Smith v. Cowart

68 So. 3d 802, 2011 Ala. LEXIS 22, 2011 WL 751322
CourtSupreme Court of Alabama
DecidedFebruary 25, 2011
Docket1090048
StatusPublished
Cited by4 cases

This text of 68 So. 3d 802 (Smith v. Cowart) is published on Counsel Stack Legal Research, covering Supreme Court of Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Smith v. Cowart, 68 So. 3d 802, 2011 Ala. LEXIS 22, 2011 WL 751322 (Ala. 2011).

Opinion

MURDOCK, Justice.

Nathan Smith and Dale D. Smith appeal from a judgment entered by the Macon Circuit Court in their action against H. Buford Cowart, Debbie Cowart d/b/a DBM Enterprises, and Herman Cowart (collectively “the Cowarts”). We affirm in part, reverse in part, and remand.

I. Facts and Procedural History

In 1994, the Smiths and Buford Cowart formed Heartland Products, Inc. (“Heartland”); Heartland engaged in a landscaping business based in Macon County. The Smiths owned 49 percent of the corporation; Buford Cowart owned 51 percent of the corporation. The Smiths alleged that Heartland owned 13.7 acres of real property and various pieces of equipment — including two forklifts, a loader, a bark screener, and a tub grinder (“the equipment”) — used in the operation of its business. The Cowarts counter that they, not Heartland, owned most of the equipment.

The Smiths claim that they were passive investors in Heartland and that Buford Cowart ran the day-to-day operations of the business. The parties agree that Heartland obtained business loans from SouthTrust Bank in exchange for which SouthTrust obtained a security interest in property owned by Heartland. The parties disagree as to whether the property in which SouthTrust obtained a security interest included the equipment. The Smiths claim that they were the guarantors on the loans, while the Cowarts claim that Buford Cowart also was a guarantor on the loans.

The Smiths claim that Buford Cowart caused Heartland to default on its business loans with SouthTrust, which forced the Smiths to make payments on those loans. The Smiths eventually paid off the loans, and SouthTrust assigned its rights and interests in Heartland’s property resulting from the loans to the Smiths. The Smiths claim that the assignment by SouthTrust gave them ownership rights in the equip- *804 merit; the Cowarts dispute this claim. The Cowarts assert that the loans had no connection to the equipment because, according to them, Heartland did not own the equipment. 1

On May 6, 1999, the Smiths filed a complaint in the Macon Circuit Court against the Cowarts. The gravamen of the complaint was that Buford Cowart had depleted the resources of Heartland without the Smiths’ knowledge for the benefit of businesses owned by Buford Cowart’s wife Debbie Cowart and by Buford Cowart’s father Herman Cowart. The complaint included claims of breach of fiduciary duty, conversion, and dissolution of the corporation. Pertinent to this appeal, the Smiths alleged that Buford Cowart fraudulently transferred some of the equipment to his wife, to be used in DBM Enterprises, a competing landscaping business operated by his wife, and that he diverted some of the equipment to his father, to be used in Heartland Trucking, a business operated by his father.

On June 21, 1999, the Smiths filed a motion for a writ of seizure of the equipment pursuant to Rule 64, Ala. R. Civ. P., as well as for a preliminary injunction to prevent the Cowarts from using the equipment. Nathan Smith filed an affidavit with the motion in which he listed the items of equipment at issue and stated that it was his “belief’ that Heartland owned the equipment. Smith also averred that the equipment had a value of $113,800. The Smiths filed a $250,000 bond with the motion; United States Fidelity & Guaranty Company (“USF & G”) was named in the bond as a surety. 2

On June 24,1999, the trial court issued a writ of seizure in which it ordered the sheriff of Lee County to attach all the equipment found at a particular address in Opelika. The order also required the Co-warts to return to Heartland all the equipment that was not seized by the sheriff. Consistent with Rule 64(b)(2)(B), Ala. R. Civ. P., the order stated that the Cowarts were entitled to a prejudgment hearing on the issue of dissolution of the writ of seizure if a written request for such a hearing was served on the Smiths’ counsel within five days of the attachment of the property. 3 The record does not reflect, and the *805 Cowarts do not contend, that the Cowarts made a written request for dissolution of the writ of seizure.

The Smiths state that they received only one item of equipment, a forklift, as a result of the writ of seizure. The Cowarts do not dispute this assertion, though they contend that because of the injunction they could not and did not use any of the equipment until the writ of seizure eventually was dissolved.

On August 13, 1999, Herman Cowart answered the Smiths’ complaint. He also stated a counterclaim of conversion against the Smiths, alleging that they had deprived him of one flashlight, one tarp, and several thousand “yards” of mulch. On December 17, 1999, Buford Cowart and Debbie Cowart jointly answered the Smiths’ complaint. They also filed counterclaims against the Smiths. Debbie Co-wart alleged that she had loaned Heartland $17,000, for which she had not been repaid. Buford Cowart alleged that the Smiths had promised to assist him in running Heartland but that the Smiths repeatedly refused to provide the help they had promised. He also alleged that he had performed work for Heartland between 1994 and 1998 for which he had not been paid, labor he valued at $97,000.

The record reflects that, in April 2000, the Smiths propounded to the Cowarts interrogatories and requests for the production of documents. When the Cowarts apparently did not reply to those discovery requests, the Smiths filed a motion to compel discovery. The record does not reflect that the trial court ruled upon the Smiths’ motion. In their brief, the Cowarts’ counsel states that “the Cowarts provided the Smiths with all company documents in their possession, which numbered in the thousands.”

For their part, the Cowarts contend in their brief to this Court that, between May 2001 and December 2008, their counsel sent notices scheduling the depositions of the Smiths on four different occasions but that the Smiths failed to appear on each such occasion. The Smiths do not directly deny this assertion; instead, they observe that the record does not contain any notices of deposition.

On January 4, 2001, the Smiths filed a motion to set the case for trial, and the trial court entered an order scheduling the trial for February 22, 2001. The parties subsequently filed a joint motion to continue, which the trial court granted. On April 4, 2002, the Smiths’ counsel informed the trial court that his address had changed. On November 12, 2002, the Co-warts filed a motion to set the case for trial; the trial court scheduled the trial for February 25, 2003. The case was not tried on that date. On April 7, 2003, the Smiths’ counsel informed the trial court that his address again had changed. The trial court next scheduled the case to be tried on May 1, 2003. The case was not tried on that date. The trial court scheduled the case for trial on August 5, 2003. The case was not tried on that date. The trial court scheduled the case for trial on November 20, 2003. The Cowarts’ counsel subsequently requested that the case be continued. On August 9, 2005, the Cowarts filed another motion to set the case for trial.

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Cite This Page — Counsel Stack

Bluebook (online)
68 So. 3d 802, 2011 Ala. LEXIS 22, 2011 WL 751322, Counsel Stack Legal Research, https://law.counselstack.com/opinion/smith-v-cowart-ala-2011.