Cook Martin Poulson v. Smith , 2021 UT App 60 ( 2021 )

2021 UT App 60THE UTAH COURT OF APPEALS
COOK MARTIN POULSON PC,
Appellee,
v.
DANIEL G. SMITH,
Appellant.
Opinion
No. 20190412-CA
Filed June 10, 2021
First District Court, Logan Department
The Honorable Kevin K. Allen
No. 140100505
Troy L. Booher, Beth E. Kennedy, and Russell S.
Walker, Attorneys for Appellant
Thomas J. Burns, Aaron R. Harris, and Elisabeth E.
Calvert, Attorneys for Appellees
JUDGE MICHELE M. CHRISTIANSEN FORSTER authored this Opinion,
in which JUDGES DAVID N. MORTENSEN and RYAN M. HARRIS
concurred.
CHRISTIANSEN FORSTER, Judge:
¶1 Daniel G. Smith appeals the district court’s orders finding
him in contempt. We reverse and remand for further
proceedings.
BACKGROUND
¶2 This matter first came before us in Cook Martin Poulson PC
v. Smith, 2020 UT App 57, 464 P.3d 541. In that appeal, Smith
challenged the district court’s findings of contempt and
concomitant entry of sanctions and judgment against him. Id.Cook Martin Poulson v. Smith
¶ 1. We reversed the court’s order and remanded for further
proceedings. Id. ¶ 44.
¶3 While that appeal was pending, however, Cook Martin
Poulson PC (CMP) took steps to enforce its judgment. Smith
sought a stay of execution but was unable to obtain one because
he could not post a bond or other security. In February 2018, in
post-judgment proceedings, the district court ordered Smith “not
to sell, loan, give away, or otherwise dispose of [his] non-exempt
property pending” a hearing scheduled for March 5 (the First
Supplemental Order). Following the hearing, the court issued a
writ of execution directing the sheriff to seize specific property,
including livestock, two promissory notes, and Smith’s shares in
Daniel G. Smith Inc. (DGSI). However, the court did not make
any additional orders prohibiting Smith from disposing of his
property.
¶4 When the sheriff sought to execute on the property in
September 2018, Smith refused to turn over the promissory notes
or the DGSI stock certificates because he claimed they were in
safe deposit boxes to which he did not have access. In fact, the
promissory notes had been moved to a safe deposit box in Idaho,
and the stock certificates were held in a safe deposit box owned
by Smith’s wife. Smith also refused to turn over certain cattle
because he had moved them out of state. CMP filed a motion for
order to show cause, alleging that Smith should be held in
contempt for violating the writ of execution and the First
Supplemental Order by transferring the cattle out of state and
refusing to turn over the promissory notes and stock certificates.
¶5 The court issued an order to show cause and scheduled a
hearing on the contempt allegations and again ordered Smith, as
of November 5, 2018, “not to sell, loan, give away, or otherwise
dispose of [his] non-exempt property” (the Second Supplemental
Order). This time, however, the court did not impose a time limit
on the order. When the matter came before the court for a
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hearing, it continued the hearing because CMP had not provided
an affidavit from the sheriff.
¶6 In the meantime, CMP filed another motion for order to
show cause based on additional conduct. In this motion, CMP
alleged that Smith had violated the supplemental orders by
pledging some of the cattle as security for a loan in September
2018 and selling off some cattle in October 2018.
¶7 The matter came before the district court again at the
continued hearing on January 7, 2019. At that hearing, CMP
asked Smith about the proceeds from the October sale of the
cattle. Smith testified that he received $26,000 from selling the
cattle and that he placed the sale proceeds in a bank account (the
Cow Calf Account). He also confirmed that between November
13 and December 11, 2018, he spent approximately $26,100 out of
the Cow Calf Account. However, he was not asked to provide
any details about how the funds were used. Moreover, neither
the court’s order to show cause nor CMP’s motion in support of
that order identified Smith’s expenditures from the Cow Calf
Account as potentially contemptuous.
