Continental Ins. Companies v. Bayless & Roberts, Inc.
| Decision Date | 22 March 1976 |
| Docket Number | Nos. 2426 and 2437,s. 2426 and 2437 |
| Citation | 548 P.2d 398 |
| Parties | CONTINENTAL INSURANCE COMPANIES and Arthur Stanford, Appellants, v. BAYLESS & ROBERTS, INC., Appellee. CONTINENTAL INSURANCE COMPANIES, Petitioner, v. SUPERIOR COURT, FOURTH JUDICIAL DISTRICT, Respondent. |
| Court | Alaska Supreme Court |
Sanford Gibbs, Hagans, Smith & Brown, Anchorage, for appellants and petitioner.
David Shimek, Anchorage, O. Nelson Parrish, James Parrish, Fairbanks, Matthew, Dunn, & Baily, Anchorage, for appellee and respondent.
Before BOOCHEVER, Chief Justice, and RABINOWITZ, CONNOR, ERWIN and BURKE, Justices.
Continental has appealed from a superior court order holding it in contempt of court and imposing a fine of $10,000.00. Continental has also filed a petition for writ of prohibition or mandamus vacating or prohibiting the enforcement of the order. This case presents important issues concerning process requirements relating to contempt procedures and the extent of the superior court's power to punish for contempt.
Bayless & Roberts, Inc. ('B&R') sued Continental Insurance Companies and Arthur Stanford ('Continental') for breach of fiduciary duty. On February 25, 1974, B&R filed a combined request for adminsions and interrogatories to Continental. Continental answered the request for admissions on March 28, 1974 and answered the interrogatories on May 6, 1974.
In June, B&R filed a motion for an order compelling responsive answers to 18 of the original 23 interrogatories. Continental did not contest this motion, and an order was entered by the court requiring Continental to answer the interrogatories within ten days. This order was dated August 12, 1974.
On September 25, 1974, B&R moved for a default judgment on the ground that Continental had failed to comply with the August 12 order. At no time during the hearing or in any of the motions was the possibility of a contempt sanction expressly raised.
The court denied the motion for default but held Continental in contempt of court for failure to comply with the court order of August 12, 1974. The court noted that Continental had made no attempt to challenge the order or suggest why the order could not or should not be complied with.
The court based the contempt on two grounds: (1) violation of the court order and (2) contributing to the delay of the discovery process. No findings of fact were made as to Continental's intent in disobeying the court's order; in fact, the circumstances surrounding Continental's failure to respond were not discussed beyond the one statement that Continental had made no attempt to challenge the order or suggest why compliance could not be had.
The court found Continental in contempt and assessed a sanction of $10,000.00 to be paid to the clerk of the court. The court also awarded B&R $500.00 as reasonable expenses and attorney's fees incurred in obtaining the order to compel discovery and the subsequent sanctions. 1 In the same memorandum decision and order, dated January 3, 1975, the court modified the August 12 order to direct Continental to answer nine of the original 23 interrogatories as opposed to the original order involving 18 of the interrogatories. The court gave Continental ten days to answer or suffer a default. Continental answered the interrogatories within the time specified.
Continental appealed the contempt order and, pending this appeal, was granted a stay of the order requiring that it pay $10,000.00 to the clerk of the superior court. Continental also filed a petition for extraordinary relief pursuant to Alaska Rule of Appellate Procedure 25, 2 requesting that the superior court be prohibited from collecting the $10,000.00 and directing the superior court to vacate the January 3, 1975 contempt order. 3
It is Continental's contention that it was denied procedural due process rights and that the fine of $10,000.00 was in excess of the court's authority. For a better understanding of the background of this case, we have summarized the complicated procedural history in a footnote. 4
At the core of Continental's due process argument is the contention that it received inadequate notice prior to being held in contempt. In order to analyze the requirements for notice properly, it is necessary first to determine whether the alleged contempt may be classified as direct or indirect. 5
Alaska Rule of Civil Procedure 90(a) and (b) specify:
(a) A contempt may be punished summarily if the judge certifies that he saw or heard the conduct constituting the contempt and that it was committed in the actual presence of the court. The order of contempt shall recite the facts and shall be signed by the judge and entered of record.
