RES-GA YPL, LLC v. ROWLAND Et Al. ( 2017 )

SECOND DIVISION
BARNES, P. J.,
RICKMAN and SELF, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
March 14, 2017
In the Court of Appeals of Georgia
A16A1919. RES-GA YPL, LLC v. J. H. ROWLAND, III et al.
RICKMAN, Judge.
In this case alleging a violation of Georgia’s Uniform Fraudulent Transfers
Act, RES-GA YPL, LLC (“YPL”), as creditor, sued J. H. Rowland, III, as judgment
debtor (the “Judgment Debtor”), as well as Marilyn Jones Rowland, Katherine
Rowland Boudreau, Rowland Partners, L.P., Rowland Companies, Inc., and MJR
Finance, LLC, as parties to various real estate transactions (appellees collectively
referred to herein as the “Rowland Appellees”), seeking to set aside the transactions
as fraudulent and requesting a declaratory judgment as to the superiority of its interest
in certain real property. The trial court granted the Rowland Appellees’ motion to
dismiss the action. YPL appeals, contending that the trial court erred in dismissing
its lawsuit. For the reasons discussed below, we affirm in part and reverse in part the
trial court’s ruling.
This Court conducts a de novo review of a trial court’s ruling on a motion to
dismiss. See Dove v. Ty Cobb Healthcare Systems, Inc., 316 Ga. App. 7, 9 (729 SE2d
58) (2012).
In doing so, our role is to determine whether the allegations of the
complaint, when construed in the light most favorable to the plaintiff,
and with all doubts resolved in the plaintiff’s favor, disclose with
certainty that the plaintiff would not be entitled to relief under any state
of provable facts; however, we need not adopt a party’s legal
conclusions based on these facts.
(Punctuation and footnotes omitted.) Id.
The facts underlying YPL’s complaint are somewhat complex. The pertinent
background information and history of the parties necessary to put the allegations of
the complaint into context are set forth below.
I. The Parties
YPL has a deficiency judgment against the Judgment Debtor in an amount
greater than $2.1 million. Marilyn Jones Rowland (“M. Rowland”) is the Judgment
Debtor’s mother, and Katherine Rowland Boudreau (“Boudreau”) is the Judgment
2
Debtor’s sister. Rowland Partners, L. P. (the “Limited Partnership”) is a limited
partnership of which it is undisputed that, at all times relevant to this action, M.
Rowland and Boudreau were officers, owners, members, affiliates, and/or partners;
YPL alleges, although the Rowland Appellees deny, that the Judgment Debtor also
held a position in the Limited Partnership. Rowland Companies, Inc. is the general
partner of the Limited Partnership. MJR Finance, LLC is a limited liability company
of which M. Rowland was, at all times relevant to this action, an officer, owner,
member affiliate, and/or incorporator; YPL alleges, although the Rowland Appellees
again deny, that the Judgment Debtor also held a position in the company.
II. Pertinent Background
In March 2007, a non-party limited liability company executed a promissory
note to Alpha Bank and Trust, as lender, in order to obtain a loan totaling over $3.5
million (the “Note”). The Judgment Debtor executed a personal guaranty in which he
guaranteed the repayment of the Note (the “Guaranty”). The Note was secured by a
security deed that encumbered certain real property in Cobb County.
In 2008, Alpha Bank and Trust was declared insolvent, and the Federal Deposit
Insurance Corporation (“FDIC”) was appointed receiver. The FDIC, as receiver,
3
transferred and assigned the Note and Guaranty to a non-party limited liability
company, which in turn assigned the Note and Guaranty to YPL in 2011.
The Note went into default, and YPL foreclosed on the collateral. The
foreclosure sale was confirmed, and YPL thereafter filed a lawsuit against the
Judgment Debtor seeking to recover a money judgment for the deficiency remaining
on the Note. YPL obtained the judgment against the Judgment Debtor on August 28,
2012, and the judgment was reduced to a writ of fieri facias that was recorded on
February 12, 2013. Payment of the judgment remains unsatisfied.
