Boudreaux v. Moritz D. Holloway, D. Duston Tapley, Jr., Tidal Water Props., Inc. (In re Holloway)

Decision Date31 March 2015
Docket NumberAdversary Proceeding Number 10-03015,Case Number 09-30446
CourtU.S. Bankruptcy Court — Southern District of Georgia
PartiesIN RE: MORITZ DEVON HOLLOWAY Debtor TODD BOUDREAUX, CHAPTER 7 TRUSTEE Plaintiff v. MORITZ D. HOLLOWAY, D. DUSTON TAPLEY, JR., TIDAL WATER PROPERTIES, INC., INVERTED INC., AND JAY TAPLEY Defendants

Chapter 7

OPINION AND ORDER

Before the Court is a motion for directed verdict filed by D. Duston Tapley Jr. ("Tapley") and his son, Jay Tapley, (jointly "Tapleys") pursuant to Federal Rule of Bankruptcy Procedure 70521 arguing they are entitled to judgment because the Chapter 7 Trustee ("Trustee") failed to carry his burden of proof to avoid the transfer of property pursuant to 11 U.S.C. §§547 and 548 and toestablish a breach of fiduciary duty. These are core proceedings pursuant to 28 U.S.C. §157 and the Court has jurisdiction under 28 U.S.C. §1334. At the end of the Trustee's presentation of evidence, Defendants moved for a directed verdict. Pursuant to Federal Rule of Civil Procedure 52(c) the court "decline[d] to render any judgment until the close of the evidence" at which point Defendants announced they rested without presenting any additional testimony or evidence.

For the following reasons, the Tapleys' motion is granted as to the §547 action and denied as to the §548, Georgia Fraudulent Transfer Act and breach of fiduciary duty claims. As for the §548, Georgia Fraudulent Transfer Act and breach of fiduciary duty claims judgment is entered in favor of the Trustee as set forth herein.

FINDINGS OF FACT

The Trustee seeks to avoid the purported transfer of real property from Moritz D. Holloway ("Debtor") to Tapley, Inverted, Inc., Tidal Water Properties, Inc. ("Tidal Water") and Jay Tapley. Inverted, Inc. and Tidal Water are entities owned and controlled by Jay Tapley. To prevail on the 11 U.S.C. §§547 and 548 actions, the Trustee must prove the transfer occurred during the relevant reach back periods of 11 U.S.C. §547 and §548, while Debtor was insolvent. In addition, to establish an 11 U.S.C. §548 claim, the Trustee alsomust show Debtor received less than reasonably equivalent value for the transfer. As for the breach of fiduciary duty, the Trustee must establish the existence of a fiduciary duty between the respective Defendants and the Debtor, a breach of this duty, and damages.

The respective reach back periods are: May 5, 2009 (90 days prior to the August 3, 2009 petition date) for the §547 action and to August 3, 2007 (two years prior to the August 3, 2009 petition date) for the §548 action.

This controversy includes issues related to the probate estate of Charlie Sharpe, Sr. ("Sharpe") who died in the 1950s. Sharpe's will was written in the 1930s wherein he acknowledged, without specificity, that he had made various inter vivos gifts of land to some of his heirs. According to the Tapleys and Debtor, one of these inter vivos gifts was to his son Arthur Sharpe and involves the purported 133 acres at issue in this adversary proceeding. There is no deed conveying this real property from Charlie Sharpe to Arthur Sharpe. According to Tapley's testimony, Sharpe's will is of record in the probate court, but it was never actually probated.

The first deed relevant to this adversary proceeding is where Arthur Sharpe purportedly conveyed the 133 acres to his niece, Eloise Deloach ("Deloach") by quit claim deed in 1978. Ex. 41. The deed was not witnessed or notarized, but it is recorded in the appropriate real estate records. Ex. 41.

Around 1999 to 2000, Tapley, a lawyer, began to try and settle the Sharpe estate. Tapley provided legal representation to the Sharpe estate and several of the Sharpe heirs involved in the administration of the Sharpe estate, including claims by Deloach and other claims by Deloach's mother, Leila McAllister. Various disputes arose among the respective heirs.

On Deloach's behalf, in January 2005, Tapley filed a motion to allow late claim in the Sharpe probate matter. This motion was based upon the 1978 deed from Arthur Sharpe to Deloach. Ex. 54. In March 2005, the Probate Court entered an order allowing Deloach to file a late claim. Ex. 55. This order was subsequently appealed to and ultimately affirmed by the Superior Court in September 2007. Ex. 56.

