AO 72A

(Rev.8/82)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
R. DENNIS CHRISTOPHER,
BROOKLAND DEVELOPMENT,
INC., and THE EAGLE GROUP,
INC.,
Appellants,
v.
RICHARD COX,
Appellee.
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CIVIL ACTION NO.
1:04-CV-1189-RWS
On appeal from:
U.S. Bankruptcy Court
Case No. 01-65356-PWB
ORDER
This case is before the Court on appeal from the United States
Bankruptcy Court for the Northern District of Georgia. After reviewing the
entire record, the Court enters the following Order.
FACTUAL BACKGROUND
In Fall 1999, Richard Cox (Cox) and Lamar Banks (Banks) each
owned a one-half interest in a 449-acre ranch in Newton County, Georgia (Cox
Tract). The Cox Tract was subject to a mortgage in favor of West Georgia
Farm Credit in an amount just under $700,000. The value of the property was
$2,445,700.
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Cox and Banks had a buy-sell agreement under which Cox invoked his
right to purchase the property for $1,750,000. A closing date was set for
February 9, 2000. Cox attempted to arrange financing through conventional
means but was unsuccessful because of limited cash flow. Cox sought a bank
loan and was initially told that he would need a guarantor for the loan. He
requested that Dennis Christopher (Christopher) serve as the guarantor on the
loan, and Christopher agreed. However, the bank then declined to make the
loan even with the guarantor.
Eventually, Cox and Christopher agreed upon an arrangement whereby
Cox would deed the Cox Tract to Christopher; Christopher would assume the
outstanding mortgage ($684,336.57); Christopher would advance funds to pay
Banks his equity ($520,641.96); Christopher would pay closing costs
($34,693.10) which included outstanding interest on the mortgage; and
Christopher would grant Cox an option contract whereby Cox had the right,
good for 365 days, to repurchase the Cox Tract from Christopher. The price at
which Cox could purchase the land was the amount paid by Christopher to
Banks for Banks equity plus closing costs paid by Christopher plus payments
made on the existing mortgage plus any other expenditures Christopher might
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make, all at an interest rate of 9.25 percent. Also, Christopher would be paid an
additional $100,000. Christopher testified that he expected to be paid back his
money and did not think he owned the Cox Tract until the option expired.
Based on these terms, Cox and Christopher closed on February 16, 2000.
The transaction was documented by a warranty deed from Cox to Christopher
and an option contract from Christopher to Cox. There was no note from Cox
to Christopher evidencing an obligation of Cox to repay Christopher. After this
transaction, Cox continued to occupy the property and to pay taxes and
insurance. He did not pay rent.
After the closing, Cox attempted to find a purchaser for the property. In
March 2000, Robert Hawk (Hawk) of Conner Smith Realty contacted Larry
Key (Key) of Brookland Development, Inc. (Brookland) to determine if
Key had any interest in the Cox Tract. Key is not a licensed broker but he and
Brookland acquire, develop, and sell real estate. Key contacted Frank Sanders
who expressed an interest in the property and eventually made an offer to Cox.
However, the deal did not close because of zoning issues.
Key spoke with other potential investors, including Ron Reeser
(Reeser), President of Eagle Land Group, Inc. (Eagle). Eagle entered into a
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contract to purchase the Cox Tract from Cox but it did not close. Again,
zoning and utility issues caused the deal not to close.
In March 2001, according to the terms of the purchase option, Coxs
option to purchase the property expired. On behalf of Christopher, Hawk again
contacted Key about the property. Hawk and Christopher advised Key that
Coxs option on the property had expired and that Christopher now owned the
Cox Tract. Key located a potential purchaser, Jerry Mussara (Mussara). Key
showed Mussara the property. Key also attended meetings with Mussara and
Christopher to discuss zoning issues with commissioners. Mussara entered into
a contract to purchase the property from Christopher, and Christopher agreed
to pay Brookland $332,000 at the closing of the sale.
