SE Property Holdings, LLC v. Braswell et al

Filing 21

Order granting 12 MOTION to Dismiss filed by Vennie T. Braswell, George S. Braswell. Plaintiff may file an amended complaint by 9/3/2013, failing which this file will be closed and judgment will be entered. Signed by Chief Judge William H. Steele on 8/21/2013. (tgw)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
SE PROPERTY HOLDINGS, LLC,
Plaintiff,
v.
GEORGE S. BRASWELL, et al.,
Defendants.

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CIVIL ACTION 13-0267-WS-N

ORDER
This matter comes before the Court on defendants’ Motion to Dismiss (doc. 12). The
Motion has been briefed and is now ripe for disposition.
I.

Background.
This action is brought under the Alabama Uniform Fraudulent Transfer Act, Ala. Code

§§ 8-9A-1 et seq. (“AUFTA,” or the “Act”). According to the well-pleaded allegations of the
Complaint (doc. 1), defendant George Braswell is indebted to plaintiff SE Property Holdings,
LLC (“SEPH”), pursuant to his status as guarantor on various unpaid loans that SEPH now owns
and holds, including pre-2009 loans made by Vision Bank to nonparties Bama Bayou, LLC,
Marine Park, LLC, and Sundance, LLC. SEPH filed suit to challenge a pair of conveyances of
real property made by George Braswell to defendant Vennie Braswell on or about May 19, 2009,
alleging that said transfers were violative of AUFTA.1

1

As discussed infra, the Act imposes liability for several different kinds of
transfers. The Complaint does not specify the particular sections of AUFTA that SEPH invokes,
nor does it identify with clarity which category or categories of fraudulent transfer plaintiff
contends are in issue. While this is not a per se pleading defect mandating dismissal, the
resulting ambiguity in the Complaint has needlessly cluttered and complicated the Rule 12(b)(6)
analysis. It would have been a relatively simple matter for SEPH to designate in its pleading
which sections of the Act it claims the Braswells violated, rather than trading in generalities and
citing AUFTA as a generic whole. Certainly, doing so would have streamlined the briefing and
review process on the Braswells’ Motion to Dismiss, with no countervailing detriment to SEPH.

Count One of the Complaint alleges that the conveyances “constitute fraudulent
transfers” under AUFTA because of, inter alia, the following facts and circumstances: (1)
“George Braswell was insolvent at the time of the transfer or became insolvent as a result of such
transfer,” (2) “the transfer was made to an insider or related party,” (3) “the transferor did not
receive reasonably equivalent value in exchange for the transfer,” (4) “the transfer was made for
an antecedent debt,” and (5) “the transfer was made with the actual intent to hinder, delay and/or
defraud … SEPH and/or other creditors.” (Doc. 1, ¶ 8.) The Complaint does not set forth
supporting facts to bolster any of these statements, nor does it cite any specific section(s) of
AUFTA. Nonetheless, on the basis of these allegations, plaintiff demands in Count One that the
purportedly fraudulent transfers be set aside and that a monetary judgment be entered against the
Braswells, jointly and severally, for compensatory and punitive damages.2 Count Two of the
Complaint adds little of substance, except to set forth an additional allegation that Vennie
Braswell conspired with George Braswell to effectuate the purportedly fraudulent transfers.
Defendants now seek dismissal of the Complaint on two distinct grounds. First, to the
extent that SEPH brings claims of insider transactions or constructive fraud under the Act, the
Braswells maintain that they are time-barred and must be dismissed. Second, to the extent that
SEPH brings claims of actual fraud under AUFTA, the Braswells contend that the Complaint
flunks a Twombly / Iqbal analysis because it pleads insufficient factual content.
II.

Analysis.
A.

Legal Standard for Rule 12(b)(6) Motions.

