Delta Gypsum, LLC v. Michael Felgemacher, E2016-01447-COA-R3-CV

Delta Gypsum (DG) supplied drywall to W.F. Interiors, LLC (WFI) when Wilhelm Felgemacher owned WFI and had executed a promissory note to DG for $370,615 in 2007; $346,890.70 remained due when Wilhelm transferred WFI to his son Michael in March 2009.
Michael signed a promissory note to his father for $12,000 on March 10, 2009 and paid that amount on June 9, 2009; the $12,000 matched the book value for WFI goodwill on a 2008 tax return.
DG sued Wilhelm and WFI in May 2009 (Delta Gypsum I); a later judgment (2012) was entered against Wilhelm individually for the outstanding balance, and DG could not collect.
DG filed this fraudulent-transfer action (July 2012) against Michael alleging actual fraud (Tenn. Code Ann. § 66-3-305(a)(1)) and constructive fraud (Tenn. Code Ann. § 66-3-306(a)). Trial occurred in Feb. 2016; parties submitted Statements of Evidence and competing business valuations.
Trial court found DG proved two statutory factors for actual fraud (transfer to an insider; prior suit/threatened suit) but that Michael rebutted the presumption of intent to defraud; the court also found DG presented no evidence Wilhelm was insolvent at the time of transfer and therefore failed on constructive-fraud. Court admitted Michael’s testimony about the $12,000 valuation; DG appealed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Actual fraud under § 66-3-305(a)(1)	Transfer was to an insider, occurred after creditor claim, and consideration ($12,000) was not reasonably equivalent to WFI’s true value — creates presumption of fraud	Michael rebutted presumption by testimony that sale followed retirement/health/bonding concerns, was advised by accountant/attorney, and $12,000 equaled book goodwill value	Court affirmed: DG proved two statutory factors but Michael successfully rebutted fraudulent intent; DG failed to prove actual fraud
Constructive fraud under § 66-3-306(a)	Michael paid inadequate consideration and Wilhelm was insolvent (or rendered insolvent) by transfer	No evidence proved Wilhelm was insolvent at time of transfer; plaintiff bears burden to prove insolvency	Court affirmed: DG produced no evidence of Wilhelm’s assets/liabilities or insolvency, so constructive-fraud claim fails
Evidentiary ruling on Michael’s testimony about advisors' valuation	Michael’s testimony as to advice/valuation was hearsay and lacked foundation because advisors were not called	Michael, as lay witness, may testify about value (Tenn. R. Evid. 701); he introduced a tax-return page showing $12,000 goodwill	Court affirmed: record does not show abuse of discretion in admitting Michael’s testimony; admission was permissible and DG failed to preserve/rebut error

Cross v. City of Memphis, 20 S.W.3d 642 (Tenn. 2000) (presumption-of-correctness standard for trial court findings)
Blair v. Brownson, 197 S.W.3d 681 (Tenn. 2006) (de novo review of legal issues)
Mansell v. Bridgestone Firestone N. Am. Tire, LLC, 417 S.W.3d 393 (Tenn. 2013) (statutory interpretation reviewed de novo)
State v. Pope, 427 S.W.3d 363 (Tenn. 2013) (statutory interpretation principles)
Macon Bank & Trust Co. v. Holland, 715 S.W.2d 347 (Tenn. Ct. App. 1986) (weight of statutory factors and fact-dependent fraudulent-transfer inquiries)
Burden v. Burden, 250 S.W.3d 899 (Tenn. Ct. App. 2007) (expert testimony is advisory; factfinder need not accept expert valuation)
Owens v. Owens, 241 S.W.3d 478 (Tenn. Ct. App. 2007) (valuation is subjective; trial court need not adopt expert opinions)
Kelly v. Kelly, 445 S.W.3d 685 (Tenn. 2014) (deference to trial court credibility findings)