The Elliott Law Group, P.A. v. Five Star Credit Union

          Appeal from Montgomery Circuit Court (CV-08-900863)

          MITCHELL, JUSTICE.

         Five Star Credit Union ("Five Star") has attempted for over a decade to collect a debt owed by William C. Elliott. Five Star obtained a judgment against Elliott in 2011, but he never paid. In 2017, Five Star sought to garnish Elliott's wages by filing a process of garnishment in the Montgomery Circuit Court against Elliott's employer, The Elliott Law Group, P.A. ("ELG"), a law firm that is under Elliott's complete control. ELG opposed the process of garnishment. Following a hearing, the trial court found that the assertions in ELG's opposition were untrue and ordered that Elliott's income from ELG be garnished. Elliott and ELG (hereinafter referred to collectively as "the appellants") now appeal. Because the appellants' arguments lack merit, we affirm the judgment of the trial court.

         Facts and Procedural History

         This case began more than a decade ago. In August 2008, Five Star sued Elliott alleging breaches of various loan agreements. On February 22, 2011, the trial court entered a judgment for Five Star in the amount of $777, 655.98 plus court costs.

         On September 25, 2017, following other attempts to collect on the judgment, Five Star filed a process of garnishment against ELG in the amount of $1, 011, 112.83.^[1] On October 28, 2017, ELG filed a garnishment answer in which it stated: "[Elliott] is employed, but [Elliott] is indebted to [ELG] in an amount greater than [Elliott's] wages. [ELG] has right of sett-off [sic] and consensual lien on wages." On December 27, 2017, 60 days after ELG filed its garnishment answer, Five Star filed a verified contest of ELG's answer ("the contest"), in which counsel for Five Star stated (1) that he believed ELG's answer to be untrue and (2) that the parties had agreed to waive the requirement in § 6-6-458, Ala. Code 1975, that contests to a garnishee's answer be filed within 30 days after notice of the filing of the answer.

         Following a hearing on the contest, the trial court concluded that ELG's garnishment answer was untrue. The trial court's conclusion was based primarily on the following findings of fact:

• ELG is under Elliott's complete control. Elliott is the president and sole shareholder of ELG.

• Although ELG based its garnishment answer on an employment agreement ("the employment agreement") purportedly dated January 1, 2017, the employment agreement was not executed until September 2017, after a postjudgment evidentiary hearing and examination of Elliott by Five Star.

• The employment agreement stated that ELG would pay Elliott an annual salary of $48, 000 and provide Elliott with a $260, 000 line of credit to be repaid annually at 1% of the principal balance and at ELG's discretion. Any failure by Elliott to make a payment to ELG was not a default under the employment agreement.

• The employment agreement purported to give ELG a consensual lien on all of Elliott's income as security for any debt that Elliott owed ELG.

• Elliott does not maintain an individual bank account, and all of his personal and business expenses are paid from an account in ELG's name. The loan agreement between Elliott and ELG was "simply a means of receiving compensation from [ELG] without acknowledging the compensation as salary or wages." No legitimate business purpose existed for the line-of-credit compensation "other than the avoidance of payment of creditors." The employment agreement was "simply a means to remove funds from [ELG] and pay the same to [Elliott] without any obligation of repayment except at the sole discretion of" Elliott.

         Based on these and other findings of fact, the trial court concluded that ELG's purported consensual lien and setoff rights were unenforceable against Five Star. It ordered Elliott to withhold a portion of his income from ELG and submit the garnished amounts to the clerk of the trial court each month, along with calculations of business and personal expenses as well as bank statements reflecting transactions from ELG's bank accounts. Following the trial court's denial of their postjudgment motions filed under Rule 59(a) and Rule 59(e), Ala. R. Civ. P., the appellants appealed under § 6-6-464, Ala. Code 1975.

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