Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

SE Property Holdings, LLC v. Center

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

August 8, 2017

SE PROPERTY HOLDINGS, LLC, Plaintiff,
v.
TAMMY T. CENTER, et al., Defendants.

          ORDER

          WILLIAM H. STEELE UNITED STATES DISTRICT JUDGE

         A non-jury trial was held in this matter before the undersigned on May 8 - 10, 2017. Pursuant to Rule 52(a)(1), Fed.R.Civ.P., the Court now finds the facts specially and states its conclusions of law separately.

         I. Nature of the Case.

         This fraudulent transfer action was brought by plaintiff, SE Property Holdings, LLC, against a host of defendants, including Tammy T. Center, both in her individual capacity and in her capacity as Personal Representative of the Estate of Charles H. Trammell; Belinda R. Trammell; Amy T. Brown; Trammell Family Orange Beach Properties, LLC; and Trammell Family Lake Martin Properties, LLC. Plaintiff contends that defendants Charles and Belinda Trammell became indebted to it pursuant to certain guaranties executed between 2005 and 2007. Plaintiff's position is that after payment was demanded and formal collection proceedings were underway against them, Charles and Belinda Trammell systematically transferred assets (including a beach condominium unit, a lake house, thousands of shares of UPS stock, and the family residence) to other defendants, including their adult daughters (Tammy Center and Amy Brown) and family-controlled limited liability companies (Trammell Family Orange Beach Properties, LLC and Trammell Family Lake Martin Properties, LLC) between 2011 and 2013.

         Of the four claims asserted by plaintiff, three are causes of action under the Alabama Fraudulent Transfer Act, Ala. Code §§ 8-9A-1 et seq. (the “AUFTA”). Specifically, Count I is a claim for actual fraudulent transfer, in violation of Ala. Code § 8-9A-4(a). Counts II and III are AUFTA claims for constructive fraudulent transfer, in violation of Ala. Code § 8-9A-4(c) and § 8-9A-5(a), respectively. And Count IV is a common-law claim for civil conspiracy under Alabama law. All claims are asserted against all defendants.

         The triable issues of law and fact joined in this matter are confined to those delineated in the Joint Pretrial Document, as incorporated in the Order on Pretrial Conference (doc. 135).[1] To the extent that any party may seek adjudication of a claim or defense not identified in the Joint Pretrial Document, such a request is denied because the Joint Pretrial Document “shall constitute the final statement of the issues involved in this action, govern the conduct of the trial, and form the basis for any relief afforded by the Court.” (Doc. 135, at 2.)[2] In resolving such triable issues, the Court has reviewed and considered the following: (i) all argument presented, testimony and exhibits admitted into evidence during the three-day bench trial; (ii) the parties' Trial Briefs (docs. 152 & 153) and Post-Trial Briefs (docs. 176 & 177); (iii) the Joint Pretrial Document (doc. 129) filed on January 6, 2017; (iv) the undersigned's previous legal, procedural and evidentiary rulings in the case, including without limitation the summary judgment Order (doc. 122) entered on December 30, 2016; the Order (doc. 150) entered on January 30, 2017 denying reconsideration of the Order on summary judgment; the Order (doc. 54) granting plaintiff's motion for leave to amend the Complaint; and (v) other portions of the court file as appropriate.[3]

         II. Findings of Fact.

         A. The Loans and Guaranties.

         Between March 2005 and September 2007, Vision Bank (the predecessor of plaintiff, SE Property Holdings, LLC) made a series of four loans totaling $21 million in principal to the developers of commercial real estate development projects in Baldwin County, Alabama known as Bama Bayou and Marine Park. Each of those loans was accompanied by contract documents including promissory notes, mortgages, loan agreements and guaranty agreements. Most of the particulars of those contract documents are not material to the issues joined in this fraudulent transfer action. In summary, however, the four Vision Bank loans consisted of the following: (i) a March 2005 loan to Riverwalk, LLC in the amount of $6 million; (ii) a June 2006 loan to Riverwalk, LLC in the amount of $5 million; (iii) a September 2007 loan to Bama Bayou, LLC in the amount of $5 million; and (iv) a March 2007 loan to Marine Park, LLC in the amount of $5 million.[4]

         Charles Trammell was an investor in Bama Bayou, LLC.[5] In this capacity, he was asked by Vision Bank to complete a Personal Financial Statement (“PFS”) as part of the underwriting process for the aforementioned loans. Charles Trammell submitted such a statement with an effective date of January 31, 2005. The January 2005 PFS reflected that Charles Trammell owned no assets in his own name, but that all his assets - including more than $4.5 million in securities (mostly UPS stock), more than $800, 000 in cash, and nearly $1 million in real estate - were jointly held by Charles Trammell and his wife, Belinda Trammell. Both Charles and Belinda Trammell signed that PFS, expressly representing that the information therein was true and complete. The PFS also included an affirmative representation by the Trammells - directly above their signatures - that Vision Bank “may consider this statement as continuing to be true and correct until a written notice of a change is given to you by the undersigned.” No written notices of material changes to Charles or Belinda Trammell's assets were furnished to Vision Bank at any time.[6]

