The appellants challenge an interlocutory injunction entered to preserve the status quo pending adjudication of the merits of appellee Branch Banking and Trust Company’s (“BB&T”) breach of contract and fraudulent transfer claims. We conclude that the trial court did not abuse its discretion in entering the interlocutory injunction, and so we affirm.
1. This case involves 16 loans that BB&T and its predecessors made between 2005 and 2007 to two companies, which were guaranteed by two other companies. 1 All four of those companies were controlled by father and son residential housing developers Stephen R. Been and Stephen S. Been. The loans were due to mature between March and May 2009. In mid-2007, the liquid assets securing the loans were transferred to two other companies controlled by the Beens, SRB Investment Services, LLLP (“SRB”) and SFB Invеstment, LP (“SFB”). BB&T required SRB, SFB, and another company controlled by the Beens to sign as additional guarantors for the loans. 2 As part of the restructuring, SRB, SFB, and the three other guarantors signed liquidity covenants requiring them to maintain an *2 aggregate of $35 million in cash and cash equivalents.
In mid-2008, as the U. S. housing market was suffering a historic collapse, the Beens authorized enormous “partnership distributions” from SRB and SFB. SRB and SFB’s third and fourth quarter 2008 financial statements show that from June 30 to December 31, 2008, their cоllective assets shrank by $191 million or nearly 90%, from $216 million to $25 million. This left the guarantors in violation of the liquidity covenants, given the very limited assets of the other three guarantors. However, SRB and SFB withheld those financial statements from BB&T until January 7, 2009. By January 16, 2009, BB&T prepared a renewal package for the 16 loans that were scheduled to mature over the next few months, which would have required an immediate infusion of cash to increase thе balances of SRB and SFB to the required $35 million in liquidity, but the Beens refused.
Negotiations between BB&T and the Beens continued over the next few months, as the financial situation of the Beens and their companies continued to worsen. On January 23, 2009, another lender filed suit to recover $22 million from the Beens, SRB and SFB, the borrowers and other guarantors on the 16 BB&T loans, two limited liability companies created by the Beens (SRB Management Company, LLC and SFB Invеstment Management, LLC), and three related entities. Despite the entry of a temporary restraining order, the defendants in that action continued to transfer away assets. On February 2, 2009, BB&T sent notices of default to SRB and SFB and the borrowers and other guarantors on the BB&T loans due to the violation of the liquidity covenants, although later that month BB&T briefly extended the maturity dates on ten of the sixteen loans. On February 19, 2009, a third lender, Bank of America, accelerated all of its loans to SRB, SFB, one of the two borrowers on the BB&T loans, the other three guarantors, and eleven affiliated entities; Bank of America later filed suit against them for $4.3 million. In addition, in May 2009, Stephen F. Been settled his divorce for $35 million.
On June 22, 2009, BB&T filed suit against SRB and SFB, the Beens, the original borrowers and guarantors on the 16 loans, the other additional guarantor added in 2007, and the twо limited liability companies controlled by the Beens that were named in the other lender’s lawsuit. BB&T sought to recover more than $19 million in principal and interest then outstanding on the loans. In addition to breach of contract, BB&T raised claims under the Uniform Fraudulent Transfers Act, OCGA §§ 18-2-70 to 18-2-80 (Georgia UFTA).
*3 Discovery commenced, but the Beens and their affiliates were not forthcoming. In March 2010, as a result of third-party subpoenаs, BB&T learned that the Beens had created eight new limited liability companies between June 2008 and August 2009 — including four created on March 6, 2009, just before the BB&T loans were scheduled to begin maturing — and that the guarantors had transferred over $330 million to these and other unidentified entities and accounts, much of it between August 2008 and March 2009. 3 On April 26, 2010, BB&T filed a motion to amend the complaint to add the eight new LLCs as defendants and a motion for an interlocutory injunction freezing SRB and SFB’s recently transferred assets.
