Case Title: Ex parte HealthSouth Corporation. PETITION FOR WRIT OF MANDAMUS: CIVIL (In re: General Medicine, P.C. v. HealthSouth Corporation)

Citation: 

Docket Number: 1051366

State: alabama

Court: Alabama Supreme Court

Date: 2007-06-15T00:00:00Z

Document:
REL: 2/16/07 HealthSouth Corp.
REL: 6/15/07 as modified on denial of rehearing
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334)
242-4621), of any typographical or other errors, in order that corrections may be made
before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2006-2007
_________________________
1051366
_________________________
Ex parte HealthSouth Corporation
PETITION FOR WRIT OF MANDAMUS
(In re:  General Medicine, P.C.
v.
HealthSouth Corporation)
(Jefferson Circuit Court, CV-05-1483)
SEE, Justice.
HealthSouth Corporation petitions this Court for a writ
of mandamus directing the Jefferson Circuit Court to enter a
1051366
2
summary judgment in its favor on the ground that General
Medicine, P.C., has no standing to bring the underlying action
against it.  Because HealthSouth has not demonstrated a clear
legal right to the remedy it seeks, we deny the petition.
Factual and Procedural History
General 
Medicine 
is 
a 
Michigan-based 
professional
corporation consisting of physicians and advanced nurse
practitioners who specialize in geriatrics and subacute and
long-term care.  General Medicine entered into a contract with
Horizon/CMS Healthcare Corporation ("Horizon") pursuant to
which General Medicine was to provide medical services at
Horizon's long-term care facilities.  In 1996, General
Medicine brought a breach-of-contract action against Horizon
in the United States District Court for the Eastern District
of Michigan.  The district court stayed the action from 1998
until 2003. 
In February 1997, HealthSouth, a Delaware corporation
with its principal place of business located in Birmingham,
Alabama, acquired Horizon, paying $1.25 billion to purchase
Horizon's stock.  From 1997 until 2001, Horizon was a wholly
owned 
subsidiary 
of 
HealthSouth. 
 
In 
November 
1997,
1051366
3
HealthSouth sold Horizon's long-term care facilities to
Integrated Health Services, Inc. ("IHS"), for $1.25 billion;
as a result of the sale, Horizon received $1.15 billion in
cash and IHS assumed $100 million of Horizon's debt.
According to General Medicine, "HealthSouth accounted for the
IHS sale on Horizon's books and records by recharacterizing
$414 
million 
of 
fictitious 
earnings 
from 
a 
previous
transaction as an asset sold to IHS";  HealthSouth then
transferred $500 million of the cash proceeds from the sale
from Horizon to itself and "replac[ed] the cash on Horizon's
balance sheet with a fictitious asset to offset the cash
transfer."  General Medicine's answer at 3-4.  In November
2001, HealthSouth sold its shares of Horizon stock to
Meadowbrook Healthcare, Inc., for $16.8 million.  Thus,
according to General Medicine, "HealthSouth fraudulently
stripped more than $1 billion in assets from Horizon."
General Medicine's answer at 4. 
In April 2004, General Medicine entered into a settlement
agreement in the federal litigation with Horizon and its
owner, Meadowbrook.  As part of the settlement, Meadowbrook
and Horizon paid General Medicine $300,000 and consented to a
1051366
HealthSouth contends that the consent judgment in the
1
federal action was the product of collusion, fraud, and bad
faith and that the amount of Horizon's liability was greatly
exaggerated.  HealthSouth's brief at  5 n.3.  The question of
HealthSouth's right to challenge the legality of the consent
judgment when General Medicine attempts to execute on the
allegedly fraudulently transferred assets is not before this
Court on this mandamus petition.
4
judgment in the federal district court in which Horizon
admitted liability in the amount of $376 million.    General
1
Medicine reserved its right to receive any payment "awarded or
returned to Horizon or Meadowbrook as a result of any action
brought 
by 
Gen[eral] 
Med[icine] 
against 
HealthSouth
Corporation to execute on the Consent Judgment."  However,
General Medicine covenanted not to execute on the consent
judgment against Meadowbrook or Horizon beyond the $300,000
provided for in the agreement.  General Medicine's answer, tab
C at 6.  The settlement agreement also provided that the
settlement 
"is not releasing Horizon and/or Meadowbrook from
liability to Gen[eral] Med[icine] arising out of the
Lawsuit or the Consent Judgment, and that this
agreement does not affect Gen[eral] Med[icine]'s
rights or claims against any other person or non-
party to this agreement."  