         In connection with the four Bama Bayou / Marine Park loans as described above, Charles Trammell executed four corresponding Limited Continuing Guaranties in favor of Vision Bank, to-wit: (i) a guaranty in the amount of $315, 000 in principal for the March 2005 Bama Bayou loan; (ii) a guaranty in the amount of $280, 000 in principal for the June 2006 Bama Bayou loan; (iii) a guaranty in the amount of $280, 000 in principal for the March 2007 Marine Park loan; and (iv) a guaranty in the amount of $280, 000 in principal for the September 2007 Bama Bayou loan.[7] Because Charles Trammell's January 2005 PFS reflected that all of his assets were jointly owned with Belinda Trammell, Vision Bank required her to sign guaranties as well. Belinda Trammell executed her own separate Limited Continuing Guaranty in favor of Vision Bank in the amount of $280, 000 in principal for the June 2006 Bama Bayou loan. Additionally, Belinda Trammell executed two of the same Limited Continuing Guaranties signed by her husband, namely, the $280, 000 guaranty for the March 2007 Marine Park loan and the $280, 000 guaranty for the September 2007 Bama Bayou loan.[8]

         All of the Limited Continuing Guaranties executed by Charles Trammell and/or Belinda Trammell contained several provisions of substantial import to this litigation. For example, Paragraph 3 of each guaranty authorized Vision Bank to prosecute an action under that particular guaranty irrespective of whether the bank brought action against the borrower or any other guarantor. Paragraph 4 specifically provided that Vision Bank was not obliged to satisfy any conditions precedent, such as resorting to any other security or remedy for the collection of the underlying indebtedness. Paragraph 14 provided that, in addition to the specified portion of the principal on the underlying loan, the guarantor was responsible for “100% of all interest on the Loan accrued or accruing at any time … prior to the payment-in-full by Guarantor of his or her liability, ” and for “100% of all other costs and expenses (include reasonable actual attorney's fees) of collection relating to all principal, interest and other charges under the Note.” And Paragraph 15 confirmed that “[e]ach Guarantor's liability hereunder shall be joint and several, ” with the guaranty's provisions to be binding on the guarantor's heirs, executors and administrators. (Plaintiff's Exhibits 10-14.)

         The Trammells were not the only guarantors of the Bama Bayou and Marine Park loans. To the contrary, there were a total of 15 guarantors (either individuals or married couples) who guaranteed different amounts of principal on the loans, ranging from a high end of $6 million in principal in the aggregate for guarantor John Saint to a low end of $875, 000 in principal in the aggregate for guarantors such as Stephen and Jennifer Lawler.[9] Each of these 15 sets of guarantors executed guaranties obligating them to be responsible for 100% of the accrued interest on the loan and 100% of the attorney's fees and other costs of collection for the loan.

         Plaintiff, SE Property Holdings, LLC (“SEPH”), is the successor by merger for Vision Bank, and now holds certain assets of Vision Bank, including all of the Bama Bayou notes and guaranties described above. To be clear, SEPH is not the holder of the note and guaranties on the March 2007 loan to Marine Park, LLC; rather, those assets have been transferred to an unrelated third party, FNB Bank. As such, Charles and Belinda Trammells' guaranties with respect to the Marine Park loan are relevant to these proceedings only insofar as they affect their balance sheets as of the dates of the challenged asset transfers.

         B. The Defaults and the Bama Bayou Action.

         Vision Bank fully funded all four of the 2005-2007 loans to Bama Bayou LLC and Marine Park, LLC, as described above. Within a short time, however, the borrowers breached their repayment obligations on the loans. In December 2008, Vision Bank sent demand letters (with copies to the Trammells, as guarantors) for the three Bama Bayou loans and the Marine Park loan, demanding payment in full by December 30, 2008. For each loan, the event of default was based on the maturity of the note, the borrower's failure to make payment, and Vision Bank's unwillingness to extend the maturity date further.[10]

         The borrowers and guarantors failed to make payment in full on the Bama Bayou and Marine Park loans by the specified deadline. Accordingly, on January 16, 2009, Vision Bank filed two collection lawsuits in the Circuit Court of Mobile County, Alabama, one relating to the Bama Bayou loans and the other related to the Marine Park loan. Those collection lawsuits will be referred to collectively herein as the “Bama Bayou Action.” Charles and Belinda Trammell are named defendants in those actions, along with the borrowers and the other guarantors. In both actions, Vision Bank asserted claims for breach of the loan agreements, promissory notes and guaranties.

         In March 2009, Vision Bank foreclosed on the mortgaged real property accompanying each Bama Bayou and Marine Park loan. Vision Bank purchased the property in foreclosure, and thereafter maintained the property as assets of the bank.[11] Even after taking into account the proceeds of the March 2009 foreclosure sales, there remained substantial deficiencies in the outstanding debt for each of the subject loans; therefore, the Bama Bayou Action proceeded against the borrowers and guarantors as Vision Bank endeavored to collect on those deficiencies.

