FIRST STATE BANK OF NORTHWEST ARKANSAS v. THE MCCLELLAND QUALIFIED PERSONAL RESIDENCE TRUST et al

Filing 73

ORDER DENYING 35 Motion for Summary Judgment; DENYING 45 Motion for Summary Judgment; DENYING 56 Motion for Partial Summary Judgment. Ordered by US DISTRICT JUDGE MARC THOMAS TREADWELL on 9/21/2015. (tlh) (Main Document 73 replaced and NEF regenerated on 9/21/2015) (tlh).

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
MACON DIVISION
FIRST STATE BANK OF NORTHWEST
ARKANSAS,
Plaintiff,
v.
THE MCCLELLAND QUALIFIED
PERSONAL RESIDENCE TRUST, et al.,
Defendants.

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CIVIL ACTION NO. 5:14-CV-130 (MTT)

ORDER
Defendant Joseph P. McClelland, Jr., Defendant The McClelland Qualified
Personal Residence Trust (the “Trust”), and Plaintiff First State Bank of Northwest
Arkansas have moved for summary judgment. (Docs. 35; 45; 56). For the following
reasons, the motions are DENIED.
I. BACKGROUND1
In 2005 and 2006, McClelland, Jr. took out two loans – Loan 2000 and Loan
6800 – from First Georgia Community Bank (“First Georgia”), where he served on the
board of directors. (Docs. 61 at 75:7-13; 66-1 at ¶ 1). According to McClelland, Jr., as
First Georgia grew and needed additional capital it had an “agreement” with its
directors: they would borrow money from other banks, buy stock from First Georgia, and
then use that stock as collateral to borrow money from First Georgia. (Doc. 61 at 75:776:21). Thus, McClelland, Jr. understood that Loan 2000 and Loan 6800 were cross-

1
The following facts are viewed in the light most favorable to the Defendants.

collateralized against all of his collateral at First Georgia, including the stock he owned.
(Doc. 61 at 20:24-21:12, 24:8-13).
In late 2007, McClelland, Jr. was diagnosed with cancer. (Doc. 61 at 73:2274:2). Dan Fears, who also served on the board of directors, suggested to McClelland,
Jr. that he make sure his estate plan was in order. (Doc. 61 at 67:25-68:9). Around the
same time, McClelland, Jr. believed the government was considering reducing the
estate tax exemption level from $5 million to $1.5 million. (Doc. 61 at 68:10-13).
Accordingly, McClelland, Jr. “decided to undertake some estate planning efforts” and
hired his attorney and son, Joseph P. McClelland, III, to create an estate plan. (Doc. 61
at 67:25-69:6). McClelland, Jr. testified that the purposes of estate planning were to
minimize the amount of tax he needed to pay and to “keep the family property.” (Doc.
61 at 143:14-23). He testified “[his] plan was to move tangible assets to the [T]rust and
to [T]he McClelland [Family Limited Partnership] [the “Partnership”] and to keep all
negotiable stuff, cash and stocks and stuff, outside. That was going to be my
retirement.”2 (Doc. 61 at 72:24-73:4).
In March 2008, McClelland, Jr. made five transfers of real property to the
Partnership and one transfer to the Trust.3 (Doc. 66-1 at ¶¶ 2, 4, 6, 8, 10, 12). On June
17, 2008, he transferred a cabin in North Carolina to the Partnership. (Docs. 61 at
170:1-4; 66-1 at ¶ 15). The properties transferred in March 2008 were transferred by

2
The general partner of the Partnership is The McClelland Family LLC, whose members are
Allison McClelland, McClelland, Jr.’s daughter, and McClelland, III. (Doc. 66-1 at ¶ 40). The
limited partners of the Partnership are McClelland, Jr., Allison McClelland, and McClelland, III.
(Doc. 66-1 at ¶ 41). The trustee of the Trust is McClelland, III and the beneficiaries of the Trust
are McClelland, Jr., Allison McClelland, and McClelland, III. (Doc. 66-1 at ¶ 39).
3