III. The Transfers
The week following the entry of YPL’s judgment against the Judgment Debtor,
several “corrective” deeds (collectively, the “Corrective Deeds”), executed on
September 4, 2012 and filed in the Superior Court of Burke County the following
day, purported to cure numerous “defective” deeds (collectively, the “Defective
Deeds”) that the Rowland Appellees allege were signed in 2003 and that transferred
four tracts of real property among and between them. These transfers (collectively,
the “Transfers”) form the basis of YPL’s complaint and are set forth in detail below.
(A) The Herndon Transfers. The first in the series of “corrective” deeds was
executed by M. Rowland and entitled “Corrective Executor’s Deed.” It purported to
4
“confirm” the conveyance of a 264-acre tract of real property (the “Herndon Tract”)
from M. Rowland, in her capacity as executor of her late husband’s estate, as grantor,
to herself (individually), the Judgment Debtor, and Boudreau, as grantees. Attached
to the corrective deed was a defective deed purporting to make the same conveyance,
which referenced the year 2003 in the opening paragraph and was allegedly signed
by M. Rowland and her late husband. The defective deed was not otherwise dated,
witnessed, or recorded.
The second “corrective” deed was entitled “Corrective Quitclaim Deed” and
was executed by the Judgment Debtor and Boudreau, as grantors. It purported to
“confirm” a conveyance of their shares of the Herndon Tract to the Limited
Partnership, as grantee. As before, attached to the corrective deed was a defective
deed referencing the year 2003, allegedly signed by the Judgment Debtor and
Boudreau, purporting to make the same conveyance. That deed was not dated,
witnessed, or recorded.
(B) The Multi-Tract Transfers. The third “corrective” deed was a “Corrective
Quitclaim Deed” executed by M. Rowland purporting to “confirm” the conveyance
of three separate parcels of real property totaling over 1,882 acres (the “Multi-Tract
Property”) from herself, as grantor, to the Judgment Debtor and Boudreau, as
5
grantees.1 Again, attached to the corrective deed was a defective deed referencing the
year 2003, allegedly signed by M. Rowland, purporting to make the same
conveyance. That deed was not dated, witnessed, or recorded.
The fourth and final “corrective” deed was a “Corrective Quitclaim Deed”
executed by the Judgment Debtor and Boudreau, as grantors, purporting to “confirm”
the conveyance of the Multi-Tract Property to the Limited Partnership, as grantee. As
with each of the others, attached to the corrective deed was a defective deed
referencing 2003, allegedly signed by the Judgment Debtor and Boudreau, purporting
to make the same conveyance. The deed was not dated, witnessed, or recorded.
(C) The MJR Finance Security Deed. On December 21, 2012, the Limited
Partnership, as grantor, purported to convey an interest in both the Herndon Tract and
the Multi-Tract Property (collectively, “the Properties”) to MJR Finance, as grantee,
via a security deed, in order to secure a note in the amount of $350,000 (the “MJR
Finance Security Deed”). The MJR Finance Security Deed was recorded on
December 26, 2012.
1
The property description attached as an exhibit to the defective deed
purportedly being “corrected” by the deed to the Multi-Tract Property is actually a
legal description of the Herndon Tract. Because the parties do not dispute that the
property involved in the second series of transfers was the Multi-Tract Property, we
will assume that to be true for the purposes of this opinion.
6
IV. The Trial Court Proceedings
On August 20, 2015, YPL filed the instant lawsuit seeking damages and to
enforce its judgment by voiding the Transfers as violative of the Georgia Uniform
Fraudulent Transfers Act, OCGA §§ 18-2-70 (2012) et seq. (“UFTA”).2 YPL also
sought a declaratory judgment that it held an interest in the Properties superior to any
alleged interest held by MJR Finance. Finally, YPL sought attorney fees and litigation
costs pursuant to OCGA § 13-6-11.
The Rowland Appellees filed a motion to dismiss YPL’s complaint,3 asserting
that YPL lacked standing under the UFTA to bring the action against the Judgment
Debtor, failed to state a cause of action against M. Rowland, Boudreau, or Rowland
2
The UFTA has since been amended and is now called the Uniform Voidable
Transactions Act. See Ga. L. 2015, Act 167, § 4A-1. The amendments, however,
apply only to transfers made or obligations incurred on or after July 1, 2015 and only
to a right of action accruing after July 1, 2015. See Ga. L. 2015, pp. 996, 1029, § 7-1.
