Great Country Bank v. Ogalin

GREAT COUNTRY BANK v. Jeffrey OGALIN et al.

No. CV930303908S

Superior Court of Connecticut, Judicial District of Fairfield, Bridgeport

December 16, 2017

UNPUBLISHED OPINION

Caption Date: December 17, 2017

OPINION

Alfred J. Jennings, Jr., Judge Trial Referee

Background

On March 15, 1994 the original plaintiff Great Country Bank obtained a foreclosure deficiency judgment in this matter against the defendant Frank F. Ogalin a/k/a/ Frank F. Ogalin Jr. (herein, " defendant") in the amount of $137 055.17. Thereafter, the judgment was assigned to the present plaintiff The Cadle Company. On December 3, 2015 the plaintiff caused to he served, through a state marshal, a personal property execution upon defendant’s employer Drywall Construction Corporation of Connecticut (Drywall), a third party believed to have property of and/or debts due and owing to the defendant. The marshal’s subsequent return of service indicated that the property execution served upon Drywall was unsatisfied. On April 10, 2014 the plaintiff filed an Application for Orders in Aid of Execution pursuant to Conn Gen. Stat. § 52-356b^[1] asking the court to enter a turnover order against Drywall with respect to non-wage debts due to the defendant Frank F. Ogalin from Drywall. The plaintiff alleged that it had determined through postjudgment discovery that Drywall, a closely-held family business whose then-president was Christina Ogalin, the daughter of defendant, owed money for non-wage debts to the defendant in the form of reimbursement for business expenses incurred on behalf of Drywall but paid for by the defendant. Drywall denied that it was indebted to the defendant for reimbursement of any expenses as of the date of the property execution, claiming that all such expenses had been previously reimbursed and that not all of the expenses were incurred by the defendant alone. Following a hearing this court (Kamp, J.) found on April 7, 2015 that Drywall was indebted to defendant Frank J. Ogalin in the amount of $19, 887.27 and granted plaintiff Cadle Company’s Motion for Turnover Order against Drywall in the amount of $19, 887.27. That order was affirmed by the Appellate Court on October 11, 2016. Great Country Bank v. Jeffrey Ogalin, 168 Conn.App. 783 (2016).

Now before the court is plaintiff’s Motion for Civil Contempt Remedies, as amended, against Drywall Construction Corporation of Connecticut and its officers Christina Ogalin and Frank F. Ogalin, Jr. for failure to comply with the court’s turnover order of April 7, 2015. The Court heard evidence on February 16, 2017, April 6, 2017, May 11, 2017 and July 13, 2017. Post-hearing memoranda have been filed.

Discussion

The Court finds that no part of the $19, 887.27 turnover order has been paid by Drywall to the plaintiff. Plaintiff is asking the court to incarcerate Drywall’s officers Christina Ogalin and Frank F. Ogalin for contempt of court. Under our law corporate presidents and/or persons-in-charge may be held accountable, through contempt powers of the court, for corporate actions that constitute contempt of court orders. See, Wilson v. United States, 221 U.S. 361, 376, 31 S.Ct. 538, 55 L.Ed. 771 (1911) (A command to a corporation constitutes a command to those in charge of it who, if knowing of the order, fail to bring about corporate compliance, are themselves recalcitrant, liable in contempt of court and subject to punishment for such contempt.) accord, MCI Telecommunications Corp. v. World Telecommunications, Inc. (S.D.N.Y. February 26, 1998). 1998 WL 85757 (order entered that if corporation fails to comply with court order by a date certain, then its president will be arrested under the court’s contempt powers). The turnover order issued from this court on April 27, 2015 and became final on October 11, 2016 (or twenty days later when no petition for certification was filed with the Supreme Court). Christina Ogalin testified, and the court finds, that she resigned as president of Drywall as of February 1, 2016 when Drywall ceased operations, with the effect that she could not have been in contempt of the turnover order as an officer of Drywall on October 11, 2016. Defendant Frank Ogalin remained and is currently Director and Vice President of Drywall (Pl. Ex. 16), and he admitted that he remained as the " person-in-charge" of the corporation for purposes of winding up its affairs. In that status he could be held in contempt and punished for Drywall’s failure to comply with the turnover order if that remedy is legally appropriate.