All of this property is located in Butts County, Georgia. (Doc. 66-1 at ¶ 26). The property
transferred to the Trust was McClelland, Jr.’s personal residence, and the remaining property is
the surrounding acreage. (Docs. 61 at 81:2-4, 120:21-121:5; 66-1 at ¶¶ 26-27). 
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Deed of Gift for a sale price of $0.00 and had a provable “As-Is” market value of
$800,000.00. (Doc. 66-1 at ¶¶ 3, 5, 7, 9, 11, 13, 16). The North Carolina cabin had a
provable “As-Is” market value of $114,000.00, and the recording stamp for the transfer
shows that an excise tax of $0.00 was assessed.4 (Doc. 66-1 at ¶¶ 15, 17). As of
March 2008, McClelland, Jr. testified that he still had around $50,000 in cash, around
$500,000 in “excess collateral” at First Georgia, meaning the value of the stock he had
“versus the notes it was collateralizing,” and that First Georgia owed him $97,000 from
his deferred compensation and bank-owned life insurance. (Doc. 61 at 72:3-20).
Notwithstanding the apparent lack of consideration for the transfers, McClelland,
Jr.; McClelland, III; Allison McClelland; and Leila M. Robinson, McClelland, Jr.’s ex-wife,
testified that the transfers were made for reasonably equivalent value. Specifically,
McClelland, Jr., Allison McClelland, and Robinson all testified that McClelland, Jr. had a
contract with Allison “that if she went to graduate school and maintained the NC
property, then she would be deeded the property.” (Docs. 45-3 at ¶ 2; 61 at 79:9-23;
45-5 at ¶ 1; 62 at 29:12-17; 45-6 at ¶¶ 2-3). Allison graduated from graduate school
and maintained and continues to maintain the property. (Docs. 45-3 at ¶¶ 3-4; 45-5 at
¶¶ 2-4; 62 at 29:12-17). Moreover, McClelland, Jr. testified that he had an
understanding with McClelland, III that he would transfer the property in exchange for
his son’s legal work and that this has “kind of been implied since I paid for his … law
school.” (Doc. 61 at 81:5-15). McClelland, III testified that he provided $19,000 of legal
work regarding the estate planning efforts and that he has generally provided almost

4
Under North Carolina law, “[a]n excise tax is levied on each instrument by which any interest in
real property is conveyed to another person. The tax rate is one dollar ($1.00) on each five
hundred dollars ($500.00) or fractional part thereof of the consideration or value of the interest
conveyed.” N.C. GEN. STAT. § 105-228.30(a).
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$175,000 of legal representation to McClelland, Jr., the Partnership, and the Trust.5 
(Docs. 45-4 at ¶¶ 4-5; 63 at 25:7-26:17). Finally, McClelland, Jr. testified that he had a
mortgage of $220,000 on his personal residence at the time he transferred it to the
Trust.  (Doc. 45-3 at ¶ 6).
McClelland, Jr. testified that he “notified First Georgia of all transfers into the
Partnership and Trust with an affidavit and by telling them in multiple conversations
before and after the transfers.” (Doc. 35-3 at ¶ 4). The “affidavit” McClelland, Jr. refers
to is a financial report, dated March 27, 2008, which he prepared “in connection with
[his] service as a bank director in Georgia” (the “Financial Report”). (Docs. 61 at 74:812, 282-83). McClelland, Jr. created the Financial Report because “[a]ll board of
directors are required to submit this at the beginning of each year for the financial
records required by the State of Georgia.” (Doc. 61 at 30:20-31:14). Under “Assets,”
and in the category “Real Estate – from Schedule A,” McClelland, Jr. wrote, “N/A.”
(Doc. 61 at 282). Under “Schedule A – Real Estate Owned,” McClelland, Jr. listed
“Residence,” “NC house,” and “Land +- 70 Acres” and, under “Title in Whose Name,” he
wrote, “The McClelland Qualified Personal Residential Trust,” “The McClelland Family
Limited Partnership,” and “same,” respectively.6 (Doc. 61 at 283). When asked with
whom he had the “multiple conversations,” McClelland, Jr. testified that “all of the board

5
McClelland, Jr. testified that he “transferred [his] interest in the Trust and part of the
Partnership property in exchange for the debt owned [sic] by Allison and my son’s legal work.”
(Doc. 45-3 at ¶ 5). Allison testified that she “transferred [her] interest in the North Carolina
property for [her] interest in the Partnership and Trust.” (Doc. 45-5 at ¶ 5). McClelland, III
testified that he “provided legal representation in exchange for [his] ownership of the Trust and
part of the Partnership.” (Doc. 45-4 at ¶ 1).
6

