Wheeler Bros., Inc. v. Virginia Jones

• Court: Court of Appeals for the Eleventh Circuit
• Decided: May 24, 2018
• Docket: 17-12686
• Status: Unpublished

Opinion

Case: 17-12686 Date Filed: 05/24/2018 Page: 1 of 7

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 17-12686 Non-Argument Calendar ________________________

D.C. Docket No. 2:14-cv-01258-PGB-TFM

WHEELER BROS., INC.,

Plaintiff - Appellee,

versus

VIRGINIA JONES, ROBERT L. JONES, III, PIRATES TOW, LLC, LAVENIA A. JONES, ROBERT L. JONES, SR., BEST BUY AUTOMOTIVE & TIRES, LLC, KYLE BREECE JONES, A&B DEVELOPMENTS, LLC,

Defendants - Appellants, ROBERT JONES, JR., ADVANCED FLEET SERVICES, L.L.C., et al.,

Defendants. Case: 17-12686 Date Filed: 05/24/2018 Page: 2 of 7

________________________

Appeals from the United States District Court for the Middle District of Alabama ________________________

(May 24, 2018)

Before TJOFLAT, JORDAN, and NEWSOM, Circuit Judges.

PER CURIAM:

Wheeler Bros., Inc. designs, manufactures, and distributes motor vehicle

parts across the country. In 1989, Wheeler and the United States Postal Service

agreed that the USPS would purchase the parts necessary to service its national

postal fleet from Wheeler. Over time, the USPS fell behind in the maintenance of

its fleet. Robert Jones, Jr., who owned a company called Advanced Fleet Services,

offered to fill the gap. Mr. Jones, Jr. and Wheeler agreed that AFS would perform

overflow maintenance for the USPS and Wheeler would sell it the parts necessary

to repair the postal vehicles. AFS breached its agreement with Wheeler and fell

behind on its contractual payment obligations. After Mr. Jones, Jr. filed for

bankruptcy in April of 2012, Wheeler sought to have the debt declared non-

dischargeable, alleging that Mr. Jones. Jr. had fraudulently transferred AFS’ funds

to a variety of relatives and business entities that the relatives owned. The

bankruptcy court agreed.

2 Case: 17-12686 Date Filed: 05/24/2018 Page: 3 of 7

In December of 2014, Wheeler filed suit against Mr. Jones, Jr., those family

members, and the entities they owned that were involved in the fraudulent

transfers. Trial proceeded against all defendants but one, Jonathan Caton Jones,

who had declared bankruptcy. All claims against him were subject to an automatic

stay. 1

After a one-day bench trial, the district court found the Joneses liable for

several fraudulent transfers under the Alabama Uniform Fraudulent Transfer Act,

Ala. Code §§ 8-9A-1 through 8-9A-12 (“AFTA”), and issued a final judgment

accordingly. The Joneses appeal that ruling, as well as sanctions orders against

them issued by the magistrate judge for misconduct in discovery. Because the

magistrate judge’s sanctions orders were never objected to before the district court,

we determined that we lacked jurisdiction to review them and sua sponte dismissed

that portion of the appeal. See 11th Cir. Dkt. No. 50. We now review only the

fourth issue on appeal: “whether the trial court’s final judgment should be set aside

for lack of evidence to support the court’s findings of fact and conclusions of law.”

I

“After a bench trial, we review the district court’s conclusions of law de

novo and the district court’s factual findings for clear error.” Tartell v. S. Fla.

Sinus and Allergy Ctr., Inc., 790 F.3d 1253, 1257 (11th Cir. 2015) (quoting

1 Because the appellants, who were the defendants in the district court, include several family members and the various entities they own, we refer to them collectively as the Joneses. 3 Case: 17-12686 Date Filed: 05/24/2018 Page: 4 of 7

Proudfoot Consulting Co. v. Gordon, 576 F.3d 1223, 1230 (11th Cir. 2009)). “A

factual finding is clearly erroneous ‘if, after viewing all the evidence, we are left

with the definite and firm conviction that a mistake has been committed.’” Id.

(quoting HGI Assocs., Inc. v. Wetmore Printing Co., 427 F.3d 867, 873 (11th Cir.

2005)).

As an initial matter, the Joneses’ argument on this point—amounting to two

pages and devoid of legal authority to support their contentions—is lacking. See

Hamilton v. Southland Christian School, Inc., 680 F.3d 1316, 1319 (11th Cir.

2012) (“A passing reference to an issue in a brief is not enough, and the failure to

make arguments and cite authorities in support of an issue waives it.”). Their reply

brief contains specific detail about some areas where they contend the evidence is

insufficient, but “[p]resenting an argument in the appellant’s reply does not

somehow resurrect it.” Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678, 683

(11th Cir. 2014) (quoting Davis v. Coca-Cola Bottling Co. Consol., 516 F.3d 955,

972 (11th Cir. 2008) (alteration adopted)).

