Opinion
No. A-12-110
03-05-2013
KEITH JAMES MOORE, APPELLEE AND CROSS-APPELLANT, v. JANE L. CROMWELL-MOORE, APPELLANT AND CROSS-APPELLEE.
Richard Register for appellant. Erik C. Klutman, of Sipple, Hansen, Emerson, Schumacher & Klutman, for appellee.
MEMORANDUM OPINION AND JUDGMENT ON APPEAL
NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION
AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).
Appeal from the District Court for Colfax County: MARY C. GILBRIDE, Judge. Affirmed in part, affirmed in part as modified, and in part reversed.
Richard Register for appellant.
Erik C. Klutman, of Sipple, Hansen, Emerson, Schumacher & Klutman, for appellee.
IRWIN, MOORE and PIRTLE, Judges.
MOORE, Judge.
INTRODUCTION
This appeal arises out of an order of the Colfax County District Court finding both parties to a divorce action in contempt. On appeal, Jane L. Cromwell-Moore challenges the district court's finding of contempt and order of compensatory damages. On cross-appeal, Keith James Moore challenges the calculation of compensatory damages. We conclude that the district court abused its discretion insofar as it held Cromwell-Moore in contempt for actions that predated the decree and awarded compensatory damages accordingly. We conclude that the district court did not abuse its discretion in finding that Cromwell-Moore willfully violated the decree with respect to the sale of property after the decree. Therefore, we affirm in part, affirm in part as modified, and in part reverse.
BACKGROUND
The parties were married on August 21, 1998. On June 12, 2006, Moore filed a complaint requesting dissolution of the marriage. The dissolution trial was held on October 12 and 29, 2007, and November 20. There were no temporary orders entered with respect to the property or debts of the parties prior to the entry of the decree. On December 17, 2008, the district court entered its dissolution decree. The decree divided the parties' personal assets, corporate assets, and debts.
McGavin Construction, Inc. (McGavin), was one of the corporate assets owned by the parties and is the primary asset at issue in this contempt proceeding. Cromwell-Moore owned 51 percent of McGavin stock; Moore owned 49 percent. Cromwell-Moore was the corporation's president and also acted as secretary and treasurer. Moore was not on the board of directors, which was comprised of Cromwell-Moore and her relatives.
The district court classified McGavin as marital property, but found the evidence insufficient to establish a value for the McGavin stock. The decree ordered the parties to "liquidate (by sale) this corporate entity and divide the proceeds equally" within 90 days of the date of entry of the decree. The decree expressly prohibited either party from selling, encumbering, hypothecating, or transferring McGavin's assets pending the sale.
The decree listed the real properties owned by McGavin and assigned values to them as follows: 315 North Walnut Street (less $3,000 land contract debt), $30,000; 505 South Chestnut Street, $23,000; and 122 St. Clair Avenue, $30,000. The decree did not specifically refer to or divide the rents received from the McGavin properties.
The decree also set forth the personal property owned by the corporate entities. That property included "Katzz wheel hitches" valued at $1,800; lumber, electrical supplies, and various plumbing supplies and tools valued at $2,650; vehicles owned by McGavin valued at $10,000; tools, equipment, and furniture owned by McGavin valued at $2,100; and a baler, windrower, and tractor valued at $6,700.
The decree specifically assigned various debts to the parties. Moore was ordered to pay the Bank of the Valley loan in the amount of $126,243. Cromwell-Moore was ordered to pay the Bank of the Valley Garden Center debt in the amount of $89,000 and the Garden Center credit card debt in the amount of $27,658.47. The decree ordered Moore to pay real estate taxes in the amount of $1,551.
In April 2008, prior to entry of the decree, Cromwell-Moore formed JBH Management, LLC, using her own assets, not marital property. Cromwell-Moore was the president of JBH Management.
On October 1, 2008, Cromwell-Moore sold equipment and supplies of McGavin or transferred them to Cromwell-Moore or JBH Management. The assets included a tractor; a baler; a windrower; construction tools, saws, lumber, and supplies; and office equipment, supplies, and furniture. Additionally, one of the items sold was a 1999 Ford truck equipped with "Katzz hitch rails." Cromwell-Moore sold these items for a total of $6,885 and applied the proceeds to pay various expenses of McGavin.
