Charles J. BRUNET v. MAGNOLIA QUARTERBOATS, INC., et al.
No. 97-CA-187.
Court of Appeal of Louisiana, Fifth Circuit.
March 11, 1998.
711 So. 2d 308
Before GAUDIN, CANNELLA and DALEY, JJ.
Richard A. Weigand, T.A., Weigand, Levenson & Costa, New Orleans, for Appellee Charles Brunet.
Carl J. Hebert, T.A., Evans & Company, New Orleans, for Magnolia Holdings, Inc., Maintenance Dredging, Inc.
Defendant, Polaris Insurance Company, Ltd. (Polaris), appeals from several trial court orders1 fining it for contempt of court,
On May 12, 1995, plaintiff filed a suit under the Jones Act2, general maritime law and for maintenance and cure, for injuries he sustained to his back in an accident onboard the Q/B MAG II on October 21, 1994.3 He initially filed suit against defendants, Magnolia Quarterboats, Inc. (Magnolia) and Maintenance Dredging, Inc. (Maintenance).
Maintenance filed a third-party suit against Polaris on September 20, 1995, asserting that Polaris provided insurance coverage for the claim and owed it a defense and indemnity. Polaris was alleged to be incorporated and/or registered in the British Virgin Islands (BVI), with their main office in San Juan, Costa Rica. On October 2, 1995, plaintiff added as defendants, Magnolia Holdings, Inc., as the owner of the vessel, and Polaris, as its’ insurer. In its’ answer, Polaris denied that it provided insurance coverage to Magnolia Holdings, Inc. or Maintenance or Magnolia (the three companies are hereinafter referred to as M/H).4
In August of 1996, plaintiff and M/H filed a series of motions against Polaris for discovery, for sanctions for failing to comply with discovery and for the posting of a bond as an unauthorized insurer, pursuant to
In August and September of 1996, plaintiff and M/H filed motions to compel discovery and motions for sanctions and to strike Polaris’ answers for failure to comply with discovery orders. A hearing was set for October 4, 1996. Trial had been set for October 8, 1996.
On August 5, 1996 and in September of 1996, the trial judge issued orders relating to discovery requests by plaintiff and M/H, individually filed in April and September of 1996.
On October 2 and 3, 1996, plaintiff and M/H filed additional motions to strike Polaris’ answers, two motions to strike the pleadings based on
On October 4, 1996 the hearing was held. On October 9, 1996, the trial judge rendered a judgment. The judgment granted plaintiff‘s and M/H‘s motions to compel discovery of the quote letter, applications, correct policies and any documents on which Polaris based its denial of coverage. She “held in abeyance” a ruling on the motions to strike
On October 15, 1996 and October 17, 1996, plaintiff and M/H filed motions for sanctions and for adverse presumptions against Polaris for their alleged failure to respond properly to the orders of October 9, 1996. They also filed a joint motion to file a supplemental memorandum and for a reconsideration of the Motion To Strike Pleadings Filed By Polaris.
On October 21, 1996, plaintiff and M/H filed a motion to order a representative of Polaris to appear at the hearing set for October 25, 1996 and to provide documents related to their status as an alleged unauthorized insurer. That motion was granted on the same day (four days before the hearing.) On the next day, Polaris responded with an opposition to the motions to strike and for the adverse presumptions.5
On October 24, 1996, plaintiff and M/H filed a motion to file a joint supplemental memorandum in support of the motion to strike the pleadings based on
On October 25, 1996, the hearing convened. However, Polaris’ representative failed to appear or produce any documents relative to the issue of it‘s status as an unauthorized insurer. Counsel for Polaris participated in the hearing by telephone. In open court and in the judgment dated October 28, 1996, the trial judge granted the motions, applied the adverse presumptions and assessed a $1,500 fine against Polaris for its failure to appear as ordered with the documents requested.
