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Cadlerock III, LLC. v. Klingenbeck

United States District Court, N.D. Alabama, Southern Division

March 3, 2017

CADLEROCK III, LLC., Plaintiff,
v.
JOHN BROOKS KLINGENBECK, et al., Defendants.

          MEMORANDUM OPINION

          KARON OWEN BOWDRE CHIEF UNITED STATES DISTRICT JUDGE

         CadleRock III, LLC, as successor-in-interest to the Federal Deposit Insurance Corporation, sued John Brooks Klingenbeck, Jennie Brooks Klingenbeck, and Eula T. Brooks, seeking to set aside an alleged fraudulent conveyance of land under two theories: Alabama's fraudulent conveyance statute and that the deed in question was not valid. CadleRock has moved for partial summary judgment with leave to later prove damages. (Doc. 27). CadleRock is seeking a determination that either the conveyance was fraudulent or the deed ineffective.

         I. BACKGROUND

         A. Florida Deficiency Judgment

         John Brooks Klingenbeck was a member of Global Southern, LLC. Global Southern entered into a series of loan agreements with GulfSouth Bank. Global Southern borrowed approximately $1.9 million, and John Klingenbeck personally guaranteed this debt.

         On July 18, 2012, Global Southern defaulted on its loans from GulfSouth, and so the bank filed suit against Global Southern, John Brooks Klingenbeck, and others in Walton County, Florida. The case was removed to the United States District Court for the Northern District of Florida. On February 25, 2014, the federal court issued a final deficiency judgment against John Brooks Klingenbeck for $1, 040, 985.11. The bank filed copies of the judgment in the probate courts of Shelby and Etowah counties in Alabama.

         B. Etowah County Property Transfer

         On October 30, 2007, John Brooks Klingenbeck became the owner of property located on Wharton Road in Gadsden, Alabama. After obtaining title, a house was built on the land and the property was insured for nearly $500, 000. The named insured on the policy was Eula Brooks, John Brooks Klingenbeck's grandmother. In August of 2012, the house on the property was destroyed by fire. Eula Brooks collected four insurance checks totaling a little over $700, 000.

         John Brooks Klingenbeck purported to convey the property to his mother, Jennie Brooks Klingenbeck, via a document entitled “Quickclaim [sic] Deed.” The deed was dated October 15, 2007, fifteen days before John Brooks Klingenbeck acquired the property. The document is also signed by notary public Dianne Turner. Curiously, Ms. Turner wrote under her signature that her commission expired on June 1, 2013. Under Ala. Code § 36-20-1, a notary public's commission lasts four years.

         Jennie Brooks Klingenbeck recorded the deed on February 20, 2013 in the Probate Court for Etowah County, Alabama. On March 17, 2014, Jennie Brooks Klingenbeck attempted to transfer the property through a deed to her brother Ronnie Brooks and his wife, Beckie Brooks.

         C. Bankruptcy Proceeding and Post-Judgment Discovery D

         During post-judgment discovery in the Florida federal court action in 2014, John Brooks Klingenbeck did not mention the property in Etowah County as an asset. In December of 2014, John Brooks Klingenbeck filed for Chapter 13 Bankruptcy and did not disclose the deficiency judgment against him or the Etowah County property.

         II. STANDARD OF REVIEW

         When a district court reviews a motion for summary judgment, it must determine two things: whether any genuine issues of material fact exist, and whether the moving party is entitled ...


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