RES-GA YPL, LLC v. ROWLAND et al.
A16A1919
Court of Appeals of Georgia
Decided January 18, 2017
Reconsiderations denied March 14, 2017
798 SE2d 315
Rickman, Judge.
Jonap & Associates, John W. Jonap, Jeffrey S. Jonap; Eric J. Hertz, for appellants.
Chambless, Higdon, Richardson, Katz & Griggs, David N. Nelson,
In this case alleging a violation of Georgia‘s Uniform Fraudulent Transfers Act, RES-GA YPL, LLC (“YPL“), as creditor, sued J. H. Rowland III, as judgment debtor (the “Judgment Debtor“), as well as Marilyn Jones Rowland, Katherine Rowland Boudreau, Rowland Partners, L.P., Rowland Companies, Inc., and MJR Finance, LLC, as parties to various real estate transactions (appellees collectively referred to herein as the “Rowland Appellees“), seeking to set aside the transactions as fraudulent and requesting a declaratory judgment as to the superiority of its interest in certain real property. The trial court granted the Rowland Appellees’ motion to dismiss the action. YPL appeals, contending that the trial court erred in dismissing its lawsuit. For the reasons discussed below, we affirm in part and reverse in part the trial court‘s ruling.
This Court conducts a de novo review of a trial court‘s ruling on a motion to dismiss. See Dove v. Ty Cobb Healthcare Systems, 316 Ga. App. 7, 9 (729 SE2d 58) (2012).
In doing so, our role is to determine whether the allegations of the complaint, when construed in the light most favorable to the plaintiff, and with all doubts resolved in the plaintiff‘s favor, disclose with certainty that the plaintiff would not be entitled to relief under any state of provable facts; however, we need not adopt a party‘s legal conclusions based on these facts.
(Punctuation and footnotes omitted.) Id.
The facts underlying YPL‘s complaint are somewhat complex. The pertinent background information and history of the parties necessary to put the allegations of the complaint into context are set forth below.
I. The Parties
YPL has a deficiency judgment against the Judgment Debtor in an amount greater than $2.1 million. Marilyn Jones Rowland (“M. Rowland“) is the Judgment Debtor‘s mother, and Katherine Rowland Boudreau (“Boudreau“) is the Judgment Debtor‘s sister. Rowland Partners, L.P. (the “Limited Partnership“) is a limited partnership of which it is undisputed that, at all times relevant to this action, M. Rowland and Boudreau were officers, owners, members, affiliates, and/or partners; YPL alleges, although the Rowland Appellees deny, that the Judgment Debtor also held a position in the Limited Partnership. Rowland Companies, Inc. is the general partner of the Limited Partnership. MJR Finance, LLC is a limited liability company of which M. Rowland was, at all times relevant to this action, an officer, owner,
II. Pertinent Background
In March 2007, a nonparty limited liability company executed a promissory note to Alpha Bank and Trust, as lender, in order to obtain a loan totaling over $3.5 million (the “Note“). The Judgment Debtor executed a personal guaranty in which he guaranteed the repayment of the Note (the “Guaranty“). The Note was secured by a security deed that encumbered certain real property in Cobb County.
In 2008, Alpha Bank and Trust was declared insolvent, and the Federal Deposit Insurance Corporation (“FDIC“) was appointed receiver. The FDIC, as receiver, transferred and assigned the Note and the Guaranty to a nonparty limited liability company, which in turn assigned the Note and the Guaranty to YPL in 2011.
The Note went into default, and YPL foreclosed on the collateral. The foreclosure sale was confirmed, and YPL thereafter filed a lawsuit against the Judgment Debtor seeking to recover a money judgment for the deficiency remaining on the Note. YPL obtained the judgment against the Judgment Debtor on August 28, 2012, and the judgment was reduced to a writ of fieri facias that was recorded on February 12, 2013. Payment of the judgment remains unsatisfied.
III. The Transfers
The week following the entry of YPL‘s judgment against the Judgment Debtor, several “corrective” deeds (collectively, the “Corrective Deeds“), executed on September 4, 2012 and filed in the Superior Court of Burke County the following day, purported to cure numerous “defective” deeds (collectively, the “Defective Deeds“) that the Rowland Appellees allege were signed in 2003 and that transferred four tracts of real property among and between them. These transfers (collectively, the “Transfers“) form the basis of YPL‘s complaint and are set forth in detail below.
1. The Herndon Transfers. The first in the series of “corrective” deeds was executed by M. Rowland and entitled “Corrective Executor‘s Deed.” It purported to “confirm” the conveyance of a 264-acre tract of real property (the “Herndon Tract“) from M. Rowland, in her capacity as executor of her late husband‘s estate, as grantor, to herself (individually), the Judgment Debtor, and Boudreau, as grantees. Attached to the corrective deed was a defective deed purporting to make the same conveyance, which referenced the year 2003 in the opening paragraph and was allegedly signed by M. Rowland and her late husband. The defective deed was not otherwise dated, witnessed, or recorded.
