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State Bank of Reeseville v. Shea

Court of Appeals of Tennessee, Knoxville

July 28, 2015

STATE BANK OF REESEVILLE
v.
MARY BETH SHEA, ET AL.

Session May 15, 2015

Appeal from the Chancery Court of Hamilton County No. 13-0672 Jeffrey M. Atherton, Chancellor

Wilson C. Von Kessler, II, Chattanooga, Tennessee, for appellants, Mary Beth Shea and Luverne C. Hall.

Stephen D. Barham and Jeffrey W. Maddux, Chattanooga, Tennessee, for appellee, State Bank of Reeseville.

John W. McClarty, J., delivered the opinion of the Court, in which Charles D. Susano, Jr., C.J., and D. Michael Swiney, J., joined.

OPINION

JOHN W. MCCLARTY, JUDGE

I. BACKGROUND

This appeal arises out of construction loan agreements and a mortgage entered into in September 2009, between Reeseville 16, LLC, ("LLC"), a Wisconsin limited liability company, and State Bank of Reeseville ("Bank"), a Wisconsin banking corporation. LLC executed a Construction Loan Promissory Note ("Note 1") with Bank wherein the company promised to pay the principal amount of $349, 003.46, together with interest at a rate of 5% per annum, in eleven monthly payments of accrued interest, plus a final payment of the unpaid principal and accrued interest.

In order to secure all obligations of LLC to Bank arising from Note 1, as well as other obligations and liabilities arising out of credit previously granted, credit contemporaneously granted, and credit granted in the future by Bank, LLC also executed a real estate mortgage ("Mortgage") in September 2009. Moreover, as part of the above construction loan agreement and Mortgage, Mary Beth Shea ("Shea") and Ronald L. Shea, her late husband, entered into personal guarantees ("M. Shea Guaranty" and "R.L. Shea Guaranty") in September 2009, thereby jointly and severally guaranteeing payment of LLC's obligations to Bank. About three months later, LLC executed another Construction Loan Promissory Note wherein the company promised to pay to Bank the principal amount of $326, 248.00, together with interest at a rate of 5% per annum, in eleven monthly payments of accrued interest.

Approximately two years following the execution of the construction loan agreements and Mortgage, Shea's husband committed suicide, leaving two life insurance policies with his wife as the beneficiary. Subsequent to the suicide, Bank filed foreclosure proceedings in a Wisconsin court against the mortgaged Wisconsin property and Shea for defaulting under the terms of the M. Shea Guaranty. After Shea failed to appear, the court entered a default judgment ("Wisconsin Judgment") in favor of Bank on October 12, 2012, ordering a judgment of foreclosure and sale of the Wisconsin property and payment of debt owed by Shea under the M. Shea Guaranty in the amount of $239, 613.73, plus attorney fees and costs of collection.

Two months after Bank obtained Wisconsin Judgment, Shea purchased property located at 8828 Igou Gap Road, Chattanooga, Tennessee ("Property"), with proceeds from the life insurance policies. Subsequently, Shea quitclaimed Property to her father, Luverne C. Hall ("Hall"). In exchange for Property, Shea received $10.00 plus "love, affection, and support." As Shea has no other income, accounts, or assets of any kind, Bank asserts this home is her only asset from which satisfaction of the Wisconsin Judgment may be obtained.

Following the transfer, in September 2013, Bank simultaneously filed two actions: 1) Petition to Enforce Foreign Judgment against Shea; and 2) Complaint against Shea and Hall, alleging that Shea knew about Wisconsin Judgment, and therefore purchased and fraudulently transferred Property in an attempt to hide assets from collection efforts. Additionally, Bank filed an Abstract and Notice of Lien Lis Pendens against Property seeking to have the conveyance to Hall voided or set-aside as a fraudulent transfer and/or to impose a constructive trust or equitable lien upon the described real estate in the amount of $120, 000.

Ultimately, in May 2014, Bank filed a summary judgment motion against Shea and Hall alleging the fraudulent transfer of Property in an effort to defraud Bank and evade collection of Wisconsin Judgment. The trial court granted the motion on July 21, 2014, ordering inter alia that: Shea's transfer of Property to her father be set aside as a fraudulent conveyance pursuant to Tennessee Code Annotated section 66-3-301; and Property ...


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