After the contract was signed, Key conferred with Reeser and asked
Reeser whether the transaction should be run through Eagle. Reeser responded
that if Key trusted Christopher he could treat the payment from Christopher to
Brookland as a referral fee.
Thereafter, Mussara decided not to close the transaction. Key requested
that Mussara allow him to find someone who could assume the contract. Key
and Reeser interested Taylor Knox (Knox) in the property and on May 11,
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2001, Mussara assigned his interest in the contract to Knoxs company, Taylor
Knox Homes, Inc. A fee was paid to extend the contract until June 11.
On April 20, 2001, Cox filed a Chapter 11 bankruptcy proceeding and a
complaint against Christopher to determine the extent of the estates interest in
the Cox Tract. On June 11, Knox, having learned of the pending bankruptcy,
chose not to close the contract. On June 13, Cox and Christopher filed a joint
motion seeking to sell the Cox Tract to Diversified Development Company.
The United States Trustee filed an objection to the proposed sale. The property
was ordered sold at auction, and on June 18, the property was sold to Robert
A. Anclien (Anclien). The sale was subject to no contingencies whatsoever.
Keys counsel attended the bankruptcy auction and made no objections.
Anclien and Knox had worked together on one previous development.
After the Mussara contract expired, Knox showed the Cox Tract to Anclien,
and they had preliminary discussions about buying the Cox Tract. However, at
the time of the auction, Anclien bought the property without participation by
Knox and despite warnings from Knox about zoning issues.
The sale closed on August 28, 2001 and proceeds of the sale have
already been used to extinguish the mortgage on the Cox Tract, repay
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Christopher his mortgage interest payments plus 9.25%, repay Christopher the
payment to Banks for Banks equity plus 9.25%, and pay Christopher his
attorneys fees and his $100,000 fee.
PROCEDURAL HISTORY
After Cox filed the Chapter 11 proceeding and complaint against
Christopher on April 20, 2001, Christopher filed an answer and a counterclaim
in which he sought to recover rent from Cox for the time Cox had occupied the
tract after the expiration of the option contract. Subsequently, Brookland and
Eagle intervened and asserted claims for a finders or referral fee in connection
with the purchase contract between Mussara and Christopher whereby Mussara
was to purchase the Cox Tract.
The Bankruptcy Court conducted the trial of the case in three parts. In
Part I, the court found that the February 16, 2000 transaction between Cox and
Christopher created a mortgage whereby Cox was the owner of the Cox Tract
subject to a mortgage held by Christopher. Christopher appeals this ruling of
the Bankruptcy Court.
In Part II, the Bankruptcy Court found that Brookland and Eagle were not
entitled to recover fees and dismissed their claims. Brookland and Eagle appeal
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this ruling. In response to their appeal, Christopher and Cox have filed a motion
for sanctions. In Part III, the Bankruptcy Court awarded legal fees and
expenses to Christopher. No appeal has been taken from that ruling.
STANDARD OF REVIEW
Factual findings of a bankruptcy court are reviewed using a clearly
erroneous standard, and conclusions of law are subject to de novo review. In re
Calvert, 907 F.2d 1069, 1071 (11th Cir. 1990). Mixed questions of law and fact
are reviewed de novo. In re Piper Aircraft Corp., 244 F.3d 1289, 1295 (11th
Cir. 2001).
DISCUSSION
A. The Transaction Between Cox and Christopher
The issue presented in the appeal from Part I of the trial is whether the
February 16, 2000 transaction between Cox and Christopher created a loan
from Christopher to Cox secured by a mortgage or an absolute sale of the Cox
Tract to Christopher, with a right in Cox to repurchase. Cox contends that the
transaction was a mortgage, and therefore, he is entitled to the proceeds of the
sale of the property. The Bankruptcy Court agreed. Christopher appeals and
asserts that the transaction was a sale, and that he was the owner and is entitled
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to the proceeds. For the most part, the parties agree on the cases that govern
the determination of whether the transaction between Cox and Christopher was
a mortgage or a sale with an option to repurchase. The parties dispute the
meanings of these decisions as well as how they should be applied to the facts
of this case. While general principles can be drawn from each of the cases, a
careful analysis of each of them suggests that the results are driven more by their
unique facts rather than by any general legal principles.