The judgment applied the adverse presumptions, as follows, stating:
1. That the failure of Polaris to
“... produce the insurance quote of October 6, 1993 in contravention of discovery requests and Court Order gives rise to an adverse presumption that the October 6, 1993 letter would have contained information adverse to the position of Polaris Insurance Company, Ltd. that it did not quote for crew coverage ...”
2. That
“... the failure of Polaris Insurance Company, Ltd. to comply with the Court Order regarding the production and identification of the applications for insurance ... precludes Polaris ... from introducing into evidence any information regarding applications for insurance other than those which Polaris ... had earlier produced, and further gives rise to an adverse presumption against Polaris ... that the applications which were produced indicate that crew coverage was requested by Magnolia Holdings, Inc. and Maintenance Dredging, Inc.”
The trial judge next granted the Joint Motion to File Supplemental Memorandum and For Reconsideration Of Motion To Strike Pleadings Filed By Polaris Insurance Company, Ltd. for Polaris’ failure to comply with
The trial judge further found Polaris to be in contempt of court for failing to appear and produce documents at the hearing, as it was ordered to do in the judgment of October 21, 1996 and by virtue of the subpoena duces tecum issued October 21, 1996. For this violation, the trial judge ordered Polaris to pay a fine of $1,500 to plaintiff and M/H. She further ordered Polaris to pay the fine and produce the subpoenaed documents at the office of plaintiff‘s counsel by Monday, October 28, 1996 at 12:00 noon, CST. Thus, Polaris was required to pay the $1,500 fine, to post bond and again to produce the documents by noon of October 28, 1996. Polaris did not ask for an extension, a stay order or any other relief.
Also, on October 29, 1996, a hearing was held on the following various outstanding motions. However, there is no motion to set a hearing on this date, or order setting a hearing on this date in the record. Both of Polaris’ attorneys were present because this was the date set for trial. The trial was apparently continued again, this time, without date.
Following this hearing, the trial judge rendered a decision in open court, ordering Polaris to perform certain acts by November 4, 1996. However, the written judgment was not signed until November 4, 1996. The judgment:
1. Struck all of Polaris’ pleadings in the case, pursuant to the Joint Motion To Strike, for its failure to comply with
2. Awarded $2,500 as sanctions against Polaris, pursuant to a joint oral motion based on Polaris’ failure to pay the fine of $1,500 and failure to produce the documents, as ordered in the October 28, 1996 judgment.
3. Further states that
“... if Polaris continues in contempt in any respect by continuing to fail to pay all fines now due or by continuing to fail to produce the documents Ordered by 5:00 p.m., CST, Thursday, October 31, 1996, they are additionally fined $3,500; if Polaris continues in contempt in any respect of this Court‘s orders by 9:00 a.m. CST on Monday, November 4, 1996, Polaris shall be fined an additional $5,000.”
4. Ordered all of the contempt fines to be paid into the court registry for the benefit of plaintiff and M/H.
On November 6, 1996, plaintiff and M/H filed a joint petition for a Judgment Debtor Rule against Polaris for the amount of all of the monetary sanctions and for the production of certain documents pertaining to Polaris’ ability to pay the fines. That hearing was set for November 15, 1996.
On November 15, 1996 at 8:42 a.m., Polaris filed a Motion for Devolutive Appeal. (See footnote 1). The motion for appeal was granted on the same date.
Also on November 15, 1996, the judgment debtor rule was heard. However, again, no one from Polaris appeared, other than counsel, and no documents were produced.
On January 6, 1997, the trial judge found Polaris in contempt of court for failing to comply with the Judgment Debtor Rule. The trial judge fined them $100 per day, continuing until they paid all fines and “Polaris brings itself into compliance with this Court‘s orders“.
In May of 1997, this court dismissed the appeal because the matters were interlocutory in nature and not appealable. Subsequently, the Louisiana Supreme Court remanded the case to this court for consideration of the merits under our supervisory jurisdiction. The case was then docketed and set for argument on the regular appellate docket.