General Medicine's answer at 7. 
1051366
5
General Medicine filed the instant action in the
Jefferson Circuit Court in August 2004, alleging that it was
a creditor of Horizon and that assets had been fraudulently
transferred from Horizon to HealthSouth.  HealthSouth moved
for a summary judgment, arguing that General Medicine had no
standing to bring this action because it was not a "creditor"
of Horizon under the Alabama Uniform Fraudulent Transfer Act
("AUFTA"), § 8-9A-1 et seq., Ala. Code 1975.  The trial court
denied the summary-judgment motion.  HealthSouth then filed a
motion for reconsideration and, alternatively, a motion for
the trial court to certify its order for interlocutory appeal
pursuant to Rule 5, Ala. R. App. P.  The trial court denied
both motions.  HealthSouth now petitions for a writ of
mandamus directing the trial court to enter a summary judgment
in its favor.  In July 2006, this Court ordered answer and
briefs and stayed the proceeding in the trial court in order
to consider the petition.
Standard of Review
Mandamus review is available where the petitioner
challenges the subject-matter jurisdiction of the trial court
1051366
6
based on the plaintiff's alleged lack of standing to bring the
lawsuit.
"'"'Mandamus 
is 
a 
drastic 
and
extraordinary writ, 
to 
be 
issued only where
there is (1) a clear legal right in the
petitioner to the order sought; (2) an
imperative duty upon the respondent to
perform, accompanied by a refusal to do so;
(3) the lack of another adequate remedy;
and (4) properly invoked jurisdiction of
the court.'  Ex parte Integon Corp., 672
So. 2d 497, 499 (Ala. 1995).  The question
of 
subject-matter 
jurisdiction 
is
reviewable by a petition for a writ of
mandamus.  Ex parte Flint Constr. Co., 775
So. 2d 805 (Ala. 2000)."
"'Ex parte Liberty Nat'l Life Ins. Co., 888 So. 2d
478, 480 (Ala. 2003) (emphasis added).  "When a
party without standing purports to commence an
action, the trial court acquires no subject-matter
jurisdiction."  State v. Property at 2018 Rainbow
Drive, 740 So. 2d 1025, 1028 (Ala. 1999).  Under
such a circumstance, the trial court has "no
alternative but to dismiss the action."  740 So. 2d
at 1029.'"
Ex parte Richardson, [Ms. 1051474, November 9, 2006] ___ So.
2d ___, ___ (Ala. 2006) (quoting Ex parte Chemical Waste
Mgmt., Inc., 929 So. 2d 1007, 1010 (Ala. 2005)).
This petition follows the denial of a motion for a
summary judgment.  To grant a motion for a summary judgment,
the trial court must determine that there is no genuine issue
of material fact and that the movant is entitled to a judgment
1051366
7
as a matter of law.  Rule 56(c)(3), Ala. R. Civ. P.  When the
movant makes a prima facie showing that those two conditions
are satisfied, the burden then shifts to the nonmovant to
present "substantial evidence" creating a genuine issue of
material fact.  Ex parte CSX Transp., Inc., 938 So. 2d 959,
961 (Ala. 2006).  Evidence is "substantial" if it is of "such
weight and quality that fair-minded persons in the exercise of
impartial judgment can reasonably infer the existence of the
fact sought to be proved."  West v. Founders Life Assurance
Co. of Florida, 547 So. 2d 870, 871 (Ala. 1989); § 12-21-
12(d), Ala. Code 1975. 
In our review of a ruling on a motion for a summary
judgment, we apply as to factual issues the same standard as
does the trial court.  Ex parte Lumpkin, 702 So. 2d 462, 465
(Ala. 1997).  We must review the record in the light most
favorable to the nonmovant and must resolve all reasonable
doubts against the movant.  Ex parte CSX Transp., 938 So. 2d
at 962.  The trial court's ruling on a question of law carries
no presumption of correctness. Ex parte Graham, 702 So. 2d
1215, 1221 (Ala. 1997).