The second “corrective” deed was entitled “Corrective Quitclaim Deed” and was executed by the Judgment Debtor and Boudreau, as grantors. It purported to “confirm” a conveyance of their shares of the Herndon Tract to the Limited Partnership, as grantee. As before, attached to the corrective deed was a defective deed referencing the year 2003, allegedly signed by the Judgment Debtor and Boudreau, purporting to make the same conveyance. That deed was not dated, witnessed, or recorded.
2. The Multi-Tract Transfers. The third “corrective” deed was a “Corrective Quitclaim Deed” executed by M. Rowland purporting to “confirm” the conveyance of three separate parcels of real property totaling over 1,882 acres (the “Multi-Tract Property“) from herself, as grantor, to the Judgment Debtor and Boudreau, as grantees.1 Again, attached to the corrective deed was a defective deed referencing the year 2003, allegedly signed by M. Rowland, purporting to make the same conveyance. That deed was not dated, witnessed, or recorded.
The fourth and final “corrective” deed was a “Corrective Quitclaim Deed” executed by the Judgment Debtor and Boudreau, as grantors, purporting to “confirm” the conveyance of the Multi-Tract Property to the Limited
3. The MJR Finance Security Deed. On December 21, 2012, the Limited Partnership, as grantor, purported to convey an interest in both the Herndon Tract and the Multi-Tract Property (collectively, “the Properties“) to MJR Finance, as grantee, via a security deed, in order to secure a note in the amount of $350,000 (the “MJR Finance Security Deed“). The MJR Finance Security Deed was recorded on December 26, 2012.
IV. The Trial Court Proceedings
On August 20, 2015, YPL filed the instant lawsuit seeking damages and to enforce its judgment by voiding the Transfers as violative of the Georgia Uniform Fraudulent Transfers Act,
The Rowland Appellees filed a motion to dismiss YPL‘s complaint,3 asserting that YPL lacked standing under the UFTA to bring the action against the Judgment Debtor, failed to state a cause of action against M. Rowland, Boudreau, or Rowland Companies, was time-barred from pursuing its UFTA claim by the applicable statute of limitation, and was not an “interested party” with standing to seek a declaratory judgment. The trial court granted the motion “for the reasons stated in [the Rowland Appellees‘] brief,” and this appeal follows.
V. Discussion
1. UFTA Claim. The UFTA provided:
A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor‘s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation... [w]ith actual intent to hinder, delay, or defraud any creditor of the debtor [.]
of fraud.” See RES-GA Hightower, LLC v. Golshani, 334 Ga. App. 176, 178 (1) (a) (778 SE2d 805) (2015). The UFTA defines a “creditor” as “a person who has a claim,”5 a “debtor” as “a person who is liable on a claim,” and a
In its complaint, YPL alleged that the Judgment Debtor made the Transfers with the actual intent of hindering, delaying, or defrauding his creditors, and specifically alleged several “badges of fraud“: the Transfers were made to insiders, were made after the Judgment Debtor had a judgment against him, consisted of substantially all of the Judgment Debtor‘s assets, were made without the Judgment Debtor‘s receipt of consideration for a reasonably equivalent value of the assets transferred, were made when the Judgment Debtor was insolvent or he became insolvent as a result of the Transfers, and occurred shortly after a substantial debt was incurred. See
A separate statute,
v. Austell, 336 Ga. App. 722, 731 (3) (784 SE2d 125) (2016); Golshani, 334 Ga. App. at 179-180 (1) (a).
(a) The Rowland Appellees contend that
Construing the complaint, as we must, in the light most favorable to YPL and resolving all doubts in its favor, neither the plain language of the statute nor this Court‘s precedent deprive YPL of standing to file its claim. Rather,
In contrast, YPL alleges that the Transfers at issue here were made after YPL held the Note and the Guaranty. Thus, YPL does not seek a remedy for an injury stemming from fraud to a previous holder of the note, but rather for an injury that was committed directly against it. If true, although YPL is an assignee of debt, the right of action for fraudulent conveyance was not assigned, but is its own, removing this case from the ambit
The Rowland Appellees nevertheless maintain that the Defective Deeds attached to the later-recorded Corrective Deeds establish that the Judgment Debtor transferred the Properties to the Limited Partnership in 2003, prior to YPL‘s acquisition of, and indeed the execution of, the Note and the Guaranty. They argue that the only post-assignment conveyances were made from the Limited Partnership to MJR Finance and were not subject to being set aside.