During the course of these contempt proceedings the Connecticut Supreme Court issued its decision on May 2, 2017 in Robert Pease v. The Charlotte Hungerford Hospital et al., 325 Conn. 363 (2017), which held as a matter of first impression in Connecticut that a litigant who lost a lawsuit against the hospital which then obtained a Practice Book § 18-5 taxation of costs award against him, could not be held in contempt of court for failure to pay those court costs to the hospital.

We conclude that, under ordinary circumstances, such as those in this case, the court’s inherent contempt power is not an appropriate means of enforcing an award of costs or other monetary judgment. Id., 364.

Citing and quoting 17 Am.Jur.2d, 568, Contempt § 128 (2017), the court said:

Contempt does not generally support the enforcement of debts reduced to judgments, or monetary judgments, when the effect of the order would be jail nonpayment of a debt. Contempt cannot be used as a mere debt-collecting device. Id., 376

Noting that the use of contempt power to enforce civil judgments is banned by constitutional prohibition or by statute in most other states, the Court further said:

To a large extent these rules arose out of and reflect the early nineteenth century movement to abolish imprisonment for commercial debt ...

Connecticut is one of the handful of states that have not adopted a constitutional amendment prohibiting debtor’s prisons. Id., 1035. Nevertheless as Justice Shea persuasively argues in his dissenting opinion in Fox v First Bank, [198 Conn. 34 (1985) ] 42-43, the history and public policy rationales that have led our sister courts to bar the use of contempt power to enforce ordinary monetary judgments counsel the same result here. Connecticut abolished imprisonment for contractual debt by statute as early as 1838. See Armstrong v. Ayres, 19 Conn. 540 (1849); and, as noted, has continued to restrict the types of debt for which contempt is a permissible sanction ... As have our sister states, Connecticut has rejected the practice of imprisonment for debt as inhumane, unjust, and generally ineffective. (Citations omitted.) Id., 376-77.

The Court concluded

Accordingly, we see no reason why Connecticut should diverge from the majority rule that, outside of the marital dissolution and child support context, ordinary monetary judgments and taxation of costs are not subject to enforcement by civil contempt absent extraordinary circumstances.^[2] Id., 378.

The plaintiff Cadle Company argues for a finding of contempt in that Drywall’s claimed inability to make any payments in response to the turnover order is wilful and caused by the fault of members of the Ogalin family including defendants Frank F. Ogalin and Christina Ogalin in setting up new companies engaging in the same business as Drywall and diverting new business and some of Drywall’s assets or resources to use by those new entities, thereby depriving Drywall of income that might have been devoted to satisfaction of the turnover order. First of all it must be noted that this is not a fraudulent transfer case or a case for violation of a restrictive covenant or a violation of fiduciary duties, and those new entities are not parties before the court. This is strictly a case where the court is being asked to use its powers of contempt to enforce a civil order in aid of a property execution for money damages. The same argument of wilfulness was made and rejected in Pease v. Charlotte Hungerford Hospital, supra, where the defendant hospital complained on appeal that the trial court had improperly denied its motion for contempt without first determining whether the plaintiff’s failure to pay was wilful. After explaining the historical and policy reasons for its ruling that the award of costs could not be enforced by the court’s contempt power and consequent incarceration, the Court concluded " as a matter of law" that the trial court properly denied the motion for contempt without first determining whether the plaintiff’s failure to pay was wilful. 325 Conn. at 378.

Defendants in their brief refer to the Pease court’s footnote 11, which implies a distinction between ordinary debt and an order to turn over a specific asset. The footnote states, in part, " Exception is frequently made for cases of fraud or refusal by a party to turn over specific assets." See note, " State Bans on...