McDaniel v. SouthFirst Bancshares, Inc. (Ex parte McDaniel)

• Decision Date: 24 May 2019
• Docket Number: 1180199
• Citation: 291 So.3d 847
• Parties: EX PARTE David MCDANIEL and Lisa McDaniel (In re: David McDaniel and Lisa McDaniel v. SouthFirst Bancshares, Inc., d/b/a SouthFirst Bank; Southern Craftsman Custom Homes, Inc. ; Jeffrey A. Rusert; Larry M. Curry, Sr.; Mari G. Gunnels; and Danny Keeney)
• Court: Alabama Supreme Court

291 So.3d 847

EX PARTE David MCDANIEL and Lisa McDaniel(In re: David McDaniel and Lisa McDaniel

v.SouthFirst Bancshares, Inc., d/b/a SouthFirst Bank; Southern Craftsman Custom Homes, Inc. ; Jeffrey A. Rusert; Larry M. Curry, Sr.; Mari G. Gunnels; and Danny Keeney)

1180199

Supreme Court of Alabama.

May 24, 2019

Rachel J. Moore and L. Griffin Tyndall of Christian & Small LLP, Birmingham, for petitioners.

James S. Williams, R. Ryan Daugherty, Meghan A. Salvati, and Thomas A. Woodall of Sirote & Permutt, P.C., Birmingham, for respondents SouthFirst Bancshares, Inc., d/b/a SouthFirst Bank, Mari Gunnels, and Danny Keeney.

Brian J. Hurst of Hurst Law Firm, LLC, Birmingham, for respondents Southern Craftsman Custom Homes, Inc., and Jeffrey Rusert.

Larry M. Curry, Sr., respondent, pro se.

SHAW, Justice.

David McDaniel and Lisa McDaniel, plaintiffs in a civil action below, petition this Court for a writ of mandamus directing the Shelby Circuit Court to vacate its order staying the proceedings against the defendants--Southern Craftsman Custom Homes, Inc. ("SCCH"); Jeffrey A. Rusert; Larry M. Curry, Sr.; SouthFirst Bancshares, Inc., d/b/a SouthFirst Bank ("SouthFirst"); Mari G. Gunnels; and Danny Keeney--while one of those defendants, Rusert, awaits the outcome of a federal criminal investigation against him. For the reasons stated below, we grant the petition and issue the writ.

Facts and Procedural History

In 2017, the McDaniels contacted Rusert for the purpose of entering into an agreement with SCCH to build a house. According to the McDaniels, Rusert represented himself as the president of SCCH. At some point, Rusert recommended that the McDaniels speak with Gunnels, who worked for SouthFirst, to secure a loan to pay for the construction of the new house. In November 2017, with Gunnels's assistance, the McDaniels began the process of applying for a construction loan with SouthFirst.

On November 4, 2017, the McDaniels and SCCH entered into a written agreement for the construction of the house. The total amount of the construction contract was $585,000. Pursuant to the terms of the contract, the McDaniels paid 10 percent of the contract amount--$58,500--as a down payment. The McDaniels contend that they made numerous inquiries with Gunnels concerning the status of the approval of their construction loan and questioned the delay in the closing of the loan. According to the McDaniels, Gunnels assured them that the delay in closing the loan was simply the result of certain signatories for SouthFirst being out of town that prevented SouthFirst from executing the appropriate documents. The McDaniels contend, however, that the delay in closing the loan was actually attributable to concerns allegedly raised by Keeney, also a SouthFirst employee, regarding Rusert's ability to perform the work designated in the construction contract.

The delay in closing of the loan allegedly led Rusert to seek additional funds from the McDaniels to "hold 2017 material prices." In December 2017, the McDaniels paid Rusert an additional $15,000 to satisfy that request.

At some point, the McDaniels learned that another person, Curry, had signed another copy of the construction contract between SCCH and the McDaniels to replace the construction contract previously executed by Rusert. SouthFirst indicated to them that Curry was the president of SCCH and that he, not Rusert, held the builder's license for the company. According to the McDaniels, Rusert's license to perform homebuilding services had been revoked, and SouthFirst had encountered prior issues with SCCH and Rusert's defaulting on other construction projects.

The loan closing occurred on January 26, 2018. The McDaniels executed, among other agreements, a written construction-loan agreement, a promissory note, and a construction-loan disbursement agreement in the total amount of $589,500 for the construction of their house. In conjunction with the execution of those agreements, the McDaniels executed a mortgage on the property in favor of SouthFirst. At the loan closing, Rusert was given a "start-up draw" in the amount of $29,843.65. Subsequently, SouthFirst funded three additional draw requests from Rusert.

On March 5, 2018, the McDaniels met with Rusert at the property site to discuss some concerns they had with the ongoing construction. During that meeting, Rusert provided the McDaniels with a credit application from a local building-supply company and asked them to execute it so that, he said, he could use the McDaniels' credit to purchase building materials and supplies. The McDaniels contacted that local building-supply company and learned that it refused to do business with SCCH, Rusert, and Curry because all three had purportedly failed to pay significant amounts owed the company. The McDaniels immediately contacted Gunnels and placed a "stop-payment" order on the most recent draw request from SCCH and Rusert. At that point, only the foundation had been poured.

