Title: Fleming v. Etherington

State: kansas

Issuer: Kansas Supreme Court

Document:

227 Kan. 795 (1980)
610 P.2d 592
JACK C. FLEMING, Appellee,
v.
GEORGE C. ETHERINGTON, Appellant. and ALLEN R. DODGE, Appellee,
v.
GEORGE C. ETHERINGTON, Appellant.
Nos. 50,789, 50,790

Supreme Court of Kansas.
Opinion filed May 10, 1980.
Randall E. Fisher, of Barta & Barta, of Salina, argued the cause and was on the brief for appellant.
William B. Stokes, of King, Stokes, Knudson & Nitz, Chartered, of Salina, argued the cause and was on the brief for appellees.
The opinion of the court was delivered by
HOLMES, J.:
Two cases in the Saline County District Court were consolidated for post-judgment proceedings and have been consolidated on appeal. The defendant, George C. Etherington, appeals from orders of the district court entered during proceedings in aid of execution in which the district court denied his motion for an in camera inspection of certain documents and found him in contempt of court for failing to comply with prior orders of the court.
In separate cases, Jack C. Fleming and Allen R. Dodge filed suits to recover on promissory notes executed by the defendant Etherington. On June 8, 1976, Fleming was granted judgment for the sum of $4,311.01, interest and costs, and Dodge was granted judgment for $3,250.00, interest and costs. No appeals were taken from these judgments and their validity is not an issue on appeal. Subsequently the two cases were consolidated for further proceedings in attempts to secure payment of the judgments. To date all such efforts have been unsuccessful. Defendant was represented in the original proceedings by Philip R. Herzig, a Salina attorney.
The record reveals that defendant is a prominent real estate broker and developer in Salina, having been in business for several years. He was involved in several closely held family trusts and corporations. G & K, Inc., was incorporated in 1964 and the 1977 records in the office of the Secretary of State revealed the defendant was president, secretary, treasurer and sole director. The stock, however, was held by defendant's children. A.B. Seelye Co., Inc., was incorporated in 1959 and defendant was shown as secretary, treasurer and as a member of the board of directors. The stock was held by defendant's children and G & K, Inc. Defendant also was the trustee of the Florence Anna Etherington Trust and his personal automobile was furnished to him by Nursing Home Foundation, Inc. Following various attempts to collect the outstanding judgments, *797 plaintiffs instituted proceedings in aid of execution under K.S.A. 60-2419 and defendant was ordered to appear for examination on February 8, 1978. As a part of such proceedings, a subpoena duces tecum was issued to the defendant commanding him to bring with him:
On February 7, 1978, a motion to quash the subpoena was filed pro se by the defendant. In the motion filed by defendant he stated he owned no stock; that although he was an officer and director of certain corporations, he did not have access to the corporate tax returns or records; that he was not authorized by the stockholders to produce such records; that he had no passbooks or investments and owned no motor vehicles. Defendant then retained Robert H. Royer, Jr., an attorney of Abilene. Mr. Royer also filed a motion to quash the subpoena duces tecum. After various proceedings and hearings the motions were overruled on October 24, 1978. On January 2, 1979, an order was issued by the court directing the defendant to produce the books and records pursuant to the subpoena duces tecum on January 15, 1979, at his accountant's office for inspection by the accountant for the plaintiffs. On January 11, 1979, Barta and Barta, attorneys of Salina, filed a motion on behalf of the defendant asking the court to conduct an in camera inspection of the books and records and make a determination of what should be made available to plaintiffs. This motion was overruled on January 12, 1979. The defendant failed to produce the books and records on January 15, 1979, and on January 16th a citation in contempt was filed and an order entered for defendant to appear on January 29, 1979, to show cause why he should not be held in contempt for failure to comply with the subpoena duces tecum and the order of January 2, 1979. On January 29, 1979, a hearing was held and the court found defendant in contempt of court and ordered him committed to the Saline County jail until he purged himself of contempt by producing the requested records and documents. The commitment was stayed upon application of the defendant and he *798 appeals (1) from the order of the court overruling his motion for an in camera examination of the documents and (2) from the order finding him in contempt of court for failure to comply with the court's orders.
Appellant's first point on appeal is that the court abused its discretion when it refused to conduct an in camera inspection of the various books and records of the family corporations. It is appellant's contention that the information which might be revealed concerned the rights of third parties not parties to the litigation and as such they were entitled to be protected from revealing such information to plaintiffs. Appellant relies upon Kansas Commission on Civil Rights v. Sears, Roebuck & Co., 216 Kan. 306, 532 P.2d 1263 (1975), wherein this court stated:
It is clear that the trial judge is vested with broad discretion in deciding whether an in camera examination of documents is necessary. The court is not required to grant such an examination in every instance. The question is, did the trial judge abuse his discretion in the case at bar? We think not.
Our statute on proceedings in aid of execution, K.S.A. 60-2419, is similar in nature to Fed. R. Civ. Proc. 69, which likewise provides procedures for the enforcement of money judgments. The scope of Rule 69 is discussed in 12 Wright & Miller, Federal Practice and Procedure: Civil § 3014 at 72 (1973):
