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IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE MIDDLE DISTRICT OF ALABAMA 

IN RE: ) 

 ) 

TERRY MANUFACTURING ) CASE NO. 03-32063-WRS 

COMPANY, INC., ) 

 ) CHAPTER 7 

 Debtor ) 

 ) 

________________________________________________________________________ 

IN RE: ) 

 ) 

TERRY UNIFORM ) CASE NO. 03-32213-WRS 

COMPANY, LLC, ) 

 ) 

 Debtor ) 

________________________________________________________________________ 

J. LESTER ALEXANDER, III, ) 

TRUSTEE OF TERRY ) 

MANUFACTURING COMPANY, ) ADVERSARY PROCEEDING 

NO.: 

 ) 05-03042 

INC, AND TERRY UNIFORM ) 

COMPANY, LLC ) 

 ) 

VERSUS ) 

 ) 

N.D. HORTON AND JAMES M. ) 

REYNOLDS, III ) 

MEMORANDUM OF LAW IN OPPOSITION TO 

MOTION FOR SUMMARY JUDGMENT

 COME NOW Defendants, N.D. Horton, Jr. (“Horton”), and James M. 

Reynolds III (“Reynolds”), and hereby submit this memorandum in opposition to the 

motion for summary judgment filed by the trustee, J. Les Alexander, III (the ‘Trustee”). 

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Introduction

In the Trustee’s motion for summary judgment, the Trustee seeks to avoid 

payments made to Horton in the amount of $298,369.30, and to Reynolds in the like 

amount of $298,369.30. The motion for summary judgment only addresses the payments 

as constructive fraudulent payments as defined under Alabama law. In order to prove a 

constructive fraudulent transfer under Alabama law, the trustee must prove: 

the debtor made the transfer without receiving a reasonably equivalent 

value in exchange for the transfer and the debtor: 

(a) Was engaged or was about to engage in a business or a transaction 

for which the remaining assets of the debtor were unreasonably 

small in relation to the business or transaction; or 

(b) Intended to incur, or believed or reasonably should have believed 

that he or she would incur, debts beyond his or her ability to pay as 

they became due. 

See Ala. Code § 8-9A-4(c). 

The trustee’s motion is due to be denied for at least five reasons. First, 

since the debtor, Terry Manufacturing Company, Inc. (“Terry Manufacturing”), was a 

guarantor of the promissory notes from Cotina Terry and Allie Robinson pursuant to 

which the payments were made, Terry Manufacturing did receive reasonably equivalent 

value, because it received a dollar for dollar reduction in the amount of its liability under 

its guaranties. This argument, however, does not apply to the $624,000 Note from Roy 

and Rudolph Terry since there was no guaranty from Terry Manufacturing. 

Second, Terry Manufacturing also received reasonably equivalent value 

owing to its ability to control Perky Cap Company (“Perky Cap”) through the stock 

purchases at issue. This acquisition of the stock and control of Perky Cap was part of the 

Terry’s overall business plan for Terry Manufacturing. Terry Manufacturing did not 

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manufacture headware, so the Terrys wanted to augment their production capabilities 

through an interest in Perky Cap to be able to serve the customers of Terry 

Manufacturing. The Terrys informed Mr. Horton that various Terry Manufacturing 

customers, and particularly McDonald’s Corporation, would only purchase entire 

uniforms including the headware. This “indirect benefit” should be considered by this 

Court at trial. 

Third, the business relationships between the Terrys and Terry 

Manufacturing were so inextricably intertwined that benefit to the Terrys constituted 

benefit to the Debtor. The Trustee readily admits that the Terrys regularly disregarded 

the corporate structure of Terry Manufacturing. This inter-relatedness should be 

considered by this Court at trial. 

Fourth, and alternatively, under Alabama law, the value provided to a third 

party constitutes the basis for an offset under Alabama Code § 8-9A-8(d). Notably, the 

Alabama statute differs from the uniform statute in that it expressly encompasses value 

conveyed to “another person as a consequence of the debtor’s making such transfer.” 

Clearly, the Alabama legislature, by amending the uniform act, determined that, if a 

transferee gives value (regardless of whether it is to the debtor or to another), the 

transferee should receive the benefit of that value. Accordingly, the stock of Perky Cap 

which was conveyed to the Terry’s entitles the defendants to an offset. 

Finally, in addition, to proving the lack of “reasonably equivalent value,” 

the Trustee must prove that the debtor either: a) was engaged, or was about to engage, in 

a business for which the remaining assets were unreasonably small in relation to the 

business; or b) intended to incur, or reasonably should have believed that he would incur, 

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debts beyond his ability to repay, which the Trustee has not done. Importantly, the 

opinions of the Trustee’s expert bely the proof needed. In his report, the Trustee’s expert 

opined that: “Notably, despite its severe problems, TMC’s core business was viable. It 

could have returned a profitability if management had focused on TMC’s core business, 

limited expenditures to those actually related to the business, implemented financial 

controls and appropriate record keeping, and refrained from waste and misuse of TMC’s 

assets.” Accordingly, the Trustee has acknowledged that Terry Manufacturing could 

have been “turned around.” If the debtor could have returned a “profitability if 

management had focused on TMC’s core business. . .,” the debtor did not have 

unreasonably small assets or debts that it could not repay. At the very least, a fact issue 

exists as to when, if ever, the requisite conditions arose. 

Statement of Facts

 1. The Defendants admit to having received all of the payments at 

issue. However, the Defendants submit that additional facts demonstrate that these 

payments did not constitute fraudulent transfers. 

 2. At all relevant times, Perky Cap Company (“Perky Cap”) was a 

manufacturer of headwear headquartered in Eatonton, Georgia. 

 3. In early 1994, Horton negotiated with the Terry family an option 

agreement to purchase 30,000 shares of the outstanding common stock of Perky Cap 

which amounted to 33% of the outstanding shares. See Affidavit of N.D. Horton, Jr. 

(“Horton Aff.”), p 2. At that time, James M. Reynolds, III (“Reynolds”), and Horton 

owned a majority of the shares of Perky Cap. Id. at 2. 

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 4. Thereafter, on June 6, 1994, the Terry family purchased the Perky 

Cap stock as follows: 10,000 shares by Roy Terry; 10,000 shares by Rudolph Terry; and 

10,000 shares jointly by Roy and Rudolph Terry. Id. at 2. 

 5. On that same date, Reynolds and Horton granted an option to the 

Terry family to purchase an additional 45,900 shares (representing 51%) of the 

outstanding common stock of Perky Cap. Id. at 2. 

 6. In November, 2000, Allie Robinson purchased 9,000 shares of 

Perky Cap common stock, which represented 10% of the outstanding common stock of 

the company. Id. at 2. Ms. Robinson executed a purchase money promissory note in 

the principal sum of $200,000 to Reynolds and Horton. Id. 

 7. On November 10, 2000, Cotina Terry purchased 9,000 shares of 

Perky Cap common stock, which represented 10% of the outstanding common stock of 

the company. Id. at 2. Ms. Robinson executed a purchase money promissory note in 

the principal sum of $200,000 to Reynolds and Horton. Id. at 3. 

 8. On May 20, 2002, Roy and Rudolph Terry purchased an additional 

27,900 shares of the outstanding common stock of Perky Cap. These shares represented 

31% of the outstanding stock. Id. at 3. In connection with this purchase, Roy and 

Rudolph Terry jointly executed a promissory note in favor of Reynolds and Horton in the 

principal amount of $624,000. Id. at 3. With this purchase, the Terry’s owned 84% of 

Perky Cap, and they became officers and directors of Perky Cap. Id. at 3. 

