EX PARTE Chris W. HAYSLIP (In re: New Pate, LLC, and Luther S. Pate IV
v.
Christopher Dobbs et al.)
Tuscaloosa
Circuit Court, CV-14-901426
Page 382
Brent
D. Hitson and E. Travis Ramey of Burr & Forman LLP,
Birmingham, for petitioner.
Patricia Clotfelter and Julie M. Schiff of Baker Donelson
Bearman Caldwell & Berkowitz, P.C., Birmingham, for
respondents.
MENDHEIM,
Justice.
Luther
S. Pate IV and New Pate, LLC, filed an action in the
Tuscaloosa Circuit Court against Chris W. Hayslip, among
others, seeking indemnity and to set aside a particular
transfer of funds as fraudulent. Hayslip filed a motion to
dismiss Pate and New Pate's action. The circuit court
entered an order granting Hayslip's motion as to Pate and
New Pate's indemnity claim and denying the motion as to
the fraudulent-transfer claim. Hayslip petitions this Court
for a writ of mandamus directing the circuit court to vacate
that portion of its order denying Hayslip's motion to
dismiss Pate and New Pate's fraudulent-transfer claim and
to enter an order granting the entirety of Hayslip's
motion to dismiss. We grant the petition and issue the writ.
Facts
and Procedural History
In
2005, Hayslip and Harlan Homebuilders, Inc., formed The
Townes of North River Development Company, LLC ("Townes
Development Company"), to develop a residential
subdivision. Christopher Dobbs and Teresa Dobbs own Harlan
Homebuilders.
At some
point, a dispute arose as to the ownership of Townes
Development Company. In June 2007, Hayslip and Harlan
Homebuilders mediated the dispute and agreed to a settlement
in which Hayslip and Harlan Homebuilders would sign a new
operating agreement for Townes Development Company indicating
that Hayslip owned 70% of Townes Development Company and that
Harlan Homebuilders owned the remaining 30%. As part of the
settlement agreement, the parties further agreed that the
Dobbses would purchase Hayslip's 70% interest in Townes
Development Company for $3,825,000.
However,
the Dobbses subsequently claimed that they had been
fraudulently induced into entering into the settlement
Page 383
agreement and determined to sue Hayslip and Townes
Development Company alleging fraud and other business torts.
To that end, the Dobbses sought to retain the legal services
of Andy Campbell, an attorney. Campbell required the Dobbses
to pay for his legal representation on an hourly basis, but
the Dobbses did not have the financial means to do so.
Accordingly, Campbell recommended that the Dobbses request
Pate loan them the money necessary to retain Campbell's
legal services and also to cover the Dobbses' living
expenses. Pate agreed to loan the Dobbses and their various
business entities $400,000 through New Pate, one of
Pate's business entities.
On
January 22, 2008, New Pate and the Dobbses, Harlan
Homebuilders, Dobbs Developments, Inc., and Dobbs Realty, LLC
(Harlan Homebuilders, Dobbs Developments, and Dobbs Realty
are hereinafter collectively referred to as "the Dobbs
entities"), executed a promissory note in the amount of
$400,000.[1] On the same date, New Pate and the
Dobbses and the Dobbs entities also executed a "loan and
security agreement." The loan and security agreement
states, in pertinent part:
"Section 1.03 Security for Loan. The Loan
will be secured by, among other things, all assets of [the
Dobbses and the Dobbs entities], whether now owned or
hereafter acquired, and all proceeds thereof (the
`Collateral'). [New Pate] shall not be obligated to
make any advances hereunder unless the Mortgages,
Investment Control Agreements, [the Dobbses' and the
Dobbs entities'] tort and contract claims against Chris
Hayslip, Kevin Vann, Bank Trust, or ... Townes [Development
Company], or any other party arising out of the same
controversy or facts (together, the `Suit'), and UCC-1s
create valid and enforceable liens on the property
described therein.
"....
