569 F.2d 1351 (5th Cir. 1978), 76-2410, ITT Community Development Corp. v. Barton

Docket Nº:76-2410, 76-3138.
Citation:569 F.2d 1351
Party Name:ITT COMMUNITY DEVELOPMENT CORPORATION, a Delaware Corporation, Plaintiff-Appellee, v. John BARTON, a/k/a John A. Barton, and Joan Barton, his wife, Defendants-Appellants, and Dan R. Warren, Esq., Wilton R. Brinkley, Esq., and Judge & Warren, P. A., Movants-Appellants.
Case Date:March 24, 1978
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 1351

569 F.2d 1351 (5th Cir. 1978)

ITT COMMUNITY DEVELOPMENT CORPORATION, a Delaware

Corporation, Plaintiff-Appellee,

v.

John BARTON, a/k/a John A. Barton, and Joan Barton, his

wife, Defendants-Appellants,

and

Dan R. Warren, Esq., Wilton R. Brinkley, Esq., and Judge &

Warren, P. A., Movants-Appellants.

Nos. 76-2410, 76-3138.

United States Court of Appeals, Fifth Circuit

March 24, 1978

Page 1352

Joseph T. Garlovsky, Ormond Beach, Fla., for defendants-appellants.

Tobias Simon, Theodore L. Tripp, Jr., and Elizabeth J. du Fresne, Miami, Fla., for movants-appellants.

Charles A. Kimbrell, Frank A. Shepherd, Stanley J. Bartel, Miami, Fla., for plaintiff-appellee.

Appeals from the United States District Court for the Southern District of Florida.

Before GOLDBERG, TJOFLAT, Circuit Judges; and WYATT [*], District Judge.

TJOFLAT, Circuit Judge:

Dan R. Warren and Wilton R. Brinkley were adjudged by the district court to be in civil contempt of court and were remanded to the custody of the United States Marshal for failing to pay $99,076.71 into the registry of the court as required by a turn-over order. The turn-over order was entered by the district court during prejudgment garnishment proceedings that were being prosecuted against Warren and Brinkley, as garnishees, in conjunction with a diversity action between ITT Community Development Corporation (ITT) and John Barton and his wife, Joan Barton. The principal issue raised by these consolidated appeals 1 concerns the efficacy of the turn-over order; if it was invalid when issued, the civil contempt adjudication cannot stand. We find the turn-over order to have been invalid and reverse.

We note here that the Bartons, defendants in the main suit below, are not parties in appeal No. 76-3138. Although they are listed as parties in appeal No. 76-2410, they were dismissed by an administrative screening panel of this court from that appeal insofar as it questions the validity of the district court contempt order. The sole issue in which they are still involved as appellants, the propriety of a freeze order on the funds entered by the district court prior to the turn-over order, we hold, as will be discussed below, to be moot. See note 7 infra. In the interests of simplicity and clarity, we shall refer to Warren and Brinkley as "appellants" and, when necessary, to the Bartons by name.

I

The procedural events that eventually culminated in the appellants' being found in contempt of court were quite bizarre indeed. Since these events bear on the validity

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of that finding, a recitation in some detail of the procedural history of this case is necessary.

This case began in the Circuit Court of Dade County, Florida, on March 21, 1975, when ITT instituted suit against the Bartons for money damages. In a six-count complaint, ITT set forth a variety of claims, all arising out of John Barton's employment as chief engineer on an ITT construction project called Palm Coast, which is on the northeast coast of Florida. 2 As ITT's chief engineer, Barton had been responsible for letting contracts for portions of the work to several local contractors and for supervising their performance of those contracts. Late in 1974, the complaint alleged, ITT discovered that Barton had received several hundred thousand dollars in the form of kickbacks from many of these contractors. 3 ITT's purpose in bringing suit was, therefore, to recover these monies and consequential damages.

Simultaneous with the commencement of its suit, ITT caused writs of garnishment to be issued and served on five banks known to have bank accounts of the Bartons. 4 One of these banks, the Barnett Bank at Ormond Beach, had issued, one week earlier, two cashier's checks to John Barton one in the sum of $40,000, the other for $59,076.71. Both checks were still in Barton's possession when the Barnett Bank received the writ of garnishment. On March 31, 1975, the Barnett Bank answered the writ, stating that it was not indebted to the Bartons for the amount of the cashier's checks because the checks were negotiable and would have to be honored by the Bank upon presentment by a holder in due course.