 9. The Terry’s purchased the stock in Perky Cap as a means of 

augmenting the business of Terry Manufacturing Company, Inc. (“Terry 

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Manufacturing”). Id. at 3. Terry Manufacturing manufactures uniforms, but it does not 

manufacture headwear. Id. at 3. 

 10. The Terry’s desired, and communicated to Horton their desire, to 

have control of a company which manufactured the products which their company did 

not manufacture. Id. at 3. This was done so that Terry Manufacturing could supply the 

entire uniforms to customers such as McDonald’s Corporation. Id. at 3. 

 11. The Terry’s told Horton that one of their biggest customers, 

McDonalds Corporation, would not buy uniforms piecemill. Id. at 3. They indicated 

that McDonald’s buys the cap, shirt and pants from one supplier. Id. at 3. 

 12. Each purchase of the Perky Cap stock was for a price of $200,000 

per 10% of stock purchased. Id. at 3. This was true from 1994 through 2002. Id. at 3. 

This was an arms length, negotiated price for the stock, and in Horton’s estimation 

represented the value of the stock. Id. at 3. 

 13. The promissory notes from Allie Robinson and Cotina Terry were 

guaranteed by Terry Manufacturing. Id. at 3. Reynolds and Horton were unwilling to 

extend credit to Mrs. Terry and Mrs. Robinson individually. Id. As a condition to the 

stock purchase, they required Terry Manufacturing to guarantee those promissory notes. 

Id.

 14. In early 2003, the Terry’s contacted Horton and indicated that they 

needed temporary financing for the company. Id. at 4. The Terry’s indicated to Horton 

that they had manufactured $12 million of uniforms for the U.S. Government for possible 

use in Iraq, but they could not bill the U.S. Government until the uniforms were shipped. 

Id. at 4. The Terry’s further indicated that they had utilized company funds to buy back 

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their stock in Terry Uniforms from Cintas. Id. at 4. They further indicated that there 

was a pending sale of Terry Uniforms to Riverside Manufacturing in Moultrie, Georgia, 

which would enable them to repay me. Id. at 4. 

 15. In an effort to assist Terry Manufacturing, on January 10, 2003, 

Horton loaned an additional sum of $175,000 to Terry Manufacturing. Id. at 4. 

 16. Then, on February 10, 2003, Horton loaned an additional $88,000 

to Terry Manufacturing. Id. at 4. 

 17. Finally, on February 25, 2003, American Real Estate Investment 

Company, Ltd., loaned an additional $500,000 to Terry Manufacturing. Id. at 4. 

 18. The Debtor received payments totaling $35,886,846 from 

McDonald’s Corporation from the year 2000 through June 30, 2003. See Summary 

Report of AEA Group, LLC, as of November 1, 2005, Appendix C. These revenues 

contributed more than one-third of the Debtor’s business. 

 19. The Trustee has acknowledged the following conduct which would 

warrant finding that the Debtor and the Terrys were alter egos: 

 a) certain financial records of TMC were either erroneous, 

highly misleading, or outright fraudulent; 

 b) TMC prepared two sets of tax returns; 

 c) TMC’s financial statements were grossly misleading; 

 d) TMC engaged in check kiting, off balance sheet loans, 

trade debt, and ponzi schemes to sustain its operations; and 

 e) Roy and Rudolph Terry used funds of TMC for personal 

obligations. Id.

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Argument

 I. Summary Judgment Standard. 

 In the Trustee’s opposition to the motion for summary judgment by 

Peoples Bank of Eatonton, the Trustee acknowledges that the issue of “reasonably 

equivalent value” is fact-intensive and, therefore, that fraudulent transfer claims are “not 

appropriate for disposition by summary judgment.” See Memorandum of J. Lester 

Alexander, III, Trustee in Support of His Cross-Motion for Partial Summary Judgment 

and in Opposition to Summary Judgment Motions of Bank of Wedowee, First Tuskegee 

Bank, and Peoples Bank of Eatonton. The Trustee cited the case of Grimes v. Gilbert, 

1997 WL 33419261, *3 (Bankr. M.D. Ga. 1997) for the proposition that summary 

judgment should not be granted on the issue of “reasonably equivalent value” even if the 

non-moving party provided “no additional evidence. . .that reasonably equivalent value 

was given.” This case contains a myriad of factual issues, which should be decided at 

trial. 

 II. The Debtor received “reasonably equipment value.” 

A. By the reduction of its guaranty obligations, the payments 

“directly” benefited the Debtor.

 Each Court that has considered whether transfers made pursuant to a 

guaranty constitute “reasonably equivalent value” has determined that they do. See In re: 

Rodriguez, 895 F.2d 725 (11th Cir. 1990); In re: Martin, 205 B.R. 646 (Bankr. M.D. Ala. 

1993); and In re: Cavalier Homes of Georgia, Inc., 102 B.R. at 878 (Bankr. M.D. Ga. 

1989). The Courts have uniformly held that, since the debtor received a dollar for dollar 

reduction in its guaranteed obligation, the debtor did receive “reasonably equivalent 

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value.” Id. Importantly, both the Eleventh Circuit and the U.S. Bankruptcy Court for the 

Middle District of Alabama have embraced this argument. 

 In Rodriguez, the Eleventh Circuit not only recognized that a debtor may 

receive reasonably equivalent value from indirect benefits, but also acknowledged that 

repayment of a guaranteed obligation would constitute a “direct benefit” and, therefore, 

“reasonably equivalent value.” Importantly, in considering the law applicable to the 

facts, the Eleventh Circuit stated: 

Since Domino was not liable for repayment of 

International’s indebtedness, Domino could not be found to 

have benefited directly from repaying the loan absent a 

piercing of International’s corporate veil. 

Id. at 727. Accordingly, under the Eleventh Circuit’s analysis, if the debtor had been 

“liable for payment of the . . . indebtedness,” it would have received a “direct benefit.” 

Id. Therefore, the “direct benefit” which Terry Manufacturing received from the 

reduction of its guaranty obligation constitutes “reasonably equivalent value.” The 

Trustee acknowledges the precedential value of Rodriguez in his Memorandum of Law. 

 Notably, the Martin opinion was decided by this Court. In In re: Martin, 

C&C Land Corporation (“C&C”) purchased certain real property from Alfa Mutual Fire 

Insurance Company. C&C signed a purchase money promissory note and a mortgage 

regarding the purchase of this real estate. The individual debtor, Don Martin, guaranteed 

both the mortgage and the promissory note. Prior to his filing bankruptcy, Martin 

submitted a check in the amount of $105,062.49 as the final payment on the promissory 

note. When Martin later filed bankruptcy, the trustee filed suit to recover this payment 

under 11 U.S.C. § 548 as a fraudulent conveyance. The trustee argued that Martin did 

not receive “reasonably equivalent value” since C&C received value through the 

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satisfaction of its debt and the release of its mortgage. However, Judge Steele found that, 

since the debtor was a guarantor of the debt, the debtor received “reasonably equivalent 

value” in the satisfaction of its antecedent debt. Id. at 648. In rendering this opinion, 

Judge Steele noted the opinion in In re: Cavalier Homes, supra. 

In Cavalier Homes, defendant AmSouth Bank issued an industrial revenue 

bond in favor of the individual defendants, who were principals of the company which 

leased real property to Cavalier Homes. As part of the transaction, the defendants 

executed a promissory note for $800,000 payable to the Development Authority of Jones 

County. This note was assigned by that authority to AmSouth Bank. Also as part of the 

transaction, the debtor executed a guaranty agreement in favor of AmSouth Bank 

guaranteeing payments under the bond. Pre-bankruptcy, the debtor made payments under 

its guaranty. The trustee filed suit to set aside these payments as fraudulent transfers, 

arguing that no value flowed to the debtor. The defendants argued that the debtor 

received “reasonably equivalent value,” because its contingent obligation under its 

guaranty was reduced by the transfers. The Court noted that, under 11 U.S.C. § 

548(d)(2)(A), “value” means: “property or satisfaction or securing of a present or 

antecedent debt of the Debtor...” The Court found that the transfer reduced the debtor’s 

contingent liability under its guaranty and, therefore, received “reasonably equivalent 

value.” Id. at 880. 