Analysis
1051366
8
HealthSouth argues that General Medicine lacked standing
to bring its claim under the AUFTA.  According to HealthSouth,
General Medicine's covenant not to sue released Horizon from
liability, thereby extinguishing the debt and divesting
General Medicine of its status as a creditor and, therefore,
of standing under the AUFTA.  General Medicine argues that it
is, as a matter of law, a creditor as that term is defined by
the AUFTA, and that, at a minimum, the settlement agreement
creates disputed questions of fact.
To demonstrate standing, General Medicine must show "(1)
an actual concrete and particularized 'injury in fact' -- 'an
invasion of a legally protected interest'; (2) a 'causal
connection between the injury and the conduct complained of';
and (3) a likelihood that the injury will be 'redressed by a
favorable decision.'" Stiff v. Alabama Alcoholic Beverage
Control Bd., 878 So. 2d 1138, 1141 (Ala. 2003) (quoting Lujan
v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).  It
must allege "specific concrete facts demonstrating that the
challenged practices 
harm 
[it], 
and that 
[it] personally would
benefit in a tangible way from the court's intervention."
Warth v. Seldin, 422 U.S. 490, 508 (1975) (footnote omitted).
1051366
9
The AUFTA provides a remedy for a creditor who alleges
that a debtor has fraudulently transferred assets in order to
avoid satisfying the debt.  § 8-9A-1 et seq., Ala. Code 1975.
"'[F]raudulent conveyances may be attacked only by a party who
is injured or damaged by the conveyance, and a stranger to the
transaction who is neither a creditor [n]or a purchaser or
otherwise affected has no standing to maintain the action.'"
Woodard v. Funderburk, 846 So. 2d 363, 366 (Ala. Civ. App.
2002) (quoting Jesse P. Evans, Alabama Property Rights and
Remedies § 31.7(a) at 543 (2d ed. 1998)).  
The AUFTA defines a "creditor" as one who has a "claim."
§8-9A-1(4), Ala. Code 1975.  The statute defines a "claim" as
"[a] right to payment, whether or not the right is reduced to
judgment, 
liquidated, 
unliquidated, 
fixed, 
contingent,
matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured ...."  § 8-9A-1(3), Ala. Code 1975.  A
"debtor" is "[a] person who is liable on a claim," § 8-9A-
1(6), Ala. Code 1975, and a "debt" is defined as "[l]iability
on a claim." § 8-9A-1(5), Ala. Code 1975.  If General Medicine
does not fit within the definition of a creditor in the
statute, then it lacks standing to bring an action under the
1051366
10
AUFTA.  Woodard, 846 So. 2d at 366 ("'[A] fraudulent
conveyance is valid as to all the world except creditors of
the grantor.'" (quoting Bank of Lexington v. Jones, 456 So. 2d
784, 785 (Ala. 1984) (interpreting the predecessor statute to
AUFTA))).
HealthSouth first argues that there is no disputed
question of fact that would preclude the trial court from
entering a summary judgment in HealthSouth's favor.  General
Medicine disagrees, but it does not put forward any evidence
other than the settlement agreement itself.  General Medicine
merely asserts that "at worst, the Settlement Agreement
evinces a question of fact as to General Medicine's status as
a creditor that should be submitted to the jury."  General
Medicine's answer at 11.  The settlement agreement, on its
face, does not appear ambiguous or otherwise raise a genuine
issue of material fact, and General Medicine fails to point
out any ambiguity or issue of fact created by the settlement
agreement.  
Because there is no genuine issue of material fact, we
turn to the question whether HealthSouth is entitled to a
summary judgment as a matter of law.  This Court has stated:
1051366
11
"'"The construction of a written document is a function of the
court.  If the document is unambiguous, its construction and
legal effect are a question of law which may be decided under
appropriate circumstances, by summary judgment."'"  Boggan v.