The injunction hearing took place on May 27, 2010. By that time, the combined assets of SRB and SFB had fallen from $216 million in June 2008 to $25 million in January 2009, shortly before the BB&T loans would become due, to just $25 thousand in May 2010. The parties stipulated to certain facts, including the sharp decline in SRB and SFB’s assets, and documentary evidence was introduced. On June 20, 2010, the trial court issued an interlocutory injunction naming the Bеens, SRB and SFB, the two LLCs that had been sued by the other lender and that were named in the original complaint, and the eight recently created LLCs (collectively, “the enjoined parties”). 4
The injunction froze $24 million in assets originating from SRB and SFB in the possession, custody, or control of the enjoined parties and anyone with notice in active concert or participation with them. The order excepted payments made in the ordinary course of business or financial affairs or pursuant to a valid court order. In addition, the order explained that the enjoined parties could avoid the asset freeze by depositing $25 million into the registry of the court or obtaining a $25 million irrevocable standby letter of credit. The enjoined parties did neither. Instead, they appealed. 5
2. The enjoined parties do nоt seriously dispute that the stipulations and documentary evidence presented to the trial court were sufficient, at the interlocutory injunction stage, to support a finding that numerous badges of fraud exist with respect to the transfers at issue here. Because actual intent to defraud is difficult to prove, the
*4
Georgia UFTA lists 11 nonexclusive factors (sometimes called “badges of fraud”) that can be considеred in determining whether funds were transferred with the actual intent to defraud a creditor. See OCGA § 18-2-74 (b) (l)-(ll);
Bishop v. Patton,
At least seven statutory badges of fraud are implicated here: (1) all of the transfers BB&T could trace went to entities the Beens control; (2) the Beens remained in possession or control of the transferred assets after those transfers; (3) the transfers were executed covertly and the Beens and their affiliatеs refused to provide details when BB&T asked about them and then resisted formal discovery; (4) during and shortly after the transfers, two creditors, as well as BB&T, threatened and then initiated lawsuits against SRB, SFB, and affiliated entities; (5) by the time of the interlocutory injunction hearing, the transfers included substantially all of the assets of SRB and SFB, the entities responsible for holding the vast majority of the liquid assets securing the 16 loans; (6) the transfers rendered SRB and SFB insolvent; and (7) during and shortly after the transfers, many of the Beens’ and their affiliates’ obligations were demanded or matured, exposing them to a substantial amount of imminently payable debt. See OCGA § 18-2-74 (b) (1), (2), (3), (4), (5), (9), (10). BB&T also presented evidence, as a nonstatutory badge of fraud, of SRB and SFB’s pattern of maintaining just enough funds in certain accounts to satisfy their financial covenants at the end of each quarter and then transferring the funds away shortly thereafter. See
Bishop v. Patton,
“Fraudulent transfer cases аre especially amenable to interlocutory injunctive relief.”
Bishop v. Patton,
3. The appellants contend that even if the evidence was sufficient to show that the challenged transfers were made with “actual intent to hinder, delay, or defraud any creditor of the debtor,” OCGA § 18-2-74 (a) (1), the trial court nevertheless erred in entering the interlocutory injunction. The appellants claim that we must reverse the grant of the interlocutory injunction for three reasons: (a) BB&T had an adequate remedy at law in the form of an action for damages; (b) BB&T wаs guilty of laches; and (c) the status quo was not in danger or in need of preservation.
In deciding whether to issue an interlocutory injunction, the trial court should consider whether:
(1) there is a substantial threat that the moving party will suffer irreparable injury if the injunction is not granted; (2) the threatened injury to the moving party outweighs the threatened harm that the injunction may do to the party being enjoined; (3) there is a substantial likelihood that the moving party will prevail on the merits of her claims at trial; and (4) granting the interlocutory injunction will not disserve the public interest.
Bishop v. Patton,
(a) The appellants’ primary argument for reversal is that BB&T has an adequate remedy at law because it can sue for money damages or foreclose on the property securing the original loans. See, e.g.,
Allen v. Hub Cap Heaven, Inc.,
The appellants argue that the rule should be different for a secured creditor like BB&T, arguing by analogy to a supersedeas bond in a civil case, which they claim has the same function as an interlocutory injunction under the Georgia UFTA. They note that by statute, a supersedeas bond is unavailable if thе amount at issue is “otherwise secured.” OCGA § 5-6-46 (a). However, the Georgia UFTA contains no such limitation, nor did this limit exist under prior equity law, and we decline to read into the statute the phrase “otherwise secured” simply because that phrase appears in the supersedeas statute. To the contrary, we presume that its omission from the equity statutes and the Georgia UFTA was intended. See
Fair v. State,
Moreover, as BB&T argues, this Court has long held thаt a creditor holding a promissory note secured by real property may
either
sue on the note
or
foreclose “ ‘until the debt is satisfied.’ ”
Oliver v. Slack,
(b) Thе appellants also contend that the interlocutory injunction was barred by laches. “Laches bars an equitable claim ‘when the truth cannot be established fairly due to a long delay ....’”
