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Clark v. AgGeorgia Farm Credit ACA

Court of Appeals of Georgia

July 13, 2015

CLARK
v.
AGGEORGIA FARM CREDIT ACA

Wrongful foreclosure. Houston Superior Court. Before Judge Nunn.

Hall Booth Smith, Joel L. McKie, Andrew K. Hazen, for appellant.

Martin Snow, John T. McGoldrick, Jr., Stuart E. Walker, for appellee.

MCMILLIAN, Judge. Andrews, P. J., Dillard and Boggs, JJ., concur. Barnes, P. J., Phipps, P. J., and Ray, J., dissent.

OPINION

Page 558

McMillian, Judge.

Appellant Donald Clark (" Donald" ) filed a complaint, as amended and recast several times, against appellee AgGeorgia Farm Credit ACA (" AgGeorgia" )[1] seeking damages arising from the alleged breach of certain deeds to secure debt and the wrongful foreclosure of a 278-acre farm in Wilcox County, Georgia (the " Farm" ) that Donald jointly owned[2] with his brother Harris Edwin Clark (" Edwin" ; collectively referred to as " the Brothers" ). The trial court granted partial summary judgment to AgGeorgia, and Donald timely filed an appeal to this Court.[3] Having carefully considered the issues raised in this appeal, we now reverse.

The underlying facts are essentially undisputed. The Brothers jointly purchased the Farm sometime during the 1980s and operated the Farm together for many years. In 1997, the Brothers obtained individual loans

Page 559

from AgGeorgia's predecessor, at which time they jointly executed two deeds to secure debt pledging the Farm as security for the loans (collectively referred to as the " 1997 Deeds" ).

According to AgGeorgia, the 1997 Deeds were set to expire on December 1, 2004, and in October 2004, the Brothers jointly executed two new security deeds (DSD No. 1 and DSD No. 2; collectively referred to as the " 2004 Deeds" ) pledging the Farm to secure certain identified existing loans, which AgGeorgia had individually extended to the Brothers. More specifically, DSD No. 1 identified an existing loan to Donald, who was named as the sole " Borrower" under that deed, and DSD No. 2 identified an existing loan to Edwin, who was listed as the sole " Borrower" in DSD No. 2. Donald and Edwin, who were defined as the " Undersigned, whether one or more," jointly executed the 2004 Deeds. The 2004 Deeds were in many respects identical to the 1997 Deeds[4] and contained many of the same terms and conditions, including " open end" and " dragnet" clauses, which [333 Ga.App. 74] made additional loans, advances, and other indebtedness subject to the 2004 Deeds under certain conditions.

Edwin paid off the debt identified in DSD No. 2 in January 2005, and Donald paid off the debt identified in DSD No. 1 in February 2005. In the summer of 2004, the Brothers had a disagreement over a matter unrelated to their farming operations, and in the ensuing months their relationship deteriorated to the point that they ceased farming together shortly after the notes were paid off. However, the Brothers continued to farm separately, and in April 2005 Donald obtained another loan from AgGeorgia, which was evidenced by a promissory note in favor of AgGeorgia for $80,000. In 2007, Donald obtained two additional loans and executed two additional promissory notes in favor of AgGeorgia.[5]

In 2008, AgGeorgia notified Donald that he was in default on his Subsequent Loans and warned him that it intended to initiate a foreclosure action if he did not satisfactorily restructure the loans. Donald failed to cure the default or otherwise restructure the loans, and in April 2009, AgGeorgia notified Edwin and Donald that Donald was in default on his Subsequent Loans as well as an additional note he executed on March 5, 2004,[6] and that it intended to initiate judicial foreclosure proceedings under the terms of DSD No. 1 if Donald did not satisfy the outstanding debt, which at that time was slightly over $193,000 including interest and fees, within ten days. Although Edwin apparently did not have any outstanding loans to AgGeorgia at that time, after he was notified of the pending foreclosure he requested and received a $190,000 loan from AgGeorgia, which was evidenced by a promissory note he signed on April 9, 2009 (hereinafter referred to as " Edwin's Subsequent Loan" ). AgGeorgia did not provide notice to Donald of Edwin's Subsequent Loan, nor did it attempt to obtain Donald's written consent prior to extending the loan.

After providing additional notice of default and advertising the sale, AgGeorgia foreclosed on the 2004 Deeds in August 2009, at which time Donald's outstanding debt amounted to approximately $198,748.70 and Edwin's outstanding debt amounted to $191,838.21. Edwin entered the highest bid at the foreclosure sale, purchasing the Farm for $392,480. Donald was present at the foreclosure sale but did not object to or challenge the sale at that time.

[333 Ga.App. 75] Over three years after the foreclosure sale, Donald instituted the present proceedings, contending, among other things, that AgGeorgia improperly exercised the power of sale in the 2004 Deeds because DSD No. 1 did not secure his previous indebtedness other than indebtedness specifically identified in the deed, and neither his nor Edwin's subsequent indebtedness was secured by the 2004 Deeds because AgGeorgia did not obtain the

Page 560

consent of the " non-borrowing" brother to the other brother's loans. Further, Donald also challenged the foreclosure on the basis that AgGeorgia was not the holder of either the notes or the 2004 Deeds at the time it instituted the foreclosure proceedings.[7] Both parties filed motions for partial summary judgment, and following a hearing, the trial court entered a written order denying Donald's motion for partial summary judgment and granting partial summary judgment to AgGeorgia on Donald's claims for breach of contract and wrongful foreclosure. We agree with Donald ...


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