Wold Family Farms v. HEARTLAND FOODS, 22767.

• Citation: 2003 SD 45,661 N.W.2d 719
• Decision Date: 23 April 2003
• Docket Number: No. 22767.,22767.
• Parties: WOLD FAMILY FARMS, INC., Plaintiff and Respondent, v. HEARTLAND ORGANIC FOODS, INC., Defendant and Petitioner.
• Court: Supreme Court of South Dakota

661 N.W.2d 719

2003 SD 45

WOLD FAMILY FARMS, INC., Plaintiff and Respondent, v. HEARTLAND ORGANIC FOODS, INC., Defendant and Petitioner.

No. 22767.

Supreme Court of South Dakota.

Considered March 20, 2003.

Decided April 23, 2003.

Allen L. Wold of Wold Family Farms, Pro se plaintiff and respondent.

H. Eugene Paulson of Heartland Organic Foods, Inc., Pro se defendant and petitioner.

PER CURIAM.

[¶ 1.] Heartland Organic Foods, Inc. (Heartland), H. Eugene Paulson and Beverly Paulson petition for intermediate appeal from the circuit court's entry of an order of contempt against Paulsons for failing to produce Heartland's business records to Wold Family Farms, Inc. (Wold). We vacate the order and remand for dismissal of the action without prejudice.

FACTS AND PROCEDURE

[¶ 2.] Wold is a shareholder in Heartland. On September 12, 2002, Wold sent a certified letter to Heartland requesting the release of certain financial information. On September 24, 2002, Wold filed the certified letter with the Roberts County clerk of courts. The next activity in this matter, as represented by the circuit court's file, was the entry of an order on October 2, 2002, compelling production of records signed by the Honorable Jon S. Flemmer. That order required H. Eugene Paulson and Beverly Paulson, as officers and majority shareholders of Heartland, to produce certain financial records to Wold no later than October 11, 2002.

[¶ 3.] On October 11, 2002, Wold filed an affidavit with the circuit court indicating that on October 8, 2002, Paulsons were served with the order. However, despite repeated requests by Wold the records were not produced. In the affidavit, Wold requested that an order to show cause be issued directing Paulsons to appear before the court to answer why they should not be held in contempt for failing to produce the records.

[¶ 4.] On October 15, 2002, Heartland, by and through its officer H. Eugene Paulson, filed a motion in affidavit form seeking to quash the order compelling production of records and set forth the reasons why production was not possible, namely that the company computer was stolen.

[¶ 5.] On October 25, 2002, the circuit court entered an order requiring Paulsons to appear on November 15, 2002, to show cause why they were not in contempt of court for failing to comply with the October 2, 2002, order to produce the financial records. The sheriff served the order and notice of that hearing upon officer Beverly Paulson on October 30, 2002, and officer H. Eugene Paulson on October 31, 2002.

[¶ 6.] On November 15, 2002, Heartland, again by and through its officer H. Eugene Paulson, filed an affidavit in defense of the order to show cause. Following a hearing, the circuit court entered findings and an order of contempt. The circuit court specifically found that an order for production had been issued; Heartland and its officers were aware of the order; the corporation had the ability to comply with the order; and the failure to comply with the order was willful. The circuit court also found that "the appropriate procedure was followed in bringing the request for production of corporate records before the court." The circuit court determined that Heartland could purge the contempt by producing the records to Wold.

[¶ 7.] On December 16, 2002, Heartland filed a "motion for new trial" challenging the order of contempt. On January 2, 2003, Wold filed an affidavit indicating he gave notice of his intention to inspect the records but was told by Paulsons it was impossible to comply with the court's order. As a result, Wold requested the circuit court to take further action, including the imposition of incarceration and financial sanctions.

[¶ 8.] An amended order to show cause was issued January 21, 2003, requiring Heartland to appear on February 20, 2003, to show cause why such further sanctions should not be instituted. Service of the order was effectuated January 27, 2003. In response, Heartland filed a document captioned "motion for new trial, trial by jury, change of venue." However, Heartland and its officers did not appear at this show cause hearing.