The issues on appeal are the validity of judgments ordering payment of contempt fines, the striking of the pleadings and the adverse presumptions.
A) CONTEMPT FINES—Judgments of October 28, 1996 and November 4, 1996.
B) DEBTOR JUDGMENT RULE—Judgment of January 6, 1997.
The judgments rendered on October 28, 1996, November 4, 1996 and January 6, 1997 ordering the payment of contempt fines, are invalid.
Contempt proceedings in civil cases are regulated by
A constructive contempt of court is any contempt other than a direct one.
Any of the following acts constitute a constructive contempt of court:
(2) Wilful disobedience of any lawful judgment, order, mandate, writ, or process of the court;
A person may not be adjudged guilty of a contempt of court except for misconduct defined as such, or made punishable as such, expressly by law.
The punishment which a court may impose upon a person adjudged in contempt of court is provided in
Except as otherwise provided by law:
(1) The supreme court, the courts of appeal, the district courts, family courts, juvenile courts and the city courts may punish a person adjudged guilty of contempt of court therein, as follows ...
(d) For any other contempt of court, including disobeying an order for the payment of child support or alimony or an order for the right of visitation, by a fine of not more than five hundred dollars, or imprisonment for not more than three months, or both. [Emphasis added.]
To find a person guilty of constructive contempt, it is necessary to find that he or she violated the order of court intentionally, knowingly and purposefully, without justifiable excuse. In making this determination, the trial court is vested with great discretion. City of Kenner v. Jan P. Jumonville, Placide Jumonville, p. 5-6, 97-125 (La.App. 5th Cir. 8/27/97), 701 So.2d 223; Reeves v. Thompson, 95-0321 (La.App. 4th Cir. 12/11/96), 685 So.2d 575, 579. Proceedings for contempt must be strictly construed, and the law does not favor extending their scope. Estate of Graham v. Levy, 93-0636, 93-0134 (La.App. 1st Cir. 4/8/94), 636 So.2d 287, 290, writ denied, 94-1202 (La.7/1/94), 639 So.2d 1167.
Constructive contempt may be found on a rule to show cause, with defendant being allowed at least forty-eight hours, from the date he or she receives notice, to prepare a defense.
In re Oliver, 333 U.S. 257, 68 S.Ct. 499, 92 L.Ed. 682 (1948) discusses the due process limitations on summary contempt procedures:
Except for a narrowly limited category of contempts, due process of law as explained in the Cooke Case requires that one charged with contempt of court be advised of the charges against him, have a reasonable opportunity to meet them by way of defense or explanation, have the right to be represented by counsel, and have a chance to testify and call other witnesses in his behalf, either by way of defense or explanation. The narrow exception to these due process requirements includes only charges of misconduct, in open court, in the presence of the judge, which disturbs the court‘s business, where all of the essential elements of the misconduct are under the eye of the court, and where immediate punishment is essential to prevent `demoralization of the court‘s authority’ before the public. If some essential elements of the offense are not personally observed by the judge, so that he must depend upon statements made by others for his knowledge about these essential elements, due process requires ... that the accused be accorded notice and a fair hearing as above set out. 333 U.S. at 275, 276, 68 S.Ct. at 508, 509, 92 L.Ed. at 695.
Pittman Const. Co., Inc. v. Pittman, 96-1079 (La.App. 4th Cir. 3/12/97), 691 So.2d 268, 273.
Furthermore, a contempt proceeding is designed for the vindication of the dignity of the court rather than for the benefit of a litigant. Nungesser v. Nungesser, 558 So.2d 695, 701 (La.App. 1st Cir.1990). Thus, the court cannot order a fine or penalty to be paid to a litigant because such payment does not vindicate the court. City of Kenner v. Jan P. Jumonville, Placide Jumonville, p. 8. The fine must be made payable to the court itself. Id.
