First Citizens Bank & Trust Co. v. Taylor
| Decision Date | 08 July 2020 |
| Docket Number | Appellate Case No. 2017-001700,Opinion No. 5739 |
| Citation | 847 S.E.2d 249,431 S.C. 149 |
| Parties | FIRST CITIZENS BANK AND TRUST COMPANY, INC., Respondent, v. Ronald D. TAYLOR and Ted D. Smith, Defendants, Ex parte: Smith Family, LLC, WHS Properties, LLC, and Wanda H. Smith, Appellants. |
| Court | South Carolina Court of Appeals |
Randall Scott Hiller, of Greenville, for Appellants.
Joey Randell Floyd and Chelsea Jaqueline Clark, both of Bruner Powell Wall & Mullins, LLC, of Columbia, for Respondent.
Smith Family, LLC, WHS Properties, LLC, and Wanda H. Smith (Appellants) appeal a master-in-equity's order based on First Citizens Bank and Trust Company, Inc.'s initiation of supplemental proceedings to collect on an order of judgment, arguing the master erred in (1) adjudicating a Statute of Elizabeth (SOE) claim as part of supplementary proceedings; (2) adjudicating facts without the opportunity for Appellants to present evidence; (3) not ruling on whether the subject property was exempt; (4) granting a motion to join Appellants; and (5) finding subject matter jurisdiction to add parties. We affirm.
On May 22, 2008, Ronald Taylor and Ted Smith1 executed a note in favor of First Citizens in exchange for a $52,526.07 loan. Taylor and Smith failed to make the required payments, and on July 28, 2014, First Citizens filed an action against them. By order filed October 1, 2015, the circuit court entered a judgment of $74,843.23 against Taylor and Smith. Taylor and Smith appealed to this court, which affirmed. First Citizens Bank & Trust Co. v. Taylor , Op. No. 2016-UP-471, 2016 WL 6609696 (S.C. Ct. App. filed Nov. 9, 2016).
After an execution was issued on October 27, 2015, and a nulla bona return was made to the execution, the matter was referred to the master, and First Citizens filed a petition for supplemental proceedings. The master held a hearing on January 23, 2017.
Smith testified he "lived off of" his social security income and had no other sources of income or bank accounts. Smith admitted his wife owned an LLC, Smith Family, LLC, that had one bank account at United Community Bank (UCB). Taylor similarly testified he had no bank accounts and "lived off of" his social security income. First Citizens moved for additional discovery, which the master granted.
First Citizens issued subpoenas and motions to compel, seeking documents regarding Smith Family, LLC. Smith, on behalf of himself and Appellants, moved to quash as to the UCB account belonging to Smith Family, LLC. After a hearing and based on documents provided by UCB, the master denied the motion to quash by order filed May 22, 2017. On May 24, 2017, Smith and Mrs. Smith were deposed.
In his deposition, Smith testified he had an accounting degree and an MBA, was 69 years old, and had worked in banking and the building business until 2008. He asserted he set up between fifteen and twenty LLCs during his business career, and he had three primary companies at the time he quit in 2008.
Smith admitted he used the UCB account for personal use, such as to pay bills. He also admitted he was a signatory on the account. At the time of his deposition, the UCB account had a balance of $380,000.
Smith testified he was a realtor and a broker-in-charge of two real estate companies. He admitted he transferred his personal funds into the Smith Family, LLC, including the following four deposits of his money into the UCB account:
1) March 23, 2016: Inheritance of $15,789.27.2
2) July 14, 2016: Real estate commission for $16,800.
3) August 17, 2016: Real estate commission for $20,250.
4) October 27, 2016: Compensation for managing a project known as the "Easley Building" of $28,187.49.
These deposits totaled $81,026.76.
Smith also admitted Mrs. Smith purchased silver from the account in February 21, 2016, for $135,374. The Smiths also purchased gold using money from the account. Smith estimated they owned approximately $300,000 in gold and silver at the time of the depositions. Smith acknowledged his money was "mixed in with" the Smith Family, LLC money.
Mrs. Smith testified in her deposition that she majored in Art in college, worked for a few years in administrative/retail jobs, worked for fifteen years for her father's construction company, and then became a stay-at-home mother to the Smiths' two children. She testified that throughout the forty-two years of their marriage, she never worked for any of her husband's businesses. According to Mrs. Smith, she and Smith are now retired, although Smith looks for real estate deals. Smith always handled the family finances, and Mrs. Smith was only aware of one BB&T bank account.