[¶ 9.] On February 27, 2003, the circuit court entered an order finding Paulsons, as officers for Heartland, in contempt of court. That order recites that service of the order to show cause was properly made; Heartland had previously been held in contempt; Heartland was given an opportunity to purge the contempt; Heartland has the ability to comply with the orders; and the imposition of fines would not remedy the contempt because of Heartland's insolvency. As such, the circuit court ordered:

[T]hat the officers and directors of Heartland, namely H. Eugene Paulson and Beverly Paulson, be alternately incarcerated in the Roberts County Jail for a period of five (5) days at a time, with weekends off, until such time as the requested corporate and financial records are produced for inspection by Plaintiff. It is the Court's intention that one of the officers/directors, either H. Eugene Paulson or Beverly Paulson, be incarcerated from Monday through Friday of one week, then released for the weekend, and the other officer/director incarcerated for the following Monday through Friday, and released for the weekend, and so alternating until the records that have been ordered to be produced are produced. This will allow one officer/director to always be available to work on preparing or retrieving the requested records and to conduct the Defendant's business.

An arrest warrant in conformity with this order was issued the same day.

[¶ 10.] Heartland and its officers filed a petition for permission to appeal with this Court and an application for stay of proceedings. The order for temporary stay was granted March 12, 2003.¹ In the petition and response, as well as throughout these proceedings, all parties have appeared pro se. [¶ 11.] After reviewing the contents of the petition, the response and the record certified pursuant to SDCL 15-26A-20, we find it necessary to address the following issues: (1) whether necessary procedures for a finding of contempt were followed in the circuit court; and (2) whether the circuit court had jurisdiction to act in this matter.

STANDARD OF REVIEW

[¶ 12.] "The appropriate remedy or punishment for contempt of court, and any reconsideration thereof, lies within the sound discretion of the trial court." Harksen v. Peska, 2001 SD 75, ¶ 10, 630 N.W.2d 98, 101. We review conclusions of law under a de novo standard with no deference given to the circuit court. Id. "We are required to take notice of jurisdictional questions, whether presented by the parties or not." Double Diamond Construction v. Farmers Cooperative Ass'n, 2003 SD 9, ¶ 6, 656 N.W.2d 744. This can be done on the reviewing court's own motion. Ripple v. Wold, 1997 SD 135, ¶ 15, 572 N.W.2d 439, 443. The issue of jurisdiction may be raised at any time and is reviewed by this court de novo. Devitt v. Hayes, 1996 SD 71, ¶ 6, 551 N.W.2d 298, 300.

ANALYSIS

ISSUE ONE

[¶ 13.] Whether necessary procedures for a finding of contempt were followed in the circuit court.²

[¶ 14.] We have recognized that "[s]ince civil contempt can result in incarceration, constitutional safeguards must be observed." Thomerson v. Thomerson, 387 N.W.2d 509, 512 (S.D.1986). In Thomerson, we held that specific requirements are necessary for a finding of contempt "because the very jurisdiction of the court rests upon proper procedure." Id. Given the necessity of these jurisdictional requirements we determined in Thomerson that "a detailed review appears appropriate." Id. We find cause here to review that procedure again.

Contempt of court is classified as either criminal or civil. Criminal or direct contempts are words spoken or acts committed in the presence of the court or during its intermissions which tend to subvert, embarrass, or prevent the administration of justice and may be summarily punished by the presiding judge as he may deem just and necessary. Constructive or civil contempts arise not from matters transpiring in court but rather from a person's failure to comply with orders and decrees issued by the court in a civil action for the benefit of an opposing party. It is not always easy to classify a particular act as belonging either to criminal or civil contempt. It may partake of the characteristics of both. However, the distinction in punishment is clear. In criminal contempt the order itself is in the nature of punishment. In civil contempt the punishment is coercive, that is, it compels the person to act in accordance with the court's order.

Id. (internal citations omitted). On these facts it is clear that we are concerned with civil contempt. [¶ 15.] "A prosecution for civil contempt, as distinguished from criminal contempt, involves features of a formal trial including the making of an affidavit and the giving of notice to the contemner." Id. "The affidavit seeking an adjudication of civil contempt is treated as a complaint or information to which the accused, in effect, is requested to plead guilty or not guilty." Id. The affiant must establish four elements for a prima facie case warranting a finding of contempt. Those elements are (1) the existence of an order; (2) knowledge of the order; (3) ability to comply with the order; and (4) willful or contumacious disobedience of the order. Id. (citing Rousseau v. Gesinger, 330 N.W.2d 522, 524 (S.D.1983)). The complaining affidavit cannot be stated upon presumption, intendments, or upon information and belief. Id. Rather, it must be based on specific facts within the knowledge of the affiant. Here, Wold submitted an affidavit outlining what he asserted to be contumacious behavior and requested the imposition of imprisonment or fines in order to compel production.

[¶ 16.] This Court has held that:

If the contempt consists in the refusal of the party to do something which he is ordered to do for the benefit or advantage of

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