Ex parte Chambers

• Decision Date: 15 June 1995
• Docket Number: No. 94-0495,94-0495
• Parties: 38 Tex. Sup. Ct. J. 448 Ex parte Franklin D. CHAMBERS
• Court: Texas Supreme Court

Page 257

898 S.W.2d 257

38 Tex. Sup. Ct. J. 448

Ex parte Franklin D. CHAMBERS

No. 94-0495.

Supreme Court of Texas.

Argued Nov. 11, 1994.

Decided March 30, 1995.

Rehearing Overruled June 15, 1995.

Robert K. Frisch, Dallas.

Ray N. Donley, Jane M.N. Webre, Austin.

HIGHTOWER, Justice, delivered the opinion of the Court, in which PHILLIPS, Chief Justice, and HECHT, CORNYN, GAMMAGE, SPECTOR and OWEN, Justices, join.

In this case we must decide whether a judgment of contempt was properly rendered against a corporate officer, director and shareholder for his personal failure to cause the corporation to pay a contempt fine previously adjudged against it. Although we find that the order was sufficiently specific to give rise to a personal duty on Chambers' part to obey it, we grant his petition for writ of habeas corpus because we find that he has conclusively proven that the corporation was unable to comply with the order.

In early 1992, Franklin Delano Chambers was an employee of International Business Exchange Corporation (hereinafter "IBEC"), a corporation whose business consisted primarily of bringing together buyers and sellers of businesses through listings, mail outs and advertising. In connection with his employment, Chambers entered into an agreement in which he promised not to use IBEC's marketing tools and trade secrets in competition with IBEC. In April 1992, Chambers founded International Business Search, Inc. (hereinafter "IBS"). IBS employed Chambers and several other former IBEC employees to provide essentially the same business listing services which they had offered as employees of IBEC. Chambers, along with Donna Nicholls and Allan Millen, made up IBS's initial board of directors; however, Nicholls and Millen were removed from the board only two months after IBS was formed. This left Chambers as the sole officer, director and 100% stockholder.

In mid 1992, believing that IBS and Chambers were unlawfully competing with it in violation of the nondisclosure and noncompetition agreements, IBEC sued IBS, Chambers, and the other former IBEC employees. Among the remedies sought by IBEC and granted by the trial court was an injunction to restrain the defendants from using or disclosing IBEC's trade secrets and confidential information. The injunctions granted by the trial court were subsequently and repeatedly violated.

On February 2, 1993, IBS and the individual defendants were found to be in contempt of court for violating the injunctions through customer contacts which occurred in July and August of 1992. Fines were ordered and were paid. During March of 1993, Chambers proceeded to shut down IBS and open a sole proprietorship called Investor Brokerage Service (hereinafter "IBS II"). The assets of IBS were transferred to IBS II, which used the same location, the same phone number, and engaged in the same business as IBS. On June 24, 1993, the defendants were again found to be in violation of the trial court's injunctions stemming from customer contacts in September, November and December of 1992. On this occasion, however, only IBS was held in contempt. For these multiple acts of contempt, IBS, of which Chambers was the sole officer, director and shareholder, was ordered to pay a $3000 fine within seven days.

One hundred fifteen days later, the fine from the second contempt judgment against IBS remained unpaid and Chambers was ordered to show cause why he should not be held in contempt for the failure of IBS to pay the fine. At the show cause hearing, Chambers contended that IBS was unable to pay the fine. Chambers and IBS were both found to be in contempt of court. Chambers, individually, was ordered to pay a total fine of $6000 and was sentenced to jail for a period of 7 days and for so long thereafter as the $6000 fine remained unpaid.

Chambers sought a writ of habeas corpus from the Third Court of Appeals, which writ was ultimately denied by that court. --- S.W.2d ----. We initially granted Chambers' release on bond while his application was pending, and we now grant the writ of habeas corpus because Chambers has established the corporation was unable to pay the court ordered fine.

I.

