hold a person in contempt if that person acted "contumaciously, in bad faith, and out of disrespect for the judicial process." Erickson v. Erickson, 385 N.W.2d 301, 304 (Minn. 1986) (quotation omitted). On appeal, a district court's contempt-related findings of fact are reviewed for clear error. Emery Air Freight Corp. v. Local 544, Int'l Bhd. of Teamsters, 379 N.W.2d 539, 542 (Minn. App. 1985), review denied (Minn. Feb. 14, 1986). A district court's decision to invoke its contempt power can be reversed "only if the appellate court finds an abuse of discretion." Mower County Human Servs. v. Swancutt, 551 N.W.2d 219, 222 (Minn. 1996).
The district court found that appellant opened a Crofton Construction bank account "to conduct [Crofton Construction] activity without the knowledge of" respondent and that, for "no legitimate reason," appellant failed to disclose the account to respondent and did not fully disclose the account information to the receiver. Appellant notes that he testified that he thought the account was closed and that no evidence to the contrary was entered. But a factfinder "is not required to accept even uncontradicted testimony if the surrounding facts and circumstances afford reasonable grounds for doubting its credibility." Varner v. Varner, 400 N.W.2d 117, 121 (Minn. App. 1987). Here, the record unambiguously shows that Crofton Construction and appellant have a history of being difficult and not cooperating with respondent's attempts to collect the stipulated judgment. Therefore, we defer to the district court's implicit determination that appellant was not credible on this point. Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (stating appellate courts defer to district court credibility determinations).
Despite the November 1, 2007 order appointing the receiver and forbidding appellant from acting or purporting to act on Crofton Construction's behalf, the record shows that five days later, appellant sent a letter to the purchaser of a Crofton Construction vehicle. The letter addressed the terms of the sale and the disposition of the sale proceeds. The letter also provided appellant's contact information in case the purchaser had "any questions." The district court found that this letter was sent "contumaciously, in bad faith, and out of disrespect for the judicial process." Appellant argues that restating the sale terms is not acting on behalf of Crofton Construction. But, because appellant's letter also refers all questions to himself without acknowledging the receivership, appellant has not shown that the district court clearly erred in finding him in contempt of the November 2007 order forbidding him from acting or purporting to act on Crofton Construction's behalf.
Appellant argues that he did not otherwise fail to cooperate with the receiver. But the district court found that, in addition to the Crofton Construction account that appellant opened to conduct Crofton Construction business without respondent's knowledge, appellant also opened an account in his own name, used this personal account "to conduct [Crofton Construction] business without the knowledge of" respondent and that appellant failed to disclose this account to the receiver. In addition, before the receivership was put in place, appellant sent an e-mail message to respondent's counsel, seeking money in exchange for information regarding the location of Crofton Construction assets, despite having stipulated to the judgment and to the September 19, 2007 and September 21, 2007 orders requiring him to assist in collection of the judgment.
Finally, the district court found that appellant "was not cooperative (and less than candid) with the Receiver." Appellant has not shown these findings to be clearly erroneous, and we will not alter the district court's finding that his conduct was contumacious.
II.
The district court's October 29, 2008 order required respondent to pay the receiver $30,194 and, under Minn. Stat. § 588.11, awarded respondent a judgment against appellant for that amount. While appellant challenges the requirement that he pay respondent, his notice of appeal mentioned only the October 29, 2008 order, not the resulting judgment. Notices of appeal, however, are liberally construed in favor of their sufficiency and are not deemed insufficient for defects that could not have been misleading. Kelly v. Kelly, 371 N.W.2d 193, 195-96 (Minn. 1985). Therefore, we will construe appellant's notice of appeal to include the October 31, 2008 judgment.
Under Minn. Stat. § 588.11, a district court may direct a contemnor to pay a party aggrieved by the contumacious conduct "a sum of money sufficient to indemnify the party and satisfy the party's costs and expenses, including a reasonable attorney's fee incurred in the prosecution of such contempt." Appellant argues that the finding of respondent's damages ($30,194) is not supported by the record. Because a determination of contempt-related damages is a finding of fact, appellate courts review those determinations for clear error. See Emery Air Freight Corp., 379 N.W.2d at 543 (ruling that contempt-related "findings" regarding damages were "not clearly erroneous").