Many of the cases under the federal rules involve situations in which a third party, not involved in the litigation, is sought to be examined about assets which might have some connection with the debtor. In the case at bar it was the debtor who was being requested to furnish information and documents about his possible connection with third parties. The situations are similar insofar as the protection of the interests of the third party *799 non-litigant is concerned. In Burak v. Scott, 29 F. Supp. 775 (D.D.C. 1939), the court stated:
More recent cases have not restricted the judgment creditor's scope of discovery so severely. In Magnaleasing, Inc. v. Staten Island Mall, 76 F.R.D. 559 (S.D.N.Y. 1977), the United States District Court held that the rule banning disclosure concerning the assets of a non-party is not to be mechanically applied. "Discovery has been permitted against a non-party where the relationship between the judgment debtor and the non-party is sufficient to raise a reasonable doubt about the bona fides of the transfer of assets between them." (p. 562.) See also Caisson Corporation v. County West Building Corp., 62 F.R.D. 331 (E.D. Pa. 1974); Monticello Tobacco Co. v. American Tobacco Co., 12 F.R.D. 344 (S.D.N.Y.), aff'd on other grounds 197 F.2d 629 (2d Cir.1952); and Davis Acoustical Corp. v. Skulnik, 131 N.J. Super. 87, 328 A.2d 633 (1974).
In Davis Acoustical Corp. v. Skulnik, the Superior Court of New Jersey, Appellate Division, held that:
In Skulnik a judgment creditor secured an ex parte order for discovery compelling the son of the judgment debtor to produce certain documents pertaining to a business which the son owned. Evidence was presented to the trial judge which tended to show that the judgment debtor had transferred his property to his son in an attempt to avoid paying the judgment. The court found that "sufficient information was furnished by the judgment creditor to raise a reasonable doubt of the ownership of the properties in question and to raise a sufficient possibility that the judgment debtor had interests in the properties." p. 92.
Originally, defendant in these actions took the position that he could not reveal his personal tax returns to plaintiffs as the returns *800 were joint with his wife and his wife would not consent. It is our understanding from statements made at oral argument that defendant has abandoned that argument and has made, or is willing to make, such returns available.
Appellant contends that in order to protect the interests of the third party non-litigants the court was under a duty to go through the records in an in camera inspection and sort out what plaintiffs' accountant could examine and what he could not. The court, in overruling the motion, stated:
We have carefully examined the numerous authorities cited by appellant and have carefully considered his arguments. Considering the close family relationship existing between the defendant and the various principals in the corporations and the broad discretion vested in the trial court, we find no abuse of that discretion.
Defendant's second point on appeal is that the district court erred in finding defendant in contempt of court for failing to produce the subpoenaed records. Defendant basically argues that he should not have been found in contempt because he had *801 complied with the court order to the limits of his ability. It is well-settled that a party cannot be punished for contempt for failure to perform an act which is impossible or beyond his control. Haberer v. Newman, 219 Kan. 562, 566-567, 549 P.2d 975 (1976). See also Traub v. United States, 232 F.2d 43 (D.C. Cir.1955), and Oriel v. Russell, 278 U.S. 358, 73 L. Ed. 419, 49 S. Ct. 173 (1929).
At the hearing on January 29, 1979, defendant testified that on January 2, 1979, he had been removed as president of G & K, Inc. and his wife named in his place. He testified that he had no control or access to the corporate records and no authority to produce them. Having produced his personal records and having testified that he owned no property, defendant contends he complied with the court's orders to the extent of his ability to do so. One of the fallacies in defendant's position is that on January 11, 1979, defendant filed his motion for an in camera inspection of the corporate records and on January 12, 1979, argued to the court in support of such motion and thereby conceded that he did, in fact, have access to such records. If defendant were able to produce the records for an in camera examination, he was equally able to produce them in compliance with the prior subpoena and court orders. In a contempt proceeding where the prior orders of the court have not been complied with, the burden is upon the contemner to produce sufficient evidence to show cause why he should not be held in contempt of court. This defendant failed to do. In its ruling the trial court stated:
Most of the cases which have come before this court involving contempt proceedings have arisen out of domestic problems between the litigants. The principles propounded in those cases regarding the powers and duties of the trial court apply equally to other contempt proceedings. In Haynes v. Haynes, 168 Kan. 219, 212 P.2d 312 (1949), we stated at page 226:
We find no abuse of discretion.
Finally, appellant argues he should not have been found in contempt because the subpoena duces tecum was invalid as to all but personal records in that it was directed to the defendant individually and not as the appropriately named officer of the various family entities. This argument was not raised before, or presented to, the trial court and cannot be raised for the first time on appeal before this court. Landrum v. Taylor, 217 Kan. 113, 120, 535 P.2d 406 (1975).
The judgment is affirmed.