UNITED NATIONAL REAL ESTATE, INC., )
)
Plaintiff/Appellee, )
) Chancery Court Maury
) No. 94-531
VS. )
) Appeal No.
) 01A01-9604-CH-00173
C. F. THOMPSON AND COLUMBIA AUTO )
PARTS, INC., )
Defendants/Appellants.
)
) FILED
October 4, 1996
IN THE COURT OF APPEALS OF TENNESSEE
Cecil W. Crowson
MIDDLE SECTION AT NASHVILLE
Appellate Court Clerk
APPEAL FROM THE CHANCERY COURT
OF MAURY COUNTY, TENNESSEE
HONORABLE JIM T. HAMILTON, JUDGE
Robert L. Holloway, Jr.
FLEMING, HOLLOWAY & FLYNN, P.C.
B.P.R. #6535
P.O. Box 90
207 West Eighth Street
Columbia, Tennessee 38402-0090
ATTORNEY FOR PLAINTIFFS/APPELLANTS
William Landis Turner
KEATON, TURNER & SPITZER
102 North Court Street
Columbia, Tennessee 38402-0090
ATTORNEY FOR DEFENDANT/APPELLEE
REVERSED AND REMANDED.
HENRY F. TODD
PRESIDING JUDGE, MIDDLE SECTION
CONCUR:
SAMUEL L. LEWIS, JUDGE
BEN H. CANTRELL, JUDGE
UNITED NATIONAL REAL ESTATE, INC., )
)
Plaintiff/Appellee, )
) Chancery Court Maury
) No. 94-531
VS. )
) Appeal No.
) 01A01-9604-CH-00173
C. F. THOMPSON AND COLUMBIA AUTO )
PARTS, INC., )
)
Defendants/Appellants. )
OPINION
This is a suit by a judgment creditor to set aside a fraudulent transfer of assets and to
subject said assets to the satisfaction of the judgment.
In September, 1985, Columbia Auto Parts, Inc., executed with United National Real
Estate, Inc., an “Exclusive Listing Agreement” for the sale of the assets of Columbia Auto Parts,
Inc. In October, 1985, Columbia Auto Parts, Inc. contracted to sell said assets to Al Carroll. In
March, 1986, the sale was concluded, and the proceeds were deposited in the corporate bank
account. After payment of outstanding debts (except United National Real Estate, Inc.), the
remainder of the proceeds were distributed to the shareholders, of whom C. F. Thompson was
one.
On September 25, 1986, United National Real Estate, Inc. sued C. F. Thompson and
Columbia Auto Parts, Inc. for its commission on the sale. On July 21, 1993, the Trial Court
granted United National a judgment against C. F. Thompson and Columbia Auto Parts, Inc. for
$83,993.00. On November 16, 1993, post-judgment motions were overruled.
On May 28, 1994, plaintiff filed the present suit against C. F. Thompson and Columbia
Auto Parts, Inc., alleging that C. F. Thompson had fraudulently transferred to his wife
approximately $100,000 of the distribution received by him from the liquidation of Columbia
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Auto Parts, Inc., which amount was on deposit with Hilliard Lyons, Inc., an investment broker.
The petition (complaint) states:
In this proceeding plaintiff seeks to make Angela
Thompson and the broker parties to this action, to
determine what portion of the account belongs to
C. F. Thompson by reason of a fraudulent transfer
to his wife, disregarding the rights of plaintiff, as
judgment creditor, and to obtain such orders and
other relief as will enable plaintiff to reach those
funds in satisfaction of its judgment.
The prayers of the petition include:
That Angela Thompson and J. J. B. Hilliard, W.
L. Lyons, Inc. be made parties defendant to this
action and served with process and a copy of this
petition.
On September 21, 1994, “the defendants” (not otherwise identified) filed a “response to
petition” denying a fraudulent transfer and pleading laches and statute of limitations.
On March 13, 1995, the Trial Court entered the following order:
ORDER
This Petition for Relief Required to Aid in the
Collection of Judgment and the Response to said
Petition were heard on the 14th day of December
1994.