         For their part, Bama Bayou, LLC and the guarantors interposed certain counterclaims against Vision Bank in the Bama Bayou Action. Among those counterclaims were numerous claims of wrongful foreclosure.[12] In October 2015, Mobile County Circuit Judge Stewart entered an Order holding that the guarantors (including the Trammells) “do not have standing to assert a claim for wrongful foreclosure against the Lenders because they have no legally protected interest in the property foreclosed upon.” (Plaintiff's Exh. 141, at 10.) An evidentiary hearing in the Bama Bayou Action limited to the borrowers' wrongful foreclosure claims was held in May 2016. Following that hearing, on October 26, 2016, Judge Stewart entered an order finding “the extremely low bids at the foreclosure sale raise the presumption of unconscionableness and the grossly inadequate prices coupled with substantial evidence of misconduct justifies setting aside the foreclosure sale.” (Defendants' Exh. 1, at 2.) On that basis, she “set[] aside the foreclosure sale and declare[d] the foreclosure deeds null, void and of no force and effect.” (Id.)[13]

         The Bama Bayou Action remains pending today in Mobile County Circuit Court, with SEPH being the named plaintiff as the successor by merger of Vision Bank. No trial on the merits of SEPH's claims for breach of the loan agreements and guaranties has taken place to date, nor have the parties indicated that a trial setting is imminent.

         C. The Challenged Transfers.

         1. Circumstances Leading to Transfers.

         Charles and Belinda Trammell amassed substantial personal wealth pursuant to Charles' long and successful career with United Parcel Service (“UPS”). According to a Personal Financial Statement the Trammells submitted to Vision Bank, as of June 15, 2009, Charles Trammell had over $4.5 million in assets, including UPS stock in his own name valued at $1, 983, 698; an Orange Beach condominium unit jointly held with Belinda Trammell valued at $1, 200, 000; a lake house jointly held with Belinda Trammell valued at $1, 003, 000; and a personal residence in Montgomery jointly held with Belinda Trammell valued at $225, 000. But those assets were vulnerable to the Trammells' creditors. Since January 2009, the Trammells had been named defendants in the Bama Bayou Action where they faced potential liability on the Bama Bayou and Marine Park guaranties reaching into the millions of dollars.[14] Moreover, Charles Trammell knew as of January 2011 that further litigation with Vision Bank was imminent on the Sundance loan, as to which he had executed a guaranty in the amount of $900, 000 in principal; indeed, Vision Bank had sent him a notice of default and demand for payment under that guaranty on December 1, 2010.

         Aside from their legal obligations under the Bama Bayou, Marine Park and Sundance guaranties, for which payment had been demanded by Vision Bank upon the borrowers' default but for which the Trammells had refused to pay, Charles and Belinda Trammell diligently paid their debts as they became due. They maintained an excellent credit rating, and were never late on payments for matters such as mortgage debt, car lease payments, credit card debt, utility bills, tax bills, and other routine expenses. Excepting their guaranty obligations, the Trammells paid their bills in a timely, conscientious and complete manner.

         As of January 2011, Charles Trammell had experienced serious health problems for quite some time. He had been diagnosed with a blood disorder in or about early 2008, for which he required blood transfusions with increasing frequency and which caused him to become progressively weaker. That medical condition ultimately claimed his life on October 24, 2013. The Court does not find, however, that Charles Trammell's medical condition reached a crisis point in or shortly before January 2011. While the evidence at trial established an ongoing decline in his health in the last six years of his life, there was no evidence suggesting that things took a turn for the worse in January 2011, that he received a new or particularly unfavorable prognosis in January 2011, or that there were any material changes in his health condition at that time, as compared with the previous four years. What did change in the weeks leading to January 2011 was that Charles Trammell received a notice of default and demand for payment from Vision Bank relating to the Sundance guaranty (for which his personal exposure, counting interest and collection costs, was in excess of $1 million) on or about December 1, 2010. The spectre of imminent Sundance litigation added to Charles Trammell's considerable financial burdens, given that he and Belinda Trammell were already defendants in multi-million dollar litigation for guaranties they had signed in connection with the Bama Bayou and Marine Park loans.

