Se Prop. Holdings, LLC v. Tammy T. Ctr.

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

CIVIL ACTION 15-0033-WS-C

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

December 30, 2016

ORDER

This matter comes before the Court on plaintiff's Motion for Partial Summary Judgment (doc. 90). The Motion has been briefed and is ripe for disposition.

I. Background.

A. Nature of the Case.

Plaintiff, SE Property Holdings, LLC ("SEPH"), brought this fraudulent transfer action seeking to have certain transfers of property made by Charles Trammell and Belinda Trammell (collectively, the "Trammells") set aside and declared null and void under Alabama law. Plaintiff's position is that the Trammells owe it millions of dollars pursuant to certain guaranties they executed in favor of SEPH's predecessor during the period of 2005-2007. When the borrowers defaulted on their loan repayment obligations, SEPH looked to the Trammells to make good on their guaranty commitment. Between 2011 and 2013, and after SEPH demanded payment from and filed suit against them, the Trammells transferred ownership of various assets (including a house on Lake Martin, a beach condominium unit in Baldwin County, tens of thousands of shares of UPS stock, and ownership interests in limited liability companies) to LLCs and other family members. Plaintiff maintains that, as a result of these transfers, the Trammells were left with assets valued far less than their debts.

Based on these allegations, SEPH has asserted claims under the Alabama Uniform Fraudulent Transfer Act, Ala. Code §§ 8-9a-1 et seq., against the Personal Representative of the Estate of Charles H. Trammell (the "Estate"),¹ Belinda R. Trammell, Amy T. Brown, Tammy T. Center, Trammell Family Orange Beach Properties, LLC ("Trammell Orange Beach"), and Trammell Family Lake Martin Properties, LLC ("Trammell Lake Martin").² As pleaded in the First Amended Complaint, SEPH maintains that the following transfers by Charles and Belinda Trammell were fraudulent under Alabama law: (i) their execution of a deed to Trammell Orange Beach of the Baldwin County beach condominium unit in January 2011; (ii) their execution of a deed to Trammell Lake Martin of the Lake Martin house in January 2011; (iii) their transfer of a 90% ownership/membership interest in Trammell Orange Beach and Trammell Lake Martin to Brown and Center in December 2011, such that each LLC (which had previously been owned 50% by Charles Trammell and 50% by Belinda Trammell) was now owned 45% by Brown, 45% by Center, 5% by Charles Trammell, and 5% by Belinda Trammell; (iv) Charles Trammell's transfer of UPS stock to relatives or family-controlled LLCs in 2012; and (v) transfer upon Charles Trammell's death of his interest in the Trammells' principal residence and additional UPS stock shares to Belinda Trammell, leaving his Estate with a value of less than $200,000, some $5.8 million lower than Charles Trammell's net worth in 2008. (Doc. 55, ¶¶ 19, 21, 23, 24, 28.) Defendants Belinda Trammell, Center and Brown are alleged to have liquidated some of these fraudulently transferred assets and expended the proceeds for their own use and benefit. (Id., ¶ 24.)

In the First Amended Complaint, SEPH parlays the foregoing allegations into claims of actual fraudulent transfer pursuant to Alabama Code § 8-9A-4(a) (Count One); constructive fraudulent transfer pursuant to Alabama Code § 8-9A-4(c) (Count Two); constructive fraudulent transfer pursuant to Alabama Code § 8-9A-5(a) (Count Three); and conspiracy (Count Four). SEPH now moves for summary judgment as to Count Three (and only Count Three) of the FirstAmended Complaint.³ Counts One, Two and Four are not implicated by plaintiff's Rule 56 Motion, and therefore will not be addressed herein.

B. Relevant Facts.⁴

1. The Loans and Guaranties.

Between 2005 and 2007, SEPH's predecessor (Vision Bank) entered into certain loan agreements with companies called Bama Bayou, LLC (formerly known as Riverwalk, LLC) and Marine Park, LLC, whereby those entities became indebted to Vision Bank (and, later, SEPH) for certain commercial loans. (Braswell Aff. (doc. 92, Exh. A), ¶ 4 & Exh. A-1.)⁵ In connection with those loans, Riverwalk, LLC signed a promissory note for $6 million in Vision Bank'sfavor on March 24, 2005; Riverwalk, LLC signed a promissory note for $5 million in Vision Bank's favor on June 12, 2006; Bama Bayou, LLC signed a promissory note for $5 million in Vision Bank's favor on September 27, 2007; and Marine Park, LLC signed a promissory note for $5 million in Vision Bank's favor on March 2, 2007. (Id.) Those loans and notes were fully funded by Vision Bank and its participant banks. (Braswell Aff., ¶ 6.)

