Ex parte SE Prop. Holdings
| Decision Date | 05 November 2021 |
| Docket Number | 1190816,1190814 |
| Parties | Ex parte SE Property Holdings, LLC v. David L. Harrell In re: SE Property Holdings, LLC SE Property Holdings, LLC v. David L. Harrell |
| Court | Alabama Supreme Court |
Appeal from Baldwin Circuit Court (CV-10-901862)
PETITION FOR WRIT OF CERTIORARI TO THE BALDWIN CIRCUIT COURT
In case no. 1190816, the appellant and plaintiff below, SE Property Holdings, LLC ("SEPH"), has appealed the Baldwin Circuit Court's denial of its petition seeking to hold the appellee and defendant below, David L. Harrell, in contempt for failing to comply with the trial court's postjudgment charging order entered in a previous action involving the parties and its failure to hold a hearing on its contempt petition. In case no. 1190814, SEPH has also petitioned this Court for a writ of certiorari, seeking the same relief. This Court consolidated the proceedings ex mero motu. In case no. 1190816, we reverse the trial court's decision and remand the case; in case no 1190814, we dismiss the certiorari petition.
In December 2006, Water's Edge, LLC ("Water's Edge"), a real-estate development company, entered into a construction-loan agreement ("the agreement") with a bank that later merged into SEPH for two construction loans totaling $17, 000, 000. Some of Water's Edge's members, including Harrell, served as guarantors on the loans and, pursuant to the agreement guaranteed timely payment of the two loans by November 30, 2010. According to SEPH, the last payment made by Water's Edge on both loans occurred in May 2010.
In October 2010, SEPH sued Water's Edge and the loan guarantors, including Harrell. Following years of litigation, the trial court entered a judgment against Water's Edge for $13, 863, 052.94. The trial court also entered a judgment against the guarantors, including Harrell, for $9, 084, 076.14 on one loan and for different amounts totaling $2, 297, 431 --including $84, 392 against Harrell -- on the other loan.
The trial court granted SEPH's request and issued a charging order directing SLB and the other companies to "distribute to the Clerk of Court any income, officer's fees, bonuses, distributions, salaries or dividends paid or otherwise conveyed to [Harrell] by reason of any interest [he] own[s] in the Limited Liability Companies until [SEPH's] judgment is satisfied in full." According to SEPH, despite the entry of the trial court's charging order, the judgment has not been fully satisfied.
On June 12, 2020, SEPH filed a petition asking the trial court to hold Harrell in contempt and to sanction him for violating the charging order. According to SEPH, Harrell and his wife, Carolyn, each owned 50% of SLB. SLB's operating agreement required that all distributions, profits, and income be distributed to each member based on their ownership interest in the company.[1] SEPH alleged that, after the trial court had entered its charging order, Harrell, as SLB's managing member, began making distributions solely to Carolyn in violation of SLB's operating agreement. Those distributions to Carolyn, SEPH alleged, included distributions actually owed to Harrell, thereby violating the trial court's charging order.
SEPH also alleged that SLB had been making payments on Harrell's American Express account for his personal expenses. Because those expenses were not related to the business, SEPH alleged, those payments were "de facto distributions" to Harrell that should have been paid to the clerk of court in accordance with the charging order. In support of its petition, SEPH attached numerous financial documents that it had obtained from Harrell and SLB, including Schedule K-1 federal tax forms on which Harrell declared that he had received distributions from SLB in the years following the trial court's issuance of its charging order.
