Green v. Maginn

OPINION

FRIEDLANDER, Judge.

This case arises out of insurance rehabilitation and liquidation proceedings involving Consolidated National Life Insurance Company, of which Burton R. Green was president, instituted by the Commissioner of the Department of Insurance of the State of Indiana (“Liquidator”). On July 21, 1994, the trial court entered an order of liquidation which provided in pertinent part:

8. No action at law or equity outside [Marion Circuit Court] may be brought against Consolidated, its Liquidator, its former Rehabilitator, or its assets, whether in Indiana or elsewhere, nor shall any such existing action outside this Court be maintained or further presented.

9. All persons and entities are hereby enjoined from:

a. The obtaining of any preference, judgment, attachment, garnishment or lien against Consolidated or its property or assets, or any part thereof, wherever located, or the levying of execution against Consolidated or its property or assets, or any part thereof, wherever located, or the commencement, prosecution or further prosecution of any suit, action or proceeding having any such purpose or effect;

* * * * * *

d. Any other action that might lessen the value of Consolidated’s assets or prejudice the rights of its policyholders, insureds, creditors, shareholders, agents, reinsurers, brokers or other person, or the administration of this proceeding under Indiana Code 27-9.

Record at 181-182. Despite these provisions, on December 1, 1995, Green filed a second amended complaint in the Pike Circuit Court in Alabama against Liquidator and several members of Liquidator’s staff. Liquidator thereafter filed a petition for contempt, alleging that Green had violated the injunctive language contained within the order of liquidation. Green failed to appear in person or by counsel at a hearing to show cause why he should not be held in contempt for violation of the liquidation order. The trial court thereafter found Green in contempt for violating the court’s liquidation order and issued an October 15, 1996 contempt citation and order to dismiss lawsuits, which stated in pertinent part:

6. The Court finds that the Respondent Green (together with other plaintiffs) willfully violated the Order of Liquidation by filing a Second Amended Complaint on or about December 1, 1995 in the Circuit Court of Pike County, Alabama under Civil Action No. CV-95-171' (“Alabama Court Action”) against Consolidated, its Liquidator (Petitioner herein), its former Reha-bilitator Mortel (Petitioner’s predecessor), against ..., all employees and representatives of petitioner acting on behalf of petitioner in her official capacity and such action being also against Consolidated’s assets, seeking to claim certain Pike County, Alabama real estate of Consolidated, which real estate was the subject of this Court’s Order to the Liquidator Sell filed herein August 8, 1995. Respondent Green is further found in contempt for seeking to have this Court’s Liquidation Order void [sic] by the Alabama State Court.

7. The Court further finds that Respondent Green has also willfully disobeyed the above portions of the Order of Liquidation by causing the joining as parties plaintiff in the Alabama Court Action the following corporations of which he serves as controlling officer, director and stockholder: Green Rivers Forest, Inc.; Green Land Company, Inc.; American Educators Financial Corporation and CNL Marketing Corporation of Alabama.

8. The Court further finds that the actions of Respondent Green have been willful and contemptuous and designed to hinder, delay, obstruct and prevent the orderly liquidation of Consolidated as prescribed by this Court’s Order of Liquidation. Such actions are in disobedience of the prohibitions and injunctions of the Order of Liquidation described above prohibiting Respondent Green and others from initiating and pursuing such legal actions-“outside this Court”. Such acts of Respondent Green constitute indirect contempt of this Court as set forth in I.C. 34-4-7-3.

IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED that Burton R. Green, individually, and as Chairman of American Educators Financial Corporation, President of Green Land Company, Inc., President of. Green Rivers Forest, Inc., and President of CNL Marketing Corporation, is found in contempt of this Court’s Liquidation Order and is hereby ordered and directed to dismiss, with prejudice, forthwith, the Alabama court action by such Respondent, individually, and by such four corporate entities controlled by_ him, against [Liquidator], both in her official capacity and individually, [Liquidator’s staff members], all of whom are past or present employees of [Liquidator], and [Liquidator’s Insolvency Office, individually and in their official capacities as representatives of [Liquidator] in the liquidation of Consolidated. Said Respondent Green is further ordered to submit to this Court proof of the filing of such Dismissal, with prejudice, within twenty (20) days, of the date of this Order and failing such, Respondent Green shall be subject to arrest and imprisonment by the Sheriff of Marion County, Indiana, such incarceration to continue until Respondent executes and causes to be filed such Dismissal, with prejudice, of such Alabama court action against the above-named parties.

Record at 441-443 (emphasis supplied).

After this court granted Green’s petition to accept jurisdiction of this interlocutory appeal, the trial court stayed the October 15, 1996 order pending the disposition of this appeal or until further order of the court.

Green’s sole claim on appeal is that the provision in the contempt order which subjects him to arrest and imprisonment upon his failure to file a dismissal of the Alabama suit is an unlawful “penalty in anticipation of a future contempt”, Appellant’s Brief at 1.

We affirm in part and reverse in part.

The proper procedure to follow when there has been a failure to comply with a contempt order which requires the doing of an affirmative act is for the trial court to bring the offender before the court a second time and then determine an appropriate remedy, if any. See Thomas v. Woollen, 255 Ind. 612, 266 N.E.2d 20 (Ind.1971); Bottoms v. B & M Coal Corp., 405 N.E.2d 82 (Ind.Ct.App.1980); Caito v. Indianapolis Produce Terminal, Inc., 162 Ind.App. 590, 320 N.E.2d 821 (1974). In Thomas, the trial court entered a March 11, 1968 order requiring the defendants to close a driveway that was located in violation of restrictive covenants and “to take all reasonable measures in the future as occasion arises”, Thomas, 266 N.E.2d at 21, to prevent its use. On March 24, 1969, the trial court entered a contempt judgment, which awarded the plaintiffs damages, attorney fees, and costs and ordered the defendants to take affirmative action within a prescribed period of time. The contempt judgment provided:

[I]n the event such [affirmative] action not be completed within such period, the defendants [shall] pay an additional sum of $300.00 damages and the sheriff [shall] incarcerate the defendant James G. Thomas and confine him- until he has complied.

Id. Our supreme court stated:

It is not to be anticipated that the lawful orders of the court will be violated but rather that they will be obeyed. If they are violated, however, the remedy is by way of attachment or a rule to show cause. In either event, the matter and alleged offender is again brought to the attention of the court for appropriate action. There must be some prima facie showing that the order has been violated. There may be intervening circumstances that rendered compliance impossible or circumstances surrounding the violation may have rendered it relatively innocent. These are factors that should be taken into account in determining whether or not there has been a contempt and, if so, what the penalty should be. They cannot be determined in advance. To anticipate the breach, assess the penalty and provide for the execution, it appears to us, amounts to the abandonment by the trial court of its responsibility in this area and should not be sanctioned.

Id. 266 N.E.2d at 23 (citations omitted). The court reversed the contempt judgment “insofar as it prescribed the damages and incarceration in anticipation of a future contempt.” Id.

Likewise, in Caito and Bottoms, this court reversed contempt judgments to the extent that each judgment predetermined the penalty for noncompliance and ordered automatic incarceration.

In Caito, the trial court entered an order enjoining Caito Foods from constructing an enclosed dock next to the warehouse premises it leased from the Indianapolis Produce Terminal. The Terminal thereafter filed a motion for contempt, alleging that Caito Foods had violated the court’s injunction by completely enclosing the dock. -.Following a contempt hearing, the. trial court entered a contempt judgment against Caito Foods, which stated:

Defendants are found" in Contempt of Court for permitting the erection and construction of overhead doors and framework thereof enclosing a part of the dock area adjoining the space leased by Defendants from Plaintiff. Defendants ordered to remove overhead doors and framework thereof by February 15, 1973, without damages to Plaintiffs premises, and failing to so remove, Defendants are ordered committed to jail on showing the Court that Defendants have not complied with this Court order.