"Section 1.06 Equity Interest. For and as a
material consideration and inducement for [New Pate] making
this loan to [the Dobbses and the Dobbs entities], whether
[New Pate] fully funds this loan or not, [the Dobbses and
the Dobbs entities] agree[] to the following:
"(a) At the option of [New Pate], on or before January
15, 2010, [the Dobbses and the Dobbs entities] shall
transfer to [New Pate] fifty per cent (50%) of [the
Dobbses' and the Dobbs entities'] ownership in
Townes [Development Company] at the time of [New
Pate's] election of this option. Further the option
shall extend to such additional ownership that the [Dobbses
and the Dobbs entities] may acquire subsequent to [New
Pate's] election, but [the Dobbses' and the Dobbs
entities'] ownership in ... Townes [Development
Company] shall at no time be no less than thirty per cent
(30%) of the total ownership of ... Townes [Development
Company]. Until such time that [New Pate] exercises it[s]
said options, [the Dobbses and the Dobbs entities] shall
pay to [New Pate] one-half of all distributions, income and
proceeds that it receives from ... Townes [Development
Company] or is entitled to receive from ... Townes
[Development Company]. Such transfer shall not constitute
payment in whole or in part of the Loan. Any and all
distributions or income received by Harlan [Homebuilders]
from ... Townes [Development Company] shall be subject to
Section 1.06(b) herein....
"(b) Out of any settlement payment, distribution or
payment of any kind
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whatsoever from Chris Hayslip or Townes [Development
Company], their insuror [sic]; and any distributions and
income received by Harlan [Homebuilders] from ... Townes
[Development Company] shall be distributed as follows and
in the following order:
"(i) First, to the repayment of that part of the
indebtedness owed by [the Dobbses and the Dobbs entities]
to [New Pate] for attorney fees, expert fees and litigation
expenses incurred with the law firm of Campbell, Gidieie,
Lee, Sinclair & Williams, PC, with interest as accrued.
"(ii) Second, the next $250,000.00 shall be paid to
[New Pate], and shall not be applied against the
indebtedness owed by [the Dobbses and the Dobbs entities]
to [New Pate] under this Agreement and the Loan Documents.
"(iii) Third, the remaining proceeds shall be divided
equally between the [Dobbses and the Dobbs entities] and
[New Pate]; with the [Dobbses' and the Dobbs
entities'] proceeds to be first applied to the
repayment of the indebtedness owed by [the Dobbses and the
Dobbs entities] to [New Pate] under this Agreement and the
Loan Documents. Upon full payment of the indebtedness owed
by [the Dobbses and the Dobbs entities] to [New Pate] under
this Agreement and the Loan Documents, the [Dobbses'
and the Dobbs entities'] share of the proceeds shall
then be disbursed to the [Dobbses and the Dobbs entities].
That part of the [New Pate] proceeds paid to [New Pate]
under this section of the Agreement shall not be applied
against the indebtedness owed by [the Dobbses and the Dobbs
entities] to [New Pate] under this Agreement and the Loan
Documents.
"(c) Any distributions in kind arising out of Hayslip,
Townes [Development Company], or their insurer shall be
owned equally by the [Dobbses and the Dobbs entities] and
[New Pate], subject to [New Pate's] approval.
"(d) The payment in full of the indebtedness owed by
[the Dobbses and the Dobbs entities] to [New Pate] shall
not extinguish the rights, duties and obligations in this
Section 1.06.
"Section 1.07 Additional Loan Terms.
"....
"(b) Collateral. [The Dobbses and the Dobbs
entities] shall not sell any collateral, nor allow any
collateral to be foreclosed, reserved, waived, surrendered,
compromised or sold under process of law or other
collateral or loan documents, without the written consent
of [New Pate].
"....
"Section 4.11 Continuing Effectiveness. All
representations and warranties contained herein shall be
deemed continuing and in effect at all times while [the
Dobbses and the Dobbs entities] may obtain any Loan
proceeds pursuant to this Agreement or any Obligations
remain outstanding, and all such representations and
warranties shall be deemed to be incorporated in each
requisition for an advance by [the Dobbses and the Dobbs
entities] unless [the Dobbses and the Dobbs entities]
specifically notifies [New Pate] of any change therein.
"....
"Section 7.12 Indemnification. [The Dobbses
and the Dobbs entities] shall indemnify and hold harmless
[New Pate] from and against any and all claims, charges,
losses, expenses and costs, including reasonable
attorneys' fees, asserted directly or indirectly by any
third party resulting from any claims, actions
Page 385
or proceedings in connection with the execution, delivery
and performance of this Agreement, the Note, or any other
Loan Documents. The indemnification provided in this
section shall survive the ...