Between the filing of the petition for dissolution and the entry of the decree, Cromwell-Moore collected rents for McGavin properties in the amount of $8,230 and applied them toward the debt at the Bank of the Valley that she was later ordered to pay by the decree. Additional rental income was applied toward collection fees.
On December 10, 2008, about 1 week before the decree was entered, Cromwell-Moore, acting as McGavin's president, sold the Chestnut Street real estate to a third party for $12,000. Cromwell-Moore applied the proceeds of the sale to the Garden Center debt at the Bank of the Valley, which the decree later ordered her to pay.
The McGavin board of directors conducted a meeting on April 6, 2009, to discuss the sale of McGavin properties. Moore received notice of the meeting by certified mail. The notice stated that a copy of the agenda was attached, which agenda included a "report on sale of property" and "update on legal issues and court order for the sale of McGavin Construction and Rental property. Action to proceed with sale." Moore did not attend the meeting due to a restraining order previously entered against him. Cromwell-Moore testified that she later sent the meeting minutes to Moore via regular mail, but Moore denied receiving the minutes from the meeting. The minutes set forth a plan for the sale of the remaining McGavin property. Moore did not object to the sale of McGavin properties, either personally or through a representative.
On May 29, 2009, Cromwell-Moore, again acting as McGavin's president, sold the Walnut Street and St. Clair Avenue properties--McGavin's remaining real estate--to JBH Management for $30,500. She applied the proceeds from the sale to pay off the Garden Center debt at the Bank of the Valley.
In accordance with the plan set forth in McGavin's minutes, before JBH Management purchased the two parcels of real estate, Cromwell-Moore attempted to list the properties and to sell them to outside buyers, but she had difficulty finding a Realtor to list them. A Realtor did list the Walnut Street property, but it did not sell. The properties were within 1 week of being sold by the Bank of the Valley at a sheriff's foreclosure sale when, according to plan, JBH Management purchased them for $30,500. Cromwell-Moore testified that she determined the sale price based on the debt against the parcels, taxes, the amount required to clear McGavin of debt, and tax valuations. Cromwell-Moore opined that the market was depressed at the time of the sale and that McGavin received the fair market value for the properties.
Cromwell-Moore testified that she did everything possible to liquidate McGavin within 90 days, but did not succeed. She explained that there was no market for McGavin's assets within 90 days after the decree.
Moore did not receive any proceeds from the sales or transfers of McGavin property. There was no evidence that Moore received any rental income from the McGavin properties.
The parties filed cross-applications for contempt findings. Moore filed his application on November 2, 2009, and contended that Cromwell-Moore was in contempt of the provision of the decree which ordered the liquidation of McGavin within 90 days of the decree and division of the proceeds equally between the parties. Cromwell-Moore filed her application on December 1 and alleged that Moore violated the decree by failing to pay real estate taxes as ordered in the decree.
A contempt hearing was held on February 10, 2010. We have summarized the relevant evidence in the recitation of facts above.
On May 27, 2010, the district court entered an order, noting that while the case was pending, the Nebraska Supreme Court changed the burden of proof in contempt cases and allowed for a new measure of damages. See Smeal Fire Apparatus Co. v. Kreikemeier, 279 Neb. 661, 782 N.W.2d 848 (2010), disapproved on other grounds, Hossaini v. Vaelizadeh, 283 Neb. 369, 808 N.W.2d 867 (2012) (modifying burden of proof in civil cases from beyond reasonable doubt to clear and convincing evidence and allowing court to enter order for compensatory as well as coercive relief). The district court allowed each party to withdraw his or her rest and reopen the record for consideration under the new standard of proof and damages standard and to argue the case under the new standards.
A second contempt hearing was held on June 30, 2010. The relevant evidence from that hearing is also included in our recitation of the facts above.
