Title: Appalachian Transp. Group, Inc. v. Parks
Citation: 738 So. 2d 878
Docket Number: 1971617
State: Alabama
Issuer: Alabama Supreme Court
Date: June 18, 1999

738 So. 2d 878 (1999)
APPALACHIAN TRANSPORTATION GROUP, INC., et al.
v.
Jimmy Clyde PARKS et al.
1971617.

Supreme Court of Alabama.
June 18, 1999.
*879 L. Vastine Stabler, Jr., Birmingham, for appellants Q Capital Corp., Q Financial Group, Inc., Philip Moylan, and Stephen Parrish.
Jeffrey B. Carr and Charles R. Hare, Jr., of Gullahorn &amp; Hare, P.C., Albertville, for appellants Appalachian Transportation Group, Inc., and Wade Dulaney Shell.
James F. Walsh and Michael J. Velezis of Lange, Simpson, Robinson &amp; Somerville, L.L.P., Birmingham, for appellees.
COOK, Justice.
This is an appeal from the issuance of a temporary injunction. We reverse and remand.
On July 25, 1997, Appalachian Transportation Group, Inc. ("Appalachian"), a Tennessee corporation, entered a "Prompt Payment Guarantee Agreement" with Q Capital, a New Jersey corporation. The agreement provided that Appalachian would assign its accounts receivable to Q Capital, for which Q Capital would pay Appalachian approximately 96% of the amount due on each account. This practice, known as "factoring," provided Appalachian with immediate cash.
On September 1, 1997, Parks &amp; Son Excavating, Inc. ("Parks &amp; Son"), an Alabama corporation, entered an "Option Agreement" ("the Agreement") with Appalachian. Under the Agreement, Appalachian immediately assumed full management of Parks &amp; Son and, at the end of a 45-day option period (referred to herein as either "the Management Period" or "the Option Period"), Appalachian could exercise the option to purchase the assets of Parks &amp; Son.
Pertinent portions of the Agreement provided:
Exhibit A to the Agreement provided, in part, that Appalachian would assume the notes on Parks &amp; Son's equipment "with arrearages" and would "use all reasonable efforts to have equipment refinanced prior to closing." Exhibit B to the Agreement, which set out the specifics of the financing arrangement for the purchase of the Assets, provided that Appalachian's note to Parks &amp; Son would be "guaranteed by Q Financial Group." Exhibit B also contained a provision, identical to the provision in Exhibit A, stating that Appalachian would "assume equipment notes with arrearages and use all reasonable efforts to have equipment refinanced prior to closing." According to Parks &amp; Son, during the negotiation of the Agreement, a representative of Appalachian told Parks &amp; Son *881 to contact Q Financial Group to confirm the financing of Appalachian's ultimate purchase of the assets of Parks &amp; Son.
Appalachian made the $50,000 escrow payment and assumed the management of Parks &amp; Son's business on September 1, 1997. In a series of letters dated October 2, 6, 10, and 15, 1997, counsel for Parks &amp; Son informed Appalachian of Parks &amp; Son's displeasure with Appalachian's breaches of the Agreement, asked Appalachian to cure these defaults, and warned of legal action by Parks &amp; Son if Appalachian failed to remedy the problems. In the letters, counsel for Parks &amp; Son pointed out that suppliers and customers of Parks &amp; Son were terminating or threatening to terminate their relationships with Parks &amp; Son and to repossess property and equipment of Parks &amp; Son as a result of Appalachian's failing to pay Parks &amp; Son's monthly bills and failing to provide proper service to Parks &amp; Son's customers. Counsel for Parks &amp; Son requested that Appalachian "reveal its intentions regarding refinancing trucks and trailers so Parks &amp; Son can tell if Appalachian is merely trying to run Parks &amp; Son into the ground and renegotiate the sales price of the Parks &amp; Son assets." Ultimately, counsel for Parks &amp; Son stated that Appalachian's conduct was viewed as a breach of the Agreement and, thus, that the Agreement was terminated, demanded the return of all Parks &amp; Son assets, and stated that the $50,000 held in escrow would be used to reduce the approximately $140,000 in unpaid monthly payments and late charges.
