Ld III, LLC v. Bbrd, Lc

2013 UT App 115_________________________________________________________
THE UTAH COURT OF APPEALS
LD III, LLC,
Plaintiff and Appellant,
v.
BBRD, LC AND BEVERLY JEAN BLACK DAVIS,
Defendants and Appellee.
Opinion
No. 20120073‐CA
Filed May 2, 2013
Fourth District, Provo Department
The Honorable Fred D. Howard
No. 080400318
Denver C. Snuffer Jr., Steven R. Paul, and
Daniel B. Garriott, Attorneys for Appellant
Michael N. Zundel and James A. Boevers,
Attorneys for Appellee
JUDGE WILLIAM A. THORNE JR. authored this Opinion, in which
JUDGES JAMES Z. DAVIS and J. FREDERIC VOROS JR. concurred.
THORNE, Judge:
¶1 LD III, LLC appeals from the district court’s final judgment
awarding Richard W. Davis $1,051,607 in damages, attorney fees,
and costs as a result of LD III’s contempt of court.1 We reverse the
district court’s judgment and remand for further proceedings.
1. Richard W. Davis died during the pendency of this appeal, and
this court granted a motion to substitute the personal
representative of his estate, Beverly Jean Black Davis, as the
appellee in this matter.
LD III v. BBRD
BACKGROUND
¶2 On October 14, 2008, Davis filed a motion for an order to
show cause why LD III, its owner, and its managers should not be
held in contempt of court.2 The basis for this motion was LD III’s
failure to comply with the district court’s September 23, 2008 ruling
(the September 23 Ruling) enforcing a settlement agreement
between the parties and ordering that LD III transfer certain real
property to Davis by September 30, 2008.3
2. Background information on the parties’ underlying dispute can
be found in LD III, LLC v. BBRD, LC, 2009 UT App 301, ¶¶ 2–12,
221 P.3d 867.
3. There is no transcript of the district court’s oral September 23
Ruling, but the resulting minute order stated that “[t]he court
enforces the Settlement Agreement” and that “[t]he Order should
be changed to reflect that . . . the deadline for completing LD III’s
closing obligations should be changed to September 30, 2008.” On
October 9, the district court entered a revised written order
prepared by Davis (the October 9 Order). The October 9 Order
stated,
LD III shall close the real estate transaction with
Davis by September 30, 2008 in accordance with the
closing documents . . . , with the exception that the
transferee shall be Davis, and by such date plaintiff
shall sign and deliver the closing documents that call
for plaintiff’s signature, and deliver the other closing
documents, all as shown by such documents. If
LD III does not close the real estate transaction by
September 30, 2008, the Court shall quiet title to the
subject real property and water rights in Davis.
As of the entry of the October 9 Order, LD III still had not closed
the transaction.
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¶3 Davis’s motion was supported with an affidavit of counsel
asserting that the September 23 Ruling had ordered LD III to close
the sale of the property to Davis by September 30 and that LD III
had failed to do so. LD III opposed the motion on the grounds that
it had filed an appeal of the September 23 Ruling prior to the
September 30 deadline and that, in any event, the district court’s
oral September 23 Ruling was not effective until the entry of the
written October 9 Order. The district court granted Davis’s motion
and entered an order directing LD III and its owners and managers
to “show cause why they should not be held in contempt for failure
to comply with [the September 23 Ruling] enforcing the parties’
settlement agreement, and ordering LD III to close the sale of the
subject real property and water rights to [Davis] by September 30,
2008.”
¶4 On October 22, 2008, the district court held a hearing on the
order to show cause, at which LD III challenged the district court’s
jurisdiction to consider a contempt finding in light of LD III’s
pending appeal. Although LD III brought fact witnesses to the
hearing, the hearing largely focused on the effect of LD III’s appeal,
the timeliness of a request by LD III to stay the proceedings, and
the nature and amount of the bond LD III would be required to
post.
¶5 Near the conclusion of the hearing, the district court
indicated that it would accept further briefing on the jurisdictional
question. The court stated, “I’m happy to read a case on if I’ve lost
jurisdiction or not. That’s just the contempt citation. I think that can
be deferred and I think we could set that for a hearing, it’s probably
a one hour matter . . . .”