 Similarly, in the case of In re: Uiterwyk Corp., 75 B.R. 33 (Bankr. M.D. 

Fla. 1987), the Debtor corporation made payments for the debt of another, which the 

trustee attacked as fraudulent conveyances. In finding that the debtor received 

“reasonably equivalent value,” the Court noted that, “it is without dispute that these 

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payments came out of funds belonging solely to the debtor but were on account of the 

sole obligations of Egyptian and West Africa; however, the debtor debited the accounts 

of Egyptian and West Africa and the amount paid on their behalf and received full credit 

against what it owed them.” Id. at 34. In each of the cases directly addressing payments 

under a guaranty, the bankruptcy court found that the reduction of the debtor’s liability 

constituted “reasonably equivalent value” even though the debtor was not the primary 

obligor on any of the debts at issue. Counsel for Horton has failed to find, and counsel 

for the Trustee has failed to cite, any case which holds contrary to these opinions. 

B. This Court should determine to what extent the Debtor received 

“indirect benefits” which constituted “reasonably equivalent 

value.”

As acknowledged by the Trustee in his Memorandum of Law, the analysis 

of reasonably equivalent does not require that the exchange be dollar for dollar. Id. at p. 

10. In fact, Courts have recognized that a debtor may realize “reasonably equivalent 

value” indirectly through benefit to a third person. See In re: Rodriguez, 895 F.2d 725 

(11th Cir. 1990). Also, see Rubin v. Manufacturers Hanover Trust Co., 661 F.2d 979, 991 

(2nd Cir. 1981) (citing Klein v. Tabatchnick, 610 F.2d 1043, 1047 (2nd Cir. 1979). 

In Rodriguez, the Eleventh Circuit opined that: “a transfer which ‘confers 

an economic benefit upon the debtor,’ either directly or indirectly,” is not due to be 

avoided. Id. at 727. (citing Rubin, supra.) In Rubin, the Second Circuit stated that: 

“The cases recognize, however, that a debtor may sometimes receive ‘fair’ consideration 

even though the consideration given for his property or obligation goes initially to a third 

person.” Id. at 991. The Second Circuit then went on to discuss with approval several 

cases in which the consideration came “indirectly through benefit to a third person.” Id. 

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(citing Klein, supra.) The Second Circuit remanded the case to the trial court to consider 

the indirect benefit which accrued to the debtor corporation. Again, Rubin is a case 

which the Trustee has cited for its precedential value. 

 In this case, the Terrys decided to purchase stock in Perky Cap to ensure a 

steady, certain supply of caps to Terry Manufacturing. The Terrys have indicated that 

many of the customers of Terry Manufacturing, and particularly McDonald’s 

Corporation, required the uniform supplier to provide all parts of the uniform. The 

Terrys made a business decision to purchase the Perky Cap stock to ensure that their 

business with McDonald’s would be within their control. Ultimately, the Terrys owned 

84% of Perky Cap and were officers and directors of the company. Based upon the 

Trustee’s reconstructed business records, Terry Manufacturing received $35,886,846 in 

payments from McDonald’s from 2000 through June 30, 2003. These revenues 

amounted to more than one-third of the Debtor’s revenue for that period. Accordingly, 

this Court should consider at trial the “indirect benefit” that the Debtor derived from the 

Perky Cap stock purchases and to what it constituted “reasonably equivalent value.” 

C. Terry Manufacturing and the Terrys were Alter Egos; therefore, 

any benefit to one constituted benefit to the other.

 Again, the Eleventh Circuit has spoken to this issue in Rodriguez. In 

Rodriguez, the Eleventh Circuit considered whether it should pierce the corporate veil 

and find that the debtor benefited from the consideration given to a subsidiary 

corporation on the grounds that the subsidiary corporation was an “instrumentality of the 

debtor.” The Court noted that, for the “instrumentality” doctrine to apply, there must 

have been undue control over the other party and the use of that control must have 

harmed the transferee. Id. at 728. In finding that there was no evidence of undue control, 

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the Eleventh Circuit noted that there was no evidence of “shared officers or intermingling 

of funds to support a claim” of undue control. Id. In this case, the Trustee has 

determined that there was intermingling of funds and that the Terrys, in their business 

dealings, made no distinction between themselves and their company. Furthermore, this 

has worked an inequity on Horton and Reynolds, because they indicated that they would 

not have sold the stock to Allie Robinson and to Cotina Terry, but for the guaranty of 

Terry Manufacturing. 

 Another opinion which speaks to this issue is In re: Pembroke 

Development Corporation, 124 B.R. 398 (Bankr. S.D. Fla. 1991). In Pembroke, the 

debtor executed a loan modification agreement, which the trustee claimed to constitute a 

fraudulent transfer. The Court found that this loan modification was not a fraudulent 

transfer since the corporate debtor had guaranteed the loan. Furthermore, the Court 

recognized that an indirect benefit to the transferor may be sufficient to establish 

“reasonably equalivent value” where the debtor and third party “are so related or situated 

that they share an identity of interest because what benefits one will, in such case, benefit 

the other in some degree.” Id. at 400. Accordingly, the case law supports an inquiry by 

this Court into the inter-relatedness of the Terrys and the Debtor. 

III. Value Given to Another is Credited to Transferee 

Under Ala. Code § 8-9A-8(d), a good faith transferee is entitled to an 

offset to the extent of value given the debtor for the transfer “or to another person as a 

consequence of the debtor’s making such transfer.” Accordingly, under the plain 

language of the statute, Horton and Reynolds are entitled to an offset in the amount of the 

value of the stock given to Ms. Robinson, Ms. Terry and Roy and Rudolph Terry. The 

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comments to the Ala. Fraudulent Transfer Act, at Comment 3, indicate that the language 

“or to another person as a consequence of the debtor’s making such transfer to” was 

added to the Uniform Act to clarify the fact that a “good faith transferee is protected to 

the extent of value given by the transferee to one other than the Debtor.” The Alabama 

legislature added this language to make it clear that, if a good faith transferee gives value 

(regardless of whether it is to the debtor or to another), the transferee will not have to 

reimburse the debtor to the extent of the value given. In his affidavit, Mr. Horton 

indicated that the price for the stock was arrived at by arms length negotiations going 

back to 1994. He further stated that this price was $200,000 per 10% of stock. So, each 

time that the Terry family purchased stock in Perky Cap, it paid this amount for the stock. 

Accordingly, Horton and Reynolds are due an offset in the amount of $1,024,000.00. 

IV. The trustee admits that the Debtor’s assets were not unreasonably 

small and that the debt was not too significant to repay. 

 In order to prove a fraudulent conveyance, the trustee must prove either 

that the debtor’s business had unreasonably small assets to continue or that the debtor had 

incurred or was about to incur liability that it would have been unable to repay. While 

the trustee’s expert, Mr. Alexander, opines that both of these situations existed, he further 

states that: “Notably, despite its severe problems, TMC’s core business was viable. It 

could have returned a profitability if management had focused on TMC’s core of 

business, limited expenditures to those actually related to the business, implemented 

financial controls and appropriate record keeping and refrained from waste and misuse 

from TMC’s assets.” Accordingly, the Trustee acknowledges that the Debtor could have 

“turned around” its business. Therefore, there is a question of fact for trial as to whether, 

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at the time of the transfers to Horton and Reynolds, the Debtor’s assets were insufficient 

and/or its debts too great. 