         On January 4, 2011, Charles Trammell met for the first time with a Prattville estate planning attorney named Robert Burton. The intake form submitted by Trammell for that first consultation listed Vision Bank as the “Name of Adverse Party.” The single page of notes in Burton's file from the January 4 meeting listed the Trammells' most valuable assets (i.e., the lake house, the beach condo, the residence and the UPS stock) and income, and also referenced the ongoing and anticipated Vision Bank litigation, including (i) notations that Bama Bayou owed $10 million and that Sundance owed $3 million; and (ii) identification of the attorney representing the Trammells' interests in the Bama Bayou Action. On or about January 11, 2011, Burton followed up with an email to the Trammells attaching what he called an “Estate Planning Options letter, ” which was a slightly customized form letter reciting estate tax law status and proposing options like new wills, equalizing assets for estate tax purposes, powers of attorney, living wills, health care proxies and the like. On the final page of the January 11 letter, Burton mentioned the possibility of “[b]eginning a gifting program with your children, grandchildren, and in-laws” in order to “help lower estate taxes, protect assets, and allow better asset management, ” and recommended the use of LLC membership interests for that purpose. (Defendants' Exh. 18, at 3.)

         Nine days later, on January 20, 2011, Charles Trammell sent an email to Burton concerning the LLC idea mentioned in Burton's January 11 letter. After proposing a name for the LLC and suggesting that “the largest share” possible be given to his children and grandchildren, Trammell wrote the following: “If you feel we should use one property, then I would most want it to be the Trillium lake house on Longpine Drive for that is the one I would most ‘like to protect'. I received an email that the 2nd investment in Orange Beach will be going into litigation.” (Plaintiff's Exh. 81.) Although defendants endeavored to explain away these adjacent sentences as mere unrelated bulletpoints, [15] the Court rejects such a strained interpretation. Under a straightforward reading of Charles Trammell's email of January 20, 2011, he sought to use an LLC vehicle to “protect” his assets from potential exposure in imminent and ongoing litigation. He did not indicate that the lake house was the property he most wanted his children and grandchildren to receive as part of an estate-planning exercise; rather, Charles Trammell wrote that he most wanted to “protect” the lake house, and in the very next breath mentioned a likely imminent lawsuit against him for a failed Orange Beach investment. The implication is clear: Charles Trammell was trying to structure his assets in such a way that Vision Bank could not reach them even if it reduced to judgment its claims against Charles and Belinda Trammell for breach of guaranty obligations relating to the Bama Bayou, Marine Park and Sundance projects.[16]

         Also located in Burton's file are several other pages of notes in his own handwriting that shed light on their discussions concerning the Trammells' litigation exposure, at the same time that Burton was setting up LLCs for Charles and Belinda Trammell. In particular, on a page of notes that states the phrases “Trammel [sic] Family Lake Martin, LLC” and “Trammel [sic] Family Orange Beach, LLC, ” Burton wrote the following: (i) “Bama Bayou lawsuit filed, ” (ii) “Sundance no lawsuit yet, ” (iii) “14 investors 2 died a couple of bankrupt, ” and (iv) named the attorney representing the Trammells' interests in the Bama Bayou Action.[17] Elsewhere in his notes, Burton wrote “Call Lit. Attorney” and “Stock gift (not good idea?).” Because Burton did not have litigation expertise, he wanted to “bounce it off somebody, ” meaning check with litigation counsel as to the legality and propriety of the proposed transfer of the Trammells' assets (and particularly millions of dollars of UPS stock) into new family-held LLCs, given the pending and threatened litigation against the Trammells. Burton was unfamiliar with the law of fraudulent transfers and did not know what a constructive fraudulent transfer was. After speaking with litigation counsel, but without requesting that any analysis of the fraudulent transfer issue be done, Burton notified the Trammells that there was a risk the proposed asset transfers might be set aside.

         In the course of the ensuing asset transfers from Charles Trammell and Belinda Trammell, Charles Trammell was making the decisions. For her part, Belinda Trammell accompanied her husband to at least two of the meetings with Burton. As of January 2011, she was well aware of the Bama Bayou debt, the Marine Park debt, and the pending lawsuits against the Trammells as guarantors for those debts. She was also aware of the Sundance debt. Belinda Trammell signed the documents creating the LLCs and effectuating transfers of her ownership interests in particular assets, and Burton explained the meaning and effect of those documents to her before she did so. By contrast, the preponderance of the evidence does not show that defendants Tammy Center and Amy Brown were aware of the enormous potential liability their parents were facing in litigation pertaining to the Bama Bayou, Marine Park and Sundance loans. Defendants Center and Brown did not participate substantively in their parents' meetings with Burton, but only met with him one time to sign the relevant documents. Defendant Center did not even know what an LLC was, and defendant Brown was never called to testify, although she was present in the courtroom during trial. The Court does not find on this record that Center and Brown were cognizant that their parents' transfers of assets to them through LLC vehicles would or might protect those assets from collection by Vision Bank in the event of a judgment against Charles and Belinda Trammell in the pending litigation relating to their guaranties.

         2. The January 2011 Transfers.

         On January 26, 2011, just two days after Vision Bank sued Charles Trammell for breach of his $900, 000 guaranty on the Sundance loan, Charles and Belinda Trammell signed Articles of Organization forming two Alabama limited liability companies, named Trammell Family Orange Beach Properties, LLC (“Trammell Orange Beach”) and Trammell Family Lake Martin Properties, LLC (“Trammell Lake Martin”). As to each LLC, both Charles and Belinda Trammell were listed as members and organizers. For Trammell Orange Beach, the Trammells' daughter Tammy T. Center (also a named defendant herein) was designated as manager. For Trammell Lake Martin, the Trammells' daughter Amy T. Brown (another named defendant herein) was designated as manager. The Articles of Organization were recorded in probate court (Trammell Orange Beach in Elmore County, Trammell Lake Martin in Montgomery County).