Second, the November 4, 1996 judgment is also invalid for the same reasons. That judgment ordered escalating fines based on a hearing held October 29, 1996. However, there was neither a rule to show cause filed stating the basis for the contempt, (for failure to pay the fine, post the bond, or produce the documents as ordered in the judgment of October 28, 1996), nor did a notice issue to Polaris that there would be a contempt hearing on that date. In addition, the fines exceeded the permissible $500 maximum under
In her November 4, 1996 judgment, the trial judge struck Polaris’ pleadings because it failed to post the bond on October 28, 1996. This was neither a contempt nor sanctions ruling. Sanctions relate to discovery and contempt remedies are either fines or incarceration. Once the trial judge determined that Polaris was not exempt from posting the bond, she was mandated by
In reference to the judgment debtor rule, Polaris was obligated to attend and comply with the rule‘s request, whether or not it agreed.6 Nonetheless, the subsequent judgment on January 6, 1996, awarding the parties contempt fines for failing to appear at the judgment debtor rule is also invalid, because it was rendered without compliance with the timely notice and hearing requirements of the contempt articles,
C) APPLICABILITY OF R.S. 22:1255: Judgment of November 4, 1996.
Polaris argues that the trial judge erred in striking its pleadings because it is exempt from the bond requirement. Polaris asserts that it issued marine protection and indemnity policies, which are excluded from the provisions of
In Marine Marketing Services, Inc., the Commissioner of Insurance attempted to apply the unauthorized insurer provisions to a broker who had sold insurance policies covering recreational marine vessels. The Commissioner claimed that the sale of policies on recreational vessels was not included in the exemption under
Part XXVII, of the Louisiana Insurance Code regulates unauthorized insurers doing business in Louisiana.
§ 1249. Transacting a business of insurance by unauthorized insurer defined
A. Any of the following acts in this state, effected by mail or otherwise, by an unauthorized foreign or alien insurer is defined to be transacting an insurance business in this state ...
B. This Section shall not apply to ...
(7) Insurance on vessels, crafts, hulls, cargoes, marine builders risks, marine protection and indemnity or other risk including strikes and war risks commonly insured under ocean or wet marine forms of policy.
Thus, an exclusion is made for insurers placing and delivering marine protection and indemnity insurance and hull insurance in the definition of “transacting an insurance business“.
§ 1255. Requirements to be met before using courts
A. Before any unauthorized insurer shall file or cause to be filed any pleading in any action, suit or proceeding instituted against it, such unauthorized insurer shall either (1) file with the clerk of the court in which such action, suit or proceeding is pending a bond with good and sufficient sureties, to be approved by the court, in an amount to be fixed by the court sufficient to secure the payment of any final judgment which may be rendered in such action; or (2) procure a certificate of authority to transact the business of insurance in this state ...7
§ 1254. Use of courts; prohibited to unauthorized insurer
No unauthorized insurer shall institute or file, or cause to be instituted or filed, any suit, action or proceeding in this state to enforce any right, claim or demand arising out of the transaction of business in this state until such insurer shall have obtained a certificate of authority to transact insurance business in this state. Nothing in this Section shall be construed to require an unauthorized insurer to obtain a certificate of authority before instituting or filing or causing to be instituted or filed any suit, action or proceeding either in connection with any of its investments in this state or in connection with any contract issued by it at a time when it was authorized to do business in the state where such contract was issued.
We point out that, even if this court were to find that Polaris is exempt from the bond requirement, they failed to seek relief from the order. At the time the pleadings were struck, the order was in effect and Polaris was bound to obey the order or suffer the consequences. Polaris’ remedy was to immediately either post the bond or ask for a stay order and then seek supervisory relief in the appellate court. See: State in Interest of J.B., 499 So.2d 611, 613 (La.App. 5th Cir. 1986). Therefore, we find that the trial
D) SERVICE OF PLEADINGS: Hearings of October 4, 1996, October 25, 1996 and October 29, 1996.