¶6 Both parties filed supplemental briefing on the jurisdictional
issue, and the district court entered several orders pertaining to the
show cause order. On December 4, 2008, the district court entered
its Ruling Re: Enforceability of Judgment. That order stated,
20120073‐CA 3 2013 UT App 115LD III v. BBRD
The Court finds that notwithstanding [LD III’s]
Notice of Appeal dated September 29, 2008, the
Court retained jurisdiction to enforce its September
23, 2008 Ruling by holding [LD III] in contempt for
failure to close the subject real estate transaction by
September 30, 2008 as ordered. As such, the Court
further finds that in the event that [Davis] prevail[s]
on appeal, on remand to this Court, the Court
reserves to [Davis] leave to present further evidence
of damages allegedly caused by [LD III’s] acts of
contempt.
On February 4, 2009, the district court entered its Order Regarding
Order to Show Cause, Motion to Stay Pending Appeal and Related
Matters (Order Regarding Order to Show Cause), in which the
court stated,
[F]urther proceedings on whether LD III . . . shall be
held in contempt of this Court for failure to comply
with the Judgment were deferred pending the
parties’ briefing of the issue of whether enforcement
of the Judgment was automatically stayed by LD III’s
filing of the Appeal. . . . The Court had tentatively set
a hearing for December 19, 2008 to further consider
the contempt issues (including the issues of [Davis’s]
contempt damages and costs and expenses).
Finally, the Property Bond for Stay Pending Appeal, signed by all
parties and approved by the district court on February 27, 2009,
stated, “In the event the Judgment is not reversed on the Appeal,
Davis may incur damages resulting from LD III’s failure to sell the
subject real property and appurtenant water right to Davis by
September 30, 2008.” However, the district court never did conduct
the deferred hearing on whether LD III was in contempt of court,
as the court had indicated it would do at the initial October 22, 2008
contempt hearing.
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¶7 On October 22, 2009, this court issued its opinion in LD III,
LLC v. BBRD, LC, 2009 UT App 301, 221 P.3d 867, which affirmed
the district court’s enforcement of the parties’ settlement
agreement. In light of this affirmance, LD III attempted to close the
real estate transaction with Davis, but he refused. LD III filed
motions with the district court asking it to enforce the settlement
agreement and order Davis to accept the property. Davis opposed
the motions, arguing that the district court had previously ruled
that he would have the option of electing either specific
performance or contempt damages and that he was no longer
“willing nor obligated” to purchase the property for $1.2 million as
contemplated in the settlement agreement. The district court
denied LD III’s motions and set a trial to determine the amount of
contempt damages to which Davis was entitled.
¶8 The trial on contempt damages occurred on September 21
and 23, 2011. At the beginning of trial, LD III argued that the
district court had never actually entered a finding that LD III was
in contempt. The district court rejected LD III’s argument, stating,
“I’m unpersuaded to strike the trial setting and revisit the question
of contempt. . . . Therefore, the Court will stand on its finding of
contempt citation. We’ll proceed with the trial on damages.” At
trial, the district court took evidence on Davis’s damages but also
allowed LD III to raise several defenses to contempt. The evidence
supporting these purported defenses included testimony that
LD III’s owner, Leslie Mower, refused to transfer the property on
the advice of her attorney due to a prior tax evasion conviction and
that Mower was unable to obtain release from home confinement
resulting from that conviction.
¶9 The district court entered its Findings of Fact and
Conclusions of Law on January 4, 2012, concluding that it had
previously found LD III in contempt in its December 4, 2008 Ruling
Re: Enforceability of Judgment, as confirmed by the language in the
subsequent February 4, 2009 Order Regarding Order to Show
Cause and February 27, 2009 Property Bond for Stay Pending
Appeal. The district court also concluded that it was not required
20120073‐CA 5 2013 UT App 115LD III v. BBRD
to have entered factual findings in support of its previous contempt
finding because the affidavit in support of Davis’s motion
established LD III’s contempt and shifted the burden onto LD III to
respond with evidence. Because LD III had never presented
evidence disputing Davis’s affidavit, the district court concluded
that no factual findings were necessary. The district court also
made further findings and conclusions on contempt in light of
LD III’s defenses at trial, rejecting LD III’s argument that advice of
counsel was grounds for disobeying a court order and determining
that either Mower or another agent of LD III could have transferred
the property despite Mower’s home confinement.