Two United States Supreme Court cases lay the foundation for the
principles which govern this case. In Conways Executors and Devisees v.
Alexander, 11 U.S. 218, 3 L. Ed. 321 (1812), the Court held that in cases where
it is not clear whether a mortgage or a sale with a right to repurchase is intended,
the courts have generally decided the transaction was a mortgage. However, the
Court held that a conditional sale, if really intended, is valid. Id. at 237. The
Court went on to state:
[T]he inquiry in every case must be, whether the contract in the
specific case is a security for the re-payment of money or an actual
sale. . . .the want of a covenant to repay the money is not complete
evidence that a conditional sale was intended, but is a circumstance
of no inconsiderable importance. If the vendee must be restrained
to his principal and interest, that principal and interest ought to be
secure. It is, therefore, a necessary ingredient in a mortgage, that
the mortgagee should have a remedy against the person of the
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debtor. If this remedy really exists, its not being reserved in terms
will not affect the case. But it must exist in order to justify a
construction which overrules the expressed words of the
instrument.
Id. Thus, the nature of the transaction is determined by the intent of the parties.
The absence of a covenant by the grantor to repay the money, while not
conclusive, is evidence of considerable importance.
In Conways Executors, Alexander tried in 1788 to sell off part of his
land in Alexandria, Virginia. He never tried to mortgage it. Lyles, not a money
lender by trade, bought the property at or near market price, and gave a
repurchase option set to expire in July 1790. There was no note or any evidence
of personal liability. Alexander did not repurchase. In late August 1790, Lyles
sold the property to Conway. With Alexanders knowledge, Conway improved
and subdivided the land. Throughout his life, Alexander never referred to the
1788 transaction as a mortgage, and never claimed to anyone that he owned the
transferred property. He did not mention the property in his will.
Alexander died in 1793. He had a son who was his heir. In 1807-- four
years after turning twenty-one, and nineteen years after his father transferred the
property-- young Alexander filed a bill to redeem. Alexander argued the
mortgage per se rule. Alexander won in the lower court, but the United States
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Supreme Court reversed. In weighing all of the circumstances to determine the
intent of the parties, Chief Justice Marshall noted the foregoing facts. The Chief
Justice also noted, A conditional sale made in such a situation at a price
bearing no proportion to the value of the property would bring suspicion on the
whole transaction. The excessive inadequacy of price would, in itself, in the
opinion of some of the judges, furnish irresistible proof that a sale could not
have been intended. Id. at 241. The Court found that evidence related to the
value of the property was too uncertain to support a finding of disparity in this
case.
The second Supreme Court case forming the foundation of principles for
consideration of the issues before the Court is Russell v. Southard, 53 U.S. 139,
13 L. Ed. 927 (1851). In Russell, the Court specifically addressed the issue of
disparity between the value of the property and the alleged purchase price.
First, the Court stated that extraneous evidence is admissible to inform the
court of every material fact known to the parties when the deed and
memorandum were executed. Id. at 147. In examining the question of the
nature of a transaction, it is of great importance to inquire whether the
consideration was adequate to induce a sale. Id. at 148. On the issue of the
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obligation of the grantor to repay the grantee, the court held that the absence of
the personal liability of the grantor to repay the money [is not] a conclusive test
to determine whether the conveyance was a mortgage. Id. at 152.
In Russell, Russell conveyed by absolute deed in fee simple a 216 acre
farm to Southard in September 1827. At the time the deed was delivered and as
part of the same transaction, Southard gave Russell a memorandum wherein
Southard agreed to resell and convey the farm to Russell for the same price that
Southard had paid to Russell with interest. The memorandum further provided
that if Russell did not pay that sum within four months of the date of the
memorandum, the agreement would be null and void. The purchase price paid
by Southard, and for which Russell could repurchase the property from
Southard, was $4,929.81 cents.
