Morgan v. Thomas

• Decision Date: 15 November 1971
• Docket Number: No. 71-1152.,71-1152.
• Citation: 448 F.2d 1356
• Parties: E. E. MORGAN, Petitioner-Appellant, v. Fred THOMAS, Sheriff of Hinds County, Miss., etc., Respondent-Appellee, United States Fidelity & Guaranty Company, Intervenor.
• Court: U.S. Court of Appeals — Fifth Circuit

448 F.2d 1356 (1971)

E. E. MORGAN, Petitioner-Appellant, v. Fred THOMAS, Sheriff of Hinds County, Miss., etc., Respondent-Appellee, United States Fidelity & Guaranty Company, Intervenor.

No. 71-1152.

United States Court of Appeals, Fifth Circuit.

September 17, 1971.

Rehearing and Rehearing Denied November 15, 1971.

Vardaman S. Dunn, Thomas H. Watkins, Jackson, Miss., for petitioner-appellant; Cox & Dunn, Ltd., Watkins & Eager, Jackson, Miss., of counsel.

A. F. Summer, Atty. Gen. of Miss., William A. Allain, Asst. Atty. Gen., Jackson, Miss., for respondents; Joe A. Covington, Meridian, Miss., George H. Butler, Robert C. Cannada, Junior O'Mara, Phineas Stevens, Jackson, Miss., for intervenor; Snow, Covington, Temple & Watts, Meridian, Miss., Butler, Snow, O'Mara, Stevens & Cannada, Jackson, Miss., of counsel.

Junior O'Mara, Phineas Stevens, Jackson, Miss., for respondent.

Before JOHN R. BROWN, Chief Judge, and GEWIN and MORGAN, Circuit Judges.

Rehearing and Rehearing En Banc Denied November 15, 1971.

MORGAN, Circuit Judge:

This is an appeal from a judgment, 321 F.Supp. 565, denying a petition for a writ of habeas corpus by which the appellant Morgan seeks to challenge collaterally a decree adjudging him to be in civil contempt for failing to comply with a decree of the Chancery Court of Hinds County, Mississippi, and directing that he be fined and imprisoned until he purge himself of contempt. The decree with which he refuses to comply resulted out of a proceeding in the nature of a judgment creditor's bill and directed Morgan, among other things, to file with the court and United States Fidelity & Guaranty Company (hereafter, U. S.F.&G.), an intervenor herein, a financial statement in regular form giving his financial position on two dates specified in the decree and a statement under oath setting forth the identity, status, and location of assets of every kind, including the names of persons having possession, custody or control of the assets. Morgan contends that in order to provide this information he will be required to incriminate himself in violation of the Fifth and Fourteenth Amendments to the United States Constitution under §§ 2250 and 2252 of the Mississippi Code of 1942, Recompiled, which prohibit as larceny the removal or concealment of assets subject to a judgment lien and, further, that such information might subject him to punishment for criminal contempt for having failed to convey all his assets to a receiver as directed by the chancellor's decree. We reverse and remand with directions more fully set out below.

In 1958, Morgan entered an arrangement with R. W. Hyde, Jr., doing business as the Hyde Construction Company, for the purpose of lending his considerable assets to Hyde's growing construction business to enable Hyde to secure payment and performance bonds secure payment and performance bonds from various surety companies. Under this arrangement, Morgan would execute an indemnity agreement with the surety company supplying the necessary bonds for a construction project and then, in return, would receive a commission from Hyde, which under the terms of their agreement was two and one-half percent of the contract price of the project. As a result it became possible for Hyde to obtain large construction contracts that would have otherwise been beyond his financial reach.

In that same year, U.S.F.&G. began writing bonds for Morgan and Hyde, and Morgan furnished it his financial statements for the years 1956, 1957, and 1958, each of which showed that he had a personal net worth in excess of three million dollars.

In January, 1960, the R. V. Tyler Company, Inc., and Hyde Construction Company executed an application for a performance and payment bond and an indemnity agreement with U.S.F.&G. in connection with a contract entered into between Hyde Construction Company and the City of Shively, Kentucky, for the construction of a large sewer system. Morgan obligated himself under the bond application and indemnity agreement by letter in which he stated:

That the signing and furnishing of this letter obligates me to the terms and conditions of the enclosed `Application for Performance and Payment Bonds and Indemnity Agreement\' on Form No. 1 just as though I were named as one of the applicants therein and my signature were duly affixed thereto.