¶10 As to damages, the district court found that LD III’s refusal
to transfer the property to Davis by September 30, 2008, caused
Davis to lose multiple opportunities to sell five lots of the
subdivided property to cover the cost of the property purchase.
Davis had intended to keep a sixth lot as his profit from the
transaction, and the district court determined that the September
30, 2008 value of that sixth lot was $900,000. Accordingly, the
district court determined contempt damages to be $900,000. The
district court also awarded Davis his attorney fees and costs
through July 31, 2011, in the amount of $71,637, with leave to
supplement that award with additional fees and costs incurred
afterward. Davis established an additional $79,000 in attorney fees,
and the district court ultimately entered judgment for Davis in the
amount of $1,051,607 on April 3, 2012. LD III appeals.
ISSUE AND STANDARD OF REVIEW
¶11 LD III argues that the district court’s contempt citation must
be reversed because LD III was not allowed to respond to the
merits of the order to show cause and because the district court
failed to enter a contempt finding supported by adequate findings
of fact and conclusions of law. “We review a trial court’s exercise
of its contempt power to determine whether it exceeded the scope
of its lawful discretion, which is subject to constitutional and
20120073‐CA 6 2013 UT App 115LD III v. BBRD
statutory restraints regarding [due process].” Gardiner v. York, 2010
UT App 108, ¶ 11, 233 P.3d 500 (alteration in original) (citation and
internal quotation marks omitted).
ANALYSIS
¶12 LD III appeals from the district court’s judgment awarding
Davis damages resulting from LD III’s contemptuous violation of
the September 23 Ruling. LD III argues that the district court never
did enter a contempt order supported by the three required
findings that LD III “knew what was required, had the ability to
comply, and intentionally failed or refused to do so.” Von Hake v.
Thomas, 759 P.2d 1162, 1172 (Utah 1988), superseded on other grounds
as stated in State v. Hurst, 821 P.2d 467, 470 (Utah Ct. App. 1991). We
agree, and we reverse the district court’s judgment below and
remand this matter for further proceedings consistent with the
terms of this opinion.
¶13 “A court’s authority to sanction contemptuous conduct is
both statutory and inherent.” Chen v. Stewart, 2005 UT 68, ¶ 36, 123
P.3d 416; see also Burke v. Lewis, 2005 UT 44, ¶ 23, 122 P.3d 533 (“‘[I]t
has always been held, regardless of express statutory authority,
that courts of general jurisdiction have the inherent power to make
and enforce all necessary rules and orders calculated to enforce the
orderly conduct of their business and secure justice between parties
litigant.’” (quoting Peterson v. Evans, 188 P. 152, 153 (Utah 1920))).
As to contempt based on express statutory authority, Utah Code
section 78B‐6‐301 identifies certain types of “acts or omissions in
respect to a court or its proceedings [that] are contempts of the
authority of the court.” Utah Code Ann. § 78B‐6‐301 (LexisNexis
2012). One such category of contempt is “disobedience of any
lawful judgment, order or process of the court.” Id. § 78B‐6‐301(5).
Utah Code section 78B‐6‐311 elaborates upon a court’s authority to
award damages as a sanction for contempt, stating,
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If an actual loss or injury to a party in an action or
special proceeding is caused by the contempt, the
court, in lieu of or in addition to the fine or
imprisonment imposed for the contempt, may order
the person proceeded against to pay the party
aggrieved a sum of money sufficient to indemnify
him and to satisfy his costs and expenses.
Id. § 78B‐6‐311.
¶14 Utah case law has imposed certain requirements on the use
of the contempt power.