This Court awarded judgment to the Plaintiff in the
amount of Eighty-three Thousand Nine Hundred
Ninety-three Dollars ($83,993) on July 21, 1993,
after the Court of Appeals reversed and remanded
the case on April 8, 1992. On November 16, 1993,
this Court overruled the Motion for Alteration of
Judgment. At this point the Plaintiff had a right of
action to attack the validity of a certain conveyance
between Defendant C. F. Thompson and his wife,
which occurred in 1987. The statute of limitations
to set aside a fraudulent transfer is six years.
However, a reading of T.C.A. § 29-12-106 clearly
indicates the statute does not begin to run until the
creditor affected (here the Plaintiff) has a right of
action to test the validity of the conveyance. This
Court finds that right of action to have been
December 16, 1993. The Petition was filed by the
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Plaintiff on August 29, 1994, well within the six-year
statute of limitation.
IT IS, THEREFORE, ORDERED that the
Defendant’s Response seeking a dismissal of the
Plaintiff’s Petition be overruled.
This 12th day of March, 1995
(Signed)
Jim T. Hamilton, Circuit Judge
On April 11, 1996, the defendant, C. F. Thompson, alone, filed a motion to alter or
amend stating:
1. A judgment was entered on March 13, 1995.
This judgment ordered “that the Defendant’s
response seeking a dismissal of the Plaintiff’s
petition be overruled.” It is unclear to the
Defendants whether this judgment is a final
judgment on the merits or if this Order is a decision
on the statute of limitations issue. The Defendants
respectfully requests the Court to clarify this Order
so that if a final judgment has been rendered, the
Defendants may properly appeal. If the Order is
not a final judgment, the Defendants would ask
leave to continue to defend this creditor’s bill suit.
2. If this Order is a final judgment on the merits,
the Defendants would respectfully request the Court
vacate its judgment on the grounds that the Plaintiff
in this suit has produced any (sic) proof of any
kind to warrant the finding of a fraudulent
transfer or the rendering of a judgment. In the
alternative if the Court finds that proof has been
submitted by the Plaintiff, the Defendant aver that
Plaintiff has fallen far short of meeting its burden of
proof.
On November 20, 1995, the Trial Court entered judgment stating:
JUDGMENT
This civil action is before the court on the motion
of Defendant, C.F. Thompson, to amend, vacate or
clarify the order filed on March 13, 1995. In
addition, Defendants have moved for permission to
appeal under Rule 9(a), T.R.A.P., in the event that
the order last entered by the court is determined not
to have been a final order.
Upon reviewing the entire record the court is of
the opinion that a final judgment disposing of all
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issues may and should be entered at this time,
without any necessity for further proceedings. To
the extent stated herein, Defendants’ motion for
clarification is granted and, this being a final
judgment, Defendants’ motion for an interlocutory
appeal becomes moot and is denied.
In civil action No. 2633 the Circuit Court for
Maury County, Tennessee, awarded judgment to
Plaintiff in the amount of $83,993.00 on July 21,
1993, after the Court of Appeals reversed and
remanded the case on April 8, 1992. On
November 16, 1993, the Circuit Court overruled
the motion for new trial and on December 16,
1993, the Circuit Court overruled the motion for
alteration of judgment. At this point Plaintiff had
a right of action to attack the validity of a certain
conveyance between Defendant, C. F. Thompson
and his wife, which occurred in 1987. The statute
of limitations to set aside a fraudulent transfer is
six years. However, as reading of T.C.A. § 29-12-
106 clearly indicates, the statute does not begin to
run until the creditor affected (here the Plaintiff)
has a right of action to test the validity of the
conveyance.
In May, 1994, Plaintiff filed its petition for relief
required to aid in the collection of judgment in
Circuit Court. On motion of Defendants the
petition was transferred to this court by order filed
in this court August 26, 1994. Plaintiff’s petition
was filed in this court August 29, 1995, well within
the six year statute of limitations. This court finds
that Plaintiff’s right of action to seek the relief
requested in the petition began on December 16,
1993.
After considering the entire record and evidence
offered at the hearing before this court on
December 14, 1994, especially the deposition given
by C. F. Thompson on March 4, 1994, the court
finds as follows:
1. Angela Thompson and J. J. B. Hilliard
W. L. Lyons, Inc. are properly before the court as
parties defendant and subject to this judgment.
2. The account now in the name of Angela
Thompson in the original principal amount of
$100,000.00 is the result of fraudulent transfers for
the purpose of defeating Plaintiff’s rights and
remedies as a judgment creditor.
