Hadley v Bank of Hawaii [1996] FMSC 54; 7 FSM Intrm. 449 (App. 1996) (3 April 1996)

FEDERATED STATES OF MICRONESIA
SUPREME COURT APPELLATE DIVISION
Cite as Hadley v Bank of Hawaii, [1996] FMSC 54; 7 FSM Intrm. 449 (App. 1996)

NELSON HADLEY,
Appellant,

vs.

BANK OF HAWAII,
Appellee.

APPEAL CASE NO. P5-1995

OPINION

Argued: January 15, 1996
Decided: April 3, 1996

BEFORE:

Hon. Richard H. Benson, Associate Justice, FSM Supreme Court
Hon. Martin G. Yinug, Associate Justice, FSM Supreme Court
Hon. Wanis R. Simina, Temporary Justice, FSM Supreme Court*

Associate Justice, Chuuk State Supreme Court, Weno, Chuuk

APPEARANCES:

For the Appellant:
Charles Greenfield, Esq.
Micronesian Legal Services Corporation
P.O. Box 129
Kolonia, Pohnpei FM 96941

For the Appellee:
Michael White, Esq. (brief)
White, Pierce, Mailman & Nutting
P.O. Box 5222
Saipan, CM 96950

Douglas Parkinson, Esq. (argued)
Law Offices of R. Barrie Michelsen
P.O. Box 1450
Kolonia, Pohnpei FM 96941

* * * *

HEADNOTES

Contempt
Before a trial court can hold a defendant in civil contempt of a court order it must find that the alleged contemnor knew of the court order and it must find that the alleged contemnor had the ability to comply with that order. Hadley v. Bank of Hawaii, [1996] FMSC 54; 7 FSM Intrm. 449, 452 (App. 1996).

Appeal and Certiorari - Standard of Review
Whether a debtor has the ability to comply with an order in aid of judgment is a finding of fact, which will be set aside on appeal only if it is clearly erroneous. Hadley v. Bank of Hawaii, [1996] FMSC 54; 7 FSM Intrm. 449, 452 (App. 1996).

Appeal and Certiorari - Standard of Review
In determining whether a factual finding is clearly erroneous, an appellate court must view the evidence in the light most favorable to the appellee, but it should not set aside a finding of fact where there is credible evidence in the record to support that finding, in part because the trial court had the opportunity to view the witnesses and the manner of their testimony. If, upon reviewing all the evidence in the record, the appellate court is left with the definite and firm conviction that a mistake has been made, it may then conclude that the trial court's finding was clearly erroneous, but it cannot substitute its judgment for that of the trial court. Hadley v. Bank of Hawaii, [1996] FMSC 54; 7 FSM Intrm. 449, 452 (App. 1996).

Contempt
The inability of an alleged contemnor, without fault on his part to obey a court order generally absolves him from being held in contempt for violating that order, but such a defense is effective only where, after using due diligence, the person still is not able to comply with the order. The defense of inability to comply is not available where the contemnor has voluntarily created the incapacity. Hadley v. Bank of Hawaii, [1996] FMSC 54; 7 FSM Intrm. 449, 452 (App. 1996).

Contempt; Debtors' and Creditors' Rights
FSM law allows imprisonment of a debtor for "not more than six months" if he is "adjudged in contempt as a civil matter" for failure "without good cause to comply with any order in aid of judgment." 6 F.S.M.C. 1412. The inability of a judgment debtor to comply with an order in aid of judgment without fault on his part after his exercise of due diligence constitutes "good cause" within the meaning of the statute. Hadley v. Bank of Hawaii, [1996] FMSC 54; 7 FSM Intrm. 449, 452 (App. 1996).

Contempt; Debtors' and Creditors' Rights
Generally, a person who seeks to satisfy the court that his failure to obey an order or decree was due entirely to his inability to render obedience, without fault on his part, must prove such inability. The FSM Supreme Court places the burden on the movant to show that the debtor has the ability to comply. Once this burden has been met and the debtor has been held in contempt, it is then the debtor's burden to show that he no longer has the ability to comply through no fault of his own despite his exercise of due diligence. Hadley v. Bank of Hawaii, [1996] FMSC 54; 7 FSM Intrm. 449, 452-53 (App. 1996).