3
Copies of each of the deeds and other record documents discussed herein
were attached as exhibits to YPL’s verified complaint and are thus properly
considered for the purposes of the Rowland Appellees’ motion to dismiss. See
Minnifield v. Wells Fargo Bank, N.A., 331 Ga. App. 512, 514 (2) (771 SE2d 188)
(2015) (“When considering a motion to dismiss for failure to state a claim, a trial
court may consider exhibits attached to and incorporated into the complaint and
answer.”) (citation omitted).
7
Companies, was time-barred from pursuing its UFTA claim by the applicable statute
of limitations, and was not an “interested party” with standing to seek a declaratory
judgment. The trial court granted the motion “for the reasons stated in [the Rowland
Appellees’] brief,” and this appeal follows.
V. Discussion
1. UFTA Claim. The UFTA provides that, “[a] transfer made or obligation
incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose
before or after the transfer was made or the obligation was incurred, if the debtor
made the transfer or incurred the obligation . . . [w]ith actual intent to hinder, delay,
or defraud any creditor of the debtor . . . .” OCGA § 18-2-74 (a) (1) (2012). When
determining a debtor’s intent, consideration is given to, among other things, the
factors set forth in OCGA § 18-2-74 (b) (2012),4 which are commonly referred to as
4
The “badges of fraud” include whether:
(1) The transfer or obligation was to an insider;
(2) The debtor retained possession or control of the property transferred after
the transfer;
(3) The transfer or obligation was disclosed or concealed;
(4) Before the transfer was made or obligation was incurred, the debtor had
been sued or threatened with suit;
(5) The transfer was of substantially all the debtor’s assets;
(6) The debtor absconded;
(7) The debtor removed or concealed assets;
(8) The value of the consideration received by the debtor was reasonably
8
the “badges of fraud.” See RES-GA Hightower, LLC v. Golshani, 334 Ga. App. 176,
178 (1) (a) (778 SE2d 805) (2015). The UFTA defines a “creditor” as “a person who
has a claim,”5 a “debtor” as “a person who is liable on a claim,” and 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.” OCGA § 18-2-71 (3), (4), (5). A transfer made with
an actual intent to defraud creditors may be avoided if the recipient did not take the
transfer in good faith and for reasonably equivalent value. See OCGA §§ 18-2-74 (a)
(1) (2012); 18-2-77 (a) (1) (2012), 18-2-78 (a) (2012); Miller v. Lomax, 266 Ga. App.
93, 100 (3) (596 SE2d 232) (2004).
equivalent to the value of the asset transferred or the amount of the obligation
incurred;
(9) The debtor was insolvent or became insolvent shortly after the transfer was
made or the obligation was incurred;
(10) The transfer occurred shortly before or shortly after a substantial debt was
incurred; and
(11) The debtor transferred the essential assets of the business to a lienor who
transferred the assets to an insider of the debtor.
OCGA § 18-2-74 (b) (2012).
5
The 2015 amendments to the UFTA now define the term “creditor” as “a
person who has a claim, regardless of when the person acquired the claim, together
with any successors or assigns.” See Ga. L. 2015, Act 167, §4A-1, eff. July 1, 2015.
9
In its complaint, YPL alleged that the Judgment Debtor made the Transfers
with the actual intent of hindering, delaying, or defrauding his creditors, and
specifically alleged several “badges of fraud”: the Transfers were made to insiders,
were made after the Judgment Debtor had a judgment against him, consisted of
substantially all of the Judgment Debtor’s assets, were made without the Judgment
Debtor’s receipt of consideration for a reasonably equivalent value of the assets
transferred, were made when the Judgment Debtor was insolvent or he became
insolvent as a result of the Transfers, and occurred shortly after a substantial debt was
incurred. See OCGA § 18-2-74 (b) (2012). YPL further alleged that the Rowland
Appellees knew or should have known that the Judgment Debtor was insolvent and
that the Transfers were made with the intent to hinder, delay, or defraud the Judgment
Debtor’s creditors.
