In re Harrell

• Decision Date: 25 September 2006
• Docket Number: Bankruptcy No. 03-01070-3F1.,Bankruptcy No. 03-01071-3F1.,Bankruptcy No. 03-9]1072-31F1.,Adversary No. 05-AP-401634AF.,Bankruptcy No. 03- 3249-3F1.
• Citation: 351 B.R. 221
• Court: U.S. Bankruptcy Court — Middle District of Florida
• Parties: In re Curtis Walter Robert HARRELL, a/k/a C.W.R. Harrell, Curtis Robert Harrell, Matthew Walter Harrell and Warraer-Harrelll Plantation, L.L.C., Debtors. Curtis Walter Robert Harrell, a/k/a C.W.R. Harrell, Curtis Robert Harrell, and Matthew Walter 11-Razzell, Plaintiffs, v. Wood & Associates of America, Inc., Fla-Land, L.L.C. and Dorada Real Estate Services, Defendants.

351 B.R. 221

In re Curtis Walter Robert HARRELL, a/k/a C.W.R. Harrell, Curtis Robert Harrell, Matthew Walter Harrell and Warraer-Harrelll Plantation, L.L.C., Debtors Curtis Walter Robert Harrell, a/k/a C.W.R. Harrell, Curtis Robert Harrell, and Matthew Walter 11-Razzell, Plaintiffs, v. Wood & Associates of America, Inc., Fla-Land, L.L.C. and Dorada Real Estate Services, Defendants.

Bankruptcy No. 03-01070-3F1.

Bankruptcy No. 03-01071-3F1.

Bankruptcy No. 03-9]1072-31F1.

Bankruptcy No. 03- 3249-3F1.

Adversary No. 05-AP-401634AF.

United States Bankruptcy Court, M.D. Florida, Jacksonville Division.

September 25, 2006.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

James H. Post, Leanne McKnight Prendergast, Smith Hulsey & Busey, Jacksonville, FL, for Debtors/Plaintiffs.

Miriam G. Suarez, United States Trustee, Orlando, FL, for U.S. Trustee.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

JERRY A. FUNK, Bankruptcy Judge.

This proceeding came before the Court upon the Complaint for declaratory relief filed by Plaintiffs, C.W.R. Harrell, Curtis R. Harrell and Matthew W. Harrell (collectively, the "Harrells"), the counterclaim filed by Defendants, Wood & Associates of America, Inc. ("Wood & Associates") and Fla-Land, L.L.C. ("Fla-Land"), for specific performance or alternatively damages caused by the Harrells' alleged breach of contract, the counterclaim filed by Defendant Dorada Real Estate Services ("Dorada") for damages based on the Harrells' alleged failure to pay a real estate commission, and the counterclaim filed by Defendants, Wood & Associates and Fla-Land for specific performance joining Osceola Land & Timber Corp. ("Osceola") as an involuntary party plaintiff and as an indispensable party holding title to the real estate in question under an Option Agreement with the Harrells. The trial of this proceeding was held on March 2 and March 3, 2006. In lieu of oral argument, the Court directed the parties to submit memoranda in support of their respective positions. Upon the evidence presented and the arguments of the parties, the Court makes the following Findings of Fact and Conclusions of Law.

FINDINGS OF FACT

A. Formation and alleged breach a the contract in dispute.

On February 5, 2003, the Harrells each filed petitions for reorganization under Chapter 11 of the Bankruptcy Code. On April 1, 2003, Warner-Harrell Plantation, L.L.C. ("Warner-Harrell Plantation") filed a petition for reorganization under Chapter 11. The cases of the Harrells and Warner-Harrell Plantation are being jointly administered.

At the time of the petition, the Harrells each owned an undivided 25% interest in approximately 3,735 acres of real property in Suwannee County, Florida. Sara Beth Harrell, C.W.R. Harrell's ("Mr. Harrell") daughter and Curtis R. Harrell's ("Curt Harrell") and Matthew W. Harrell's ("Matt Harrell") sister, owned the remaining 25% interest.

Steve Guinn ("Mr. Guinn") is the owner of Dorada and a licensed real estate broker. Mr. Guinn acknowledged that he may have learned from his friend, Walter Lawson ("Mr. Lawson"), that the Harrells had property for sale. (Tr. Vol. I at p. 118, lines 5-15.) Mr. Lawson is a real estate developer and one of the principal owners of the Florida limited liability companies, Tryland, L.L.C. ("Tryland") and Fla-Land. Mr. Guinn contacted the Harrells and solicited them to list their real estate with his agency, and the Harrells believed that he had the experience and contacts in South Florida and other areas to diligently use his best efforts to market the property and obtain the highest and best price. (Tr. Vol. I at p. 44, line 21 through p. 45, line 2.)

On June 26, 2003, the Court authorized the employment of Mr. Guinn and Dorada as real estate broker for the Harrells in their jointly administered Chapter 11 cases. On June 26, 2003, the Court entered an Order authorizing the Harrells to employ Mr. Guinn and Dorada as the real estate broker for the Harrells. In doing so, the Court expressly deleted from the . proposed order the words "pursuant to the terms set forth in the application" and thereby expunged the boilerplate provisions of the exclusive listing agreement. (Docket Entry 126, Case No. 03-01070JAF; Pls.' Ex. 13.)

