(Code 1981, §18-2-74, enacted by Ga. L. 2002, p. 141, § 3; Ga. L. 2015, p. 996, § 4A-1/SB 65.)
Law reviews.- For article, "Self-Settled Asset Protection Trusts in Georgia," see 23 Ga. St. B.J. 17 (Feb. 2018).
JUDICIAL DECISIONS
Transfers of assets before death.
- Before decedent died, a decedent's gifts to the decedent's spouse, the decedent's subsequent purchase of land and deeding of the land in a corporate entity's name without documented consideration from the entity, and the decedent's involvement in the capitalization of the entity with purported funds from the spouse could all be found to constitute transfers made with the intent to fraudulently defeat claims of the decedent's ex-spouse under the terms of a settlement agreement the decedent had with the decedent's ex-spouse, and could constitute fraud under the statute. Miller v. Lomax, 266 Ga. App. 93, 596 S.E.2d 232 (2004).
Evidence was sufficient to sustain the jury's verdict under the plaintiff's theory of fraudulent transfer and civil conspiracy as some evidence authorized the jury to find that a deed conveying the property owner's sole interest to the real property to the owner and one defendant as joint tenants with right of survivorship without any money exchanged prior to death was to evade the plaintiff before a promissory note was paid. Bloom v. Camp, 336 Ga. App. 891, 785 S.E.2d 573 (2016).
Badges of fraud identified by federal court applicable.
- O.C.G.A. § 18-2-74 permits the trustee to avoid a transfer made with the actual intent to hinder, delay or defraud any creditor of the debtor. Subsection (b) states that, in determining actual intent, the court could consider a specified list of factors among other factors, which track the badges of fraud identified by the United States Court of Appeals for the Eleventh Circuit. Scarver v. M. Abuhab Participacoes S.A. (In re Moskowitz), Bankr. (Bankr. N.D. Ga. Nov. 28, 2011).
Intentional fraud.- Plaintiff established prima facie case of intentional fraud sufficient to trigger Georgia's fraudulent transfer law because the plaintiff provided evidence showing that the transaction resulted in transfer of substantially all assets, transferring company became insolvent shortly after transfer, transfer occurred just before potential lawsuit against transferring company became known, shareholders of transferring company simply switched over to company to whom assets transferred, and some evidence existed that efforts were made to conceal the nature of the transfer. Jones v. Tauber & Balser, P.C., 503 Bankr. 162 (N.D. Ga. 2013).
Assignee of debt could bring fraudulent transfer claim.
- Judgment creditor had standing to pursue the creditor's claim against a judgment debtor and the debtor's transferees, although the judgment creditor was the assignee of the debt leading to the judgment, because it did not seek a remedy for an injury to the previous holder of the note, but for an injury that was committed directly against it; O.C.G.A. § 44-12-24 did not apply. RES-GA YPL, LLC v. Rowland, 340 Ga. App. 713, 798 S.E.2d 315 (2017).
Right of action for injuries arising from fraud cannot be assigned.
- An assignee of debt is precluded from pursuing a fraudulent transfer claim even though the assignee met the definitions of a creditor with a claim under the Georgia Uniform Fraudulent Transfers Act (now the Uniform Voidable Transactions Act), O.C.G.A. § 18-2-70 et seq., because the non-assignment statute provides that a right of action for injuries arising from fraud cannot be assigned; thus, the second assignee had no standing to assert a fraudulent transfer claim against the appellee regarding two parcels of real property because a fraudulent transfer claim could not be assigned under Georgia law. RES-GA Hightower, LLC v. Golshani, 334 Ga. App. 176, 778 S.E.2d 805 (2015), cert. denied, No. S16C0330, 2016 Ga. LEXIS 54 (Ga. 2016).
Court granted a motion for default judgment and denied Chapter 7 debtor's discharge when the well-pled allegations of the complaint established that post-petition, the debtor liquidated the debtor's 401(k) account and spent or transferred proceeds without authority from the court and with intent to hinder, delay, or defraud creditors or officers of the debtor's bankruptcy estate. The court inferred the debtor's fraudulent intent based on badges of fraud under Georgia fraudulent conveyance statute, including that the debtor did not fully disclose the value of the account; the debtor transferred a portion of the funds to the debtor's mother and daughter, who were insiders; funds were substantially all of the debtor's assets; and the debtor transferred a portion of the funds without adequate consideration. Gebhardt v. Oliver (In re Oliver), Bankr. (Bankr. N.D. Ga. May 5, 2015).
