Kenny Allen Cathers v. Iowa District Court for Greene County ( 2014 )

IN THE COURT OF APPEALS OF IOWA
No. 14-0449
Filed December 10, 2014
KENNY ALLEN CATHERS,
Plaintiff,
vs.
IOWA DISTRICT COURT FOR GREENE COUNTY,
Defendant.
________________________________________________________________
Certiorari to the Iowa District Court for Greene County, Kurt J. Stoebe,
Judge.
Kenny Cathers challenges the district court’s order finding him in contempt
of a dissolution decree, contending his bankruptcy filing stayed proceedings.
WRIT SUSTAINED IN PART.
Joel Baxter of Wild, Baxter & Sand, P.C., Guthrie Center, for plaintiff.
Gina C. Badding of Neu, Minnich, Comito & Neu, P.C., Carroll, for Tina
Cathers.
Considered by Potterfield, P.J., and Tabor and Mullins, JJ.
2
POTTERFIELD, P.J.
Kenny Cathers challenges the district court’s order finding him in contempt
of a dissolution decree, contending his bankruptcy filing stayed proceedings.
I. Background Facts and Proceedings.
Kenny and Tina Cathers’s marriage was dissolved by decree filed on April
2, 2012. The decree divided the marital property, allocated their debts, and
required Kenny to pay child support.
On January 14, 2014, Tina filed an application to show cause, asserting
Kenny was in willful violation of the decree in three respects: (1) Kenny was
awarded the marital home and was ordered to be responsible for the outstanding
mortgage on the property and to hold Tina harmless, but he had failed to make
mortgage payments and the lender was seeking payment from Tina; (2) he was
ordered to be responsible for all the parties’ debts, including a debt owed to
Rediker Furniture, but he had not paid that debt, and a judgment had been
entered against Tina for that debt; and (3) the parties were to file a joint tax return
for 2011 and Kenny was to pay any tax due, but Kenny failed to sign or file the
amended tax return submitted to him by Tina.
On February 5, 2014, Kenny filed a pro se motion to continue the matter to
retain an attorney and obtain bank statements. Tina resisted the motion to
continue, but the court granted the motion and scheduled a hearing for March 10.
On February 28, the court appointed an attorney to represent Kenny. On March
3, Kenny filed a pro se motion requesting a different attorney because “I fil[]ed
bankrup[tcy] on [the appointed attorney] pertaining to my divorce, amount owed
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over $800.00. . . . Bankrup[tcy] not finalized yet.” A different attorney was
appointed to represent Kenny.
On March 8, Kenny filed a motion to dismiss for lack of jurisdiction or
request for stay of proceedings, asserting he had filed for bankruptcy in 2013 and
this matter was subject to the automatic stay guaranteed by 11 U.S.C. § 362.
Tina resisted, arguing the contempt application was exempt from the automatic
stay under 11 U.S.C. § 362(b) because it was a criminal action. She also
asserted she was
not seeking to recover, collect, assess, or enforce Kenny’s
responsibility to pay these debts at this time. She is instead
seeking an order that will “vindicate the authority of the court” that
Kenny has violated under Iowa Code section 598.23(1), which
provides as follows:
If a person against whom a temporary order or final
decree has been entered willfully disobeys the order
or decree, the person may be cited and punished by
the court for contempt and be committed to the county
jail for a period of time not to exceed thirty days for
each offense.
In Scully v. Iowa Dist. Ct., 489 N.W.2d 389, (Iowa 1992), the
Iowa Supreme Court held that in “the realm of contempt
proceedings arising from a debtor’s failure to comply with a
prepetition order requiring discharge of a debt, it can generally be
said that criminal contempt proceedings are usually exempt from
the automatic stay, whereas civil proceedings are not.” This is
because civil contempts are remedial, while criminal contempts are
punitive. Id. As a result, “criminal contempt sanctions do not
frustrate the policy underlying the automatic stay, which is ‘to
protect the relative position of creditors and shield the debtor from
financial pressure during the pendency of a bankruptcy
proceeding.’” Id. (citation omitted).
....
Kenny seems to argue the decision in In re Ballstaedt has
somehow overruled or abrogated the court’s decision in Scully. To
the contrary, the court in Ballstaedt recognized the “‘automatic stay
protection does not apply in all cases; there are statutory
exemptions in 11 U.S.C. § 362(b), and there are non-statutory
exceptions.’” 500 B.R. 586, 592 (N.D. Iowa 2013). It then held a
4
quasi-criminal injunction prohibiting contact between divorced
parties did not violate the automatic stay.