On August 16, 2010, the district court entered an order finding that each party had sustained its burden of proving contempt under standards of proof in effect both before and after Smeal Fire Apparatus Co. v. Kreikemeier, supra. The district court scheduled sentencing for November 10. It allowed Moore the opportunity to purge his contempt if he paid the real estate taxes as ordered in the decree. The district court ordered Cromwell-Moore to provide "a concise detailed listing of all assets sold by the corporation, the date sold, to whom sold, the price paid, and the allocation of the proceeds of the sale and a note or loan number to which the proceeds were allocated" no later than October 10.
On October 8, 2010, Cromwell-Moore filed approximately 70 pages of narrative descriptions of transactions, lists of figures pertaining to loans holding a security on McGavin property, and attached real estate documents, apparently attempting to illustrate that Moore benefited from transfers made by Cromwell-Moore. On October 14, the district court entered an order finding that Cromwell-Moore had not met the requirements of the previous order and gave her an additional 5 days to provide statements in compliance with the order. The district court granted Cromwell-Moore's subsequent request for a continuance and rescheduled the sentencing hearing for January 5, 2011. Subsequently, hearings were held on March 23, October 18, and November 15 to give the parties the opportunity to present evidence pertaining to compensatory damages. We have summarized the relevant evidence from those hearings above.
On January 18, 2012, the district court entered purge orders for the parties. The district court found that Cromwell-Moore sold McGavin properties and used the proceeds to pay debt that the decree had ordered her to pay and did not pay Moore any of the proceeds. The court noted that this debt was not corporate debt but was related to certain business operations of the parties. The district court expressly found the summary prepared by Moore to be more credible than the extensive accounting submitted by Cromwell-Moore. Moore's summary of Cromwell-Moore's transfers of McGavin property essentially provided as follows:
+-------------------------------------------------------------+ ¦Description of McGavin Property ¦Value ¦ +-----------------------------------------------------+-------¦ ¦315 North Walnut Street and 122 St. Clair Avenue ¦$30,500¦ +-----------------------------------------------------+-------¦ ¦505 South Chestnut Street ¦12,000 ¦ +-----------------------------------------------------+-------¦ ¦Personal Property ¦6,885 ¦ +-----------------------------------------------------+-------¦ ¦(Katzz wheel hitches, lumber and electrical supplies,¦ ¦ ¦ ¦___ ¦ ¦vehicles, tools, baler, windrower, and tractor) ¦ ¦ +-----------------------------------------------------+-------¦ ¦Total McGavin assets transferred ¦$49,385¦ +-------------------------------------------------------------+ The district court ordered Cromwell-Moore to pay Moore $24,693, which was one-half the amount Cromwell-Moore or JBH Management received from the sale of McGavin's assets, to be offset by the real estate tax of $1,551 that Moore was ordered to pay. The district court further ordered Cromwell-Moore to pay Moore $4,115, which was one-half of $8,230, the amount of McGavin rents collected by Cromwell-Moore.
With regard to Moore, the district court found that the contempt of Moore had been purged because the $1,551 that he was required to pay for real estate taxes was offset completely by the amount Cromwell-Moore owed Moore.
Cromwell-Moore timely appeals, and Moore cross-appeals.
ASSIGNMENTS OF ERROR
Cromwell-Moore assigns, as combined and summarized, that the district court erred in finding her in contempt and in its determination of compensatory damages. While Cromwell-Moore also assigns that the district court erred when it "sua sponte reopened the evidence and opposed full retrial," brief for appellant at 8, she does not specifically argue that alleged error in her brief, and we will not consider it. See In re Estate of Cushing, 283 Neb. 571, 810 N.W.2d 741 (2012) (to be considered by appellate court, alleged error must be both specifically assigned and specifically argued in brief of party asserting error).
On cross-appeal, Moore assigns that the district court erred in assigning actual sale price values to personal and real property to compute compensatory damages rather than the estimated values stated in the decree.
STANDARD OF REVIEW
In a civil contempt proceeding where a party seeks remedial relief for an alleged violation of a court order, an appellate court employs a three-part standard of review in which (1) the trial court's resolution of issues of law is reviewed de novo, (2) the trial court's factual findings are reviewed for clear error, and (3) the trial court's determinations of whether a party is in contempt and of the sanction to be imposed is reviewed for abuse of discretion. Hossaini v. Vaelizadeh, 283 Neb. 369, 808 N.W.2d 867 (2012).