On October 24, 1997, Parks &amp; Son and its principals, Jimmy Clyde Parks and Jimmy Dewayne Parks, sued Appalachian and its principals, Wade Delaney Shell and the estate of Scott Warren Lyons, alleging fraud, suppression, breach of contract, breach of fiduciary duty, and conversion. On October 30, 1997, the trial court issued a temporary restraining order directing that Parks &amp; Son's accounts receivable accrued by Appalachian during the Management Period be paid into court or to counsel for Parks &amp; Son.
On October 31, 1997, Parks &amp; Son applied for a preliminary injunction restraining and enjoining Appalachian from:
In support of its application, Parks &amp; Son set out the facts of nonpayment and other conduct by Appalachian that, according to Parks &amp; Son, amounted to a breach of the Agreement. Parks &amp; Son stated that, upon notifying its customers with accounts receivable arising during the Management Period to pay either Parks &amp; Son or the court's interpleader account, it was told by the customers that they had been told by Appalachian to pay Appalachian and not to pay Parks &amp; Son or the interpleader account. In the application, Parks &amp; Son also claimed that it needed the accounts-receivable moneys to "keep Parks &amp; Son afloat and ward off the impending truck repossession," and that it might be "forced to declare bankruptcy should these funds not be received shortly."
Following a hearing on the application for preliminary injunction, a representative of Q Capital telephoned counsel for Parks &amp; Son on November 12, 1997, and sent a facsimile communication on November 13, informing Parks &amp; Son that Q Capital had received notice of the issuance of the TRO but had not received prior notice of the hearing on Parks &amp; Son's application for a preliminary injunction. According to Appalachian, "apparently the court had not been notified by [Parks &amp; Son] that Q Capital had a security interest in the accounts that [Parks &amp; Son] was attempting to appropriate." Parks &amp; Son maintains, however, that Q Capital's November 13, 1997, facsimile transmission was the first notice Parks &amp; Son had of Q Capital's existence, and was the first indication *882 that Q Financial was anything other than guarantor of Appalachian's ultimate purchase of the assets of Parks &amp; Son.
The trial court issued the following preliminary injunction on November 18, 1997:
Appalachian claimed that the notice it received set November 7, not November 4, as the date for the preliminary-injunction conference; therefore, a second hearing was scheduled for February 1998.
On November 25, 1997, Q Capital filed a motion to intervene in the lawsuit for the purpose of protecting its interests. Q Capital claimed that Appalachian had held title to the Parks &amp; Son accounts receivable and that Appalachian had sold those accounts to Q Capital pursuant to their Prompt Payment Guarantee Agreement.
On December 19, 1997, Parks &amp; Son amended its complaint and added Q Capital and Q Financial (the holding company that owns Q Capital) as defendants. In the amended complaint, Parks &amp; Son contended that its only knowledge of Q Financial was by way of the provision in Exhibit B to the Agreement stating that Appalachian's note to Parks &amp; Son for the purchase of the Assets would "be guaranteed by Q Financial." Parks &amp; Son also alleged that November 13, 1997, was the date it learned of the Prompt Payment Guarantee Agreement between Appalachian and Q Capital (executed in July 1997); that the Agreement had not given Appalachian the right to "factor" the Parks &amp; Son accounts receivable through Q Capital; and that Q Capital had continued to factor Parks &amp; Son accounts after it had been advised by Parks &amp; Son that Appalachian was in default and that the Option Agreement was terminated.
In its answer, Q Capital asked that the TRO be dissolved and that the application for a preliminary injunction be denied, and asked that all funds deposited with the court be released. After a hearing on February 17, 1998, the trial court issued an order that held, in pertinent part:
The defendants appeal.
The defendants argue that the injunction does not meet the mandatory requirements of Rule 65(d)(2), Ala. R. Civ. P., and, therefore, that the judgment based on the injunction order must be reversed. We agree.