Under the terms of the application, the applicants, including Morgan, agreed that:

* * * applicants and any of them will furnish to sureties upon request and at such reasonable intervals of time as sureties may designate, financial statements showing the current financial position of the applicant of whom such request or statement is made.¹

As time progressed, Hyde became financially unable to meet his obligations and U.S.F.&G. became liable to third parties on several bonds covering his contracts, including the bond covering the Shively sewer project. After discharging these liabilities U.S.F.&G. filed an action in Mississippi chancery court to recover indemnity from Morgan, Hyde and their affiliates. In its decree the chancery court held that Morgan and the other defendants were obligated "to perform specifically each and every obligation assumed by them under the terms of each of the various bond applications and indemnity agreements signed by them" and awarded U.S.F.&G. a money judgment for approximately $3,000,000. In doing so, the chancellor found that U.S.F.&G. acted in reliance on the combined net worth and assets of Morgan and Hyde and was thereby induced to write surety bonds on numerous construction projects involving many millions of dollars, and that, in each of the twelve bonds on which indemnity was being sought, Morgan voluntarily and specifically bound himself to protect, reimburse, indemnify and exonerate U.S. F.&G. in funds with which to pay creditors of the projects. The decree was affirmed on appeal, Morgan v. United States Fidelity & Guaranty Co., 191 So. 2d 917 (Miss.1966), and was enrolled and became a judgment lien upon all the assets and properties of the judgment debtors.

On September 3, 1965, U.S.F.&G. made a formal demand and request that Morgan furnish it with a financial statement showing his current financial position. Morgan refused the request and, in November, 1965, was adjudged in civil contempt for his refusal to furnish the requested financial statement by the chancery court. However, on appeal the Mississippi Supreme Court held that the 1965 decree was not sufficiently specific to support the civil contempt decree. Morgan v. United States Fidelity & Guaranty Co., 191 So.2d 851 (1966).

Thus in 1967, after failing to obtain a financial statement and after failing to collect its judgment by means of writ of execution and garnishment, U.S.F.&G. filed an action in the nature of a judgment creditor's bill in chancery court seeking to enforce the 1965 decree; to enforce specific performance of Morgan's agreement to furnish current financial statements; to obtain discovery of Morgan's assets; and to obtain other equitable relief, including the appointment of a receiver. In its bill, U.S.F. &G. averred that:

* * * Said judgment has been duly enrolled and constitutes a lien on the property of defendant. * * * Complainant avers upon information and belief that defendant has concealed his assets and resorted to other devices for the purpose of hindering, delaying and defrauding complainant of its rights as a judgment creditor, and complainant has no plain, adequate, speedy and complete remedy at law.

Morgan refused to respond to this averment on the ground that to do so might tend to incriminate him under §§ 2250 and 2252 of the Code of Mississippi of 1942, Recompiled.²

While the chancellor refused to require Morgan to answer the averment made by U.S.F.&G. that he had fraudulently concealed assets on the ground that to do so would violate his privilege against self-incrimination under the Fifth Amendment, he held, after a trial on the merits, that a course of conduct was shown indicating concealment of assets by Morgan when regard was had to Morgan's failure to testify; that the complainant U.S.F.&G. was entitled to a full discovery of the identity, status and location of assets of every kind, including the names of persons having possession, custody or control of assets; that a receiver should be appointed for the collection of Morgan's assets;³ and that Morgan should be enjoined from disposing of any assets which might be owned by him. Pursuant to these holdings, the chancellor decreed that:

6. The complainant is entitled to specific performance of the application and indemnity agreement relating to the Shively, Kentucky project * * * and it is ordered, adjudged and decreed that the defendant, E. E. Morgan, is ordered, directed and commanded to furnish the complainant, within fifteen (15) days from the date of this decree, and to file with the Clerk of this Court in this cause, a financial statement showing the current financial position of defendant as of the date of September 3, 1965, and as of the date of the decree. Said financial statement shall be in the form and shall show in detail the information called for by the form attached hereto * * *.

7. That the defendant, E. E. Morgan, be and he is hereby ordered, directed and commanded to file with the complainant and with the Clerk of this Court, within fifteen (15) days from the date of this decree, a statement in writing setting forth the identity, status and location of all his assets and property of every kind, nature and description, and setting forth the name or names of any persons, firms or corporations who may have custody or control of any of said assets or property, such statement to include, but not to be limited to, all goods, chattels, money, accounts, notes, bonds, mortgages, deeds of trust, contracts securities, evidences of debt and choses in action, belonging to defendant or wherein he has any interest.

In his exception to the final...