The Financial Report also lists as assets $40,000 in cash, $80,000 in “[n]otes, loans and other
accounts receivable considered good and collectible,” and $846,000 in “marketable securities,”
including $840,000 in “First GA Community Bank.” (Doc. 61 at 282-83).
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members knew that I had moved those assets. Several of the board members knew I
was going to move the assets, ‘cause they’re the ones that told me I should back in
2007, specifically Dan Fears, who was an attorney and also on the board with me that
started me looking at that. And in a small bank in a small town, there’s no secrets. You
kind of tell everybody.” (Doc. 61 at 74:13-22).7
McClelland, Jr. resigned from the board of directors in May 2008. (Doc. 61 at
133:14-19, 166:3-7). He signed the final renewal of Loan 2000 on August 18, 2008, and
the final renewal of Loan 6800 on July 11, 2008. (Doc. 61 at 20:7-14, 25:4-7). The
Plaintiff contends that Loan 2000 and Loan 6800 went into default on November 17,
2008. (Doc. 56-1 at ¶ 18). The Defendants dispute this, claiming that “[Loan] 2000 was
due on November 17, 2008 but was in the process of being renewed.” (Doc. 66-1 at
¶ 18). At the time, McClelland, Jr. was expecting to receive almost $90,000 from his
deferred compensation and bank-owned life insurance and “had a line of credit for
about $30,000.” (Doc. 61 at 41:11-14). “Historically,” McClelland, Jr. would use those
“to keep all the notes current,” but “for some reason, when I went back in in November,
it had changed.” (Doc. 61 at 41:15-20). McClelland, Jr. testified that when Loan 2000
and Loan 6800 came due in November, he was discussing with First Georgia what to
do: “I asked for a line of credit. For some reason, something was going on. And before
we could reach an agreement or whatever, the bank failed.”8 (Doc. 61 at 39:24-40:13).

7
The Plaintiff’s business records regarding Loan 2000 and Loan 6800 contain the Financial
Report. (Doc. 41-2 at ¶¶ 4, 9).
8

When the bank failed all of McClelland, Jr.’s assets were seized. (Doc. 61 at 39:24-40:2, 1417). In January 2009, McClelland, Jr. completed and signed a financial statement that showed
him with a negative net worth. (Doc. 66-1 at ¶ 33). Beginning in early 2009, he failed to make
payments on the mortgage on his personal residence. (Doc. 66-1 at ¶ 28). He also defaulted
on two other loans by First Georgia and on a loan by McIntosh State Bank. (Doc. 66-1 at ¶¶ 31-5-

On December 5, 2008, First Georgia failed and went into receivership by the
Federal Deposit Insurance Corporation (“FDIC”). (Doc. 66-1 at ¶ 19). The FDIC sued
McClelland, Jr. to recover amounts due on Loan 2000 and Loan 6800 in the United
States District Court for the Northern District of Georgia9 and obtained a judgment
against him on February 22, 2011. (Doc. 66-1 at ¶ 21). First Georgia and the FDIC
refused to pay McClelland, Jr. his deferred compensation and bank-owned life
insurance.10 (Doc. 61 at 41:23-24). On December 1, 2011, the FDIC assigned its
interest in Loan 2000 and Loan 6800 and the related judgment to the Plaintiff. (Doc. 661 at ¶ 22). On March 18, 2013, the Plaintiff obtained an amended final judgment in the
Northern District of Georgia case in the amount of $73,983.83 after being allowed to
intervene as a plaintiff. (Doc. 66-1 at ¶ 23). The judgment remains unpaid in its
entirety. (Doc. 66-1 at ¶ 25).
The Plaintiff has moved for partial summary judgment, seeking to set aside the
seven transfers of property, which it contends are fraudulent, as well as damages,
injunctive relief, and the imposition of a constructive trust pursuant to Georgia’s Uniform
Fraudulent Transfers Act (“GUFTA”), O.C.G.A. § 18-2-70, et seq.11 (Doc. 56). The
Trust has moved for summary judgment, arguing it took in good faith and for a

32). It is undisputed that he was “out of work” for a year and a half after March 2008. (Doc. 661 at ¶ 37).
9

FDIC v. McClelland, 1:09-cv-2352-RLV (N.D. Ga.).

10

McClelland, Jr. filed a breach of contract action against First Georgia and the FDIC, alleging
that the Defendants breached the agreements regarding his deferred compensation and
bank-owned life insurance. McClelland v. First Ga. Cmty. Bank, 5:09-cv-256-CAR (M.D. Ga.).
Summary judgment was granted against McClelland, Jr. because his claims were barred
pursuant to 12 U.S.C. § 1823(e). Id.
11

The Plaintiff has not moved for summary judgment on its claim for attorney’s fees and
expenses of litigation pursuant to O.C.G.A. § 13-6-11.
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reasonably equivalent value under O.C.G.A. § 18-2-78. (Doc. 45). Finally, McClelland,
Jr. has moved for summary judgment, arguing he is entitled to dismissal as a matter of
law based on the defense of ratification and waiver. (Doc. 35).
II.