(b) For every contempt other than that specified in subdivision (a) of this rule, upon a proper showing on ex parte motion supported by affidavits, the court shall either order the accused party to show cause at some reasonable time, to be therein specified, why he should not be punished for the alleged contempt, or shall issue a bench warrant for the arrest of such party. Such proceeding may be commenced and prosecuted in the same action or in an independent proceeding either by the state, or by the aggrieved party whose right or remedy in an action has been defeated or prejudiced or who has suffered a loss or injury by the act constituting a contempt.
Thus it may not be necessary to furnish any notice for a direct contempt committed in the presence of the court, 6 but a notice and hearing is required for indirect contempts. 7 We confronted a similar problem in Taylor v. District Court, 434 P.2d 679 (Alaska 1967). There an attorney was held in contempt of court for failing to appear at the time set for trial in the district court. The court had issued an order to show cause but had not commenced the proceedings by means of an affidavit as required by Rule 90(b).
Justice Dimond, writing for the court, stated:
In order for there to be contempt it must appear that there has been a willful disregard or disobedience of the authority or orders of the court. Whether such willfulness exists is something the court cannot be aware of from its own observations in the courtroom and without inquiry from other sources. Without such inquiry the court cannot ascertain the operational facts from which an inference of willful disobedience or disregard of the court's authority or orders can be drawn. 434 P.2d at 681 (footnotes omitted) The court went on to hold that to require the judge to prepare and file an affidavit stating that the attorney had failed to appear at the time specified would be pointless and unnecessary for the protection of the rights of the defendant or for the orderly administration of justice.
The purpose of Civil Rule 90(b) in requiring a motion to be supported by affidavits in indirect contempt proceedings is to afford the one charged with contempt the procedural due process requirement of notice of the charge against him. Appellant was given this notice by the order to show cause. In that order the alleged contemptuous act-the failure to appear as required by court order-was specified. . . . Appellant was fully notified of what he was called upon to defend. 434 P.2d at 681-82 (footnotes omitted)
Under the circumstances involved in Taylor, however, where the district court was advised in advance of the attorney's inability to be present because of his participation in a superior court case which lasted longer than anticipated, the district court was ordered to vacate the judgment of contempt.
As in Taylor, the contempt here must be regarded as indirect. While the failure to comply with the court's order was apparent from the records of the court, it was not possible to ascertain whether that failure was willful 8 without inquiry from sources other than the court's observations. In Cooke v. United States, 267 U.S. 517, 537, 45 S.Ct. 390, 395, 69 L.Ed. 767, 774 (1925), the United States Supreme Court stated:
Due process of law, therefore, in the prosecution of contempt, except of that committed in open court, requires that the accused should be advised of the charges and have a reasonable opportunity to meet them by way of defense or explanation. We think this includes the assistance of counsel, if requested, and the right to call witnesses to give testimony, relevant either to the issue of complete exculpation or in extenuation of the offense and in mitigation of the penalty to be imposed. (citations omitted)
Thus prior notice was required both under Civil Rule 90(b) and general due process principles.
B&R did furnish notice that a motion for default was to be heard concerning Continental's failure to comply with the August 12, 1974 order requiring it to answer interrogatories. 9 The notice did not refer specifically to any rule of court, and the memorandum submitted in support of this motion was most confusing. Apparently it was addressed to another motion for default submitted by B&R. Nevertheless, it may fairly be said that Continental was placed on notice that a default was being sought due to Continental's failure to comply with the court's order of August 12, 1974. Alaska Rule of Civil Procedure 37(b) 10 deals with failure to comply with discovery orders. Rule 37(b)(2) (C) provides in part for the entry of default as a possible sanction, and subsection (D) specifies that in lieu of other orders, or in addition thereto, the court may enter an order treating as a contempt of court the failure to obey its orders.
The notice received by Continental advised that default was being sought against it for failure to obey the court's order requiring it to answer interrogatories. For B&R to prevail on its motion for default, it was necessary for the court to find not only that Continental had failed to comply with the court's order but also that the failure was willful.
In Oaks v. Rojcewicz, 409 P.2d 839 (Alaska 1966), this court held that before the sanction of...
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...reversed, case remanded. All the Justices concur, except SMITH, J., not participating. 1 See e.g., Continental Ins. Cos. v. Bayless & Roberts, Inc., 548 P.2d 398, 407 (Alas.1976); State v. Cohen, 15 Ariz.App. 436, 489 P.2d 283, 287 (1971); Howell v. State, 257 Ark. 134, 514 S.W.2d 723, 724 ......
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