Merrill Ranch Props., LLC v. Austell, A15A2313.

• Decision Date: 28 March 2016
• Docket Number: No. A15A2313.,A15A2313.
• Parties: MERRILL RANCH PROPERTIES, LLC v. AUSTELL et al.
• Court: Georgia Court of Appeals

336 Ga.App. 722

784 S.E.2d 125

MERRILL RANCH PROPERTIES, LLC

v.AUSTELL et al.

No. A15A2313.

Court of Appeals of Georgia.

March 28, 2016.

Reconsideration Denied April 13, 2016.

Certiorari Denied October 31, 2016.

Bryan Cave, Jennifer Burch Dempsey, Atlanta, William V. Custer IV, Laura Ann Williams, for Appellant.

Chausmer Law, Aaron B. Chausmer, Schreeder, Wheeler & Flint, John A. Christy, Atlanta, Thomerson, Spears & Robl, Robert Edwin Spears Jr., Decatur, for Appellees.

McMILLIAN, Judge.

Appellant Merrill Ranch Properties, LLC ("Plaintiff" or " Appellant") brought suit¹ against appellees² seeking, among other things, to set aside certain transfers and conveyances that Plaintiff contends were made in violation of Georgia's Uniform Fraudulent Transfers Act, OCGA § 18–2–70 et seq. (the "UFTA").³ The trial court granted summary judgment to appellees, and Plaintiff filed this appeal. We now affirm in part, reverse in part, and remand for further proceedings as more fully set forth below.

The underlying facts, although somewhat complex and confusing,⁴ are largely undisputed.⁵ In 2006, the Peoples Bank of Winder, Georgia ("Peoples Bank") extended a $100 million revolving line of credit (the "Loan") to WHM Merrill Ranch Investments LLC (the "Borrower"). The Loan was evidenced by a Loan Agreement dated September 28, 2006 and a Promissory Note executed "of approximately even date herewith"; it was secured by certain real property located in Arizona. The Loan was guaranteed by real estate developer W. Harrison Merrill ("Harrison Merrill") and eight trust entities⁶ he controlled (collectively "Guarantors"). In addition to Peoples Bank, numerous other banks held participation interests in the Loan.

Over time, $89 million was extended to the Borrower under the Loan. However, the Borrower was unable to make the required payments on the debt, and the Loan was declared in default on or around September 26, 2008. A few months later, in February 2009, Peoples Bank purchased by credit bid the Arizona property securing the Loan, and in April 2009, Peoples Bank instituted proceedings in Arizona against the Borrower and Guarantors to recover the deficiency owing after the sale of the property (the "Arizona litigation").

While the Arizona litigation was pending, on September 28, 2009, Peoples Bank entered into a written agreement with a "Steering Committee of Subparticipant Lenders," to sell its interest in the Loan and collateral ("Agreement"). The Agreement expressly provided that an unidentified legal entity would be created prior to closing to consummate the transaction, and Plaintiff was formed about a month later for this purpose. On October 28 and 29, 2009, Peoples Bank executed a series of documents, including an allonge to the note, which transferred and assigned its interests in the Loan to Plaintiff, and Plaintiff wired the purchase money for the Loan to Peoples Bank.

After Plaintiff was substituted for Peoples Bank in the Arizona litigation, the parties settled the suit for $10 million, plus post-judgment interest, and the judgment was entered accordingly on June 14, 2011.⁷ Plaintiff petitioned to domesticate the judgment in the Superior Court of Fulton County, Georgia and on August 15, 2011, the court entered an order domesticating the Arizona judgment.

During post-judgment discovery, Plaintiff determined that shortly after the Loan was declared in default in September 2008, three limited liability companies with corporate relationships to Merrill companies⁸ made transfers of unsecured real property (collectively the "2008 LLC Real Estate Transfers") to various newly-created entities that were, in turn, directly or indirectly "owned" by trusts established for the benefit of Harrison Merrill, his then-wife whom he was in the process of divorcing, and his five children ("Children's Trusts"). Although the 2008 LLC Real Estate Transferors were neither guarantors of the Loan nor Judgment Debtors and the property transferred had not been pledged to secure the Loan, the LLC Real Estate Transferors were at least partially owned by several of the Judgment Debtors.

Additionally, Plaintiff discovered that at the beginning of 2010, the Item Nine Will Trust, which is one of the Judgment Debtors, transferred its membership interests in five limited liability companies to the Merrill Family Partnership, LLC, which was "owned" by the Children's Trusts ("Item Nine Will Transfer"). And another transfer also occurred sometime at the beginning of 2010⁹ when Merrill Mining, LLC, transferred stock it owned in S–Corporation Florence Copper Mining Inc.¹⁰ either directly or indirectly to the Children's Trusts ("Merrill Mining Transfer"). Although neither Florence Copper

nor Merrill Mining were guarantors of the Loan or Judgment Debtors, Judgment Debtor MCRT was a member of Merrill Mining, LLC.

