State v. Eckert
| Decision Date | 27 July 1978 |
| Docket Number | No. 76-247-A,76-247-A |
| Citation | 120 R.I. 560,389 A.2d 1234 |
| Parties | STATE v. Al ECKERT. ppeal. |
| Court | Rhode Island Supreme Court |
This is an appeal from an order of the Superior Court denying the plaintiff's motion to adjudge the defendant in contempt for allegedly violating the terms of a preliminary injunction.
This case arises from the morass of transactions surrounding a 10-year leverage funding program used to sell life insurance policies to Rhode Island clients from 1971 through 1975. Several of the corporations involved decided to terminate the program before the end of the 10-year period, and that decision has generated other litigation that has come before this court. State v. Piedmont Funding Corp., R.I., 382 A.2d 819 (1978).
Elva Eckert, 1 defendant in this matter, was affiliated with two corporations that were involved in the program. He served as branch manager of the Providence office of the Piedmont Capitol Corporation, and was an agent for the Pacific Fidelity Life Insurance Company. Eckert was licensed to sell insurance in Rhode Island. As part of the leverage funding program, he sold life insurance policies to approximately 100 Rhode Island residents. These program holders paid the premiums on their life insurance policies by taking loans from the Piedmont Funding Corporation. In turn, the loans were secured by mutual funds purchased by the program holders.
In 1973 and 1974 the office of the Attorney General received complaints from several participants in the program. The complainants stated that in selling them insurance policies, defendant made various misrepresentations. As a result of investigations conducted in response to these complaints, defendant's license to sell insurance in Rhode Island was eventually revoked in February 1976. Prior to this, on July 11, 1975, the Attorney General, on behalf of plaintiff, the State of Rhode Island, filed a complaint seeking injunctive and other relief, alleging that defendant had misrepresented aspects of the leverage funding program to the public and had engaged in unfair and deceptive acts in contravention of the Unfair Trade Practice and Consumer Protection Act, G.L.1956 (1969 Reenactment) ch. 13.1 of title 6. 2 The defendant answered and filed third party complaints against several corporations involved in the funding program. 3
On August 12, 1975, a hearing was held concerning plaintiff's petition for a preliminary injunction. At the conclusion of the hearing the trial justice delivered an oral order granting the preliminary injunction. Paragraph one of this oral order enjoined defendant from selling insurance of any form in Rhode Island, while paragraph five enjoined him from contacting, counseling, or advising program participants concerning involvement in the funding program. Attorneys for both parties were present when the oral order was read. The plaintiff contends that there is some dispute about whether defendant was present at that time, although defendant denied being there. The written preliminary injunction, which was prepared by the Attorney General, was entered and effectuated as of August 12, 1975. The preliminary injunction was obviously intended to memorialize the oral order. However, there was a discrepancy between the provisions of the oral order and the injunction. The preliminary injunction omitted what was paragraph five of the oral order, the prohibition against contacting, counseling or advising program participants. The defendant received a copy of the preliminary injunction from his attorney, who was aware of the omission.
The plaintiff learned that defendant had been contacting program participants after August 12 in apparent violation of paragraph five of the oral order. At this time plaintiff realized the discrepancy between the oral order and the preliminary injunction. As a result on November 14, 1975, plaintiff moved to amend the preliminary injunction on August 12 to include the missing paragraph five as set forth in the oral order of that same date. Until this time, plaintiff obviously felt that defendant was bound by paragraph five. In response to plaintiff's motion to amend, a hearing was held in the Superior Court, the motion was granted, and on November 24, the substance of the heretofore missing paragraph five was reduced to writing and engrafted onto the still outstanding preliminary injunction of August 12. By virtue of the amendment, the modified preliminary injunction of November 24 was, for all practical purposes, made identical to the oral order of August 12.
On December 10, plaintiff asked the Superior Court to adjudge defendant in contempt for violating the proscriptions of paragraphs one and five of the amended preliminary injunction of November 24. 4 In response to the complaint, defendant denied that he had knowledge of the amended injunction at the time he allegedly violated the terms of paragraph five. As to paragraph one, defendant contended that his actions were not contemptuous because they did not involve the sale of insurance in Rhode Island after August 12, 1975.
A hearing was conducted, during which various witnesses testified that they had been contacted by defendant after August 12. Apparently, the premature termination of the leverage funding program resulted in the cancellation of the loans by which participants were paying their insurance premiums. Program holders were notified of this by an agent of the corporation responsible for the loans. This agent also offered to sell the program holders new term insurance policies at considerably lower premiums than the regular life insurance and endowment policies that they had purchased from defendant under the leverage funding program. A number of these policies originally sold by defendant lapsed as a result of the curtailment of funding. Some of the holders of these lapsed policies bought new policies from the agent, while others did not. The defendant then began contacting program holders and continued to do so after August 12, 1975. He advised them to reinstate the lapsed policies that he had originally sold to them. Some of the people contacted by defendant testified that at defendant's behest they did reinstate the lapsed policies.
The trial justice concluded that defendant was not enjoined by paragraph five until he received notice that the preliminary injunction of August 12 had been amended to include that paragraph. Furthermore, the trial justice found no evidence in the record showing that after receiving notice of the November 24 amendment defendant had contacted, counseled, or advised any program holder in violation of paragraph five. In holding that defendant had not violated the proscription of paragraph one against selling insurance, the trial justice found that while there was evidence showing that defendant had been instrumental in effectuating the reinstatement of lapsed life insurance policies, nevertheless reinstatement of lapsed insurance policies was not equivalent to selling insurance. Thus the trial justice denied and dismissed plaintiff's motion to adjudge defendant in contempt. The plaintiff appeals from this decision.
We believe that plaintiff has presented four issues for resolution in this appeal: (1) whether a person can be held in contempt for violation of a proscription of an oral order of a preliminary injunction when the preliminary injunction, which became effective at the same time, does not contain that proscription; (2) whether there was sufficient evidence before the trial justice to establish that defendant had contacted, counseled, or advised program participants in violation of paragraph five of the amended preliminary injunction after he became bound by the amendment; (3) whether there was sufficient evidence before the trial justice to establish that defendant had sold insurance in violation of paragraph one of the preliminary injunction; (4) assuming defendant did not violate the express terms of the preliminary injunction prohibiting the sale of insurance, whether defendant violated the spirit of the preliminary injunction by reinstating the lapsed life insurance policies. We will address the issues separately.
The first issue focuses on the time period between August 12 and November 24, and concerns the effect that the omission of paragraph five from the original preliminary injunction has on our characterization of that conduct of defendant between those dates which was allegedly contumacious in light of paragraph five. We wish to emphasize that this is not a case where there was a violation of an oral order of a preliminary injunction prior to the time a preliminary injunction containing the same terms was issued. Nor is this a case where an oral order was entered, violated, and later reduced to writing in such a manner that the violation would no longer be contemnible. In the instant case, the oral order and the preliminary injunction became effective on the same date, August 12, 1975.
The plaintiff argues that because defendant had actual knowledge of the oral order, either by his presence at the time it was read into the record or by communication from his attorney, he was bound by the terms of that order. Under this theory, paragraph five would be part of the preliminary injunction from the date it was ordered orally, August 12. This proposal would result in the imposition of a burden on defendant to have discovered the discrepancy between the order and the preliminary injunction, and to have honored the proscriptions of both for fear of a possible contempt citation for violation of any of their overlapping provisions or any provisions unique to only one. We do not believe that the law dictates such a harsh result.
The general rule is that to be enforceable by a contempt...
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