After his employment as broker was approved by the Court, Mr. Guinn brought a proposed contract for the purchase of 764 acres of land to the Harrells for their approval. This contract was with the purchaser, Wood & Associates or its assigns. The Court granted the Harrells' motion to sell the 764 acres to Wood & Associates (the "764 Acre Purchase"). At the closing, the Harrells learned that Wood & Associates had assigned the contract to Tryland. Mr. Guinn did not explain or disclose to the Harrells his connection with Wood & Associates, Tryland or its principals, which were still unknown to the Harrells at that time.

On August 19, 2004, the Harrells completed negotiations with Osceola to sell almost all of their land subject to an option to repurchase the property within two years (the "Option Agreement"). The sales price to Osceola was calculated to generate enough proceeds to pay all known allowed claims in full. The sale was consummated on November 18, 2004. Following Court approval, the Harrells paid the allowed claims of all of their creditors in full and bought out the interest of Sara Beth Harrell so that she was no longer required to be a party to any future transactions.

In essence, the Option Agreement was the equivalent of a financing arrangement, which allowed the Harrells the opportunity to reacquire their land within a certain period of time. Therefore, pursuant to the terms of the Option Agreement (Pls.' Ex. 23; Defs.' Ex. 26), the Harrells had the right to repurchase the property from Osceola if payment of the full amount due Osceola could be generated from the refinance or sale of some portion of the property, subject to minimum release price provisions. The Harrells also had the right to make principal payments of the Osceola debt by selling any portion of the property, subject to Osceola's right to retain such property according to the same terms and conditions of any such proposed contract. If Osceola elected to retain the property, the Harrells' debt to Osceola would be credited in an amount approximately equal to the proposed contract price. The Option Agreement gave Osceola ten days after receipt of an executed contract to exercise its right to retain the property under contract.

In a series of communications between January and December, 2004, Mr. Guinn proposed possible sale transactions between the Harrells and Wood & Associates as the purported purchaser. On or about December 3, 2004, Mr. Guinn submitted by facsimile the first page of a draft contract to the Harrells which proposed a sale of approximately 600 acres of property to Wood & Associates. The Harrells responded by marking up the same one-page draft to reflect an increase in the price per acre and shortening the closing period, among other changes, and returned the document to Mr. Guinn by facsimile. (Pls.' Ex. 24; Defs.' Ex. 27.) These communications were the beginning of the negotiations that form the basis of the disputed contract.

On the morning of December 21, 2004, Mr. Guinn set up a meeting with the Harrells by telling them that he was "coming over with something for them to sign". (Tr. Vol. I at p. 137, lines 18-21.) The Harrells' testimony regarding what was said and done at that meeting is significantly different than Mr. Guinn's version of the meeting. According to Mr. Guinn, he consolidated the negotiations into a clean contract and presented the entire contract to the Harrells for approval. (Tr. Vol. I at p. 138, line 8.) Five additional terms were written in at the bottom of the signature page. (Tr. Vol. I at p. 138, lines 6-19.) As the sellers were the first to sign the contract, Mr. Guinn explained to the Harrells that the contract was not final until the buyer had signed it and the condition contained in it relative to Osceola's approval had been satisfied.¹ (Tr. Vol. I at p. 139, lines 18-19.) All three Harrells read and then signed the contract to sell over 600 additional acres of real property to Wood & Associates. (Tr. Vol. I at p. 139, lines 16-17.)

Mr. Harrell, Curt Harrell and Matt Harrell each testified at trial that on December 21, 2004, they executed and delivered the signature page of the contract prepared by Mr. Guinn after confirming with Mr. Guinn that no contract would be final or binding on them without an opportunity for them and their counsel to review and approve the proposed final agreement. (Tr. Vol. I at p. 60, line 20 through p. 61, line 2; Tr. Vol. II at p. 116, lines 14-16 and p. 117, lines 2-5; Tr. Vol. II at p. 143, lines 13-17.) Among other assertions, the Harrells testified that the meeting with Mr. Guinn lasted approximately five to ten minutes, that Mr. Guinn informed the Harrells that their signing of the contract was only a way to move forward in the negotiation process, and that Mr. Guinn provided only the signature page of the document with handwritten provisions that were on the document prior to the meeting.

The testimony regarding what transpired directly after the meeting the morning of December 21, 2004, is so incongruous that even Defendants cannot agree as to what certainly occurred. Somewhere in the labyrinthine skein of facts proffered by the parties lies the truth, but the Court is satisfied that at some point on December 21, 2004, Mr. Guinn provided the document signed by the Harrells to Mr. Lawson, as a facsimile in the record shows that Mr. Lawson faxed the document to his attorney at 6:18 p.m. on December 21, 2004. (Defs.' Ex. 31.) Indeed, Mr. Lawson testified at trial that (i) he met with Mr. Guinn "on the road" on the afternoon of December 21, 2004 (Tr. Vol. II at p. 75, lines 14-20), (ii) Mr. Guinn asked Mr. Lawson if they could go back to Mr. Lawson's office (Tr. Vol. II at p. 75, lines...