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First Citizens Bank & Trust, Inc. v. Ruddell

Court of Appeals of Georgia

November 21, 2014

FIRST CITIZENS BANK & TRUST, INC.
v.
RUDDELL, JR. FIRST CITIZENS BANK & TRUST, INC.
v.
TWM ENTERPRISES, LLC et al. FIRST CITIZENS BANK & TRUST, INC.
v.
PYLOROS, LLC et al. FIRST CITIZENS BANK & TRUST, INC.
v.
MARY RUDDELL COULTER FAMILY, LP et al. FIRST CITIZENS BANK & TRUST, INC.
v.
PYLORUS 2, LLC et al. FIRST CITIZENS BANK & TRUST, INC.
v.
FIRST QUALITY EQUITIES, INC. et al. FIRST CITIZENS BANK & TRUST, INC.
v.
ESTATE OF MARY COULTER et al. FIRST CITIZENS BANK & TRUST, INC.
v.
RUDDELL, JR. et al

Page 539

[Copyrighted Material Omitted]

Page 540

Contract. Cobb Superior Court. Before Judge Grubbs.

Judgments affirmed in part and reversed in part in Case Nos. A14A1335, A14A1336, A14A1338, and A14A1341. Judgments reversed in Case Nos. A14A1337, A14A1339, A14A1340, and A14A1342.

Busch White Norton, Bryan E. Busch, Tawana B. Johnson, Christopher M. Porterfield, Samantha L. Gunnison, Shane P. Stogner, Laura H. Mirmelli, Vanessa Y. Suh, for appellant.

Martin Bagwell Luke, Jimmy C. Luke II, for appellees.

PHIPPS, Chief Judge. McMillian, J., concurs. Ellington, P. J., concurs in judgment only.

OPINION

Page 541

Phipps, Chief Judge.

In these eight cases, First Citizens Bank & Trust, Inc. (the bank) appeals summary judgments entered against it and in favor of: E. R. Ruddell, Jr.; TWM Enterprises, LLC; Pyloros, LLC; Mary Ruddell Coulter Family, LP; Pylorus 2, LLC; First Quality Equities, Inc.; and the Estate of Mary R. Coulter (collectively, " defendants" ). The summary judgments preclude the bank from recovering monies it claimed the defendants owed under various promissory notes, credit agreements, and/or guaranties.[1] For the reasons explained below, the judgments in Case Nos. A14A1335, A14A1336, A14A1338, and A14A1341 are affirmed in part and reversed in part; the judgments in Case Nos. A14A1337, A14A1339, A14A1340, and A14A1342 are reversed.

In 2011, the bank filed eight separate complaints against these various defendants, pursuing in each complaint claims of breach of contract and unjust enrichment. While the cases were pending in the trial court, in April 2012, the bank conducted nonjudicial foreclosure sales of six properties that served as collateral. The bank did not thereafter seek judicial confirmation of those sales under OCGA § 44-14-161.

The defendants then filed in their respective cases motions for summary judgment, arguing that the bank's failure to obtain confirmation [330 Ga.App. 83] of the six foreclosure sales barred all claims pursued in the eight complaints.[2] More particularly, the defendants asserted that all debts alleged in the complaints were " inextricably intertwined" with the debts that underlay the six foreclosure sales; the defendants then characterized the bank's claims pursued in the complaints as attempts to obtain deficiency judgments; the defendants thus argued that the bank's quest for deficiency " judgment[s] based on loans that are inextricably intertwined to the loans secured by the Foreclosed Properties" must be denied.

The trial court conducted a hearing,[3] then entered orders in June 2013 granting the motions for summary judgment.[4] The summary

Page 542

judgments were expressly premised upon the trial court's determination that the debts underlying the bank's claims were inextricably intertwined with the debts that underlay the foreclosure sales. Having thus lost all its claims as impermissible attempts to obtain deficiency judgments, the bank appeals.

