Reynolds v. Colonial Bank

• Decision Date: 20 June 2003
• Citation: 874 So.2d 497
• Parties: Thomas E. REYNOLDS et al. v. COLONIAL BANK et al.
• Court: Alabama Supreme Court

874 So.2d 497

Thomas E. REYNOLDS et al. v. COLONIAL BANK et al.

1087.

Supreme Court of Alabama.

June 20, 2003.

As Modified on Denial of Rehearing August 15, 2003.

Michael C. Skotnicki of Haskell Slaughter Young & Rediker, LLC, Birmingham, for appellants.

Richard A. Wright and Kirkland E. Reid of Miller, Hamilton, Snider & Odom, L.L.C., Mobile for appellee Colonial Bank.

Jeffrey E. Friedman, P. Thomas Dazzio, Jr., and Lee T. Patterson of Friedman, Leak & Bloom, P.C., Birmingham; Edward R. Jackson of Tweedy, Jackson, Beech & Fikes, P.C., Jasper; and Donald M. Wright of Sirote & Permutt, Birmingham, for appellees Friedman, Leak & Bloom, P.C., and Tweedy, Jackson, Beech & Fikes, P.C.

LYONS, Justice.

Thomas E. Reynolds, the interim Chapter 7 bankruptcy trustee for Jefferson Screening, Inc.; Laguna Resources, Inc.; and Black Creek Land and Minerals, Inc. (hereinafter referred to collectively as "the debtors"), appeals from the trial court's orders of condemnation of interpleaded funds and its award of attorney fees and expenses in favor of the garnishment liens of Colonial Bank; Komatsu Financial, L.P.; General Electric Capital Business Asset Funding Corporation; Brad Regan, Inc.; the law firm of Friedman, Leak & Bloom, P.C. ("Friedman"); and the law firm of Tweedy, Jackson, Beech and Fikes, P.C. ("Tweedy"). Derrell Chamblee and Scott Chamblee, former employees of Jefferson Screening, are also named as appellees.

I. Factual and Procedural History

The debtors were the plaintiffs in a fraud action against Seminole Electric Cooperative, Inc. On May 3, 2000, after the commencement of the debtors' action, Colonial Bank sued both the debtors and Seminole, claiming that the debtors had defaulted on their loans with Colonial Bank because of Seminole's alleged failure to honor its contracts to purchase coal from the debtors. Colonial Bank's action was consolidated with the debtors' action against Seminole.

On October 12, 2000, the trial court entered a summary judgment in favor of Colonial Bank for its claims against the debtors in the amount of $7,446,363.16. The judgment was made final pursuant to Rule 54(b), Ala. R. Civ. P. The debtors did not appeal the summary judgment against them. The debtors assigned to Colonial Bank any potential recovery in their fraud action against Seminole, and, in return, Colonial Bank agreed to seek recovery of the debtors' indebtedness only from the proceeds recovered, if any, in the debtors' fraud action against Seminole. The trial court entered an order of attachment in favor of Colonial Bank charging with payment of Colonial Bank's judgment any monetary judgment recovered by the debtors against Seminole, subject to any liens held by the debtors' attorneys. Colonial Bank dismissed its action against Seminole.

The debtors' remaining claims against Seminole were tried before a jury. On June 26, 2001, the jury returned a verdict in favor of the debtors against Seminole in the amount of $22,196,899.69. Colonial Bank, along with Komatsu, General Electric, and Brad Regan, other creditors of the debtors, served their writs of garnishment on Seminole. Friedman and Tweedy also asserted their claims for attorney fees related to the services they provided for one of the debtors, Jefferson Screening.

Seminole subsequently appealed the trial court's judgment for the debtors on their fraud claim. On September 9, 2002, while that appeal was pending before this Court, the debtors and Seminole executed a "Release and Settlement Agreement"¹ settling the debtors' judgment against Seminole for $6,900,000. To protect itself from competing claimants, Seminole filed a complaint for interpleader of the funds pursuant to § 6-6-463, Ala.Code 1975, and Rule 22, Ala. R. Civ. P. Seminole paid the interpleaded funds to the trial court so the trial court could determine the proper distribution of the funds among the competing claimants. The debtors answered the interpleader complaint and disclaimed any entitlement to the proceeds of the interpleaded funds.

On September 11, 2002, again while the appeal was still pending before this Court, the trial court conducted a hearing at which the debtors, Seminole, and Colonial Bank were present. The trial court entered an order condemning the $6,900,000 settlement amount; that order stated:

"Therefore, it is hereby ordered, adjudged, and decreed as follows:

"1. The $6.9 million settlement amount tendered and paid into court by Seminole Electric Cooperative, Inc. is hereby condemned in its entirety.

