Elliott Law Grp., P.A. v. Five Star Credit Union

• Decision Date: 13 September 2019
• Docket Number: 1170922
• Citation: Elliott Law Grp., P.A. v. Five Star Credit Union, 297 So.3d 1148 (Ala. 2019)
• Parties: The ELLIOTT LAW GROUP, P.A., and William C. Elliott v. FIVE STAR CREDIT UNION
• Court: Alabama Supreme Court

297 So.3d 1148

The ELLIOTT LAW GROUP, P.A., and William C. Elliott

v.FIVE STAR CREDIT UNION

1170922

Supreme Court of Alabama.

September 13, 2019

Rehearing Denied December 13, 2019

William C. Elliott of The Elliott Law Group, P.A., Vestavia, for appellants.

Leonard N. Math and Katherine E. Luders of Chambless Math & Carr, P.C., Montgomery, for appellee.

MITCHELL, Justice.

Five Star Credit Union ("Five Star") has attempted for over a decade to collect a debt owed by William C. Elliott. Five Star obtained a judgment against Elliott in 2011, but he never paid. In 2017, Five Star sought to garnish Elliott's wages by filing a process of garnishment in the Montgomery Circuit Court against Elliott's employer, The Elliott Law Group, P.A. ("ELG"), a law firm that is under Elliott's complete control. ELG opposed the process of garnishment. Following a hearing, the trial court found that the assertions in ELG's opposition were untrue and ordered that Elliott's income from ELG be garnished. Elliott and ELG (hereinafter referred to collectively as "the appellants") now appeal. Because the appellants' arguments lack merit, we affirm the judgment of the trial court.

Facts and Procedural History

This case began more than a decade ago. In August 2008, Five Star sued Elliott alleging breaches of various loan agreements. On February 22, 2011, the trial court entered a judgment for Five Star in the amount of $777,655.98 plus court costs.

On September 25, 2017, following other attempts to collect on the judgment, Five Star filed a process of garnishment against ELG in the amount of $1,011,112.83.¹ On October 28, 2017, ELG filed a garnishment answer in which it stated: "[Elliott] is employed, but [Elliott] is indebted to [ELG] in an amount greater than [Elliott's] wages. [ELG] has right of sett-off [sic] and consensual lien on wages." On December 27, 2017, 60 days after ELG filed its garnishment answer, Five Star filed a verified contest of ELG's answer ("the contest"), in which counsel for Five Star stated (1) that he believed ELG's answer to be untrue and (2) that the parties had agreed to waive the requirement in § 6-6-458, Ala. Code 1975, that contests to a garnishee's answer be filed within 30 days after notice of the filing of the answer.

Following a hearing on the contest, the trial court concluded that ELG's garnishment answer was untrue. The trial court's conclusion was based primarily on the following findings of fact:

• ELG is under Elliott's complete control. Elliott is the president and sole shareholder of ELG.

• Although ELG based its garnishment answer on an employment agreement ("the employment agreement") purportedly dated January 1, 2017, the employment agreement was not executed until September 2017, after a postjudgment evidentiary hearing and examination of Elliott by Five Star.

• The employment agreement stated that ELG would pay Elliott an annual salary of $48,000 and provide Elliott with a $260,000 line of credit to be repaid annually at 1% of the principal balance and at ELG's discretion. Any failure by Elliott to make a payment to ELG was not a default under the employment agreement.

• The employment agreement purported to give ELG a consensual lien on all of Elliott's income as security for any debt that Elliott owed ELG.

• Elliott does not maintain an individual bank account, and all of his personal and business expenses are paid from an account in ELG's name. The loan agreement between Elliott and ELG was "simply a means of receiving compensation from [ELG] without acknowledging the compensation as salary or wages." No legitimate business purpose existed for the line-of-credit compensation "other than the avoidance of payment of creditors." The employment agreement was "simply a means to remove funds from [ELG] and pay the same to [Elliott] without any obligation of repayment except at the sole discretion of" Elliott.

Based on these and other findings of fact, the trial court concluded that ELG's purported consensual lien and setoff rights were unenforceable against Five Star. It ordered Elliott to withhold a portion of his income from ELG and submit the garnished amounts to the clerk of the trial court each month, along with calculations of business and personal expenses as well as bank statements reflecting transactions from ELG's bank accounts. Following the trial court's denial of their postjudgment motions filed under Rule 59(a) and Rule 59(e), Ala. R. Civ. P., the appellants appealed under § 6-6-464, Ala. Code 1975.

Subject-Matter Jurisdiction

The appellants contend, as a threshold matter, that the trial court lacked subject-matter jurisdiction to hold a hearing on the contest. Although the appellants did not raise this issue in their postjudgment motions, subject-matter jurisdiction cannot be waived. Knoedler v. Blinco, 50 So. 3d 1047, 1049 (Ala. 2010). Thus, we consider –– and dispose of –– the appellants' jurisdictional arguments.

