In re Duggan, Bankruptcy No. 90-41261.
| Decision Date | 15 November 1991 |
| Docket Number | Bankruptcy No. 90-41261. |
| Citation | 133 BR 671 |
| Parties | In re Joseph T. DUGGAN, Jr., Debtor. |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
Richard P. Salem, pro se.
H. Hoover Garabedian, Worcester, Mass., for debtor.
OPINION IN SUPPORT OF CONTEMPT ORDER
The Trustee, Richard P. Salem, moves for an order declaring the Debtor, Joseph T. Duggan, Jr., to be in contempt of the court's order of August 7, 1991, and for appropriate sanctions. That order required the Debtor to surrender to the Trustee, by August 29, 1991, numerous items of property which had been listed on the Debtor's schedules, including equipment valued at $1,345,000 and records on receivables in the sum of $1,897,089.
It was undisputed at the hearing that the Debtor had not complied with the August 7th order. The contention of Debtor's counsel, as best I can understand it, is that a civil complaint by a bank against the Debtor has criminal overtones with ramifications concerning the privilege against self-incrimination. That is no defense here. I find that the Debtor has intentionally and willfully, without just cause, failed and refused to comply with the August 7th order.
Determining the appropriate sanction is more problematic. This case has been a protracted struggle between the Trustee and the Debtor. I will recount just a few of the contests. By order of June 24, 1991, I sustained the Trustee's objection to the Debtor's claim to exemptions on the ground that the Debtor's exemption claim under 11 U.S.C. § 522(d) (1988) was not supported by that statute. Denial of exemptions is therefore not an available sanction here.
Nor can I sanction the Debtor by denying him the privilege of a discharge from his debts. I have already denied his discharge pursuant to the Trustee's prior complaint seeking denial of discharge under 11 U.S.C. § 727 (1988) on the ground that he has concealed records and property of the estate. At the pretrial on that complaint, the Debtor through counsel consented to the denial, and judgment to that effect was accordingly entered.
A monetary sanction would not be appropriate. There is no reason to expect that the Debtor would comply with a monetary judgment any more readily than he has complied with the order which is the subject of the present motion. And even if the judgment were paid, the money would likely come from property which should have been turned over to the Trustee in the first place.
Incarceration is therefore the only alternative. Incarceration would perhaps be the most appropriate sanction even if others were available. It can be conditioned upon continued noncompliance with the August 7th order, so as to end when the court finds that the Debtor has complied with the order. The coercive effect of such a sanction is obviously far stronger than that of an order imposing monetary sanctions or one denying exemptions or the right to a discharge. Its conditional nature would demonstrate that I seek to promote the proper administration of this estate and not to punish the Debtor. A separate judgment has accordingly entered incarcerating the Debtor until such time that he complies with the order of August 7th as certified by the Trustee or as determined by the court after a hearing.
The Debtor has not contested the power of the court to impose such a sanction. There is nevertheless sufficient disagreement concerning a bankruptcy judge's civil contempt powers that some brief observations on the subject are in order.
I emphasize that this is civil contempt rather than criminal contempt, notwithstanding the type of sanction imposed. Civil contempt serves to either: (1) compel or coerce obedience to a court order or (2) compensate parties for another's noncompliance with a court order. United States v. United Mine Workers of America, 330 U.S. 258, 303-304, 67 S.Ct. 677, 701-702, 91 L.Ed. 884 (1947); In re Haddad, 68 B.R. 944, 952 (Bankr.D.Mass.1987). Criminal contempt, conversley, serves to vindicate the dignity of the court. In re Better Homes of Virginia, Inc., 52 B.R. 426, 430 (E.D.Va.1985), aff'd on other grounds, 804 F.2d 289 (4th Cir.1986); In re Haddad, 68 B.R. 944, 954 (Bankr.D.Mass.1987). The sanction for criminal contempt is imposed by a federal court as punishment for an act in contempt of its authority committed in or near its presence in obstruction of the administration of justice, or for an act committed outside of its presence in disobedience or resistance of its lawful order. 18 U.S.C. § 401 (1988). The order here is for the benefit of the Trustee in order to permit administration of the estate. It is quite different from the criminal contempt order imposing a fixed term of incarceration which was entered by the bankruptcy judge in In re Hipp, 895 F.2d 1503 (5th Cir.1990) and declared by the Fifth Circuit to be beyond the power of the bankruptcy judge.
There is even some disagreement concerning a bankruptcy judge's civil contempt powers. That disagreement, surprisingly, extends to orders in a core proceeding such as the core proceeding we have here involving a turnover order under 28 U.S.C. § 157(b)(2)(E) (1988). I have treated the subject at some length in In re Haddad, 68 B.R. 944 (Bankr.D.Mass.1987), and I will not repeat that discussion here. It suffices to say that civil contempt powers are expressly granted to the bankruptcy court by 11 U.S.C. § 105(a) through its authorization for the court "taking any action or making any determination necessary or appropriate to enforce or implement court orders . . . ".
Three courts of appeal have dealt with the issue. Ignoring the quoted language in § 105(a), the Ninth Circuit has held that the bankruptcy court has no civil contempt powers. In re Sequoia Auto Brokers, Ltd., 827 F.2d 1281 (9th Cir.1987). The Tenth and Fourth Circuits, on the other hand, read § 105(a) as an unambiguous grant of civil contempt powers. In re Skinner, 917 F.2d 444 (10th Cir.1990); In re Walters, 868 F.2d 665 (4th Cir.1989). Both Skinner and Walters concerned monetary sanctions against a non-debtor, not incarceration of a debtor under the rather unique circumstances of the present case. The Skinner decision summed up the matter rather succinctly: "Civil contempt proceedings arising out of core matters are themselves core matters." 917 F.2d at 448.
The rules of procedure promulgated under the Bankruptcy Code take a position on this question of substantive law. Under...
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