         The very same day that the two LLCs were created, the Trammells executed Warranty Deeds to effectuate the transfer of certain real estate holdings into the LLCs. The first transfer involved a condominium unit known as Unit 501, Perdido Place, and located in Orange Beach, Alabama (the “Perdido Place Condo”).[18] As of January 2011, the Trammells owned the Perdido Place Condo free and clear, with no mortgage on the property. Pursuant to a Warranty Deed dated January 26, 2011, Charles and Belinda Trammell conveyed the Perdido Place Condo to Trammell Orange Beach. The second transfer involved the Trammells' Trillium lake house on Longpine Drive (the “Lake House”). As of January 2011, the Trammells owned the Lake House free and clear, with no mortgage on the property. Pursuant to a Warranty Deed dated January 26, 2011, Charles and Belinda Trammell conveyed the Lake House to Trammell Lake Martin.[19]

         The Trammells caused both Warranty Deeds to be recorded in the appropriate county's Probate Court, which was necessary to render those transfers effective against third party creditors. However, the Trammells did not undertake to notify Vision Bank of those January 2011 transfers of significant assets, as they had promised to do in the Personal Financial Statement they had executed in June 2009.

         3. The December 2011 Transfers.

         The second set of transfers occurred on December 12, 2011. Prior to that date, Trammell Orange Beach and Trammell Lake Martin had been owned 50% by Charles Trammell and 50% by Belinda Trammell. On December 12, 2011, that all changed. Pursuant to a First Amendment to the Operating Agreement for each LLC, the Trammells transferred and assigned the lion's share of their interest in the two LLCs to their daughters, Center and Brown.[20] Specifically, each of Charles and Belinda Trammell transferred a 22.5% membership interest in each of Trammell Orange Beach and Trammell Lake Martin to each of Center and Brown. In the immediate aftermath of those December 2011 transfers, then, Trammell Orange Beach was owned 45% by Center, 45% by Brown, and just 5% by each of Charles and Belinda Trammell. The same was true of Trammell Lake Martin. Again, both entities had previously been owned 50% by Charles Trammell and 50% by Belinda Trammell, with the daughters holding no membership interest at all. Brown and Center paid no money or property to their parents in exchange for the transfer/assignment of these membership interests in the subject LLCs.[21]

         Following the December 2011 transfers, nothing changed in terms of the family's usage of the Perdido Place Condo or the Lake House. The Trammells and their daughters did not use those properties any more or any less than they had previously. There is no indication that the Trammells' access to, use of, or enjoyment of the Perdido Place Condo or the Lake House were in any way curtailed, altered or diminished following their transfer of 90% of their ownership interests in such real property to Brown and Center via membership interest in Trammell Orange Beach and Trammell Lake Martin. Also, the Trammells did not undertake to notify Vision Bank of those December 2011 transfers of 90% of their ownership interests in the Perdido Place Condo and the Lake House to their children, as they had promised to do in the Personal Financial Statement they had executed in June 2009.

         From an accounting standpoint, the Trammells and their daughters treated the December 2011 transfers of LLC membership interests as a gift. In gift tax returns filed in October 2013, the Trammells reported to the Internal Revenue Service gifts to each daughter in the amount of $697, 050.[22]

         4. The April 2012 Transfers.

         Following the transfers of the Perdido Place Condo and the Lake House, the only substantial assets listed by Charles Trammell on the June 2009 PFS that he still owned were his joint interest with Belinda Trammell in their residence on Short Line Drive in Montgomery, Alabama; and tens of thousands of shares of UPS stock, which he owned individually. On April 30, 2012, Charles Trammell transferred nearly three-quarters of his UPS stock to Belinda Trammell, Brown and Center. The recipients of those stock shares paid no money or property to Charles Trammell in exchange for his transfer of those shares into the subject LLCs in which they held 95% ownership interests.

         Those transfers were accomplished in the following manner: Charles Trammell transferred 12, 551 shares of UPS stock to Trammell Orange Beach, and another 12, 551 shares of UPS stock to Trammell Lake Martin. At a then-effective share price of $78.325, the fair market value of those stock transfers to the LLCs was $1, 966, 114.15. Given the ownership structure of the LLCs (45% Brown, 45% Center, and 5% each for Charles and Belinda Trammell), the effect of the April 2012 transfers was to gift 11, 296 shares of UPS stock to Center, 11, 296 shares to Brown, and 1, 255 shares to Belinda Trammell.[23] Once again, the Trammells completed gift tax returns reporting these transfers to Center and Brown, at a valuation of $884, 759 to each on the date of the gift. Using the same methodology, the fair value of the UPS stock transferred to Belinda Trammell in April 2012 was $98, 297 (1, 255 shares x $78.325/share). At no time did Charles Trammell undertake to report to Vision Bank (or SEPH, its successor by merger) that he had transferred to his wife and daughters nearly $2 million in UPS stock previously listed as assets on his June 2009 Personal Financial Statement.