To withstand Rule 12(b)(6) scrutiny and satisfy Rule 8(a), a plaintiff must plead “enough
facts to state a claim to relief that is plausible on its face,” so as to “nudge[ ] [his] claims across
the line from conceivable to plausible.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127
S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
2

AUFTA provides that avoidance of a transfer is an authorized remedy for
violation of the Act. See Ala. Code § 8-9A-7(a)(1) (remedies available to creditors include
“[a]voidance of the transfer to the extent necessary to satisfy the creditor’s claim”). Also, the
Alabama Supreme Court has confirmed that “the law permits damages awards in cases involving
fraudulent transfers” under the catch-all remedies clause of Ala. Code § 8-9A-7(a)(3)(c). Johns
v. A.T. Stephens Enterprises, Inc., 815 So.2d 511, 516 (Ala. 2001).

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for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d
868 (2009) (citation omitted). “This necessarily requires that a plaintiff include factual
allegations for each essential element of his or her claim.” GeorgiaCarry.Org, Inc. v. Georgia,
687 F.3d 1244, 1254 (11th Cir. 2012). These minimum pleading standards “require[ ] more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Twombly, 550 U.S. at 555. As the Eleventh Circuit has explained, Twombly/Iqbal
principles require that a complaint’s allegations be “enough to raise a right to relief above the
speculative level.” Speaker v. U.S. Dep’t of Health and Human Services Centers for Disease
Control and Prevention, 623 F.3d 1371, 1380 (11th Cir. 2010) (citations omitted).
For purposes of a Rule 12(b)(6), the Court accepts as true the well-pleaded factual
allegations of the Complaint and draws all reasonable inferences in the plaintiff’s favor. See,
e.g., Keating v. City of Miami, 598 F.3d 753, 762 (11th Cir. 2010) (on a motion to dismiss under
Rule 12(b)(6), court must “accept[] the facts alleged in the complaint as true” and “draw[] all
reasonable inferences in the plaintiff’s favor”). That said, “if allegations are indeed more
conclusory than factual, then the court does not have to assume their truth.” Chaparro v.
Carnival Corp., 693 F.3d 1333, 1337 (11th Cir. 2012); see also Mamani v. Berzain, 654 F.3d
1148, 1153 (11th Cir. 2011) (“Legal conclusions without adequate factual support are entitled to
no assumption of truth.”). The Court’s review of the Braswells’ Motion to Dismiss is informed
by these principles.
B.

Salient Features of Alabama Uniform Fraudulent Transfer Act.

“The purpose of the AUFTA is to prohibit the fraudulent transfer of property by a debtor
who intends to defraud creditors by placing assets beyond their reach.” American National Red
Cross v. ASD Specialty Healthcare, Inc., 888 So.2d 464, 465 (Ala. 2003) (citation and internal
quotation marks omitted). “The AUFTA statutory scheme includes four different types of
‘fraudulent transfers’ upon which liability may be predicated.” American National Red Cross v.
ASD Specialty Health Care, Inc., 325 F. Supp.2d 1322, 1336 (S.D. Ala. 2002). First, a debtor’s
transfer is fraudulent as to a creditor whose claim arose before or after the transfer “if the debtor
made the transfer with actual intent to hinder, delay, or defraud any creditor.” Ala. Code § 8-9A4(a). Second, a debtor’s transfer is fraudulent as to a creditor whose claim arose before or after
the transfer “if the debtor made the transfer without receiving a reasonably equivalent value …
and the debtor [either] [w]as engaged or about to engage in a business or a transaction for which