She requested that Kenny be sentenced to thirty days in jail for each violation of
the divorce decree.
At the hearing, Kenny responded to Tina’s argument, contending the
proceeding was an attempt to collect a pre-bankruptcy-petition debt and
therefore stayed.
The district court found the dissolution decree was entered “well in
advance of” the bankruptcy petition and stated, “Scully interpreted a contempt
order arising in a dissolution proceeding as exempt from the bankruptcy stay.”
With respect to the defaulted mortgage payments, the court found Kenny’s
“earnings were involuntarily and significantly reduced,” impliedly finding the
default was not willful. However, with respect to the failure to pay the furniture
debt ($25 per month, as renegotiated by Tina), the court found “Kenny had the
ability to make such a payment, but did nothing”; thus, Tina had proved Kenny
was in contempt. As for the failure to sign the joint tax return, the court found
Kenny in contempt, writing:
Kenny’s failure to file a joint tax return for 2011 involved an
act, rather than the payment of a debt. If the basis of Tina’s
contempt was Kenny’s failure to pay a tax obligation, it would be
stayed. However, her action is based on Kenny’s failure to simply
sign the amended joint tax return which Tina provided to him nearly
a year ago. The court is aware that this may generate tax liability
for Kenny, but the tax liability need not be satisfied at the time the
tax returns are filed.
The court then ordered:
The Court sentences [Kenny] to seven days in the Greene
County Jail for his failure to sign the 2011 state and federal tax
returns. [Kenny] may purge this contempt by signing the amended
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state and federal 2011 tax return within ten (10) days of this order.
If [Kenny] has complied, he shall notify the Court and a mittimus
shall not issue. Otherwise, the Clerk of Court shall issue the
mittimus within 10 (ten) days without further hearing.
The Court sentences [Kenny] to seven days in the Greene
County Jail for his failure to hold [Tina] harmless from the Redeker
Furniture debt. [Kenny] may purge this contempt by releasing
[Tina] from the judgment within 20 days of this order. If [Kenny] has
complied, he shall notify the Court and a mittimus shall not issue.
Otherwise, the Clerk of Court shall issue the mittimus within 20
days without further hearing.
Kenny filed a motion for further review, asserting the purgeable sanction
was a coercive method of collection and thus violated the automatic stay. The
district court refused to reconsider its ruling.
Kenny filed a petition for writ of certiorari and request for stay.1 The
supreme court granted the writ and request for a stay, it then transferred the case
to this court for disposition.
II. Scope and Standard of Review.
Certiorari is an action at law; therefore, our review is for correction of
errors at law. Ary v. Iowa Dist. Ct., 735 N.W.2d 621, 624 (Iowa 2007). “In our
review of a certiorari action, we can only examine ‘the jurisdiction of the district
court and the legality of its actions.’” Id. (quoting Christensen v. Iowa Dist. Ct.,
578 N.W.2d 675, 678 (Iowa 1998)). An illegality exists if the district court’s
factual findings are not supported by substantial evidence or if the district court
has not applied the law properly. Id.III. Discussion.
A. Failure to sign tax returns. We agree with the district court that the
order requiring Kenny to sign tax returns did not implicate the protections of a
1
No brief was filed in support of the district court’s ruling.
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bankruptcy stay, since it was not an action to collect a debt or to create financial
insecurity. While Kenny argues the signing creates a tax liability for him, we find
the order does not violate the bankruptcy stay.
B. Failure to pay Redeker debt. As for the order to pay the furniture debt,
which falls squarely within the bankruptcy stay, we examine the nature of the
district court’s contempt sanction to determine if the stay applies. In Scully, 489
N.W.2d at 339, our supreme court was presented with a challenge to a district
court order sentencing the challenger to thirty days in jail for his contemptuous
failure to comply with a dissolution decree order to discharge certain joint marital
debts. Scully contended the order violated the Bankruptcy Code’s automatic
stay, 11 U.S.C. § 362(a).2 Scully, 489 N.W.2d at 389. Noting the Bankruptcy
Code exempted criminal actions from the automatic stay, 11 U.S.C. § 362(b), the
court was required to determine whether the district court’s contempt order was
civil or criminal in nature.
