Kearney Construction Company, LLC v. Travelers Casualty and Surety Company of America

712 F. App'x 907
CourtCourt of Appeals for the Eleventh Circuit
DecidedOctober 19, 2017
Docket17-11368 Non-Argument Calendar
StatusUnpublished
Cited by2 cases

This text of 712 F. App'x 907 (Kearney Construction Company, LLC v. Travelers Casualty and Surety Company of America) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eleventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kearney Construction Company, LLC v. Travelers Casualty and Surety Company of America, 712 F. App'x 907 (11th Cir. 2017).

Opinion

PER CURIAM:

FTBB, LLC, appeals the judgment in favor of Travelers Casualty and Surety Company of America. Travelers initiated a proceeding supplementary to void an assignment to FTBB of a monetary judgment Regions Bank had against Bing Kearney. Fed. R. Civ. P. 69(a)(1); Fla. Stat. §§ 56.29, 726.105. The district court ruled that the assignment was fraudulent and voided the priority lien that FTBB acquired from Regions. We affirm.

I. BACKGROUND

In December 2007, Kearney’s son, Clayton, obtained in excess of $11 million for injuries he incurred in an automobile accident. Before Clayton collected the payment, his family formed Moose Investments of Tampa Bay, LLC, to invest the settlement proceeds. Clayton was named the sole owner of Moose, but his father served as its co-manager until August 2012. Moose kept its records at the offices of several Kearney companies and used a company bookkeeper.

In January 2011, Kearney formed FTBB as a shelf corporation. FTBB was owned and managed by Moose.

Kearney accumulated large debts. On October 28, 2011, Travelers obtained a judgment against Kearney for $8.7 million, which it executed in September 2014. When served with a writ of garnishment, USAmeriBank responded that it owed Kearney $700,022.29. On September 28, 2012, Regions obtained a judgment against Kearney for $3,407,620.35, and it served a writ of garnishment on USAmeriBank in May 2013.

Meanwhile, in March 2012, Moose granted Kearney a line of credit of $5 million at 3 percent annual interest in exchange for his execution of a promissory note and a security agreement. Kearney drew freely on the line of credit. On August 12, 2012, Moose filed a Uniform Commercial Code-1 that notified creditors it had an interest in Kearney’s property.

On March 17, 2015, Kearney borrowed $3.5 million from a life insurance policy. Kearney transferred the money to Moose, ostensibly to pay down his line of credit.

Later that month, Kearney entered me-diations with Regions. James Reed, Kear-ney’s attorney, advised Kearney to activate FTBB to purchase the Regions judgment. On April 8, 2015, Moose transferred $2,625 million to the mediator’s trust fund. The next day, Clayton executed an operating agreement for FTBB.

On April 21, 2015, Regions agreed to sell and assign its judgment against Kearney to FTBB for $2,625 million. • That same day, Reed became a manager of Moose. On April 22 and 23, Regions assigned its judgment to FTBB, and Moose paid $2,625 million to Regions. In a side settlement, FTBB agreed to pay, but Moose paid, $50,000 to Kearney’s wife as a partial reimbursement of costs and expenses she had incurred during the fraudulent transfer action.

On April 28, 2015, Kearney directed the attorney for FTBB, Frank Miranda, to refrain from making any commitments for the company before consulting with Kear-ney’s attorney. After the assignment, Regions transferred all execution-related documents to Kearney’s attorney “at [Kearney’s] request as representative of FTBB,” despite a provision in the purchase and sale agreement instructing Regions to deliver the documents to FTBB “in connection with judgment collection efforts.” Miranda received a copy of Kear-ney’s request.

On May 1, 2015, Kearney stipulated to a judgment in favor of Regions in its garnishment action. Four days later, FTBB was substituted for Regions in the action, after which FTBB moved for entry of a final judgment. FTBB did not collect from Kearney’s accounts at USAmeriBank.

On June 1, 2015, Travelers moved for proceedings supplementary in its garnishment action and to implead FTBB. Travelers served a second writ of garnishment on USAmeriBank, which responded that it owed Kearney $1,158,087.38. Kearney, Moose, and FTBB moved to dissolve the writ and argued that FTBB had priority over Travelers for garnishment of Kear-ney’s accounts at USAmeriBank. Travelers amended its complaint to allege a fraudulent transfer and requested as relief to void the assignment from Regions to FTBB or to equitably subordinate the priority FTBB had over Travelers to the USAmeriBank accounts.

During an evidentiary hearing held by a magistrate judge, Travelers submitted evidence that Kearney managed his son’s finances and wrote checks from his son’s bank account and the Moose account. Clayton exhibited little understanding of the business activities of Moose, the line of credit for his father, the Regions settlement, or the purpose for FTBB. Kearney testified that his payment to Moose was unrelated to the Regions settlement and that he benefited by paying Moose instead of Regions. Kearney stated that he had forgotten most details involved in the negotiations, but he remembered that, after reaching a settlement with Regions, he searched for a buyer for the Regions settlement, Clayton agreed to be the purchaser, and Reed suggested transferring the judgment to FTBB. Kearney disavowed using FTBB to hinder Travelers from collecting its judgment.

Reed testified that he had served numerous years as advisor to the Kearney family and Kearney’s companies and the principal advisor to Clayton and Moose and that he served as a manager of Moose and ran the daily operations of FTBB. Reed stated that he advised Kearney to settle the fraudulent transfer action with Regions because, in his opinion, the action was overvalued and FTBB did not have an expert witness. Kearney and Reed testified that purchasing the Regions judgment was a good investment for Moose because of the discount in price, the ability to reeou-perate about $700,000 from USAmeriBank, the likelihood of collecting on the judgment, and the protection it provided Moose in relation to its UCC-1 action against Kearney. Reed stated that FTBB garnished Kearney’s account at Platinum Bank and collected about $10,000, although the cheek had yet to be deposited by FTBB. According to an attorney for Regions, neither Moose nor FTBB were involved in negotiating the purchase price of the Regions judgment.

The district court adopted the findings and recommendation of the magistrate judge to enter a judgment in favor of Travelers. The district court ruled that the assignment of the Regions judgment was a fraudulent transaction intended to hinder or defraud Travelers. The district court found that “Kearney, with the counsel and assistance of James Reed, concocted and orchestrated a scheme” to “purchase and assign[ ] ... the Regions judgment [to] Clayton Kearney’s entities to place that judgment in the hands of a friendly creditor and thereby block Travelers from reaching Mr. Kearney’s funds at USAmer-iBank.” The district court discredited Kearney’s explanation for the payment to Moose; rejected the argument that Clayton decided to purchase the Regions judgment; and regarded Moose and FTBB as “insiders” acting at Kearney’s behest. The district court based its finding on several events.

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Bluebook (online)
712 F. App'x 907, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kearney-construction-company-llc-v-travelers-casualty-and-surety-company-ca11-2017.