We must first decide whether Chambers, a corporate officer and director, can be held in contempt of court when the violated order is directed only to the corporation. Contempt of court is broadly defined as disobedience to or disrespect of a court by acting in opposition to its authority. Ex parte Norton, 144 Tex. 445, 191 S.W.2d 713, 714 (1946). See also William W. Kilgarlin & Scott A. Ozmun, Contempt of Court in Texas--What You Shouldn't Say to the Judge, 38 Baylor L.Rev. 291, 292 (1986). Within this definition, there are two basic types of contempt: direct contempt and constructive contempt. Direct contempt is that type of disobedience or disrespect which occurs within the presence of the court, while constructive contempt occurs outside the court's presence. Ex Parte Gordon, 584 S.W.2d 686, 688 (Tex.1979). The contempt alleged in this case, violation of a written court order, outside the presence of the court, is constructive contempt. A criminal contempt conviction for disobedience to a court order requires proof beyond a reasonable doubt of: (1) a reasonably specific order; (2) a violation of the order; and (3) the willful intent to violate the order. See In the Matter of Hipp, Inc., 5 F.3d 109, 112 (5th Cir.1993) (citing Cooper v. Texaco, Inc., 961 F.2d 71, 72 n. 3 (5th Cir.1992); United States v. Burstyn, 878 F.2d 1322 (11th Cir.1989)). ¹ In reviewing the record, we are without jurisdiction to weigh the proof and determine whether it preponderates for or against the relator; rather, we determine only if the judgment is void because, for example, the relator has been confined without a hearing or with no evidence of contempt to support his confinement. Ex parte Barnett, 600 S.W.2d 252 (Tex.1980); Ex parte Helms, 152 Tex. 480, 259 S.W.2d 184 (1953). See also Ex parte Howell, 843 S.W.2d 241, 245 (Tex.App.--Houston [1st Dist.] 1992, orig. proceeding).

A.

We first consider whether the order Chambers is accused of violating is sufficiently specific to support a judgment of contempt. The order which Chambers is charged with violating is an order directing IBS to pay a $3000 fine, but it does not designate any particular person to carry out its terms. In order to support a judgment of contempt, Texas law requires that the underlying decree set forth the terms of compliance in clear, specific and unambiguous terms so that the person charged with obeying the decree will readily know exactly what duties and obligations are imposed upon him. Ex parte MacCallum, 807 S.W.2d 729, 730 (Tex.1991); Ex parte Hodges, 625 S.W.2d 304, 306 (Tex.1981); Ex parte Slavin, 412 S.W.2d 43, 44 (Tex.1967). Chambers argues that nonpayment by the corporation cannot result in his own contempt because the court did not clearly and unambiguously order him to pay the fine. We disagree.

A court order is insufficient to support a judgment of contempt only if its interpretation requires inferences or conclusions about which reasonable persons might differ. MacCallum, 807 S.W.2d at 730. Only the existence of reasonable alternative constructions will prevent enforcement of the order. See, e.g., Ex parte Crawford, 684 S.W.2d 124 (Tex.App.--Houston [14th Dist.] 1984, orig. proceeding) (holding an obligor in contempt who knew with certainty he was to pay one of two amounts of child support but ignored the order altogether). The order need not be full of superfluous terms and specifications adequate to counter any flight of fancy a contemnor may imagine in order to declare it vague. Ex parte Johns, 807 S.W.2d 768, 774 (Tex.App.--Dallas, 1991).

There is no question in this case which corporation was responsible for paying the court ordered fine. Further, there is no ambiguity concerning the amount of the fine ordered or when it was due. The only issue is whether it was reasonable to conclude that IBS was required to pay the fine, but that it would do so without human intervention. The absurdity of the question provides its own answer.

Although a corporation is a legally distinct and cognizable entity, it is only able to act through its agents. San Antonio Bar Ass'n v. Guardian Abstract & Title Co., 156 Tex. 7, 291 S.W.2d 697, 699 (1956). Since a corporation is capable of violating a court order only if its agents act or refrain from acting, it follows that an order directed at a corporation is binding on agents authorized to act on its behalf, whether specifically named in the order or not. See, e.g., Wilson v. United States, 221 U.S. 361, 31 S.Ct. 538, 55 L.Ed. 771 (1911) (order directed at corporation only but president held in contempt); United States v. Laurins, 857 F.2d 529 (9th Cir.1988), cert. denied, 492 U.S. 906, 109 S.Ct. 3215, 106 L.Ed.2d 565 (1989) (order directed at corporation and vice-president but managing director held in contempt). See also Charles R.P. Keating, Fletcher Cyclopedia of Corporations § 5073 (Perm. ed. 1986). There can be no doubt that a command to the corporation is in effect a command to those who are officially responsible for the conduct of its affairs. Wilson, 221 U.S. at 376, 31 S.Ct. at 542-43. Were this not true, entities could delegate their disobedience to physical actors who, since they would be beyond judicial power, would have no reason to recognize or obey it. ²

Simply because a corporation has failed to comply with a court order, it does not necessarily follow that all corporate agents or officers are in contempt because of their agent status. There must be evidence in the record that the corporate agent charged with contempt was somehow personally connected with defying the authority of the court or disobeying its lawful decrees. See, e.g., Deramus v. Thornton, 160 Tex. 494, 333 S.W.2d 824 (1960). We have previously refused to uphold a judgment of contempt against a corporate president...