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Wechsler v. Wechsler

Supreme Court of Idaho

December 6, 2017

SHARON WECHSLER, Plaintiff-Respondent,
v.
NORMAN J. WECHSLER, Defendant-Appellant.

         Appeal from the District Court of the Sixth Judicial District of the State of Idaho, Bannock County. Hon. David C. Nye, District Judge.

         The District Court's decision is affirmed. Attorney fees and costs on appeal are awarded to respondent.

          May, Rammell & Thompson, Chtd., Pocatello, attorneys for appellant. Bron M. Rammell argued.

          Racine, Olsen, Nye, Budge & Bailey, Chtd., Pocatello, attorneys for respondent. Stephen J. Muhonen argued.

          JONES, Justice.

         I. Nature of the Case

         Appellant, Norman Wechsler ("Norman"), and Respondent, Sharon Wechsler ("Sharon"), divorced in New York in 2005. A Divorce Judgment, dated November 9, 2005, was entered in the office of the New York County Clerk on February 3, 2006, which set forth a distribution of the parties' property and maintenance obligations. In 2014, Sharon moved a New York court for an order to direct the entry of a money judgment in her favor because Norman had defaulted on his obligation to transfer funds according to the Divorce Judgment. On May 27, 2014, a New York court granted Sharon's motion and issued a $9, 468, 008.98 Judgment in her favor. On March 10, 2015, the New York Judgment was filed in Idaho as a Foreign Judgment (the "Foreign Judgment"). The issues on appeal relate to Sharon's attempt to collect on the Foreign Judgment.

          II. Factual and Procedural Background

         On March 16, 2012, Sharon partially collected on a $17, 669, 678.57 divorce-related Judgment by executing on Norman's house in Colorado. Between the acquisition of Norman's Colorado house, and the filing of the Foreign Judgment in Idaho, Norman did not disclose his updated address; accordingly, in an affidavit filed with the Idaho Foreign Judgment, Sharon indicated that Norman's last known address was the Colorado house that she had acquired. Unbeknownst to Sharon, Norman had moved to a rental apartment in Angel Fire, New Mexico. After living in New Mexico for one year, Norman moved to Pocatello, Idaho.

         On May 2, 2013, a New York court issued an order appointing Joseph B. Nelson as receiver for the assets held by Norman, including Norman's interest in CYB Master, LLC, a holding company. The New York court reasoned that the appointment of a receiver was appropriate because Norman had not satisfied several divorce related judgments, nor had he paid maintenance and distributive award obligations. The New York court noted that Norman's interest in intangible assets, including interests in several LLCs, warranted the appointment of a receiver. The order granted Mr. Nelson wide-ranging authority to liquidate Norman's assets and disburse the resulting money to Sharon to satisfy the New York Judgment.

         On August 26, 2015, Sharon moved for an order in Idaho to conduct a debtor's examination of Norman. Therein, she noted that the Foreign Judgment remained unsatisfied and claimed that an examination of Norman, under oath, could reveal property owned by Norman, or property in which Norman has an ownership interest, upon which she could execute. The district court issued an order for a debtor's examination, and on September 16, 2015, Sharon conducted a debtor's examination of Norman. Norman was evasive during the examination. For example, when asked whether he had caused CYB Master, LLC to transfer money or property to any individual or entity during the last three years, Norman replied "Well, you know, what do you mean did I cause some? Did the butterfly beating its wings in China cause the thunderstorm that we had two weeks ago in Pocatello?" However, Norman did state that: (1) he kept his personal business records in his house in Pocatello, Idaho; (2) his records for CYB Master, LLC are kept "[h]ither and yon" and may be on his computer in Pocatello; and (3) his records for life insurance policies are stored on a home computer owned by IntelliCorp (a company for which he is a director). Throughout the debtor's examination, Norman refused to answer many questions relating to his business interests claiming that it was not his right to provide information of "third parties" to Sharon.

         On the same day as the debtor's examination, Sharon served Norman a subpoena duces tecum, which demanded the production of records relating to his assets as well as his business and investment interests. On October 14, 2015, Norman sent a letter to Sharon in which he explained that he refused to produce documents pertaining to his business or investment interests because that information belonged to "third parties, " and he did not have the right to produce those documents. On October 16, 2015, Norman filed an objection and request for a protective order for the subpoena duces tecum. On December 8, 2015, Sharon sent a letter to Norman, which requested the production of certain documents that were not produced as requested in the subpoena duces tecum. In support of her request, Sharon cited Idaho Rules of Civil Procedure 34(a) and 45(b), and stated that her request was a "good faith attempt to avoid bringing contempt proceedings." On January 7, 2016, Norman responded by letter and explained that he would not produce the requested documents.