¶8 After the hearing, the court ruled that Smith could not be
held in contempt for violating the writ of execution because that
writ did not command him to do anything or prohibit him from
acting. The court also determined that Smith could not be held in
contempt for disposing of property between March 5, 2018,
(when the First Supplemental Order expired) and November 5,
2018, (when the court issued the Second Supplemental Order)
because there was no order prohibiting him from doing so
during that time period. Because Smith’s actions of moving the
promissory notes to an out-of-state safe deposit box, selling
cattle, and pledging cattle as security occurred during that time,
they could not be contemptuous of a court order. Additionally,
the court concluded that Smith could not be held in contempt for
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attempting to gift stock certificates to his wife, because the date
of the gift was unclear. 1
¶9 However, the court did hold Smith in contempt (the First
Contempt Order) for spending the proceeds of the cattle sale that
were in the Cow Calf Account, since those expenditures were
made after November 5. In addition to holding Smith in
contempt for the expenditures, the court ordered Smith to return
$26,100.45 to the Cow Calf Account and produce the DGSI stock
certificates, which he had turned over to his wife, within
fourteen days of the court’s order. Smith did not turn over the
money or the stock certificates as ordered. Instead, he filed two
“precipes” 2 with the court explaining why he was not required
to comply with the court’s order. The first precipe asserted that
Smith’s wife had exercised her “right to demand and receive
[Smith]’s indorsement” of the stock certificates under Utah law
and that he intended to comply with that request. The second
asserted that the expenditures from the Cow Calf Account were
“used strictly to pay for expenses necessary to feed and maintain
the herd” and could therefore not be considered “a disposition
of assets.”
¶10 Following Smith’s failure to return the money and turn
over the stock certificates, CMP filed a Notice of Defendant’s
Non-Compliance with Court Order & Request for Telephone
1. The court determined that Smith still owned the stock
certificates and shares in DGSI because transferring the
certificates to his wife did not “equate to a change of share
ownership in” DGSI. Smith does not contest this determination
on appeal.
2. A praecipe, also spelled precipe, is a common law “writ
ordering a defendant to do some act or to explain why inaction
is appropriate.” Praecipe, Black’s Law Dictionary (11th ed. 2019).
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Conference, in which it asked the district court for “a telephone
conference to secure guidance from this Court regarding the next
steps that this Court will expect CMP to follow in order to seek
sanctions for [Smith’s] contempt.” CMP did not request an order
to show cause or file a motion for sanctions.
¶11 The court scheduled a hearing at CMP’s request and,
when the parties appeared for the hearing, announced, “We’re
here on a motion for sanctions.” Smith was not present at the
hearing, and his counsel pointed out that CMP had not actually
filed a motion for order to show cause or a motion for sanctions
and in its filing was only “asking the court for advice.” Smith’s
counsel asserted that the court could not hold Smith in contempt
for failing to turn over the funds and stock certificates without
“go[ing] through a contempt process.”
¶12 Nevertheless, the court proceeded to hold Smith
in contempt (the Second Contempt Order) for failing to
return the funds to the Cow Calf Account and for signing
the stock certificates over to his wife. As sanctions, the
court ordered Smith to serve fourteen days of jail time and pay a
$500 fine. Smith served that time and paid the fine. He now
appeals.
ISSUES AND STANDARD OF REVIEW
¶13 Smith asserts that the district court could not hold him in
contempt for spending money out of the Cow Calf Account
because he did not receive notice that the court would be
considering contempt on that basis and did not have any
opportunity to defend himself against those specific accusations.
Further, he argues that the court could not hold him in contempt
for failing to return the money to the Cow Calf Account and
produce the stock certificates because there was no pending
order to show cause or motion for sanctions when the court
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made that ruling. 3 Whether someone has been provided with
“timely and adequate notice and an opportunity to be heard in a
meaningful way,” in compliance with due process protections, is
a “question[] of law which we review for correctness.” In re
Cannatella, 2006 UT App 89, ¶¶ 2–3, 132 P.3d 684 (quotation
simplified).
ANALYSIS
I. First Contempt Order
¶14 First, Smith argues that he did not receive adequate notice
that he might be held in contempt for making expenditures out
of the Cow Calf Account. “To satisfy an essential requisite of
procedural due process, a hearing must be prefaced by timely
notice which adequately informs the parties of the specific issues
they must prepare to meet.” Nelson v. Jacobsen, 669 P.2d 1207,
1213 (Utah 1983) (quotation simplified); accord In re Cannatella,
2006 UT App 89, ¶ 3, 132 P.3d 684.
3. Smith also appealed the district court’s findings regarding his
ownership interest in the two promissory notes and the Cow
Calf Account. However, at oral argument on appeal, CMP
acknowledged that those findings were no longer of any effect in
light of our reversal of the underlying judgment in the previous
appeal involving the parties. See generally Cook Martin Poulson PC
v. Smith, 2020 UT App 57, 464 P.3d 541. In light of this
acknowledgment, we need not reach the merits of Smith’s
appeal of those factual findings; instead, we simply clarify that
all findings the district court previously made regarding
ownership of these assets are of no further legal effect. If
questions regarding ownership arise in further proceedings, the
court will need to take evidence and make new findings.
