Opinion
X03HHDCV106012959S
02-27-2019
D’Anna WELSH v. William A. MARTINEZ
UNPUBLISHED OPINION
OPINION
Carl J. Schuman Judge, Superior Court
The issue presented is whether the court can consider a person’s otherwise exempt retirement accounts in determining his ability to pay a fine imposed as a sanction for civil contempt of court. For the reasons explained below, the court answers the question in the affirmative.
I
In June 2012, a jury returned a verdict against the defendant, Dr. William Martinez, in the amount of $2 million arising out of the defendant’s surreptitious installation of electronic surveillance equipment in the home and motor vehicle of the plaintiff, D’Anna Welsh— his ex-girlfriend— in order to monitor her activities. The court, Robaina, J., awarded the plaintiff $360,000 as punitive damages. In 2015, the Appellate Court affirmed the judgment and the Supreme Court denied certification. Welsh v. Martinez, 157 Conn.App. 223, 114 A.3d 1231, cert. denied, 317 Conn. 922, 118 A.3d 63 (2015).
In the meantime, the trial court had imposed various asset standstill and asset disclosure orders. In 2017, the plaintiff moved for a contempt finding against the defendant on the ground that he had violated these orders. After a hearing, the court, Moll, J., granted the motion in part and denied it in part. Judge Moll found that the defendant’s depositing of the entirety of his wages into his then-wife’s bank accounts constituted "a series of wilful violations of the Asset Standstill Order" and that the defendant had "gone to great lengths to deprive the plaintiff of the ability to use statutory collection procedures" (Entry # 268.00, pp. 13-14). The court also denied several other components of the contempt motion on the ground that the defendant’s failure to disclose certain other assets was not wilful or that the assets had no value (Entry # 268.00, pp. 14-15). As a remedy for the civil contempt finding, the court imposed a fine of $2.2 million, payable directly to the plaintiff in the amount of $25,000 per month. The court noted that the amount of the fine represented the plaintiff’s proven, actual losses as a result of the defendant’s wilful violation of the Asset Standstill Order. The court also found that "Dr. Martinez has sufficient income and other assets that render him financially able to pay the monthly amount ordered herein" (Entry # 268.00, pp. 15-16 & n.4).
The defendant then filed a second appeal to the Appellate Court and moved for a stay pending appeal. Judge Moll denied the stay motion. The court initially observed that the filing of an appeal from a judgment of contempt does not automatically result in a stay. (Entry # 272.86, citing General Statutes § 52-400d and Papa v. New Haven Federation of Teachers, 186 Conn. 725, 731, 444 A.2d 196, 200 (1982).) The court then found that, under the principles set forth in Griffin Hospital v. Commission on Hospitals & Health Care, 196 Conn. 451, 456, 458-59, 493 A.2d 229 (1985), the balancing of the equities did not favor a stay. The court observed that "Dr. Martinez has not voluntarily paid the plaintiff any amount toward the judgment, and only a small portion of the judgment has been satisfied over the past five and one-half years" (Entry # 272.86, p. 1).
The plaintiff in the meantime had filed an application for a turnover order concerning various assets, including retirement accounts, allegedly held by the defendant. On February 13 and 20 , 2018, Judge Moll issued memoranda of decisions granting and denying the application in part (Entry # s 279.00, 280.00).
The defendant has now filed an Expedited Motion for Emergency Relief seeking another stay of the contempt order (Entry # 285.00). The defendant alleges, and there is no substantial dispute, that his sole source of income was his annual salary of $1.2 million from his employment as a physician at St. Francis Hospital, that he has lost his job, that he has been unable to find a new position in his field despite his continuing efforts to do so, and that he now has no nonexempt assets to pay the monthly fine. There is also apparently no dispute that the defendant has made his monthly payments of $25,000 of the contempt fine through February 2019, totaling approximately $375,000. The defendant’s motion seeks a stay until he has found gainful employment with sufficient income that would render him financially able to make additional monthly payments. The plaintiff opposes the motion and claims that the defendant has the ability to pay based on the defendant’s ownership of four otherwise exempt retirement accounts— known familiarly as an IRA, a 401(k), a 403(b), and a 457(b) (hereinafter retirement accounts)— that total approximately $1.5 million.
The defendant owns a home but there is virtually no equity in it.
II
The defendant first argues that the court in this case has already decided the issue of whether it can consider exempt retirement accounts in determining a contemnor’s ability to pay. The defendant is incorrect. In Judge Moll’s February 13 and 20, 2018 decisions, she was deciding whether some of the retirement accounts were exempt from plaintiff’s application for a turnover order, not whether they can be considered in determining ability to pay a contempt order. See, e.g., Entry # 279.00, p. 14 ("The crux of the issue presented by this argument is whether an individual retirement account is exempt from creditors’ claims under 29 U.S.C. § 1056(d)(1) ...").
The issue here is actually not whether the defendant has the ability to pay a court financial order and should be found in contempt. On the contrary, the court has already found the defendant in contempt. The issue is instead whether the defendant has the ability to continue complying with previously-imposed contempt sanctions. Nonetheless, the same standards undoubtedly apply. It is well-settled that the "inability of [a] defendant to obey an order of the court, without fault on his part, is a good defense to the charge of contempt ..." (Internal quotation marks omitted.) Afkari-Ahmadi v. Fotovat-Ahmadi, 294 Conn. 384, 398, 985 A.2d 319, 328 (2009). Thus, a court cannot enforce a contempt financial order unless the contemnor has the ability to pay. See Watrous v. Watrous, 108 Conn.App. 813, 833 n.9, 949 A.2d 557 (2008) ("the court found that the defendant had the ability to pay alimony and child support and, therefore, was in wilful contempt of the court’s financial orders").