Polaris next asserts that the order to post security was decided on the basis of a memorandum that was improperly served and exhibits that were not served on counsel. Polaris argues that the supplement and exhibits were required to be served 72 hours before the hearing and that service by fax was not permitted in 1996, under the Code of Civil Procedure. It also argues that the trial judge erred in granting the renewed motion because there was no new evidence in the matter.
First, the matter of the bond requirement was not a new issue or a renewal of one that had already been decided, but one that had been pending since October 9, 1996. In the judgment of October 9, 1996, the trial judge held a decision on this issue in abeyance. Thus, the trial judge did not err in permitting plaintiff and M/H to re-urge the motion later.
The law applicable in 1996, provided, as it still does, that it is unnecessary to serve on the adverse party a copy of a written document that is an exhibit to a pleading, unless the party filing the pleading prays for service.
Service was timely on all pleadings for the October 4, 1996 hearing (judgment on October 9, 1996), other than those filed October 3 and 4, 1996: the first Motion to Strike based on
The pleadings filed in conjunction with the hearing on October 25, 1996 were timely, except for the Joint Supplemental Memorandum in Support of the Motion to Strike, asserting that Polaris is a “bogus” insurer. This was filed and served on October 24, 1996, one day before the hearing. Thus, it was not served 72 hours before the hearing and service of that supplemental memorandum was deficient under the local rules. However, our review of the record reflects that the trial judge did not sign the order permitting this supplement to be filed. In addition, we find that the motion which she granted was the Joint Motion To File Supplemental Memorandum and for Reconsideration of Motion to Strike (based on
E) ADVERSE PRESUMPTIONS: Judgment of October 28, 1996.
The next issue is whether the trial judge erred in ordering that the adverse presumptions were appropriate because of Polaris’ failure to comply with the production of documents.
Polaris argues that they searched their files and were unable to locate the requested “quote” letter. Further, they argue that the adverse presumptions are irrelevant and without factual basis because the policies are the contracts, not the quote letter or applications. Polaris argues that the policy itself is the evidence of insurance and that M/H and plaintiff have been in possession of the policy at all times.11
Art. 1471. Failure to comply with order compelling discovery; sanctions
If a party or an officer, director, or managing agent of a party or a person designated under Articles 1442 or 1448 to testify on behalf of a party fails to obey an order to provide or permit discovery, including an order made under Article 1469 or Article 1464, the court in which the action is pending may make such orders in regard to the failure as are just, and among others the following:
(1) An order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order. (2) An order refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting him from introducing designated matters in evidence.
(3) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party.
(4) In lieu of any of the foregoing orders or in addition thereto, an order treating as a contempt of court the failure to obey any orders except an order to submit to a physical or mental examination.
(5) Where a party has failed to comply with an order under Article 1464, requiring him to produce another for examination, such orders as are listed in Paragraphs (1), (2), and (3) of this Article, unless the party failing to comply shows that he is unable to produce such person for examination.
In lieu of any of the foregoing orders or in addition thereto, the court shall require the party failing to obey the order or the attorney advising him or both to pay the reasonable expenses, including attorney‘s fees, caused by the failure, unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust.
Service of the pleadings relative to these particular issues giving rise to the adverse presumptions was timely.12 The trial judge ordered the documents produced and Polaris defied the order. Whether or not Polaris agrees with the importance of the requested documents, they were requested in pursuit of discovery and ordered to be produced. Under
Accordingly, the judgment of October 9, 1996 is affirmed.
The judgment of October 28, 1996 is affirmed in part and reversed in part. It is reversed insofar as it holds Polaris in contempt for failing to appear at the hearing on October 25, 1996. Therefore, the fine assessed against Polaris of $1,500 for that contempt is vacated. The judgment of October 28, 1996, effecting the adverse presumptions against Polaris, is affirmed.
The judgment of November 4, 1996 is affirmed in part and reversed in part. It is affirmed insofar as it strikes Polaris’ pleadings for failure to post a bond in compliance with
Costs in this matter are to be paid by Polaris.
REVERSED IN PART AND AFFIRMED IN PART.