Shuffler v. Heritage Bank
| Decision Date | 25 November 1983 |
| Docket Number | No. 82-5584,82-5584 |
| Citation | 720 F.2d 1141 |
| Parties | Rex L. SHUFFLER and Betty L. Shuffler, Plaintiffs-Appellants, v. HERITAGE BANK, a California corporation, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
William R. Thomas, II, San Diego, Cal., for plaintiffs-appellants.
Michael G. Dawe, Irvine, Cal., for defendant-appellee.
Appeal from the United States District Court for the Southern District of California.
Before GOODWIN, TANG and FLETCHER, Circuit Judges.
Appellants challenge an order of the district court finding them in civil contempt of a prior order of the court and imposing a fine of $500 per day for the duration of their contumacy. We sustain the finding of contempt but vacate the sanction order and remand for entry of a statement of the purpose or purposes of the contempt sanction and findings to support the fine and such recalculation as may be required to determine the amount of the fine consonant with the purpose or purposes of the sanction.
On November 10, 1980, Rex L. Shuffler and Betty L. Shuffler (the Shufflers) brought suit in federal district court to restrain a foreclosure sale by Heritage Bank of two properties owned by the Shufflers. They alleged violations by Heritage of certain provisions of the federal Truth in Lending Act. After a year of litigation, on October 21, 1981, the Shufflers stipulated to the entry of a judgment against them (1) ordering them to pay into escrow for Heritage $190,000 on or before February 15, 1982, and (2) granting Heritage "the right to have sold by Trustee's Sale" on February 17 and 18, 1982, the two properties owned by the Shufflers if they had not made the $190,000 payment by February 15, 1982. The judgment by its literal terms did not impose any other restrictions on the actions of or compel any further acts by the Shufflers. While the judgment was lodged with the court on October 22, 1981, it was not to be entered and filed, according to its terms, until the district court had received notice that the Shufflers had not made the $190,000 payment by February 15, 1982. Pursuant to the stipulation, the Shufflers "irrevocably waived" any "right of appeal, or any other form of challenge" to the judgment.
The Shufflers did not pay the $190,000 into escrow on or before February 15, 1982. On February 16, 1982, after the district court had received notice of the Shufflers' nonpayment, the Shufflers filed a motion seeking a temporary restraining order (TRO) further postponing the foreclosure sale. The same day, the district court denied the TRO and then entered the judgment as stipulated. On March 18, 1982, the Shufflers took an appeal from the denial of the TRO, which appeal was later abandoned.
On February 16, 1982, upon denial of the TRO, the Shufflers conveyed their two On April 6, 1982, Heritage filed a motion under Federal Rule of Civil Procedure 70 seeking contempt sanctions against the Shufflers to compel the Shufflers to perform acts necessary to effectuate the February judgment and to compensate the bank for losses sustained. Specifically, Heritage sought an order requiring the Shufflers (1) to reimburse Heritage for all costs, attorney's fees, and damages arising from the alleged contumacy, including lost profits on the $190,000 which Heritage would have earned if the judgment had been timely complied with; and (2) to pay Heritage a fine of $1,000 a day until the Shufflers complied with the judgment by either placing $190,000 into escrow or securing reconveyance of title to the properties to them so that the properties might go to foreclosure sale "as originally contemplated in the judgment."
properties to Coastal Community Enterprises (Coastal), a California partnership, which then immediately filed a petition in bankruptcy. Pursuant to section 362(a) of the Bankruptcy Reform Act of 1978, Coastal's filing in bankruptcy invoked an automatic stay of any foreclosure against the property of Coastal, including the two properties. See 11 U.S.C. Sec. 362(a) (Supp. V 1981).
The district court held a hearing on Heritage's motion on April 26, 1982, and apparently ruled from the bench that the Shufflers were in contempt and would be fined. On May 27, 1982, the court entered an order finding the Shufflers "in contempt of this court, having willfully violated the terms of the judgment entered in this matter February 16, 1982." The court further ordered the Shufflers to pay to Heritage "contempt sanctions" in the amount of $500 per day beginning on April 26, 1982, and ending upon Shufflers' compliance with the February judgment. The court stated that either the Shufflers' deposit of $190,000 plus 7 percent interest from February 16, 1982, or "the sale of the residences pursuant to, and in accordance with, the terms of" the February judgment would constitute compliance with the February judgment. The Shufflers filed a notice of appeal on June 25, 1982, seeking review of the May contempt order.