Because the 2015 amendments to the Georgia Uniform Fraudulent Transfers Act (now the Uniform Voidable Transactions Act), O.C.G.A. § 18-2-70 et seq., specifically allowed assignees and successors to debt to pursue fraudulent transfer claims, it follows that under the previous version of the Georgia Uniform Fraudulent Transfers Act, such assignments were not allowed. RES-GA Hightower, LLC v. Golshani, 334 Ga. App. 176, 778 S.E.2d 805 (2015), cert. denied, No. S16C0330, 2016 Ga. LEXIS 54 (Ga. 2016).
Even though the four-year statute of limitations under the Georgia Uniform Fraudulent Transfer Act (UFTA) (now the Uniform Voidable Transactions Act), O.C.G.A. § 18-2-70 et seq., had not expired, a Chapter 7 trustee's avoidance action, which was brought pursuant to a Bankruptcy Code provision allowing the trustee to step into the shoes of an unsecured creditor, was barred by the two-year limitations period in the Bankruptcy Code. Nor was the statute tolled by a Bankruptcy Code provision dealing with extensions of time as the trustee's fraudulent transfer action was brought standing in the shoes of a creditor, not the debtor. Boudreaux v. Hall Oil Co. (In re Pope Logging, Inc.), Bankr. (Bankr. S.D. Ga. Sept. 17, 2015).
Chapter 7 trustee's state law fraudulent transfer claim was barred by the statute of limitations because the trustee was pursuing the claim through the trustee's authority as lien creditor and did not bring the action within the time set forth under bankruptcy law. Boudreaux v. Hall Oil Co. (In re Butler Logging, Inc.), 538 Bankr. 174 (Bankr. S.D. Ga. 2015).
Void as to creditor not void ab initio.- When a bank sought relief from the automatic stay to proceed with a sheriff's sale under a prepetition state court consent judgment that resolved a fraudulent transfer action against the debtor and others by declaring the transfer "void," the court denied the motion as unnecessary. No interest in the property revested in the debtor because, applying rules of contract construction to the consent judgment, and giving the consent judgment a construction that rendered it in compliance with Georgia fraudulent transfer statutes, the court determined that the word "void" meant void as to the bank, not void ab initio. Southeastern Bank v. Allen (In re Allen), Bankr. (Bankr. S.D. Ga. June 5, 2017)(decided prior to the 2015 amendment).
Insider.- Certain individuals and entities were insiders of the debtor, including officers and persons in control of the debtor, their spouses, the owner of 66 percent of the debtor, and indirect owners of 20 percent or more of the debtor. Watts v. MTC Dev., LLC (In re Palisades at W. Paces Imaging Ctr., LLC), 501 Bankr. 896 (Bankr. N.D. Ga. 2013).
Pleading requirements.
- Special pleading requirements of Fed. R. Civ. P. 9(b) did not apply to an action for fraudulent conveyance under Georgia Uniform Fraudulent Transfers Act (now Uniform Voidable Transactions Act), O.C.G.A. § 18-2-70 et seq. Nesco, Inc. v. Fairley Cisco, F. Supp. 2d (S.D. Ga. Oct. 7, 2005).
Trustee's pleadings that alleged that the investors used the debtors as part of a Ponzi scheme and that the money transferred to the limited liability company amounted to a fraudulent transfer was sufficient to meet the pleading requirements of Fed. R. Civ. P. 8, Fed. R. Bankr. 7008, the heightened pleading requirements of Fed. R. Civ. P. 9(b), and to state a claim under 11 U.S.C. § 548 and O.C.G.A. § 18-2-75(a). Perkins v. Crown Fin., LLC (In re Int'l Mgmt. Assocs. LLC), Bankr. (Bankr. N.D. Ga. Mar. 6, 2007).
Defendant LLC did not establish that a more definite statement was required for the trustee's allegations under 11 U.S.C. § 548 and O.C.G.A. § 18-2-74 because the trustee's complaint was not unintelligible and provided sufficient information to the LLC so it could frame a response; the complaint named only the LLC as a defendant and alleged that the transfer made pursuant to a settlement agreement was fraudulent. Perkins v. Crown Fin., LLC (In re Int'l Mgmt. Assocs. LLC), Bankr. (Bankr. N.D. Ga. Mar. 6, 2007).
