Ga. SC freezes $20M in assets of family housing company

Jessica M. Karmasek Mar. 31, 2011, 11:50am


ATLANTA (Legal Newsline) - The Georgia Supreme Court said a lower court did not abuse its discretion in temporarily freezing more than $20 million in assets owned by father-and-son residential housing developers and their companies.

Stephen R. Been and Stephen F. Been develop and construct residential real estate. At issue in the case were 16 loans that Branch Banking and Trust Co., or BB&T, made to the Legacy Investment Group, Tampa Investment Group and related entities -- all of which are owned and controlled by the Beens.

From 2005 through 2007, Tampa Financial and Legacy Communities executed agreements guaranteeing the indebtedness to the bank. In 2007, when the liquid assets securing the debt were transferred to "SRB" Investment and "SFB" Investment, the bank required three additional guarantors: SRB Investment, SFB Investment and the affiliated companies' operating entity, Legacy Communities Group, Inc.

The three additional guarantors guaranteed all future debt to the bank and agreed to covenants requiring them to hold a total of $35 million in cash or cash equivalents.

Then, the housing market began to collapse. And in 2008, the Beens authorized so-called "partnership distributions" from SRB and SFB. From June 30 to Dec. 31, 2008, SRB's and SFB's collective assets shrank by $191 million or nearly 90 percent, from $216 million to $25 million, according to financial statements. This left the guarantors in violation of the liquidity covenants.

The following year, all 16 of the BB&T loans matured, resulting in $80 million in obligations.

In June 2009, the bank sued the borrowers and their guarantors for failure to pay the loans. It also alleged that the entities holding the liquid assets to guarantee the loans -- SRB Investment and SFB Investment -- had fraudulently transferred about $216 million to their partners, which included Stephen R. and Stephen F. Been.

In April 2010, the bank filed a motion for a preliminary injunction and a motion to add new entities to the suit.

In June 2010, the trial court granted the bank's motion, and ordered the Beens and their companies to freeze $24 million in assets, which was later reduced to $21 million. The Beens then appealed to the state Supreme Court.

The Court, in its 17-page opinion filed March 25, said it would not reverse the trial court's decision to grant or deny an interlocutory injunction.

That is, "unless the trial court made an error of law that contributed to the decision, there was no evidence on an element essential to relief, or the court manifestly abused its discretion," the Court wrote.

Justice David Nahmias, who authored the Court's unanimous opinion, said Georgia law is clear on the issue.

"When a money judgment is likely to be uncollectible because a debtor has fraudulently moved its assets in an attempt to dissipate or conceal them from a creditor, Georgia law, both before and under the Georgia (Uniform Fraudulent Transfers Act), gives the creditor the right to interlocutory relief by freezing the assets where they are," he wrote for the Court.

The Court said the trial court was merely safeguarding the status quo pending final resolution of BB&T's claims.

"Georgia's policy giving secured creditors a choice of remedies would be thwarted if the borrower could force the secured creditor to foreclose on its collateral, irrespective of its current value, by voluntarily and fraudulently rendering itself insolvent," it wrote.

From Legal Newsline: Reach Jessica Karmasek by e-mail at

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