DISCUSSION

A. Summary Judgment Standard
A court must grant summary judgment “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). “A factual dispute is genuine only if ‘a reasonable
jury could return a verdict for the nonmoving party.’” Info. Sys. & Networks Corp. v. City
of Atlanta, 281 F.3d 1220, 1224 (11th Cir. 2002) (quoting United States v. Four Parcels
of Real Prop., 941 F.2d 1428, 1437 (11th Cir. 1991)). The burden rests with the moving
party to prove that no genuine issue of material fact exists. Id. The party may support
its assertion that a fact is undisputed by “citing to particular parts of materials in the
record, including depositions, documents, electronically stored information, affidavits or
declarations, stipulations (including those made for purposes of the motion only),
admissions, interrogatory answers, or other materials.” Fed. R. Civ. P. 56(c)(1)(A).
“If the moving party bears the burden of proof at trial, the moving party must
establish all essential elements of the claim or defense in order to obtain summary
judgment.” Anthony v. Anthony, 642 F. Supp. 2d 1366, 1371 (S.D. Fla. 2009) (citing
Four Parcels of Real Prop., 941 F.2d at 1438). The moving party must carry its burden
by presenting “credible evidence” affirmatively showing that, “on all the essential
elements of its case on which it bears the burden of proof at trial, no reasonable jury
could find for the nonmoving party.” Four Parcels of Real Prop., 941 F.2d at 1438. In

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other words, the moving party’s evidence must be so credible that, if not controverted at
trial, the party would be entitled to a directed verdict. Id.
“If the moving party makes such an affirmative showing, it is entitled to summary
judgment unless the nonmoving party, in response, ‘come[s] forward with significant,
probative evidence demonstrating the existence of a triable issue of fact.’” Id. (quoting
Chanel, Inc. v. Italian Activewear of Fla., Inc., 931 F.2d 1472, 1477 (11th Cir. 1991))
(alteration in original). However, “credibility determinations, the weighing of the
evidence, and the drawing of legitimate inferences from the facts are jury functions, not
those of a judge. ... The evidence of the non-movant is to be believed, and all justifiable
inferences are to be drawn in his favor.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
255 (1986). Thus, the Court “‘can only grant summary judgment if everything in the
record demonstrates that no genuine issue of material fact exists.’” Strickland v. Norfolk
S. Ry. Co., 692 F.3d 1151, 1154 (11th Cir. 2012) (quoting Tippens v. Celotex Corp., 805
F.2d 940, 952 (11th Cir. 1986)).
In contrast, “[w]hen the nonmoving party has the burden of proof at trial, the
moving party is not required to ‘support its motion with affidavits or other similar material
negating the opponent's claim.’” Four Parcels of Real Prop., 941 F.2d at 1437 (quoting
Celotex Corp. v. Cartrett, 477 U.S. 317, 323 (1986)). The moving party “simply may
show … that there is an absence of evidence to support the nonmoving party’s case.”
Id. at 1438 (internal quotation marks and citation omitted). “Assuming the moving party
has met its burden, the non-movant must then show a genuine dispute regarding any
issue for which it will bear the burden of proof at trial.” Info. Sys. & Networks Corp., 281
F.3d at 1224-25 (citing Celotex Corp., 477 U.S. at 324).

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The standard of review for cross-motions for summary judgment does not differ
from the standard applied when only one party files a motion. See Am. Bankers Ins.
Grp. v. United States, 408 F.3d 1328, 1331 (11th Cir. 2005). “Cross-motions for
summary judgment will not, in themselves, warrant the court in granting summary
judgment unless one of the parties is entitled to judgment as a matter of law on facts
that are not genuinely disputed.” United States v. Oakley, 744 F.2d 1553, 1555 (11th
Cir. 1984) (internal quotation marks and citation omitted). The Court will consider each
motion on its own merits, resolving all reasonable inferences against the party whose
motion is under consideration. See Am. Bankers Ins. Grp., 408 F.3d at 1331.
B. Georgia Uniform Fraudulent Transfers Act
GUFTA “is modeled on the Uniform Fraudulent Transfer Act promulgated by the
national Conference of Commissioners on Uniform State Laws and adopted in various
forms by 43 states and the District of Columbia.” Truelove v. Buckley, 318 Ga. App.
207, 209, 733 S.E.2d 499, 501 (2012) (citation and internal quotation marks omitted).
O.C.G.A. § 18-2-74(a) provides that a transfer made by a debtor “is voidable as to a
creditor, whether the creditor’s claim arose before or after the transfer was made[,]” if
the debtor made the transfer:
(1) With actual intent to hinder, delay, or defraud any creditor of the debtor; or
(2) Without receiving a reasonably equivalent value in exchange for the transfer
or obligation, and the debtor:
(A)