         5. The October 2013 Transfers.

         Charles Trammell died on October 24, 2013, at the age of 69. Defendant Tammy Center is the personal representative of his estate. Upon Charles Trammell's death, two particular assets were transferred directly to his widow, Belinda Trammell, outside of probate. First, Charles and Belinda Trammell had jointly owned their residence on Short Line Drive (the “Short Line Residence”) in Montgomery, Alabama for nearly 30 years. The Warranty Deed dated October 24, 1986 conveying that property to them reflected that Charles and Belinda Trammell owned the Short Line Residence “for and during their joint lives and upon the death of either of them, then to the survivor of them in fee simple, and to their heirs and assigns of such survivor forever, together with every contingent remainder and right of reversion.” (Defendants' Exh. 26.) Thus, by operation of that 1986 deed, upon Charles Trammell's death, Belinda Trammell owned the Short Line Residence in fee simple.[24] Second, at the time of his death, Charles Trammell held 8, 798 shares of UPS stock. All of those shares passed to Belinda Trammell pursuant to a payable-on-death arrangement. See generally Ala. Code § 5-24-1(13) (defining “POD designation” as the designation of “[a] beneficiary in an account payable on request to one party during the party's lifetime and on the party's death to one or more beneficiaries”).[25] Belinda Trammell paid no money or property to Charles Trammell's estate in exchange for such transfers.

         Following those transfers, the total assets remaining in Charles Trammell's estate (the “Estate”) were valued at less than $200, 000. According to an itemized list that Center prepared or caused to be prepared in her capacity as personal representative, the Estate's assets consisted of the following: (i) Charles Trammell's 5% interest in Trammell Lake Martin, valued at $90, 000; (ii) Charles Trammell's 5% interest in Trammell Orange Beach, valued at $80, 000; (iii) automobiles and watercraft valued at $28, 000; and (iv) miscellaneous items and effects valued at $1, 700.[26]

         D. The Debtors' Financial State Resulting from Transfers.

         A critical issue for this constructive fraudulent transfer analysis concerns the assets and liabilities of each of Charles and Belinda Trammell at the times of the challenged asset transfers. In the interest of clarity, the relevant findings of fact will be set forth separately for each transferor at the time of each of their asset transfers.[27]

         1. Charles Trammell's Assets and Liabilities at Relevant Times.

         a. December 2011.

         As discussed supra, on December 12, 2011, Charles Trammell transferred a 22.5% membership interest in Trammell Orange Beach to Center, a 22.5% membership interest in Trammell Orange Beach to Brown, a 22.5% membership interest in Trammell Lake Martin to Center, and a 22.5% membership interest in Trammell Lake Martin to Brown. As a result of these transfers, Charles Trammell retained only a 5% interest in each LLC. Based on defendants' valuation of the Perdido Place Condo at $624, 000 and the Lake House at $925, 000 as of December 2011, and given that the LLCs had no substantial assets or liabilities at that time other than the real property, Charles Trammell's 5% interest in Trammell Orange Beach was fairly valued at $31, 231 ($624, 000 x .05, plus 5% of cash on hand) and his 5% interest in Trammell Lake Marin was fairly valued at $46, 313 ($925, 000 x .05, plus 5% of cash on hand) as of December 12, 2011.

         The other assets owned by Charles Trammell as of the December 12, 2011, and the fair market valuations of each, were as follows: (i) a half interest in the Short Line Residence ($81, 000, based on a $162, 000 appraised value); (ii) a half interest in the Trammells' cash on hand and in joint bank accounts ($31, 387); (iii) a half interest in the Trammells' automobiles and other assets ($29, 700); and (iv) 36, 026 shares of UPS stock ($2, 574, 418, based on a share price of $71.46). Thus, immediately after the December 2011 transfers of LLC membership interests to his daughters, Charles Trammell's total assets were fairly valued at $2, 794, 049.

         In terms of liabilities, Charles Trammell owed half of the Trammells' outstanding mortgage on the Short Line Residence, or $8, 571. All of his remaining liabilities relate to the three Bama Bayou guaranties, the Marine Park guaranty and the Sundance guaranty.[28] As of December 12, 2011, Charles Trammell owed $1, 535, 917 (which includes $315, 000 in principal plus $1, 220, 917 in accrued interest) on the March 2005 Bama Bayou guaranty. With respect to the May 2006 Bama Bayou guaranty, Charles Trammell owed a total of $1, 532, 222 (including $280, 000 in principal plus $1, 252, 222 in accrued interest) as of December 12, 2011. With respect to the September 2007 Bama Bayou guaranty, Charles Trammell owed a total of $1, 269, 587 (including $280, 000 in principal plus $989, 587 in accrued interest) as of December 12, 2011. With respect to the Marine Park guaranty, Charles Trammell owed a total of $1, 905, 909 (including $280, 000 in principal plus $1, 625, 909 in accrued interest) as of December 12, 2011. And with respect to the Sundance guaranty, Charles Trammell owed a total of $1, 385, 341 (including $900, 000 in principal plus $485, 341 in accrued interest) as of December 12, 2011. Thus, as of December 2011, Charles Trammell's total liabilities were $7, 637, 547.[29]

         b. April 2012.

