Smith County Planning Commission v. Carver Trucking, Inc.

Citation: Not availableDocket: M2011-00146-COA-R3-CV

Court: Court of Appeals of Tennessee; July 11, 2012; Tennessee; State Appellate Court

Original Court Document: View Document

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The case involves an appeal by Carver Trucking, Inc., a closely-held corporation owned by Wayne Carver, against a contempt ruling by the Circuit Court of Smith County. The court found that Carver Trucking violated zoning ordinances by operating a trucking terminal and salvage yard without authorization on property they leased and later purchased. Following a notice of violation issued by the Smith County Planning Commission in December 2008, which identified illegal activities, the property owner appealed but only regarding the trucking terminal. After the zoning board confirmed the violation, the owner transferred the property to Carver Trucking for $22,000. Carver Trucking continued to operate the unauthorized terminal and salvage yard, leading to a lawsuit by the Planning Commission in May 2009. The trial court ruled in favor of the Planning Commission, ordering Carver Trucking to cease operations and enjoining them from maintaining the illegal activities. When Carver Trucking leased the property to a business associate who continued the violations, a contempt petition was filed. The trial court found Carver Trucking in contempt for the violations and Carver Trucking appealed, arguing that they should not be held responsible for the tenant's actions. The appellate court affirmed the trial court's judgment.

The former property owner allegedly consented to Carver Trucking removing junk vehicles from the property. Carver Trucking is operating an illegal trucking freight terminal at 632 Lebanon Highway, Carthage, Tennessee, and is ordered to cease all related activities immediately. The court has permanently enjoined Carver Trucking from various operations, including the transfer and storage of trailers, allowing driver parking, and maintaining a junk yard. Tractors can only be present for quick repairs, with trailers allowed for a maximum of 24 hours and no freight permitted on-site. Additionally, Carver Trucking must remove junk materials within sixty days of the order.

Despite the injunction issued in August 2009, the Planning Commission filed a contempt petition in July 2010, claiming that Carver Trucking continued its illegal operations and caused public nuisance by obstructing traffic. Carver Trucking denied these allegations. During the October 2010 hearing, the Planning Commission presented evidence, including photographs and neighbor testimonies, confirming ongoing trucking activities and junk presence. Mr. Carver acknowledged ownership of the property but claimed that Carver Trucking had ceased operations and was in the process of corporate dissolution, although no official dissolution documents were provided. He also mentioned renting the property to Michael Butler under an informal agreement without a written lease and denied any involvement in Butler's trucking operations, despite admitting to visiting the property frequently to assist with automotive parts.

Mr. Carver acknowledged having seen trucking activities at the property, including tractor-trailer operations. Butler, aware of an injunction against certain property uses, denied operating a trucking terminal, claiming he only serviced trucks. He admitted using trucks previously leased to Carver Trucking and noted that Carver occasionally visited but was not compensated for his presence. The trial court concluded that prohibited activities were ongoing, despite Carver Trucking's claim of administrative dissolution and Butler's assertions. The court requested further briefing on Carver Trucking's potential violation of the injunction, leading to a contempt ruling on November 30, 2010. The court imposed a $50 daily fine for the violation starting from the injunction's date and reserved decisions on attorney fees and further sanctions. Carver Trucking filed an early appeal, prompting a remand for a final order. Subsequent orders established attorney fees and a cease and desist for prohibited activities, making the order final for appeal. Carver Trucking's appeal questions the trial court's authority to hold a defunct corporation in contempt for actions by a lessee, while not disputing the violation of the injunction itself. The appeal involves determining whether the contempt is civil or criminal, with civil contempt aimed at enforcing compliance and criminal contempt being punitive.

The trial court imposed a civil fine of $50 per day against Carver Trucking for each day of violation of its injunctive order, retroactive to the order's entry date. The fine was intended to be coercive, accumulating as long as the violations continued, but ultimately served as punishment for past infractions, categorizing the contempt finding as criminal. For criminal contempt, the appellate review standard requires that evidence be viewed favorably for the prosecution, allowing any reasonable trier of fact to find essential elements proven beyond a reasonable doubt. A conviction can only be reversed if evidence is insufficient to support the finding of contempt. The appellate court utilizes an abuse of discretion standard when reviewing contempt sanctions and evaluates the clarity of the underlying order de novo, without a presumption of correctness.

Carver Trucking contended that it could not be held in contempt due to its status as a defunct corporation and the actions of its lessee, Butler, who was not a party to the lawsuit. The argument regarding corporate dissolution was inadequately developed, referencing Mr. Carver's testimony about the company's closure in 2009 and citing the 1944 Supreme Court case Walling v. James V. Reuter, Inc. However, this case did not support Carver Trucking's claims as it involved a completely dissolved corporation with liquidated assets, unlike Carver Trucking, which still owned property relevant to the injunction. Furthermore, Tennessee law indicates that an administratively dissolved corporation retains its existence for winding up affairs and may be held in contempt of court.

Dissolution of a corporation does not preclude the initiation of legal proceedings against it in its corporate name, as stated in Section 48-24-105(b) of the Tennessee Code. Carver Trucking, which continued to operate and lease property despite potential administrative dissolution, failed to provide legal support for its claim that this status shielded it from contempt charges related to court orders. Carver Trucking contends that it should not be held accountable for actions taken by its lessee, Butler, citing Rule 65.02(2) of the Tennessee Rules of Civil Procedure, which binds parties and their affiliates to injunctions. However, Carver Trucking did not prove that Butler was an agent or officer of the corporation or that Carver Trucking was involved in Butler’s operations. The argument centers on the assertion that Butler's activities, which violated an August 2009 injunction, do not implicate Carver Trucking itself. The Tennessee Supreme Court's decision in Konvalinka outlines four elements necessary for civil contempt: a lawful order, clear and specific terms, actual disobedience, and willful violation. Carver Trucking’s defense hinges on the claim that it was not the entity violating the order; however, ongoing illegal activities on the property and the history of the injunction suggest a factual basis for the trial court’s contempt finding against Carver Trucking.

Zoning authorities initiated legal proceedings against Carver Trucking after it violated an injunction prohibiting the operation of illegal activities at its property. Following the injunction, Carver Trucking leased the property to associate Butler, who continued those illegal activities, using the same trucks branded with "Carver Trucking." Carver Trucking argued that zoning authorities would need to pursue legal action against Butler to stop the activities, suggesting a cyclical evasion of the injunction. The trial court had previously determined in August 2009 that Carver Trucking was operating an illegal trucking terminal and salvage yard, ordering an immediate cessation of such activities. The court found that Carver Trucking willfully violated this order by allowing Butler to continue the prohibited uses, thereby maintaining the illegal operations. Carver Trucking was held in contempt for its own actions, not for Butler's. The trial court's findings were deemed sufficient to affirm the contempt ruling, with no errors found, and the decision was upheld. Costs were awarded to the Appellant, Carver Trucking, Inc., and its surety.