Dunning v. Tallman

• Decision Date: 13 August 1993
• Docket Number: No. S-90-1144,S-90-1144
• Citation: 244 Neb. 1,504 N.W.2d 85
• Parties: Karen D. DUNNING, Appellant and Cross-Appellee, v. Mark H. TALLMAN, Appellee and Cross-Appellant.
• Court: Nebraska Supreme Court

Page 85

504 N.W.2d 85

244 Neb. 1

Karen D. DUNNING, Appellant and Cross-Appellee, v.Mark H. TALLMAN, Appellee and Cross-Appellant.

No. S-90-1144.

Supreme Court of Nebraska.

Aug. 13, 1993.

Syllabus by the Court

1.Contempt: Final Orders: Appeal and Error.A final judgment or order in a contempt proceeding is reviewed in the same manner as a criminal case.

2.Contempt: Proof.A defendant's contempt must be established by proof beyond a reasonable doubt.

3.Contempt: Final Orders: Appeal and Error.An appellate court, examining a final judgment or order in a contempt proceeding, reviews for errors appearing on the record.

4.Contempt: Appeal and Error.A trial court's factual finding in a contempt proceeding will be upheld on appeal unless the finding is clearly erroneous.

5.Contempt.The character, nature, or purpose of a contempt proceeding is determined by the procedure used in a trial to determine whether there is contempt and the sanction imposed.

6.Contempt.A civil contempt proceeding is primarily coercive because a contemnor, through compliance with a court's order, is able to avoid punishment for noncompliance with the court's order.A criminal contempt proceeding is primarily punitive because a court imposes an unconditional sentence to punish the contemnor for disrespecting the court's dignity or disobeying the court's order.

7.Contempt.In a civil contempt proceeding, a fine is an appropriate sanction to coerce a contemnor's compliance with a valid order, so long as the contemnor, by complying with the order, may avoid the fine.

8.Contempt.An unconditional fine which the contemnor is not allowed to avoid by compliance with a court's order is impermissible in a civil contempt proceeding because the fine operates not as a remedy coercive in its nature, but solely as punishment for the completed act of disobedience.

9.Contempt: Equity.A civil contempt proceeding cannot be the means to afford equitable relief to a party.

10.Contempt: Equity.In imposing a sanction for civil contempt, a court cannot use, as a requisite to purge contempt, a condition that, if fulfilled for compliance with a court's order, affords equitable relief to a party.

11.Contempt: Costs: Attorney Fees.In a civil contempt proceeding, costs, including a reasonable attorney fee, may be assessed against a contemnor.

Robert B. Creager, of Berry, Anderson, Creager & Wittstruck, P.C., for appellant.

W. Michael Morrow and Gregory C. Damman, of Hecht, Sweet, Morrow, Poppe & Otte, P.C., for appellee.

HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, FAHRNBRUCH, and LANPHIER, JJ.

SHANAHAN, Justice.

Karen D. Dunning appeals from the judgment of the district court for Lancaster County which found her in contempt and levied a fine for willful violation of a noncompetition provision contained in a property settlement agreement incorporated into the decree dissolving Dunning's marriage to Mark H. Tallman.

BACKGROUND

Karen Dunning and Mark Tallman were married January 9, 1982.In 1983, Tallman and others founded Data Source Media, Inc.(DSM), a retailer of computer supplies.In September 1984, Dunning left her job as a salesperson with IBM, acquired 51 percent of DSM's capital stock, and became DSM's president.As DSM's chief executive officer, Dunning operated DSM until November 1988, during which time DSM's annual sales increased from $270,000 in 1984 to about $2 million in 1987.

At Dunning's request, Tallman left DSM in February 1988.Because the pair were experiencing marital problems, Dunning filed for a divorce and, in May 1988, began living with Bruce Christensen, DSM's marketing manager.

In November 1988, Dunning and Tallman signed a property settlement agreement which provided, among other things, that Tallman would buy Dunning's shares of DSM stock for $400,000 and that Dunning would not compete with DSM for 2 years, in accordance with a noncompetition provision in the settlement agreement:

[Dunning] agrees not to sell or supervise others selling or cooperate, encourage or in any manner be involved with any firm or person in the selling to cumtomers [sic] located in the State of Nebraska or the State of Iowa of computer and word processing supplies and other products normally and regularly sold by Data Source Media, Inc.(excluding stock paper and forms) for a period of two (2) years following the entry of the Decree.

