Judges uphold contempt order against attorney

A Morgan Circuit judge had jurisdiction to order a Unionville attorney to pay $75,000 to the county clerk after finding the attorney in contempt, the Indiana Court of Appeals ruled Tuesday.

In the case In Re: The Order of Contempt Against Craig Benson, Martinsville Depot, Inc., and SBS Enterprises, Inc. v. Co-Alliance, LLP, No. 55A04-1010-CC-646, Craig Benson appealed the trial court’s finding that he was in contempt of court orders by distributing funds in 2010 that were to be held in his account. Martinsville Depot Inc. and SBS Enterprises were represented by Benson in a complaint filed by Co-Alliance seeking money for fuel that it had provided to Depot. The court ordered that proceeds from sales of assets from the defendants should be held until the court decides what should happen to those proceeds.

A sale happened in February 2010, and funds were deposited into Benson’s escrow account. Despite the court order, Benson distributed $75,000 to creditors and himself for attorney fees. After the distributions, Benson filed a motion for partial relief to be allowed to distribute some funds, but that was denied.

Several months later, SBS and Depot filed for protection under Chapter 7 of the United States Bankruptcy Code and proceedings against SBS and Depot were stayed by the trial court. Co-Alliance then filed an unverified motion for contempt against Benson, and later filed a similar amended verified motion for contempt. The trial court found Benson in contempt and ordered he pay the $75,000 to the Morgan County Clerk and that he be jailed until he paid the money. He paid the amount owed to the clerk.

Benson attempted to have the contempt petition dismissed because the original contempt petition was unverified. It appears the parties decided to have the trial judge rule on the original motion, but even if the court erred by proceeding on this motion, any error didn’t affect Benson’s substantial rights, ruled the appellate court. As a result of the amended contempt motion, the trial court had before it almost identical verified allegations against Benson, so the essential purpose of the verification requirement was satisfied, wrote Judge Michael Barnes.

Also, the trial court did have subject matter jurisdiction to order the payment of $75,000 for contempt even though the bankruptcy court had previously stayed the proceedings. The money the trial court ordered him to pay wasn’t proceeds from the defendants’ sale and property of the bankruptcy estate, but was Benson’s personal money and it was damages resulting from his contempt. The funds at issue here aren’t subject to the bankruptcy court’s jurisdiction, wrote the judge.