On July 26, 2018, the McDaniels sued SCCH, Rusert, Curry, SouthFirst, Gunnels, and Keeney. In their complaint, the McDaniels sought damages for negligence, suppression, fraudulent misrepresentation, civil conspiracy, conversion, and the infliction of emotional distress. The McDaniels further alleged breach-of-contract claims against SouthFirst, SCCH, Rusert, and Curry, as well as a claim of breach of fiduciary duties against SouthFirst. Finally, the McDaniels sought a judgment against SouthFirst, Gunnels, and Keeney declaring the loan agreement and mortgage void. At some point, SouthFirst, Gunnels, and Keeney filed a motion for leave to file a cross-claim against Rusert, Curry, and SCCH.

On August 13, 2018, Rusert and SCCH moved to stay the civil proceedings against them pending the outcome of a federal criminal investigation against Rusert. See Ex parte Ebbers, 871 So.2d 776, 787 (Ala. 2003) (noting that individuals cannot be compelled to testify or to provide discovery in a civil proceeding while there is a parallel criminal action pending against them). According to Rusert and SCCH, Rusert was being investigated by the federal government for alleged bank fraud and wire fraud. No documents, affidavits, or other evidence was filed in support of that motion.

The McDaniels filed an opposition to the motion to stay and requested a hearing. On October 17, 2018, Rusert and SCCH moved for a protective order and a temporary injunction seeking to prevent any discovery pending resolution of their motion to stay. Attached to that motion was a copy of a "target letter"¹ Rusert had received from the United States Department of Justice ("the USDOJ") informing him that he was being investigated for bank fraud and wire fraud. The trial court granted the motion to stay on October 18, 2018.

The presumptively reasonable time for the McDaniels to file a petition for a writ of mandamus challenging the stay is 42 days. See Rule 21(a)(3), Ala. R. App. P., and Ex parte Meadowbrook Ins. Grp., Inc., 987 So.2d 540, 546 (Ala. 2007) ("[A] petition for a writ of mandamus must ordinarily be filed within 42 days of the challenged order."). On November 9, 2018, the McDaniels filed a motion to lift the stay. The motion was in substance a motion for the trial court to reconsider its decision; that motion would not have tolled or extended the time in which to file a mandamus petition challenging the order granting the stay. See Ex parte Troutman Sanders, LLP, 866 So.2d 547, 549-50 (Ala. 2003) (holding that a "motion to reconsider" does not toll the time for seeking mandamus review). On November 29, 2018--42 days after the trial court granted the motion to stay--the McDaniels filed the present petition.

The materials before us suggest that, after the McDaniels filed this mandamus petition, the trial court held a hearing on the McDaniels' motion to lift the stay;² following that hearing, the trial court issued an order denying the motion to lift the stay.

Standard of Review

A petition for a writ of mandamus is a proper method by which to challenge a trial court's decision on a motion to stay a civil proceeding when a party to that proceeding is the subject of a criminal investigation. See, e.g., Ex parte Rawls, 953 So.2d 374 (Ala. 2006) ; Ex parte Weems, 711 So.2d 1011 (Ala. 1998).

" ‘A writ of mandamus is an extraordinary remedy that is available when a trial court has exceeded its discretion. Ex parte Fidelity Bank, 893 So.2d 1116, 1119 (Ala. 2004). A writ of mandamus is "appropriate when the petitioner can show (1) a clear legal right to the order sought; (2) an imperative duty upon the respondent to perform, accompanied by a refusal to do so; (3) the lack of another adequate remedy; and (4) the properly invoked jurisdiction of the court." Ex parte BOC Group, Inc., 823 So.2d 1270, 1272 (Ala. 2001).’

" Ex parte Antonucci, 917 So.2d 825, 830 (Ala. 2005)."

Rawls, 953 So.2d at 377. "[T]he purpose of our review is to determine only if the petitioner has shown that the trial court exceeded the discretion accorded it in determining whether to grant the requested stay." Ex parte Antonucci, 917 So.2d 825, 830 (Ala. 2005).

Discussion

As an initial matter, the McDaniels move to strike three exhibits SCCH and Rusert attached to their brief filed in response to the mandamus petition: a detailed list of the civil actions against SCCH and Rusert that, they claim, were active at or around the time Rusert received his target letter from the USDOJ; an e-mail exchange between Rusert's criminal-defense attorney, SCCH, and Rusert's civil-defense attorney that asserted that the circumstances underlying the McDaniels' lawsuit were part of the USDOJ's criminal investigation of Rusert; and a subpoena issued by the United States District Court for the Northern District of Alabama requesting that SCCH turn over all documents related to its and Rusert's dealings with certain parties and entities, including the McDaniels. In their motion to strike, the McDaniels argue that those materials were...