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the remaining assets of the debtor were unreasonably small … or … [i]ntended to incur, or
believed or reasonably should have believed that he or she would incur, debts beyond his or her
ability to pay as they became due.” Id. at § 8-9A-4(c). Third, a debtor’s transfer is fraudulent as
to a creditor whose claim arose before the transfer “if the debtor made the transfer without
receiving a reasonably equivalent value … and the debtor was insolvent.” Id. at § 8-9A-5(a).
Fourth, a debtor’s transfer is fraudulent as to a creditor whose claim arose before the transfer “if
the transfer was made to an insider for an antecedent debt and the debtor was insolvent at that
time and the insider had reasonable cause to believe that the debtor was insolvent.” Id. at § 89A-5(b). These types of claims may be broadly classified as claims for actual fraudulent transfer
(violation of § 8-9A-4(a)), claims for constructive fraudulent transfer (violation of §§ 8-9A-4(c)
or 8-9A-5(a)), and what the Court will refer to as claims for “insider” constructive fraudulent
transfer (violation of § 8-9A-5(b)).
The distinctions among these kinds of claims are not purely academic; rather, there are
important differences for limitations purposes. Under the Act, a claim for actual fraudulent
transfer involving real property must be brought within 10 years after the transfer. See Ala. Code
§ 8-9A-9(1). Claims for constructive fraudulent transfer by creditors whose claims arose prior to
the transfer must be brought within four years. Id. at § 8-9A-9(3). And claims for insider
constructive fraudulent transfer must be brought within one year. Id. at § 8-9A-9(5).
As framed by defendants’ Rule 12(b)(6) Motion and the associated briefing, the task at
hand is to determine (i) which types of AUFTA claims SEPH is pursuing, (ii) whether those
claims are adequately pleaded, and (iii) whether they are timely under the applicable limitations
provisions. The undersigned will examine each category of claim (actual fraudulent transfer,
constructive fraudulent transfer, insider constructive fraudulent transfer) separately.
C.

Insider Constructive Fraudulent Transfer.

SEPH’s Complaint invokes the language of insider constructive fraud by alleging that
“the transfer was made to an insider or related party” and “the transfer was made for an
antecedent debt.” (Doc. 1, ¶ 8.) Again, § 8-9A-5(b) provides that a transfer is fraudulent if
“made to an insider for an antecedent debt” and if certain other circumstances exist. In their
Motion to Dismiss, the Braswells correctly point out that the statute of limitations for insider
constructive fraud claims brought under § 8-9A-5(b) is one year. See Ala. Code § 8-9A-9(5).
Here, of course, the allegedly fraudulent transfers occurred on May 19, 2009, but the Complaint

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was not filed until May 17, 2013, nearly four years later. On that basis, defendants argue that
any claim by SEPH for insider constructive fraud pursuant to § 8-9A-5(b) should be dismissed as
time-barred.
In response, plaintiff does not interpose a tolling argument or defend the timeliness of
this cause of action. Instead, SEPH states in a footnote that it “is not pursuing a claim pursuant
to Ala. Code § 8-9A-5(b)” (doc. 17, at 3 n.1), even though the plain language of its pleading
suggests otherwise. Thus, the § 8-9A-5(b) claim pleaded in the Complaint appears to be
untimely and has been disavowed by SEPH. For both of these reasons, defendants’ Motion to
Dismiss is granted as to the insider constructive fraudulent transfer claim embedded in Count I,
and that claim is dismissed without prejudice.
D.

Constructive Fraudulent Transfer.

