Matter of Lemco Gypsum, Inc.

• Decision Date: 25 January 1989
• Docket Number: Bankruptcy No. 486-00839.
• Citation: 95 BR 860
• Parties: In the Matter of LEMCO GYPSUM, INC., Debtor. KEMIRA, INC., Movant, v. Lawrence E. MILLER, Jr., Miller Resources, Inc., Respondents.
• Court: U.S. Bankruptcy Court — Southern District of Georgia

95 B.R. 860 (1989)

In the Matter of LEMCO GYPSUM, INC., Debtor KEMIRA, INC., Movant, v. Lawrence E. MILLER, Jr., Miller Resources, Inc., Respondents.

Bankruptcy No. 486-00839.

United States Bankruptcy Court, S.D. Georgia.

January 25, 1989.

Walter C. Hartridge, Savannah, Ga., for movant.

C. James McCallar, Jr., Savannah, Ga., for respondents.

MEMORANDUM AND ORDER ON MOTION FOR CONTEMPT

LAMAR W. DAVIS, Jr., Bankruptcy Judge.

FINDINGS OF FACT

1) Debtor's case was filed on October 3, 1986.

2) On July 10, 1987, the Chapter 7 Trustee filed an application for leave to sell, at public sale, certain specified assets of the estate which can be generally described as the Debtor's machinery, fixtures, equipment, building and contents with which it had engaged in recycling of gypsum.

3) A hearing to consider the Trustee's application and any objections to it was held on August 10, 1987 and on August 17, 1987, the Honorable Herman W. Coolidge entered an Order permitting the Trustee to conduct the sale of the subject property upon the conditions and requirements stated in the Order.

4) That Order contained a condition and requirement providing that: "Unless other arrangements are made satisfactory to both the Trustee and Kemira (debtor's landlord), all property shall be removed from the site within sixty (60) days following the sale." No such arrangements were made. Lawrence E. Miller, Jr., admits that he was aware of the terms of the sale when he bid on the property. He further admits that while the timetable could have been met, he failed to do so because of the expense and because he believed he could resell the assets to third parties for a better price if they saw the plant assets on site, rather than disassembled and in storage.

5) The date of sale was set for October 11, 1987, by a revised notice sent by the Trustee filed in this Court on September 23, 1987, and approved by Judge Coolidge on September 30, 1987.

6) On November 23, 1987, Judge Coolidge entered an Order confirming the public sale of the Debtor's personal property to Miller Resources, Inc., for the sum of $200,000.00. The Order recited that Miller Resources "is a company owned in whole or in part by Lawrence E. Miller, the Debtor's former president." The Order provided that the sale was confirmed unless a party in interest objected within ten days. No objection was filed or served and the sale became final on December 3, 1987.

7) The auctioneer's report which the Trustee filed with the Court indicated that the sale was well-advertised and attended, and that the successful bulk bid of $200,000.00 was more than twice the combined values of the items offered separately. The cost of removal of the industrial equipment and buildings was a significant factor in the monetary amount of bids received. The Court-ordered condition that the property be removed within sixty (60) days was advertised and announced as a condition of the sale and this had a negative impact on the amount and number of bid prices as well.

8) On June 28, 1988, Kemira, Inc., the owner of the real estate on which the subject property was located filed a Motion alleging that Miller Resources, Inc., and Larry E. Miller, Jr., had failed to remove the property within sixty days following the sale as required by previous Court Order and sought damages for loss of use of its real property after December 21, 1987.

9) On August 17, 1988, this Court entered an Order which, inter alia, required Lawrence E. Miller, Jr., and Miller Resources, Inc., to show cause on September 6, 1988, why they should not be held in contempt of Court for failure to comply with previous orders of this Court and particularly this Court's Order of August 17, 1987. An evidentiary hearing was conducted on September 6th, as scheduled, at which time the Respondents raised certain jurisdictional and procedural defenses, and defended the order to show cause on the merits as well.

10) On October 20, 1988, this Court entered an Order granting the Motion for Reconsideration of Lawrence E. Miller, Jr., and Miller Resources, Inc., and expressly found that "the contempt complained of is civil in nature and concerns violation of this Court's Orders dated August 17, 1987 and August 17, 1988, in that the purchaser at the Trustee's sale, Miller Resources, Inc., by and through its agent Lawrence E. Miller, Jr., has failed to remove the personal property within the time limits established by this Court and such action is not only contemptuous of this Court's Order, but has deprived Kemira, Inc., of the use of its real property."

11) At the hearing conducted on November 7, 1988, it was expressly stipulated by counsel for Lawrence E. Miller, Jr., and Miller Resources, Inc., that the transcript of the hearing conducted on September 6, 1988, together with all exhibits thereto, would be admitted as evidence.

12) Lawrence E. Miller, Jr., acting individually and as executive officer of Miller Resources, Inc., was familiar with the terms of Judge Coolidge's Order of August 17, 1987, and November 23, 1987, and this Court's Order of August 17, 1988. Mr. Miller, individually and as executive officer of Miller Resources, Inc., made a deliberate decision not to abide by the terms of Judge Coolidge's Orders or this Court's Orders, a decision motivated by his desire to realize greater profits from the resale of the assets in question.