Contempt; Debtors' and Creditors' Rights
In order to hold a debtor in contempt for failure to comply with an order in aid of judgment it is not enough that the debtor's noncompliance was found to be willful. There must also be a recital, or a finding somewhere in the record, that the debtor was able to comply. Hadley v. Bank of Hawaii, [1996] FMSC 54; 7 FSM Intrm. 449, 453 (App. 1996).

* * * *

COURT'S OPINION

RICHARD H. BENSON, Associate Justice:

This is an appeal from an order of commitment of a judgment debtor for contempt of court for failure to comply with an order in aid of judgment. The issue before us is whether a finding by the court of the contemnor's present ability to comply with the court order is necessary before the contemnor can be jailed for violation of the court order. We hold that it is.

I. Background

Nelson Hadley borrowed $897.95 from the Bank of Hawaii on April 25, 1989, signing a promissory note to that effect. The loan was to be paid back at the rate of $66.33 a month from June 1989 to August 1990. The principal sum was reduced to $850.26 before the borrower defaulted. The bank filed suit on August 24, 1992. Judgment was entered on July 30, 1993.

Nelson Hadley, the judgment debtor, appeared before the trial court on numerous occasions. On October 27, 1993, at a hearing on the plaintiff's motion for an order in aid of judgment, the debtor asked if he could pay $20 biweekly. The court so ordered. No payments were made. At a March 18, 1994 hearing on a motion to show cause why he should not be held in contempt, the debtor assured the court he would make the $20 biweekly payments if not held in contempt then. Not one payment had been made when the debtor again appeared, on June 16, 1994. The court found that he had been diverting his resources to other uses,[1] and felt it had no choice but to find him in contempt of its March 30th order, which reflected the proceedings of March 18th. The court found that the debtor had been able to make the payments and chose not to do so, and ordered commitment to jail unless the $120 arrears was paid by July 18, 1994. The debtor paid $80 on July 14, 1994. No other payments were made.

Due to the debtor's repeated failures to comply with the court's orders, the debtor was ordered committed to jail on January 3, 1995, unless he had paid his arrearages by then. The debtor tendered another $20 in partial payment and moved that the order of commitment be vacated. Plaintiff's attorney also requested that suspension of sentence be continued to March 1995. In March, the debtor tendered $200 [arrearages were then $360] and asked that payments be reduced to $20 a month. (This payment evidently paid off the arrearages due at the time of the original June 1994 finding of contempt perhaps purging him of that contempt.) The motion to commit was thus continued to September and the reduction to $20 monthly was granted by the court's written order of April 26, 1995. None of these monthly payments had been made at the time of the September 28, 1995 hearing.

Nor had the debtor ever made any of the earlier court-ordered biweekly payments although the payments were set at a level requested by the debtor. His only payments had come when threatened with jail. The debtor testified that he usually appeared in court having gotten a job shortly beforehand, but not having received a paycheck yet. Transcript at 9-11 (Sept. 28, 1995). The debtor admitted that this had happened five times. Id. at 11.

The trial court judge concluded that the debtor "ha[d] been before th[e] Court many times, and I have tried my best not to put you in jail, but I am convinced that you are not trying very hard." Id. at 19. The trial court found that the debtor's failure to comply with the court orders "had been willful," that he "had repeatedly made promises to the plaintiff and to the Court that he had no intention of keeping," and that "he had made no sincere effort to make [the] payments required." Order and Memorandum of Decision at 5 (Oct. 3, 1995). The court therefore ordered the debtor committed to jail from 5:00 p.m. to 8:00 a.m. on weekdays and all day weekends for a period not to exceed thirty days. The debtor appealed. The court granted a stay of its order as a matter of statutory right. 4 F.S.M.C. 119(3).

II. Issues Raised by the Appellant

The appellant raises two issues. He contends that the trial court erred in finding that he had the ability to comply with the court's order - to make the payments. He also contends that he cannot be committed to jail for failure to pay because in the Federated States of Micronesia "[i]mprisonment for debt is prohibited." FSM Const. art. IV, § 13.

III. Standard of Review

Before a trial court can hold a defendant in civil contempt of a court order it must find that the alleged contemnor knew of the court order and st find that the alleged coed contemnor had the ability to comply with that order. See, e.g., Rappaport v. Superior Court, 102 P.2d 526, 529 (Cal. Dist. Ct. App. 1940). In this case it is undisputed that the debtor knew of the orders. The debtor, however, disputes that he had the ability to comply with the order of April 26, 1995.