 V. Conclusion 

 This bankruptcy case bears a striking resemblance to the case of In re 

Chase & Sanborn Corporation, 904 F. 2d 588 (11th Cir. 1990). The Eleventh Circuit 

described that case as “a series of related financial transactions accurately described by 

the bankruptcy court as ‘bewildering.’” Id. at 590. Like that case, the Terry 

Manufacturing case involves many inter-related business transactions involving the 

Debtor and the Terry family. Horton and Reynolds respectfully submit that this Court 

should investigate this myriad of transactions at trial to determine the many factual issues 

raised by this lawsuit. 

 

 \s\ C. Ellis Brazeal III

C. Ellis Brazeal III 

Attorney for N.D. Horton, Jr., and 

James M. Reynolds, III 

OF COUNSEL:

WALSTON, WELLS & BIRCHALL, LLP 

1819 5th Avenue North, Suite 1100 

Birmingham, Alabama 35203 

Telephone: (205) 244-5237 

Telecopier: (205) 244-5437 

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CERTIFICATE OF SERVICE

I hereby certify that a copy of the above and foregoing Memorandum of 

Law in Opposition to Motion for Summary Judgment has been served by placing same in 

the United States mail, properly addressed and postage prepaid, as follows: 

Katherine Mille Determan 

Phelps Dunbar LLP 

City Plaza 

445 North Boulevard 

Suite 701 

Baton Rouge, LA 70802-5707 

This the 3rd day of January, 2006. 

 _______________________________ 

 OF COUNSEL 

 

 

 

 

 

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UNITED STATES BANKRUPTCY COURT 

MIDDLE DISTRICT OF ALABAMA 

In re: Case No. 03-32063 

TERRY MANUFACTURING 

COMPANY INC., 

 Debtor. 

In re: Case No. 03-32213 

TERRY UNIFORM 

COMPANY, LLC, 

 Debtor. 

J. LESTER ALEXANDER III, Adv. Pro. No. 05-3042 

TRUSTEE OF TERRY 

MANUFACTURING COMPANY, INC. 

AND TERRY UNIFORM COMPANY, 

LLC 

 Plaintiff, 

v. 

N.D. HORTON, JR., AND 

JAMES M. REYNOLDS, III 

MEMORANDUM DECISION

 This Adversary Proceeding is before the Court upon the motion for summary 

judgment filed by the Plaintiff and Trustee, J. Lester Alexander, III, (“Plaintiff”). (Docs. 

34, 48, 49, 67). The Court has jurisdiction pursuant to 28 U.S.C. § 1334 and this is a core 

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2

proceeding within the meaning of 28 U.S.C. § 157(b)(2)(H). The Court has considered 

the memoranda and arguments made by counsel therein. For the reasons set forth below, 

the Court finds that material facts are in dispute and in view of that the Plaintiff’s motion 

for summary judgment is DENIED. (Doc. 34). 

I. FACTS

The Plaintiff is seeking to avoid payments1

 made by Terry Manufacturing Company2

(“Terry Manufacturing”) to Defendant N.D. Horton, Jr., (“Horton”), in the amount of 

$298,396.30, and to Defendant James M. Reynolds, III, (“Reynolds”), also in the amount 

of $298,369.30.3

 The crux of this Adversary Proceeding involves the purchase of Perky 

Cap Company (“Perky Cap”) stock by Roy and Rudolph Terry, Cotina Terry (daughter of 

Roy Terry), and Allie R. Robinson (wife of Rudolph Terry). At all times relevant to this 

proceeding, Perky Cap was a manufacturer of headwear in Eatonton, Georgia. (Doc. 48; 

Horton Aff. ¶ 2). The myriad of transactions underlying the claims asserted in this 

Adversary Proceeding began sometime in 1994, when Horton, who at that time along 

with Reynolds owned a majority of shares of Perky Cap, negotiated with the Terrys an 

 

1

 In this Adversary Proceeding the Trustee asserts claims pursuant to the Georgia and Alabama fraudulent 

conveyance provisions, and as avoidable fraudulent conveyances and preferences pursuant to 11 U.S.C. § 

548 and 11 U.S.C. § 547. (Doc. 1). However, the present motion for summary judgment was brought 

solely upon the theory of constructive fraudulent transfers and hence that is the only theory addressed by 

this Memorandum Decision. 

 

2

 Terry Manufacturing filed a voluntary Chapter 11 petition in this Court on July 7, 2003. (Case No. 03-

32063, Doc. 1). Terry Uniform, an affiliated entity, filed a voluntary Chapter 11 petition on July 22, 2003. 

(Case No. 03-32213, Doc. 1). Joint Administration of these two cases was ordered by this Court’s Order of 

October 3, 2003. J. Lester Alexander, III, was appointed Chapter 11 Trustee by Order of this Court on July 

10, 2003. (Doc. 20). The Chapter 11 cases of Terry Manufacturing and Terry Uniform were converted to 

cases under Chapter 7 of the United States Bankruptcy Code, by Order of the Court dated May 13, 2004. 

(Case No. 03-32063, Doc. 579). J. Lester Alexander, III, was appointed Trustee of both Chapter 7 cases. 

3

 Horton and Reynolds will at times be collectively referred to as Defendants. 

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3

option agreement to purchase 30,000 shares of the outstanding common stock of Perky 

Cap which amounted to 33% of the outstanding shares. (Doc. 48; Horton Aff. ¶ 2). In 

accord with that understanding, on June 6, 1994, Roy and Rudolph Terry purchased 

10,000 shares each individually, and purchased 10,000.00 shares jointly. (Doc. 48; 

Horton Aff. ¶ 2). On that same day, Horton and Reynolds granted the Terry family the 

option to purchase an additional 45,900 shares of outstanding Perk Cap common stock. 

(Doc. 48; Horton Aff. ¶ 2-3) 

With the aforementioned purchases of stock in mind, in November 2000, the Terrys 

and the Defendants engaged in the following transactions which are at the heart of this 

Adversary Proceeding. On November 10, 2000, Allie R. Robinson purchased 9,000 

shares of Perky Cap common stock. In exchange for the stock, Allie Robinson executed 

a promissory note payable jointly to Horton and Reynolds in the amount of $200,000.00 

plus 9.5% interest. These shares represented 10% of the outstanding common stock of 

Perky Cap. (Docs. 34, 38; Lester Aff. ¶ 14-15; Horton Aff. ¶ 2-3). 

On November 10, 2000, Cotina Terry executed a promissory note identical in form to 

that of the Allie Robinson note. The principal sum of the note made payable jointly to 

Horton and Reynolds was $200,000.00, with an interest rate of 9.5%, and was given in 

consideration of 9,000 shares of Perky Cap stock sold to Cotina Terry. (Docs. 34, 38; 

Lester Aff. ¶ 14-15; Horton Aff. ¶ 2-3). Terry Manufacturing was a guarantor on both 

the Cotina Terry and Allie Robinson notes. (Doc. 49; Ex.’s 6, 8). 

On May 20, 2002, Roy and Rudolph Terry executed a promissory note payable to 

Horton and Reynolds jointly in the principal amount of $624,000.00 at an interest rate of 

9.0%. In consideration of the note, Horton and Reynolds transferred to Roy and Rudolph 

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4

Terry jointly, 27, 900 shares of Perky Cap stock. These shares represented 31% of the 

outstanding common stock of that company. (Doc. 34; Lester Aff. ¶ 17). Combined with 

the aforementioned transfers of stock, this purchase resulted in the Terry family owning 

84% of Perky Cap, with the ability to exercise full control over the company. (Docs. 34, 

48; Lester Aff. ¶ 17; Horton Aff. ¶ 3). 