A judicial abuse of discretion exists when the reasons or rulings of a trial judge are clearly untenable, unfairly depriving a litigant of a substantial right and denying just results in matters submitted for disposition. In re Interest of Samantha L. & Jasmine L., 284 Neb. 856, 824 N.W.2d 691 (2012).
ANALYSIS
Contempt Finding.
Cromwell-Moore generally assigns that the district court erred in finding her in contempt of the decree. When a party to an action fails to comply with a court order made for the benefit of the opposing party, such act is ordinarily a civil contempt, which requires willful disobedience as an essential element. "Willful" means the violation was committed intentionally, with knowledge that the act violated the court order. Hossaini v. Vaelizadeh, supra; Smeal Fire Apparatus Co. v. Kreikemeier, 279 Neb. 661, 782 N.W.2d 848 (2010), disapproved on other grounds, Hossaini v. Vaelizadeh, supra. A court cannot hold a person or party in contempt unless the order or consent decree gave clear warning that the conduct in question was required or proscribed. Smeal Fire Apparatus Co. v. Kreikemeier, supra.
The provision of the dissolution decree that formed the basis for the district court's finding of contempt against Cromwell-Moore was the order that McGavin be liquidated within 90 days of the decree with the proceeds from the sale of corporate property to be divided equally between the parties. In its purge order, the district court found that Cromwell-Moore sold McGavin property and used the proceeds to pay down the Garden Center debt, which the decree had ordered her to pay personally. The district court further found that Cromwell-Moore did not pay Moore any of the proceeds received from McGavin property as required by the decree. While we find no clear error in these factual findings, the question becomes whether such findings can support the conclusion that Cromwell-Moore was in contempt of the decree. The record shows that some of the transactions at issue occurred before entry of the decree while other transactions occurred after the decree was entered.
Actions Taken Before Entry of Decree.
The sale of the Chestnut Street real estate, the collection of rents from the real property, and the sale of some of McGavin's personal property all occurred prior to the decree. Thus, these actions could not have been taken with knowledge that they violated the decree. Moreover, we note that the decree did not specifically mention McGavin rents, which were presumably to be included in the liquidation, nor did Moore mention rents in his application for contempt. Therefore, we conclude that the district court abused its discretion insofar as it found Cromwell-Moore in contempt for the sales or transactions which were completed before the decree. See Grady v. Grady, 209 Neb. 311, 307 N.W.2d 780 (1981) (former husband could not be held in contempt of court for acts which became prohibited by court order entered subsequent to their commission). Our holding that the sale of McGavin property and application of the proceeds by Cromwell-Moore prior to the entry of the decree cannot form the basis for a finding of contempt does not preclude enforcement of these provisions in a separate proceeding.
Actions Taken After Entry of Decree.
The record reflects that McGavin was not liquidated within the timeframe ordered by the decree; however, evidence was adduced to explain that despite Cromwell-Moore's efforts, the market prevented McGavin's timely liquidation. Nevertheless, the fact remains that after the decree was entered, Cromwell-Moore sold two parcels of McGavin's real property, the Walnut Street and St. Clair Avenue properties, and used the proceeds to pay debt that had been separately assigned to her by the decree as opposed to dividing the proceeds equally with Moore. As such, Cromwell-Moore failed to comply with a court order made for the benefit of Moore. We conclude that the district court did not abuse its discretion in finding Cromwell-Moore in contempt of its decree as to the sale and disposition of proceeds of the Walnut Street and St. Clair Avenue properties.
As to actions carried out after the decree, Cromwell-Moore further argues that the decree's ambiguity forestalled the formation of the required intent to violate it. We disagree. The decree clearly ordered that proceeds from the liquidation of McGavin assets be divided equally between the parties. After the decree was entered, Cromwell-Moore, acting as McGavin's president and treasurer, sold two parcels of McGavin's property to her own corporation and then applied the proceeds toward debt that the decree had ordered her alone to pay. We find that the decree was sufficiently clear for Cromwell-Moore's actions to constitute willful violation of the decree. The district court did not abuse its discretion in finding Cromwell-Moore to be in willful violation of the decree as to the transactions taken after the decree was entered.
