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Consolidated Electrical Contractors & Engineers, Inc. v. Center Stage/Country Crossing Project, LLC

Alabama Court of Civil Appeals

February 27, 2015

Consolidated Electrical Contractors & Engineers, Inc.
v.
Center Stage/Country Crossing Project, LLC, a/k/a Country Crossing, LLC, and Generator Source, LLP, d/b/a/ Diesel Service & Supply

Appeal from Houston Circuit Court CV-11-295

DONALDSON, Judge.

A party who has been wrongfully enjoined or restrained by an injunction issued pursuant to Rule 65, Ala. R. Civ. P., may seek recourse to recover costs, damages, and attorney fees that are the actual, natural, and proximate result of the wrongful injunction under Rule 65.1, Ala. R. Civ. P., or through an independent action. Recovery is limited to the amount of the injunction bond approved by the court under Rule 65(c), Ala. R. Civ. P., unless it can be established that the party who obtained the injunction acted in bad faith, in which event the injured party's damages are not limited by the amount of the injunction bond. In the present case, the Houston Circuit Court ("the trial court"), after dissolving an injunction obtained by Consolidated Electrical Contractors & Engineers, Inc. ("Consolidated Electrical"), against Center Stage/Country Crossing Project, LLC, a/k/a Country Crossing, LLC ("Center Stage"), [1] and Generator Source, LLP, d/b/a Diesel Service & Supply ("Generator Source"), determined that Consolidated Electrical had wrongfully obtained injunctive relief in bad faith; thus, the trial court awarded Center Stage and Generator Source costs, damages, and attorney fees in an amount in excess of the injunction bond. Consolidated Electrical appealed. We dismiss Consolidated Electrical's appeal insofar as it addresses the trial court's decision to dissolve the injunction. However, because we find that Center Stage and Generator Source failed to establish that Consolidated Electrical acted in bad faith in obtaining the injunction, we reverse the trial court's determination that Consolidated Electrical owed costs, damages, and attorney fees in excess of the amount of the injunction bond.

Facts and Procedural History

On July 9, 2009, Consolidated Electrical entered into an agreement with Alliance Construction Co., Inc. ("Alliance Construction"), in which Consolidated Electrical agreed to provide electrical work as a subcontractor on the construction of a bingo pavilion and amphitheater project in Dothan for Center Stage, the owner of the project. As part of that contract, Consolidated Electrical was to deliver two 1, 500 kilowatt diesel-fuel generators and install them on Center Stage's property. Consolidated Electrical purchased the generators from Thompson Tractor Company, Inc. ("Thompson Tractor"), of Birmingham, and, pursuant to a financing arrangement with Consolidated Electrical, Thompson Tractor perfected a security interest in the generators by filing a UCC financing statement with the Alabama Secretary of State naming Consolidated Electrical as the debtor. Consolidated Electrical installed the generators on Center Stage's property in November 2009.

In July 2011, Center Stage and Generator Source, a corporation whose principal place of business is in Colorado, negotiated a sale of the generators for a purchase price of $285, 000. During the negotiations, Center Stage informed Generator Source that there were no liens or encumbrances on the generators. On July 29, 2011, Generator Source paid the amount of the agreed-upon purchase price by wire transfer. Generator Source scheduled a freight pickup of the generators in Dothan for August 22, 2011, which required the utilization of two flatbed trucks and cranes capable of lifting the generators.

On August 2, 2011, Consolidated Electrical filed in the Houston Probate Court a lien on "both the land [belonging to Center Stage] and the buildings and improvements thereon, and the said land, including the land on which each of the buildings and improvements thereon are located." The stated purpose of the filing of the lien was to "secure an indebtedness of One Million Eighty-three Thousand One Hundred Twenty Two U.S. Dollars ($ 1, 083, 122.00), with interest, from February 3, 2011 plus costs of work labor, goods and services that [Consolidated Electrical] supplied and provided to and for the benefit and improvement of the property and that was used in and contributed to the construction of the buildings and improvements thereon ...." The lien did not expressly reference the generators.