         On or about April 30, 2012, Charles Trammell transferred 25, 102 shares of UPS stock from his personal holdings into the LLCs. Upon completing those transfers, his remaining assets consisted of the following: (i) a 5% interest in Trammell Orange Beach fairly valued at $81, 448 ($645, 000 x .05, plus 5% of cash on hand and newly-transferred UPS stock shares); (ii) a 5% interest in Trammell Lake Martin fairly valued at $91, 708 ($850, 000 x .05, plus 5% of cash on hand and newly-transferred UPS stock shares); (iii) a half interest in the Short Line Residence ($81, 000, based on a $162, 000 appraised value); (iv) a half interest in the Trammells' cash on hand and in joint bank accounts ($30, 766); (v) a half interest in the Trammells' automobiles and other assets ($29, 700); and (iv) 8, 798 shares of UPS stock ($689, 103, based on a share price of $78.325). Thus, immediately after the April 2012 transfers of UPS stock to the LLCs, Charles Trammell's total assets were fairly valued at $1, 003, 725.

         With respect to liabilities, Charles Trammell owed the following sums as of April 30, 2012: (i) half of the Trammells' outstanding mortgage on the Short Line Residence, or $6, 572; (ii) $1, 682, 167 (including $315, 000 in principal and $1, 367, 167 in accrued interest) on the March 2005 Bama Bayou guaranty; (iii) $1, 682, 222 (including $280, 000 in principal and $1, 402, 222 in accrued interest) on the May 2006 Bama Bayou guaranty; (iv) $1, 388, 101 (including $280, 000 in principal and $1, 108, 101 in accrued interest) on the September 2007 Bama Bayou guaranty; (v) $2, 101, 856 (including $280, 000 in principal and $1, 821, 856 in accrued interest) on the Marine Park guaranty; and (vi) $412, 144 on the post-judgment settlement note relating to the Sundance guaranty.[30] Thus, as of April 30, 2012, Charles Trammell's total liabilities were $7, 273, 062.

         c. October 24, 2013 (Estate).

         Upon his death on October 24, 2013, Charles Trammell's interest in the Short Line Residence and his remaining 8, 798 shares of UPS stock went to Belinda Trammell as payable on death. With the completion of those transfers, his remaining assets consisted of the following: (i) a 5% interest in Trammell Orange Beach fairly valued at $92, 566 ($660, 000 x .05, plus 5% of cash on hand and previously transferred UPS stock shares); (ii) a 5% interest in Trammell Lake Martin fairly valued at $102, 634 ($859, 000 x .05, plus 5% of cash on hand and previously transferred UPS stock shares); and (iii) a half interest in the Trammells' automobiles and other assets ($29, 700). Thus, immediately after the October 2013 transfers of UPS stock and the half interest in the Short Line Residence, the total assets in Charles Trammell's Estate were fairly valued at just $224, 900.

         With respect to liabilities, Charles Trammell owed the following sums as of October 24, 2013: (i) $2, 274, 750 (including $315, 000 in principal and $1, 959, 750 in accrued interest) on the March 2005 Bama Bayou guaranty; (ii) $2, 290, 000 (including $280, 000 in principal and $2, 010, 000 in accrued interest) on the May 2006 Bama Bayou guaranty; (iii) $1, 868, 306 (including $280, 000 in principal and $1, 588, 306 in accrued interest) on the September 2007 Bama Bayou guaranty; (iv) $2, 895, 803 (including $280, 000 in principal and $2, 615, 803 in accrued interest) on the Marine Park guaranty; and (v) $390, 502 (including $387, 723 in principal and $2, 779 in accrued interest) on the Sundance post-judgment settlement note. Thus, as of October 24, 2013, the Estate's total liabilities were $9, 719, 361.

         2. Belinda Trammell's Assets and Liabilities as of December 2011.[31]

         As discussed supra, on December 12, 2011, Belinda Trammell transferred a 22.5% membership interest in Trammell Orange Beach to Center, a 22.5% membership interest in Trammell Orange Beach to Brown, a 22.5% membership interest in Trammell Lake Martin to Center, and a 22.5% membership interest in Trammell Lake Martin to Brown. As a result of these transfers, Belinda Trammell retained only a 5% interest in each LLC. Based on defendants' valuation of the Perdido Place Condo at $624, 000 and the Lake House at $925, 000 as of December 2011, and given that the LLCs had no substantial assets or liabilities at that time other than the real property, Belinda Trammell's 5% interest in Trammell Orange Beach was fairly valued at $31, 231 ($624, 000 x .05, plus 5% of cash on hand) and her 5% interest in Trammell Lake Marin was fairly valued at $46, 313 ($925, 000 x .05, plus 5% of cash on hand) as of December 12, 2011.