The subject farm contained 216 acres about 2 miles from Louisville,
Kentucky abutting one of the principal highways leading to the city. A house
located on the land was estimated to have cost from $10,000 to $12,000.
Though there was some effort to show that fences and buildings on the farm
were not in the best condition, the Court could not avoid the conclusion that
this consideration was grossly inadequate and concluded that there was no
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real proportion between the alleged price and the value of the property said to
have been sold. Id. at 149. The memorandum which was given at the time of
the transaction did not contain any promise by Russell to repay the money, and
no personal security was taken. Yet, the court concluded that
in this case there is sufficient evidence that the relation of debtor
and creditor was actually created, and that the written memorandum
ascertains the amount of the debt, though it contains no promise to
pay it. . . . The conclusion at which we have arrived on this part of
the case is that the transaction was, in substance, a loan of money
upon the security of the farm, and being so, a court of equity is
bound to look through the forms in which the contrivance of the
lender has enveloped it, and declare the conveyance of the land to
be a mortgage.
Id. at 152-53. Thus, even in the absence of any evidence of an obligation by the
grantor to repay the grantee, the court concluded that, under the circumstances,
the transaction was a mortgage.
Several Georgia cases have relied upon these Supreme Court decisions in
addressing this issue. Like the decisions of the Supreme Court, Georgia courts
have emphasized that the court must ascertain the intent of the parties, looking
past the mere form of the paper and considering all the circumstances.
Spence v. Steadman, 49 Ga. 133 (1873).
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In Spence, the plaintiff sold property to defendants. Defendants gave
plaintiff a bond to resell the property to him. Though the Georgia Supreme
Court ultimately concluded that the transaction was not a mortgage but a sale
with an option to rebuy, the Court explained the justification for the close
scrutiny of transactions such as the one in issue.
A sale with an agreement to repurchase, or as is usually termed a
conditional sale, though nearly allied to a mortgage, is yet very
distinct in its effect, if the terms of the condition be not complied
with. By the strict rules of the common law even in the case of a
mortgage, if payment was not made according to the agreement,
the estate was forfeited, and the title remained absolutely in the
mortgagee. But Courts of equity taking into consideration the
important fact that it was not the intent of the parties to sell, but
only to secure the payment of a debt, came to the relief of the
mortgagor and gave him the right of redemption even after
condition broken. The fundamental idea of the doctrine of the
equity of redemption in a mortgagor, was that it was not the intent
of parties to sell and buy that the transaction was, in truth, an
arrangement to secure the payment of money, and that on the
payment of the money due, with lawful interest, the whole intention
of the parties was complied with.
Id. at 137-38.
The Court went on to describe the process of analysis to be applied in
these cases:
It is unquestionably sometimes difficult to determine what was the
real intent. . . . It is therefore a settled rule that the mere form of the
paper the words used such as purchase, sell, repurchase, etc.,
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if the real intent be only to secure the payment of money, will not
make the instrument other than a mortgage. And equity will lean to
the construction that will give to the vendor the right to redeem.. . .
The great question in every such case is, what was the intent of the
parties? . . .
The question of intention is one of fact, to be decided from all the
circumstances, including the papers. It is impossible to lay down
any accurate, rigid rule by which to ascertain the motives of the
parties. They are to be gathered from all the circumstances. Even
the papers are open to contradiction by parol, though in this State,
if the possession has changed, a deed absolute on its face cannot
be shown to be a mortgage, unless, indeed, fraud in its
procurement is the issue.
Id. at 138-39 (emphasis in original).