3. The result of the findings above are that
the account must be viewed as the property of the
judgment debtor, C. F. Thompson.
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4. As such Plaintiff is entitled to take
possession of the account and subject it to payment
of Plaintiff’s judgment.
On December 10, 1995, a notice of appeal was filed, reading as follows:
NOTICE OF APPEAL
NOTICE IS HEREBY GIVEN that C. F.
Thompson and Columbia Auto Parts, Inc.,
Defendants above named, and Angela Thompson,
an unnamed Defendant who was served with
process, hereby appeal to the Court of Appeals
from the Final Judgment entered in this action on
the 20th day of November, 1995.
On appeal, the appellants present the following issues:
I. Whether or not the chancery court erred
in finding the petition for relief required to aid in
the collection of judgment to have been filed
within the statute of limitations set forth in T.C.A.
§ 16-11-104.
II. Whether or not the chancery court erred
in entering a final judgment without a trial as to
the issues related to a fraudulent transfer.
III. Whether the Trial Court erred by entering
a judgment against Angela Thompson when she
was not properly before the court.
THE STATUTE OF LIMITATIONS
T.C.A. § 16-11-104 provides for chancery jurisdiction of suits to subject property to
execution, but contains no statute of limitation for same.
The complaint does not specify the date of the alleged fraudulent transfer but it does
specifically state that the transfer was from C. F. Thompson to his wife, Angela Thompson. The
uncontradicted evidence is that a joint survivorship bank account was created in 1966 in the
names of Mr. and Mrs. C. F. Thompson; that the distributions from Columbia Auto Parts, Inc.,
were deposited in said joint account in 1986; that, as of January 27, 1989, Charles F. and Angela
C. Thompson had a joint survivorship account with Hilliard Lyons Investments in the amount
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of $5,000; that, by various transfers from the joint bank account to the Hilliard Lyons joint
account during 1989, the latter account was increased to $105,853.96; and that in December,
1993, the Hilliard Lyons account was changed to the sole name of Angela C. Thompson.
In respect to the last mentioned transfer to Angela C. Thompson, counsel for appellants
made the following statement to the Trial Court:
So if Mr. Turner is seeking to set aside the
transfer to Ms. Thompson, I’ll agree to set that
transfer aside, put the account back as joint
tenants with right of survivorship. I think he
would be successful if I put on my proof and
Your Honor read the cases that I have. I think
that would happen.
And we will agree part of the order of this
Court to direct Hilliard Lyons to reestablish that
account as joint tenants with right of survivorship.
Mr. Turner then has a claim against the
survivorship interest of Mr. Thompson and, if Ms.
Thompson predeceases Mr. Thompson, he has a
right to all that money.
From the foregoing it appears that Angela C. Thompson concedes that she should be
divested of her sole ownership of the subject fund, but insists that she is entitled to retain her
interest in the joint survivorship account because it was acquired at a time when the statute of
limitations bars its recovery.
Plaintiff insists that the statute of limitations did not begin to run upon its rights asserted
in this suit until December 16, 1993, when the judgment in plaintiff’s favor and against C. F.
Thompson and Columbia Auto Parts, Inc., became final.
T.C.A. § 29-12-101 provides:
Fraudulent conveyances and other devices. - Any
creditor, without first having obtained a judgment at
law, may file his bill in chancery for himself, or for
himself and other creditors, to set aside fraudulent
conveyances of property, or other devices resorted
to for the purpose of hindering and delaying creditors,
and subject the property, by sale of otherwise, to the
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satisfaction of the debt. [Code 1858, § 4288 (deriv.
Acts 1851-1852, ch. 365, § 10); Shan., § 6097; Code
1932, § 10358; T.C.A. (Orig. Ed.), § 23-1001.]
A bill may be filed before judgment, execution, and returned nulla bona for the purpose
of setting aside fraudulent conveyances or other devices to hinder and delay creditors. Shepard
v. Lanier, 192 Tenn. 608, 241 S.W.2d 587, 594 (1951); Citizens National Bank v. Watkins, 126
Tenn. 453, 150 S.W.96, 97 (1912).
A creditor may file a bill in chancery to set aside a fraudulent conveyance without first
obtaining judgment. Delrose v. Mansfield, 4 Tenn. App. 488 (1927).