Was engaged or was about to engage in a business or a
transaction for which the remaining assets of the debtor were
unreasonably small in relation to the business or transaction; or

(B)

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
they became due.
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O.C.G.A. § 18-2-75(a), on the other hand, provides that a transfer made by a debtor “is
voidable as to a creditor whose claim arose before the transfer was made … if the
debtor made the transfer or incurred the obligation without receiving a reasonably
equivalent value in exchange for the transfer or obligation and the debtor was insolvent
at that time or the debtor became insolvent as a result of the transfer or obligation.”
1. Actual Fraud
“Because actual intent to defraud is difficult to prove, [GUFTA] lists 11
nonexclusive factors (sometimes called ‘badges of fraud’) that can be considered in
determining whether funds were transferred with the actual intent to defraud a creditor.”
SRB Inv. Servs., LLLP v. Branch Banking & Tr. Co., 289 Ga. 1, 3-4, 709 S.E.2d 267,
270 (2011); O.C.G.A. § 18-2-74(b)(1)–(11). The Plaintiff argues it has established
“multiple badges of fraud” and thus the Court should find as a matter of law that
McClelland, Jr. “actually intended to defraud his creditors by transferring his interest in
the [p]roperties to the Trust and the Partnership.” (Doc. 56-13 at 7). Specifically, the
Plaintiff argues the transfers were made to “insiders” because McClelland, III and
Allison are relatives of McClelland, Jr., O.C.G.A. § 18-2-74(b)(1); McClelland, Jr.
continued to reside at his personal residence after the transfer to the Trust, O.C.G.A.
§ 18-2-74(b)(2); he did not receive reasonably equivalent value for the transfers
because they were made by deed of gift, no purchase price was paid, and the alleged
agreements with McClelland, III and Allison cannot support a finding of reasonably
equivalent value, O.C.G.A. § 18-2-74(b)(8); the transfers were executed shortly before
Loan 2000 and Loan 6800 were due, O.C.G.A. § 18-2-74(b)(10); and, he was insolvent
or became insolvent shortly after the transfers because he was not paying his debts at

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the time of the transfers or shortly thereafter, O.C.G.A. § 18-2-74(b)(9).12 (Doc. 56-13 at
7-13).
The Defendants admit the transfers were made to insiders but argue there are
genuine disputes of fact with respect to the other badges of fraud. They admit that
McClelland, Jr. has continued to use the property transferred to the Trust as his
personal residence but argue that his right of use has changed under the terms of the
Trust. (Docs. 66 at 11; 61-3 at 3-15). They argue the evidence shows McClelland, Jr.
received more than reasonable value for the transfers in light of his agreements with
Allison and McClelland, III and the fact that the $220,000 mortgage should be
considered in determining the value of the property transferred to the Trust. They argue
that McClelland, Jr. “clearly did not run up any debts shortly before a transfer” and,
given his “long history of repayment [and] renewals,” this badge weighs against the
Plaintiff. (Doc. 66 at 19). They provide evidence that McClelland, Jr. was not insolvent
in March 2008 and that his “capital diminished and cash flow stopped” only after the
“unforeseen events of the FDIC taking the stock collateral to zero, pulling his accounts,
and First Georgia breaching his contracts.” (Docs. 61 at 72:3-20; 66 at 17). Finally, the
Defendants provide evidence that McClelland, Jr. fully disclosed the transfers to First
Georgia, which weighs against the Plaintiff, O.C.G.A. § 18-2-74(b)(3). (Docs. 35-3 at
¶ 4; 61 at 74:8-22, 282-83).