As to Smith Family, LLC, Mrs. Smith testified her husband managed it; she did not know where it banked; she did not know what assets it held; she was unaware of whether there were corporate records and that the LLC had been subpoenaed; and she knew nothing about the purchase of gold and/or silver. She further testified Smith had full and exclusive control of all bank accounts of the LLC. Smith acknowledged she was the sole owner of the LLC and Smith was the sole manager; however, she insisted the money in the LLC was solely hers although she did not know where it came from. During cross-examination, she testified the money came from earnings she saved while working "since [she] was a teenager."
Mrs. Smith testified WHS Properties, LLC (WHS), one of the appellants in this case, was her company, but she admitted Smith organized it in 2008. Mrs. Smith testified WHS owned a shopping center that had been sold; the proceeds were transferred to Smith Family, LLC; and WHS was now "closed." She admitted Smith suffered financial hardships during the recession in 2008 and 2009.
Following the depositions, First Citizens moved to join Appellants as parties. First Citizens also moved to execute on funds held by Appellants. The master entered a consent order prohibiting Smith Family, LLC from selling, disposing of, or otherwise transferring the gold and silver.
A hearing on the motions to join the parties and execute on the funds was held on June 23, 2017. First Citizens argued Rhino Realty 1, Fund 1, LLC, changed its name to WHS Properties, LLC, in 2008 when Smith closed most of his businesses. First Citizens argued the judgment was obtained in 2015; the funds were transferred into the Smith Family, LLC account in 2016; and the purchases of gold and silver were made in 2016. At the time of the hearing, Smith Family, LLC was actively engaged in a project with a church, which obligated Smith Family, LLC to build a building. According to First Citizens, Smith was not retired; rather, he was actively involved in developing property. Furthermore, First Citizens argued, the SOE applied because property was transferred to a third-party, the Smith Family, LLC, to avoid the judgment. The master granted the motion to add the parties during the hearing and took the other issues under advisement.
By written order filed July 5, 2017, the master granted the motion to add the parties. The master found Smith's deposits totaling $81,026.76 of his personal funds into the Smith Family, LLC, bank account constituted "transfers without valuable consideration" or in the alternative, fraudulent transfers made with the actual intent of defrauding creditors. Thus, the master ordered Appellants to pay First Citizens $81,026.76 toward its judgment against Smith. The master declined to seize or proceed against other assets owned by Appellants, "based upon substantive due process rights of these parties ... [, finding] such relief is more appropriately sought through [First Citizens] bringing an independent action against them."
Appellants moved to reconsider, and First Citizens moved to compel payment. By order filed August 7, 2017, the master denied the motion to reconsider and held the motion to compel in abeyance, stating "[i]n the event that Smith Family, LLC has not paid the money ... this Court will schedule and hear [the motion to compel] as soon thereafter as reasonably possible." Appellants filed a motion for supersedeas with the master and filed a notice of appeal with this court. By order filed September 6, 2017, the master required Appellants to transfer $125,000 in gold to First Citizens, after its verification, to be held in a safety deposit box until Appellants paid the $81,026.76 by December 31, 2017. The master retained jurisdiction over the motion for supersedeas. First Citizens moved to hold Appellants in contempt when they failed to comply with the September 6, 2017 order by allegedly tendering only $91,438.76 worth of gold. By order filed October 20, 2017, the master ordered Smith to liquidate the gold within fifteen days and pay First Citizens by check to be held by the clerk of court. The master held in abeyance First Citizen's request for fees for authentication and transportation of the gold. According to First Citizens, the funds are being held by the court during the pendency of the appeal.
"A clear and convincing evidentiary standard governs fraudulent conveyance claims brought under the Statute of Elizabeth." Oskin v. Johnson , 400 S.C. 390, 396, 735 S.E.2d 459, 463 (2012). "An action to set aside a conveyance under the Statute of Elizabeth is an equitable action, and a de novo standard of review applies." Id. at 397, 735 S.E.2d at 463. "On appeal from an action in equity, [the appellate court] may find facts in accordance with its view of the preponderance of the evidence." Walker v. Brooks , 414 S.C. 343, 347, 778 S.E.2d 477, 479 (2015). "However, this broad scope of review does not require this court to disregard the findings at trial or ignore the fact that the [master] was in a better position to assess the credibility of the witnesses." Laughon v. O'Braitis , 360 S.C. 520, 524-25, 602 S.E.2d 108, 110 (Ct. App. 2004).
"The interpretation of a statute is a question of law." Sparks v. Palmetto Hardwood, Inc. , 406 S.C. 124, 128, 750...
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