To be sure, a determination that the Judgment Debtor conveyed his interests in the Properties to the Limited Partnership in 2003 and that the only post-assignment conveyances were those from the Limited Partnership to MJF Finance would be fatal to YPL‘s UFTA claim. See
partner owns an interest in the legal entity but holds no title to the assets of the partnership.“).7
Such a determination, however, cannot be made at this stage of the litigation. Although a deed that has been neither witnessed nor recorded may be sufficient to bind the parties and their privies to the deed itself, it is not admissible to prove title in the grantee without first laying the proper foundation. See Latham v. Fowler, 199 Ga. 648, 648 (34 SE2d 870) (1945) (“Where, in a suit for land, the right of the plaintiffs was predicated upon an alleged lost and unrecorded deed . . . proof of the existence of a genuine original must have been established before secondary evidence relating thereto would have been admissible.“); Hoover v. Mobley, 198 Ga. 68, 73 (31 SE2d 9) (1944) (“The penalty for failure to execute the deed in the manner prescribed by the statute is a refusal to admit the same to record.“) (on motion for rehearing); see also Smith v. Forrester, 156 Ga. App. 79, 80 (1) (274 SE2d 101) (1980). On a motion to dismiss, the question before this Court is whether the allegations of the complaint, when construed in the light most favorable to YPL and with all doubts resolved in its favor, “disclose with certainty that [YPL] would not be entitled to relief under any state of provable facts.” (Punctuation and footnote omitted.) Dove, 316 Ga. App. at 9. With factual questions remaining as to the authenticity of the Defective Deeds, we cannot say that YPL lacks standing to pursue its UFTA claim based upon its status as an assignee of debt.8 Compare
(b) The Rowland Appellees assert that YPL failed to assert any viable claims against M. Rowland, Boudreau, and Rowland Companies, Inc. On this point, we agree.
YPL, as creditor, can seek relief under the UFTA against the Judgment Debtor, as well as any recipient of the Transfers made by the Judgment Debtor, i.e., the Limited Partnership. See
panies, Inc., however, received any interest in the Properties from the Judgment Debtor that would render them subject to a UFTA claim by YPL. Because they are likewise not debtors of YPL as that term is defined under the UFTA, any transfers made by them are not subject to attack by YPL. See
(c) YPL argues that the trial court erred in dismissing its UFTA claim to the extent that the court held that it was barred by the statute of limitation. Georgia law mandates that a claim challenging a transfer as fraudulent must be filed within four years of the date of the transfer, unless the transfer was made with an actual intent to defraud a creditor, in which case the claim may be filed “within one year after the transfer . . . was or could reasonably have been discovered by the claimant” if later than four years. See
The Rowland Appellees assert, as they did in the trial court, that the four-year limitation period began to run in 2003, when the Defective Deeds were allegedly executed, and that the one year “discovery” period for intentional fraud began to run, at the latest, on September 5, 2012, the date on which the Corrective Deeds were recorded. They argue that YPL failed to exercise reasonable diligence in discovering the deeds during that period and, consequently, that its UFTA claim, filed in August 2015, is time barred.
Even assuming that the reference to the year 2003 in the first paragraph of the otherwise undated Defective Deeds was sufficient to prove that the deeds were executed in 2003, those deeds, as we held in Division V (1) (a), cannot prove the passing of title for the purposes of the record without the Rowland Appellees first laying the proper foundation for their admission. See Latham, 199 Ga. at 648; Hoover, 198 Ga. at 73. Moreover, questions concerning a plaintiff‘s diligence in discovering an alleged fraud are generally questions for a trier of fact. Merrill Ranch Properties, 336 Ga. App. at 733 (4). Regardless, the record does not establish as a matter of law that YPL‘s UFTA claim is time barred and, consequently, the trial court erred in dismissing it on this ground. See Hickson v. Bryan, 75 Ga. 392, 393 (2) (b) (1885) (“Unless the facts from which fraud is inferred are undisputed, it is never a question of law, and the same rule applies where fraud and concealment are replied to a plea of the statute of limita-
tions.“); Merrill Ranch Properties, 336 Ga. App. at 733 (4) (“[I]ssues concerning a plaintiff‘s diligence usually must be resolved by the trier of fact. . . .“).
2. Declaratory Judgment. Finally, YPL asserts that the trial court erred in dismissing its action for a declaratory judgment that its purported interest in the Properties is superior to any interest held by MJR Finance. The Rowland Appellees contend that YPL lacks standing to seek declaratory relief because its interest in the Properties is merely contingent, as opposed to an actual, legal interest.
Georgia‘s Declaratory Judgments Act is meant “to settle and afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations.”
Construed in the light most favorable to the complaint, YPL alleges that it has a legal interest in the Properties vis-à-vis its judgment,
jury. . . .“); Calvary Independent Baptist Church v. City of Rome, 208 Ga. 312, 314 (3) (66 SE2d 726) (1951) (reversing the trial court‘s dismissal of appellant‘s declaratory action involving its ownership of real property). It follows that the trial court erred in dismissing YPL‘s claim for declaratory judgment at this stage of the litigation.
In sum, we affirm the trial court‘s dismissal of the complaint as to M. Rowland, Boudreau, and Rowland Companies, Inc. We otherwise reverse.9
Judgment affirmed in part and reversed in part. Barnes, P. J., and Self, J., concur.