A separate statute, OCGA § 44-12-24 (2012), prohibits the assignment of “[a]
right of action . . . for injuries arising from fraud to the assignor.” Reading this statute
in conjunction with the UFTA, this Court has previously held that assignees of debt
who otherwise qualified as “creditors” with “claims” under the broad definitions of
the UFTA were nevertheless precluded by OCGA § 44-12-24 from pursuing a
10
fraudulent transfer claim.6 See Merrill Ranch Properties, LLC v. Austell, 336 Ga.
App. 722, 731 (3) (784 SE2d 125) (2016); Golshani, 334 Ga. App. at 179-80 (1) (a).
(A) The Rowland Appellees contend that OCGA § 44-12-24 (2014), in
conjunction with the holdings of Merrill Ranch Properties and Golshani, bar YPL,
as assignee of the Note and Guaranty, from pursuing an action under the UFTA.
Construing the complaint, as we must, in the light most favorable to YPL and
resolving all doubts in its favor, neither the plain language of the statute nor this
Court’s precedent deprive YPL of standing to file its claim. Rather, OCGA § 44-12-
24 (2014) expressly prohibits the assignment of a right of action based in fraud.
Consequently, in both Merrill Ranch Properties and Golshani, we held that an
assignee of debt lacked standing under OCGA § 44-12-24 (2014) to pursue a
fraudulent transfer claim otherwise belonging to a previous debt holder for
conveyances made prior to the date of the debt assignment. See Merrill Ranch
Properties, 336 Ga. App. at 731 (3) (summarizing Golshani as holding that “an
assignee of debt is precluded [by OCGA § 44-12-24] from pursuing a pre-assignment
6
In the 2015 amendments to the UFTA, the Georgia General Assembly added
section 18-2-74 (c), which now provides that “[i]f a creditor is a successor or
assignee, a right of action [for fraudulent transfer under OCGA § 18-2-74 (a)] is
automatically assigned to such successor or assignee.” See Ga. L. 2015, Act 167,
§4A-1, eff. July 1, 2015.
11
fraudulent transfer claim under the UFTA”) (citation and punctuation omitted;
emphasis supplied.); Golshani, 334 Ga. App. at 180 (1) (a) (holding that an assignee
of the original creditor lacked standing to set aside as fraudulent a conveyance made
before assignment of the debt).
In contrast, YPL alleges that the Transfers at issue here were made after YPL
held the Note and the Guaranty. Thus, YPL does not seek a remedy for an injury
stemming from fraud to a previous holder of the note, but rather for an injury that was
committed directly against it. If true, although YPL is an assignee of debt, the right
of action for fraudulent conveyance was not assigned, but is its own, removing this
case from the ambit of both OCGA § 44-12-24 (2012) and our prior precedent.
The Rowland Appellees nevertheless maintain that the Defective Deeds
attached to the later-recorded Corrective Deeds establish that the Judgment Debtor
transferred the Properties to the Limited Partnership in 2003, prior to YPL’s
acquisition of, and indeed the execution of, the Note and Guaranty. They argue that
the only post-assignment conveyances were made from the Limited Partnership to
MJR Finance and were not subject to being set aside.
To be sure, a determination that the Judgment Debtor conveyed his interests
in the Properties to the Limited Partnership in 2003 and that the only post-assignment
12
conveyances were those from the Limited Partnership to MJF Finance would be fatal
to YPL’s UFTA claim. See OCGA § 44-12-24 (2012); Merrill Ranch Properties, 336
Ga. App. at 731 (3); Golshani, 334 Ga. App. at 179-80 (1) (a); see also Maxco, Inc.
v. Volpe, 247 Ga. 212, 214 (1) (274 SE2d 561) (1981) (“A limited partner owns an
interest in the legal entity but holds no title to the assets of the partnership.”).7
Such a determination, however, cannot be made at this stage of the litigation.