 Terry Manufacturing made payments to Horton on the Cotina Terry and Allie 

Robinson note in the amount of $234,375.81. Identical payments, totaling $234,375.81 

were also made on these notes by Terry Manufacturing to Reynolds. Terry 

Manufacturing made payments totaling $127,986.98 on the Roy and Rudolph Terry 

notes. (Doc. 34; Lester Aff. ¶ 16). It is these payments that the Plaintiff is now seeking 

to avoid. 

II. CONCLUSIONS OF LAW

A. Summary Judgment Standard

Summary judgment is proper only when there is no genuine issue of any material 

fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 

56, made applicable to Adversary Proceedings pursuant to Fed. R. Bank. P. 7056; 

Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2553, 91 L.Ed. 2d 265 

(1986); Jones v. City of Columbus, 120 F.3d 248, 251 (11th Cir. 1997). Federal Rule of 

Civil Procedure 56(c) states the following: 

The judgment sought shall be rendered forthwith if the pleadings, depositions, 

answers to interrogatories, and admissions on file, together with the affidavits, if 

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5

any, show that there is no genuine issue as to any material fact and that the 

moving party is entitled to judgment as a matter of law. 

Fed. R. Civ. P. 56(c). The facts must be viewed in a light most favorable to the 

nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 

2505, 91 LED. 2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. at 322; Hail v. Regency

Terrace Owners Association, 782 So.2d1271, 1273 (Ala. 2000). At the stage of summary 

judgment, “the judge’s function is not himself to weigh the evidence and determine the 

truth of the matter but to determine whether there is a genuine issue for trial.” Anderson 

v. Liberty Lobby, Inc., 477 U.S. at 249. To avoid an adverse ruling on a motion for 

summary judgment,“the nonmoving party must provide more than a mere scintilla of 

evidence.” See Loyd v.Ram Industries, Inc., 64 F.Supp.2d 1235, 1237 (S.D. Ala. 1999) 

(quoting Combs v.Plantation Patterns, 106 F.3d 1519, 1526 (11th Cir. 1997). 

B. Discussion

 

The Court finds that there are material facts in dispute in this Adversary 

Proceeding. Central to the Plaintiff’s fraudulent conveyance claims on the theory of 

constructive fraud is determining whether Terry Manufacturing received reasonably 

equivalent value in exchange for making payments on promissory notes executed by the 

Terrys for the purpose of purchasing Perky Cap Stock. The Plaintiff avers that Terry 

Manufacturing did not receive any value at all for making payments to Horton and 

Reynolds, much less reasonably equivalent value. (Doc. 34). The Plaintiff further 

asserts that Terry Manufacturing received no benefit from making the payments and that 

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6

it was not a signatory to any of the subject notes. The Defendants have put forth several 

ways in which they claim Terry Manufacturing received reasonably equivalent value: (1) 

by realizing a dollar for dollar reduction on its guaranteed obligation; (2) by receiving an 

indirect benefit from the business decision of the Terrys to acquire Perky Cap stock; and 

(3) because Terry Manufacturing and the Terrys were alter egos, a benefit to one 

constituted a benefit to the other. The Defendants also alternatively argue that under 

Alabama Code § 8-9A-8(d), Horton and Reynolds are entitled to an offset in the amount 

of the value of the stock given to the Terrys. The Trustee has vigorously countered each 

of the arguments advanced by the Defendants, however, the Court finds that at this point 

the necessity for a trial has been amplified. (Doc. 67). 

 The Court finds material facts in dispute rendering disposition by way of 

summary judgment inappropriate. See Taylor v. Riverside-Franklin Prop. (In re: Taylor), 

228 B.R. 491, 498 (Bankr. M.D. Ga. 1998)(the court is hesitant to decide such matters at 

summary judgment stage because fraudulent conveyances are fact intensive by nature). 

III. CONCLUSION

 

For the reasons stated above, the Plaintiff’s motion for summary judgment is 

DENIED. (Doc. 34). The Plaintiff’s claims asserted in the Complaint pursuant to the 

Alabama and Georgia fraudulent conveyance statutes, and as avoidable fraudulent 

conveyances and preferences pursuant to 11 U.S.C. § 548 and 11 U.S.C. § 547, are 

subject to trial. The Defendants’ Motion to Extend Deadline to Respond to Plaintiff’s 

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7

Reply Brief is DENIED as moot. (Doc. 65). The Court will enter an Order consistent 

with this Memorandum Decision by way of a separate document. 

 Done this 16th day of February, 2006. 

 /s/ William R. Sawyer 

 United States Bankruptcy Judge 

c: Brent B. Barriere, Attorney for Plaintiff 

 C. Ellis Brazeal, III, Attorney for Defendants 

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-1- 

NO.99591510.1 

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE MIDDLE DISTRICT OF ALABAMA 

IN RE: ) 

) 

TERRY MANUFACTURING ) CASE NO. 03-32063-WRS 

 COMPANY, INC. ) 

) CHAPTER 7 

 Debtor ) 

 ) 

 ______________________________________ 

IN RE: ) 

) CASE NO. 03-32213-WRS 

TERRY UNIFORM ) 

 COMPANY, LLC, ) CHAPTER 7 

) 

Debtor. )

 ______________________________________

J. LESTER ALEXANDER, III, ) 

TRUSTEE OF TERRY ) 

MANUFACTURING COMPANY, INC. ) 

AND TERRY UNIFORM ) 

COMPANY, LLC ) ADVERSARY PROCEEDING 

) NO. 05-03042 

VERSUS ) 

) 

N.D. HORTON, JR. AND JAMES ) 

M. REYNOLDS, III ) 

TRUSTEE’S SUPPLEMENT TO HIS OBJECTION TO 

ADMISSION OF TESTIMONY OF RANDY AVERETT AND

MOTION TO STRIKE 

RANDY AVERETT AND JESSE SLATON AS EXPERT WITNESSES

NOW INTO COURT, through undersigned counsel, comes plaintiff, J. Lester Alexander, 

III, the duly appointed and acting Chapter 7 Trustee (the “Trustee”) of Terry Manufacturing 

Company, Inc., (“Terry Manufacturing”) and Terry Uniform, L.L.C. (“Terry Uniform”) and 

respectfully requests that the Court (i) refuse to permit Randy Averett to testify at the trial of the 

Case 2:06-cv-00746-WHA Document 5-6 Filed 08/29/2006 Page 1 of 39
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NO.99591510.1 

captioned Adversary Proceeding, and (ii) that Mr. Averett and Mr. Jesse Slaton be stricken as 

expert witnesses for the following reasons. 

(i) Rule 26(a)(2)(B) of the Federal Rules of Civil Procedure and Bankruptcy Rule 

7026 (the “Rules”) require that a proffered expert witness be specifically identified and tender “a 

written report prepared and signed by the witness.” The expert report rendered by defendants 

was prepared and signed by Mr. Slaton; Mr. Averett has testified that he did not draft, edit or 

sign the report. Indeed, he did not even review the report until after it was delivered to counsel 

for the Trustee. Likewise, Mr. Averett has not made any of the other disclosures required by the 

Rules. Mr. Slaton, the author and signatory of the report, is available for trial, and Mr. Averett, 

who has not complied with any of the requirements of the Rules, should not be permitted to 

testify. 