         The other assets owned by Belinda Trammell as of the December 12, 2011, and the fair market valuations of each, were as follows: (i) a half interest in the Short Line Residence ($81, 000, based on a $162, 000 appraised value); (ii) a half interest in the Trammells' cash on hand and in joint bank accounts ($31, 387); (iii) $154 in a Wachovia/Wells Fargo bank account; (iv) a UBS retirement account valued at $172, 141; and (v) a half interest in the Trammells' automobiles and other assets ($29, 700). Thus, immediately after the December 2011 transfers of LLC membership interests to her daughters, Belinda Trammell's total assets were fairly valued at $391, 926.

         On the liability side of the ledger, Belinda Trammell owed half of the Trammells' outstanding mortgage on the Short Line Residence, or $8, 571. Her remaining liabilities relate to the two Bama Bayou guaranties and the Marine Park guaranty she had executed. With respect to the May 2006 Bama Bayou guaranty, Belinda Trammell owed a total of $1, 532, 222 (including $280, 000 in principal plus $1, 252, 222 in accrued interest) as of December 12, 2011. With respect to the September 2007 Bama Bayou guaranty, Belinda Trammell owed a total of $1, 269, 587 (including $280, 000 in principal plus $989, 587 in accrued interest) as of December 12, 2011. And with respect to the Marine Park guaranty, Belinda Trammell owed a total of $1, 905, 909 (including $280, 000 in principal plus $1, 625, 909 in accrued interest) as of December 12, 2011. Thus, as of December 12, 2011, Belinda Trammell's total liabilities were $4, 716, 289.

         III. Conclusions of Law: Liability.

         A. Threshold Liability Issues Common to All AUFTA Causes of Action.

         At trial and in post-trial briefing, defendants have raised certain legal objections that apply with equal force to all of Counts I, II and III, SEPH's causes of action asserted under the Alabama Uniform Fraudulent Transfer Act. The Court will resolve those threshold issues first, then undertake a specific claim-by-claim analysis.

         1. AUFTA Liability as to Non-Debtor / Non-Transferor Defendants.

         A recurring theme in defendants' Post-Trial Brief is that defendants Center, Brown, Trammell Orange Beach and Trammell Lake Martin cannot be liable under the AUFTA, as a matter of law. (See doc. 176, at 3, 6, 7, 18, 26-27, 30-31, 33.) In a typical iteration of this refrain, defendants posit that there can be no AUFTA liability unless one is a debtor, and there is no evidence that Center, Brown, or the LLCs were “debtors” within the meaning of the AUFTA. They point out that SEPH introduced no evidence at trial suggesting that Center, Brown and the LLCs ever owed SEPH or Vision Bank anything. They reason that SEPH has not challenged any asset transfers made by Center, Brown and the LLCs. On the basis of these observations, defendants contend that the transferee defendants cannot be liable under the AUFTA because “Amy Brown, Tammy Center, and both Family LLCs are not debtors and did not transfer any assets under AUFTA.” (Id. at 18.)

         This argument hinges on the incorrect premise that AUFTA liability can be visited only on “debtors” and “transferors.” On its face, the statute does not restrict liability to transferors of fraudulently transferred assets; to the contrary, it expressly provides for remedies against transferees, as well. Pertinent statutory language includes the following:

“[T]o the extent a transfer is voidable in an action by a creditor under Section 8-9A-7(a)(1), the creditor may recover judgment for the value of the asset transferred … or the amount necessary to satisfy the creditor's claim, whichever is less, or judgment for conveyance of the asset transferred. The judgment may be entered against:
“(1) The first transferee of the asset or the person for whose benefit the transfer is made; or
“(2) Any subsequent transferee other than a good faith transferee who took for value or from any subsequent transferee.”

Ala. Code § 8-9A-8(b) (emphasis added). More generally, where statutory remedies include avoidance of a transfer, injunction against further disposition of assets and so on, logic and common sense dictate that transferees must be valid AUFTA defendants in order for such remedies to take effect. Abundant case law supports the proposition that defrauded creditors have a right of action against fraudulent grantees.[32] More fundamentally, it is well settled that “[t]he purpose of the AUFTA is to prevent fraudulent transfers of property by a debtor who intends to defraud creditors by placing assets beyond their reach.” Thompson Properties v. Birmingham Hide & Tallow Co., 839 So.2d 629, 632 (Ala. 2002). That statutory purpose would be frustrated if the defrauded creditor's only remedy was against the debtor who had already placed the assets beyond the creditor's reach, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.