With regard to constructive fraudulent transfer, defendants first argue that the Complaint
contains no such claim. (Doc. 13, at 12 (“SEPH alleged an ‘actual intent’ to defraud claim and
an ‘insider’ claim, but did not allege a constructive fraud claim.”).) Not so, says SEPH. Plaintiff
has the better argument. The Complaint’s allegations that George Braswell “did not receive
reasonably equivalent value for the transfer” and that he “was insolvent at the time of the transfer
or became insolvent as a result of such transfer” (doc. 1, ¶ 8) are couched in the vernacular of
constructive fraudulent transfer, and invoke buzzwords from § 8-9A-4(c) and § 8-9A-5(a). See,
e.g., Baggett v. Baggett, 870 So.2d 735, 739 (Ala.Civ.App. 2003) (“A constructive fraudulent
transfer occurs when a debtor transfers assets to another without consideration, and the debtor
was, or became, insolvent at the time of the transfer.”) (citations omitted). Whatever else may be
said, the plain language of the pleading demonstrates that SEPH is pursuing a constructive
fraudulent claim against the Braswells.
Alternatively, defendants maintain that the constructive fraudulent transfer claim should
be dismissed because it has not been adequately pleaded to satisfy minimum standards under
Rule 8, as articulated by the Supreme Court in Twombly and Iqbal. To recapitulate, a complaint
filed in federal court cannot survive Rule 12(b)(6) review unless it “contain[s] sufficient factual
matter, accepted as true, to state a claim to relief that is plausible on its face.” Chaparro, 693
F.3d at 1337 (citation omitted). Thus, “[p]laintiffs must plead all facts establishing an
entitlement to relief with more than labels and conclusions or a formulaic recitation of the
elements of a cause of action.” Resnick v. AvMed, Inc., 693 F.3d 1317, 1324 (11th Cir. 2012)

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(citation and internal quotation marks omitted); Chaparro, 693 F.3d at 1337 (“A complaint that
provides ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action’
is not adequate to survive a Rule 12(b)(6) motion to dismiss.”) (citation omitted). “The
plausibility standard calls for enough fact to raise a reasonable expectation that discovery will
reveal evidence of the defendant’s liability.” Miyahira v. Vitacost.com, Inc., 715 F.3d 1257,
1265 (11th Cir. 2013) (citation and internal quotation marks omitted). Binding precedents have
endorsed a two-step approach under which courts first identify “pleadings that, because they are
no more than conclusions, are not entitled to the assumption of truth,” and then “turn to the wellpleaded factual allegations and, assuming their veracity, determine whether they plausibly give
rise to an entitlement to relief.” Resnick, 693 F.3d at 1325 (citations and internal quotation
marks omitted).
For a transfer to be constructively fraudulent under § 8-9A-4(c), the debtor must have
“made the transfer without receiving a reasonably equivalent value” and the debtor must either
(i) have been engaged in a business or transaction for which his remaining assets were
“unreasonably small in relation to the business or transaction;” or (ii) have intended to incur, or
believed that he would incur, debts beyond his ability to pay. With respect to these elements, the
Complaint states only a conclusory allegation that “the transferor did not receive reasonably
equivalent value in exchange for the transfer.” (Doc. 1, ¶ 8.) Significantly, the pleading is
devoid of factual allegations that might lend shape and substance to this formulaic recitation of
an element. There are no well-pleaded facts plausibly suggesting that George Braswell did not
receive reasonably equivalent value for the subject real property. All we have is plaintiff’s
conclusory say-so, which is not entitled to the assumption of truth under Iqbal / Twombly.3