On March 24, three days after the commencement of ITT's action, John Barton employed the appellants, as attorneys, to defend the law suit, and on March 26 he endorsed the $40,000 cashier's check over to them. The next day, March 27, appellant Brinkley deposited the $40,000 cashier's check in his personal checking account and immediately issued his personal check in the same amount to appellants' law firm. A deposit of $30,000 was placed in the firm's general account and credited as a payment from the Bartons toward the fees and costs incurred and to be incurred in defending the ITT suit. The remaining $10,000 was placed in the firm's trust account to apply against any legal fees and expenses incurred in the defense of any criminal proceedings that might be instituted against the Bartons.

On March 28, the day after these transactions had been accomplished, ITT caused an emergency hearing to be convened in the Dade County Circuit Court in a belated effort to prevent the Bartons from negotiating the two cashier's checks drawn on the Barnett Bank and already negotiated. When the hearing commenced, the Bartons announced that earlier in the day they had filed a removal petition in the federal court below. When ITT indicated no objection to the petition (even though the Bartons had no standing under 28 U.S.C. § 1441 (1970) to seek removal), the circuit court acquiesced in the removal, and the proceedings were thus lodged in the district court. 5

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Several days later, on April 9, ITT caused additional writs of garnishment to be issued in this action; this time the appellants were served. On May 1, they answered the writs. Each appellant denied that he was individually indebted to the Bartons; however, appellant Warren, answering in behalf of appellants' law firm, stated that the law firm possessed certain books and records of the Bartons and that the firm was contingently indebted to John Barton in the amount of $10,000 for prepaid, nonassignable legal fees relating to the pending litigation with ITT. On May 12, ITT replied to these answers, asserting that the proceeds of the $40,000 cashier's check (including the $10,000 in prepaid fees) were already subject to a writ of garnishment, to wit, the writ served on the Barnett Bank on March 21. Alternatively, ITT alleged that of the $40,000 proceeds the appellants had received, whatever amount was being retained by appellants as payment toward fees and expenses not yet earned or incurred was subject to the writs of garnishment that had been served on them on April 9. On May 16, four days after serving this reply to appellants' answer to the writ, ITT moved the district court to cite the Bartons for criminal contempt on the theory that the Bartons were attempting to obstruct justice through a series of fraudulent transfers that were calculated to remove their assets from the reach of the court's process. The motion was heard by the court on June 18, but no ruling was made. On August 26, ITT moved the court to require the Bartons to deposit in the registry of the court the proceeds of the second Barnett Bank cashier's check, the one for $59,076.71. The same theory was asserted as the basis for the motion: the Bartons would transfer these funds to avoid the court's process. This motion was denied on September 9. The district court's order recited that Florida law would not authorize such a turn-over order until ITT prevailed on the merits of its unliquidated claims against the Bartons.

On April 21, 1976, the district judge held a hearing for the stated purpose of disposing of all pending motions, including ITT's motion, filed over eleven months earlier, to have the Bartons cited for criminal contempt. At the hearing, ITT amended that motion and demanded that appellants also receive a criminal contempt citation. The only theory advanced by ITT to have appellants held in contempt was that they had knowingly and intentionally interfered with orders of the district court. No specific orders were mentioned, however.

At the conclusion of the hearing on the pending motions (including the amendment to ITT's motion for criminal contempt citations), the district court made the following announcement from the bench:

I am going to grant the motion for a contempt order in the form of a rule to show cause, and should there be any question or doubt, which is not presently in my mind as to the validity of the writ of (garnishment), the Court will issue a temporary injunction in joining (sic ) any person who has possession of these funds from in any manner transferring them without further order of the Court.

Transcript, April 21, 1976, at 37. This order was subsequently reduced to writing on April 27. 6 Later in the day ITT moved the court to require the Bartons and the appellants to turn over the proceeds of the two Barnett Bank cashier's checks and to deposit them in the registry of the court. On May 7, 1976, the court apparently reversing the position taken in its September 9, 1975, order that a turn-over order could not issue until ITT obtained a judgment against the Bartons granted the motion. The appellants (and the Bartons) were ordered to deposit $99,076.71, representing the proceeds of the two Barnett Bank cashier's checks, in the court's registry. This turn-over order completely vitiated the district court's temporary injunction in its April 27 order, which enjoined the transferral of the checks or their proceeds. On May 20, at

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9:15 a. m., a show cause hearing (noticed in the court's order of April 27, 1976) was convened before the district court. The...

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