Teleprompter of Mobile, Inc. v. Bayou Cable TV, 428 So. 2d 17, 19 (Ala.1983) (emphasis added, some citations omitted).
Rule 65(d)(2) provides:
This Court has repeatedly held that the requirements of Rule 65(d)(2) are mandatory. "[I]t is mandatory that a preliminary injunction (1) give reasons for issuing the injunction, (2) be specific in its terms, and (3) describe in reasonable detail the acts sought to be restrained." Tapscott v. Fowler, 437 So. 2d 1280, 1282 (Ala.1983); Teleprompter of Mobile, supra; Bankruptcy Authorities v. State, 592 So. 2d 1042 (Ala.1992); International Brotherhood of Electrical Workers v. Morton, 365 So. 2d 662 (Ala.1978).
The preliminary injunction order issued by the trial court in International Brotherhood of Electrical Workers read:
365 So. 2d  at 663. This Court wrote:
365 So. 2d  at 663-64 (emphasis in original).
In Teleprompter of Mobile, the plaintiff cable company alleged that the defendant cable company had intentionally cut the plaintiff's cables while installing its own cables. The trial court entered this preliminary injunction:
428 So. 2d  at 20. This Court held:
428 So. 2d  at 20.
The plaintiffs in Tapscott were seeking injunctive relief to restrain the defendants from allegedly illegal deer-hunting activities on the plaintiffs' properties. The first preliminary injunction issued in the case was reversed by this Court for noncompliance with Rule 65(c) (failure to provide security). The injunction reviewed on the second appeal provided:
437 So. 2d  at 1281. With regard to this injunction, this Court held:
437 So. 2d  at 1282.
In Bankruptcy Authorities, the State of Alabama sued a furniture retailer and its president, "seeking to temporarily restrain *885 and, ultimately, to permanently enjoin them from engaging in what the State alleged were deceptive trade practices." 592 So. 2d  at 1042. The trial court issued a temporary restraining order and, while it was in effect, the State moved to hold the defendants in contempt for failing to abide by that TRO. The trial court held a hearing and found the defendants to be in contempt and issued a lengthy order that set forth examples of the alleged deceptive trade practices and the conduct of the defendants. The trial court ultimately entered a preliminary injunction, which read, in pertinent part:
592 So. 2d  at 1044.
This Court wrote:
592 So. 2d  at 1044-45.
The two injunction orders issued on behalf of Parks &amp; Son read:
When viewed in the context of this Court's consistent interpretation of Rule 65(d)(2), the orders of the trial court here cannot withstand appellate scrutiny. The orders do not contain the reasons for their issuance, nor does the trial court state that but for its orders irreparable harm would occur. Because the court did not follow the mandatory provisions of Rule 65(d)(2), the preliminary injunction is due to be *886 dissolved and the judgment based thereon is, therefore, reversed, and the cause remanded.
REVERSED AND REMANDED.
HOOPER, C.J., and MADDOX, KENNEDY,[2] SEE, LYONS, and BROWN, JJ., concur.
HOUSTON and JOHNSTONE, JJ., concur in the result.
HOUSTON, Justice (concurring in the result).
See Martin v. First Federal Savings &amp; Loan Ass'n of Andalusia, 559 So. 2d 1075 (Ala.1990); and Chunchula Energy Corp. v. Ciba-Geigy Corp., 503 So. 2d 1211 (Ala. 1987).
[1]  Chief Justice Torbert filed a dissent in Tapscott, in which Justice Almon and Justice Shores concurred. The dissenters argued that the "spirit" of the Rules of Civil Procedure had not been served by the majority's opinion because the first preliminary injunction order did set forth a list of "very specific and comprehensive reasons" for the issuance of the order, but the reasons were not repeated in the second injunction order issued on remand. 437 So. 2d  at 1282-83.
[2]  Justice Kennedy's vote in this case was made prior to his resignation on June 11, 1999.