"2. The settlement amount, net of any partial distribution that may be approved by this Court in order to satisfy the attorneys' liens for reasonable fees and expenses shall be held pending further order of this Court subject to the claimants' garnishment liens.

"3. That the charging order entered by this Court on April 4, 2001, in favor of Colonial Bank and the garnishment liens of Colonial Bank, Komatsu Financial, L.P., General Electric Capital Business Asset Funding Corp., and Brad Regan, Inc. shall attach to the Court in the order of priority as determined by this Court after notice and hearing.

"4. The Clerk of the Court is directed to serve Colonial Bank, Komatsu Financial, L.P., General Electric Capital Business Asset Funding Corp., and Brad Regan, Inc. with the Complaint for Interpleader filed in this action by Seminole Electric Cooperative, Inc. and a copy of this Order. Each garnishor is directed to file an Answer establishing its claim to and priority in the interpled funds within 30 days hereof."

The trial court also approved the payment of attorney fees and litigation expenses pursuant to the employment contract Friedman and Tweedy had with Jefferson Screening.² The trial court stated:

"It is Therefore, the Order, Judgment and Decree of this Court as Follows:

"1. The petition of [Friedman] and [Tweedy] as to [their] attorney fees is hereby granted as reasonable and the Court finds that [Friedman] and [Tweedy] receive as its attorney fees forty percent of the gross amount of the settlement for a total of $2,760,000.00.

"2. The petition of [Friedman] and [Tweedy] as to the expenses incurred in connection with the prosecution is granted. The expenses are found to be reasonable and necessary, in the sum of $964,833.70 and are approved based on the findings contained in this order.

"3. The Court has been advised that [Friedman] and [Tweedy] have arrived at a split of the monies due them for their attorney fees and expenses and so approves said split.

"4. The Clerk is ordered to instanter pay to the firms of [Friedman] and [Tweedy] the sum of $2,974,833.70 as their total amount of attorney fees and reimbursement of expenses owed herein. The sum of these numbers represents the payment of 40% of the gross amount of the settlement plus approved expenses.³

"5. The Clerk is ordered to instanter pay to Scott Chamblee the sum of $350,000.00; to Derrell Chamblee the sum of $400,000.00.

"6. The money remaining in the clerk's office after the payment of these fees and expenses as set out hereinabove is to be held by the clerk until further order of this court.

"7. Seminole Electric Cooperative, Inc., ... is forever released from any further liability in this case and the judgment against it shall be marked satisfied by the clerk."

The trial court also entered an order sealing the record in the case.

On September 11, 2002, the same date the trial court entered its orders, the parties filed a joint motion with this Court asking us to remand Seminole's appeal of the underlying fraud action. Not until two days later, on September 13, 2002, did this Court remand Seminole's case for proceedings consistent with the release and settlement agreement. Consequently, the trial court's hearing took place and its orders were entered while Seminole's appeal was pending before this Court.

On September 13, 2002, the same date this Court remanded Seminole's case, General Electric, Cumberland Casualty and Surety Company, and Regions Bank⁴ filed petitions of involuntary bankruptcy against the debtors. Reynolds was appointed as interim bankruptcy trustee.⁵ On September 26, 2002, approximately 15 days after the trial court entered its orders, this Court dismissed the appeal on Seminole's motion.

On October 23, 2002, Reynolds appealed the trial court's condemnation order and its award of attorney fees and expenses. The named appellees are Colonial Bank, Komatsu, General Electric, Brad Regan, Friedman, Tweedy, Derrell Chamblee, and Scott Chamblee.⁶

II. Standard of Review

Reynolds's appeal focuses on the application of the law to the facts. Reynolds claims that the facts are uncontested; Colonial Bank, Friedman, and Tweedy claim that Reynolds omits pertinent facts and that he mischaracterizes the record. We find that the facts applicable to the issues presented are undisputed, and that, therefore, "no presumption of correctness is accorded to the trial court's judgment" and "we review de novo the application of the law to the facts of this case." Allstate Ins. Co. v. Skelton, 675 So.2d 377, 379 (Ala.1996); Beavers v. County of Walker, 645 So.2d 1365, 1372 (Ala.1994). Because we find that the trial court lacked jurisdiction to enter its condemnation order and to award attorney fees and expenses, we pretermit a discussion of Reynolds's claim that the interpleader notices to the creditors were insufficient.

III. Analysis

Reynolds argues that the trial court could not recognize or enforce the parties' settlement agreement without the consent of this Court because, he argues, the trial court was divested of its jurisdiction while Seminole's appeal was pending before this Court. According to Reynolds, only "collateral" matters remained within the jurisdiction of the trial court. See Foster v. Greer & Sons, Inc., 446 So.2d 605, 608 (Ala.1984) (overruled by Ex parte Andrews, 520 So.2d 507 (Ala.1987), to the extent Foster held that filing a notice of appeal ousts the trial court of...