Chapter 7 trustee's allegations were sufficient to survive a creditor's motion to dismiss the trustee's complaint seeking to avoid and recover transfers pursuant to 11 U.S.C. §§ 544(b)(1) and 550 when the trustee alleged sufficient facts to suggest that, pursuant to O.C.G.A. § 18-2-74(b), the creditor received avoidable fraudulent transfers from the debtor. The trustee alleged that all of the transfers were made within four years of the petition date, that the transfers were from the debtors' bank account, and that several badges of fraud indicated the debtors' actual intent to hinder, delay, or defraud including the fact that the transfers occurred when the debtors were insolvent, the creditor was an insider of the debtors at the time of the transfers, and the creditor knew or should have known that the debtors were involved in an unlawful scheme to defraud investors. Gordon v. Graybeal (In re CM Vaughn, LLC), Bankr. (Bankr. N.D. Ga. June 21, 2010).
Court rejected transferees' argument that a Chapter 7 trustee could not plausibly assert the existence of a creditor with an allowed claim that gave the creditor standing under 11 U.S.C. § 544(b)(1) to assert a constructively fraudulent transfer claim under O.C.G.A. § 18-2-74 and Del. Code Ann. tit. 6, § 1304 because the assertion that only an unsecured creditor with a claim arising prior to the transfers could seek their avoidance was legally flawed. Under the state statutes, a transfer for less than reasonably equivalent value was constructively fraudulent as to creditors whose claims arose after the transfers when the debtor was engaged or was about to engage in a business or transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction. Watson v. Powell (In re Atlantis Plastics, Inc.), Bankr. (Bankr. N.D. Ga. Mar. 31, 2011)(Unpublished).
When an investor asserted a fraudulent transfer claim against a bank to which a consultant who allegedly defrauded the investor made a down payment on a house, it was error to dismiss the claim based on the bank's assertion that the bank, under O.C.G.A. § 18-2-74(a)(1), took the consultant's funds in good faith and for a reasonably equivalent value because: (1) the investor's complaint did not admit or otherwise demonstrate such an affirmative defense; and (2) the investor had no obligation to anticipate the affirmative defense. Furthermore, the claims could survive a motion to dismiss because the investor: (1) stated viable claims; (2) did not have to anticipate affirmative defenses; and (3) did not admit such defenses. Speedway Motorsports, Inc. v. Pinnacle Bank, 315 Ga. App. 320, 727 S.E.2d 151 (2012).
Trustee could not prevail under O.C.G.A. § 18-2-74 because the trustee was not a "creditor" who was able to utilize § 18-2-74. Here, the trustee did not plead that the trustee was moving under 11 U.S.C. § 544; rather, the trustee simply asserted a state law cause of action. Cooper v. Bullock (In re Bullock), Bankr. (Bankr. N.D. Ga. June 12, 2012).
Actual fraud was adequately pled by alleging badges of fraud sufficient to infer the fraudulent nature of transfers to insiders; moreover, insolvency resulting in constructive fraud also was adequately pled. Ralls Corp. v. Huerfano River Wind, LLC, 27 F. Supp. 3d 1303 (N.D. Ga. 2014).
Transferees were not entitled to summary judgment on a Chapter 7 trustee's claim to avoid transfers as actually fraudulent under the Bankruptcy Code and Georgia law as the transferees failed to demonstrate by either affirmative evidence or by pointing to lack of evidence that the trustee could not carry the trustee's burden at trial regarding the debtor's intent to transfer the debtor's assets. Rather, several badges of fraud existed, including that the debtor made the transfer to an insider (a company wholly owned by a director of debtor who owned more than 20 percent of the stock of the debtor) and that the transfer was made for the purpose of satisfying an antecedent debt owed to an insider. Howell v. Fulford (In re Southern Home & Ranch Supply, Inc.), 515 Bankr. 699 (Bankr. N.D. Ga. 2014).
Bankruptcy trustee failed to allege that payments to a creditor were avoidable as fraudulent since the bankruptcy debtor incurred the obligation upon execution of an agreement which occurred outside the look-back period for avoiding fraudulent transfers. Gordon v. Harrison (In re Alpha Protective Servs.), 531 Bankr. 889 (Bankr. M.D. Ga. 2015).
