Receiver to Bank: Stop Interfering With Flake & Kelley

by Andrew Jensen  on Monday, Aug. 25, 2008 12:00 am  

Brandon Barber stands in front of the Legacy Building in mid-2007 on its opening night. Barber declared Chapter 11 bankruptcy through his Lynnkohn LLC on Aug. 21.

A last-minute lawsuit filed last week provided a surprising twist in the long-running battle over Brandon Barber's Legacy Building in downtown Fayetteville.

Barber filed a complaint seeking $10 million against lender Legacy National Bank of Springdale and Flake & Kelley Commercial, which in May entered into an agreement with court-appointed receiver Wayne Swofford to market the building.  Barber accused the bank of conspiring to maximize his $18.7 million in liabilities on the project with the intention of repurchasing the building and profiting from the sale of its condos.

Barber alleges that Legacy blocked pending condo sales by improperly ordering Flake & Kelley to not accept any offers until after the foreclosure sale of the building, which was scheduled for last Thursday. The suit filed Wednesday – the same day Barber's Lynnkohn LLC filed for Chapter 11 bankruptcy protection – postponed the sale.

The lawsuit fingers Legacy – which signed a regulatory agreement with the Office of the Comptroller of the Currency on April 24 – as main culprit and describes Flake & Kelley as a complicit party.

"Flake Commercial is also at fault because it knew or should have known that Legacy Bank did not have authority to refuse to accept offers on the Property," the suit states. "Flake knew or should have known it was to follow the orders of the Receiver and the Court."

Legacy National Bank shared participation in the $16.7 million loan with Metropolitan National Bank of Little Rock, First National Bank of Fort Smith and First National Bank in Green Forest. Metropolitan has also entered into a regulatory agreement with the OCC this year, signing an agreement on May 22 that found "unsafe and unsound" practices at the bank.

Lynnkohn LLC's bankruptcy filing listed assets of $35.46 million and liabilities of $31.62 million. Lynnkohn has 86 creditors holding unsecured claims of $3.88 million and outstanding real estate debt of $25.3 million.

Barber identified himself as the sole member of Lynnkohn, but his wife, Keri Barber, and Seth and Laura Kaffka are guarantors on the original $16.7 million loan from Legacy written in December 2005. Barber was the sole guarantor on a subsequent $2.7 million loan written in February 2007.

In an Aug. 13 e-mail, receiver Swofford's attorney, Bob Honea, informed Barber's attorney, Vaughn Knight, that Legacy COO Patrick Swope had instructed Flake & Kelley's Christine Pennington to change the listed prices on the condos.

The e-mail was also sent to Legacy's attorney, Marshall Ney. Addressing Ney, Honea wrote, "Marshall, I once again demand that you take whatever steps are necessary to ensure that your client stops interfering with the receiver's court approved contractual relationship with Flake and Kelley. Please advise whether it will be necessary to secure a court order to make this happen."

In a statement, Ney said the suit by Barber – which alleged tortuous interference, violations of the Deceptive Trade Practices Act, fraud, breach of contract and breach of fiduciary duty – is without merit.

"The combined efforts of the lawsuit and bankruptcy by Barber's company are nothing more than a desperate attempt to prevent the August 21 sale of the Legacy Building and resulting deficiency against the Barbers and Kaffkas," he said.

Ney declined to comment further. Knight's office said he would have no comment on the lawsuit. Honea did not return a call seeking comment.

 

 

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