The judgment ultimately rendered in favor of plaintiff and against C. F. Thompson is
conclusive evidence that plaintiff was a creditor of C. F. Thompson at the time that suit was filed
on September 25, 1986.
On and after that date, September 25, 1986, plaintiff had unquestionable standing as a
creditor to sue to set aside transfer of property by C. F. Thompson as fraudulent.
C. F. Thompson received the checks from Columbia Auto Parts, Inc., and deposited them
in the joint bank account during 1986. Therefore, not later than December 31, 1986, plaintiff had
standing to sue for the allegedly fraudulent transfer of funds from Columbia Auto Parts, Inc. to
C. F. Thompson and/or from C. F. Thompson to C. F. Thompson and wife Angela.
Suits to set aside fraudulent conveyance of intangible personalty are subject to the statute
of limitations of actions for conversion of personal property. Howell v. Thompson, 95 Tenn. (11
Pickel) 396, 32 S.W. 309 (1895).
The statute of limitations for conversion of personal property is three years from the
accruing of the cause of action. T.C.A. § 28-3-105.
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On May 23, 1994, when the present suit was filed, plaintiff’s right of action, which
accrued prior to January 1, 1987, was seven years old and barred by the statute of limitations.
As a result of the foregoing, the plaintiff has lost the right to recover that part of or
interest in the joint survivorship interest in the fund which was transferred to Mrs. Thompson.
However, the joint survivorship interest which Mr. Thompson retained in the joint
survivorship fund was conveyed to Mrs. Thompson in December, 1993, within the statutory
limitations, and is therefore subject to attack as fraudulent.
The appellants assert that there is no evidence that the last transfer to Mrs. Thompson was
fraudulent.
T.C.A. § 66-3-101 reads as follows:
Conveyances in fraud of creditors or purchasers
void. Every gift, grant, conveyance of lands, tenements,
Hereditaments, goods, or chattels, or of any rent,
common or profit out of the same, by writing or
otherwise; and every bond, suit, judgment, or
execution, had or made and contrived, of malice, fraud,
covin, collusion, or guile, to the intent or purpose to
delay, hinder, or defraud creditors of their just and
lawful actions, suits, debts, accounts, damages, penalties,
forfeitures; or to defraud or to deceive those who shall
who shall purchase the same lands, tenements, or
hereditaments, or any rent, profit, or commodity out of
them, shall be deemed and taken, only as against the
person, such person’s heirs, successors, executors,
administrators, and assigns, whose debts, suits, demands,
estates, or interest, by such guileful and covinous
practices as aforementioned, shall or might be in any wise
disturbed, hindered, delayed, or defrauded, to be clearly
and utterly void; any pretense, color, feigned
consideration, expressing of use, of any other matter or
thing, to the contrary not withstanding.
The general rule is that the burden of proof is on the party attacking a conveyance for
fraud to establish his case. Citizens Bank & Trust v. White, 12 Tenn. App. 508 (1930).
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No evidence is cited or found which would support a conclusion that Mr. Thompson’s
transfer of his interest in the Hilliard Lyons account to his wife rendered him insolvent or
otherwise served to delay, hinder or defraud plaintiff of the collectibility of its judgment. T.C.A.
§§ 66-3-101, 66-3-305; See Hicks v. Whiting, 149 Tenn. 411, 258 S.W. 784 (1924); Macon Bank
& Trust Co. v. Holland, Tenn. App. 1986, 715 S.W.2d 347, 349 (1986).
There is therefore no basis for granting to plaintiff any access to Mr. Thompson’s joint
survivorship interest in the Hilliard Lyons fund.
The foregoing renders unnecessary any consideration of the remaining issue relating to
service of process upon Mrs. Thompson.
The judgment of the Trial Court is reversed and vacated. Plaintiff’s suit is dismissed.
All costs, including costs of this appeal are assessed to the plaintiff. The cause is remanded to
the Trial Court for entry and enforcement of judgment in conformity with this opinion.
REVERSED AND REMANDED.
___________________________________
HENRY F. TODD
PRESIDING JUDGE, MIDDLE SECTION
CONCUR:
___________________________
SAMUEL L. LEWIS, JUDGE
___________________________
BEN H. CANTRELL, JUDGE
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United National Real Estate, Inc. v. C.F. Thompson and Columbia Auto Parts, Inc.
Combined Opinion