In December 2005, while the Probate Court's order granting Deloach's motion to allow late claim was on appeal, Deloach conveyed the purported 133 acres to the Debtor, her nephew, and this deed was recorded in the appropriate real estate records in August 2006. Ex. 34. Debtor testified that his Aunt Deloach lived out of state and was having medical issues and deeded mere "legal" title of the property to him to allow him to hold title in trust for her as her conduit to handle issues related to the land. Trial Tr. Vol. 041614, 207-208, 211, 213, 218, and 224, April 16, 2014. However, Deloach never executed an official power of attorney naming Debtoras her agent. Nevertheless, Debtor testified it was Deloach's intent for him to handle all of her business transactions involving the purported 133 acres with Tapley and otherwise. Id. Debtor further testified that his oral agreement with Deloach was that upon Deloach's death, Debtor would own the property outright. Trial Tr. Vol. 041614, 213, April 16, 2014.2 Debtor held mere legal title with a contingent interest upon Deloach's death, and he was to be a conduit for these payments for Deloach until her death. Deloach died in December 2007, sixteen months after the deed purportedly conveying title to Debtor was recorded. Trial Tr. Vol. 041614, 213 and 226, April 16, 2014.

Shortly after Deloach deeded the property to Debtor, warranty deeds respectively transferring a one-third interest in the purported 133 acres from the Debtor to Tapley and Inverted, Inc. were executed and recorded in the appropriate real estate records ("the 2006 Deeds"). Ex. 21 and Ex. 22. The legal description to the 133 acres is as follows:

All that tract or parcel of land situate, lying and being in the 275th District, G.M., Montgomery County, Georgia containing 133 acres, more or less, and bounded, now or formerly, as follows: On the North by lands of Isiah Blount; on the East by lands of the Charlie Sharpe Estate; on the South by lands of Carrie Sharpe Currie; and on the West by lands of Hack Chambers. Said tract of land is one of the same as referred to in the Will of Charlie H. Sharpe, Sr., recorded in Minute Book Number 10, pages 514-33, Montgomery County, Georgia Probate Court Records, being referred to as land already given to children in Item III thereof. See Deed Book 74, page 252, Montgomery County, Georgia Deed Records.

Ex. 22.

Debtor and Tapley testified, and the written fee agreement with Deloach confirms, Tapley was to obtain a 33 1/3 contingency fee "of all sums recovered before filing suit and if suit is filed, 40% of all sums recovered", plus expenses. Employment Agreement between Tapley and Deloach, Ex. 80; Trial Tr. Vol. 041614, 47 and 225, April 16, 2014. "[I]f there [was] no recovery, there [would] be no fee...." Id. Tapley and Debtor testified this conveyance was in regards to the contingency fee agreement. However, the conveyance of this one-third interest was done while the matter was still on appeal and before the parties reached an agreement or distribution. Exs. 55 and 56. Tapley testified that at the time of the transfer, he was confident things were going to work out.

For its one-third interest, Inverted, Inc. was to pay Debtor $60,000.00. Ex. 22. A deed to secure debt3 from Inverted, Inc. in favor of Debtor was executed and recorded. Ex. 61. Nopromissory note was ever prepared or executed. Trial Tr. Vol. 041614, 207-208, 211, 213, 218, and 224, April 16, 2014.

This security deed was ultimately cancelled by Debtor in May 2007, before Deloach's death. Ex. 61. Debtor testified that before he executed the cancellation of the security deed, he and Jay Tapley walked the land and realized there was a problem with the acreage and a court-ordered survey was obtained and showed the actual acreage of this land was 76.06 acres, not the purported 133 acres. Tr. Vol. 041614, 248-49, April 16, 2014. Debtor stated that before the court ordered survey, he did not know everyone's acreage allocation or the discrepancies therein. Tr. Vol. 041614, 223, 278, April 16, 2014. In January 2007, due to this decrease in acreage and after walking the land and realizing there was a problem in the acreage, while Deloach was still living, Debtor executed two deeds entitled "Corrected Warranty Deeds" wherein he purports to respectively convey a one-half interest in 76.06 acres to Tapley and Inverted, Inc.4 Exs. 23 and 24. These Corrected Warranty Deeds were recorded March 18, 2009, more than two years after the execution date, and during the pendency of the Debtor's initial chapter 13 petition, and less than six months before Debtor filedhis current bankruptcy petition. (Collectively, these Corrected Warranty Deeds are referred to as "the March 2009 Deeds"). Tapley testified it was an inadvertent oversight for these deeds not to be recorded contemporaneously with their execution. Trial Tr. Vol. 041614, 91, April 16, 2014. He stated it simply fell through the cracks. Id. Tapley testified he was not waiting on a final order from the Superior Court before he recorded the March 2009 Deeds. Trial Tr. Vol. 041614, 93, lines 9-13, April 16, 2014.

Tapley testified that the purpose of the March 2009 Deeds was to correct the amount of acreage and because Debtor approached him and told him that the acreage had shrunk from 133 acres to 76 acres and that Debtor wanted to sell out and be done with the whole transaction. Trial Tr. Vol. 041614, 92 lines 1-9, April 16, 2014. In addition, Jay Tapley testified the purpose of the March 2009 Deeds was to give approximately the same acreage as previously agreed to by the parties, explaining that when you divide 133 acres by 3, "you come up with about...

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