Judgment creditor could seek relief under the Uniform Fraudulent Transfers Act (now Uniform Voidable Transactions Act), O.C.G.A. § 18-2-70 et seq., against the judgment debtor and transferees, but it could not pursue the judgment debtor's mother and sister or their corporation because they did not receive any interest from the judgment debtor and were not themselves debtors of the judgment creditor whose transfers were subject to attack. RES-GA YPL, LLC v. Rowland, 340 Ga. App. 713, 798 S.E.2d 315 (2017).
Colorable claim in bankruptcy.
- When a Chapter 7 debtor failed to list a creditor's claim, the claim was non-dischargeable under 11 U.S.C. § 523(a)(3). Pursuant to the fraudulent transfer elements of O.C.G.A. § 18-2-74, the creditor made the required showing of a colorable claim of non-dischargeability under 11 U.S.C. § 523(a)(6). D.A.N. Joint Venture III, L.P. v. Wier (In re Wier), Bankr. (Bankr. N.D. Ga. Sept. 30, 2012).
No asset of debtor involved.
- Judgment voiding a transfer of property as fraudulent under the Uniform Fraudulent Transfers Act (UFTA) (now Uniform Voidable Transactions Act), O.C.G.A. § 18-2-70 et seq., was reversed because, despite not being recorded, the 2002 security deed executed in favor of a former sister-in-law, pledging the property as collateral for a promissory note, gave the former sister-in-law, as one of the defendant's creditors, priority over the plaintiff's judgment, such that the property could not be characterized as the defendant's asset under the UFTA. Wallin v. Wallin, 341 Ga. App. 440, 800 S.E.2d 617 (2017).
Property was transferred.- Defendants' argument that transfer of corporate goodwill, or "book of business," could not as a matter of law constitute transfer under Georgia's fraudulent transfer law because goodwill had no value was rejected because the plaintiff produced evidence that the goodwill transferred had substantial value. Jones v. Tauber & Balser, P.C., 503 Bankr. 162 (N.D. Ga. 2013).
Fraudulent transfer shown.- Checks payable from a Chapter 7 debtor that were deposited in an insider's account were avoidable as made with actual intent to defraud a creditor because the deposited checks were not fully disclosed, the debtor received no consideration for the transfer, the debtor was insolvent at the time, and the checks, and any invoices which allegedly supported them, were created in order to defraud a creditor into making advances for expenses not validly incurred. Watts v. MTC Dev., LLC (In re Palisades at W. Paces Imaging Ctr., LLC), 501 Bankr. 896 (Bankr. N.D. Ga. 2013).
Father who admitted he caused property to be transferred to his son to shield the property from the father's creditors was not entitled to judgment against the son because he had unclean hands, under O.C.G.A. § 23-1-10. Under O.C.G.A. § 18-2-74(a)(1), the transfer was fraudulent because the transfer was made with actual intent to hinder, delay, or defraud the father's creditors. Roach v. Roach, 327 Ga. App. 513, 759 S.E.2d 587 (2014).
Chapter 7 debtor's discharge was denied based on transfer of funds for no consideration shortly after the debtor had been sued from a joint bank account to an account purportedly controlled by the debtor's spouse because the debtor testified that the funds were transferred to the spouse so that money would not be garnished. McAfee v. Harman (In re Harman), Bankr. (Bankr. N.D. Ga. Sept. 10, 2014).
Assignment of a bankruptcy debtor's interest in real property was avoidable as fraudulent since the debtor received no proceeds from the assignee's sale of the property, did not receive reasonably equivalent value for the assignment, and became insolvent as a result of the assignment. Boudreaux v. Holloway (In re Holloway), Bankr. (Bankr. S.D. Ga. Mar. 31, 2015), aff'd, 2017 U.S. App. LEXIS 3359 (11th Cir. Ga. 2017).
Beneficiary of trust preferred securities sufficiently alleged a fraudulent transfer based on allegations that the issuer of the securities caused its subsidiary bank to issue new stock in a concealed placement to transfer substantially all of the issuer's assets with an intent to deprive the beneficiary of returns on the securities. U.S. Capital Funding VI, Ltd. v. Patterson Bankshares, Inc., 137 F. Supp. 3d 1340 (S.D. Ga. 2015).
No fraudulent transfer shown.
- When a debtor received valuable consideration or reasonably equivalent value as a result of a creditor bank's release of the bank's lien against the debtor's assets in exchange for the payment of another's obligation guaranteed by the debtor, no fraudulent transfer occurred under 11 U.S.C. § 548(a)(1)(B) or O.C.G.A. § 18-2-74(a). Hays v. Farmers and Merchants Bank (In re Stewart Fin. Co.), Bankr. (Bankr. M.D. Ga. June 8, 2007).