The due process provision of the federal constitution
requires that in a prosecution for a contempt not
committed in the presence of the court, “the person
charged be advised of the nature of the action against
him [or her], have assistance of counsel, if requested,
have the right to confront witnesses, and have the
right to offer testimony on his [or her] behalf.”
Von Hake, 759 P.2d at 1170 (alterations in original) (quoting Burgers
v. Maiben, 652 P.2d 1320, 1322 (Utah 1982)). Further, “[a]s a general
rule, in order to prove contempt for failure to comply with a court
order it must be shown that the person cited for contempt knew
what was required, had the ability to comply, and intentionally
failed or refused to do so.” Id. at 1172. “These three elements must
be proven . . . by clear and convincing evidence in a civil contempt
proceeding,” id.,4 and “[t]he trial court must enter written findings
4. “The primary determinant of whether a particular contempt
order is to be labeled civil or criminal is the trial court’s purpose in
entering the order.” Von Hake v. Thomas, 759 P.2d 1162, 1168 (Utah
1988), superseded on other grounds as stated in State v. Hurst, 821 P.2d
467, 470 (Utah Ct. App. 1991). “A contempt order is civil if it has a
(continued...)
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of fact and conclusions of law with respect to each of the three
substantive elements,” id.
¶15 We determine that the district court’s contempt ruling
against LD III violates these principles and cannot stand. We first
disagree with the district court’s conclusion that LD III was given
an appropriate opportunity to defend against Davis’s allegation of
contempt. In its January 4, 2012 Findings of Fact and Conclusions
of Law, the district court found that
[Leslie] Mower, Barry and Robert Steed, counsel of
record for [LD III], Rex Macey (Ms. Mower’s case
manager for her home confinement) and Bart Bailey
(counsel for Ms. Mower), among others, were present
at the [October 22, 2008] hearing. However, [LD III]
presented no evidence at the hearing. Instead, at the
hearing, [LD III’s] sole argument for why it should
not be held in contempt was that the Court lost
jurisdiction to enforce its September 23 Order, when
[LD III] filed its notice of appeal on September 29,
2009.
(Citations omitted.) We have reviewed the transcript of that
hearing, and we cannot agree with the district court’s assessment
of the opportunity provided to LD III.
¶16 LD III did challenge the district court’s jurisdiction to
entertain Davis’s contempt motion in light of LD III’s pending
appeal, and the district court appropriately considered this
jurisdictional challenge as a threshold matter to be resolved prior
to reaching the merits of the contempt allegation. See Robinson v.
4. (...continued)
remedial purpose,” such as “to compensate an aggrieved party for
injuries resulting from the failure to comply with an order.” Id.Thus, the contempt order against LD III is civil in nature.
20120073‐CA 9 2013 UT App 115LD III v. BBRD
Baggett, 2011 UT App 250, ¶ 12, 263 P.3d 411 (“[T]he issue of
subject matter jurisdiction is a threshold issue, which can be raised
at any time and must be addressed before the merits of other
claims.” (alteration in original) (citation and internal quotation
marks omitted)). However, by our review of the transcript, the
district court never did resolve the jurisdictional question and
reach the merits of the contempt issue. Instead, the district court
stated, “I’m happy to read a case on if I’ve lost jurisdiction or not.
That’s just the contempt citation. I think that can be deferred and
I think we could set that for a hearing, it’s probably a one hour
matter . . . .” Thus, although it appears from the district court’s
findings that LD III had brought witnesses to the October 22, 2008
hearing, those witnesses were prevented from testifying when the
district court deferred the hearing on the merits of the contempt
citation.
¶17 The deferred hearing on the elements of the contempt
charge against LD III never did occur. Instead, the district court
issued its December 4, 2008 Ruling Re: Enforceability of Judgment,
in which the court rejected LD III’s jurisdictional argument and
reserved the issue of “damages allegedly caused by [LD III’s] acts
of contempt” pending the outcome of LD III’s appeal.5 The district
court’s failure to conduct the deferred hearing, however, deprived
5. After the September 2011 trial, the district court ruled that its
December 4, 2008 reference to LD III’s “acts of contempt,” as
confirmed by language contained in its February 4 and 27, 2009
orders, constituted an order finding LD III in contempt. This is
problematic, particularly in light of the February 4 Order
Regarding Order to Show Cause’s express acknowledgment that
“further proceedings on whether LD III . . . shall be held in
contempt of this Court for failure to comply with the Judgment
were deferred.” However, for purposes of this appeal, we accept
the district court’s characterization of its prior orders and review
the resulting contempt ruling under the standards established by
Utah case law.