12
“A debtor is insolvent if, at a fair valuation, the sum of the debtor's debts is greater than the
sum of the debtor's assets.” O.C.G.A. § 18-2-72(a). Moreover, “[a] debtor who is generally not
paying his or her debts as they become due other than as a result of a bona fide dispute is
presumed to be insolvent. The presumption imposes on the party against which the
presumption is directed the burden of proving that the nonexistence of insolvency is more
probable than its existence.” O.C.G.A. § 18-2-72(b).
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“The law is well established that the question of intent in a fraudulent conveyance
case is generally one for the jury.”13 Target Corp. v. Amerson, 326 Ga. App. 734, 742,
755 S.E.2d 333, 341 (2014). “[T]he critical inquiry is [McClelland, Jr.’s] intent at the time
of transfer.” Roach v. Roach, 327 Ga. App. 513, 515-16, 759 S.E.2d 587, 589 (2014)
(citation and internal quotation marks omitted). The Court cannot say as a matter of law
that there is no genuine dispute with respect to McClelland, Jr.’s intent. Not only is
there evidence that McClelland, Jr. made these transfers as part of his estate plan,
there is evidence that a director of First Georgia recommended that he undertake these
efforts in the first place, that First Georgia then renewed the loans with full knowledge of
the transfers, and that McClelland, Jr. was far from insolvent at the time of the transfers
and only became so after First Georgia failed and froze his accounts. Therefore, the
Defendants have put forth enough evidence to suggest that the transfers were not made
to defraud First Georgia. Cf. Target Corp., 326 Ga. App. at 742-43, 755 S.E.2d at 341
(reversing the denial of a directed verdict where “the record present[ed] absolutely no
evidence from which a jury could infer that the conveyance was motivated by some
nefarious intent”); Williams v. Williams, 255 Ga. 264, 265, 336 S.E.2d 244, 246 (1985)
(reversing the denial of a directed verdict where the husband “freely admit[ted] that the
property was placed in his former wife’s name in order to avoid any alimony claim
against it by his second wife”).
2. Constructively Fraudulent Transfers
“While actual or intentional fraud requires a showing of intent, ‘[c]onstructive
fraudulent transfers are established conclusively, without regard to the actual intent of
the parties … .” Truelove, 318 Ga. App. at 210, 733 S.E.2d at 501 (citation and internal

13
Of course, whether a party meets its summary judgment burden is a matter of federal law.
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quotation marks omitted). Relying on the same evidence discussed above, the Plaintiff
argues the Court can find as a matter of law that McClelland, Jr. was insolvent at the
time of the transfers or should have reasonably believed that he would become
insolvent and that he transferred his interest in the properties without receiving
reasonably equivalent value. (Doc. 56-13 at 14-15). Yet, as discussed above, there is
at least a genuine dispute with respect to whether McClelland, Jr. “[i]ntended to incur, or
believed or reasonably should have believed that he … would incur, debts beyond his
… ability to pay as they became due” and “was insolvent at [the] time [of the transfers]
or … became insolvent as a result of the transfer[s].” O.C.G.A. §§ 18-2-74(a)(2)(B), 182-75(a). Accordingly, the Plaintiff’s motion for summary judgment (Doc. 56) is
DENIED.14
3. Defenses
The Trust argues it is entitled to summary judgment because it took in good faith
and for a reasonably equivalent value. See O.C.G.A. § 18-2-78. Construing the
evidence in the light most favorable to the Plaintiff, the Court cannot say as a matter of
law that the Trust gave reasonably equivalent value for the property transferred to it,
which had a provable “As-Is” market value of $250,000. (Docs. 45-1 at 1; 66-1 at ¶ 16).
At the very least, public record evidence indicates that McClelland, Jr. received no value