Alabama law instructs plaintiffs seeking a writ of garnishment to initiate the process by filing an affidavit "with the clerk of the court in which the action is pending or the judgment was entered." § 6-6-391, Ala. Code 1975. In interpreting a substantively identical predecessor to this law, this Court stated that "[a] writ of garnishment used to enforce a judgment must issue out of and be returnable to the court that renders the judgment." Pepperell Mfg. Co. v. Alabama Nat'l Bank of Montgomery, 261 Ala. 665, 669, 75 So. 2d 665, 669 (1954) (interpreting Alabama Code of 1940, Title 7, § 997). Thus, there can be no serious argument that the trial court, which issued the final judgment against Elliott, lacked subject-matter jurisdiction over the subsequent garnishment proceedings.

The appellants, however, do not contend that trial court never had jurisdiction. Instead, they appear to claim that the trial court somehow lost jurisdiction over the proceeding when Five Star –– relying on the time-requirement waiver to which the parties had stipulated –– took 60 days to contest ELG's garnishment answer.² The appellants' argument appears to be grounded in § 6-6-458, Ala. Code 1975,³ which provides, in relevant part: "The plaintiff, his agent, or attorney may controvert the answer of the garnishee by making oath within 30 days after the notice of the answer that he believes it to be untrue."⁴ According to the appellants, on the 31st day following ELG's filing of its garnishment answer, "the [t]rial [c]ourt lost jurisdiction" and "all matters heard by the trial court thereafter were void as a matter of law." The appellants assert that this position is supported by Alabama caselaw. It is not.

The appellants summarily cite three cases in support of this jurisdictional argument: Tinnin v. Tinnin, 391 So. 2d 1047 (Ala. Civ. App. 1980) ; Ex parte State Department of Revenue, 195 So. 3d 280 (Ala. Civ. App. 2015) ; and Lumpkin v. State, 171 So. 3d 599 (Ala. 2014). Contrary to the Alabama Rules of Appellate Procedure, the appellants do not explain how those cases support their argument; nor do the appellants identify the portions of the cited opinions upon which they rely. See Rule 28(a)(10), Ala. R. App. P. ("Citations [contained in the brief of an appellant] shall reference the specific page number(s) that relate to the proposition for which the case is cited ...."). We are thus under no obligation to consider those cases.⁵ The appellants provide no reason we should accept this jurisdictional argument –– and we therefore reject it.⁶

Standard of Review

The appellants appeal the trial court's denials of their motion for a new trial under Rule 59(a) and their motion to alter, amend, or vacate the judgment under Rule 59(e). "The granting or denial of a motion for new trial is presumed correct and will not be reversed on appeal except for plain and palpable abuse of discretion." Arata v. Gustin, 410 So. 2d 102, 104 (Ala. Civ. App. 1982). Likewise, "[w]hether to grant relief under Rule 59(e) ... is within the trial court's discretion." Bradley v. Town of Argo, 2 So. 3d 819, 823 (Ala. 2008). Because the trial court heard oral testimony without a jury at the hearing on the contest, we afford a presumption of correctness to the trial court's findings of fact and will not disturb a judgment based on those facts unless the findings are clearly erroneous. See Board of Comm'rs of Mobile Cty. v. Weaver, 99 So. 3d 1210, 1216 (Ala. 2012). We will, however, review questions of law de novo. See Alabama Republican Party v. McGinley, 893 So. 2d 337, 342 (Ala. 2004).

Discussion

The appellants bring two categories of arguments; both are unavailing. First, the appellants challenge a number of factual findings made by the trial court that led the court to determine that ELG's garnishment answer was untrue. Second, the appellants challenge the conduct of the garnishment proceeding as well as certain points made by the trial court in its order. We address both sets of arguments.

A. Challenges to Findings of Fact

The appellants first argue that the trial court erred in determining that no legitimate business reason –– "other than the avoidance of payment to creditors such as [Five Star]" –– existed for the $260,000 line of credit that ELG provided to Elliott. But the trial court had ample evidence from which to make this finding. It is undisputed that the employment agreement providing for the line of credit and consensual lien, though purportedly taking effect January 1, 2017, was executed in September 2017 following a postjudgment examination of Elliott in this case. That, in itself, constitutes sufficient evidence that Elliott had pretextual reasons for establishing the consensual lien. In addition, because (1) the employment agreement gives ELG complete discretion in exercising the lien, (2) ELG is under Elliott's complete control, and (3) a failure by Elliott to make a required payment on any loan is not a default under the employment agreement, Elliott has virtually no incentive to ever pay back loans from ELG,...