Buck Creek Industries, Inc. v. Alcon Const., Inc.
| Decision Date | 09 September 1977 |
| Docket Number | Civ. A. No. 75-M-2142. |
| Citation | 438 F. Supp. 168 |
| Parties | BUCK CREEK INDUSTRIES, INC., Plaintiff, v. ALCON CONSTRUCTION, INC., Robert R. Martin Building Co., Inc., Baptist Home for Senior Citizens, Inc., Baptist Home for Senior Citizens, Defendants. |
| Court | U.S. District Court — Northern District of Alabama |
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Larry B. Clark, Lange, Simpson, Robinson & Somerille, Birmingham, Ala., for plaintiff.
C. Stephen Trimmier, Rives, Peterson, Pettus, Conway & Elliott, Birmingham, Ala., A. Dwight Blair, Gaines, Hereford & Cleckler, Pell City, Ala., W. B. Hairston, Jr., Engel & Hairston, Birmingham, Ala., for defendants.
This action seeks damages resulting from the transfer of a construction contract by defendant, Alcon Construction, Inc. to defendant, Robert L. Martin Building Company, Inc. Plaintiff asserts that the transfer was made with the intent to hinder, delay or defraud plaintiff in the collection of its judgment obtained against Alcon in an earlier suit.
On March 19, 1975, Alcon and The Baptist Home for Senior Citizens, Inc. entered into a contract for construction work for a sum in excess of $700,000. The Home made two payments to Alcon on or before May 26, 1975, the date of the transfer, but none thereafter.
On April 2, 1975, in another case, plaintiff Buck Creek obtained a jury verdict and judgment against Alcon in an amount in excess of $68,000, which was reduced to that amount pursuant to a remittitur order entered May 6, 1975. In an effort to collect its judgment, Buck Creek garnished Baptist Home and Martin. On September 15 and October 31, respectively, each answered "not indebted." On October 14, plaintiff moved to require an oral examination with respect to the Home pursuant to Title 7, § 1011, Code of Alabama (1940), and on November 14 so moved with respect to Martin. The examination was had on December 22, 1975, whereupon Buck Creek moved for judgment based on the oral examination.
Plaintiff's motion was overruled by order entered June 28, 1976. The Court overruled plaintiff's motion for reconsideration or alternatively to amend the order.
This complaint was filed on November 14, 1975. A jury verdict of $68,000 against Alcon and Martin was returned on September 17, 1976. Alcon now moves for judgment notwithstanding the verdict or alternatively for a new trial. Martin moves for reconsideration, in the alternative for judgment notwithstanding the verdict or for a new trial.
Defendants contend: (1) that the matter was or could have been litigated in the garnishment proceeding which is accordingly res judicata; (2) that only nominal damages could be recovered since the contract was without value; (3) that the transfer was for a valid prior consideration which is an allowable preference and therefore not actionable; and (4) that plaintiff had to prove common law fraud and failed to do so; (5) that the Court improperly failed to instruct the jury on common law fraud.
The jury's finding of fraud effectively disposes of the contention that there was prior consideration and a valid preference. A preferential transfer at a fair price is permissible. Fraud vitiates a preference. Reynolds v. Welch, 47 Ala. 200 (1872).
The Court is of the opinion that plaintiff was not restricted to a common law theory of fraud which would require specific intent but that it might proceed on the basis of statutory fraud under the Alabama law. In my judgment, the jury charge on fraud was correct within the meaning of § 7, Title 20, Alabama Code, and there was ample evidence to support the jury finding.
The res judicata question is whether a judgment creditor is barred from utilizing Section 7 of Title 20, Alabama Code, to sue his debtor and his debtor's transferee for the fraudulent disposition of an asset, where the creditor has previously sought to recover from the transferee using the garnishment procedures as authorized by the Alabama statutes.
