Truelove v. Buckley

• Decision Date: 25 October 2012
• Docket Number: No. A12A1267.,A12A1267.
• Parties: TRUELOVE et al. v. BUCKLEY.
• Court: Georgia Court of Appeals

318 Ga.App. 207

733 S.E.2d 499

TRUELOVE et al.

v.BUCKLEY.

No. A12A1267.

Court of Appeals of Georgia.

Oct. 25, 2012.

Troy R. Millikan, Gainesville, for Appellant.

Abbott Swift Hayes Jr., Gainesville, Jessica Mallanda Lund, for Appellee.

ADAMS, Judge.

Richard L. Buckley, Jr. d/b/a/ Press–A–Dent brought suit against Jeffrey B. Truelove and his mother Peggy M. Truelove (hereinafter collectively referred to as the appellants) seeking to have the transfer of certain real property (the “property”) from Jeffrey to his mother declared void under section 18–2–74 and section 18–2–75 of the Uniform Fraudulent Transfers Act (UFTA). OCGA § 18–2–70 et seq. The trial court found Buckley was entitled to summary judgment under OCGA § 18–2–75(b), and appellants filed the present appeal. Upon careful consideration, we now reverse the grant of summary judgment in favor of Buckley.

In 1998, Buckley obtained a judgment against Jeffrey Truelove in the amount of approximately $100,000 dollars, and a writ of fieri facias was filed, recorded and renewed on the judgment. At the time the trial court's order was entered in the present case, this judgment remained mostly unsatisfied.

Jeffrey subsequently obtained the right to purchase the property at issue here as part of the settlement of a dispossessory action. But Jeffrey did not have the money to buy the property, so it was arranged that the property would be purchased by his mother Peggy instead and that the property would be deeded to her. However, according to the affidavit of the closing attorney, Peggy did not want the sellers to know she was the one actually buying the property, and the transaction was structured so that at the closing the property would be deeded to Jeffrey and transferred from Jeffrey to Peggy after the closing. The funds for the purchase were deposited in the closing attorney's trust account; those funds were dispersed at closing to the sellers and the property was deeded to Jeffrey. After the sellers left the closing, however, another deed was executed transferring the property to Peggy, and this bears the same date as the deed from the sellers to Jeffrey.¹ Also on or about the closing date, Peggy, as Lessor, and Jeffrey, as Lessee, executed a “10 Year Buy Out Lease Purchase Agreement” pursuant to which Jeffrey was to pay Peggy $700.00 a month to lease the property, with those payments going toward the purchase price of the property. The term of the lease purchase was for 120 months and would have expired on August 31, 2016, but Peggy rescinded the agreement on April 23, 2010 because Jeffrey failed to make all the payments due by that date. Nevertheless, Jeffrey was allowed to continue to lease the property for $400 a month, without any purchase rights.

Buckley filed the present case against appellants in 2010, seeking to have the transfer of the property from Jeffrey to Peggy declared fraudulent and void under OCGA § 18–2–74 and OCGA § 18–2–75, and he subsequently moved for summary judgment on his claim under OCGA § 18–2–75. The trial court determined that Buckley was entitled to summary judgment under subsection (b) of that section but found that material issues of fact precluded the grant of summary judgment under subsection (a).

1. We thus begin our analysis by considering whether the transfer was fraudulent as

to Buckley under OCGA § 18–2–75(b), which provides as follows:

A transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe that the debtor was insolvent.

The trial court found that the evidence was undisputed that (1) Buckley's claim arose prior to the transfer; (2) Peggy was an insider as defined by OCGA § 18–2–71; ² (3) Peggy knew of her son's insolvency and (4) the transfer was for an antecedent debt because Peggy provided the funds to buy the property and Jeffrey transferred the property to Peggy to satisfy this antecedent debt.

Citing OCGA § 18–2–22, appellants argue that the trial court nevertheless erred in granting summary judgment because no evidence was presented that the transfer was made with actual intent to delay, hinder or defraud creditors. However, that section was repealed by Ga. L. 2002, p. 141, § 2, effective July 1, 2002, and replaced by the current provisions of the UFTA. The first question we must address then is whether it is necessary to show actual intent in order to establish a fraudulent transfer under OCGA § 18–2–75.

The UFTA “is modeled on the Uniform Fraudulent Transfer Act promulgated by the national Conference of Commissioners on Uniform State Laws and adopted in various forms by 43 states and the District of Columbia.” Bishop v. Patton, 288 Ga. 600, 606(3)(b), 706 S.E.2d 634 (2011), disapproved on other grounds, SRB Investment Svs. v. Branch Banking & Trust Co., 289 Ga. 1, 709 S.E.2d 267 (2011). For this reason, and in light of the dearth of Georgia decisions construing the provisions of the Georgia UFTA, we look to the decisions of other jurisdictions for guidance. E.g., State v. Mayze, 280 Ga. 5, 9, 622 S.E.2d 836 (2005) (sister state's analysis of similar constitutional and statutory provision persuasive although not controlling).