On July 30, 2012, Plaintiff filed its initial complaint¹¹ under the UFTA seeking to set aside or impose a constructive trust on the assets involved in the Merrill Mining Transfer. Shortly before the suit was filed, on March 9, 2012, and then after the suit was filed on December 19, 2013, Plaintiff obtained charging orders against the membership and ownership interests of various Judgment Debtors in numerous limited liability companies,¹² including the 2008 LLC Real Estate Transferors and the Merrill Mining Transferor.

Plaintiff amended its complaint several times, and on January 9, 2014, Plaintiff filed a motion and proposed amended complaint to add additional defendants and/or fraudulent transfer claims based on the 2008 Real Estate Transfers and the 2010 Item Nine Will Transfer. On April 22, 2014, the trial court granted Plaintiff's motion to amend, and on April 29, 2014, Plaintiff amended its complaint to add these fraudulent transfer claims and defendants.

Subsequently, the parties filed opposing motions for summary judgment, and following a hearing, the trial court denied Plaintiff's summary judgment motion and granted appellees' motion, entering judgment in favor of appellees on all claims. The trial court based its ruling on the following findings: (1) the Loan assignment to Plaintiff was ineffective and thus Plaintiff was not the holder of the Loan; (2) even if the assignment of the debt was proper, the fraud claims were not assignable as a matter of law; (3) Plaintiff lacked standing under the UFTA because it was not a creditor or subsequent creditor of the non-judgment debtor LLC transferors; and (4) the Loan, domesticated Arizona Judgment, and charging orders did not create "a direct nexus" or basis of direct liability between Plaintiff and the LLC transferors. As more fully set forth below, we now reverse in part and affirm in part the trial court's order and remand for further proceedings consistent with this opinion.

1. As a preliminary matter, we must decide if the Loan was properly assigned to Plaintiff. To answer this question, we must determine if, as the trial court found, the assignment of the Loan to Plaintiff was ineffective because Peoples Bank had already assigned the Loan to the Steering Committee pursuant to the terms of the Subparticipant Agreement.

We begin our analysis by turning to the relevant provisions of the Agreement, which we review under the usual rules of contract construction, JBM Investments, LLC v. Callahan Indus., Inc., 293 Ga.App. 580, 582(1), 667 S.E.2d 429 (2008), mindful that "[w]here contract language is unambiguous, construction is unnecessary, and the court simply enforces the contract according to its clear terms." (Citation and punctuation omitted.) Losey v. Prieto, 320 Ga.App. 390, 391, 739 S.E.2d 834 (2013). Contrary to the trial court's findings, the Subparticipant Agreement did not effect an immediate transfer and assignment of the Loan by People's Bank to the Steering Committee of the subparticipant banks. Rather, the unambiguous terms of the Agreement show that the actual transfer and assignment of the Loan was to be made at a future date. For example, the Agreement expressly provides that the Seller's rights in the Loan and Loan documents would be sold, transferred, assigned and conveyed "[u]pon satisfaction of the terms and conditions contained herein, ..." including a due diligence review conducted to the "Buyer's" satisfaction of the relevant documents. (Emphasis supplied.) Further, the Agreement also expressly provides that a not-yet-in-existence entity, such as the Plaintiff, would be created by the Buyer for the purpose of actually consummating the transaction, defined in the Agreement as the Closing. The evidence appears undisputed that the Plaintiff was formed about a month later to close the Loan and that the only "Closing" that took place occurred on or about October 28, 2009, when an allonge¹³ was executed, the guaranties and security instruments were transferred and assigned to Plaintiff, and Plaintiff wired the purchase money to Peoples Bank.

"A party may assign to another a contractual right to collect payment, including the right to sue to enforce the right. But an assignment must be in writing in order for the contractual right to be enforceable by the assignee." (Citation and punctuation omitted.) Hosch v. Colonial Pacific Leasing Corp., 313 Ga.App. 873, 874(2), 722 S.E.2d 778 (2012) ; Ware v. Multibank 2009–1 RES–ADC Venture, LLC, 327 Ga.App. 245, 251–52(4), 758 S.E.2d 145 (2014). Here, the transfer and assignment of the Loan occurred with the execution of the allonge and other documents from Peoples Bank to Plaintiff. Accordingly, the trial court erred by granting summary judgment to Defendants based on a finding that the Loan had not been effectively assigned to Plaintiff.¹⁴

2. That does not end our inquiry, however, because the trial court also cited other reasons why the Plaintiff lacked standing to pursue its claims. We begin this portion of our analysis by looking to the relevant provisions of the UFTA.

At the pertinent time, OCGA § 18–2–74(a)(1) (2014), the actual fraud...