Dufenhorst v. Aitkin

MAJOR, Circuit Judge. This is an appeal from an order of the District Court entered on the 21st day of February, 1938, adjudging appellant guilty of contempt of court and requiring him to pay as damages the sum of $600 to the — 539 — debtor’s trustee. The contempt, as found, occurred during a proceeding to reorganize the debtor under Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207. A petition for reorganization was filed on November 18, 1935, and debtor’s proposed plan of reorganization on October 10, 1936. There was a failure to obtain the necessary consents to the original plan, and on May 3, 1937, certain amendments to the plan were proposed. May 6, 1937, an order was entered submitting the proposed plan as amended to creditors. May 3, 1937, appellant filed a petition jin the bankruptcy proceeding asking for certain relief, particularly to declare debtor insolvent and to determine the classes of creditors affected, and requested that a vote on the amended plan be stayed until these questions and other related issues be determined. A hearing upon this petition was continued until July 6, 1937, the date which had been set for a hearing upon the debtor’s plan of reorganization as amended. On June 7, 1937, during the time the amended plan was being submitted to the creditors, appellant, the owner of first mortgage bonds of the debtor, sent a letter to all other first mortgage bondholders, which it is alleged contained material false statements of fact designed to influence the creditors in refusing to consent to the amended plan. On June 21, 1937, subsequent to the acts complained of, an injunction was issued restraining appellant from communicating with any of debtor’s bondholders in respect to any of the matters referred to in the petition filed by appellant, or in respect to any other matters referred to in the letter dated June 7, 1937, addressed to bondholders by appellant. At the same time the matters raised in appellant’s petition of May 3, 1937, and the motion of the debtor for relief against the activities of appellant, were referred to a Special Master. Hearings were thereafter had before the Special Master and, on October 5, 1937, his report was made, the findings, conclusions and recommendations of which were confirmed by the court on November 6, 1937. On October 10, 1937, debtor filed its petition asking that appellant be adjudged in contempt of court and be required to pay the debtor’s damages resulting from his alleged contumacious act. The basis for the petition appears to be that the subject matter of the letters sent to bondholders by appellant was the same as that contained in the petition filed by appellant on May 3, 1937, a hearing on which was continued by the court on May 15, 1937, and that the subject matter being before the court for consideration, had the same effect as an order enjoining appellant from doing that which is complained of. Appellant answered the petition that he be adjudged in contempt, by affidavit, and requested a trial. His request was refused and a hearing, consisting solely of arguments of counsel on the debtor’s petition and appellant’s answer, was had, and at the conclusion thereof appellant was adjudged in contempt of court. The report of the Special Master is not contained in the transcript of the record, but it is argued by appellant and seems to find support in the findings of fact and conclusions of law that the adjudication in contempt was based upon the testimony taken before the Special Master, although the issue in the contempt proceeding was not before the Master — in fact, the petition requesting that appellant be adjudged in contempt was not filed until some time after the report of the Master. The essential question presented is whether the sending of a letter by one bondholder to others during the period when a plan of reorganization in a section 77B proceeding has been submitted to the creditors for their approval, without an order specifically prohibiting such action, can be made the basis of a proceeding in contempt, and if so, there is the further question as to whether appellant was entitled to offer testimony upon the issue presented by the petition filed against him and his answer thereto. Appellant relies upon Section 268 of the Judicial Code, 28 U.S.C.A. § 385, as limiting the power of Federal Courts in contempt proceedings. So far as here material, it provides: “ * * * Such power to punish con-tempts shall not be construed to extend to any cases except the misbehavior of any person in their presence, or so near thereto as to obstruct the administration of justice, the misbehavior of any of the officers of said courts in their official transactions, and the disobedience or resistance by any such officer, or