Waste Away Group, Inc., 585 So. 2d 1357, 1359-60 (Ala. 1991)
(quoting Jehle-Slauson Constr. Co. v. Hood-Rich, Architects &
Consulting Eng'rs, 435 So. 2d 716, 720 (Ala. 1983), quoting in
turn Wheeler v. First Alabama Bank of Birmingham, 364 So. 2d
1190, 1194 (Ala. 1978)); see also Baldwin v. Branch, 888 So.
2d 482, 484 (Ala. 2004) ("When a document is unambiguous, its
construction and legal effect are questions of law for the
court to decide.").  Further, the Court may use established
rules of contract construction to attempt to resolve as a
matter of law any ambiguity found within the four corners of
the document.  Alfa Life Ins. Corp. v. Johnson, 822 So. 2d
400, 405 (Ala. 2001) ("[I]f the trial court finds the contract
to be ambiguous, it 'must employ established rules of contract
construction 
to 
resolve 
the 
ambiguity.'" 
(quoting 
Voyager 
Life
Ins. Co. v. Whitson, 703 So. 2d 944, 948 (Ala. 1997)); see
also Vesta Fire Ins. Corp. v. Liberty Nat'l Life Ins. Co., 893
So. 2d 395, 404 (Ala. Civ. App. 2003) ("In short, a court is
1051366
Paragraph 6.i. provides: 
2
"The 
consideration for this Agreement between
Gen[eral] Med[icine], Horizon and Meadowbrook is the
covenants contained herein, the Consent Judgment to
be entered in the Lawsuit, the other agreements and
provisions contained in this Agreement, and:
"i.  Horizon and/or Meadowbrook's payments to
Gen[eral] Med[icine] of the total sum of Three
Hundred Thousand ($300,000.00) Dollars, payable by
check(s) drawn in favor of General Medicine, P.C. or
its designee and delivered not later than fourteen
days following the entry of the Consent Judgment in
the Lawsuit ...."
General Medicine's answer, tab C at 2.
12
to evaluate the contract on its face and apply rules of
contract construction in an effort to resolve ambiguities
before submitting the case to a jury.").
General Medicine agreed in paragraph 4 of the settlement
agreement that it 
"(i) will not enforce, execute against or attempt to
collect 
in 
any 
fashion 
from 
Horizon 
and/or
Meadowbrook as a result of or under the Consent
Judgment, beyond the amounts identified in paragraph
6(i.) [$300,000]; and (ii) will not execute against
or attempt to collect in any fashion from Horizon
and/or Meadowbrook as a result of or under the
Consent Judgment, beyond the amounts identified in
paragraph 6(i.)
 below; and (iii) will not commence
[2]
another lawsuit against Horizon and/or Meadowbrook
for anything occurring prior to the date of this
agreement."
1051366
13
General Medicine's answer, tab C at 2.  The only difference
between clauses (i) and (ii) is that the phrase "not enforce"
is omitted from clause (ii); therefore, clause (ii) appears
largely redundant.  
General Medicine has not argued that the settlement
agreement does not represent the intentions of the parties.
According to its terms, the agreement bars General Medicine
from suing Horizon or Meadowbrook for any money owed on the
consent judgment in excess of the $300,000 referenced in
paragraph 6(i). 
HealthSouth argues that the covenant not to sue found in
paragraph 4 of the settlement agreement operates to release
Horizon from liability because, it argues, the covenant
prevents General Medicine from suing to collect any amount
beyond the $300,000 provided for in the settlement agreement,
and it is undisputed that General Medicine has received that
amount.  HealthSouth argues that "'[w]ithout a debt
enforceable against the transferor, a creditor has no claim
against the transferee.'"  HealthSouth's brief at 14 (quoting
Jahner v. Jacob, 515 N.W.2d 183, 185 (N.D. 1994)).
1051366
14
General Medicine acknowledges that the settlement
agreement contained a covenant not to sue and notes that the
express language in paragraph 5 of the agreement states that
the argument is "not a release" and that General Medicine is
"not releasing Horizon and/or Meadowbrook from liability ...
arising out of the Lawsuit or the Consent Judgment ...."
