Se Prop. Holdings, LLC v. Braswell

• Decision Date: 07 June 2017
• Docket Number: CIVIL ACTION 13-0267-WS-N.
• Citation: 255 F.Supp.3d 1187
• Parties: SE PROPERTY HOLDINGS, LLC, Plaintiff, v. George S. BRASWELL, et. al., Defendants.
• Court: U.S. District Court — Southern District of Alabama

255 F.Supp.3d 1187

SE PROPERTY HOLDINGS, LLC, Plaintiff,

v.George S. BRASWELL, et. al., Defendants.

CIVIL ACTION 13-0267-WS-N.

United States District Court, S.D. Alabama, Southern Division.

Signed June 7, 2017

Russel P. Myles, McDowell Knight Roedder & Sledge, L.L.C., Blair J. Newman Jr., Richard M. Gaal, Mobile, AL, for Plaintiff.

James G. Curenton Jr., Fairhope, AL, for Defendant.

ORDER

WILLIAM H. STEELE, UNITED STATES DISTRICT JUDGE

This fraudulent transfer action comes before the Court on plaintiff's Motion for Partial Summary Judgment (doc. 98) and defendants' Motion for Summary Judgment (doc. 99). Both of these overlapping Rule 56 Motions have been briefed, with considerable duplication of argument along the way, and are now ripe for disposition.

I. Nature of the Action.

This case is one of a number of fraudulent transfer actions that SE Property Holdings, LLC ("SEPH"), is pursuing in this District Court against guarantors of multimillion dollar loans made by SEPH's predecessor for the development and financing of certain real estate projects in Orange Beach, Alabama, known as Bama Bayou and Marine Park. When the projects failed and the loans went into default, the guarantors declined to pay, thereby embroiling SEPH and the guarantors in many years of litigation spanning numerous cases and courts, including this District Court and the Mobile County Circuit Court, as well as probate and bankruptcy courts.

In this particular action, SEPH filed its First Amended Complaint (doc. 22) against defendants, George S. Braswell and Vennie T. Braswell, alleging that George Braswell ("Braswell") executed guaranties exceeding $1.1 million on loans made by SEPH's predecessor for the Bama Bayou / Marine Park project. After the borrowers defaulted on those loans, Braswell transferred certain real property to his wife, Vennie Braswell ("Mrs. Braswell"), on or about May 19, 2009. In particular, the Complaint alleges that Braswell conveyed to Mrs. Braswell the couple's primary residence in Baldwin County (purportedly valued at between $1 million and $2.5 million, with a mortgage balance of $600,000) and a Baldwin County condominium unit (purportedly valued at $500,000, with no outstanding mortgage balance). SEPH maintains that both transfers violate the Alabama Uniform Fraudulent Transfer Act, Ala. Code §§ 8–9A–1 et seq. (the "AUFTA"), in multiple respects.

The First Amended Complaint alleges three distinct AUFTA causes of action against the Braswells. In Count One, SEPH brings a claim of actual fraudulent transfer, in violation of Alabama Code § 8–9A–4(a), based on allegations that Braswell made the subject transfers with the intent of hindering, delaying or defrauding SEPH's predecessor. In Count Two, SEPH asserts a claim of constructive fraudulent transfer, in violation of Alabama Code § 8–9A–4(c), based on allegations that Braswell's remaining assets after the transfers were unreasonably small and he believed or should have believed that he would be called upon to pay debts beyond his ability to pay. In Count Three, SEPH advances a claim of constructive fraudulent transfer, in violation of Alabama Code § 8–9A–5(a), predicated on an allegation that Braswell was insolvent at the time of, or as a result of, the subject transfers. Finally, in Count Four, SEPH brings a claim of civil conspiracy, alleging that the Braswells conspired with each other in effecting the subject asset transfers, all to SEPH's detriment in being deprived of assets that could have been used to collect on Braswell's guaranty obligations.

II. Factual Background.¹

A. The Loans and Guaranties.

Between 2005 and 2007, SEPH's predecessor (Vision Bank) entered into a series of four commercial loan agreements whereby it loaned $21 million to entities called Bama Bayou, LLC (formerly known as Riverwalk, LLC) and Marine Park, LLC. (Corbitt Aff. (doc. 101, Exh. A), ¶ 5.) Those loans were fully funded by Vision Bank and its participant banks. (Id. , ¶ 7.)