Thompson v. Central of Ga. R.R.,
However, “laches does not arise from delay alone. To prevail on a plea of laches, prejudice, too, must be shown.”
Stone v. Williams,
The appellants’ laches argument also ignоres the obstacles that BB&T faced in becoming fully informed of its rights until shortly before it requested the injunction, including the appellants’ efforts to frustrate discovery. BB&T did not sit idly by in the 16 months between the delayed receipt in January 2009 of the SRB and SFB financial statements showing the massive “partnership distributions” in the previous two quarters and the April 2010 filing of the motion for an interlocutory injunction. In that time, BB&T investigated the appellants’ conduct so that it could file its original complaint in good faith, served discovery, defended against early dispositive motions, served third-party discovery after the appellants refused to provide relevant information, defended against a motion to quash the third-party discovery, and reviewed the documents that were finally produced. Until that time, BB&T had been unable to identify many of the recipients of the frаudulent transfers, which were a host of newly formed entities. Armed with the third-party discovery responses, BB&T was able to serve pointed interrogatories on the appellants and learn and document the details of the fraudulent transfer scheme for the first time. And around the same time, BB&T obtained new information from the Beens’ depositions.
There is a balance between a plaintiffs knowing that a cause of action exists and that interim injunctive relief may be needed and sitting on its rights to the prejudice of the defendant. Here, the *8 evidence before the trial court showed that the delay resulted primarily from the appellants’ concealment of their actions and obstruction of BB&T’s efforts to discover the details. The trial court had the discretion to accept BB&T’s argument that it was appropriate not to “shoot first and aim second.” There was no intentional or careless delay. As BB&T explained at the interlocutory injunction hearing:
We wanted to get as much information as we could before coming to this point, and we feel that under the circumstances, we have done all that we could to gather as much information as we could so that we would be in an informed position today before seeking the relief which we seek.
The trial court was entitled to accept that explanation and reject the laches defense.
(c) Finally, the appellants contend that an interlocutory injunction was not available because “[t]he only appropriate purpose for granting an interlocutory injunction is to preserve the status quo of the parties pending a final adjudication of the case.”
Ga. State Licensing Bd. for Residential & General Contractors v. Allen,
This argument is puzzling in light of the important role that interlocutory injunctions play when fraudulent transfers are alleged. As we said in
Bishop v. Patton,
“[fraudulent transfer cases are especially amenable to interlocutory injunctive relief.”
The appellants’ argument that there was no threat to the status quo because similar distributions had been made in the past ignores *9 several key differences. First, the earlier distributions occurred before SRB and SFB were required to be added as additional guarantors on the 16 loans. Second, the earlier distributions did not cause any debtor to violate its liquidity covenants with BB&T. Finally, the earlier distributions did not render SRB or SFB so poorly capitalized as to be essentially insolvent relative to maturing liabilities. The challenged transfers bear little resemblance to the earlier distributions cited by the appellants, and the trial court did not abuse its discretion by safeguarding the status quo pending final resolution of BB&T’s claims.
Judgment affirmed.
Notes
The borrowers were Tampa Investment Group, Inc. and Legacy Investment Group, LLC, and the guarantors were Tampa Financial Company, Inc. and Legacy Communities, LLC. Although they are defendants in the trial court, these companies are not named in the interlocutory injunction and have not appealed.
The third company required to sign as an additional guarantor was Legacy Communi *2 ties Group, Inc. This company also was not named in the interlocutory injunction and is not a party in this appeal.
The LLCs are SRB Investment Management Group, LLC; Galleon Investment Group, LLC; Calamondon, LLC; SFB Financial Group, LLC; Forrest Investment Group, LLC; Forrest Holdings, LLC; Treasure Coast Investment Partners, LLC; and DCH Investments, LLC.
Builder’s Financе Group, Inc., another recently created LLC controlled by a close associate of the Beens, was also named in the interlocutory injunction but did not appeal.
In September 2010, the trial court ruled on the parties’ motions for summary judgment, holding the defendants liable to BB&T for seven of the sixteen notes at issue, which reduced the amount frozen from $24 million to $21 million. Both BB&T and the defendants indicate that thеy are appealing the summary judgment order separately.
Because we hold that the evidence was sufficient, at least at the interlocutory injunction stage, to prove actual fraud under OCGA § 18-2-74 (b), we need not address BB&T’s alternative claim that the transfers were fraudulent under OCGA § 18-2-75 (a), which provides:
A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.
To the extent that our opinion in
Bishop v. Patton,