Finally, the court addressed the issue of the obligation of the grantor to
repay the grantee. In the case at bar, Christopher contends that a debtor-
creditor relationship is required to establish a mortgage. He argues that Cox
was not obligated to repay him, and therefore, the transaction was a sale. In
Spence, the court found that if the transaction provided the grantor with a right
or option to rebuy, with no corresponding right, either express or implied, in
the other parties to insist on the repayment of the money then it was not a
mortgage. We do not mean that there shall be an express stipulation of this right
to the lender. If the facts, the nature of the transaction indicates it, that would be
sufficient. Id. at 141. Although the Court found the transaction was a sale with
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an option to rebuy, the court acknowledged that a different result could occur at
trial when a jury heard all of the relevant evidence. As a matter of course, we
do not say, or undertake to say, what a jury may find in the proof as it will be
made on the trial. Id. at 139.
In Tingle v. Tingle, 227 Ga. 97 (1970), Mary Alice Tingle (Ms. Tingle)
was facing foreclosure on two properties. In an effort to pay her outstanding
debts, Ms. Tingle entered into an agreement with Ben F. Tingle, III (Mr.
Tingle) whereby Mr. Tingle obtained a loan which he used to pay off Ms.
Tingles indebtedness. He agreed to make monthly installment payments on the
loan as they came due and to pay ad valorem taxes and other governmental
assessments if Ms. Tingle were unable to do so. Ms. Tingle deeded both of the
properties to Mr. Tingle and their agreement provided that the properties were
conveyed to prevent loss of the properties through foreclosure and levy. Ms.
Tingle resided on one of the properties and the agreement provided that she
would be permitted to continue to reside there. Ms. Tingle was also given the
right to repurchase the property by paying Mr. Tingle the balance due on the
loans obtained by him and any sums advanced or expended by him for
installment payments, closing costs, taxes, or other expenses associated with the
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property. Ms. Tingle had the right to repurchase the property during her
lifetime. In the event she did not repurchase before her death, the deeds to Mr.
Tingle would become absolute deeds of bargain and sale, free of any implied
trust or obligation.
The trial court construed the agreement without any extrinsic evidence
and found that the parties intended the warranty deeds to be security deeds.
The Georgia Supreme Court found that the transaction was not a mortgage but
was a conditional sale. The court also held that it was not error for the trial
court to have construed the transaction without extrinsic evidence because the
language here was not ambiguous, but only required ascertainment of its legal
effect. Id. at 103.
The other Georgia case relied upon by Christopher is Haire v. Cook, 237
Ga. 639 (1976). Aaron Haire owned two tracts of land on which a bank holding
a security deed threatened foreclosure. Dole Cook agreed that in exchange for
a warranty deed from Aaron Haire he would pay Aaron Haires debt to the bank
and would reconvey the property to Aarons son Steven Haire upon his
attaining age 21 and paying the defendant the principal plus eight percent
interest. Id. at 639. Aaron Haire executed and delivered a warranty deed to
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Cook who paid $69,000 to the bank. Aaron Haire and his family remained in
possession of the land.
Steven Haire became 21 on October 10, 1969. He leased the property
from the defendant by written leases for the years 1970, `71, `72, and `73. The
1973 lease expressly acknowledges that the defendant is the fee simple owner of
the property. Id. Aaron and Steven Haire brought suit against Cook
contending that the deed from Aaron Haire to Cook was intended to be a
mortgage. The court stated that a deed absolute on its face not accompanied
with possession of the property may be proved by parol evidence to be a
mortgage only. Id. at 643. Citing Spence, the court noted that the great
cardinal rule for testing the intent is whether the relation of debtor and creditor
was to continue to exist. Id. Finding no evidence that Cook had the right to
demand repayment and no evidence that either of the Haires agreed to be
obligated to repay the debt, the court found that a debtor-creditor relationship
was not created, and thus, the deed could not be considered a mortgage.
The last two decisions seem to support Christophers contention that a
debtor-creditor relationship between the grantor and grantee is required to
establish a mortgage. However, the facts of these cases distinguish them from
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the earlier United States and Georgia Supreme Court decisions. Noticeably
absent is a full consideration of all the circumstances associated with the
transactions. In fairness, the failure to address these factors may be the result of
there being no evidence to support findings on these points rather than an
outright failure to even consider the points. But in any event, neither of the latter
two cases involved transactions with significant disparities between the value of
the subject property and the consideration paid by the grantee.