3

In response, SEPH relies on “[t]he attachments to the Complaint, property deeds
reflecting George Braswell’s transfers of two pieces of real property for $10.00 each.” (Doc. 17,
at 8.) But the Complaint itself does not allege that George Braswell received just $10 for each
parcel. Although the warranty deeds are attached to the Complaint (and are properly considered
in the Rule 12(b)(6) analysis), those deeds state that George Braswell transferred each piece of
real property to Vennie Braswell “for and in consideration of the sum of TEN AND NO/100
DOLLARS ($10.00) cash and other good and valuable considerations.” (Doc. 1, Exhs. A & B.)
What are the “other good and valuable considerations”? They must be considered in a
“reasonably equivalent value” analysis, yet SEPH waves them aside without explanation and
asks that its § 8-9A-4(c) claim be deemed plausible based on a selective reading of the deeds that
omits language harmful to plaintiff’s position. Accepting the well-pleaded factual allegations of
(Continued)
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Exacerbating the problem, the Complaint says nothing whatsoever (conclusory or otherwise)
with regard to the element set forth in § 8-9A-4(c)(1)-(2), to-wit: that the debtor’s remaining
assets were “unreasonably small” for the business or transaction in which he was engaged, or
that he intended to incur, or believed he would incur, debts beyond his ability to pay. The
Complaint, as pleaded, sidesteps that element altogether. This omission is fatal to the claim on
Rule 12(b)(6) review. See GeorgiaCarry.Org, 687 F.3d at 1254 (pleading standards require that
“a plaintiff include factual allegations for each essential element of his or her claim”).
Accordingly, in its present form, SEPH’s claim for constructive fraudulent transfer under § 89A-4(c) fails to state a claim upon which relief can be granted.
The same determination attaches to plaintiff’s attempt to state a constructive fraudulent
transfer claim under § 8-9A-5(a). That section provides that a transfer is fraudulent if the debtor
did not receive “reasonably equivalent value” and if the debtor was “insolvent.” As already
stated, the Complaint recites no factual allegations plausibly supporting the conclusory statement
that George Braswell did not receive reasonably equivalent value for the subject property
transfers. Moreover, the Complaint articulates no facts that might support a conclusion that
George Braswell is “insolvent” as that term is defined in Alabama Code § 8-9A-2. All plaintiff
has done is cut and paste the statutory element as a conclusory label that “George Braswell was
insolvent at the time of the transfer or became insolvent as a result of such transfer,” with no

the Complaint as true, the Court has no idea whether George Braswell received reasonably
equivalent value for the subject transfers because the Complaint does not allege what he received
or how it was inadequate. On these factual allegations, SEPH’s ability to show a transfer for less
than reasonably equivalent value does not rise above the speculative level. Nor does SEPH
strengthen its position by protesting that it “cannot be expected to already know all of the facts
regarding the circumstances and intent of George Braswell’s decision to transfer real property to
his wife for $10.00.” (Doc. 17, at 5.) Leaving aside the facts that the Complaint neither alleges a
familial relationship between George Braswell and Vennie Braswell nor alleges that the
consideration for each transfer was just $10.00, this argument fails because applicable procedural
rules (as interpreted by the Supreme Court) require that a plaintiff only bring claims for which it
has a plausible basis in fact. If SEPH is simply guessing – with no factual predicate – that
George Braswell is insolvent or that he did not receive reasonably equivalent value, then plaintiff
falls well short of relevant pleading standards.

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supporting facts. That omission also violates Twombly principles and is not entitled to the
assumption of truth, thereby rendering SEPH’s § 8-9A-5(a) claim inadequately pleaded.4
E.

Actual Fraudulent Transfer.

Plaintiff also proceeds against the Braswells on an actual fraudulent transfer theory.
Once again, however, defendants balk that the Complaint as presently constituted lacks sufficient
factual heft to nudge SEPH’s claim from the conceivable to the plausible. Pursuant to AUFTA, a
transfer is fraudulent “if the debtor made the transfer with actual intent to hinder, delay, or
defraud any creditor of the debtor.” Ala. Code § 8-9A-4(a). To guide courts in determining
actual intent, the Act delineates a nonexhaustive list of 11 factors that may be considered, such as
whether the transfer was to an insider, whether the debtor retained possession or control of the
property, whether the transfer was of substantially all the debtor’s assets, whether the value of
consideration received was reasonably equivalent to that of the asset, whether the debtor was
insolvent, and so on. See id. at § 8-9A-4(b).5
In response to the Rule 12(b)(6) Motion, SEPH argues that the Complaint presents
substantial facts as to these statutory factors demonstrating George Braswell’s actual intent to
defraud. Review of the pleading shows otherwise. Rather than specific facts, the Complaint sets
forth nothing more than conclusory labels concerning various factors, such as “George Braswell
4