General Medicine's answer, tab C at 2.  General Medicine also
relies on paragraph 6.ii. as the basis of its claiming status
as a creditor of Horizon, contending that this paragraph
creates an obligation owed by Horizon separate from the
covenant not to sue.  Paragraph 6.ii. provides:  
"The payment, conveyance, assignment or transfer by
Horizon and/or Meadowbrook to Gen[eral] Med[icine],
upon receipt, of any assets or property, of any kind
or nature, awarded or returned to Horizon or
Meadowbrook, as a result of any action brought by
Gen[eral] 
Med[icine] 
against 
HealthSouth 
Corporation
to execute on the Consent Judgment as long as
Gen[eral] Med[icine] is not in breach of its
obligations under paragraph 8(vi.) herein."
General Medicine's brief at 18.  Under the settlement
agreement, any payment Horizon or Meadowbrook receives as a
result of litigation brought by General Medicine against
HealthSouth to collect on the consent judgment would be owed
to General Medicine.  
1051366
15
General Medicine contends that Michigan law governs the
effect of the covenant not to sue.  HealthSouth has not argued
that Michigan law does not apply, although it analyzes the
issue under both Michigan and Alabama law.  The settlement
agreement contains a choice-of-law clause that states that
Michigan law will govern the interpretation of the contract.
Moreover, "[i]n a contractual dispute, Alabama law would have
us first look to the contract to determine whether the parties
have specified a particular sovereign's law to govern."
Stovall v. Universal Constr. Co., 893 So. 2d 1090, 1102 (Ala.
2004); see also Polaris Sales, Inc. v. Heritage Imports, Inc.,
879 So. 2d 1129, 1133 (Ala. 2003) ("'Alabama law has long
recognized the right of parties to an agreement to choose a
particular state's laws to govern an agreement.'" (quoting
Cherry, Bekaert & Holland v. Brown, 582 So. 2d 502, 506 (Ala.
1991)).  Therefore, we apply Michigan law to determine whether
the covenant not to sue operates as a release of liability.
Michigan law distinguishes between a release and a
covenant not to sue:  
"A release immediately discharges an existing claim
or right.  In contrast, a covenant not to sue is
merely an agreement not to sue on an existing claim.
It does not extinguish a claim or cause of action.
1051366
16
The difference merely affects third parties, rather
than the parties to the agreement."
J & J Farmer Leasing, Inc. v. Citizens Ins. Co. of America,
472 Mich. 353, 357-58, 696 N.W.2d 681, 684 (2005).  Thus,  as
between the parties, a covenant not to sue operates as a
release.  Industrial Steel Stamping, Inc. v. Erie State Bank,
167 Mich. App. 687, 693, 423 N.W.2d 317, 320 (1988) ("As
between the parties to the agreement, the result [of a
covenant not to sue or a release] is the same.").  
Michigan law requires the court to look to the language
of the contract and to the intentions of the parties to
determine the scope of a release.  See Adair v. State, 470
Mich. 105, 127, 680 N.W.2d 386, 399 (2004) ("The scope of a
release is controlled by the language of the release, and
where, as here, the language is unambiguous, we construe it as
written."); Cole v. Ladbroke Racing Michigan, Inc., 241 Mich.
App. 1, 13, 614 N.W.2d 169, 176 (2000) ("The scope of a
release is governed by the intent of the parties as it is
expressed in the release.").  The settlement agreement before
us provides that it is a covenant not to sue and not a
release; the agreement states that General Medicine "will not
enforce, execute against[,] or attempt to collect" under the
1051366
HealthSouth argues that, under Cook v. City Transport
3
Corp., 3 Mich. 615, 261 N.W. 257 (1935), a party's covenant
not to sue on a breach-of-contract claim amounts to a release
because, it argues, the covenant not to sue supersedes the
17
consent judgment and that it "will not commence another
lawsuit" against Horizon or Meadowbrook.  General Medicine's
answer, tab C at 2.  Further, the agreement states that
General Medicine 
"is not releasing Horizon and/or Meadowbrook from
liability to Gen[eral] Med[icine] arising out of the
Lawsuit or the Consent Judgment, and that this
agreement does not affect Gen[eral] Med[icine]'s
rights or claims against any other person or non-
party to this agreement." 
General Medicine's answer at 7.  