13) Mr. Miller borrowed $100,000.00 on his personal signature and in addition invested $5,000.00 more for a total personal investment of $105,000.00 of the purchase price.

14) At the sale conducted on October 23, 1987, Mr. Miller personally made the bid for the subject property and issued his personal check for $231,000.00 to the Trustee. He conducted the bidding without identifying Miller Resources, Inc., as a purchaser and at least two months passed before the Trustee was informed that the subject property would be conveyed to Miller Resources, Inc., rather than to Mr. Miller personally.

15) Mr. Miller caused Miller Resources, Inc., to begin the removal of property on or about March 1, 1988. As of the date of the hearing, that removal has not been completed.

16) In view of the fact that Judge Coolidge's Orders became final on December 3, 1987, Miller Resources, Inc., had sixty (60) days from that date, i.e. through February 1, 1988, to remove the property from the premises of Kemira, Inc.

17) Due to the delay in removal of the property Kemira has been deprived of the use of five acres of property it owns for the storage of industrial by-products. The cost of preparing a substitute five acre site on other property of Kemira, Inc., has been demonstrated to be $78,000.00. This site preparation had to be performed by Kemira much sooner, due to the default, than if Respondents had performed as required by the terms of the sale. However, eventually, this site preparation would be necessary. Kemira has also been deprived of the reasonable rental value of the site for the period Respondents have occupied it in violation of the terms of the sale. Under the lease with Lemco, Kemira would receive $3,000.00 per year plus an amount calculated on the volume of by-product purchased by Lemco, subject to a maximum of 200,000 tons per year. Under the lease, Lemco actually purchased 92,000 tons of by-product for a price of $145,490.00 or an annual additional rent due of $36,372.50 from 1981-1985.

CONCLUSIONS OF LAW

Before the Court is the motion of Kemira, Inc., to have the sanction of civil contempt imposed upon Lawrence E. Miller, Jr., and Miller Resources, Inc., for failure to abide by and comply with Orders of this Court. The purpose of civil contempt is to vindicate the rights of aggrieved persons under valid court orders. In the instant case, the aggrieved party, Kemira, Inc., instituted the proceeding and upon a finding of civil contempt by this Court, is entitled to benefit from such finding. Such benefit may consist of coercive or compensatory relief. Here, Kemira, Inc., seeks compensatory relief to reimburse it for its damages due to the noncompliance of Lawrence E. Miller, Jr., and Miller Resources, Inc., with Orders of this Court. Louisiana Education Association v. Richland Parish School Board, 421 F.Supp. 973 (W.D. La.1976) aff'd, 585 F.2d 518 (5th Cir.1978); Miller v. Carson, 550 F.Supp. 543 (M.D. Fla.1982).

Bankruptcy Rule 9020, contempt proceedings, sets forth the procedure for addressing contempt committed in a bankruptcy case. In addition to Rule 9020, the inherent civil contempt power to enforce compliance with lawful judicial orders is well-recognized, as judicial power to issue an order carries with it the power to enforce such order. Kellogg v. Chester, 71 B.R. 36 (N.D.Tex.1987); In re Miller, 81 B.R. 669 (Bankr.M.D.Fla.1988). Also see: In re Newport Offshore, Ltd., 88 B.R. 566, 571 (Bankr.D.R.I.1988); In re Haddad, 68 B.R. 944 (Bankr.D.Mass.1987); In re McLean Industries, Inc., 68 B.R. 690 (Bankr. S.D.N.Y.1986); In re Shafer, 63 B.R. 194 (Bankr.D.Kan.1986); In re McCullough, 63 B.R. 97 (Bankr.E.D.Pa.1986); In re L.H. Realty, Inc., 62 B.R. 910 (Bankr.D.Vt. 1986); Matter of Crum, 55 B.R. 455 (Bankr.M.D.Fla.1985); In re Damon, 40 B.R. 367 (Bankr.S.D.N.Y.1984); In re Crabtree, 39 B.R. 702 (Bankr.E.D.Tenn. 1984); In re Burrow, 36 B.R. 960 (Bankr. D.Utah 1984). Cf: United States v. Revie, 834 F.2d 1198, 1206 (5th Cir.1987), cert. denied ___ U.S. ___, 108 S.Ct. 2845, 101 L.Ed.2d 882 (1988) (A show cause hearing for the failure to obey a turnover order falls within the authority granted in 28 U.S.C. Section 157. The Court did not decide, however, whether the Bankruptcy Court is vested with civil contempt powers); Budget Service Co., v. Better Homes of Virginia, 804 F.2d 289, 293 (4th Cir.1986) (A finding of civil contempt is not necessary in order to impose sanctions under 11 U.S.C. Section 362(h). The Fourth Circuit expressly did not decide whether Bankruptcy Judges have authority to find one in...