Although a deed that has been neither witnessed nor recorded may be sufficient to
bind the parties and their privies to the deed itself, it is not admissible to prove title
in the grantee without first laying the proper foundation. See Latham v. Fowler, 199
Ga. 648, 648 (34 SE2d 870) (1945) (“Where, in a suit for land, the right of the
plaintiffs was predicated upon an alleged lost and unrecorded deed . . . , proof of the
7
But see OCGA § 14-9A-52 (a), (b) (“On due application to a court of
competent jurisdiction by any judgment creditor of a limited partner, the court may
charge the interest of the indebted limited partner with payment of the unsatisfied
amount of the judgment debt . . . [T]he interest may be redeemed with the separate
property of any general partner, but may not be redeemed with partnership
property.”); Nigri v. Lotz, 216 Ga. App. 204, 205 (2) (453 SE2d 780) (1995) (“The
charging order remedy entitles the creditor to receive the profits and surplus of the
limited partnership, which the limited partner would otherwise have been entitled to
receive, up to the unsatisfied amount of the judgment debt, but gives no direct remedy
against specific limited partnership property.”).
13
existence of a genuine original must have been established before secondary evidence
relating thereto would have been admissible.”); Hoover v. Mobley, 198 Ga. 68, 73 (31
SE2d 9) (1944) (“The penalty for failure to execute the deed in the manner prescribed
by the statute is a refusal to admit the same to record.”); see also Smith v. Forrester,
156 Ga. App. 79, 80 (1) (274 SE2d 101) (1980). On a motion to dismiss, the question
before this Court is whether the allegations of the complaint, when construed in the
light most favorable to YPL and with all doubts resolved in its favor, “disclose with
certainty that [YPL] would not be entitled to relief under any state of provable facts.”
(Punctuation and footnote omitted.) Dove, 316 Ga. App. at 9. With factual questions
remaining as to the authenticity of the Defective Deeds, we cannot say that YPL lacks
standing to pursue its UFTA claim based upon its status as an assignee of debt.8
Compare OCGA § 44-12-24 (2012); Merrill Ranch Properties, 336 Ga. App. at 731
(3); Golshani, 334 Ga. App. at 179-80 (1) (a).
(B) The Rowland Appellees assert that YPL failed to assert any viable claims
against M. Rowland, Boudreau, and Rowland Companies, Inc. On this point, we
agree.
8
Our holding under the UFTA renders it unnecessary for us to address YPL’s
additional arguments regarding standing.
14
YPL, as creditor, can seek relief under the UFTA against the Judgment Debtor,
as well as any recipient of the Transfers made by the Judgment Debtor, i.e., the
Limited Partnership. See OCGA § 18-2-77 and §18-2-78. Neither M. Rowland,
Boudreau, nor Rowland Companies, Inc., however, received any interest in the
Properties from the Judgment Debtor that would render them subject to an UFTA
claim by YPL. Because they are likewise not debtors of YPL as that term is defined
under the UFTA, any transfers made by them are not subject to attack by YPL. See
OCGA § 18-2-74 (a) (2012) (“A transfer made . . . by a debtor is voidable as to a
creditor . . .”) (emphasis supplied); OCGA § 18-2-75 (a) (2012) (same); Merrill
Ranch Properties, 336 Ga. App. at 727-31 (2) (holding that creditor lacked standing
under the UFTA to set aside transfers made by non-debtors). It follows that the trial
court did not err in granting the motion to dismiss as to M. Rowland, Boudreau, and
Rowland Companies, Inc.
(C) YPL argues that the trial court erred in dismissing its UFTA claim to the
extent that the court held that it was barred by the statute of limitations. Georgia law
mandates that a claim challenging a transfer as fraudulent must be filed within four
years of the date of the transfer, unless the transfer was made with an actual intent to
defraud a creditor, in which case the claim may be filed “within one year after the
15
transfer . . . was or could reasonably have been discovered by the claimant” if later
than four years. See OCGA § 18-2-79 (1), (2) (2012).
The Rowland Appellees assert, as they did in the trial court, that the four-year
limitations period began to run in 2003, when the Defective Deeds were allegedly
executed, and that the one year “discovery” period for intentional fraud began to run,
at the latest, on September 5, 2012, the date on which the Corrective Deeds were
recorded. They argue that YPL failed to exercise reasonable diligence in discovering
the deeds during that period and, consequently, that its UFTA claim, filed in August
2015, is time barred.