In connection with each of those loans, George Braswell executed a limited continuing guaranty in favor of Vision Bank. (Corbitt Aff., ¶ 6.) First, on or about March 10, 2005, he executed a guaranty with respect to Vision Bank's $6 million loan to Riverwalk, LLC in March 2005. (Id. , ¶ 6 & Exh. A–2.) In that guaranty, Braswell agreed to be liable for up to $315,000 in principal of the note, as well as 100% of all interest on the loan accruing at any time, and 100% of collection costs, expenses, and reasonable attorney's fees. (Id. , Exh. A–2 at ¶ 14.) Second, on or about May 20, 2006, Braswell executed a guaranty with respect to Vision Bank's $5 million loan to Riverwalk LLC in June 2006. (Corbitt Aff., ¶ 6 & Exh. A–3.) In that guaranty, he agreed to be liable for up to $280,000 in principal of the note, as well as 100% of all interest on the loan accruing at any time, and 100% of collection costs, expenses, and reasonable attorney's fees. (Id. , Exh. A–3 at ¶ 14.) Third, on or about September 25, 2007, Braswell executed a guaranty with respect to Vision Bank's $5 million loan to Bama Bayou, LLC in September 2007. (Corbitt Aff., ¶ 6 & Exh. A–4.) In that guaranty, he agreed to be liable for up to $280,000 in principal of the note, as well as 100% of all interest on the loan accruing at any time, and 100% of collection costs, expenses, and reasonable attorney's fees. (Id. , Exh. A–4 at ¶ 14.) And fourth, on or about December 17, 2007, Braswell executed a guaranty with respect to Vision Bank's $5 million loan to Marine Park, LLC in March 2007. (Corbitt Aff., ¶ 6 & Exh. A–5.)² In that guaranty, he agreed to be liable for up to $280,000 in principal of the note, as well as 100% of all interest on the loan accruing at any time, and 100% of collection costs, expenses, and reasonable attorney's fees. (Id. , Exh. A–5 at ¶ 14.)

B. The Defaults and SEPH's Collection Efforts.

Plaintiff's evidence is that, even though the loans had been fully funded, Bama Bayou, LLC and Marine Park, LLC defaulted under the loans and notes sometime prior to January 2009. (Corbitt Aff., ¶¶ 7–8.) Vision Bank subsequently demanded payment from the borrowers and guarantors, including Braswell. (Id. , ¶ 8.) When payment was not forthcoming, Vision Bank sued Bama Bayou, Marine Park, Braswell, and others in the Circuit Court of Mobile County, Alabama, on January 16, 2009 (the "Bama Bayou Action"). (Id. ) The Bama Bayou Action remains pending today. To date, it has not gone to trial; indeed, the Court's understanding is that no trial setting is in place at this time.

On March 20, 2009, as part of its collection activities, Vision Bank foreclosed on multiple parcels of real property that secured its loans to Bama Bayou and Marine Park, purchasing such property via credit bids. (Id. , ¶ 9.) In the wake of those foreclosure sales, large deficiencies remained on the Bama Bayou and Marine Park loans. Indeed, plaintiff's calculations are that, as of February 21, 2017, Braswell owes SEPH the sum of $875,000 in principal on the Bama Bayou / Riverwalk guaranties, as well as $9,294,012.19 in interest on those loans (exclusive of attorney's fees and costs of collection). (Id. , ¶ 16.)

C. The Challenged Transfers.

As noted, SEPH's claims herein focus on a pair of real property transfers made by Braswell to his wife, Mrs. Braswell, who is not a signatory on the subject guaranties and is not directly indebted to SEPH on the Bama Bayou / Riverwalk loans. Both of the challenged transfers occurred on May 19, 2009, some four months after Vision Bank commenced the Bama Bayou Action against Braswell to collect on the underlying debt.

The first transfer from Braswell to Mrs. Braswell was of real estate described as "Unit 1001, The Sands at Romar Beach, a condominium, located in Baldwin County, Alabama." (Doc. 101, Exh. G, at 1.) The Warranty Deed executed by Braswell conveyed and transferred to Mrs. Braswell his entire ownership interest in that condo unit, in exchange for a listed consideration of $10.00 cash. (Id. ) Braswell confirms that his wife paid him no other consideration for that conveyance. (Braswell Dep. (doc. 101, Exh. H), at 28.) Braswell listed the value of that beach condo during the relevant time period as being $500,000. (Doc. 101, Exh. K at Exh. 2; doc. 105, Exh. B.)

The second transfer from Braswell to Mrs. Braswell was of real estate described as "Lot 73, of Sandy Creek Farms, Phase I." (Doc. 101, Exh. F, at 1.) This property was the couple's primary residence. (Braswell Dep., at 143.) As with the Romar Beach condo, the only consideration furnished by Mrs. Braswell to her husband in exchange for this conveyance was $10.00 cash. (Id. ) Braswell listed the value of the Sandy Creek Farms residence during the relevant time period as being $1 million, but a January 2008 appraisal valued it at $1,365,000. (Doc. 101, Exh. J at Supp. Exh. 3a; doc. 105, Exh. B.)

George Braswell executed deeds conveying both of these properties to Vennie Braswell on May 19, 2009. (Doc. 24, ¶¶ 6, 8, 14.) Whether coincidentally or otherwise, this was precisely one day before Vision Bank foreclosed on the mortgaged real property securing its loans to Bama Bayou.

Defendants' evidence is that these transfers were made in the ordinary course of estate planning activities with their attorney, Mort Swaim. In particular, defendants show that Braswell first met with Swaim for estate-planning purposes in February 2008. (Doc. 10, Exh. 23.) When Braswell consulted with Swaim again in May 2009, he did so for the stated purpose that he "wanted to update his estate plan." (Swaim Dep. (doc. 100–1, Exh. 5), at 68.) Defendants' evidence is that the transfers of Braswell's interest in the Sandy Creek Farms residence and the Romar Beach condo to Mrs. Braswell were made pursuant to Swaim's advice that they "balance their assets for estate-planning purposes." (Id. at 179.) According to Swaim, "the moment [Braswell] went above one million, ... he had a tax problem. So I wanted to hit the ... two main assets that I...