When damages are awarded under Minn. Stat. § 588.11, the amount of the indemnification "must be based on proof of the damage actually sustained." Campbell v. Motion Picture Mach. Operators, 151 Minn. 238, 242, 186 N.W. 787, 789 (1922) (referring to predecessor of Minn. Stat. § 588.11); see Time-Share Sys., Inc. v. Schmidt, 397 N.W.2d 438, 441 (Minn. App. 1986) (stating same rule under current statute). Appellant argues that the part of the receiver's bill that accrued before the receiver contacted appellant "is not the result of [appellant] being uncooperative." But the order appointing the receiver finds that Crofton Construction "has not devoted any of its assets to the [stipulated] Judgment and refuses to apply property in satisfaction of the Judgment" and that the sheriff had returned the writ of execution unsatisfied. It then states that respondent "is entitled to the appointment of a Receiver over [Crofton Construction] pursuant to Minnesota Statute § 576.01, subd. 1(2)."
Under Minn. Stat. § 576.01, subd. 1(2) (2008), a receiver may be appointed "when an execution has been returned unsatisfied and the judgment debtor refuses to apply property in satisfaction of the judgment." Thus, the receiver was appointed because Crofton Construction refused to cooperate in paying the judgment. The record shows that, while Crofton Construction was refusing to cooperate in paying the stipulated judgment, appellant was Crofton Construction's treasurer, owned 82% of its stock, was a corporate director, and "had principal responsibility on behalf of [Crofton Construction] to direct matters relating to the litigation." Had appellant cooperated initially, the expense of the receiver, including expenses incurred before the receiver contacted appellant, would have been unnecessary. Therefore, we reject appellant's argument that the record lacks adequate support for the indemnification award.
Appellant's other challenge to the amount of the indemnification is that there was no evidence that his failure to disclose an account to the receiver damaged respondent. But, as previously stated, had appellant initially cooperated in paying the judgment, the receiver would not have been necessary. Further, given Crofton Construction's lack of cooperation, the amount was reasonable because the receiver had to spend time and effort to pursue information regarding Crofton Construction accounts.
III.
Appellant argues that the district court should not have imposed contempt sanctions on him. First, appellant argues that the contempt determination is defective because he was not given an opportunity to purge the contempt before being required to reimburse respondent for the receiver's fees. The "primary purpose of a civil contempt sanction is to coerce compliance with an existing obligation, [but] the court may impose additional obligations if the contemnor's misconduct has prejudiced the party whose rights the court was seeking to enforce." Hon. D.D. Wozniak Cynthia Lehr, Dealing with a Double-Edged Sword: A Practical Guide to Contempt Law in Minnesota, 18 Wm. Mitchell L.Rev. 7, 17 (1992) (citing Minn. Stat. § 588.11 (1990) and Schmidt, 397 N.W.2d at 441).
Here, the district court, under Minn. Stat. § 588.11, ordered appellant to indemnify respondent for the $30,194 that respondent had paid the receiver. Satisfying the conditions that allow a contemnor to avoid the sanction that is intended to coerce compliance with an unfulfilled obligation does not allow a contemnor to avoid a duty to indemnify an injured party. Id., supra, at 18. Indeed, if a party is found in contempt, the "court may require the contemnor to comply with the preexisting obligation and to pay the additional award" made under Minn. Stat. § 588.11 to purge the contempt. Id., supra, at 17-18.