On April 28, 1982, two days after the hearing on the Rule 70 motion, the bankruptcy court granted Heritage's petition for relief from the automatic stay and Heritage regained the ability to foreclose on the properties. The Shufflers nonetheless managed to convince Heritage to delay the sale of their homes for several weeks.
The parties finally entered a settlement agreement on June 11, 1982, regarding the Shufflers' obligations to Heritage. Heritage, for its part, agreed to postpone indefinitely the trustee's sale of the two Shuffler properties, to execute certain documents of satisfaction and release upon payment by the Shufflers, and to forbear any and all efforts to execute upon the sanctions accruing under the May contempt order. In return, the Shufflers agreed, inter alia, to deposit $208,483.26 plus interest into an escrow account for the benefit of Heritage, to pay an increased rate of interest if the escrow payment were not timely made, to extend and modify the terms of a promissory note previously issued to Heritage by Shufflers to cover "the total amount of sanctions having accrued against the Shufflers for the benefit of Heritage" plus interest, and to secure the modified note by modifying Heritage's deed of trust on Shufflers' properties.
Pursuant to this agreement, an escrow account was established, and escrow closed on July 9, 1982. Heritage received $182,999.64 in cash and a promissory note from the Shufflers for $30,000. The following September, Heritage had recorded an acknowledgement of full satisfaction of the February judgment.
On August 10, 1982, Heritage filed a motion for a writ of execution on the contempt sanction, seeking a determination of the date upon which the $500 per day sanctions had ceased to run. On September 3, 1982, the Shufflers filed a counter-motion for reconsideration of the order of contempt. On September 13, 1982, the district court issued an order denying the Shufflers' counter-motion and holding Shufflers liable in contempt
from April 26, 1982, through July 9, 1982, a period of 74 days, for a total of $37,000.
Heritage contends that we have no jurisdiction over the appeal from the order of contempt of May 27, 1982, for several reasons: (a) lack of finality; (b) mootness; (c) waiver; and (d) settlement agreement. We do not find these arguments persuasive.
Heritage argues first that the May order is not a "final decision" of the district court as required by 28 U.S.C. Sec. 1291 (1976), because it did not quantify the contempt sanction and left open the manner by which the order was to be enforced. Heritage points to the subsequent order of the district court quantifying the duration of contempt at 74 days and issuing a writ of execution against Shufflers in the amount of $37,000 as proof of the lack of finality of the May order. We cannot agree.
Where the contempt proceeding is the sole proceeding before the district court, an order of civil contempt finding a party in contempt of a prior final judgment and imposing sanctions is a final decision under section 1291. See Alexander v. United States, 201 U.S. 117, 121-22, 26 S.Ct. 356, 357-58, 50 L.Ed. 686 (1906); Cabrera v. Municipality of Bayamon, 622 F.2d 4, 7 (1st Cir.1980); Vincent v. Local 294, International Brotherhood of Teamsters, 424 F.2d 124, 128 (2d Cir.1970); 9 J. Moore, B. Ward & J. Lucas, Moore's Federal Practice p 110.13, at 168 (2d ed. 1982). Even though the size of the sanction imposed by the order depends upon the duration of contumacious behavior occurring after entry of the contempt order, the order is nonetheless final for purposes of section 1291. See Cabrera, 622 F.2d at 7 (); Vincent, 424 F.2d at 127 (). Once the finding of contempt has been made and a sanction imposed, the order has acquired all the "elements of operativeness and consequence necessary to be possessed by any judicial order to enable it to have the status of a final decision under Sec. 1291." See SEC v. Naftalin, 460 F.2d 471, 475 (8th Cir.1972). Thus, we have jurisdiction over this appeal under 28 U.S.C. Sec. 1291. 1
Heritage next argues that the appeal is moot because the closing of escrow on July 9, 1982, satisfied the terms of the February judgment upon which the order of contempt was based and thereby purged the contempt. We reject the argument. While the contempt itself has been purged, whether the Shufflers are liable for the $500 daily fine imposed under the May contempt order remains a live controversy. Indeed, it is only from that order and not the earlier judgment that this appeal is taken.
Marshall v. Whittaker Corp., 610 F.2d 1141 (3d Cir.1979), which states that an appeal taken from a contempt order is moot once the contempt has been purged, is inapposite. In Marshall, the district court ordered the contemnor to permit inspection, but did not impose any monetary penalty....
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