14
 The Plaintiff objects to a declaration filed by McClelland, III, which “attaches” 41 exhibits to the
Defendants’ response to the Plaintiff’s motion for summary judgment. (Doc. 71). The Plaintiff
argues the declaration violates 28 U.S.C. § 1746(2) and does not state that it is made on
personal knowledge or that McClelland, III is competent to testify on the matters stated. The
Plaintiff argues that the 41 exhibits should be excluded from the Court’s consideration of its
motion for summary judgment because the “Defendants have not attempted to show [their]
admissibility” and, in the alternative, that at least four of the exhibits should be excluded
because they are hearsay documents. (Doc. 71 at 3-4). Even if the Court did not consider the
41 exhibits attached to the Defendants’ response (many of which can be found elsewhere in the
record), the Plaintiff has not shown that it is entitled to judgment as a matter of law.
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for the transfer. (Doc. 66-1 at ¶ 13). Accordingly, the Trust’s motion for summary
judgment (Doc. 45) is DENIED.
Finally, McClelland, Jr. has moved for summary judgment as to all of the
Plaintiff’s claims, arguing that “[w]ith complete knowledge of all transfers, First Georgia
ratified the contracts as made by accepting payments, origination fees, and then,
renewing both contracts, thereby waiving any alleged fraud.”15 (Doc. 35-1 at 1). The
Plaintiff argues this defense fails because “whether a transfer was disclosed or not is
only one of many factors that go to whether an actual fraudulent transfer is shown, and
such disclosure has nothing to do with a claim for constructive fraudulent transfer.”
(Doc. 40 at 2). This argument fails to recognize McClelland, Jr.’s point. He does not
just argue that his disclosure is evidence of the absence of fraud; he argues, as an
affirmative defense, that First Georgia’s knowledge of the transfers operates as a total
bar to its claims. However, the Plaintiff also argues McClelland, Jr. has not established
as a matter of law that First Georgia had knowledge of the transfers before it renewed
Loan 2000 and Loan 6800.
GUFTA provides that under certain conditions a transfer “is voidable as to a
creditor.” O.C.G.A. §§ 18-2-74(a)(1)-(2), 18-2-75(a) (emphasis added). “The term
‘voidable’ is defined as ‘That which may be avoided, or declared void; not absolutely
void, or void in itself. That which operates to accomplish the thing sought to be
accomplished, until the fatal vice in the transaction has been judicially ascertained and
declared.’” Dal-Tile Corp. v. Cash N’ Go, Inc., 226 Ga. App. 808, 811, 487 S.E.2d 529,
532 (1997) (Beasley, J., concurring) (citation omitted); see Stoudemire v. HSBC Bank
USA, 2015 WL 3480428, at *1 (Ga. Ct. App.) (“A void contract is one that has no effect

15
It is not clear why McClelland, Jr. alone moves for summary judgment on this ground.
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whatsoever and is incapable of being ratified, while a voidable contract is one that is
unenforceable at the election of the injured party.”).
Because a fraudulent transfer “is not void, but voidable,” courts have generally
held that “it can be ratified by a creditor who is then estopped from seeking its
avoidance.” In re Adelphia Recovery Trust, 634 F.3d 678, 691 (2d Cir. 2011) (citation
and internal quotation marks omitted); see also In re Lyondell Chem. Co., 503 B.R. 348,
383-84 (Bankr. S.D.N.Y. 2014) (“[C]reditors who are participants in an alleged
fraudulent transfer, or who have ratified it, cannot then seek to have that transfer
avoided. The rubrics under which that conclusion has been reached have varied
slightly—‘ratification,’ ‘consent,’ ‘estoppel,’ or ‘material participa[tion] in the
transaction’—but the underlying point is the same. Creditors who authorized or
sanctioned the transaction, or, indeed, participated in it themselves, can hardly claim to
have been defrauded by it, or otherwise to be victims of it.”). But see In re Morse Tool,
Inc., 108 B.R. 389, 390 (Bankr. D. Mass. 1989).16
Assuming that ratification (or estoppel or whatever it may be called) is a defense
to a GUFTA claim, the question of ratification generally “depends upon the intention of
the parties, and is a matter of fact to be determined by the jury.” Nalley v. Langdale,
319 Ga. App. 354, 366, 734 S.E.2d 908, 918 (2012) (quoting Warner v. Hill, 153 Ga.

