FILED

U.S. COURT OF APPEALS

ELEVENTH CIRCUIT

JULY 27, 2007

THOMAS K. KAHN

CLERK

[ PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________

No. 04-15891

________________________

D.C. Docket No. 04-01189-CV-RWS-1 & 01-65356 BKC-PW

IN RE: RICHARD JON COX,

Debtor.

______________________________________________________________

R. DENNIS CHRISTOPHER,

Plaintiff-Appellant,

versus

RICHARD JON COX,

Defendant-Appellee.

__________________________

Appeal from the United States District Court

for the Northern District of Georgia

_________________________

 (July 27, 2007)
 Honorable Stephen N. Limbaugh, United States District Judge for the Eastern District of *

Missouri, sitting by designation.

 The loan was made by AgSouth Farm Credit, ACA’s predecessor, West Georgia Farm 1

Credit, ACA; we refer to both as “AgSouth.”

2

Before TJOFLAT and KRAVITCH, Circuit Judges, and LIMBAUGH, District *

Judge. 

PER CURIAM:

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.

I.

A.

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 $775,000.1

A 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
 The agreement set a floor value on the property as a whole of 1.5 million. 2

 Under the buy-sell agreement, the offeree had 30 days to exercise his option to purchase 3

the property. If he did not do so, the offeror had 90 days to close the transaction. 

 Banks was treating the property as a whole as worth $1.75 million. 4

 Cox waited more than the 30 days allotted him under the agreement to exercise his 5

option to purchase the property. See note 3, supra. The record is silent as to why Banks did not

consider Cox’s November 16 exercise of the option a nullity. All we know is that he treated

Cox’s exercise as timely.

 These figures are approximations. The exact amounts are not material for our purposes. 6

3

entered into a buy-sell agreement, whereby either could offer to purchase the

other’s interest in the Ranch for $750,000 or more. The party receiving the buy- 2

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. As Cox was considering the offer, the property was being appraised at 4

$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, $875,000.5

Under 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
4

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. 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 onhand 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-ofpocket outlay totaled approximately $545,000.

Several documents were executed at the closing. Two are pertinent here: a
 The consideration cited in the warranty deed was “ten dollars and other good and 7

valuable consideration.” The consideration cited in the option contract was “one dollar.” 

 The option contract did not state, but the parties nonetheless agreed, that if Cox 8

exercised his option, he would grant Christopher, as his real estate agent, a non-exclusivelisting

for a 5% commission. 

5

warranty deed executed by Cox, as grantor, in favor of Christopher, as grantee,

and an option contract. The contract gave Cox the option to purchase the 7

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 developers expressed an interest in the property; some

extended offers to purchase it. The offers came to naught, however. On March 5,

2001, after two extensions, Cox’s option to purchase the property expired. 
6

B. 

After Cox’s option expired, an associate of Christopher’s, acting on

Christopher’s behalf, contacted, Dwayne Key, a realtor who earlier had made an

offer (to Cox) for the property that fell through. Over the next three months,

between March and June 2001, Key, in turn, located two potential buyers for the

land. 

Meanwhile, on April 20, 2001, Cox petitioned the United States Bankruptcy

Court for the Northern District of Georgia for Chapter 11 relief. Shortly

thereafter, as debtor-in-possession, Cox commenced an adversary proceeding

against Christopher to determine the extent of the bankruptcy estate’s interest in

the Ranch. Christopher answered the complaint, alleging that he owned the

property by virtue of the warranty deed Cox had given to him on February 16,

2000. Christopher also filed a counterclaim, in an attempt to recover rent for

Cox’s occupancy of the Ranch after his option expired. 

Pursuant to an order issued by the bankruptcy court, the property was sold at

auction on July 18, 2001 for $2.8 million. The sale closed the following month. 

The proceeds of the sale were used to (1) satisfy the balance due on the AgSouth

mortgage, (2) reimburse Christopher for the monies he had paid AgSouth and

Banks, and (3) pay Christopher the $100,000 “kicker,” interest (at 9.25% per
 Like the district court, we review the bankruptcy court’s findings of fact for clear error 9

and the court’s conclusions of law and mixed questions of law and fact de novo. See In re

Calvert, 907 F.2d 1069, 1071 (11th Cir. 1990). 

7

annum) on the funds he had advanced, and his attorney’s fees. 