Whether a debtor has the ability to comply with an order in aid of judgment is a finding of fact. See, e.g., United States ex rel. Thom v. Jenkins, [1985] USCA7 379; 760 F.2d 736, 738 (7th Cir. 1985). A trial court's findings of fact are set aside only if they are clearly erroneous. Kapas v. Church of Latter Day Saints, 6 FSM Intrm. 56, 59 (App. 1993); see also FSM Civ. R. 52(a). In determining whether a factual finding is clearly erroneous, an appellate court must view the evidence in the light most favorable to the appellee. Kinere v. Kosrae, [1993] FMSC 43; 6 FSM Intrm. 307, 309 (App. 1993). An appellate court should not set aside a finding of fact where there is credible evidence in the record to support that finding, in part because the trial court had the opportunity to view the witnesses and the manner of their testimony. Nakamura v. Bank of Guam (II), [1994] FMSC 2; 6 FSM Intrm. 345, 349 (App. 1994). If, upon reviewing all the evidence in the record, the appellate court is left with the definite and firm conviction that a mistake has been made, it may then conclude that the trial court's finding was clearly erroneous, Kinere, 6 FSM Intrm. at 309, but an appeals court cannot substitute its judgment for that of the trial court. Kapas, 6 FSM Intrm. at 59.

IV. Debtor's Ability to Comply

"The inability of an alleged contemnor, without fault on his part" to obey a court order generally absolves him from being held in contempt for violating that order. 17 Am. Jur. 2d Contempt § 161, at 514 (1990). "[S] de a defense is effective only where, after using due diligence, the person still is not able to comply with the order." Id. at 515. Generally, "the defense of inability to comply with a court order is not available where the contemnor has voluntarily created the incapacity." Id. FSM law allows imprisonment of a debtor for "not more than six months" if he is "adjudged in contempt as a civil matter" for failure "without good cause to comply with any order in aid of judgment." 6 F.S.M.C. 1412. We hold that the inability of a judgment debtor to comply with an order in aid of judgment without fault on his part after his exercise of due diligence constitutes "good cause" within the meaning of the statute.

Generally, "[a] person who seeks to satisfy the court that his failure to obey an order or decree was due entirely to his inability to render obedience, without fault on his part, must prove such inability." 17 Am. Jur. 2d Contempt § 161, at 5990). However, the, the FSM Supreme Court has traditionally placed the burden on the movant to show that the debtor has the abilo comply. We believe that this is reasonable in light of the fact that in the FSM debtors uors usually appear pro se and creditors do not. Once this burden has been met and the debtor has been held in contempt, it then should be the debtor's burden to show that he no longer has the ability to comply through no fault of his own despite his exercise of due diligence.

V.

We do not conclude that the trial court's findings are clearly erroneous. Those findings are supported by credible evidence in the record. We therefore affirm the trial court's findings that the debtor's noncompliance had been willful, that the debtor repeatedly made promises to the plaintiff and the court he had no intention of keeping, and that the debtor made no sincere effort to make the payments required. We take it that when the trial justice said, "I am convinced that you are not trying very hard," he was finding that the debtor was not using due diligence to comply with the order in aid of judgment. That finding is also affirmed.

We cannot agree with the debtor's contention that the trial court's finding that the debtor had the ability to comply with the court's April 26th order was clearly erroneous when we cannot locate such a finding in the record. We are troubled by the lack of such a finding or a recital thereof in the court's September 28th oral findings, in its September 29th Order of Commitment, or in its October 3rd Order and Memorandum of Decision. Such a recital, or a finding somewhere in the record, is necessary. In re Cowden, 73 P. 156, 156 (Cal. 1903). It may indeed be that the debtor had the ability to comply with the April 26th order, or that he would have had the ability to pay if not for fault on his part. It may be he did not. We, however, cannot substitute our own judgment for that of the trial court and make findings that are not in the record. It is not enough that the debtor's noncompliance was found to be willful. There must also be a finding that the debtor was able to comply.

We therefore vacate the order of commitment and remand for the limited purpose of allowing the trial court the opportunity to make the appropriate finding. Because of our remand we do not reach the constitutional issue.

* * * *

---

^[1] The Minutes Entry for this hearing indicates that the debtor said some money had gone for an aunt's funeral, some had gone for damages to an auto caused by his son, and $60 went to Public Utilities Corporation, and that he was earning $80 biweekly. Most of this was corroborated by the debtor's later testimony. Transcript at 10 (Sept. 28, 1995).