On August 16, 2011, Consolidated Electrical was made aware of Center Stage's agreement with Generator Source to sell the generators. On August 17, 2011, Consolidated Electrical filed a petition for injunctive relief in the trial court, naming Center Stage as the defendant and seeking to restrain Center Stage from selling the generators to Generator Source. In the petition, Consolidated Electrical asserted that it was the owner of the generators, that Center Stage had not paid Consolidated Electrical for the generators, that Consolidated Electrical owed money to Thompson Tractor for the generators, and that Center Stage was in the process of selling the generators to Generator Source. Consolidated Electrical further asserted that it would "suffer irreparable injury in the form of the loss of collateral and/or loss of profit." Consolidated Electrical attached to the petition for injunctive relief an affidavit of Mahmoud Affan, Consolidated Electrical's chief financial officer. Affan averred that the generators were a part of a "mechanics lien" that Consolidated Electrical had filed in the Houston Probate Court on August 2, 2011. Consolidated attached the lien to the petition.

The trial court conducted a hearing on the petition on August 22, 2011. Counsel for Consolidated Electrical and for Center Stage were present at the hearing and presented oral arguments to the trial court. The trial court did not receive testimony at this hearing. Consolidated Electrical contended that the generators were subject to a security interest established by Thompson Tractor and that Consolidated Electrical had not paid Thompson Tractor for the generators because Center Stage had not paid for the work Consolidated Electrical had done on the Center Stage property. Consolidated Electrical argued that Thompson Tractor's security interest was still valid. Following that hearing, the trial court entered an order granting Consolidated Electrical a preliminary injunction and directing Center Stage to suspend the sale of the generators to Generator Source. Pursuant to Rule 65(c), Ala. R. Civ. P., the trial court also set an injunction bond in the amount of $15, 000. The trial court also entered an order on August 23, 2011, directing Center Stage to keep the generators on its property until further notice of the court. During the August 22 hearing and before the trial court ruled on the petition for an injunction, one of the generators had been placed on a truck and had been removed from the Center Stage property to be delivered to Colorado.

On August 24, 2011, Generator Source filed a motion to intervene in the action pursuant to Rule 24, Ala. R. Civ. P. Generator Source asserted that it was a bona fide purchaser in good faith of the generators. The trial court entered an order on August 26, 2011, granting Generator Source's motion to intervene. On August 26, 2011, Generator Source filed a motion to dissolve the preliminary injunction that had been issued on August 22, 2011, asserting, in part, that "the liens which were presented to [the trial court] at the hearing on August 22, 2011, in connection with the subject generators were neither timely filed nor do they apply to the generators sold by [Center Stage] to [Generator Source]." Generator Source attached to its motion an affidavit executed by Edward A. Vecchiarelli, Jr., its vice president of operations, detailing the history of the sale of the generators. He testified that, in July 2011, he negotiated with a representative of Center Stage for the purchase of the generators. He testified that he was not aware of any liens pertaining to the generators at the time of the purchase, that a Center Stage representative had informed him that the generators were not subject to any liens, and that a lien search Generator Source conducted on August 26, 2011, through the Delaware Secretary of State did not produce any evidence indicating that a lien existed on the generators. He testified that upon receipt of a proper invoice from Center Stage on July 29, 2011, Generator Source had paid the purchase price and had accepted ownership of the generators.

On August 29, 2011, the trial court conducted a hearing on Generator Source's motion to dissolve the injunction. At that hearing, the trial court received the testimony of Michael Ryan Newer, vice president of Center Stage, and Patrick Merritt, Consolidated Electrical's vice president of operations. Merritt testified that be became aware on August 16, 2011, that Center Stage had sold the generators. He testified that Consolidated Electrical had not completed its contract with Alliance Construction. He testified that Center Stage still owed approximately $1.2 million dollars to Consolidated Electrical, that Consolidated Electrical still owed Thompson Tractor for the generators, and that Thompson Tractor had placed a UCC financing lien on the generators, which lien listed Consolidated Electrical as the debtor. Under cross-examination from Generator Source's counsel, Merritt testified concerning Consolidated Electrical's alleged security interest in the generators:

"Q. 'Your, ' being Consolidated Electric[al]'s security interest. You're claiming a security interest in these -- in these generators, are you not?
"A. I provided them to the ...

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