Harrell filed an objection to SEPH's petition in which he acknowledged that, pursuant to § 10A-5A-5.03(a), the charging order issued by the trial court gave SEPH the right to receive any distributions from SLB to which Harrell would otherwise be entitled as a result of any transferrable interest held by him in the company. He also acknowledged that, pursuant to § 10A-5A-5.03(c), the charging order constituted a lien on his transferrable interests and that § 10A-5A-5.03(f) provided the exclusive remedy by which a judgment creditor of a member or transferee could satisfy a judgment out of his transferrable interests. He asserted, however, that SEPH's petition was due to be denied because, he said, he had not transferred "any transferrable interest he maintains in and to [SLB] and [he had] not received an actual cash distribution (K-1) from the profits, if any, earned by [SLB]." No documentary evidence or affidavits were filed with Harrell's objection.
After SEPH filed a response to Harrell's objection, the trial court, without holding a hearing, issued an order on July 1, 2020, denying SEPH's petition.
As noted above, SEPH filed both an appeal and a petition for certiorari review. Before the adoption of Rule 70A(g), Ala. R. Civ. P., and Rule 33.6, Ala. R. Crim. P., a trial court's contempt ruling was subject to appellate review by a petition for a writ of certiorari. Ex parte Dearman, 322 So.3d 5, 9 n.5 (Ala. 2020) ().[2]Rule 70A(g), which was adopted in 1994 and is applicable in civil cases, provides that an adjudication or finding of contempt is subject to direct appeal.[3] As SEPH correctly points out, the language of the rule contemplates an appeal only when a party has been found in contempt; it does not provide that an aggrieved party may appeal a trial court's order denying a finding of contempt.
However, our appellate courts have since clarified that, in many cases, a petition seeking the imposition of sanctions based on a finding of contempt initiates an independent proceeding that requires payment of a filing fee. See, e.g., Morgan v. Morgan, 183 So.3d 945 (Ala. Civ. App. 2014) (); Kyle v. Kyle, 128 So.3d 766, 772 (Ala. Civ. App. 2013) ; and Wilcoxen v. Wilcoxen, 907 So.2d 447, 449 n.1 (Ala. Civ. App. 2005) (recognizing that the filing of a contempt petition initiated a separate and independent proceeding from the underlying action). Under § 12-22-2, Ala. Code 1975, an appeal lies from "any" final judgment of a circuit court or a probate court. See, e.g., Richburg v. Richburg, 895 So.2d 311 (Ala. Civ. App. 2004) (recognizing that a judgment is final and appealable if it disposes of all the claims and controversies between the parties). Our appellate courts have previously reviewed denials of contempt petitions on appeal -- instead of by certiorari petition -- in cases in which those denials were part of final judgments. See, e.g., J.S.S. v. D.P.S., 281 So.3d 434 (Ala. Civ. App. 2019); Hummer v. Loftis, 276 So.3d 215 (Ala. Civ. App. 2018); and Seymour v. Seymour, 241 So.3d 733 (Ala. Civ. App. 2017).Therefore, the denial of a petition for contempt that initiates an independent proceeding and is adjudicated in a final judgment is subject to appeal.
In the present case, SEPH filed the underlying petition for contempt and paid a filing fee, thereby initiating an independent action below. The trial court's judgment adjudicated all the claims against all the parties and was a final judgment for purposes of Rule 54, Ala. R. Civ. P. Therefore, the trial court's ruling is properly reviewed by appeal; therefore, we dismiss SEPH's separately filed certiorari petition in case no. 1190814 as superfluous.
" 'The issue whether to hold a party in contempt is solely within the discretion of the trial court, and a trial court's contempt determination will not be reversed on appeal absent a showing that the trial court acted outside its discretion or that its judgment is not supported by the evidence.' "
J.S.S. v. D.P.S., 281 So.3d at 437-38 (quoting Poh v. Poh, 64 So.3d 49, 61 (Ala. Civ. App. 2010)). See also Hummer v. Loftis, 276 So.3d at 225.
SEPH argues that the trial court, in denying its petition to hold Harrell in contempt for failing to comply with the charging order, exceeded its discretion because, it says, the record contains undisputed evidence establishing that Harrell violated the charging order. It also argues that the trial court erred in denying its petition without first holding a hearing on that petition.
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