Sections 1011 and 1020 of Title 7, Code of Alabama, the necessary starting point in analysis, provides:
Until 1940, neither of these sections contained its present thirty-day limitation. Section 1011 in its earlier forms contained no time limitation at all, while Section 1020 provided that the answer might be contested "at the term the answer is made." On motion made during that term, however, the issue might be formulated at the term following. Roman v. Dimmick, 123 Ala. 366, 26 So. 214 (1899).
Movants contend that the prior garnishment proceeding provided Buck Creek, under Section 1020, the unexploited opportunity for a trial of the issue of the fraudulent transfer, and is therefore res judicata precluding a trial here of the same issue.
The doctrine of res judicata in Alabama law:
is confined to those cases where the parties to the two suits are the same, the subject-matter the same, the identical point is directly in issue, and the judgment has been rendered on that point.
Byrd v. Fowler, 50 Ala.App. 596, 281 So.2d 647, 649 (1973); see also Gulf American Fire & Cas. Co. v. Johnson, 282 Ala. 73, 209 So.2d 212, 217 (1968), and Jones v. Adler, 183 Ala. 435, 62 So. 777, 779 (1913). Res judicata extends to bar matters which, although not actually litigated, might or should have been litigated in a former suit. Empire Land Co. v. Sanford, 218 Ala. 318, 118 So. 563 (1928).
Defendants' argument, therefore, has a certain surface attraction. See, e. g., Brake v. Curd-Sinton Manufacturing Co., 102 Ala. 339, 14 So. 773 (1893); Roman v. Dimmick, 123 Ala. 366, 26 So. 214 (1899); Roman v. Montgomery Iron Works, 156 Ala. 604, 47 So. 136 (1908), purportedly overruled in Hall & Farley v. Alabama Terminal & Improvement Co., 173 Ala. 398, 56 So. 235, 241 (1911); and Shepherd Motor Co. v. Henderson Land & Lumber Co., 213 Ala. 195, 104 So. 334 (1925). This contention, in the Court's opinion, mistakes the sense of these authorities, which were all decided while Sections 1011 and 1020 were in their earlier forms, previous to the amendments of the Code of 1940. The deceptively minor addition of the thirty-day period of limitation makes no Alabama case directly in point. The State courts have yet to examine the doctrine of res judicata with reference to the amended sections.
In applying the doctrine of res judicata, the cited authorities presuppose a real opportunity: that having evaluated the results of the oral examination, and being still dissatisfied, a plaintiff could go forward under Section 1020 to demand a trial. The earlier forms of Sections 1011 and 1020 clearly supported this presupposition. Until the Code of 1940, there was no stringent time limitation upon their utilization. This presupposition is not realistic today, now that a thirty-day limitation circumscribes a litigant's use of each section. A plaintiff's opportunity for a trial would depend upon his ability to evaluate the adequacy of a written response, to demand an oral examination and, on the basis thereof, to ascertain the desirability of a trial and to request it, all within thirty days of notice of the written response. Common sense compels the rejection of that notion.
Limitations of time inherent in the judicial process itself must often preclude a litigant, from use of Section 1020 by pushing the date of oral examination beyond the thirty-day limitation period. Precisely this appears to have been the experience of Buck Creek, for having timely demanded an oral examination, the Section 1011 hearing transpired some three weeks after the final day on which Buck Creek could have controverted Martin's answer and nine weeks after the final day it could have controverted the Home's. It is not that Buck Creek neglected to utilize Section 1020 in the earlier proceeding; rather, Section 1020 in its amended form was not available to it.
For this reason, the earlier proceeding lacks res judicata effect. It has long been the scheme of the garnishment statute that having taken advantage of Section 1011, a litigant should have available the possibility of a trial; and where Section 1020 will not serve, the present action will. The thirty-day limitation periods do not reverse the statutory scheme, and make the sections alternative instead of complementary. Such an interpretation renders Section 1011 useless to any good purpose and a death-trap for litigants. This apparently innocuous change will not support such an inference. Had such a result been intended, the legislature could and would have said so and not left the result to depend on precarious inference.
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