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Wallin v. Wallin

Court of Appeals of Georgia, Fourth Division

May 18, 2017

WALLIN et al.

          DILLARD, P. J., RAY and SELF, JJ.

          Dillard, Presiding Judge.

         In 2009, Cassie Wallin filed a lawsuit against her then father-in-law, Eugene ("Gene") Wallin, and her soon-to-be-former husband, Jeremy Wallin, asserting claims for breach of an oral agreement and quantum meruit based on Gene's refusal to deed a parcel of property to her. Following trial, a jury awarded $276, 000 to Cassie on her quantum meruit claim, and shortly thereafter, the trial court entered judgment, affirming that award.[1] But that same day, Gene Wallin transferred the subject property, via a security deed, to his brother's former wife, Linda Wallin. Subsequently, Cassie filed suit against Gene, Linda, and Jeremy, claiming that the transfer of the property was fraudulent and, thus, should be set aside. And following a bench trial, the court agreed and voided the transfer. Gene, Linda, and Jeremy (collectively "appellants") now appeal, arguing that the court erred in ruling the transfer was fraudulent under OCGA § 18-2-70 et seq. and in entering judgment against Jeremy when he was not a party to the allegedly fraudulent security deed. For the reasons set forth infra, we reverse the trial court's judgment voiding the transfer.

         We first note that on appellate review of a bench trial, "the factual findings shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses."[2] Importantly, in a bench trial, the judge sits as trier of fact, and "the court's findings are analogous to a jury's verdict and should not be disturbed if there is any evidence to support them."[3] But this Court reviews any questions of law decided by the trial court de novo.[4]

         So viewed, the record shows that in 1990, Gene's brother, Jack Wallin, and Jack's wife, Linda, purchased the subject property, which is located at 317 Deer Head Cove Road in Rising Fawn, Georgia, by obtaining a mortgage for $127, 000 and executing a security deed in favor of the lender, Citizens Bank & Trust. On May 12, 1994, Jack and Linda conveyed the property to Gene, via a warranty deed, but the parties executed no promissory note at that time, and instead, Gene made mortgage payments directly to Citizens Bank & Trust. Moreover, Jack and Linda retained possession of the property and, in fact, operated a business on it for several years.

         In 2002, Jack and Linda divorced, and on January 29 of that year, allegedly as a means for Jack to satisfy part of the couples' divorce settlement, Gene executed a promissory note in favor of Linda for $150, 000. The promissory note, however, mentioned no collateral. At the same time, Gene executed a security deed in favor of Linda, pledging the property as collateral for the $150, 000 promissory note, but this deed was never recorded.

         Thereafter, Cassie and her then-husband, Jeremy, Gene's son, rented the property from Gene but paid rent directly to Linda. During that time, Cassie and Jeremy made significant improvements to the property and operated two businesses on it for several years. In addition, Cassie and Jeremy paid the mortgages, insurance, and taxes on the property, allegedly under an oral agreement with Gene that, if they did so, he would deed the property to them. But in 2009, when Gene purportedly breached that agreement, Cassie filed suit against him and her soon-to-be-former husband, Jeremy, seeking damages on claims of breach of contract and quantum meruit.[5]

         As previously noted, on April 8, 2011, following trial, a jury awarded Cassie $276, 000 on her quantum meruit claim, and on May 12, 2011, the trial court affirmed the jury's verdict and entered a judgment in favor of Cassie.[6] On that very same day, and with the assistance of the same counsel who represented him at trial, Gene executed a second security deed in favor of Linda, again pledging the subject property as collateral for the 2002 promissory note. Eight days later, unlike the 2002 deed, that deed was recorded.

         On May 25, 2011, five days after the second deed from Gene to Linda was recorded, Cassie obtained a writ of fieri facias in the amount of $276, 000 against Gene and Jeremy.[7] But shortly after doing so, Cassie learned of the May 12, 2011 security deed that Gene had executed in favor of Linda. And on November 23, 2011, following unsuccessful efforts to collect on the judgment, Cassie filed suit against Gene, Linda, and Jeremy, alleging that the subject property was fraudulently conveyed and, thus, seeking to have the second deed voided.

         After discovery, the case proceeded to a bench trial, during which all of the parties testified. Specifically, during Gene's testimony, he conceded that he executed the second security deed so that Linda would have priority over Cassie to satisfy the debt he owed Linda under the 2002 promissory note. But Gene's new counsel argued, inter alia, that even the unrecorded 2002 security deed gave Linda priority over Cassie's judgment. Nevertheless, at the conclusion of the bench trial, the court entered an order finding that the conveyance was fraudulent because it was executed "to defeat and hinder" Cassie's ability to collect on her judgment and voiding it on such grounds. Subsequently, Gene, Jeremy, and Linda filed a motion for reconsideration, which the trial court denied. This appeal follows.

         1. The appellants contend that the trial court erred in ruling that Gene's May 12, 2011 conveyance of the subject property to Linda, via a security deed, was fraudulent under the Uniform Fraudulent Transfers Act ("UFTA"), OCGA § 18-2-70 et seq.[8] We agree.

         Under the UFTA, "[a] transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation . . . [w]ith actual intent to hinder, delay, or defraud any creditor of the debtor[.]"[9] And OCGA § 18-2-74 (b) lists several factors, colloquially known as "badges of fraud, "[10] that "consideration may be given [to], among other factors, " in determining whether a fraudulent transfer has been made with actual intent to defraud a creditor:

(1) [t]he transfer or obligation was to an insider; (2) [t]he debtor retained possession or control of the property transferred after the transfer; (3) [t]he transfer or obligation was disclosed or concealed; (4) [b]efore the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit; (5) [t]he transfer was of substantially all the debtor's assets; (6) [t]he debtor absconded; (7) [t]he debtor removed or concealed assets; (8) [t]he value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred; (9) [t]he debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred; (10) [t]he transfer occurred shortly before or shortly after a substantial debt was incurred; and (11) [t]he debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.[11]

         Thus, a creditor who can show a fraudulent conveyance has "numerous remedies under the Act including but not limited to avoidance of the transfer and ...

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