Transfers from bankruptcy debtors were avoidable as fraudulent under O.C.G.A. § 18-2-74(a)(1) since the transfers made in the course of a Ponzi scheme were deemed to be made with fraudulent intent, and the lack of information from the debtors, the refusal of the debtors to allow transferees to conduct due diligence, and the usurious interest paid by the debtors clearly indicated that the transactions were fraudulent. Kerr v. Audio Answers, Inc. (In re Christou), Bankr. (Bankr. N.D. Ga. Sept. 28, 2009).
Chapter 7 trustee was not entitled to the recovery of property from the debtor's property under 11 U.S.C. § 544. Under the fraudulent transfer elements of O.C.G.A. § 18-2-74, the debtor received reasonably equivalent value in exchange for the privilege of living in the property without the payment of rent, taxes, or insurance and in exchange for enjoying the benefit of property improvements. Pettigrew v. Rollins (In re Rollins), Bankr. (Bankr. N.D. Ga. Sept. 29, 2011).
Distributions to the members of a limited liability company did not constitute a fraudulent transfer in violation of O.C.G.A. § 18-2-74(a) because insolvency on the part of the company and an actual intent to hinder, defraud, or delay the creditor's collection of the creditor's debt was not shown. Sun Nurseries, Inc. v. Lake Erma, LLC, 316 Ga. App. 832, 730 S.E.2d 556 (2012).
No fraudulent transfer when work performed.
- Debtor's twice monthly $1833 payments to the defendant in exchange for regular, hotel managerial services did not constitute avoidable fraudulent transfers under O.C.G.A. §§ 18-2-74(a)(2)(B) and18-2-75 because the defendant's work for the debtor constituted reasonably equivalent value in exchange for the payments. Anderson v. Patel (In re Diplomat Constr., Inc.), Bankr. (Bankr. N.D. Ga. Aug. 6, 2013).
Transfer before a crime was committed.
- Although the transfer of a house was accompanied by some badges of fraud, the trial court abused the court's discretion in enjoining further disposition of the house, pending adjudication of the merits of wrongful death and fraudulent transfer claims, since the transferor gave the house to the transferor's three minor grandchildren in Florida three months before the transferor murdered the decedent. Bishop v. Patton, 288 Ga. 600, 706 S.E.2d 634, overruled on other grounds by SRB Inv. Servs., LLLP v. Branch Banking & Trust Co., 289 Ga. 1, 709 S.E.2d 267 (2011).
Fraudulent transfer by individual accused of murder.
- Court did not abuse the court's discretion in entering an interlocutory injunction barring further disposition of the proceeds from joint bank accounts pending final disposition of fraudulent transfer and wrongful death lawsuits because badges of fraud indicated an actual intent to hinder, delay, or defraud a decedent's estate and heirs of a full recovery. The transferor's adult child came up from Florida to withdraw the funds from joint bank accounts in Georgia three days after the transferor was arrested for the murder of the decedent. Bishop v. Patton, 288 Ga. 600, 706 S.E.2d 634, overruled on other grounds by SRB Inv. Servs., LLLP v. Branch Banking & Trust Co., 289 Ga. 1, 709 S.E.2d 267 (2011).
Accrual of action for fraudulent conveyance.
- In determining when a cause of action accrued for purposes of O.C.G.A. § 9-3-32 it was necessary to ascertain the time when the plaintiff could first have maintained plaintiff's action to a successful result. The relevant date for determining the statute of limitations on a fraudulent conveyance claim, pursuant to O.C.G.A. §§ 18-2-74,18-2-75, and18-2-76, was the date that the debtor incurred the obligation to make the transfer. Kipperman v. Onex Corp., 411 Bankr. 805 (N.D. Ga. 2009).
Fraudulent conveyance claim time-barred.
- Administrator's fraudulent conveyance claims against group one were time-barred under O.C.G.A. §§ 18-2-74(a)(1) and18-2-79(1), even though the claim was not time-barred under the limitations period in effect when the claim accrued, as application of § 18-2-79, a procedural law in effect at the time the suit was filed, did not violate the constitutional prohibition against retroactive laws under Ga. Const. 1983, Art. I, Sec. I, Para. X; the administrator also failed to utilize the one-year statute of limitation effective upon discovery of the alleged fraud. Huggins v. Powell, 315 Ga. App. 599, 726 S.E.2d 730 (2012).
