Rachels v. Steele

633 S.W.2d 473, 1981 Tenn. App. LEXIS 597
CourtCourt of Appeals of Tennessee
DecidedAugust 20, 1981
StatusPublished
Cited by21 cases

This text of 633 S.W.2d 473 (Rachels v. Steele) is published on Counsel Stack Legal Research, covering Court of Appeals of Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Rachels v. Steele, 633 S.W.2d 473, 1981 Tenn. App. LEXIS 597 (Tenn. Ct. App. 1981).

Opinion

TOMLIN, Judge.

This is an appeal from an order denying the stay of proceedings and granting a motion for summary judgment in favor of the plaintiff-appellee. The plaintiff commenced an action in the Circuit Court of Shelby County to collect a debt from the defendant. The complaint charged that the defendant was indebted to plaintiff for fraudulently misappropriating funds belonging to plaintiff. The complaint further stated as fact that subsequent to the misappropriation, defendant filed a voluntary petition in bankruptcy, and that in those proceedings a consent order had been entered, adjudicating the defendant’s indebtedness to plaintiff, declaring further that the debt was not dischargeable in bankruptcy.

Defendant filed a motion to stay the proceedings in this cause, based on her Fifth Amendment privilege, alleging that she was also the target of a criminal investigation being conducted by the Internal Revenue Service. The motion to stay was denied. Plaintiff’s motion for summary judgment, based upon a certified copy of the record in the Bankruptcy Court, was granted by the trial court. In this appeal, defendant presents two issues to this Court: (1) Did the trial court abuse its discretion in denying defendant’s motion for a stay of proceedings; and (2) did the trial court err in granting plaintiff’s motion for summary judgment? We hold that the trial court was correct in both instances.

The essential facts are these: The defendant filed a voluntary petition in bankruptcy in November, 1977, in the United States District Court for the Western District of Tennessee, Western Division, in Memphis. In her sworn petition, an indebtedness to the plaintiff was listed among her liabilities. The plaintiff filed his proof of claim, and in addition, filed a complaint in the Bankruptcy Court, seeking a determination of the dischargeability of the debt of defendant under the Bankruptcy Act. The complaint in the bankruptcy proceeding, a certified copy of which was filed in this cause, alleged that while an employee of the plaintiff, and in a fiduciary position in regard to the management of plaintiff’s personal funds, the defendant created the debt by appropriating funds of the plaintiff to her own use.

A consent order was entered by the Bankruptcy Judge, approved by attorneys for plaintiff and the bankrupt (defendant here), which reads in part as follows:

In (sic) appearing to the court through the announcement of the attorneys of record for the parties that the indebtedness of the defendant, Peggy S. Weldon, to the plaintiff, William H. Rachels, Jr., is nondischargeable by reason of Section 17 of the Bankruptcy Act and that the plaintiff should be allowed his claim in full of $49,639.20.

The judge decreed that the debt of the plaintiff should be allowed in full, for the reason that it is a non-dischargeable debt of the bankrupt, in accordance with § 17(c) of the Bankruptcy Act.

On the basis of these proceedings, the plaintiff filed suit in the Circuit Court of Shelby County, seeking judgment against the defendant for $49,639.20. Defendant’s answer denied the existence of the debt but admitted the existence and validity of the proceedings in the Bankruptcy Court. The plaintiff then filed a motion for summary judgment, based on certified copies of the record in the bankruptcy proceedings. Before a hearing was held on the plaintiff’s motion for summary judgment, the plaintiff filed a motion for default judgment. These two pending motions by plaintiff apparently prompted defendant to file a motion seeking to have all proceedings in this civil action stayed “pending further orders of the court.”

In support of the motion to stay, the defendant asserted that:

[475]*475... she is presently a target of a criminal investigation being conducted by the Criminal Investigation Division of the Internal Revenue Service which involves the subject matter of the litigation presently pending before this Court. To require this Defendant to respond to a motion for a summary judgment or to otherwise answer or plead to the complaint filed in this cause would interfere with this Defendant’s exercise of her Fifth Amendment privileges afforded by the Constitution of the United States of America.

It appears that no evidentiary hearing on this motion was held. The trial court denied plaintiff’s motion for summary judgment and defendant’s motion for a stay, as well.

The case came on to trial. Plaintiff renewed his motion for summary judgment, based upon defendant’s record in the bankruptcy proceeding. The trial court granted plaintiff’s motion, entering judgment in the amount of $56,981.52, being the amount stipulated by the parties as damages.

I. THE FAILURE TO STAY THE PROCEEDINGS

The first issue is whether or not the trial court erred in denying defendant’s motion to stay all proceedings. Defendant’s request for a stay was based on her claim of Fifth Amendment privilege. Defendant concedes that the disposition of a motion to stay a proceeding is clearly a matter of discretion with the trial court, and on appeal defendant has the burden to show that the court abused its discretion. Landis v. North American Co., 299 U.S. 248, 57 S.Ct. 163, 81 L.Ed. 163 (1936). The action of the trial court will not be disturbed on appeal unless it is clear from the record that there was an abuse of discretion. 1 Am.Jur.2d Actions, § 97 (1962).

The principal thrust of defendant’s argument on this issue is to the effect that defendant was faced with both a criminal proceeding and a civil action at the same time; thus the choice given her was either to forfeit her defense to plaintiff’s civil action and thus give up her property without a fight, or to testify in defense of plaintiff’s action and thereby provide for the government some type of discovery which otherwise would not be normally obtainable in a federal criminal action. In other words, defendant takes the position that without a stay of this action she was facing compulsory self-incrimination.

In our opinion, the cases do not support her contention. Defendant relies heavily upon the case of United States v. Kordel, 397 U.S. 1, 90 S.Ct. 763, 25 L.Ed.2d 1 (1970). In Kordel, there was an action in rem against two products sold by a corporation whose officers were in serious danger of criminal prosecutions relating to these products. The officers argued that it violated due process to hold the civil proceeding along with its intendent discovery before the criminal trial occurred. The Supreme Court unanimously decided against this contention. Insofar as protective orders are concerned, Kordel is limited to the situation where corporate officers might be prevented from exercising their Fifth Amendment privileges because to do so would extend the constitutional protection to the corporation which employed them, which would be unacceptable.

In the opinion of this Court, more in point are the cases of Arthurs v. Stern, 560 F.2d 477 (1st Cir. 1977); and U. S. v. White, 589 F.2d 1283 (5th Cir. 1979). In Arthurs, a physician was accused of writing illegal prescriptions.

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Bluebook (online)
633 S.W.2d 473, 1981 Tenn. App. LEXIS 597, Counsel Stack Legal Research, https://law.counselstack.com/opinion/rachels-v-steele-tennctapp-1981.