MERRILL RANCH PROPERTIES, LLC v. AUSTELL Et Al.
336 Ga. App. 722
| Ga. Ct. App. | 2016Background
- In 2006 Peoples Bank made a $100M revolving loan to WHM Merrill Ranch Investments LLC, guaranteed by Harrison Merrill and several trust entities (Judgment Debtors); loan went into default and Peoples Bank foreclosed the Arizona collateral.
- Peoples Bank entered a subparticipant/steering-committee purchase agreement in Sept. 2009 providing for a buyer entity (not yet formed) to close; Merrill Ranch Properties, LLC (Plaintiff) was formed and purchased Peoples Bank’s loan interest in Oct. 2009 via an allonge and related documents.
- Plaintiff succeeded Peoples Bank in Arizona litigation, obtained a $10M consent judgment domesticated in Georgia, then discovered several transfers: (a) three 2008 transfers of LLC-owned real estate to entities owned by family trusts (non-judgment-debtor LLC transfers); (b) a circa-2010 transfer of Item Nine Will Trust membership interests (a Judgment Debtor transfer); and (c) a 2010 transfer by Merrill Mining LLC of stock to Children’s Trusts.
- Plaintiff sued under Georgia’s UFTA to avoid or impose constructive trusts on these transfers and obtained charging orders against certain LLC interests; defendants moved for summary judgment, and the trial court granted it on multiple grounds.
- On appeal the Court of Appeals: (a) held the loan assignment to Plaintiff was effective; (b) affirmed that Plaintiff lacked UFTA standing to challenge transfers made by non-judgment-debtor LLCs (charging orders do not make the creditor a creditor of the LLC); (c) held pre-assignment transfers are not actionable by an assignee under NeSmith and related precedent; and (d) remanded the Item Nine Will Trust transfer (made by a Judgment Debtor) to the trial court to resolve whether the one-year discovery tolling defeats the §18-2-79 statute of limitations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the Peoples Bank loan effectively assigned to Plaintiff? | Assignment/closing documents (allonge, transfer docs, purchase funds) made Plaintiff the assignee; assignment effective. | Steering Committee Agreement already assigned loan to committee so Plaintiff lacked title. | Assignment effective; trial court erred to find otherwise. |
| Does a charging order against a member give Plaintiff standing under the UFTA to attack LLC transfers? | Charging orders create a "right to payment" (a claim) against LLC interests, making Plaintiff a creditor of those LLCs under UFTA. | Charging orders only divert distributions; they do not create creditor-debtor relationship with LLC or permit direct remedies against LLC assets. | Charging orders do not make the judgment creditor a creditor of the LLC for UFTA purposes; no standing to attack transfers by non-judgment-debtor LLCs. |
| Can an assignee of a debt sue to avoid fraudulent transfers that occurred before the assignment? | As assignee of the loan, Plaintiff may pursue fraudulent-transfer claims arising before assignment under UFTA. | Georgia precedent (NeSmith / anti-assignment principles) bars assignees from prosecuting pre-assignment fraudulent-transfer claims. | Pre-assignment transfers are not actionable by assignee here; NeSmith and Golshani bar such claims. |
| Is the Item Nine Will Trust transfer (by a Judgment Debtor) time-barred under OCGA §18-2-79(1)? | Plaintiff argues discovery tolling applies because transfers were concealed; amendment to assert claim occurred within discovery window. | Defendants argue the 2010 transfer is outside the 4-year/1-year discovery limit and thus time-barred. | Remanded: court finds Plaintiff has UFTA standing as to this Judgment Debtor transfer but remands for factual determination whether the one-year discovery tolling saves the claim. |
Key Cases Cited
- JBM Investments, LLC v. Callahan Indus., Inc., 293 Ga. App. 580 (contract-construction principles)
- Losey v. Prieto, 320 Ga. App. 390 (where contract language is unambiguous, enforce it)
- Hosch v. Colonial Pacific Leasing Corp., 313 Ga. App. 873 (assignment of contract rights must be in writing to be enforceable)
- RES-GA Hightower, LLC v. Golshani, 334 Ga. App. 176 (assignee’s standing to pursue pre-assignment UFTA claims limited by NeSmith/anti-assignment law)
- Gaslowitz v. Stabilis Fund I, LP, 331 Ga. App. 152 (charging order does not permit creditor to reach LLC assets or obtain accounting)
- Mahalo Investments III, LLC v. First Citizens Bank & Trust Co., Inc., 330 Ga. App. 737 (charging-order mechanics; distributions diverted to judgment creditor)
- Acree v. McMahan, 276 Ga. 880 (creditor generally may not reach corporate/LLC assets to satisfy individual’s debt)
- Bishop v. Patton, 288 Ga. 600 (transfer need not be directly by debtor when asset is debtor’s property)
- Security Feed & Seed Co. of Thomasville, Inc. v. NeSmith, 213 Ga. 783 (historical anti-assignment principle barring assignees from prosecuting certain claims)