The court reviews questions of law de novo. The Court concludes that
under the applicable law, the intent of the parties at the time the transaction was
entered into determines the nature of the transaction. Conways Executors, 11
U.S. at 237. The Court must consider all of the circumstances of the
transaction in determining intent. Russell, 53 U.S. at 147-48; Spence, 49 Ga. at
139. In cases where the grantor remains in possession, the Court is free to
consider parol evidence which helps define the transaction and may differ from
the documents evidencing the transaction. Spence, 49 Ga. at 139; Haire, 237
Ga. at 643. The Court may consider the absence of an obligation for the
grantor to repay the grantee a circumstance of no inconsiderable importance
Conways Executors, 11 U.S. at 237. However, the absence of such an
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obligation is not conclusive that the transaction was not a mortgage. Russell, 53
U.S. at 152. When the consideration paid by a grantee is grossly inadequate
when compared to the value of the property being conveyed, the Court may
consider that disparity and find an intent to create a mortgage even in the
absence of a promise to pay. Russell, 53 U.S. at 149-152.
Findings of fact by the Bankruptcy Court are reviewed using a clearly
erroneous standard. The question of intention is one of fact, to be decided
from all the circumstances. Spence, 49 Ga. at 139. There is substantial
evidence in the record supporting the finding of the Bankruptcy Judge that Cox
and Christopher intended their transaction to be a mortgage. The most
significant fact is the grossly inadequate consideration paid by Christopher. At
the time of the transaction, the property was worth over $2.4 million.
Christopher paid just over $1.2 million for the property. At the time Cox agreed
to the purchase price, he had committed to exercise a buy-sell with Banks and
had been unable to secure conventional financing to close the deal. Cox initially
sought to have Christopher co-sign a loan with him but this arrangement was not
acceptable to the bank. The purchase price was established based solely on the
money Cox needed to close the deal with Banks. There is no evidence of any
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effort to value the property by the parties. The arrangement was clearly one in
which Christopher was financing the buy-sell deal for Cox. Christophers
purchase price for the property is strong evidence that the transaction was
actually a mortgage rather than a sale.
Other aspects of the transaction also favor finding a mortgage rather than
a sale. After the transaction between Cox and Christopher, Cox remained on
the property and paid no rent to Christopher. Also, Cox continued to pay taxes
and insurance on the property. Based on the foregoing, the Court finds that the
record supports the findings of the Bankruptcy Judge, and that his findings are
not, therefore, clearly erroneous.
The parties have suggested that the determination of the intent of the
parties is a mixed question of law and fact, and therefore, the Court should
review the decision de novo. Though the Court believes intent is a question of
fact, this Court would reach the same conclusion as the Bankruptcy Judge if
reviewing the matter de novo.
The Court would rely on the law and facts cited above to conclude that
the intent of the parties was to create a mortgage. In addition to the specific
facts previously cited, the totality of the circumstances of the transaction
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compel the same conclusion. At the time of the transaction, Cox was not trying
to sell his property. On the contrary, the entire transaction was designed to
enable him to purchase the property. Had he desired to sell, Cox could have
sold the property to Banks for $1,750,000. Faced with the option of selling to
Banks at that price, Cox instead chose to purchase the property at that price. It
would make no sense for Cox to agree to sell to Christopher for just over $1.2
million in light of the outstanding offer from Banks for $1.75 million. Cox
wanted to purchase the property and the transaction with Christopher was the
method he chose to finance the purchase. From all the circumstances, the
Court concludes that the transaction was a loan of money upon the security of
the property, and the Court is required to look through the forms to the intent of
the parties. See Russell, 53 U.S. at 152-53. Therefore, the transaction was a
mortgage, not an outright sale.