         On March 28, 2016, Sharon filed a motion to compel responses to certain debtor's examination questions. In support of her motion, Sharon attached an affidavit of her Idaho attorney, David Alexander; an affidavit of her New York attorney, Louis Black; and a memorandum. Sharon also filed a motion to appoint an ancillary receiver "to assist the primary receiver appointed over [Norman] in marshalling assets and property of [Norman] located within the State of Idaho."

         In response, Norman filed a motion to strike the affidavit of Louis Black. Therein, he argued that certain exhibits attached to Mr. Black's affidavit should not be admitted because they were hearsay and lacked context or foundation. Norman also filed a motion to strike portions of Sharon's memorandum of law arguing that certain portions must be struck because they "contain redundant, immaterial, impertinent, or scandalous matter."

         On May 11, 2016, the district court issued a decision addressing the motion to compel, the motion to appoint an ancillary receiver, and the motions to strike. The district court granted Sharon's motion to compel, writing:

The [c]ourt hereby orders Norman to comply with Sharon's request and present answers to questions asked during the debtor's exam in relation to the two corporate entities owned by him. Furthermore, Norman is ordered to produce all documents necessary for Sharon and the receiver to assess any and all assets that may be used to satisfy the debt.

         The district court also granted Sharon's motion to appoint an ancillary receiver, David M. Smith, CPA (the "Ancillary Receiver"), to help the primary receiver, who was appointed by a New York court, in his fiduciary duties over CYB Masters, LLC. The district court denied Norman's motion to strike Louis Black's affidavit. The district court explained that Norman objected to emails attached to Mr. Black's affidavit, which purport to detail Norman's interests in various entities, on the grounds that they were inadmissible hearsay. The district court noted that the affidavit would not be struck because it was used during the course of discovery and the rules of discovery are broader than the rules of evidence. Similarly, the district court denied Norman's motion to strike portions of Sharon's memorandum.

         On May 24, 2016, the district court issued an order appointing the Ancillary Receiver pursuant to Idaho Code section 8-601. Therein, the district court appointed David M. Smith as the Ancillary Receiver and granted him:

all of the powers authorized pursuant to Idaho Code § 8-605, namely, . . . as receiver; to take and keep possession of the property, to receive rents, collect debts, to compound for and compromise the same, to make transfers, and generally to do such acts respecting the property as the court may authorize.
. . . .
All parties to this action are ordered to cooperate with and assist the Ancillary Receiver in taking possession of the property described above. The past and/or present officers, directors, agents, members, managers, general partners, managing partners, trustees, attorneys, accountants, and employees of CYB Master LLC, any of the "Receivership Defendants" identified in the Order Appointing Receiver Pursuant to CPLR 5228, or any employee, officer, director, or agent of any second-tier or subsequent-tier entity, are ordered to turn over to the Ancillary Receiver forthwith all paper and electronic information belonging to and/or relating to CYB Master LLC, any of the "Receivership Defendants, " and/or any second-tier or subsequent-tier entities or assets, in such manner as the Ancillary Receiver may specify.

         Hours later, Norman filed an objection and response to Sharon's proposed order appointing the Ancillary Receiver.

         On June 8, 2016, Sharon filed an Application for Writ of Assistance wherein she requested that the Bannock County Sheriff's Office assist the Ancillary Receiver in taking possession of Norman's business records. The Writ of Assistance (the "Writ") was issued that same day.

          On June 16, 2016, the Ancillary Receiver, Deputy Nickel, and Sergeant Dalquist, of the Bannock County Sheriff's Department, served the Writ on Norman in an effort to collect the items as outlined therein. Norman refused to let the Ancillary Receiver or Sheriff's deputies in, and he did not produce any documents. Not wanting to escalate the situation, the Sheriff's deputies and the Ancillary Receiver left.

         On June 17, 2016, Norman filed a notice of appeal of the district court's decision on the motion to compel, motion to appoint the Ancillary Receiver, and the motions to strike. This Court issued a Notice of Defect on July 12, 2016 advising that the decision was not appealable pursuant to Idaho Appellate Rule 11(a)(7). Also on June 17, 2016, Norman filed a motion to stay the enforcement of the district court's orders, which the district court denied. The district court reasoned that Norman's motion was "nothing more than another attempt . . . to avoid his duties and waste the time and resources of the judicial system."

         On June 20, 2016, Sharon filed a motion for contempt seeking court assistance due to Norman's refusal to cooperate with the Ancillary Receiver's attempt to take possession of certain documents. Also on June 20, 2016, Norman filed an objection to the Writ arguing that it "grants unconstitutionally wide ranging seizure authority to the Bannock County Sheriff and the Receiver." Thereafter, Norman appealed the district court's grant of the Writ.