Since an administrator's fraudulent conveyance claims were time-barred under O.C.G.A. §§ 18-2-74(a)(1) and18-2-79(1), a limited liability company's (LLC) failure to respond to the administrator's requests for admissions was of no consequence and the trial court's denial of summary judgment to the LLC was improper. Huggins v. Powell, 315 Ga. App. 599, 726 S.E.2d 730 (2012).
Margin or settlement payments.
- Federal statute, 11 U.S.C. § 546(e), was a defense to the counts of a trustee's avoidance action brought against an investment company under 11 U.S.C. § 544, which incorporated O.C.G.A. §§ 18-2-22(3) and18-2-74(a)(2), and to the count brought pursuant to 11 U.S.C. § 548(a)(1)(A). Hayes v. Morgan Stanley DW Inc. (In re Stewart Fin. Co.), 367 Bankr. 909 (Bankr. M.D. Ga. 2007).
Charging order did not give creditor rights against LLC assets.
- Judgment creditor did not have standing to set aside allegedly fraudulent transfers made by non-judgment debtor limited liability companies (LLCs), although the creditor had charging orders against the LLCs under O.C.G.A. § 14-11-504(a); the charging orders did not give the creditor any rights against the assets of the LLCs. Merrill Ranch Props., LLC v. Austell, 336 Ga. App. 722, 784 S.E.2d 125 (2016).
Discovery of attorney-client communications.- Judgment creditor could inquire into attorney-client communications only as the communications were related to the planning or execution of the transition from the limited liability company (LLC) to the other entities. The creditor could not inquire into communications made after these transactions were carried out, even if those communications concern the possible legal implications of the transactions. Tindall v. H & S Homes, LLC, F. Supp. 2d (M.D. Ga. Jan. 10, 2011).
Crime fraud exception to attorney-client privilege triggered.- With respect to documents claimed to be protected by attorney-client privilege, because the plaintiff successfully established a prima facie case of intentional fraud and violation of Georgia's fraudulent transfer law, that was enough to trigger the crime-fraud exception and require the defendants to produce documents related to the transfer at issue. Jones v. Tauber & Balser, P.C., 503 Bankr. 162 (N.D. Ga. 2013).
Interlocutory injunction proper.
- Trial court did not abuse the court's discretion in entering an interlocutory injunction to preserve the status quo pending adjudication of the merits of the creditor's action against the debtors alleging breach of contract and fraudulent transfers because the debtors presented no evidence of harm from the creditor's delay in amending the creditor's complaint to seek an interlocutory injunction, and the delay resulted primarily from the debtors' concealment of the debtors' actions and obstruction of the creditor's efforts to discover the details; vague assertions of harm supported by no citation to evidence in the record are insufficient to sustain a defense of laches, and there is a balance between a plaintiff's knowing that a cause of action exists and that interim injunctive relief may be needed and sitting on the plaintiff's rights to the prejudice of the defendant. SRB Inv. Servs., LLLP v. Branch Banking & Trust Co., 289 Ga. 1, 709 S.E.2d 267 (2011).
Trial court did not abuse the court's discretion in entering an interlocutory injunction to preserve the status quo pending adjudication of the merits of the creditor's action against the debtors alleging breach of contract and fraudulent transfers in violation of the Georgia Uniform Fraudulent Transfers Act (UFTA) (now Uniform Voidable Transactions Act), O.C.G.A. § 18-2-70 et seq., because foreclosing on collateral of uncertain remaining value, going through confirmation proceedings, and suing the insolvent debtors to reclaim the deficiency and then having to recover the fraudulently transferred assets to collect on the ensuing judgment was not an adequate remedy at law since it was not nearly as practical and as efficient to the ends of justice and its prompt administration as the remedy in equity enjoining further transfers temporarily so that the creditor could collect a final judgment; when a money judgment is likely to be uncollectible because a debtor has fraudulently moved the debtor's assets in an attempt to dissipate or conceal the assets from a creditor, Georgia law, both before and under the Georgia UFTA, gives the creditor the right to seek interlocutory relief by freezing the assets where the assets are. SRB Inv. Servs., LLLP v. Branch Banking & Trust Co., 289 Ga. 1, 709 S.E.2d 267 (2011).