The district court examined the terms of the property settlement agreement and, in view of relevant evidence presented to the court, found that the agreement's provisions were "reasonable, just and not unconscionable as to either of the parties."The court then approved the property settlement agreement and incorporated all the agreement's provisions into the dissolution decree entered on November 22, 1988.No appeal was taken from the dissolution decree, which, therefore, became final 6 months later.SeeNeb.Rev.Stat. § 42-372(Reissue 1988).

In December 1988, Dunning began a new business venture with Christensen.As a part of this venture, Dunning formed a corporation named "Computer Products, Inc."(CP), and Christensen with another incorporated a business called Business Media, Inc.(BMI).Both CP and BMI were Nebraska corporations.The same lawyer who handled the incorporations of CP and BMI also advised Dunning and Christensen about Dunning's business activities in reference to the noncompetition provision in the dissolution decree.The lawyer told Dunning and Christensen that if any question arose regarding Dunning's activities in relation to the noncompetition agreement, Dunning should return to court for a determination whether Dunning's activity violated the noncompetition provision.

Christensen proceeded to operate BMI from an office in Lincoln, Nebraska, and sold retail computer supplies in direct competition with DSM.Meanwhile, Dunning operated CP, which did not retail computer supplies in Nebraska or Iowa, but did rent an office in Kansas for the purpose of selling retail computer supplies in that state.However, Dunning did not keep any of CP's business records at the Kansas office, and phone calls to that office were automatically forwarded to BMI's office in Lincoln.

In large part, CP's operations consisted of shipping wholesale computer supplies from a Kansas warehouse to BMI in Lincoln, although CP, at BMI's request, shipped merchandise directly to BMI's customers in Nebraska and Iowa.On one occasion, Dunning, acting for CP, sold merchandise to Mutual of Omaha (Mutual), a customer to which Dunning had personally made sales while she was at DSM.When Tallman learned of this sale, he notified Dunning that she had breached the noncompetition agreement.Dunning canceled the Mutual sale, but directed Mutual's purchasing agent to Christensen at BMI, where Mutual purchased the merchandise.

Dunning also personally trained a salesperson for BMI.During one meeting, Dunning showed BMI's prospective salesperson a DSM sales brochure and told the trainee that the trainee salesperson would be selling BMI products identical to those described in the DSM brochure.Additionally, during a training session Dunning said that "she[Dunning] really shouldn't be doing this" because training a salesperson to compete directly with DSM was prohibited by the noncompetition agreement signed by Dunning in the proceedings for her divorce from Tallman.

On March 24, 1989, Tallman filed an "Application for an Order to Show Cause" in the district court for Lancaster County, requesting that Dunning state why she should not be held in contempt for willful violation of the noncompetition agreement.Also, Tallman requested that if Dunning was adjudged in contempt, the court"extend the term of the [noncompetition agreement] for an additional two years due to [Dunning's] failure to comply with the terms and provisions of the [noncompetition agreement]."Responding to the order to show cause, Dunning denied any violation of the noncompetition agreement.

In accordance with Tallman's motion based on the finality of the dissolution decree, the district court ruled that Dunning could not raise the question of reasonableness concerning the noncompetition provision in the settlement agreement, since the court, in its dissolution decree, had determined that the settlement agreement and all its provisions were reasonable and incorporated the agreement into the decree.After a trial conducted under the rules of civil procedure, the district court found that Dunning was in contempt of court because she"willfully and contumaciously" violated the noncompetition agreement and fined her $20,000.However, the court set out a "purge plan" whereby Dunning could purge herself of contempt and eliminate the fine by complying with the terms of the noncompetition agreement for a period "up to and inclusive of November 21, 1991," although the noncompetition agreement, by its own terms, would expire on November 22, 1990.The court also ordered Dunning to pay the costs of the contempt proceedings, including a $5,000 attorney fee for Tallman's lawyer.Finally, the court stated that "[t]his sentence is coercive rather than punitive in nature."When Dunning notified the court that she rejected the purge plan, the court, on November 20, made the $20,000 fine an unconditional and final judgment.

ASSIGNMENTS OF ERROR

Dunning contends the district court erred (1) by finding that Dunning willfully violated the noncompetition provision in the court-approved settlement agreement; (2) by imposing a punitive fine against Dunning in a civil contempt proceeding; (3) by ordering that Dunning could purge her contempt and exonerate herself from the fine by agreeing to extend the noncompetition agreement for an additional 1 year beyond the term specified in the original agreement; (4) in striking Dunning's "public policy defense," which questioned the reasonableness of the noncompetition agreement; (5) by imposing an excessive...