In connection with those loans, Charles and/or Belinda Trammell executed at least four guaranties in Vision Bank's favor. (Braswell Aff., ¶ 5.) First, on March 20, 2005, Charles Trammell executed a Limited Continuing Guaranty with respect to Riverwalk's indebtedness in the March 24, 2005 promissory note. (Braswell Aff., ¶ 5 & Exh. A-2.) In that guaranty, Charles Trammell agreed to be liable for up to $315,000 in principal of the note, 100% of all interest accruing at any time, and 100% of collection costs, expenses, and reasonable attorney's fees. (Id., Exh. A-2 at ¶ 14.) Second, in May 2006 Charles Trammell and Belinda Trammell each executed Limited Continuing Guaranties with respect to Riverwalk's indebtedness in the June 12, 2006 promissory note. (Braswell Aff, ¶ 5 & Exh. A-3.) In those guaranties, the Trammells each agreed to be liable for up to $280,000 in principal of the note, 100% of all interest accruing at any time, and 100% of collection costs, expenses and reasonable attorney's fees. (Id., Exh. A-3 at ¶ 14.) Third, on January 26, 2006, Charles and Belinda Trammell jointly executed a Limited Continuing Guaranty with respect to Marine Park's indebtedness in the March 2, 2007 promissory note. (Braswell Aff., ¶ 5 & Exh. A-4.)⁶ In that guaranty, the Trammells agreed to be liable for up to $280,000 in principal of the note, 100% of all interest accruing at any time, and 100% of collection costs, expenses and reasonable attorney's fees. (Id., Exh. A-4 at ¶ 14.) And fourth, on September 27, 2007, Charles and Belinda Trammell jointly executed a Limited Continuing Guaranty with respect to Bama Bayou's indebtedness in the September 27, 2007promissory note. (Braswell Aff., ¶ 5 & Exh. A-5.) In that guaranty, the Trammells agreed to be liable for up to $280,000 in principal of the note, 100% of all interest accruing at any time, and 100% of collection costs, expenses and reasonable attorney's fees. (Id., Exh. A-5 at ¶ 14.)⁷

2. The Defaults and Plaintiff's Collection Efforts.

Plaintiff's evidence is that, even though the loans had been fully funded, Bama Bayou, LLC and Marine Park, LLC defaulted under the loans and notes. (Braswell Aff., ¶ 6.) Vision Bank subsequently demanded payment from the borrowers and guarantors, including Charles and Belinda Trammell. (Id.) When payment was not forthcoming, Vision Bank sued Bama Bayou, Marine Park, Charles and Belinda Trammell, and others in the Circuit Court of Mobile County, Alabama, on January 16, 2009 (the "Bama Bayou Action"). The Bama Bayou Action remains pending today. To date, it has not gone to trial; indeed, the Court's understanding is that no trial setting is in place at this time.

Pursuant to its collection efforts, on March 20, 2009, Vision Bank foreclosed on multiple parcels of real property that secured its loans to Bama Bayou and Marine Park, purchasing such property via credit bid. (Id., ¶ 7.) In the wake of that foreclosure, large deficiencies remained on both the Bama Bayou and Marine Park loans. (Id.) Indeed, SEPH's calculations are that, as of September 23, 2016, Charles Trammell (or, more accurately, the Estate) was indebted to SEPH in the amount of $4,872,895 in principal and interest pursuant to his guaranties of Bama Bayou's indebtedness. (Id., ¶ 8.) SEPH further calculates that, as of the same date, Belinda Trammell was indebted to SEPH in the amount of $2,524,791.84 in principal and interest pursuant to her guaranty of Bama Bayou's indebtedness. (Id.) Such calculations exclude costs of collection, which are claimed to be well in excess of a million dollars.

3. The Challenged Transfers.

As noted, the claims asserted by SEPH herein focus on four specific transfers of property by Charles and Belinda Trammell. Most of those transfers were made to defendants Brown and Center (their daughters), either directly or through entities established and controlled by the Trammells; however, SEPH also seeks relief on transfers made by Charles Trammell to Belinda Trammell upon the former's death. Relevant facts pertaining to each such transfer include the following:

On January 26, 2011, after the Bama Bayou Action was underway, Charles and Belinda Trammell transferred ownership of their Baldwin County beach condominium unit to defendant Trammell Orange Beach, an Alabama limited liability company then owned 50% by Charles Trammell and 50% by Belinda Trammell. (Doc. 92, Exh. F, at #8; doc. 92, Exh. M, at #8.) On the same date, Charles and Belinda Trammell transferred ownership of their Lake Martin house to defendant Trammell Lake Martin, an Alabama limited liability company then owned 50% by Charles Trammell and 50% by Belinda Trammell. (Doc. 92, Exh. F, at #8; doc. 92; Exh. M, at #8.) The LLCs paid neither monetary consideration nor other property to the Trammells in exchange for these valuable transfers of real property. (Id.)

Belinda Trammell testified that, when she and Charles Trammell formed the defendant LLCs, they had planned to give their daughters (defendants Center and Brown) an ownership interest in those entities. (Doc. 92, Exh. E, at 53.) Defendant Center confirmed her understanding that, as part of their estate planning, her parents intended to give Center and Brown an interest in those LLCs. (Doc. 92, Exh. B, at 66...