On October 9, 2003, the bankruptcy court held a bench trial in the adversary

proceeding. After considering what Cox and Christopher had to say, the testimony

of their witnesses, and the documentary evidence presented, the court rendered its

decision on October 20, 2003. The court found that, under the circumstances

leading up to and surrounding the parties’ dealings, the parties intended that the

warranty deed and the option contract create a mortgage. Cox’s estate was

therefore entitled to the balance of the $2.8 million that had been paid for the

Ranch. 

Christopher appealed the decision to the district court. Concluding that the

bankruptcy court’s findings of fact were not clearly erroneous and that the court’s

application of Georgia law to those findings was correct, the district court

affirmed. This appeal followed.

9

II.

The proposition that a transaction that is, on its face, an absolute

conveyance of title, may, in actuality, convey title only as security for a loan is
 This is done because lenders often seek to disguise mortgages as conveyances to avoid 10

the pro-mortgagor regime of law. See Restatement (Third) of Prop.: Mortgages § 3.2 cmt. a

(1997).

 Not all conditional sales may automatically be deemed mortgages. On occasion, a 11

repurchase option may be truly intended by the parties, and if so, those conveyances are not

deemed mortgages. See Conway’s Ex’rs and Devisees, 11 U.S. (7 Cranch) 218 at 236– 37.

8

black letter law. See Restatement (Third) of Prop.: Mortgages § 3.2 (1997). It is

necessary to look beyond the four corners of some conveyances – to consider parol

evidence – to determine, in light of all the circumstances, whether the parties to

the transaction intended to transfer title or create to create a mortgage. See 10

Russell v. Southard, 53 U.S. (12 How.) 139, 152, 13 L.Ed. 927 (1851); Conway’s

Ex’rs and Devisees v. Alexander, 11 U.S. (7 Cranch) 218, 237, 3 L. Ed. 321

(1812); Spence v. Steadman, 49 Ga. 133, 138 (Ga. 1873). 

11

Georgia law has long recognized that the determinative factor in

distinguishing a mortgage from an absolute conveyance is the intent of the parties. 

See Monroe v. Foster, 49 Ga. 514, 519 (Ga. 1873) (“[I]f . . . it appear that the loan

of money and security for its repayment was, in truth, the purpose and intent of the

parties, it will be treated as such, notwithstanding very strong language may be

used at the time to give it a different appearance.”); see also Restatement (Third)

of Prop.: Mortgages § 3.2 (1997). The intent of the parties in a given scenario is a

question of fact. Spence, 49 Ga. at 139 (“The question of intention is one of fact,
9

to be decided from all the circumstances.”). 

Christopher contends that, under Georgia law, a transaction cannot be

deemed a mortgage unless it creates a creditor-debtor relationship between the

parties – that absent a right to recourse by the purported lender against the

purported debtor, the conveyance is what it is on its face, a conditional sale. 

Historically, the explicit creation of a creditor-debtor relationship, while an

important factor to be considered, has not been dispositive. See Conway’s Ex’rs

and Devisees, 11 U.S. (7 Cranch) at 237. Christopher argues that the Georgia

Supreme Court identified the explicit creation of such a relationship as a

requirement for a conveyance to be construed as a mortgage in Haire v. Cook, 229

S.E.2d 436 (Ga. 1976), and Tingle v. Tingle, 179 S.E.2d 51 (Ga. 1971). 

It is true that both Haire, and Tingle place great weight on the purported

lender’s lack of recourse against the purported debtor, and both cases contain

language that supports Christopher’s contention. See Haire, 229 S. E. 2d at 439

(“[T]here is no evidence that the grantee had the right to demand repayment and

no evidence that either plaintiff agreed to be obligated to repay the debt. . . . Thus

the deed cannot be considered to be a mortgage.”); Tingle, 179 S. E. 2d at 55 (“For

a security transaction to exist there must be the relationship of debtor and

creditor.”) We agree, however, with the distinctions pointed out by the district
10

court in affirming the bankruptcy court’s decision. In neither Tingle nor Haire did

the supreme court fully consider all the circumstances surrounding the transaction,

as required by Spence. Instead, both courts looked only to the face of the

conveyances and finding no indication of an intent to create a mortgage there, the

courts concluded that the transactions in question were sales. Also, in both Haire

and Tingle, there was not, as there is here, a great disparity between the

consideration paid for the property and the property’s value. 