Cromwell-Moore also contends that the district court erred in finding her in contempt for actions which did not harm Moore. Cromwell-Moore points out that both parties were named on the notes pertaining to the Garden Center debt and that she was therefore benefiting Moore by paying off the debt. However, the decree clearly ordered that the proceeds from the liquidation of McGavin assets were to be divided equally between the parties, and Moore did not benefit from the application of a portion of his share of those proceeds to debt that the decree had assigned to Cromwell-Moore alone in order to equitably divide the marital estate.
Finally, Cromwell-Moore argues that she did not act individually in selling McGavin properties, but, rather, it was McGavin that took the complained of actions. She therefore asserts that she cannot be held in contempt for actions taken by McGavin. The evidence is clear that as majority shareholder, president, treasurer, and secretary of McGavin, Cromwell-Moore had significant control over the disposition of its assets. And, more important, the record shows that Cromwell-Moore applied the proceeds from the sale of the McGavin property after the decree was entered to the debt assigned to her personally in the decree as opposed to dividing the proceeds equally with Moore. Under these circumstances, we cannot say that the district court abused its discretion in finding Cromwell-Moore in contempt for failing to divide the proceeds of the McGavin property sold after the entry of the decree with Moore.
Compensatory Damages.
Both parties contest the compensatory damages awarded by the district court. The trial court's determination of the sanction to be imposed is reviewed for abuse of discretion. Hossaini v. Vaelizadeh, 283 Neb. 369, 808 N.W.2d 867 (2012).
As discussed above, we find that the district court abused its discretion in finding Cromwell-Moore in contempt for sales and transfers she made prior to the decree and rents collected prior to the decree. See Grady v. Grady, 209 Neb. 311, 307 N.W.2d 780 (1981). To the extent that the district court used these amounts in the calculation of compensatory damages, we conclude that the district court abused its discretion. Specifically, we find that the district court erred in awarding compensatory damages for the sale of the Chestnut Street real estate, the personal property, and the McGavin rents, one-half of which totaled $13,557.50. As noted above, this finding does not preclude enforcement of the decree with regard to these assets in a separate proceeding.
Cromwell-Moore assigns that the district court erred in basing compensatory damages on gross proceeds rather than net proceeds. She argues that the district court's calculations do not take into account the evidence she presented of the costs of selling the real estate or the efforts involved. The decree did not specify whether the gross or net proceeds from the liquidation of McGavin assets should be divided between the parties. Therefore, we cannot say that the district court erred in determining that Moore was entitled to half of the gross proceeds from the sale of the McGavin property.
Cromwell-Moore contends that the district court did not take into account payments she made over and above the $89,000 debt assigned in the decree for the Garden Center debt. However, because she did not assign this contention as error, we do not consider it. See In re Estate of Cushing, 283 Neb. 571, 810 N.W.2d 741 (2012) (to be considered by appellate court, alleged error must be both specifically assigned and specifically argued in brief of party asserting error).
On cross-appeal, Moore assigns that the district court erred in using the actual sale prices of the property to compute compensatory damages rather than the estimated values assigned in the decree. Cromwell-Moore adduced evidence to show that the properties in question sold for less than the values used in the decree because of the depressed realty market at that time. Thus, we conclude that the district court did not abuse its discretion in using the actual sale prices in calculating compensatory damages.
In conclusion, we find that the district court did not abuse its discretion in awarding Moore compensatory damages for Cromwell-Moore's failure to divide the $30,500 proceeds from the sale of the Walnut Street and St. Clair Avenue properties. We therefore modify the award of compensatory damages to Moore to the sum of $15,250, to be offset by the sum of $1,551 in real estate taxes owed by Moore, for a final award of $13,699.
CONCLUSION
For the reasons stated above, we affirm the district court's contempt finding resulting from the sale of the Walnut Street and St. Clair Avenue properties. We reverse the finding of contempt with regard to the disposition of assets and rents collected prior to the entry of the decree. We modify the award of compensatory damages to Moore to the sum of $13,699.
AFFIRMED IN PART, AFFIRMED IN PART
AS MODIFIED, AND IN PART REVERSED.