Second, to the extent that appellant argues that the requirement that he indemnify respondent under Minn. Stat. § 588.11 converts this civil contempt proceeding to a criminal contempt proceeding, we reject that argument. See id., supra, at 18 (stating that inclusion of award of costs and fees under Minn. Stat. § 588.11 "does not convert the proceeding to a criminal contempt"); see also Campbell, 151 Minn. at 242, 186 N.W. at 789 (noting that duty to indemnify injured party for damages arising from contumacious conduct was not penalty for that conduct under predecessor to Minn. Stat. § 588.11); Hanson v. Thom, 636 N.W.2d 591, 593-594 (Minn. App. 2001) (citing Campbell and reaching same result under Minn. Stat. § 588.11 (2000)).
The third argument advanced by appellant is that respondent's "failure to seek compliance with the district court's orders prior to the contempt hearing mandates a reversal of the finding of contempt." Appellant appears to rely on Hopp v. Hopp, 279 Minn. 170, 174, 156 N.W.2d 212 (1968), in support of his argument. Although contempt matters are addressed in Hopp, Hopp does not require any showing of the previous attempts to compel compliance before contempt proceedings may be brought. See Hopp, 279 Minn. at 174-75, 156 N.W.2d at 216-17 (describing contempt process). Even if a showing of other efforts were required, that showing was made here: before appellant was adjudicated in contempt, respondent secured the appointment of a receiver for Crofton Construction to collect the judgment, and the possibility of a contempt adjudication for a failure of Crofton Construction and its officers to assist with the efforts to enforce respondent's judgment has unambiguously been a major part of this proceeding since at least the September 19, 2007 order, which explicitly stated that a failure to assist respondent with its collection efforts would prompt a show-cause hearing.
Appellant further argues that the record lacks a notice of motion and motion seeking a finding of contempt and therefore that the contempt finding must be reversed. To prevail on appeal, a party must show both error and that the error caused prejudice. Midway Ctr. Assocs. v. Midway Ctr., Inc., 306 Minn. 352, 356, 237 N.W.2d 76, 78 (1975); see Minn. R. Civ. P. 61 (requiring harmless error to be ignored). Here, not only does appellant identify no prejudice arising from the alleged lack of a notice of motion and motion, but no prejudice is obvious: appellant cannot claim to have been unaware of the existence or nature of the contempt proceedings or to have lacked time to prepare for the contempt hearing that ultimately occurred July 17-18, 2008. The secretary of appellant's attorney was personally served on June 20, 2008, with respondent's memorandum seeking to have appellant held in contempt of court, a supporting affidavit and its exhibits, and an order to show cause setting a hearing. Appellant's counsel filed a July 8, 2008 memorandum arguing against finding appellant in contempt, but admitting that appellant's attendance at the contempt hearing had been "compelled." Also, during the contempt phase of the case, appellant asked the district court to exempt certain items of property from respondent's collection efforts, thereby acknowledging that the district court could exercise authority over him. See Papke v. Papke, 30 Minn. 260, 262, 15 N.W. 117, 118 (1883) (stating, on appeal from ruling finding party in contempt where party argued that district court lacked jurisdiction over him and objected to merits of his alleged contempt, that "party cannot at the same time object to, and ask the court to exercise, its jurisdiction").
Similarly, the September 19, 2007, and September 21, 2007, orders stated that failure to assist in collection efforts would result in an October 15, 2007 hearing "to show cause as to why an order should not be entered finding [Crofton Construction] in contempt of Court." The November 1, 2007 order appointing the receiver stated that, upon notice by the receiver that Crofton Construction and its agents, "including [appellant]," have not complied with "any of their obligation(s)," Crofton Construction and its agents and representatives, "including [appellant]," shall appear for a December 3, 2007 hearing "to show cause as to why they should not be held in contempt of Court." That hearing was later reset for December 27, 2007, and an affidavit of service shows that the amended notice of hearing was served on Crofton Construction "c/o Luther Crofton" by facsimile and United States mail on November 30, 2007. This record does not show prejudice arising from any allegedly inadequate notice.
Finally, because Westgor v. Grimm, 381 N.W.2d 877, 880 n. 1 (Minn. App. 1986), explicitly refused to address the adequacy of the notice of that contempt proceeding, we reject any argument that Westgor requires reversal for inadequate notice here.
Affirmed.