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¶15 The court’s order to show cause advised Smith that
he should be prepared to address his alleged failure to
comply with the First and Second Supplemental Orders
prohibiting him from disposing of property; his alleged failure
to comply with the writ of execution; his alleged actions
impeding the execution of the writ by the sheriff; and
his removing assets out of Utah that were listed in the writ.
Only the first allegation could possibly be construed as
pertaining to his spending money from the Cow Calf Account,
but we agree with Smith that nothing in the order to show
cause or the supporting motions adequately put him on
notice that his expenditure of funds from the Cow Calf Account
would be a subject of the contempt hearing. Indeed, to the
extent that those documents referenced specific conduct,
they mentioned only “removing assets . . . from the State of
Utah.” Those documents did not specifically address the Cow
Calf Account or Smith’s use of funds from it.
¶16 Nevertheless, CMP asserts that the more detailed
allegations in its motion for order to show cause should be
read as providing Smith notice of the specific actions
that allegedly violated the Second Supplemental Order. Even
accepting this argument, however, none of the allegations
in CMP’s motion for order to show cause would have alerted
Smith that spending Cow Calf Account funds was one of
the alleged violations of the court’s order. The motion for
order to show cause alleges only that Smith pledged the
livestock as security for a loan, sold cattle, and moved the
promissory notes to a safe deposit box in Idaho. It mentions
nothing about the Cow Calf Account or Smith’s expenditures
from that account.
¶17 Because Smith did not have adequate notice that
spending from the Cow Calf Account would be at issue in the
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contempt hearing, the court erred by entering the First Contempt
Order against him. 4 We therefore reverse that order.
II. Second Contempt Order
¶18 Next, Smith argues that he did not receive adequate
notice that the hearing on CMP’s motion for a telephone
conference would be one in which he needed to be prepared to
defend himself against contempt allegations.
¶19 CMP maintains that the order for Smith to return the
funds to the Cow Calf Account and produce the stock certificates
was an opportunity for him to purge his contempt with respect
to the First Contempt Order. Accordingly, CMP asserts that the
court’s Second Contempt Order did not find additional
contempt at all but merely imposed sanctions based on the First
Contempt Order due to Smith’s failure to purge his contempt.
¶20 However, nothing in the First Contempt Order stated or
suggested that Smith would have an opportunity to purge his
contempt. Moreover, nothing in the Second Contempt Order
suggested that it was merely an implementation of a sanction in
the First Contempt Order rather than a new finding of contempt.
To the contrary, the court stated, “I find . . . Smith in contempt of
court for not complying with the . . . [First Contempt Order]
where . . . [t]he defendant was ordered to return [$26,100.45] to
the [Cow Calf Account].” Further, the court found Smith in
contempt because he “intentionally went against the November
4. The First Contempt Order also did not explicitly find that the
expenditures constituted a disposal of assets. Given the
legitimate ways the funds might have been used—e.g., to
maintain other assets—it was not adequate for the court to
assume that any expenditure out of the account was a violation
of the Second Supplemental Order.
20190412-CA 8 2021 UT App 60Cook Martin Poulson v. Smith
2018 order when he endorsed the stock certificates in February of
2019.” Not only did this action take place after the previous
contempt hearing, but in the First Contempt Order, the court
found that Smith was not in contempt with respect to the stock
certificates. Thus, the Second Contempt Order was clearly a new
contempt finding and not merely a determination that Smith had
not purged his previous contempt.
¶21 Because no motion was pending when the court issued
the Second Contempt Order, and the hearing at which that order
was issued was noticed only to address “Plaintiff’s Notice of
Defendant’s Non-Compliance with Court Order,” Smith did not
receive adequate notice that the court would address further
contempt allegations at the hearing. 5 Accordingly, we must
reverse the district court’s Second Contempt Order as well.
CONCLUSION
¶22 Because Smith did not receive adequate notice regarding
the contempt allegations he would face at the contempt hearings,
both the First and Second Contempt Orders violated his due
process rights. Accordingly, we reverse those orders and vacate
the fine imposed by the court. 6
5. We also note that there was no evidence that Smith actually
signed the stock certificates over to his wife—only that he
expressed an intent to do so. Accordingly, the court could not
hold him in contempt for disposing of the stock certificates.
6. As Smith has already served his jail time, we are unable to
undo that part of the sanction.
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