NO.99743001.1 

UNITED STATES DISTRICT COURT 

MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION 

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, ) CIVIL ACTION NO. 

 Appellee, ) 

 ) 2:06-CV-0746 

VERSUS ) 

) 

N.D. HORTON, JR. AND JAMES M. ) 

REYNOLDS, ) 

 Appellants. ) 

MOTION FOR LEAVE TO FILE POST-HEARING MEMORANDUM

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

Trustee of Terry Manufacturing Company, Inc. and Terry Uniform Company, LLC and the 

Plaintiff-Appellee herein, and respectfully requests that he be granted leave to file the attached 

post-hearing memorandum addressing the limited issue of whether the defense asserted by 

Defendant-Appellants pursuant to § 8-9A-8(d) of the Alabama Fraudulent Transfer Act is 

dispositive of the captioned appeal and fatal to the Plaintiff-Appellee’s judgment. As more fully 

Case 2:06-cv-00746-WHA Document 12 Filed 12/06/2006 Page 1 of 3
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NO.99743001.1 

set forth in the accompanying memorandum, during oral argument this Court inquired as to 

whether it would be dispositive of the appeal should the Court accept the Appellants’ 

interpretation of the scope and meaning of § 8-9A-8(d). Counsel for the Appellee acknowledged 

that should the Court adopt the Appellants’ interpretation and conclude that Appellants qualify as 

“good faith transferee(s),” it would be dispositive of the Trustee’s judgment under the Alabama 

Fraudulent Transfer Act. Counsel may not have made clear, however, that the defense would not 

be dispositive of the Trustee’s separate claims under the fraudulent conveyance provisions of the 

United States Bankruptcy Code, 11 U.S.C. § 548. The attached memorandum explains this 

distinction and addresses the impact upon the damages awarded by the Bankruptcy Court. 

WHEREFORE, J. Lester Alexander, III, Trustee and Plaintiff-Appellee herein, 

respectfully requests that he be granted leave to file the attached memorandum and that he be 

provided such other and further relief as may be just and equitable. 

 Respectfully submitted, 

PHELPS DUNBAR LLP 

By: /s/ Brent B. Barriere________________ 

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

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

 365 Canal Street, Suite 2000 

 New Orleans, LA 70130 

Telephone: (504) 566-1311 

Facsimile: (504) 568-9130 

 

ATTORNEYS FOR J. LESTER 

ALEXANDER, III, TRUSTEE FOR TERRY 

MANUFACTURING COMPANY, INC. 

AND TERRY UNIFORM COMPANY, LLC 

Case 2:06-cv-00746-WHA Document 12 Filed 12/06/2006 Page 2 of 3
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NO.99743001.1 

CERTIFICATE OF SERVICE

I certify that, on this 6th day of December, 2006, by United States mail, properly 

addressed and postage pre-paid to the following persons: 

C. Ellis Brazeal 

Walston Wells & Birchall, LLP 

One Federal Place 

1819 5th Avenue North, Suite 1100 

Birmingham, Alabama 35203-2122 

 /s/ Brent B. Barriere__________ 

Case 2:06-cv-00746-WHA Document 12 Filed 12/06/2006 Page 3 of 3
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NO.99743098.1 

UNITED STATES DISTRICT COURT 

MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION 

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, ) CIVIL ACTION NO. 

 Appellee, ) 

 ) 2:06-CV-0746 

VERSUS ) 

) 

N.D. HORTON, JR. AND JAMES M. ) 

REYNOLDS, ) 

 Appellants. ) 

O R D E R

Considering the foregoing Motion for Leave to File Post-Hearing Memorandum filed by 

Plaintiff-Appellee, J. Lester Alexander, III, Trustee of Terry Manufacturing Company, Inc. 

(“Motion”) and Terry Uniform Company, LLC and finding good cause of the relief requested 

therein 

IT IS HEREBY ORDERED that the Motion is granted in its entirety; 

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NO.99743098.1 

IT IS FURTHER ORDERED that the Plaintiff-Appellee is granted leave to file a PostHearing Memorandum; 

IT IS FINALLY ORDERED that the Post-Hearing Memorandum filed by the PlaintiffAppellee shall be entered into the record of this proceeding. 

Montgomery, Alabama, this __________ day of ____________. 