In arguing that he lacks the ability to pay, the defendant claims that the retirement accounts are exempt from consideration. The plaintiff relies on General Statutes § 52-350f, which provides in pertinent part: "[a] money judgment may be enforced against any property of the judgment debtor unless the property is exempt from application to the satisfaction of the judgment under section 52-352a, 52-352b, 52-352d or 52-361a, or any other provision of the general statutes or federal law." Under § 52-352a, ‘Exempt’ means, unless otherwise specified, not subject to any form of process or court order for the purpose of debt collection ..." General Statutes § 52-352a(c). Included in § 52-352b, a statute listing forms of "Exempt Property," are [a]ny assets or interests of an exemptioner in, or payments received by the exemptioner from, a plan or arrangement described in section 52-321a ..." General Statutes § 52-352b(m). Section 52-321a, in turn, renders "exempt from the claims of all creditors of such participant or beneficiary" various federally-authorized retirement accounts such as "a retirement plan established by a corporation which is qualified under Section 401, 403, 404 or 409 of the Internal Revenue Code of 1986 ..." General Statutes § 52-321a(a)(1).
These statutes most certainly make the retirement accounts in this case exempt from a "court order for the purpose of debt collection" and from the "claims of all creditors." General Statutes § § 52-321a(a)(1), 52-352a(c). However, the present issue does not involve an attempt by a private party to collect a debt or the claim of a private creditor. Rather, it involves the question of whether a court can enforce its own contempt order and consider these assets in determining a contemnor’s ability to comply. The exemption statutes simply do not address this issue.
This issue is apparently one of first impression in Connecticut. Appellate courts in various other states have addressed this issue, however, and seemingly are in agreement that a court can consider otherwise exempt assets in determining ability to pay for purposes of contempt. See Wix v. Wix, 159 So.3d 312, 315 (Fla.Dist.Ct.App. 2015) (in civil contempt case, "a payor spouse cannot claim inability to pay while at the same time using an IRA to hoard assets ... The fact that the account in question here is a 401k rather than an IRA account does not require a different result.") Christensen v. Iowa District Court for Polk County, 578 N.W.2d 675, 678 (Iowa 1998) ("The primary piece of evidence supporting the trial court’s finding of contempt is the uncontroverted existence of a retirement account Steven could have accessed to meet his obligations"); Krokyn v. Krokyn, 378 Mass. 206, 213-14, 390 N.E.2d 733, 737 (1979) ("[c]ommon sense and basic concepts of fairness support the notion that ownership of a valuable asset demonstrates ability to pay without further inquiry as to whether payment can be enforced directly against the asset"); Plasman v. Decca Furniture (USA), Inc., 800 S.E.2d 761, 776 (N.C. Ct.App. 2017), review denied, cert. denied, 812 S.E.2d 849 (N.C. 2018) ("this Court has previously held that a trial court properly considered funds in a defendant’s retirement account in determining that the defendant had the present ability to pay alimony arrears and purge himself of civil contempt"); Johnson v. Johnson, 85 Ohio App.3d 161, 164, 619 N.E.2d 458, 460 (1993) ("[i]t is clear that the court’s order does not direct the prohibited act, the attachment of or execution against appellant’s retirement fund directly, but is only an order allowing appellant to avoid incarceration by himself taking steps to divide the fund. The primary purpose of the order is to vindicate the authority of the court"). Succinctly stated, the holding of these courts is that "the test for determining an ability to pay is not merely whether [the contemnor] is presently working or has current funds or cash on hand, but whether he has any property out of which payment can be made." (Internal quotation marks omitted.) Christensen v. Iowa District Court for Polk County, supra, 578 N.W.2d 678-79.
The court adopts the reasoning of these courts. Not only are the exemption statutes inapplicable here because the case does not involve an attempt by a private party to collect a debt, but the court is not directly ordering the defendant to liquidate his otherwise exempt retirement accounts. These accounts do reveal an ability to pay but the court has no preference as to whether the defendant liquidates these accounts or finds some other way to pay his fine, such as using these accounts as security to obtain a loan. Ultimately, however, the question is whether the defendant has the ability to pay a fine of $25,000 per month. The court certainly cannot say that a person who has $1.5 million in retirement accounts is unable to pay this fine.
The court recognizes that there will be tax consequences and other complications if the defendant has to liquidate his retirement accounts. But there would also be hardship if the defendant had to sell his house or make available his savings account. The hardship that the defendant will encounter in paying the fine is inevitable, but against that hardship the court must weigh some of the aggravating factors. The jury found the defendant to have committed a serious invasion of the plaintiff’s privacy. The defendant has failed for over six years to pay any substantial part of the judgment against him. As Judge Moll found, the defendant has committed "a series of wilful violations of the Asset Standstill Order" and had "gone to great lengths to deprive the plaintiff of the ability to use statutory collection procedures." The court has found the defendant in contempt of court. The court has an obvious interest in insuring compliance with its orders.
The court thus declines to grant an indefinite stay. The court nonetheless will give the defendant some additional time to obtain employment and to get his financial affairs in order. The court accordingly grants a limited stay until April 10, 2019 and orders that, at that time, the defendant must comply with the order of contempt and resume making payments of $25,000 per month.
III
The court grants a stay only until April 10, 2019, at which time the defendant must comply with the order of contempt and resume making payments of $25,000 per month.
It is so ordered.