B. Fees for Brookland and Eagle
A Notice of Appeal was filed by Brookland and Eagle. However, the
Brief in Support of the Appeal only argues for fees for Brookland. No
argument is offered in support of Eagle. Therefore, the Court finds that Eagle
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has raised no issues for appeal and will, therefore, limit the discussion to the
claims of Brookland.
The Bankruptcy Judge held that Brookland is barred from seeking fees by
O.C.G.A. 43-40-24(a) which provides:
No person shall bring or maintain any action in the courts of this
state for the collection of compensation for the performance of any
of the acts mentioned in this chapter without alleging and proving
that he was a licensed broker in Georgia at the time the alleged
cause of action arose.
A broker is defined as:
Any person who, for another, and who, for a fee, commission, or
any other valuable consideration or with the intent or expectation of
receiving the same from another:
(A) negotiates or attempts to negotiate, or assists in procuring
prospects for the listing, sale, purchase, exchange, renting,
lease, or option for any real estate or the improvements
thereon;
(B) holds himself or herself out as a referral agent for the
purpose of securing prospects for the listing, sale,
purchase, exchange, renting, lease, or option for any
real estate;
....

(I) provides or attempts to provide to any party to a real
estate transaction consulting services designed to
assist the party in the negotiations or procurement of
prospects for the listing, sale, purchase, exchange,
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renting, lease, or option for any real estate or the
improvements thereon.
The Bankruptcy Judge found, and this Court agrees, that Brookland
qualifies as a broker under this definition. Brookland, through Key, procured
prospects for the purchase of the property and participated in the negotiations
of the sale price. Key also provided additional services by participating in
discussions to try to resolve zoning issues related to the property. He also did
research regarding utilities for the property.
Brookland contends that it is an exception to the above-stated rule based
on O.C.G.A. 43-40-29(a)(9), which provides:
(a) Except as otherwise provided, this chapter shall not apply to:
....
(9) Any person acting as a referral agent who is not
involved in the actual negotiations, execution of
documents, collection of rent, management of
property, or other related activity which involves more
than the mere referral of one person to another and
who:
(A) Does not receive a fee for such referral
from the party being referred;
(B) Does not charge an advance fee; and
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(C) Does not act as a referral agent in more
than three transactions per year.
Brookland seeks to excuse its activities in connection with the property
because it argues Key was acting in a dual role of either developing the property
for himself or referring others to purchase the property. However, this argument
is unavailing. Keys involvement in the case was clearly more than as a referral
agent. He actively procured buyers and participated in negotiations for the
purchase price and for extensions of contracts. He also worked with
prospective purchasers in trying to remove obstacles to closing on the property.
The Court agrees with the findings of the Bankruptcy Judge that Brookland
does not come within this exception.
Cox and Christopher have filed a Motion for Sanctions [12-1] against
Brookland and Eagle contending that their appeal is frivolous. After reviewing
the briefs of the parties, the Court concludes that the Appeal is not frivolous.
Brookland argues that it should fit within the exception allowing referral fees
because Key was acting in a dual capacity throughout the relevant time period;
i.e., Key was looking at the property as an opportunity to partner with others for
development or, alternatively, as an opportunity simply to refer a prospective
purchaser. There is evidence supporting this position. However, the
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Bankruptcy Judge found, and this Court agrees, that the preponderance of the
evidence supports a finding that Key went beyond referral with the parties he
brought to the process. A desire to have the Bankruptcy Judges findings on
this issue reviewed was not frivolous merely because it was not successful.
Based on the foregoing, the Motion for Sanctions [12-1] is DENIED.
CONCLUSION
Based on the foregoing, the Court affirms the decision of the Bankruptcy
Court finding that the February 16, 2000 transaction between Cox and
Christopher created a loan from Christopher to Cox secured by a mortgage and
that Brookland and Eagle are not entitled to recover fees, and the Court
DENIES the Motion for Sanctions [12-1].
SO ORDERED this 8th day of September, 2004.
s/ Richard W. Story
RICHARD W. STORY
UNITED STATES DISTRICT JUDGE

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