Concerning the issue of intent, the Supreme Court of North Dakota has explained that fraudulent transfers under the UFTA “are broadly separated into two classifications: actual fraud and constructive fraud....” Farstveet v. Rudolph, 630 N.W.2d 24 (N.D.2001). While actual or intentional fraud requires a showing of intent, “[c]onstructive fraudulent transfers are established conclusively, without regard to the actual intent of the parties,....” Id. at 31(2).

In Georgia, the provisions governing actual fraud appear in OCGA § 18–2–74, which is not at issue here, while OCGA § 18–2–75, the provision at issue in this case, governs constructively fraudulent transfers. In North Dakota, this identical provision is codified at N.D. Cent.Code § 13–02.1–05(2), about which the North Dakota Court further expounded:

One of the innovations of the Uniform Fraudulent Transfer Act is its adoption of the preferential transfer concept. See Prairie Lakes Health Care System v. Wookey, 1998 S.D. 99, ¶ 14, 583 N.W.2d 405. It also has been described as constructive fraud or fraud in law.... [This section] ‘renders a preferential transfer—i.e., a transfer by an insolvent debtor for or on account of an antecedent debt—to an insider vulnerable as a fraudulent transfer when the insider had reasonable cause to believe that the debtor was insolvent.’ UFTA § 5, cmt. (2). While it has been held that debtors generally may prefer one creditor over another in applying assets to discharge their obligations, [this section] curtails this privilege if the debtor is insolvent at the time and the preference is to an insider. Wookey, 1998 S.D. 99, ¶ 14, 583 N.W.2d 405. The premise behind [this section], ‘is that an insolvent debtor is obligated to pay debts to creditors not related to him before paying those who are insiders.’ UTFA, Prefatory Note. The drafters of the revised Act intended this provision to be an attempt at diminishing the sometimes unfair advantages insiders possess when they are familiar with the debtor's financial status. Wookey, 1998 S.D. 99, ¶ 14, 583 N.W.2d 405. Constructive fraudulent transfers are established conclusively, without regard to actual intent of the parties,....

(Indention omitted.) Farstveet, 630 N.W.2d at 30–31.

This finding comports with our own plain reading of OCGA § 18–2–75(b). A showing of actual intent is not necessary under that section; rather a transfer of property will be deemed fraudulent if it falls within the circumstances enumerated therein.

Further, as one Georgia district court has noted, “[i]t is noteworthy that Georgia's UFTA no longer contains language regarding a transferee's intent.” United States v. Sherrill, 626 F.Supp.2d 1267, 1276, n. 10 (M.D.Ga.2009). Thus, the fact that Peggy had no knowledge that Jeffrey had an outstanding judgment against him is irrelevant under the current version of the UFTA. Based on the foregoing, we find no merit to appellants' contention that summary judgment must be reversed because there was no evidence of actual intent to delay, hinder or defraud in this case.

But that does not end our inquiry. Appellants also opposed the grant of summary judgment to Buckley on the basis that this case did not involve an antecedent debt. With this contention we agree.

Although the term “debt” is defined broadly under Georgia's UFTA, ³ it is clearly limited by the term “antecedent.” “[E]ssentially a debt is ‘antecedent’ if it is incurred before the transfer.... Antecedent debt may be described as a debt preexisting or prior to the transfer.” (Emphasis supplied.) In the Matter of: Cavalier Homes of Georgia, Inc., 102 B.R. 878 (Bankr.M.D.Ga.1989).⁴

In this case, Buckley argued and the trial court agreed that Jeffrey became indebted to Peggy when she paid for the property and it was deeded in his name, and that Jeffrey satisfied this preexisting debt by transferring the property to Peggy. However, we believe this narrow, piecemeal view ignores the essential nature of the transaction here, about which the undisputed evidence shows that (1) the property was purchased by Peggy; (2) it was briefly deeded to Jeffrey because he had the right to purchase the property; and (3) the property was transferred to Peggy on the same day and shortly after she purchased it. This evidence clearly shows that the transfer to Peggy was “at essentially the same time” that she purchased the property, and thus was not made to satisfy an “antecedent” debt.⁵In re Hasbro, Inc. v. Serafino, 37 F.Supp.2d 94, 97 (D.C.Mass.1999) (mortgage was not for antecedent debt when the loan was made at essentially the same time as the mortgage was granted.) See also Bear Rock Franchise...