Even assuming that the reference to the year 2003 in the first paragraph of the
otherwise undated Defective Deeds was sufficient to prove that the deeds were
executed in 2003, those deeds, as we held in Division V (1) (A), cannot prove the
passing of title for the purposes of the record without the Rowland Appellees first
laying the proper foundation for their admission. See Latham, 199 Ga. at 648;
Hoover, 198 Ga. at 73. Moreover, questions concerning a plaintiff’s diligence in
discovering an alleged fraud are generally questions for a trier of fact. Merrill Ranch
Properties, 336 Ga. App. at 733 (4). Regardless, the record does not establish as a
matter of law that YPL’s UFTA claim is time barred and, consequently, the trial court
16
erred in dismissing it on this ground. See Hickson v. Bryan, 75 Ga. 392, 393 (2) (b)
(1885) (“Unless the facts from which fraud is inferred are undisputed, it is never a
question of law, and the same rule applies where fraud and concealment are replied
to a plea of the statute of limitations.”); Merrill Ranch Properties, 336 Ga. App. at
733 (4) (“[I]ssues concerning a plaintiff’s diligence usually must be resolved by the
trier of fact . . .”).
2. Declaratory Judgment. Finally, YPL asserts that the trial court erred in
dismissing its action for a declaratory judgment that its purported interest in the
Properties is superior to any interest held by MJR Finance. The Rowland Appellees
contend that YPL lacks standing to seek declaratory relief because its interest in the
Properties is merely contingent, as opposed to an actual, legal interest.
Georgia’s Declaratory Judgment Act is meant “to settle and afford relief from
uncertainty and insecurity with respect to rights, status, and other legal relations.”
OCGA § 9-4-1. The statute should be liberally construed, and “gives superior courts
the power to declare rights and other legal relations of any interested party in ‘cases
of actual controversy’ under OCGA § 9-4-2 (a) and ‘in any civil case in which it
appears to the court that the ends of justice require that the declaration should be
made’ [under OCGA § 9-4-2 (b)].” Walker v. Owens, 298 Ga. 516, 518 (783 SE2d
17
114) (2016); see Lapolla Industries, Inc. v. Hess, 325 Ga. App. 256, 257 (1) (750
SE2d 467) (2013) (“The declaratory judgment statute is liberally construed; applies
where a legal judgment is sought that would control or direct future action; and
requires under subsection (a) or (b) the presence in the declaratory action of a party
with an interest in the controversy adverse to that of the petitioner.”). An “interested”
party within the context of the statute is one who “has a protectable interest and
asserts an adverse claim on an accrued statement of facts.” Hobgood v. Black, 144 Ga.
App. 448, 449 (241 SE2d 60) (1978).
Construed in the light most favorable to the complaint, YPL alleges that it has
a legal interest in the Properties vis-a-vis its judgment, the writ of fieri facias, and the
UFTA due to the alleged fraudulent nature of the Transfers. That disputed factual
issues remain as to the actualization of YPL’s claimed interest does not foreclose on
its standing to seek a declaratory judgment as to the priority of that interest for the
purposes of a motion to dismiss. See generally Hobgood v. Black, 144 Ga. App. 448,
449 (2) (241 SE2d 60) (1978) (“The fact that the dispute in a declaratory judgment
action turns upon questions of fact does not withdraw it from judicial cognizance. The
legal consequences flow from the facts, and it is the province of the court to ascertain
and find the facts in accordance with the rules prescribed in the Georgia Declaratory
18
Judgments Act in order to determine the legal consequences.”) (citation and
punctuation omitted.); see also OCGA § 9-4-6 (“When a declaration of right or the
granting of further relief based thereon involves the determination of issues of fact
triable by a jury and jury trial is not waived, the issues shall be submitted to a jury .
. .”); Calvary Independent Baptist Church v. City of Rome, 208 Ga. 312, 314 (3) (66
SE2d 726) (1951) (reversing the trial court’s dismissal of appellant’s declaratory
action involving its ownership of real property). It follows that the trial court erred
in dismissing YPL’s claim for declaratory judgment at this stage of the litigation.
In sum, we affirm the trial court’s dismissal of the complaint as to M. Rowland,
Boudreau, and Rowland Companies, Inc. We otherwise reverse.9
Judgment affirmed in part and reversed in part. Barnes, P. J., and Self, J.,
concur.
9
We likewise reverse the trial court’s dismissal of the claim for recovery of
attorney fees and expenses to the extent it is predicated upon the surviving claims of
YPL’s complaint.
19