16
Georgia courts have not addressed this issue since Georgia adopted GUFTA. Before
GUFTA’s adoption, Georgia courts had held that a creditor’s knowledge of a transfer prior to its
renewal of a loan bars a fraudulent conveyance claim. See Peachtree Bank & Tr. Co. v. Atha,
151 Ga. App. 565, 260 S.E.2d 559 (1979); Jowers v. High Point Furniture Co., 10 Ga. App. 297,
73 S.E. 415 (1912). Given the overwhelming authority that such knowledge can bar claims for
both actual and constructively fraudulent transfers, the Court is confident that a Georgia court
would hold that a creditor with knowledge of a transfer at the time credit was advanced can be
barred from attacking the transfer under GUFTA. See, e.g., Calaska Partners, L.P. v. Lavigne,
1998 WL 34086069 (Super. Ct. Me.); Truelove, 318 Ga. App. at 209-10, 733 S.E.2d at 501 (“[I]n
light of the dearth of Georgia decisions construing the provisions of the Georgia UFTA, we look
to the decisions of other jurisdictions for guidance.”).
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510, 513, 112 S.E. 478, 480 (1922)). “Ratification involves full knowledge of all the
facts.” Warner, 112 S.E. at 480; see also Stewart v. Storch, 274 Ga. App. 242, 245,
617 S.E.2d 218, 222 (2005) (“Generally, ratification requires both knowledge of the act
and acceptance of benefits resulting from the act.”). It is true, as McClelland, Jr. points
out and the Plaintiff candidly admits, that the Plaintiff is not in a position to refute his
evidence with regard to whether First Georgia knew about the transfers. The problem is
none of the evidence relied upon by McClelland, Jr. is sufficient to establish, as a matter
of law, that First Georgia knew about the transfers before it renewed Loan 2000 and
Loan 6800.
McClelland, Jr. testified in his affidavit that “First Georgia knew of the transfers
prior to renewal of the same contracts/loans” and that “First Georgia renewed said
obligations to McClelland, Jr. with knowledge of transfers.” (Doc. 35-3 at ¶¶ 6, 7).
These conclusory statements are not sufficient. McClelland, Jr. also testified that he
“notified First Georgia of all transfers into the Partnership and Trust with an affidavit and
by telling them in multiple conversations before and after the transfers.” (Doc. 35-3 at
¶ 4). The Court has pieced together that when McClelland, Jr. says he notified the bank
“with an affidavit” he is referring to the Financial Report. (Doc. 61 at 74:8-12). The
Financial Report likely was sufficient to disclose the transfers and, circumstantially, it
appears that First Georgia likely had it. But McClelland, Jr. never quite puts any
evidence into the record establishing that he provided First Georgia with the Financial
Report before he renewed the loans. McClelland, Jr.’s affidavit does not say when he
provided it to the bank. His affidavit says he notified “First Georgia” in “multiple

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conversations” but never identifies who he notified. For all the Court knows, he walked
into the bank and told the janitor. That is not sufficient.
McClelland, Jr. has also provided an affidavit from Art Hammond, President of
First Georgia in 2008, who testified that “in 2008 [First Georgia] received all of the board
of director’s financial statements including director Joseph P. McClelland, Jr.’s for the
year of 2008.” (Doc. 66-3 at ¶ 4). At most, this suggests First Georgia received the
Financial Report at some point in 2008. But it does not directly speak to whether First
Georgia received the Financial Report before the loans were renewed. Similarly,
McClelland, Jr. has provided an affidavit (which he never cites in his briefs) from Herb
Warren, a member of the board of directors, who testified that “[w]hile as a director of
the bank Joseph P. McClelland, Jr. disclosed to all board of directors that he did an
estate plan and transferred property into entities” and that McClelland, Jr. “resigned
from the bank board late spring 2008.” (Doc. 66-5 at ¶¶ 2, 6, 7). Again piecing things
together on its own, the Court could conclude that McClelland, Jr. resigned from the
board before the loans were renewed and thus that Warren’s affidavit suggests First
Georgia was aware of some unspecified transfers McClelland, Jr. made before the
renewals. But even then the Court could not conclude as a matter of law that First
Georgia was aware of the transfers at issue.
Finally, McClelland, Jr. has provided an affidavit from Pam Browning, a loan
officer at First Georgia, who testified, “I think [McClelland, Jr.] was transparent about his
financial position throughout 2008” and “[First Georgia] followed the normal banking
procedures for all of [McClelland, Jr.’s] loan renewals.” (Docs. 66-4 at ¶¶ 2-4; 66-7 at

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¶¶ 2-4). This bolsters McClelland, Jr.’s credibility, but it does not entitle him to summary
judgment.17
In short, although the record suggests that McClelland, Jr. could establish that
First Georgia had notice of the transfers before the loans were renewed, he has not yet
proved the point as a matter of law. Therefore, his motion for summary judgment (Doc.
35) is DENIED.
III. CONCLUSION
Defendant McClelland, Jr.’s, Defendant Trust’s, and the Plaintiff’s motions for
summary judgment (Docs. 35; 45; 56) are DENIED.
SO ORDERED, this 21st day of September, 2015.
S/ Marc T. Treadwell
MARC T. TREADWELL, JUDGE
UNITED STATES DISTRICT COURT

17
McClelland, Jr. also relies on the transfers being recorded in the public record as evidence
that First Georgia had knowledge of the transfers; however, he cites no Georgia case law
suggesting that, standing alone, this is sufficient as a matter of law to say that First Georgia
intended to ratify the transfers.
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