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.

Swope and Don Gibson, president and CEO of Legacy National Bank, declined to comment.

After nearly a dozen contractors with more than $2 million in lien claims were paid off, a July 23 foreclosure decree in favor of Legacy National Bank found the Barbers and Kaffkas liable for loans totaling more than $18.7 million.

The contractors enjoyed first priority lien rights because work began on the Legacy Building site before the bank issued its $16.7 million construction mortgage. Under Arkansas law, first lien rights date to the first work done on a project, meaning the contractors had to be paid before the bank.

According to the suit and supported by e-mails attached as exhibits, the latest dispute arose over the Aug. 1 weekend when Barber Real Estate agent Stacy McSpadden asked a representative from Flake & Kelley to meet her on Aug. 3 to show a prospective buyer two units in the Legacy Building.

In an Aug. 3 e-mail, Jordan Jeter of Flake & Kelley told McSpadden he couldn't put anything under contract until Aug. 21 and couldn't close on any sales until Sept. 21.

"I know this stinks but my hands are tied until the banks receive full possession," Jeter wrote.

That exchange prompted an e-mail from Knight to Swofford and copied to Ney and Honea on Aug. 6 asking how long such a moratorium had been in place and who authorized such an order.

After speaking to Jeter, Knight reported to Ney that Legacy National Bank attorney Alan Lewis had personally instructed Pennington not to enter into any more contracts until Aug. 21.

Unit 510, a 1,283-SF condo, was under contract during this period, and sold on Aug. 8 for $320,750, well below Flake & Kelley's listed price of $442,165, which was also a steep discount from its original asking price. A Washington County property appraisal values the unit at $450,450.

Also during this period, a buyer made an offer on unit 501 for the same $250 per SF paid on unit 510. According to the lawsuit, Swope ordered Flake & Kelley to counter offer at $306 per SF, a $25,000 increase.

The suit alleges that when Swope ordered Pennington to change the listed price on the unit, he had her raise the prices on five units other buyers had expressed interest in – including 501 – while lowering prices on the 24 other units.

After Knight's Aug. 6 e-mail to Ney, Ney responded that, "To be clear, the Receiver answers to the Court – not to the banks or their attorneys – and Flake has the contractual privity with the Receiver – again, not the banks or their attorneys.

 

 

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