Nevertheless, even if adequately briefed, the argument lacks merit. Wheeler

brought claims for both actual fraudulent transfers under Ala. Code §§ 8-9A-4(a)

& (4)(b), and constructive fraudulent transfers under Ala. Code §§ 8-9A-4(c)

& 8-9A-5. Under Alabama law,

[a]n actual fraudulent transfer is one made by a debtor who transfers assets ‘with actual intent to hinder, delay, or defraud any creditor of 4 Case: 17-12686 Date Filed: 05/24/2018 Page: 5 of 7

the debtor.’ Ala. Code 1975, § 8-9A-4(a). 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. Ala. Code 1975, § 8-9A-4(b). 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. Ala. Code 1975, § 8-9A-5(a).

Aliant Bank v. Davis, 198 So. 3d 508, 512 (Ala. Civ. App. 2015) (additional

citations omitted). See generally Actual and Constructive Fraud, Tilley's Alabama

Equity § 11:4 (5th ed. 2017) (explaining elements of actual and constructive fraud

under the AFTA). The district court correctly set forth the required elements of

each claim in its thorough order. See D.E. 176 at 8–9.

Contrary to the Joneses’ assertions, the record—particularly the testimony of

Wheeler’s accounting expert, Tara Gearhart—amply supports the district court’s

conclusion that the transfers at issue were either actually or constructively

fraudulent. The district court found “that Ms. Gearhart [was] a credible and

knowledgeable witness and that her findings and conclusions [were] supported by

the evidence.” Id. at 35. Moreover, it adopted her “findings and conclusions as its

own, including those findings and conclusions not specifically stated in th[e]

Memorandum of Decision.” Id. 2

2 We note that the Joneses argue that “[a]s a result of the [s]anctions [o]rder, [they] did not present any evidence of any consideration or reasons for any transfers.” Appellants’ Br. at 29. We have already decided that the Joneses’ failure to properly object to the magistrate judge’s sanctions orders prevents them from raising those issues here. See 11th Cir. Dkt. No. 50. In any event, the sanctions orders did not prevent them from cross-examining Wheeler’s witnesses. 5 Case: 17-12686 Date Filed: 05/24/2018 Page: 6 of 7

With respect to actual fraud, Ms. Gearhart reviewed financial data and

concluded that the transfers at issue “were made with the actual intent to defraud

Wheeler and other creditors.” Id. at 34. She supported this opinion with a variety

of factors which mirror the so-called “badges of fraud” provided in the AFTA, Ala.

Code § 8-9A-4(b), including: (1) that no defendant gave anything of value in

exchange for any of the transfers; (2) the transfers were made to insiders; (3) Mr.

Jones, Jr. or AFS retained possession of or control over much of the money that

was transferred; (4) the “true nature” of the transfers was concealed (“such as by

destroying evidence,” etc.); and (5) Mr. Jones, Jr. and AFS were insolvent when

they made the transfers. See D.E. 176 at 34. Given the presence of these and other

“badges of fraud,” the district court’s determination that certain transfers were

actually fraudulent within the meaning of the AFTA is well supported by the

evidence and the law. See Holsombeck v. USAmeriBank, — So. 3d —, 2018 WL

1354747, *5 (Ala. Civ. App. Mar. 16, 2018) (“[S]ubstantial evidence supports the

circuit court’s determination that the divorce settlement agreement had been

crafted to transfer the husband’s interest in the marital assets to the wife with an

actual intent to hinder, delay, or defraud the bank based upon the court’s

consideration of the factors provided by § 8-9A-4(b).”).

That was their choice, and their complete failure to rebut any of Wheeler’s evidence cannot be ascribed to the magistrate judge’s order. 6 Case: 17-12686 Date Filed: 05/24/2018 Page: 7 of 7

As the district court recognized, Ms. Gearhart’s testimony on the factors

discussed above—particularly the findings that transfers were made without

receiving anything of value in exchange and that they were made when Mr. Jones,

Jr. and AFS were or would become insolvent—also supports its conclusions with

respect to the constructively fraudulent transfers under Ala. Code § 8-9A-4(c) and

Ala. Code § 8-9A–5. Like the district court’s conclusions on actual fraud, its

conclusions that other transfers were constructively fraudulent is similarly well

supported by the evidence at trial and the law. See, e.g., McPherson Oil Co., Inc.

v. Massey, 643 So. 2d 595, 596 (Ala. 1994) (“[W]ithout regard to the actual intent

of the grantor, the law infers constructive fraud when it appears that an indebted

grantor has conveyed property to a family member without receiving valuable

consideration.”).

II

For the foregoing reasons, we affirm the judgment of the district court.

AFFIRMED.