20120073‐CA 10 2013 UT App 115LD III v. BBRD
LD III of its constitutionally guaranteed opportunity to confront
Davis’s witnesses or present its own evidence and testimony on the
three elements of contempt. See Von Hake v. Thomas, 759 P.2d 1162,
1170 (Utah 1988), superseded on other grounds as stated in State v.
Hurst, 821 P.2d 467, 470 (Utah Ct. App. 1991). And while the
district court subsequently allowed LD III to litigate various
affirmative defenses to contempt,6 it did not clearly allow LD III to
challenge whether it “knew what was required, had the ability to
comply, and intentionally failed or refused to do so.” Id. at 1172.
¶18 LD III also complains that the district court failed to enter a
contempt citation containing “written findings of fact and
conclusions of law with respect to each of the three substantive
elements.” See id. In its January 4, 2012 Findings of Fact and
Conclusions of Law, the district court explained its failure to enter
findings by quoting from Coleman v. Coleman, 664 P.2d 1155 (Utah
1983) (per curiam). In Coleman, the supreme court observed, “While
it is true that an order to show cause will not issue except upon an
affidavit that a party has violated or disobeyed the court’s orders,
once issued, the burden is on the defendant to present evidence
with respect to the three elements” of knowledge, ability, and
intentional failure to comply. Id. at 1156–57. The supreme court
then went on to hold that because the contempt defendant had
failed to present rebuttal evidence showing inability to comply
with a court order, no explicit factual finding of ability to comply
was required. See id. at 1157.
¶19 The district court reasoned that, under Coleman, because
LD III failed to present evidence contradicting the allegations made
in the order to show cause, the court was excused from making
factual findings on the elements of contempt. However, as we have
6. At trial, the district court heard evidence regarding the terms of
Mower’s home confinement and the advice given to her by her tax
attorney, but it rejected LD III’s attempts to revisit the previous
contempt ruling.
20120073‐CA 11 2013 UT App 115LD III v. BBRD
determined above, the district court’s failure to conduct a hearing
on the elements of contempt—issues which the district court had
expressly deferred at the October 22, 2008 hearing—deprived
LD III of an adequate opportunity to present evidence on those
issues. Further, it seems reasonable to infer from the presence of
LD III’s witnesses at the October 22, 2008 hearing that LD III had
intended to present testimony on the merits of the contempt
citation. Under these circumstances, we cannot accept the district
court’s logic that the matter was essentially uncontested and that
Coleman excused it from entering the required factual findings.
¶20 For these reasons, we reverse the district court’s contempt
ruling against LD III and remand this matter for additional
proceedings. If the district court opts to pursue Davis’s contempt
allegations on remand, it is directed to hold a hearing at which
LD III can present evidence of its knowledge and understanding of
the district court’s September 23 Order, its ability to comply, and
whether it intentionally failed to comply. The district court is
additionally directed to support any contempt ruling with factual
findings on each of the three elements of contempt.7
CONCLUSION
¶21 The district court’s contempt ruling against LD III deprived
LD III of its due process rights to confront witnesses and present
evidence and testimony, and the district court failed to enter
adequate factual findings on LD III’s knowledge, ability to comply
with the district court’s order, and intentional failure to do so. For
7. In particular, the district court is to determine the exact terms of
the oral September 23 Ruling that LD III is accused of violating.
Those terms may or may not have been completely and accurately
reflected in the district court’s minute order.
20120073‐CA 12 2013 UT App 115LD III v. BBRD
these reasons, we reverse the district court’s contempt ruling and
remand this matter for further proceedings as described herein.8
8. We decline to address LD III’s arguments pertaining to damages
and attorney fees, as those issues may become moot or be revisited
by the district court on remand.
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