Walden v. Hutchinson

• Decision Date: 09 November 2007
• Docket Number: 1060516.
• Citation: 987 So.2d 1109
• Court: Alabama Supreme Court
• Parties: Willadean WALDEN and Danya Park Garden Apartments, Inc. v. George HUTCHINSON et al.

987 So.2d 1109

Willadean WALDEN and Danya Park Garden Apartments, Inc. v. George HUTCHINSON et al.

1060516.

Supreme Court of Alabama.

November 9, 2007.

Rehearing Denied January 18, 2008.

David E. Hampe, Jr., Birmingham; and Gatewood Walden, Montgomery, for appellants.

David A. McDowell of McDowell, Faulk & McDowell, LLC, Prattville, for appellee George Hutchinson.

Charles W. Edmondson, Montgomery, for appellees ES Capital, LLC, Richard Ensley, and Patricia Ensley.

Scott M. Speagle of Hill, Hill, Carter, Franco, Cole & Black, P.C., Montgomery, for appellee Annee Caspari, executrix of the estate of Hugh Smith, Jr.

J. Myron Smith of Smith & Norman, Prattville, for appellee Annee Caspari, individually.

WOODALL, Justice.

Willadean Walden and Danya Park Garden Apartments, Inc. ("Danya Park"), formerly known as Hugh V. Smith Enterprises, Inc. ("the Enterprises"), appeal from a summary judgment in favor of George Hutchinson; the George Ellis Hutchinson, Jr., Present Interest Trust No. 1 ("the Hutchinson trust"); Annee Caspari, individually and as executrix of the estate of Hugh V. Smith, Jr. ("the estate"); ES Capital, LLC ("ES"); and Richard Ensley and Patricia Ensley, an officer and a member, respectively, of ES, in an action commenced by Walden and Danya Park, seeking, among other things, to quiet title in Walden to real estate known as Danya Park Garden Apartments ("the apartments"). We affirm in part, reverse in part, and remand.

I. Factual Background

The dispositive facts are essentially undisputed. This complicated, long-running dispute arose out of litigation in the Montgomery Circuit Court (CV-95-1093) and has already been before this Court on a number of occasions. See Walden v. Sandlin (No. 1050324, May 12, 2006), 976 So.2d 1059 (Ala.2006) (table); Ex parte Walden, 916 So.2d 632 (Ala.2004) (table); Walden v. Smith, 891 So.2d 837 (Ala.2004); and Ex parte Walden, 785 So.2d 335 (Ala. 2000). At its outset, the litigation involved Walden and the late Hugh V. Smith, Jr., in case no. CV-95-1093, an action filed against Walden by Smith and others. On June 14, 1995, Walden filed counterclaims against Smith alleging, among other things, (1) breach of a promissory note, (2) breach of a joint-venture agreement, and (3) fraudulent suppression.

While case no. CV-95-1093 was pending, Smith, an attorney representing Auburn Medical Center, Inc. ("AMC"), became indebted to Hutchinson in the amount of $310,000 in connection with the construction of a hospital in Auburn. On October 21, 1998, Smith, as president of the Enterprises, gave Hutchinson a quitclaim deed to the apartments. In conjunction with the quitclaim deed, Hutchinson and Smith, individually and as president of the Enterprises, executed agreements purporting to show that Hutchinson was to hold the deed as collateral for Smith's debt to Hutchinson and that the deed was to be recorded only upon Smith's death or in the event he defaulted on the indebtedness.

Subsequently, Walden obtained a favorable judgment for $187,166 in case no. CV-95-1093 on her counterclaims against Smith alleging breach of a promissory note and breach of a joint-venture agreement, but she suffered an adverse summary judgment on her fraudulent-suppression counterclaim. She appealed from the summary judgment, and the Court of Civil Appeals affirmed, without an opinion. Walden v. Smith Children Trust, 781 So.2d 1029 (Ala.Civ.App.1999) (table). This Court reversed the judgment of the Court of Civil Appeals and remanded the case for further proceedings on the fraudulent-suppression counterclaim. Ex parte Walden, 785 So.2d at 339.

Meanwhile, on August 20, 1999, Hutchinson created the Hutchinson trust for the benefit of his son, George Ellis Hutchinson, Jr. On August 26, 1999, Hutchinson executed a document purporting to "give[] and transfer[]" to the Hutchinson trust "[a]ll monies advanced to AMC or its lawyers or funds used for any purpose for AMC and provided by George E. Hutchinson." In or around 2000, Hutchinson and his wife divorced, and Hutchinson subsequently filed a petition for bankruptcy under Chapter 7 of the Bankruptcy Code.