Trial court did not abuse the court's discretion in entering an interlocutory injunction to preserve the status quo pending adjudication of the merits of the creditor's action against the debtors alleging breach of contract and fraudulent transfers in violation of the Georgia Uniform Fraudulent Transfers Act (UFTA) (now Uniform Voidable Transactions Act), O.C.G.A. § 18-2-70 et seq., because at least seven statutory badges of fraud listed in the UFTA, O.C.G.A. § 18-2-74(b), were implicated, and the creditor also presented evidence as a non-statutory badge of fraud of the debtors' pattern of maintaining just enough funds in certain accounts to satisfy the debtors' financial covenants at the end of each quarter and then transferring the funds away shortly thereafter; under the UFTA, O.C.G.A. § 18-22-77(a)(3)(A), the trial court was authorized to enter an interlocutory injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property. SRB Inv. Servs., LLLP v. Branch Banking & Trust Co., 289 Ga. 1, 709 S.E.2d 267 (2011).
Summary judgment improper.
- On a fraudulent transfer claim brought by the buyers of the assets of a fitness center, it was error to grant summary judgment to the sellers. There was evidence that about seven days after the closing, the sellers' corporation distributed the sales proceeds to the corporation's four shareholders and that this left the corporation with essentially no assets; furthermore, the buyers presented sufficient evidence on each of the elements of fraud so as to survive summary judgment on the buyer's fraud claim. Kilroy v. Alpharetta Fitness, Inc., 295 Ga. App. 274, 671 S.E.2d 312 (2008), cert. denied, Alpharetta Fitness, Inc., v. Kilroy, No. S09C0645, 2009 Ga. LEXIS 216 (Ga. 2009).
Based on evidence of the sale of judgment debtors' business to their long-time close friends and evidence that the friends were aware that the business owed money, a genuine issue of material fact remained as to whether the debtors transferred their assets with actual intent to hinder, delay, or defraud their creditor under O.C.G.A. § 18-2-74(a)(1). Therefore, the trial court's grant of summary judgment was reversed. Abbott Oil Co. v. Rogers, 302 Ga. App. 439, 691 S.E.2d 561 (2010), cert. denied, No. S10C1026, 2010 Ga. LEXIS 583 (Ga. 2010).
Bankruptcy court denied a Chapter 7 trustee's motion for summary judgment on the trustee's claim that transfers that were made by a mortgage company to an investor were avoidable under 11 U.S.C. § 544 and the Georgia Uniform Fraudulent Transfer Act (now Uniform Voidable Transactions Act), O.C.G.A. § 18-2-74 et seq., because a person who owned the company used the company to operate a Ponzi scheme. The trustee had the burden of showing that there was no genuine issue of material fact, and there was a genuine dispute regarding whether the investor took the transfers in good faith, or gave reasonably equivalent value in exchange for the transfers; although a significant portion of the uncertainty in the evidence arose from the fact that the investor refused to respond to the trustee's requests for discovery, the trustee had done nothing more than highlight the investor's use of U.S. Const., amend. 5. Kerr v. Hart (In re Christou), Bankr. (Bankr. N.D. Ga. Sept. 23, 2010).
O.C.G.A. § 18-2-74 allows the avoidance of a transfer made without receiving reasonably equivalent value when the debtor was either engaged or about to engage in a business or transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction, or the debtor intended to incur or believed or reasonably should have believed that he or she would incur debts beyond his or her ability to pay as the debts became due. Scarver v. M. Abuhab Participacoes S.A. (In re Moskowitz), Bankr. (Bankr. N.D. Ga. Nov. 28, 2011).
Trial court erred by granting summary judgment to a creditor because, under O.C.G.A. § 18-2-75(b), the questioned real estate transfer involved the debtor purchasing the property for the debtor's mother because the debtor had the right to purchase the property and it was only deeded to the debtor briefly the same day, which transfer was not to satisfy an antecedent debt, thus, no fraudulent transfer occurred. Truelove v. Buckley, 318 Ga. App. 207, 733 S.E.2d 499 (2012).
Summary judgment was inappropriate as to a lender's claims under Georgia's Uniform Fraudulent Transfers Act (now Uniform Voidable Transactions Act), O.C.G.A. § 18-2-70 et seq., because the evidence was not undisputed, particularly given the evidence of the guarantor's optimistic efforts to secure additional investors and shore up the financials of the guarantor's businesses during the same approximate time frame. Nissan Motor Acceptance Corp. v. Sowega Motors, Inc., F. Supp. 2d (M.D. Ga. Sept. 11, 2012).