2
Section 362(a) provides:
Except as provided in subsection (b) of this section, a petition filed under
section 301, 302, or 303 of this title, or an application filed under section
5(a)(3) of the Securities Investor Protection Act of 1970, operates as a
stay, applicable to all entities, of—
(1) the commencement or continuation, including the issuance or
employment of process, of a judicial, administrative, or other action or
proceeding against the debtor that was or could have been commenced
before the commencement of the case under this title, or to recover a
claim against the debtor that arose before the commencement of the case
under this title;
(2) the enforcement, against the debtor or against property of the
estate, of a judgment obtained before the commencement of the case
under this title;
....
(6) any act to collect, assess, or recover a claim against the debtor
that arose before the commencement of the case under this title;
11 U.S.C.A. § 362 (West)
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Our supreme court recognized the issue had been exhaustively examined
by the federal courts. Id. at 390. Where the courts had been faced with
“postpetition [post Bankruptcy petition] contempt proceedings relating to the
debtor’s failure to discharge a prepetition debt in accordance with a prepetition
court order,” id. at 391, the court summarized:
[T]he contempt sanction must be examined to determine
whether it is essentially coercive or punitive in nature. If the
contempt sanctions are coercive in nature—i.e., if the sanction is
purgeable—the federal courts have concluded that the contempt
proceedings are violative of the automatic stay. However, when the
sanction is unconditional and, therefore, punitive in nature, the
contempt proceedings are generally held to be exempt from the
automatic stay.
Id. at 392. The Scully court explained that “criminal contempt sanctions do not
frustrate the policy underlying the automatic stay, which is ‘to protect the relative
position of creditors and shield the debtor from financial pressure during the
pendency of a bankruptcy proceeding.’” Id. at 393 (quoting In re Rook, 102 B.R.
490, 492 (Bankr. E.D. Va. 1989)).
The Scully court then concluded the district court’s order “unconditionally
sentencing Scully to thirty days in jail is a contempt citation that is punitive in
nature and is, therefore exempt” from the automatic stay. Id. The court noted
the sentence was designed to punish Scully for his failure to discharge a debt as
required by the decree and “[t]hat decree was willfully violated before the
automatic stay abated the obligation to pay.”3 Id.The idea that a nonpurgeable contempt order is punitive in nature is
consistent with Iowa case law. See Amro v. Iowa Dist. Ct., 429 N.W.2d 135, 139
3
We note Tina asked for an order that will “vindicate the authority of the court” and
sentence Kenny to jail.
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(Iowa 1988) (“Incarceration for a past act of contempt is punitive when there is no
action available to the contemner which can effect release.”). Whereas, when
the contemnor “is able to purge the contempt and obtain his release by
committing an affirmative act, and thus carries the keys of his prison in his own
pocket,” it is “the paradigmatic coercive, civil contempt sanction.” Int’l Union,
United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 828 (1994); see In re
Maloney, 204 B.R. 671, 674 (E.D.N.Y. 1996) (“A contempt order that permits the
contemnor to mitigate or avoid punishment by taking action consistent with the
vindication of the rights of another party to the litigation is considered a civil
contempt order. A contempt order that, on the other hand, incarcerates a party
for a definite period of time or imposes another penalty, without any provision for
purge of the contempt, does not serve to redress a private right and is
considered a criminal contempt order.”); cf. Hartsfield v. Iowa Dist. Ct., No. 08-
0562, 2009 WL 1708825, at *5 (Iowa Ct. App. June 17, 2009) (upholding a
district court contempt order of imprisonment until contemnor provided a DNA
sample as not punitive because the contemnor “carries the keys of his prison in
his own pocket”).
Here, with respect to the failure to pay the furniture debt, the district
court’s order of contempt was coercive in nature as it allowed the possibility that
Kenny could purge the contempt. Such civil contempt orders fall within the scope
of the automatic stay under section 362(a). Scully, 489 N.W.2d at 392-93.
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Because the district court did not properly apply the law, we sustain the writ in
part. We do not address Kenny’s additional contentions.4
WRIT SUSTAINED IN PART.
4
Kenny also requests attorney fees and costs, citing to 11 US.C. § 362(k), which
provides a remedy to a debtor if a creditor willfully violated the automatic stay.
However, “[c]ertiorari is a procedure to test whether a lower board, tribunal or
court exceeded its proper jurisdiction or otherwise acted illegally.” French v. Iowa Dist.
Ct., 546 N.W.2d 911, 913 (Iowa 1996). “Relief through certiorari is strictly limited to
questions of jurisdiction or illegality of the challenged acts.” Id.