Although the operation and effect of a covenant not to
sue and that of a release may be the same as between the
parties to the agreement, a covenant not to sue does not
extinguish the 
underlying 
cause 
of 
action; it merely 
prohibits
a party from pursuing it.  J & J Farmer Leasing, 472 Mich. at
357-58, 696 N.W.2d at 684.  In short, under Michigan law,
because the breach-of-contract cause of action was not
extinguished, General Medicine preserved its right to enforce
the consent judgment against other parties, including
HealthSouth.3
1051366
original contract and destroys it.  Thus, according to
HealthSouth, a covenant not to sue all parties to a contract
effectively 
extinguishes 
the 
contract. 
 
However, 
Cook
distinguishes that rule, and it does not appear that any
Michigan court has actually applied it in a century.  Further,
the Supreme Court of Michigan has more recently stated that a
covenant not to sue does not extinguish a cause of action.  J
& J Farmer Leasing, 472 Mich. at 357-58, 696 N.W.2d at 684. 
18
HealthSouth cites cases that stand for the proposition
that once the creditor can no longer  enforce the debt against
the debtor, the creditor has no claim against the transferee
to whom assets have been transferred.   In Harper v. Raisin
Fertilizer Co., 158 Ala. 329, 48 So. 589 (1908), this Court
held that the defendant in a fraudulent-transfer action could
raise a statute-of-limitations defense that was available to
the debtor.  Harper thus stands for the principle that the
transferee in an action brought against it to unwind an
allegedly fraudulent transfer may put forward defenses
available to the transferor.  Harper does not, however,
support HealthSouth's argument that the existence of such
defenses deprives the creditor of standing.  When the statute
of limitations expires, it does not extinguish the cause of
action; instead, it makes the remedy unavailable.  See Ex
parte Liberty Nat'l Life Ins. Co., 825 So. 2d 758, 765 (Ala.
1051366
19
2002) ("'[A] statute of limitations generally is procedural
and extinguishes the remedy rather than the right ....'").
Further, the expiration of the statute of limitations does not
affect the creditor's standing to bring the action because
such an affirmative defense may be waived. See Rule 8(c), Ala.
R. Civ. P. (stating that an affirmative defense based on the
statute of limitations that is not put forward in the
defendant's 
first 
pleading 
is 
deemed waived); 
State 
of 
Alabama
ex rel. State of Ohio v. E.B.M., 718 So. 2d 669, 670 (Ala.
1998) ("The defense of the statute of limitations must be
affirmatively pleaded, and if an answer does not include an
affirmative defense, that defense is deemed to have been
waived.").  Thus, Harper does not require this Court to hold
that the fact that a claim is for some reason barred divests
a party of standing.
HealthSouth supports its position with Jahner v. Jacob,
515 N.W.2d 183, 185 (N.D. 1994), in which the Supreme Court of
North Dakota stated that "the claimant loses her status as a
creditor if her claim against the transferor becomes barred by
the statute of limitations, a non-claim statute, or other
method.  Without a debt enforceable against the transferor, a
1051366
20
creditor has no claim against the transferee." (Citations
omitted.)  The rationale for this holding was, in part, that
in North Dakota "[t]he effect of setting aside a fraudulent
transfer of property is to revest title in the debtor."
Jahner, 515 N.W.2d at 185.  The North Dakota court concluded
that "'surely the [Uniform Act] does not contemplate the
absurdity of granting such relief where, as here, judgment
cannot be obtained against the only party in whom the
transferred property could be revested.'" (Quoting Laidley v.
Heigho, 326 F.2d 592, 593-94 (9th Cir. 1963).)  
Other jurisdictions, however, hold that title does not
revest in the debtor where a court sets aside a fraudulent
transfer.  See Roth-Zachry Heating, Inc. v. Price, 77 Or. App.
382, 387, 713 P.2d 634, 637 (1986) ("In essence, the effect of
the judgment is to hold the transfer void only as to creditors
but to recognize it as binding on the parties involved.");
West v. Baker, 109 Ariz. 415, 417, 510 P.2d 731, 733 (1973)
(noting that, under Texas and Arizona law, "'[a] creditor's
judgment subjecting property fraudulently conveyed by his
debtor to the payment of his debt does not have the effect of
reinvesting title in the fraudulent vendor.'" (quoting John
1051366
21
Hancock Mut. Life Ins. Co. v. Morse, 132 Tex. 534, 539, 124
S.W.2d 330, 333 (Tex. Com. App. 1939))).