         On July 18, 2016, the district court held a hearing on Sharon's motion for contempt. During the hearing, Norman made an oral motion regarding a perceived conflict of interest between the Ancillary Receiver and Sharon. On October 28, 2016, the district court issued a decision in which it denied Norman's motion regarding the conflict of interest. The district court explained that Norman's argument was twofold: (1) Sharon was paying the Ancillary Receiver and therefore his allegiance would be swayed to Sharon; and (2) Sharon's counsel represented the Ancillary Receiver. The district court rejected Norman's first argument and held that it was not a conflict of interest because Sharon was required by the district court's order to pay the Ancillary Receiver and then seek reimbursement, if available. The district court rejected Norman's second argument, noting that Sharon's counsel did not represent the Ancillary Receiver in the instant action; rather, Sharon filed contempt charges on behalf of the Ancillary Receiver after Norman refused to let him in his home to accomplish his court ordered duty. The district court continued, writing: "the so called 'representation' only occurred as a result of [Norman's] alleged contempt. The [Ancillary Receiver] would not have needed any representation but for [Norman's] conduct."

         On November 7, 2016, Norman filed a second amended notice of appeal from the district court's decision on the motion to compel; the motion to appoint the receiver; the motions to strike; the order appointing an ancillary receiver; and the decision regarding the conflict of interest.

         On January 12, 2017, the district court held a hearing on the contempt motion. Norman, the Ancillary Receiver, and Sheriff's Deputy Phil Nickel were all called as witnesses. On February 7, 2017, the district court issued a decision on Sharon's motion for contempt in which it concluded that Norman was in contempt of its prior orders. The district court rejected two of Norman's preliminary arguments: (1) the Writ violated Idaho Rules of Civil Procedure because he did not receive it; and (2) to comply with his Sixth Amendment right to confrontation, Sharon's presence was required at the hearing in order to effectuate a charge of contempt. In dismissing Norman's first argument, the district court analyzed whether the Writ qualified as an order such that it must be immediately served upon all parties pursuant to Idaho Rule of Civil Procedure 2.3(b). The district court compared the ex parte issuance of the Writ to an issuance of a search warrant-in certain circumstances, both may be issued without notice to the person in possession for fear of destruction or concealment of the items to be seized. The district court noted that in this case, Sharon and the receiver in New York had been attempting to collect on the Judgment and gather assets for many years without success; therefore, serving the Writ without notice was appropriate and "more akin to a subpoena or warrant th[a]n to an order." Further, the district court cited Thomas v. Stephen, wherein this Court affirmed the issuance of an ex parte writ of assistance. 78 Idaho 266, 300 P.2d 811 (1956). Norman's second preliminary argument-that Sharon's presence was required to effectuate the charge of contempt-was also rejected by the district court because the Ancillary Receiver and the Sheriff's deputies were the individuals who laid out the facts necessary to allege contempt. The district court held that because Norman was able to confront them via cross-examination, Norman's Sixth Amendment right to confront was not violated.

         After addressing Norman's preliminary arguments, the district court turned to Norman's main argument: whether a search warrant was necessary to enter Norman's home to effectuate the Writ. The district court compared a search warrant to a writ of assistance and noted the significant differences, namely: a writ of assistance does not require a showing of probable cause that a criminal offense has been committed; a writ of assistance does not need to satisfy Fourth Amendment requirements; a writ of assistance does not simply allow, but rather commands a person to take possession of whatever is included in the writ; and a writ is used to enforce a court order or judgment. The district court concluded that a search warrant was not necessary in order for the Writ to be valid because, if that were the case, a judge would be required to make a determination of probable cause for criminal conduct, which has not been alleged here. Ultimately, the district court granted Sharon's motion for contempt and imposed the following sanctions: (1) the Sheriff's deputies and the Ancillary Receiver would return to Norman's house and perform their duties under the Writ; and (2) Norman would bear the costs associated with the first attempt to exercise on the Writ including Sharon's cost of bringing the motion for contempt.

         III. Issues on Appeal

         1. Whether the district court abused its discretion in granting Sharon's motion to compel.

         2. Whether the district court abused its discretion in appointing the Ancillary Receiver.

         3. Whether Norman's constitutional rights were violated.

         4. Whether the district court erred by holding that: (1) attachments to Louis Black's affidavit were not hearsay; and (2) Sharon's memorandum in support of her motion to appoint the Ancillary Receiver did not contain unsubstantiated or scandalous information without foundation.

         5. Whether the district court erred by finding that there was not a conflict of interest between Sharon and the Ancillary Receiver.

         6. Whether the district court erred by holding Norman in contempt of court. 7. Whether either party is entitled to costs and attorney fees on appeal.

         IV. Standard of Review

         "Control of discovery is within the trial court's discretion." Westby v. Schaefer, 157 Idaho 616, 621, 338 P.3d 1220, 1225 ...


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