As the bankruptcy court noted, “reliance on [a recourse obligation] as a

defining element of a loan transaction overlooks the fact that numerous secured

real estate loan transactions are nonrecourse loans[.]” Express creation of a

recourse obligation – or the absence thereof – is undoubtedly an important factor

to consider, but it cannot not the determinative factor. Instead, a court must look

at the intent of the parties in light of all the circumstances surrounding the

transaction. Spence, 49 Ga. at 139.

We conclude that the bankruptcy court properly held, and the district court

properly affirmed, that parties may create a mortgage although the instruments

they use suggest that a conveyance of title rather than the creation of a lien. A

lien may be created even when there is no provision for the payment of the debt. 

Having reached this conclusion, we now consider whether the bankruptcy court
11

clearly erred in finding that Christopher and Cox intended a mortgage.

III.

Whether Cox and Christopher intended to create a mortgage is a question of

fact. Spence v. Steadman, 49 Ga. 133, 139 (Ga. 1873). In finding that they 

intended the transaction to create a mortgage, the bankruptcy court relied on

numerous subsidiary facts established at the adversarial hearing. Perhaps the

most powerful among these was the value of the Cox tract at the time of the

February 16, 2000 closing as compared to the value of the consideration paid by

Christopher. At the closing, Christopher received title – subject to Cox’s

repurchase option – to a tract that had been valued three months earlier at nearly

$2.5 million. Christopher assumed the outstanding AgSouth mortgage, which had

an unpaid principal balance of around $700,000, and paid Banks $500,000 for

Banks’s share of the property’s equity. Christopher did not make any payment to

Cox for his share of that equity. In other words, Christopher received title to the

Cox tract in exchange for consideration equal to about half the property’s value: 

$1.2 versus $2.5 million. 

A gross disparity between the sale price and the actual value of the land is 

evidence of the parties’ intent to create a security interest – a mortgage – rather

than a sale. See Russell v. Southard, 53 U.S. (12 How.) 139, 147–48, 13 L. Ed.
12

927 (1851) (holding that extraneous evidence is admissible to inform courts of all

material facts surrounding the delivery of the deed, and concluding that “it is of

great importance to inquire whether the consideration was adequate to induce a

sale”); Conway’s Ex’rs and Devisees, 11 U.S. at 241 (“A conditional sale . . . 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.”); Monroe v. Foster, 49 Ga. 514, 519 (Ga. 1873). In Russell, for

example, the Supreme Court found that the consideration paid as part of the

absolute deed transaction – less than $5,000 for land valued at several thousand

dollars more – was “grossly inadequate” in that “there was no real proportion

between the alleged price and the value of the property said to have been sold.”

Russell, 53 U.S. at 149. Similarly, in this case the consideration paid for the

Ranch – scarcely half its actual value – was grossly inadequate, indicating that a

sale was not really intended.

The absence of proportionality between the property’s value and the

consideration Christopher paid is not the only factor the bankruptcy court relied on

to find that the parties intended to create a mortgage. The court also noted that

Christopher and Cox did not negotiate the value of the property. The price was set
13

by the amount Cox required under his buy-sell agreement with Banks. 

Christopher paid the exact amount Cox needed to avoid being compelled to sell

the Ranch. The absence of negotiations, coupled with the congruence between the

price paid and the amount Cox needed to remain on the Ranch, indicate that

Christopher intended the money he provided as a loan to Cox and not as the

purchase price for the tract.

Likewise, the terms of the repurchase option indicate that the parties

intended the transaction to create a mortgage. To exercise his option to repurchase the tract, Cox had to pay Christopher a $100,000 “kicker” and interest at

9.25% on Christopher’s total initial outlay. These terms, in the bankruptcy court’s

view, indicated that Christopher viewed the transaction as an investment

opportunity – a loan.

In its order affirming the bankruptcy court’s decision, the district court

noted an additional factor supporting the finding that Christopher and Cox

intended to create a mortgage. Following the closing, Cox continued to occupy

the Ranch – and pay the real estate taxes and the insurance premiums on the

policies covering the property – without paying Christopher any rent. Thus,

Christopher and Cox continued to act as though Cox owned the property. 

In light of the foregoing facts, the bankruptcy court’s finding that
14

Christopher and Cox intended to create a mortgage was not clearly erroneous. The

district court’s decision upholding the bankruptcy court’s determination is

therefore

AFFIRMED.