By April 2000, Walden's judgment against Smith in case no. CV-95-1093 remained unsatisfied. Consequently, on or about April 12, 2000, Walden filed an "application pursuant to Rule 70, Alabama Rules of Civil Procedure[,] for a judgment directing [Smith] to transfer stock [in the Enterprises] to [Walden], or, in the alternative, for an order divesting title to the stock in [Smith] and vesting title to the stock in [Walden]." The application quoted extensively from Smith's deposition testimony taken on February 3, 1997, in which Smith admitted that he was the "sole owner of all the stock in [the Enterprises]," of which the apartments were the sole asset. On or about August 11, 2000, the Montgomery Circuit Court entered the following order:

"[Walden] having made application for an Order divesting title to stock [in the Enterprises] from [Smith] and into [Walden] pursuant to enforcement of the judgments heretofore obtained in this court by [Walden], and the court having considered the application and the evidence presented ore tenus, the court finds from the credible evidence, which includes [Smith's] tax returns, [Smith's] admissions in depositions, pleadings of record, and records from [the Department of Housing and Urban Development], that [Smith] is the sole owner of all of the common stock in [the Enterprises], an Alabama corporation, which holds title to and owns [the apartments]. Now, therefore, for good cause shown, it is hereby

"ORDERED that [Walden's] application is granted and Willadean Walden is vested with and is the owner of all of the common stock in [the Enterprises] and [Smith] shall forthwith deliver and turn over to [Walden] all of the books and records of said corporation."

Subsequently, Caspari sought to intervene in case no. CV-95-1093. According to Walden, Caspari's first motion to intervene was denied on November 2, 2000, and a second motion was filed approximately a year later. The disposition of Caspari's second motion is unclear. However, from an order entered by the Montgomery Circuit Court on June 5, 2002, it is clear that Caspari "appeared in court" as trustee of the "Hugh V. Smith, Jr., Children's Trust" ("the Children's Trust"), contending that the Enterprises stock was, in fact, owned — not by Smith — but by the Children's Trust, of which she was trustee. More specifically, the trial court's order stated, in pertinent part:

"1. The court previously entered an order dated August [11], 2000. The intent of the order was to allow the judgment in favor of Willadean Walden and against Hugh V. Smith, Jr., to be collected out of corporate stock or assets of [the Enterprises]. [The only] corporate asset[] is [the apartments], in Prattville, Alabama. The court has since been informed that the stock of [the Enterprises] is not owned by the judgment debtor, Hugh V. Smith, Jr., but, to the contrary, is owned by Annee Caspari, as trustee of [the Children's Trust]. At the time of the order of August [11], 2000, neither Annee Caspari, as trustee of [the Children's Trust] nor [the Enterprises] was a party in the case.

"2. The court is further informed that the value of ... [the apartments] exceeds the judgment amount against [Smith].

"3. The court further finds that Annee Caspari, as trustee of the [Children's Trust], has appeared in court through her attorneys and has represented to the court that [the Enterprises] will refinance the apartments and lend sufficient money to [Smith] to pay the judgment amount with interest to [Walden] within ninety days.

"IT IS THEREFORE ORDERED, ADJUDGED AND DECREED AS FOLLOWS:

"1. The court reconsiders its order of August [11], 2000, because neither Annee Caspari, as trustee of [the Children's Trust], nor [the Enterprises] was before the court as a party.

"2. The portion of the order of August [11], 2000, which awards the ownership of the stock of [the Enterprises] to [Walden] is vacated in favor of the award of a lien on the stock of [the Enterprises], which is an asset of Annee Caspari, as trustee of [the Children's Trust], and the underlying assets of [the Enterprises], as stated in the next ... paragraph.

"3. Based on (a) the court appearance of Annee Caspari, as trustee of [the Children's Trust], as owner of the stock of [the Enterprises], (b) the representation of [Caspari] that [the Enterprises] would refinance [the apartments], and (c) the representation of [Caspari] that [the Enterprises] will lend [Smith] enough money to pay the judgment owed to [Walden], the court determines that Annee Caspari, as trustee of [the Children's Trust], and [the Enterprises] each separately have sufficient interest in the case before this court for the court to enter an order affecting, on the one hand, the ownership of Annee Caspari, as trustee of the [Children's Trust] in the stock of [the Enterprises], and, on the other hand, all of the assets of [the Enterprises]. It is therefore ordered that the judgment in favor of Willadean Walden is a lien on such portion of the assets of [the Enterprises] (including [the apartments]) as is necessary to satisfy such judgment. It is therefore further ordered that the judgment in favor of Willadean Walden is a lien against the following asset (in rem) of Annee Caspari, as trustee of the [Children's Trust] in [the Enterprises] as is necessary to satisfy such judgment.

"....

"5. Other than the lien of the judgment, it is the order of this court that neither this order nor the order of August [11], 2000, should be construed as a cloud on the title of [the Enterprises] to [the apartments], or any of its other assets."

(Emphasis added.)

In short, the June 5, 2002, judgment set aside the August 11, 2000, judgment, which had purported to award Walden ownership of both the stock of the Enterprises and the apartments and, instead, awarded her a lien on the stock and...