 

 ________________________________________ 

 UNITED STATES DISTRICT JUDGE 

Case 2:06-cv-00746-WHA Document 12-2 Filed 12/06/2006 Page 2 of 2
NO.99742976.1 

UNITED STATES DISTRICT COURT 

MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION 

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, ) CIVIL ACTION NO. 

 Appellee, ) 

 ) 2:06-CV-0746 

VERSUS ) 

) 

N.D. HORTON, JR. AND JAMES M. ) 

REYNOLDS, ) 

 Appellants. ) 

POST-HEARING MEMORANDUM OF PLAINTIFF/APPELLEE

J. LESTER ALEXANDER, III, TRUSTEE OF TERRY MANUFACTURING

COMPANY, INC.

Before this Court is the appeal of the District Court’s Judgment and Opinion dated May 

30, 2006 granting judgment in favor of the Trustee and against Defendant-Appellants and 

awarding damages of $596,738.60. On appeal, Defendant-Appellants have presented a series of 

Case 2:06-cv-00746-WHA Document 12-3 Filed 12/06/2006 Page 1 of 5
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NO.99742976.1 

arguments including principally (i) that the Defendant-Appellants provided reasonably 

equivalent value to the Debtor, Terry Manufacturing, in connection with the payments made to 

them by Terry Manufacturing on promissory notes executed by insiders of Terry Manufacturing 

and (ii) even if the Defendant-Appellants did not provide value to Terry Manufacturing, they are 

entitled to a credit against the Trustee’s judgment for value they gave persons other than Terry 

Manufacturing. With regard to the latter, Defendant-Appellants rely upon § 8-9A-8(d)(2) of the 

Alabama Fraudulent Transfer Act which provides in relevant part that “notwithstanding 

voidability of the transfer under this chapter, a good-faith transferee is entitled, to the extent of 

value given the debtor for the transfer or to another person as consequence of the debtor’s 

making such transfer to ...a reduction in the amount of the liability on the judgment.” 

According to Defendant-Appellants, for every dollar paid to them by Terry 

Manufacturing, they gave a dollar of value to insiders of Terry Manufacturing in the form of a 

reduction of indebtedness owed to the Appellants by those insiders. Accordingly, if the Court 

accepts Defendant-Appellants’ interpretation of this provision, it will constitute a complete 

defense to the Trustee’s claim under the Alabama Fraudulent Transfer Act because the Trustee 

does not, and cannot dispute that for every dollar Terry Manufacturing paid on the promissory 

notes given by its insiders there was a corresponding reduction in the insiders’ liability under 

those notes.1 

Should this Court accept the Defendant-Appellants’ interpretation of § 8-9-A-8 and

conclude that Defendant-Appellants qualify as good faith transferees, but affirm the Bankruptcy 

 

1 Obviously, the Trustee continues to disagree with the Defendant-Appellants’ interpretation for the reasons 

detailed in his original brief and amplified during oral argument. Further, the Trustee does not concede DefendantAppellants qualify as “good faith transferees.” The Bankruptcy Court did not address that issue. 

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NO.99742976.1 

Court’s decision in all other respects, it will relieve the Defendant-Appellants of liability under 

the Alabama Fraudulent Transfer Act, but will not relieve them of liability with respect to the 

Trustee’s alternate cause of action under the Bankruptcy Code. The Trustee sued Appellants 

under both § 548 of the Bankruptcy Code and the Alabama Fraudulent Transfer Act. The 

substantive elements of the cause of action for constructive fraudulent transfer under the two 

statutes are the same. Whether proceeding under § 548(a)(1)(B) of the Bankruptcy Code or § 8-

9A-4(c) of the Alabama Code, the Trustee has the burden of demonstrating (i) that there was a 

transfer; (ii) the transfer was made at a time when the debtor was either insolvent from a balance 

sheet standpoint, had inadequate capital or incurred debts beyond its ability to pay; and (iii) the 

debtor did not receive “reasonably equivalent value” in connection with the transaction. See, 

e.g., Alexander v. DeLong, Caldwell, Novotny, & Bridgers, LLC (In re Terry Mfg. Co., Inc.), ___ 

B.R. ___, 2006 WL 3210496 at *3 n.6 (Bankr. M.D. Ala. 2006)(Sawyer, J.)(recognizing that 

§ 548 and Alabama Fraudulent Transfer Act require that the plaintiff did not receive “reasonably 

equivalent value”); Alexander v. Horton and Reynolds (In re Terry Mfg. Co., Inc)., 345 B.R. 377, 

385 (Bankr. M.D. Ala. 2006)(Sawyer, J.)(“operative language of § 548 and Alabama Code § 8-

9A-5 is nearly identical”). If the Trustee makes a showing sufficient to carry its burden of proof 

under the Alabama Fraudulent Transfer Act, he simultaneously makes the requisite showing 

under § 548.