Alabama 
law 
is 
consistent 
with 
that 
of 
those
jurisdictions that hold that the effect of setting aside a
fraudulent transfer is not to revest title in the debtor.
This Court has held that "a conveyance or transfer made to
hinder, delay, or defraud creditors is valid and operative
between the parties when it has been fully consummated; after
it is fully consummated, neither party can rescind it."  Hill
v. Farmers & Merchants Bank of Waterloo, 641 So. 2d 788, 790
(Ala. 1994).  Thus, in Alabama, a court's setting aside of a
fraudulent transfer does not revest title in the debtor.
Instead, the transferee continues to own the fraudulently
transferred assets; the transfer is void only as to the
creditor, and the creditor can execute on those assets
directly.  § 8-9A-7(b), Ala. Code 1975 ("If a creditor has
obtained a judgment on a claim against the debtor, the
creditor, if the court so orders, may levy execution on the
asset transferred or its proceeds.").  In this case, the
covenant not to sue Horizon does not prevent General Medicine
1051366
22
from executing against the allegedly fraudulently transferred
assets currently in HealthSouth's possession.  
General Medicine's "right to payment" has not been
extinguished because, under Michigan law, the settlement
agreement did not vacate the consent judgment.  Although the
settlement agreement would prevent General Medicine from
attempting to collect against assets currently in Horizon's
possession, it did not extinguish Horizon's liability as to
its assets that were allegedly fraudulently conveyed.
HealthSouth contends that General Medicine nonetheless
lacks standing because, "[a]s a matter of law and logic,
General Medicine's standing to bring this AUFTA action cannot
be based on an alleged right to payment that will exist only
if this AUFTA action is allowed to proceed to a successful
conclusion as if General Medicine had standing from the
beginning ...."  HealthSouth's reply brief at 5.  HealthSouth
cites Sierra Club v. Hawaii Tourism Authority, 100 Haw. 242,
257, 59 P.2d 877, 892 (2002), for the proposition that
"'[s]tanding must be established in the beginning rather than
end of  litigation'" (quoting Atlantic States Legal Found. v.
Babbitt, 140 F. Supp. 2d 185, 194 (N.D.N.Y. 2001)).  The
1051366
This type of injury occurs in specific circumstances
4
where a statutory provision explicitly creates a right to
information.  Atlantic States Legal Found., 140 F. Supp. 2d at
192.
23
Supreme Court of Hawaii's holding in Sierra Club, however, was
based on the plaintiff's failure to demonstrate an injury in
fact and redressability.  The court held that the alleged
injuries the plaintiff had suffered -- informational injuries4
and the increased likelihood of an erroneous decision -- were
conjectural and hypothetical.  The court further held that,
because the plaintiff had no right to certain procedures, any
injury that followed from the deprivation of those procedures
was not redressable.  Sierra Club, 100 Haw. at 257, 59 P.2d at
892. 
 
Unlike 
the 
Sierra 
Club, 
General 
Medicine 
has
demonstrated an injury in fact that can be redressed by the
courts: the allegedly fraudulent transfer of assets left
Horizon without sufficient assets to pay the consent judgment,
and the AUFTA provides a remedy to creditors in this
situation.
Section 8-9A-7(b), Ala. Code 1975, allows a creditor who
has obtained a judgment on a claim against the debtor to levy
execution on the asset fraudulently transferred or on its
proceeds.  General Medicine has standing as a creditor of
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Horizon because it has a right to payment out of those assets
allegedly fraudulently transferred to satisfy the consent
judgment.  For this reason, HealthSouth has failed to
demonstrate a clear legal right to the relief it seeks. 
Conclusion
Because HealthSouth has failed to demonstrate a clear
legal right to an order directing the trial court to enter a
summary judgment in its favor, we deny its petition for the
writ of mandamus.
PETITION DENIED.
Cobb, C.J., and Woodall, Smith, and Parker, JJ., concur.