Von Hake v. Thomas

• Decision Date: 05 July 1988
• Docket Number: No. 19951,19951
• Citation: 759 P.2d 1162
• Parties: Richard A. VON HAKE, Plaintiff and Appellee, v. Harry Edward THOMAS and 1st National Credit Corp., a Nevada corporation, Defendants and Appellants.
• Court: Utah Supreme Court

Page 1162

759 P.2d 1162

Richard A. VON HAKE, Plaintiff and Appellee, v. Harry Edward THOMAS and 1st National Credit Corp., a Nevada corporation, Defendants and Appellants.

No. 19951.

Supreme Court of Utah.

July 5, 1988.

Rehearing Denied Aug. 10, 1988.

Robert R. Brown, Ronald C. Barker, Salt Lake City, for defendants and appellants.

H. Ralph Klemm, T. Quentin Cannon, Thomas R. Blonquist, Carolyn L. Driscoll, Salt Lake City, for plaintiff and appellee.

ZIMMERMAN, Justice:

Appellant Harry Edward Thomas challenges an order of commitment for contempt entered during supplemental proceedings in the Sixth Judicial District Court. Judge Don V. Tibbs found Thomas in contempt for failing to comply with court orders requiring Thomas to appear at a show-cause hearing and to produce certain documents. We affirm the finding of contempt, but only on the basis of Thomas's failure to appear.

A detailed review of the conduct leading to the contempt order is warranted. In March of 1982, appellee Richard A. Von Hake obtained a judgment for fraud against Thomas in the amount of $987,200, plus costs and interest. ¹ Eighteen months later, when Thomas had failed to make any payments on the judgment, Von Hake commenced supplemental proceedings to discover the location and extent of Thomas's assets. Judge Tibbs ordered Thomas to appear at a hearing on November 4, 1983, to answer questions concerning his property and income. The court's order provided that when Thomas appeared, he was to produce all documents within his possession or control that might disclose information about his property and income, including tax returns.

When Thomas did not appear at the November 4th hearing, the court issued a bench warrant for his arrest. The warrant was later recalled when Thomas agreed to appear at a rescheduled hearing and to post a $1,000 appearance bond. The rescheduled supplemental proceeding was to be held on January 6, 1984, and Thomas was ordered to produce the documents at that time.

Thomas appeared on January 6th but produced no documents. Under questioning, he stated that none of the requested documents were within his possession or control. He repeatedly claimed that he had no recollection of the documents and that he had no knowledge of any property, income, or other assets under his control. Thomas did admit that he had filed certain tax returns during the preceding five years but claimed that neither he nor his accountant had copies. Thomas also admitted that he had made no attempt to obtain copies of those returns from the Internal Revenue Service ("IRS").

The court ordered Thomas to produce all state and federal tax returns that he had signed during the preceding five years, without regard to whether the returns had been filed on behalf of Thomas or on behalf of any of the numerous corporations or partnerships with which he was or had been affiliated. Thomas was ordered to produce the documents within six weeks and was expressly warned that a failure to produce would be considered a contempt of court. Judge Tibbs signed an order to that effect on February 1, 1984, specifically directing that if Thomas had not produced the tax returns by March 2, 1984, then he was to appear personally before the court to show cause why he should not be held in contempt.

On February 22nd, Thomas filed a motion for a sixty-day extension of time to produce the tax returns. In support of his motion, he filed a notice sent to him by the IRS in response to his January 18th request for copies of his federal returns. The notice stated that the IRS would need up to sixty days to satisfy his request.

On March 2nd, the trial court held the scheduled show-cause hearing and granted Thomas's motion for a sixty-day extension. Thomas was represented by counsel but did not appear personally on March 2nd, as he had been ordered to do. However, neither Von Hake nor the court made an issue of Thomas's absence, apparently because the request for an extension of time to produce the returns was granted. The judge did state on the record that Thomas was to appear in person at a hearing on May 4th at which the court would determine whether he had fully complied with the amended order to produce the tax returns. The judge warned Thomas's attorney that Thomas would "find himself in jail" if he did not cooperate.

On March 12th, the court issued a written order confirming the grant of the sixty-day extension and directing Thomas to appear on May 4th "for a hearing on whether he has fully complied with the court's order and for sanctions associated therewith."