(ii) This case concerns the Trustee’s demand for avoidance of payments made by 

Terry Manufacturing in satisfaction of promissory notes given to the defendants by Cotina Terry, 

Allie Robinson, Roy Terry and Rudolph Terry. The report prepared by Mr. Slaton ignores those 

transactions entirely, and instead attempts to track the application of proceeds of three loans 

which are not at issue in this case and made by entities who are not even defendants. In his 

report, Mr. Slaton purports to provide “analysis...on specific loans that are the subject of the 

claims against the defendants made by the Trustee....” Mr. Slaton simply got it wrong. The 

Trustee has made no claim whatsoever with respect to the three loans Mr. Slaton analyzed. 

(iii) Whether defendants would engage an expert and, if so, when he would render a 

report were the subject of extensive discussions between counsel for the Trustee and counsel for 

the defendants over a several week period. On multiple occasions, both the Trustee and his 

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NO.99591510.1 

counsel were advised that whatever expert might be engaged by defendants, he would not 

address solvency issues. Consistent with that position, Mr. Slaton’s report makes no mention of 

the solvency issue. On March 17th, a bare ten days before trial, counsel for defendants reversed 

position and first announced that Mr. Averett (or in his absence Mr. Slaton) would provide 

expert testimony on whether Terry Manufacturing was insolvent at the time of the various 

transactions in question. This tardy reversal plainly violates the requirement of the Rules that 

“[t]he report shall contain a complete statement of all opinions to be expressed and the basis and 

reasons therefor.” Further, permitting this tidy and undisclosed testimony on solvency will 

significantly prejudice the Trustee. Mr. Averett did offer some opinions on the financial 

conditions of Terry Manufacturing in connection with his engagement by the Bank of Wedowee 

and First Tuskegee Bank. Those opinions are founded on certain appraisals by the Terrys, which 

the Trustee will seek to prove are either wildly inflated or outright fraudulent. That showing will 

require testimony by the appraisers, and, given the late date, the Trustee will not be able to obtain 

their attendance at trial. 

The expert report submitted by defendants is not relevant to this litigation.

The Supreme Court has emphasized that it is the duty of a trial court “to ensure the 

reliability and relevancy of expert testimony.” Kumho Tire Co. v. Carmichael, 526 U.S. 137, 

152 (1999). The expert report submitted by the defendants does not provide any analysis 

relevant to this litigation. According to the expert report, the “purpose of the analysis was to 

determine the specific use of loan proceeds from loans made by N.D. Horton and James M. 

Reynolds, II. Terry Manufacturing, Inc. (sic). The analysis was performed on specific loans 

that are the subject of the claims against the Defendants made by the Trustee of Terry 

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NO.99591510.1 

Manufacturing Company, Inc.” See Defendants’ Expert Report, dated February 24, 2006, at 1 

(emphasis supplied). The report is attached hereto without exhibits as Exhibit A. 

Exhibit D-1 to the expert report defines the loans that were the subject of Mr. Slaton’s 

analysis; a loan dated November 20, 20001 from American Real Estate to Terry Manufacturing 

in the amount of $5,500,000.00; a loan dated August 6, 2001 from American Real Estate to Terry 

Manufacturing in the amount of $1,500,000.00; and a loan dated May 30, 2002 from Peoples 

Bank of Eatonton to Perky Cap Company in the amount of $1,500,000.00. See Exhibit D-1 to 

Defendants’ Expert Report dated February 24, 2006, attached hereto as Exhibit B. None of the 

loans that were listed on Exhibit D-1 as the subject of the defendants’ expert analysis are at issue 

in this case. 

The Trustee’s complaint in this litigation asserts that the purchases of Perky Cap stock by 

Cotina Terry, Allie Robinson, Roy Terry and Rudolph Terry from the defendants, but paid for by 

Terry Manufacturing, are fraudulent conveyances under federal and state law. He does not seek 

to recover any amounts paid by Terry Manufacturing in connection with the loans listed on 

Exhibit D-1 and exclusively addressed by the report. 

Messrs. Slaton and Averett did not conduct any analyses, nor even consider the 

transactions which are at issue in this litigation. Mr. Slaton and Mr. Averett acknowledged in 

their depositions that they made no analysis concerning the Cotina Terry, Allie Robinson, Roy 

Terry or Rudolph Terry stock transactions. See Deposition of Randy Averett at 30-35, attached 

hereto as Exhibit C; Deposition of Jesse Slaton at 13-15, attached hereto as Exhibit D. Both 

admitted that their only knowledge of the transactions at issue in this litigation was what they 

 

1 Mr. Averett testified that this is a typographical error. The loan actually closed on November 10, 2000. 

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NO.99591510.1 

read in the Trustee’s expert report, and that they first read that report some time in the two hours 

preceding the depositions. Id. Typical is the exchange with Mr. Slaton : 

“Q. All right. Have you done any analysis whatsoever with respect to a transactions 

involving Cotina Terry, N.D. Horton, and James Reynolds? 

A. No. 

Q. Have you done any analysis whatsoever in connection with a transaction 

involving Allie Robinson, N. D. Horton, and James Reynolds? 

A. No. 

Q. Are you aware of either of those transactions having taken place? 

A. I am aware of them. 

Q. Based on what? 

A. Based on the summary report prepared by AEA Group, dated November 1st, 2005. 

Q. When did you first review that instrument, sir? 

A. This morning at 9:00. 

Q. All right. Likewise, did you do any analysis in connection with a transaction 

involving Rudolph Terry, Roy Terry, individually, N.D. Horton, and James 

Reynolds? 

A. No. 

Exhibit D at 14:1-14:20. 

Mr. Slaton simply got it wrong. The Trustee has not asserted any claims with respect to 

the three loans he analyzed. Put simply, his analysis and proposed testimony are irrelevant, and 

should not be admitted. 

 Mr. Averett may not testify because he has failed to comply with any of the 

disclosure obligations imposed by Federal Rule of Civil Procedure 26(a)(2)(B) and 

Bankruptcy Rule 7026

Rule 26(a)(2)(B) requires that the written report submitted by the expert be “prepared and 

signed by the witness.” The expert report produced by defendants to the Trustee was signed by 

Jesse Slaton alone. The letter dated February 27, 2006, and submitted by defendants in 

conjunction with the expert report was also signed by Mr. Slaton only. 

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NO.99591510.1 

At his deposition, Mr. Averett admitted that he neither drafted the report nor did he 

review or edit the report before it was delivered to Trustee’s counsel. In fact, Mr. Averett had 

not even read the February 27th letter until it was presented to him at his deposition. See 

Deposition of Randy Averett at 23-26, 68-70, attached hereto as Exhibit E; Deposition of Jesse 

Slaton at 9-13, attached hereto as Exhibit F. 

Mr. Averett is neither the author nor signatory of the report as required by the Rules. 

Likewise, he has not provided the other disclosures such as compensation, publications and prior 

expert experience required by the Rules. Indeed, he has not complied with any of the Rules.2

 

The Defendants Should Not Be Permitted to Offer Expert Testimony on Solvency

Counsel for defendants and for the Trustee had multiple discussions over the six-week 

period ending February 22nd on whether the defendants would engage an expert, and, if so, the 

timing of his report. Initially, the report was to be tendered by the end of January, and that date 

was extended until the first week of February, then February 10th, and ultimately February 24th. 

The report was tendered on February 27th.

3

 Importantly, in these discussions and discussions 

which also involved the Trustee, counsel for defendants repeatedly stated that he did not intend 

to contest the Trustee’s findings with respect to insolvency and that the defendants’ expert would 

 

2 Inexplicably, Mr. Slaton, likewise, failed to provide the disclosures required by the Rules with respect to 

his qualifications, compensation, publications and prior experience as an expert. The Trustee does not object to his 

testifying solely on this basis. 