As an important clarification, the Court is dismissing plaintiff’s constructive
fraudulent transfer claims under § 8-9A-4(c) and § 8-9A-5(a) only because they were
inadequately pleaded under Twombly / Iqbal tenets. The Court does not adopt or endorse
defendants’ arguments that such claims should be dismissed as untimely; to the contrary, because
a fair reading of the Complaint is that it does assert constructive fraudulent transfer claims
against the Braswells, those claims were timely filed within the four-year limitations period
established by § 8-9A-9(3). That plaintiff must supplement the factual allegations of these
claims in order for them to pass Twombly muster does not render them untimely, and any
amendment by plaintiff to bolster those previously asserted claims would “relate back” to the
original, timely Complaint by operation of Rule 15(c), Fed.R.Civ.P.
5

Alabama courts have summarized this statutory scheme as follows: “An actual
fraudulent transfer is one made by a debtor who transfers assets with actual intent to hinder,
delay, or defraud any creditor of the debtor. … The trial court considers several factors in
determining whether the debtor possessed the requisite intent, including to whom the transfer
was made, the amount of assets transferred, and the financial condition of the debtor before and
after the transfer.” Baggett, 870 So.2d at 739 (citations and internal quotation marks omitted);
see also Cox v. Hughes, 781 So.2d 197, 201 (Ala. 2000) (“Actual fraud denotes the actual mental
operation of intending to defeat or delay the rights of the creditor.”) (citation omitted).

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was insolvent at the time of the transfer or became insolvent as a result of such transfer,” “the
transfer was made to an insider or related party,” “the transferor did not receive reasonably
equivalent value,” and “the transfer was made with the actual intent to hinder, delay, and/or
defraud … SEPH.” (Doc. 1, ¶ 8.) No facts are recited as to any of these factors, leaving the
Court and the Braswells in the dark as to the factual basis (if any) for these contentions. For the
reasons stated supra, this kind of showing falls well short of the basic pleading requirements of
Rule 8(a), as prescribed in the Twombly / Iqbal line of authorities.6
III.

Conclusion.
For all of the foregoing reasons, it is ordered as follows:
1.

Defendants’ Motion to Dismiss (doc. 12) is granted;

2.

Plaintiff’s claim for insider constructive fraudulent transfer pursuant to Alabama
Code § 8-9A-5(b) is dismissed without prejudice as untimely and abandoned;

3.

Plaintiffs’ claims for constructive fraudulent transfer and actual fraudulent
transfer pursuant to Alabama Code §§ 8-9A-4(a), 8-9A-4(c) and 8-9A-5(a) are
dismissed without prejudice for failure to comport with minimum pleading
standards under the Federal Rules of Civil Procedure; and

4.

Notwithstanding the foregoing, plaintiff may file an Amended Complaint that
corrects the pleading deficiencies as to the Section 4(a), 4(c) and 5(a) claims on or

6

Notably, in opposing the Motion to Dismiss and attempting to bolster its pleading,
SEPH relies on unpleaded facts. For example, plaintiff argues that “it is difficult to imagine facts
more ‘suggestive of proscribed conduct’ than a debtor’s transfer of two pieces of real property to
his wife for $20.00.” (Doc. 17, at 6-7.) But the Complaint does not allege that the Braswells are
husband and wife, or that their shared last name is anything other than happenstance. Nor does
the Complaint allege that George Braswell transferred those parcels to Vennie Braswell for
$20.00; instead, it merely attaches deeds which specify the consideration for each transfer as
being $10.00 plus “other good and valuable considerations,” which SEPH does not acknowledge.
Similarly, although plaintiff argues in its brief that George Braswell retained control or
possession of the real property after transferring it to Vennie Braswell, and that the transfer
consumed substantially all of his assets, those facts are not pleaded or supported in the
Complaint. The sufficiency of plaintiff’s Complaint must be evaluated based on its contents, not
those of a subsequent memorandum of law.

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before September 3, 2013, failing which this file will be closed and judgment
will be entered dismissing the Complaint without prejudice.
DONE and ORDERED this 21st day of August, 2013.

s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

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