Pursuant to OCGA § 9-11-56 (c), summary judgment is proper " if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." [5] " In our de novo review of the grant of a motion for summary judgment, we must view the evidence, and all reasonable inferences drawn therefrom, in the light [330 Ga.App. 84] most favorable to the nonmovant." [6] " Summary judgments enjoy no presumption of correctness on appeal, and an appellate court must satisfy itself de novo that the requirements of OCGA § 9-11-56 (c) have been met." [7]

" A deficiency judgment is the imposition of personal liability on mortgagor for unpaid balance of mortgage debt after foreclosure has failed to yield full amount of due debt." [8] The requirements for obtaining such a judgment are delineated in OCGA § 44-14-161 (a):

When any real estate is sold on foreclosure, without legal process, and under powers contained in security deeds, mortgages, or other lien contracts and at the sale the real estate does not bring the amount of the debt secured by the deed, mortgage, or contract, no action may be taken to obtain a deficiency judgment unless the person instituting the foreclosure proceedings shall, within 30 days after the sale, report the sale to the judge of the superior court of the county in which the land is located for confirmation and approval and shall obtain an order of confirmation and approval thereon.

The aim of this legislation was " to limit and abate deficiency judgments in suits and foreclosure proceedings on debts." [9] To that end, " [a] creditor may not seek a deficiency judgment with respect to any real estate sold on foreclosure unless a confirmation of the sale is obtained." [10]

" This [c]ourt has applied OCGA § 44-14-161 (a) to foreclosure proceedings on separate debts which are inextricably intertwined to prevent creditors from circumventing the statute's mandates by making successive loans against the security of the same property." [11] Such an application prevents creditors from " avoiding the very purpose of the confirmation statute[,] that being to protect debtors from deficiency judgments when their property is sold at a foreclosure [330 Ga.App. 85] sale for less than its market value." [12] " As a general rule, two debts that are incurred for the same purpose, secured by the same property, held by the same creditor, and owed by the same debtor are inextricably intertwined." [13] " [The two debts] are not independent of each

Page 543

other, and a foreclosure of one affects the other." [14]

Accordingly, in C. K. C., Inc. v. Free,[15] this court barred suit upon a promissory note as an impermissible claim for a deficiency judgment.[16] There, a buyer of certain real estate executed two separate promissory notes in favor of the sellers.[17] One note, in the amount of $75,195, represented a portion of the down payment under the contract; the second note, in the amount of $500,797.50, represented the balance of the purchase price.[18] Both notes recited that they were secured by the deed to secure debt, which covered the entire property purchased; and the deed to secure debt reciprocally recited that it secured the two notes.[19] Thereafter, the buyers executed a renewal note in the amount of $75,195, which extended and replaced the original $75,195 note; the renewal note recited that it was secured by the same deed referenced in both earlier notes.[20] Upon the buyer's default under both notes, the sellers, inter alia, advertised foreclosure, referencing only the larger note; sold the property at foreclosure to themselves for $504,000; applied for a confirmation of the sale, stating that the total debt comprised of the two notes had not been realized by the foreclosure; and filed a complaint seeking to recover the amounts due under the smaller note.[21] When the confirmation was denied,[22] the buyer moved for summary judgment on the ground that the sellers' claim in substance was seeking a deficiency judgment that was barred for failure to obtain a confirmation of the sale.[23] This court agreed, explaining:

[B]oth notes are clearly secured by the same deed and the same property. The two debts represented purchase money [330 Ga.App. 86] loans and the security for both was the property purchased. ... The two debts, secured by the same property, held by the same creditor ... are owed by the same debtor and are inextricably intertwined. They are not independent of each other, and a foreclosure of one affects the other. If the whole of the property is exhausted in foreclosing the first there is still a secured debt for which the holder desired to obtain a deficiency judgment. Notwithstanding the fact that the foreclosure advertisement only referenced the larger note, we deem the instant action to be a deficiency judgment which is barred due to the failure to obtain a confirmation. Summary judgment should have been granted to [the buyer].[24]

This court reached a similar conclusion in Iwan Renovations v. North Atlanta National Bank.[25] There, Iwan Renovations executed a promissory note in favor of North Atlanta National Bank in the amount of $338,000 in order to purchase certain property and to build a home thereon.[26] Later, the parties to the promissory note executed a " Change in Terms Agreement" that increased the note's principal to $360,150 and extended the maturity date; a month later, the parties again agreed to extend the note's maturity date.[27] In both instances, the security deed was modified to reflect the note's new maturity date.[28] Thereafter, when Iwan Renovations requested ...


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