by any party, juror, witness, or other person to any lawful writ, process, order, rule, decree, or command of the said courts.” He argues that the only applicable provision of this section is the last clause,-and that, inasmuch as there was no order, rule or decree enjoining him from sending the — 540 — letter in question, that the court was without power to entertain the proceedings. On the other hand, appellee argues, not that there was an express order, but that the proceedings had in court to which appellant was a party, amounted to or had the effect of such order, and further, that even though there was not such an order, that the alleged misbehavior of appellant was such “as to obstruct the administration of justice.” In other words, appellee’s position is that such misbehavior may amount to a civil contempt. Both sides, without purpose, so far as we can perceive, undertake to distinguish' between criminal and civil contempt for the reason that they both finally admit that this is civil contempt and not criminal. It plainly is such. Terminal R. R. Ass’n v. United States, 266 U. S. 17, 45 S.Ct. 5, 69 L.Ed. 150; Bessette v. W. B. Conkey Co., 194 U.S. 324, 24 S.Ct. 665, 48 L.Ed. 997; In re Fox, 3 Cir., 96 F.2d 23. Appellee’s argument that the proceeding before the court was in effect an order en-' joining appellant, is not tenable. Even assuming that appellant, in his petition filed in the proceeding, raised the same question and made the same unwarranted charges against the debtor and its officers as those contained in the letter, and that the petition was before the court undisposed of, we do not think that could take the place of an order of injunction so as to fix liability upon the appellant. In Terminal R. R. Ass’n v. United States, supra, 266 U.S. page 29, 45 S.Ct. page 8, 69 L. Ed. 150, it is said: “In contempt proceedings for its enforcement, a decree will not be expanded by implication or intendment beyond the meaning of its terms when read in the light of the issues and the purpose for which the suit was brought, and the facts found must constitute a plain violation of the decree so read.” In the instant case there was not even a defective order and we have no hesitancy in concluding that the proceeding can not rest upon something that transpired in the court under the guise that it had the effect of an order. Appellee also contends that the power of. the court to punish for contempt may properly be predicated upon the language of the statute, “the misbehavior of any person in their presence, or so near thereto as to obstruct the administration of justice.” In other words, it is argued that a civil contempt may be based upon this clause. No authority cited by appellee and none which we are able to find has so held. Kirk v. United States, 9 Cir., 192 F. 273, cited by appellee, was an action for criminal contempt instituted by the Government in which the defendants were charged with an attempt to corrupt and influence jurors. This case is not even remotely applicable. Craig v. Hecht, 263 U. S. 255, 44 S.Ct. 103, 68 L.Ed. 293, also relied upon, is a case wherein the defendants were found guilty of contempt for criticising the action of the court, and likewise was a criminal proceeding. Justice Taft, in a concurring opinion, 263 U.S. page 278, 44 S.Ct..page 107, 68 L.Ed. 293, said: “If the publication criticizes the judge or court after the matter with which the criticism has to do has been finally adjudicated and the proceedings are ended so that the carrying of the court’s judgment cannot be thereby obstructed, the publication is not contempt and cannot be summarily punished by the court however false, malicious or unjust it may be. The remedy of the judge as an individual is by action or prosecution for libel. If, however, the publication is intended and calculated to obstruct and embarrass the court in a pending proceeding in the matter of the rendition of an impartial verdict, or in the carrying out of its orders and judgment, the court may, and it is its duty to protect the administration of justice by punishment of the offender for contempt.” Thus it is made plain that the sole basis for the charge is that the offending party intends or calculates to prevent “an impartial verdict, or in the carrying out of its orders and judgment.” There is no room for argument in the instant case that any order or judgment of the court was or could have been interfered with by the writing of the condemned letter. Another case relied upon is that of Clay v. Waters, 8 Cir., 178 F. 385, 21 Ann.Cas. 897, but in that case the court found that its order had been violated. A case which is in point is that of In re Probst, 2 Cir., 205 F. 512, 513, where 'it is said: “It seems to us that the bankrupt’s misappropriation of the money in his hands is not within the first of these clauses ‘misbehavior in the presence of the court, or so near thereto as to obstruct the administration of justice.’ He is not an ‘officer — 541 — of the court’ who has misbehaved in his official transactions. Our attention has been called to no writ, process, order, rule, decree, or command of the court which he has disobeyed. Had an order been made directing him to pay the amount of the misappropriated money into the registry of the court, and he had disobeyed such order, he would be within the provisions of the section; but on the record presented here we cannot find authority for the entry of the order sought to be reviewed. This may be a highly technical ruling; but where Congress has been so industrious to restrict the natural inherent powers of a federal court, scrupulous attention to the limitations it has imposed would seem to be the proper course.” This quotation is cited with approval in Morgan v. United States, 8 Cir., 95 F.2d 830, 835, and the court also distinguishes the case of Clay v. Waters, supra, cited and relied upon by appellee. Having in mind that the offending matter in the instant case was directed at the debtor and not the court, the observation of the court in McCann v. New York Stock Exchange et al., 2 Cir., 80 F.2d 211, 213, seems pertinent. There, as here, it was sought to justify the contempt upon two theories; first, that the defendant had violated an order of court, and second, because his communication was ipso facto a contempt of court. The second was made to turn upon the meaning of the phrase “so near thereto as to obstruct the administration of justice.” The court, 80 F.2d page 213, said: “ * * * The defendants’ theory seems to be that by undermining their confidence in their attorneys the course of justice may be impeded; at any rate, that is their only even colorable support, for they cannot enjoin, and a fortiori cannot punish as a contempt, mere abuse of themselves, or of their companies, or of the officers of the exchanges, even though it be libelous. Francis v. Flinn, 118 U.S. 385, 6 S.Ct. 1148, 30 L. Ed. 165; American Malting Co. v. Keitel, 209 F. 351, 353-355 (C.C.A.2).” and concluded that the libelous matter sent out in a publication did not amount to contempt per se. The distinction which the courts have so often made between the two classes of contempt well nigh precludes the idea that a civil contempt could be based upon “misbehavior of any person in their presence, or so near thereto as to obstruct the administration of justice.” In Bessette v. W. B. Conkey Co., supra, the court, 194 U.S. on page 329, 24 S.Ct. on page 667, 48 L.Ed. 997, in referring to criminal contempt, said: “ * * * It is more like an ordinary crime which affects the public at large, and the criminal nature of the act is the dominant feature.” With reference to civil contempt, the court on the same page, said: “ * * * On the other hand, if, in the progress of a suit, a party is ordered by the court to abstain from some action which is injurious to the rights of the adverse party, and he disobeys that order, he may also be guilty of contempt, but the personal injury to the party in whose favor the court has made the order gives a remedial character to the contempt proceeding. The punishment is to secure to the adverse party the right which the court has awarded to him.” In Re Fox, supra, the court 96 F.2d on page 25 makes the distinction thus: “In civil contempt the punishment is remedial, to secure an end; while in criminal the punishment is punitive4 to vindicate the authority and dignity of the court. * * * Punishment in criminal contempt cannot undo or remedy the thing which has been done, but in civil contempt punishment remedies the disobedience.” In Gompers v. Buck’s Stove & Range Co., 221 U.S. 418, 448, 31 S.Ct. 492, 501, 55 L.Ed. 797, 34 L.R.A.,N.S., 874, it is said: “ * * * The classification, then, depends upon the question as to whether the punishment is punitive, in vindication of the court’s authority, or whether it is remedial, by way of a coercive imprisonment, 'or a compensatory fine, payable to the complainant.” There can be nothing in the acts charged to the appellant in the instant case in which the public at large was interested, or that reflects upon or refers to the court’s authority, honor or dignity. The proceeding was instituted at the instance of an individual litigant for an alleged wrong done to the individual rather than to the court. We conclude that the court was without power to punish appellant for contempt, under the circumstances presented. It follows there is no occasion for us to consider other questions raised and argued. — 542 — The judgment of the District Court is reversed.