Caito, 320 N.E.2d at 824. This court, applying Thomas, concluded that the contempt judgment was defective in that it predetermined the penalty for noncompliance. It noted that the trial court, having found Caito Foods in contempt for violation of the injunction, “could have taken appropriate and necessary action in order to benefit the injured party”. Id. 320 N.E.2d at 826. Nonetheless, this court concluded that, because the trial court issued a further order requiring Caito Foods to remove the dock enclosure by a certain date, the court was required to again bring Caito Foods before it. This court in Caito stated in pertinent part:

[A]n indulgent Trial Judge chose to issue a further Order requiring Caito Foods to remove the dock enclosure by February 15, 1973, i.e., the doing of an affirmative act. This meant in the words of Justice Prentice in Thomas v. Woollen (1971), 255 Ind. 612, 266 N.E.2d 20, that “the matter and alleged offender is again brought to the attention of the court for appropriate action”.

Id. at 826-827.

Caito and the instant case are indistinguishable in all pertinent respects. The July 21, 1994 order of liquidation entered in this case, which clearly prohibited and enjoined Green from filing a second amended complaint in the Pike Circuit Court in Alabama on December 1, 1995, is analogous to the order entered in Caito which enjoined Caito Foods from constructing an enclosed dock on premises it leased from the Terminal. The remaining facts of the two cases are also analogous. After Green filed his second amended complaint in the Alabama court, Liquidator filed a petition for contempt, alleging that Greeii had violated the injunctive language in the order of liquidation. The trial court held "a hearing, found Green in contempt for violating the court’s liquidation order, and issued a contempt citation and order to dismiss the Alabama action. Similarly, in Caito, after Caito Foods allowed the construction of an enclosed dock in contravention of an order enjoining such action, the Terminal filed a motion for contempt, alleging that Caito Foods had violated the court’s injunction by enclosing the dock. The trial court in Caito held a contempt hearing, found Caito Foods in contempt, and issued a contempt judgment which ordered Caito Foods to remove the overhead doors and framework which had been constructed in violation of the court’s injunction. In both Caito and the case before us, the trial courts ordered that the offending parties be jailed if they failed to comply with the contempt orders within a certain period of time.

In Bottoms, the court stated:

Although there are older cases to the contrary, we believe Thomas and Caito control the issue. Fundamental notions of fairness demand an opportunity for a noncomplying party to present reasons for failure to follow the mandates of a court. The person may have been prevented from complying for a myriad of reasons we cannot even begin to imagine. In such a case a court could properly conclude no additional sanctions or coercions would be called for. In the other extreme, the only excuse for noncompliance might be pure stubborn rebellion, a situation in which relatively harsh measures, including incarceration, would be justified. In either case the noncomplying party must first be given the opportunity to explain the noncompliance. A court cannot “anticipate the breach, assess the penalty and provide for the execution.” Thomas v. Woollen, supra, 255 Ind. at 617, 266 N.E.2d at 23.

Bottoms, 405 N.E.2d at 89 (footnote omitted).

The contempt order in this case is reversed insofar as it provides for automatic incarceration for noneompliance. Green must obey the court order to dismiss the Alabama court action. This court will assume compliance. If Green does not comply with the contempt order, Green must then be given the opportunity, consistent with Thomas, Caito, and Bottoms, to explain such noncompliance. In the event Green fails to appear or his explanation is deemed inadequate, the court may then be justified in ordering incarceration until he complies.

Judgment affirmed in part and reversed in part. This ease is remanded to the trial court for further proceedings consistent with this opinion.

SULLIVAN, J., concurs with separate opinion. KIRSCH, J., dissents with separate opinion.