493 F.3d 1336 (11th Cir. 2007), 04-15891, In re Cox

Docket Nº:04-15891.
Citation:493 F.3d 1336
Party Name:In re: Richard Jon COX, Debtor. R. Dennis Christopher, Plaintiff- Appellant, v. Richard Jon Cox, Defendant- Appellee.
Case Date:July 27, 2007
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit

Page 1336

493 F.3d 1336 (11th Cir. 2007)

In re: Richard Jon COX, Debtor.

R. Dennis Christopher, Plaintiff- Appellant,


Richard Jon Cox, Defendant- Appellee.

No. 04-15891.

United States Court of Appeals, Eleventh Circuit

July 27, 2007.

Page 1337

R. Phillip Shinall, III, Alexander, Royston, Hardman & Shinall, Covington, GA, for Christopher.

William L. Rothschild, Ellenberg, Ogier & Rothschild, P.C., Atlanta, GA, for Cox.

Appeal from the United States District Court for the Northern District of Georgia

Before TJOFLAT and KRAVITCH, Circuit Judges, and LIMBAUGH, [*] District Judge.

Page 1338


The question this appeal presents is whether the bankruptcy court erred in determining that the contemporaneous execution of a warranty deed to a tract of land and a contract giving the grantee an option to purchase the land within a time certain created a mortgage in which the grantee became the mortgagor and the grantor the mortgagee. The district court found no error and upheld the bankruptcy court's ruling. We affirm.



In 1984, Richard Jon Cox became the owner of the Bar C Ranch (the "Ranch"), a 450-acre tract of land on the outskirts of the City of Covington, Georgia. In 1994, Cox sold a half interest in the Ranch to Lamar Banks. AgSouth Farm Credit, ACA financed part of Banks's purchase by loaning him $775,000.1A mortgage on the Ranch, executed by Banks and Cox as tenants-in-common, secured the loan. Soon after Banks acquired his interest in the Ranch, he and Cox entered into a buy-sell agreement, whereby either could offer to purchase the other's interest in the Ranch for $750,000 or more.2 The party receiving the buy-out offer would have the option to purchase the offeror's interest for the price indicated in the buy-out offer.3

On October 6, 1999, Banks offered to purchase Cox's interest for $875,000.4 As Cox was considering the offer, the property was being appraised at $2,445,700. On November 16, after the appraisal had been completed, Cox exercised his option to purchase Banks's interest for the same price, $875,000.5Under the buy-sell agreement, Cox had ninety days to close. To close the transaction, Cox would need more than $1.2 million: $700,000 to pay off the AgSouth mortgage and more than $500,000 for Banks's interest (after deducting Banks's share, $300,000, of the balance due on the AgSouth mortgage).6

Cox sought a loan from the Main Street Bank, in Covington, to finance the buy-out. The bank agreed to make the loan provided that someone acceptable to the bank guaranteed the loan. Cox turned to R. Dennis Christopher for help. Christopher was his insurance agent and a long-time friend; he was also an experienced real estate investor. Christopher agreed to guarantee the loan, and so notified the bank. The bank, meanwhile, reconsidered the matter; if a loan was to be made, it would be made to Christopher alone.

Page 1339

Christopher was not interested, however; he was not going to sign a note for $1.225 million. He was willing to help Cox out, but not that way. Christopher had an alternative plan in mind, which he proceeded to execute.

Rather than borrowing $1.225 million to pay off the AgSouth mortgage and Banks's interest in the Ranch, he would obtain AgSouth's consent to his assumption of the mortgage. If AgSouth consented, all he would have to advance at the closing would be the funds sufficient to pay Banks--funds he either had on-hand or readily accessible--and the closing costs.

AgSouth agreed to Christopher's assumption of the mortgage, and the closing went forward on February 16, 2000. At the closing, Christopher assumed the AgSouth mortgage and paid Banks for his equity in the property. His out-of-pocket outlay totaled approximately $545,000.

Several documents were executed at the closing. Two are pertinent here: a warranty deed executed by Cox, as grantor, in favor of Christopher, as grantee, and an option contract.7 The contract gave Cox the option to purchase the property within 365 days. The purchase price would amount to the sum of the following, with interest at the rate of 9.25% per annum: the costs Christopher incurred in connection with the February 16 closing; the amount he paid to Banks; his mortgage payments to AgSouth; any expenditures he may have made to maintain the Ranch; and a $100,000 "kicker." Unless Cox exercised the option, however, he would owe Christopher nothing.8

Christopher did not take possession of the Ranch after the closing. Instead, Cox continued to reside there rent-free, paid the property taxes, and kept the property insured. And Cox immediately set about the task of finding a purchaser for the Ranch --at a price sufficient to adequately compensate him for his equity in the farm and cover what Christopher would be due under the option contract. Several residential...

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