Miss Jones LLC v. Stiles

Background

Miss Jones LLC brought a mortgage-foreclosure action against Keith Stiles, Moy Rlty, LLC, and Van Hasselt Auto Service. The court had appointed a receiver after Miss Jones requested one. The September 27, 2019 receiver order required Stiles to pay the receiver security deposits and rent that was due and unpaid or later became due, and to provide copies of existing leases.

After the first receiver became ill, Miss Jones requested appointment of a replacement receiver. Miss Jones alleged that Stiles had arranged for his tenant, Lisa Lancia, to prepay rent through July 2020 to evade the receiver order. On December 5, 2019, the court entered an order that expanded the rent-turnover requirement to rent collected beginning April 22, 2019 and included consequences for noncompliance.

Miss Jones later moved for sanctions. It asked the court to hold Stiles in civil contempt, impose a $200-per-day fine, imprison him until he complied, certify facts for criminal-contempt proceedings, and grant other appropriate relief.

Lease and Payment Evidence

The record contained an earlier lease rider and an amended lease rider between Stiles and Lancia. The amended agreement extended the lease through July 31, 2020 and required a $32,000 upfront payment plus $3,000 monthly payments for ten months, for a total of $62,000. Lancia’s records showed that her last payment to Stiles was in July 2019.

The court rejected Miss Jones’s assertion that Stiles arranged a new one-year prepayment in July 2019 to circumvent the order. It found that the amended lease rider was entered into in February 2019, before Miss Jones’s receiver motion, and that the documents and accounting supported Stiles’s and Lancia’s accounts. The court said Miss Jones appeared to have misread the lease documents and had not provided evidence of an additional lease change.

The court found one violation: Stiles did not give the replacement receiver rent collected from Lancia between April 22, 2019 and the date of the December 5, 2019 order. The amount was between $7,185 and $12,000. The court found no evidence that Stiles had a security deposit to turn over and no rent due between July 2019 and the filing of the sanctions motion.

Civil Contempt Analysis

Civil contempt is a court’s power to coerce compliance with a clear order. The court explained that Miss Jones had to show that the order was clear and unambiguous, that noncompliance was proven clearly and convincingly, and that Stiles had not diligently tried to comply reasonably.

The parties agreed that the order was clear and unambiguous. The court found that Stiles had not paid the rent for nearly a year and that the record showed no effort to comply. But it accepted his inability-to-pay defense. His evidence included negative bank-account balances, an affirmation about his finances and employment, and a letter concerning his sons’ school accounts. The court found that Stiles was unable to pay when the motion was served, although it said he might have been able to pay when the order was issued.

The court also rejected Miss Jones’s argument that any inability to pay was self-created. Because the record did not support the allegation that Stiles changed the lease to evade the order, the court found that any inability to pay the rent collected between April 22 and September 27, 2019 was not self-created.

Although the court found a violation, it declined to exercise its discretion to hold Stiles in civil contempt. It stated that the expanded reach of the order had been based on Miss Jones’s unsupported circumvention allegation and that it saw no need to impose contempt for the unpaid rent. The court nevertheless expected Stiles to comply, including by paying rent directly to the replacement receiver and making diligent efforts to pay the earlier-collected rent.

Criminal Contempt and Disposition

Criminal contempt is punitive and requires proof that the defendant knowingly and willfully violated a reasonably specific court order. Judge Nelson S. Roman declined to pursue criminal contempt because the record did not suggest intentional circumvention of the receiver order.

The court denied the sanctions motion and directed the clerk to terminate the motion at docket entry 137. The opinion’s conclusion refers to “Defendant’s motion for sanctions,” although the opinion repeatedly identifies the motion as Miss Jones LLC’s motion for sanctions; the ruling itself is clear that the sanctions request was denied.