3 On February 24th, counsel for defendants attempted to correspond with counsel for the Trustee to advise 

that the report would not be available until February 27th. The letter was only sent by email, and the records of 

Trustee’s counsel do not indicate that it was received. In any event, the letter did not state that defendants would 

reverse their decision and offer an expert opinion on solvency. The letter did note that “Mr. Averett or Mr. Slaton 

would testify as to...the opinions expressed in Mr. Averett’s previous report in the case against the banks.” In fact, 

Mr. Averett’s firm provided multiple reports in the bank cases totaling over 60 pages in length. The focus of most 

of that work was Mr. Averett’s attempt to trace loan proceeds, the same topic counsel for defendants had indicated 

would be the scope of Mr. Averett’s work in this case. 

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NO.99591510.1 

not address solvency. Consistent with that repeated representation, the report authored by Mr. 

Slaton and tendered on February 27th makes no mention of solvency whatsoever. 

Mr. Averett’s deposition was conducted on March 17th. Moments before it was to 

commence, counsel for defendants announced that he was reversing his long announced and 

often repeated position that his expert would not address solvency and advised that Mr. Averett 

might be asked to opine on that issue. Counsel further stated that Mr. Averett would be relying 

on reports he had rendered in litigation filed against Bank of Wedowee and First Tuskegee Bank. 

On March 21st, counsel for defendants advised that he had decided to examine his expert on 

solvency at trial. 

The report rendered in this case makes no mention of any issue pertaining to solvency, 

and for an expert to offer an opinion in court, his “report shall contain a complete statement of all 

opinions to be expressed and the basis and reasons therefor; the data or other information 

considered by the witness in forming the opinions; [and] any exhibits to be used as a summary of 

or support for the opinions....” Fed. R. Civ. Pro. 26(a)(2)(B). None of this required information 

appears in Mr. Slaton’s report. 

Defendants’ failure to provide any notice that they would not honor their counsel’s 

repeated representations concerning the scope of their experts’ testimony will significantly 

prejudice the Trustee. At this stage and given the flagrant disregard of defendants’ disclosure 

obligations, the Trustee is uncertain of what opinions and what supporting data will be offered. 

Assuming the defense expert testifies in a manner consistent with a May 31, 2005 report in the 

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NO.99591510.1 

bank cases,4 it will be to the effect that Terry Manufacturing was marginally solvent as of 

December 31, 2000. In turn, that opinion is dependent upon the validity of two appraisals 

accepted by Mr. Averett. Given proper notice, the Trustee would call the appraisers who 

allegedly rendered those reports, Messrs. Henderson and Lambert, to establish that one of the 

appraisals is an outright fraud prepared by Roy Terry and that the other is wildly inflated. 

Having only learned today of the Trustee’s need for these witnesses, they have not been 

subpoenaed, and counsel for the Trustee has been told that both will be out of the country on the 

date of trial. 

The required disclosures of Rule 26(a)(2)(B) and Bankruptcy Rule 7026 are designed to 

insure full and timely disclosure of the opinions and qualifications of the expert witness who will 

actually testify so that counsel can avoid trial by ambush. And trial by ambush is what the 

Trustee is now facing. He respectfully requests that the Court bar Mr. Averett from testifying, 

that the Court reject defendants’ grossly tardy attempt to offer solvency opinions, and that it 

reject Mr. Slaton’s opinions and analysis as irrelevant. 

Respectfully submitted this 22nd day of March, 2006. 

 Respectfully submitted, 

 By: /s/_Brent B. Barriere______________ 

 Brent B. Barriere, T.A. (La. Bar No. 2818) 

 David L. Patrón (La. Bar No. 22566) 

 Catherine E. Lasky (La. Bar No. 28652) 

 PHELPS DUNBAR LLP

 Canal Place 

 365 Canal Street • Suite 2000 

 New Orleans, Louisiana 70130-6534 

 

4 The several subsequent reports in those cases only addressed tracing of proceeds from bank loans. 

Case 2:06-cv-00746-WHA Document 5-6 Filed 08/29/2006 Page 8 of 39
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NO.99591510.1 

 Telephone: (504) 566-1311 

 Facsimile: (504) 568-9130 

ATTORNEYS FOR J. LESTER ALEXANDER, 

III, TRUSTEE OF TERRY 

MANUFACTURING COMPANY, INC. AND 

TERRY UNIFORM COMPANY, LLC 

CERTIFICATE OF SERVICE

 I certify that a copy of the foregoing pleading has been filed into the record and further 

served on the following counsel by facsimile, this 22nd day of March, 2006: 

C. Ellis Brazeal III 

Watson, Wells, Anderson & Berchall LLP 

1819 5th Avenue North, Suite 1100 

Birmingham, AL 35203. 

__/s/ Catherine E. Lasky_______________ 

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IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE MIDDLE DISTRICT OF ALABAMA 

IN RE: ) 

 ) 

TERRY MANUFACTURING ) CASE NO. 03-32063-WRS 

COMPANY, INC., ) 

 ) CHAPTER 7 

 Debtor ) 

 ) 

_____________________________________________________________________________ 

IN RE: ) 

 ) 

TERRY UNIFORM ) CASE NO. 03-32213-WRS 

COMPANY, LLC, ) 

 ) 

 Debtor ) 

______________________________________________________________________________ 

J. LESTER ALEXANDER, III, ) 

TRUSTEE OF TERRY ) 

MANUFACTURING COMPANY, ) ADVERSARY PROCEEDING NO.: 

 ) 05-03042 

INC, AND TERRY UNIFORM ) 

COMPANY, LLC ) 

 ) 

VERSUS ) 

 ) 

N.D. HORTON AND JAMES M. ) 

REYNOLDS, III ) 

ANSWER TO FIRST AMENDED COMPLAINT

 COMES NOW the defendants, N.D. Horton, and James M. Reynolds, and for 

their response to the first amended complaint of the trustee say as follows: 

 33. The defendants admit that they received guaranties from Terry 

Manufacturing regarding the Allie Robinson Note and Cotina Terry Note. The defendants deny 

the remaining averments of paragraph 33. 

Case 2:06-cv-00746-WHA Document 5-9 Filed 08/29/2006 Page 1 of 3
GENERAL

 The defendants incorporate herein all of their previously pled responses and 

defenses to the claims set forth in this action. 

 

\s\ C. Ellis Brazeal III

C. Ellis Brazeal III 

Attorney for Defendants N.D. Horton and 

James M. Reynolds, III 

OF COUNSEL:

WALSTON, WELLS, & BIRCHALL, LLP 

1819 5th Avenue North, Suite 1100 

Birmingham, Alabama 35203 

Telephone: (205) 244-5237 

Telecopier: (205) 244-5437 

CERTIFICATE OF SERVICE

I hereby certify that a copy of the above and foregoing Answer to First Amended 

Complaint has been served by electronic filing purposes, as follows: 

Brent B. Barriere 

Katie Lasky 

365 Canal Street 

Suite 2000 

New Orleans, Louisiana 70130 

This the \24th\ day of March, 2006. 

 \s\ C. Ellis Brazeal III

 OF COUNSEL 

 

 

 

 

Case 2:06-cv-00746-WHA Document 5-9 Filed 08/29/2006 Page 2 of 3
Case 2:06-cv-00746-WHA Document 5-9 Filed 08/29/2006 Page 3 of 3
IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE MIDDLE DISTRICT OF ALABAMA 

IN RE: ) 

 ) 

TERRY MANUFACTURING ) CASE NO. 03-32063-WRS 

COMPANY, INC., ) 

 ) CHAPTER 7 

 Debtor ) 

 ) 

________________________________________________________________________ 

IN RE: ) 

 ) 

TERRY UNIFORM ) CASE NO. 03-32213-WRS 

COMPANY, LLC, ) 

 ) 

 Debtor ) 

________________________________________________________________________ 

J. LESTER ALEXANDER, III, ) 

TRUSTEE OF TERRY ) 

MANUFACTURING COMPANY, ) ADVERSARY PROCEEDING 

NO.: 

 ) 05-03042 

INC, AND TERRY UNIFORM ) 

COMPANY, LLC ) 

 ) 

VERSUS ) 

 ) 

N.D. HORTON AND JAMES M. ) 

REYNOLDS, III ) 

RESPONSE TO TRUSTEE’S MOTION TO STRIKE RANDY AVERETT AND 

JESSE SLATON AS EXPERT WITNESSES

 COMES NOW Defendants N.D. Horton, Jr. (“Horton”) and James M. 