Trustee's avoidance action alleging fraudulent conveyance could not be resolved on summary judgment because, despite existence of several badges of fraud, the mere fact that the debtor thought the debtor was returning property that was not the debtors was sufficient to preclude avoiding transfers, and what the debtor believed or reasonably should have believed was genuine issues of material fact. Kelley v. Speciale (In re Gregg), Bankr. (Bankr. M.D. Ga. July 2, 2013).
In a transfer avoidance action under 11 U.S.C. § 544(b)(1), the complaint alleged sufficient facts to raise questions of fact regarding whether the statute of limitations barred the trustee's claim as it was plausible that the debtors concealed the transfers and the creditor did not learn of the transfers until years later. Lubin v. Markowitz (In re Markowitz), Bankr. (Bankr. N.D. Ga. Mar. 22, 2017).
Fraudulent transfer claims involving evidence of several badges of fraud survived summary judgment; the equitable doctrine of earmarking was inapplicable because apportionment of the debtor's estate was not at issue, the in pari delicto defense was inapplicable because liquidators were pursuing the fraudulent transfer claims for the benefit of innocent creditors, and factual issues existed as to whether payment on an antecedent debt was actual value. Am. Pegasus SPC v. Clear Skies Holding Co., LLC, F. Supp. 2d (N.D. Ga. Sept. 22, 2015).
Insufficient basis for actual fraud to go before jury.
- Trustee's assertion of seven badges of fraud drawn from O.C.G.A. § 18-2-74(b) and fraudulent transfer case law provided insufficient factual detail to give the court a sufficient basis in the record to allow the issue of actual fraud to go before a jury. Kipperman v. Onex Corp., 411 Bankr. 805 (N.D. Ga. 2009).
Defenses.- Bankruptcy court rejected a Chapter 11 trustee's argument that investors who received payments from affiliated businesses that were accused of operating a Ponzi scheme did not give value for the payments and could not assert a defense under 11 U.S.C. § 548(c) or Georgia law against the trustee's action seeking recovery of those payments under 11 U.S.C. §§ 544(b) and 548(a)(1)(A) and (a)(1)(B), and Georgia law, as fraudulent transfers. The investors had a claim for the return of principal the investors invested, based on fraud, the investors gave value for payments the investors received up to the amount of the principal the investors invested because the payments satisfied their claim, and their right to keep the payments did not depend on whether the investments the investors made were characterized as debt or equity. In re Int'l Mgmt. Assocs., LLC, Bankr. (Bankr. N.D. Ga. Dec. 1, 2009), aff'd, 661 F.3d 623 (11th Cir. 2011)(Unpublished).
Damages available.
- Georgia law allowing the recovery of general and punitive damages for fraudulent conveyances survived the enactment of Georgia's Uniform Fraudulent Transfers Act, O.C.G.A. § 18-2-70 et seq. Interfinancial Midtown, Inc. v. Choate Constr. Co., 343 Ga. App. 793, 806 S.E.2d 255 (2017).
Statute mirrors Bankruptcy Code.
- As with actual fraud under Georgia law, both O.C.G.A. §§ 18-2-74(a)(2)(B) and18-2-75 substantially mirror the constructive fraud claims under the Bankruptcy Code. Pettie v. Bonertz (In re LendXFinancial, LLC), Bankr. (Bankr. N.D. Ga. Mar. 16, 2012).
Analysis same as under 11 U.S.C.
§ 548(a)(1)(a). - O.C.G.A. § 18-2-74(a)(1) substantially mirrors 11 U.S.C. § 548(a)(1)(A) of the Bankruptcy Code. The Georgia statutes are different in that a creditor may recover property up to four years after the transfer occurred under O.C.G.A. § 18-2-79. Pettie v. Bonertz (In re LendXFinancial, LLC), Bankr. (Bankr. N.D. Ga. Mar. 16, 2012).
Cited in In re Davis, Bankr. (Bankr. N.D. Ga. July 9, 2007); EMM Credit, LLC v. Remington, 343 Ga. App. 710, 808 S.E.2d 96 (2017).
RESEARCH REFERENCES
C.J.S.
- 37 C.J.S., Fraudulent Conveyances, § 74 et seq.