There are two important distinctions between the Alabama Fraudulent Transfer Act and 

§ 548. First, the Bankruptcy Code does not contain the “credit” provision of § 8-9A-8(d). 

Second, under the Alabama Fraudulent Transfer Act, the Trustee may avoid transfers which 

occur within four (4) years of the date the transferor/debtor files for relief under the Bankruptcy 

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NO.99742976.1 

Code. See § 8-9A-9(3) of the Alabama Fraudulent Transfer Act. In contrast, if he employs 

§ 548, the Trustee may only avoid a transfer “that was made or incurred on or within one year 

before the date of the filing of the petition...”. 11 U.S.C. § 548(a)(1).2 The transfers addressed 

by the Bankruptcy Court’s Opinion occurred between December, 2000 and July, 2003. All of 

the transfers at issue in the instant case fall within the scope of the Alabama Fraudulent Transfer 

Act. If the Trustee were effectively limited to his remedies under § 548, he could only recover 

those transfers made between July 7, 2002 and July 7, 2003, the filing date of Terry 

Manufacturing’s petition under Chapter 11. The total transfers which occurred within that period 

amount to $394,687.49 as opposed to the $596,738.60 awarded by the Bankruptcy Court.3 

CONCLUSION

During oral argument, the Court posed the question of whether it would be a complete 

defense to the Trustee’s claims and fatal to his judgment were the Court to adopt the Appellants’ 

argument with respect to the interpretation of § 8-9A-8(d)(2). The correct answer to that 

question is that if they are deemed good-faith transferees under § 8-9A-8(d)(2), Appellants 

would have a complete credit against the Trustee’s judgment under the Alabama Fraudulent 

Transfer Act. That language does not appear within the Bankruptcy Code, and is not a defense 

to the Trustee’s claims under § 548. Accordingly, were the Court to affirm the Bankruptcy 

Court’s decision in all other respects, the net effect would be to reduce damages payable by 

 

2 The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 amended § 548 to provide that a 

trustee may avoid transactions which occur within two years of the bankruptcy petition. Section 1406(b)(2) of that 

Act, however, provides that the two-year period will only apply in bankruptcy cases filed after 2006. The Terry 

Manufacturing bankruptcy was filed in 2003. 

3

 Prior to trial, the parties stipulated with respect to the payments made to the Appellants by Terry 

Manufacturing. The Bankruptcy Court admitted without objection exhibits 12, 13 and 19 which detail the specific 

payments made on the three promissory notes given by the insiders to Appellants. The Trustee had added together 

those payments which cleared the Terry Manufacturing account on or after July 7, 2002. The date a check is 

honored by the bank is deemed the date of transfer for bankruptcy fraudulent transfer analysis. See e.g., In re 

Morton Shoe Companies, 36 B.R. 14, 15-16 (Bankr. D. Mass. 1983). 

Case 2:06-cv-00746-WHA Document 12-3 Filed 12/06/2006 Page 4 of 5
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NO.99742976.1 

Appellants from $596,738.60 to $394,687.49. 

 Respectfully submitted, 

PHELPS DUNBAR LLP 

By: /s/ Brent B. Barriere________________ 

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

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

 365 Canal Street, Suite 2000 

 New Orleans, LA 70130 

Telephone: (504) 566-1311 

 

ATTORNEYS FOR J. LESTER 

ALEXANDER, III, TRUSTEE FOR 

TERRY MANUFACTURING 

COMPANY, INC. AND TERRY 

UNIFORM COMPANY, LLC 

CERTIFICATE OF SERVICE

I certify that, on this 6th day of December, 2006, by United States mail, properly 

addressed and postage pre-paid to the following persons: 

C. Ellis Brazeal 

Walston Wells & Birchall, LLP 

One Federal Place 

1819 5th Avenue North, Suite 1100 

Birmingham, Alabama 35203-2122 

 /s/ Brent B. Barriere__________ 

Case 2:06-cv-00746-WHA Document 12-3 Filed 12/06/2006 Page 5 of 5