Reynolds, III (“Reynolds”), and for their response to the Motion to Strike Randy Averett 

and Jesse Slaton as expert witnesses and to the trustee’s objection, and supplement 

thereto, to the admissibility of their testimony say as follows: 

Case 2:06-cv-00746-WHA Document 5-10 Filed 08/29/2006 Page 1 of 7
 1. When this case was initially filed, it involved an attempt to set aside 

payments made pursuant to debts guaranteed by Terry Manufacturing Company, Inc. 

(“TMC”). 

 2. Later, the trustee indicated his intention to try to set aside the guaranties 

themselves as fraudulent transfers. 

 3. Counsel for the defendants indicated that he did not object to an 

amendment to the complaint in that regard so long as he was provided time within which 

to obtain expert testimony since this substantially changed the complexion of the case. 

 4. The complaint was so amended by this Court’s order on January 30, 2006. 

 5. On February 24, 2006, counsel for the defendants forwarded the attached 

correspondence to counsel for the trustee, which indicated that Mr. Averett and/or Mr. 

Slaton would provide testimony on the following three matters: 

a. the opinions expressed in Mr. Averett’s previous report in the case 

against the banks; 

b. an opinion about the comments of Les Alexander, set forth in the 

attached excerpts from one of his depositions; and 

c. a tracing analysis of certain of the loans from Horton and ARE to 

TMC. 

6. Counsel for the trustee has indicated that he did not receive this letter of 

February 24th. As set forth therein, the defendants desire for Mr. Averett to present 

testimony regarding his opinions expressed in the trustee’s lawsuit against the three 

banks, which would involve the solvency issue. Counsel for the trustee already has 

deposed Mr. Averett in this regard. 

Case 2:06-cv-00746-WHA Document 5-10 Filed 08/29/2006 Page 2 of 7
7. As to the report of Mr. Slaton dated February 24, 2006, although Mr. 

Averett did not draft the report, Mr. Averett testified that he and Mr. Slaton discussed the 

principals for the tracing analysis which were incorporated into that report. 

8. Counsel for the trustee has deposed both Mr. Averett and Mr. Slaton 

regarding this report. 

9. The trustee also objects to testimony regarding this report on the basis that 

it is irrelevant to this litigation. However, it clearly is relevant. 

10. The testimony involves the tracing of three loans which resulted in benefit 

to the debtor in the amount of $8.5 million dollars. All of these loans were either made 

by Mr. Horton, or his company, American Real Estate Investment Company, Ltd., or 

were arranged by Mr. Horton. Accordingly, the testimony is relevant to determine the 

benefit received by the debtor. 

11. Counsel for the defendant submits that the testimony is relevant, because 

this Court, in its opinion in the litigation against the banks, has indicated that it would 

like to see the results of tracing analysis. While defendant’s counsel believes that the 

mere receipt of the loan proceeds funds by the debtor is sufficient to demonstrate benefit, 

this tracing analysis goes further in accordance with the Court’s desires set forth in its 

order dated 12-19-05 in Trustee vs. The Peoples Bank, et al., Adversary Proceeding No. 

04-3061-WRS. 

WHEREFORE, premises considered, defendants respectfully requests this 

Court to allow Mr. Averett and/or Mr. Slaton to testify as to the tracing analysis; and to 

allow Mr. Averett to testify regarding solvency. The defendants pray for such further and 

other relief as this Court may deem appropriate. 

Case 2:06-cv-00746-WHA Document 5-10 Filed 08/29/2006 Page 3 of 7
 

 \s\ C. Ellis Brazeal III

C. Ellis Brazeal III 

Attorney for Defendants N.D. 

Horton, Jr. and James M. Reynolds, 

III 

OF COUNSEL:

WALSTON, WELLS & BIRCHALL, LLP 

1819 5th Avenue North, Suite 1100 

Birmingham, Alabama 35203 

Telephone: (205) 244-5237 

Telecopier: (205) 244-5437 

CERTIFICATE OF SERVICE

I hereby certify that a copy of the above and foregoing Response to 

Trustee’s Motion to Strike Randy Averett and Jesse Slaton as Expert Witnesses has been 

served by electronic filing purposes, as follows: 

Brent Barriere 

Katie Lasky 

Phelps Dunbar LLP 

City Plaza 

445 North Boulevard 

Suite 701 

Baton Rouge, LA 70802-5707 

This the \24th\ day of March, 2006. 

 \s\ C. Ellis Brazeal III

 OF COUNSEL 

 

 

 

 

 

Case 2:06-cv-00746-WHA Document 5-10 Filed 08/29/2006 Page 4 of 7
Case 2:06-cv-00746-WHA Document 5-10 Filed 08/29/2006 Page 5 of 7
WALSTON WELLS & BIRCHALL, LLP 

1819 5th Avenue North, Suite 1100 

Birmingham, Alabama 35203 

(205) 244-5200

February 24, 2006 

VIA EMAIL

Brent P. Barriere, T.A. 

Phelps Dunbar LLP 

Canal Place 

365 Canal Street Suite 2000 

New Orleans, Louisiana 70130-6534 

RE: Terry Manufacturing Company 

 

Dear Brent: 

This letter is sent in response to yours of February 22, 2006, and our discussion of 

this morning. Regarding the proposed depositions on March 8, 2006, I had previously scheduled 

depositions in another matter for March 7th and 8th and do not know how long they will go. It 

may be that we can do the depositions on the 8th if my depositions conclude on the 7th. If not, I 

am available on the 16th or 17th. 

Mr. Averett is to have the draft of his report to me today, and I will forward the 

final version to you no later than Monday, February 27th. Mr. Averett or Mr. Slaton would 

testify as to the following: 

1. The opinions expressed in Mr. Averett’s previous report in the case 

against the banks; 

2. An opinion about the comments of Les Alexander, set forth in the attached 

excerpts from one of his depositions. 

C. Ellis Brazeal III

Partner

 (205) 244-5237

Facsimile: (205) 244-5437

ebrazeal@walstonwells.com

P.O. Box 830642 • Birmingham, Alabama 35283-0642

Case 2:06-cv-00746-WHA Document 5-10 Filed 08/29/2006 Page 6 of 7
VIA EMAIL 

February 24, 2006 

Page 2 

_____________________ 

In addition, they have reviewed the banking records of the debtor regarding the 

loans from Mr. Horton and ARE to the debtor. Those records reflect that all of these loans 

proceeds were deposited into the Bank of Wedowee and were then transferred to the First Bank 

of Tuskegee from which checks were written. Essentially, their testimony traces the funds. 

Accordingly, I am not sure that it is opinion testimony, but factual analysis. Additionally, Lee 

Benton conducted his own analysis of the utilization of the Peoples Bank funds which I expect to 

present at trial. 

I will speak with you Monday once you have had a chance to review the report. 

 Very truly yours, 

 C. Ellis Brazeal III 

 

CEBIII/tm 

Enclosures 

cc: Jesse Slaton (Via email) 

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