After the March hearing, Thomas produced his personal federal income tax returns for the years 1978, 1979, and 1982. On April 23rd, he moved for a second sixty-day extension of time to produce the additional tax returns ordered by the district court. The motion was supported by a letter from the IRS stating that copies of the personal returns for 1980 and 1981 had not yet been located and by Thomas's affidavit in which he swore that he had been unsuccessful in obtaining copies of corporate and partnership returns covered by the court's order. Thomas asked that the motion for more time be considered at the already scheduled May 4th hearing. In response, Von Hake's counsel submitted an affidavit opposing the request for a second extension of time and asking that the show-cause hearing be held as scheduled on May 4th. This affidavit included specific, factually supported allegations that Thomas had access to the corporate and partnership returns covered by the discovery order and had willfully refused to produce them. Thomas later moved to strike the affidavit.

On May 4, 1984, the day of the scheduled show-cause hearing, Thomas filed a motion to continue the time for his appearance indefinitely. He supported the motion with a physician's affidavit stating that Thomas was under treatment as a psychiatric out-patient and that his appearance in court would exacerbate his medical condition.

The May 4th hearing proceeded as scheduled. Thomas did not appear but was represented by counsel. Because the contempt order at issue resulted from that hearing, a detailed review of the hearing record is required. The two main issues addressed by Von Hake's counsel were Thomas's failure to produce corporate and partnership tax returns and his failure to appear in court.

The record shows that at the time of the hearing, Thomas had not produced any of the requested corporate and partnership tax returns. While he purported to have made efforts to obtain copies from the entities on behalf of which the returns had been filed, he had made no attempt to obtain copies from the IRS. Thomas's counsel argued that his client had done all that could be required of him; because Thomas was no longer an officer or owner of the entities, he was not entitled to copies of the returns from the IRS and could not compel the entities to provide copies. Thomas's counsel also represented that, in any event, it would now be impossible to obtain the returns because one or more of the corporations whose returns Von Hake was seeking had gone into another court and obtained protective orders directing Thomas not to deliver the returns. Apparently neither Von Hake nor Judge Tibbs had been previously informed of this development.

In response to these arguments justifying Thomas's failure to produce the corporate and partnership tax returns, Von Hake's counsel asserted that Thomas did have access to the returns because the various entities in question were little more than legal facades under the de facto control of Thomas which he was using to conceal his assets. This line of argument was supported in part by reference to depositions and testimony previously given in a related bankruptcy court proceeding.

Moving to the other ground for contempt, violation of the order to appear personally, the record shows that the judge first established that Thomas was not physically present in the courtroom. His lawyer stated that Thomas had come to Kanab, where the hearing was being held, but asked that before the court considered Thomas's failure to appear, it first dispose of the motion for a further continuance based on the physician's affidavit. Von Hake's counsel responded that this motion was merely another in a series of dilatory tactics and should be rejected as spurious, based on the fact that one week earlier Thomas had attended a different court hearing lasting seven hours and had testified for two hours. Thomas's counsel then attacked the legality of the order to appear and show cause. He argued that this order denied Thomas due process by prospectively requiring him to appear and show cause why he should not be held in contempt for failing to produce documents when it had not yet been established that Thomas had violated the underlying order to produce.

As these arguments progressed, the court twice instructed Thomas's counsel to get Thomas and bring him before the court. Thomas's counsel replied: "Your Honor, I cannot personally direct Mr. Thomas to appear especially in contradiction to the physician's affidavit. I can make inquiry as to whether or not he would be willing to appear in spite of that, your Honor."

During the hearing, the court commented on several aspects of Thomas's conduct throughout the supplemental proceedings. The court stated that it appeared that Thomas was transferring assets among various business entities so that Von Hake would be unable to identify assets without the entities' tax returns; that obtaining an order from another court protecting the tax returns was "a direct attempt to contravene an order of this Court"; and that in regard to the overall supplemental proceedings and Thomas's tactics, "I'm a little fed up with this, ... this court is being taken advantage of, ... the time has run out...."

At the conclusion of the hearing, the court denied Thomas's motion to extend the time for production of the tax...