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Inc. v. Smith

Court of Appeals of Georgia, Second Division

August 10, 2017

MIKE'S FURNITURE BARN, INC. et al.
v.
SMITH.

          MILLER, P. J., DOYLE and REESE, JJ.

          Miller, Presiding Judge.

         More than seven years after appellee Cheryl Smith failed to repay a loan, appellant Mike's Furniture Barn ("MFB") foreclosed on a security deed for Smith's home. Smith filed a complaint seeking to set aside the foreclosure sale and enjoin defendants MFB, Michael Miller, Richard Plymale, and Kristine R. Moore Tarrer (collectively "the MFB Appellants")[1] from taking any further dispossessory action. The trial court found that the security deed at issue was subject to a statutory seven-year reversionary period and, therefore, title to the property had already reverted back to Smith prior to the foreclosure sale. Accordingly, the trial court set aside the foreclosure sale and enjoined the MFB Appellants from taking further action.[2] The MFB Appellants now appeal, and, for the reasons that follow, we affirm.

         The limited record before us shows that, in October 2002, Smith borrowed $2, 154.22 from MFB. Smith executed a promissory note ("the Note"), which identified the collateral merely as "[t]he goods or property being purchased, " and further indicated that Smith was giving MFB a security interest in a "loan on property." The Note provided for payment in 22 installments with a maturity date of August 5, 2003. That same day, Smith executed a deed to secure a debt of $2, 100 ("the Deed") in favor of "Michael G. Miller." The Deed included a description of the real property at issue and indicated that final payment on the secured debt was due on September 30, 2005.[3] Additionally, the Deed granted Miller the power of sale upon default.

         Smith failed to make all of the payments owed. In 2016, more than seven years after the loan maturity date identified in either the Note or the Deed, MFB commenced a non-judicial foreclosure on the property identified in the Deed and purchased the property at the foreclosure sale.

         Smith filed this wrongful foreclosure action, arguing that (1) MFB was not the holder of the Deed, and (2) prior to the foreclosure, title to the property statutorily reverted to her seven years after the loan maturity date listed on the Deed. The trial court agreed, set aside the foreclosure sale, and granted Smith's request for an injunction preventing the MFB Appellants from any further attempts to foreclose on the property. This appeal followed.[4]

         In three related enumerations of error, the MFB Appellants contend that the trial court erred in setting aside the foreclosure sale and granting injunctive relief to Smith because (1) the language in the Note and the Deed should be viewed together; (2) these documents show that the parties intended to extend the statutory reversionary period to 20 years; and (3) the trial court erred by limiting the ability of "open-end clauses" to extend the reversionary period to 20 years only in arrangements involving revolving lines of credit.

         1.We first consider whether the trial court properly set aside the foreclosure sale.[5] Under Georgia law, only the holder of the deed may initiate foreclosure proceedings. Ames v. JP Morgan Chase Bank, 298 Ga. 732, 741 (3) (e), n. 7 (783 S.E.2d 614) (2016); You v. JP Morgan Chase Bank, 293 Ga. 67, 69-71 (1) (743 S.E.2d 428) (2013). Here, Miller, and not MFB, was the holder of the Deed. Thus, MFB had no authority to initiate the foreclosure sale. Ames, supra, 298 Ga. at 741 (3) (e), n. 7; You, supra, 293 Ga. at 69-71 (1). Although a security deed can be transferred by assignment, see OCGA § 44-14-64, the record is devoid of any evidence that Miller, individually, transferred the deed to MFB. Thus, because MFB was not the holder of the Deed, it had no right to foreclose on the property, and the trial court properly set aside the foreclosure sale.

         2. We next turn to the issue of injunctive relief. The trial court issued the permanent injunction after finding that title to the property reverted back to Smith after seven years because the Deed did not indicate an intent to extend this statutory reversionary period. We agree with the trial court's analysis.

         Georgia law provides that title to property used as collateral for a debt will revert to the grantor

at the expiration of seven years from the maturity of the debt or debts or the maturity of the last installment thereof as stated or fixed in the record of the conveyance . . .; provided, however, that where the parties by affirmative statement contained in the record of conveyance intend to establish a perpetual or indefinite security interest in the real property conveyed to secure a debt or debts, the title shall revert at the expiration of the later of (A) seven years from the maturity of the debt or debts or the maturity of the last installment thereof as stated or fixed in the record of conveyance . . .; or (B) 20 years from the date of the conveyance as stated in the record . . . .

OCGA § 44-14-80 (a) (1). Under the plain language of this statute, any intent to create a perpetual and indefinite security interest must appear by an "affirmative statement" in the deed. (Emphasis supplied.) Id. If title has reverted to the grantor under this statute, all actions to foreclose upon and to recover the property are barred. OCGA § 44-14-83. Thus, the question before us is whether the Deed contained a sufficient "affirmative statement" showing the parties' intent to apply the 20-year reversionary period.

          The construction of a deed, like any other contract, is a question of law that we review de novo. Vineville Capital Group, LLC v. McCook, 329 Ga.App. 790, 794 (1) (b) (766 S.E.2d 156) (2014).

The cardinal rule of construction of deeds, as well as other contracts, is to ascertain the intention of the parties. If that intention be clear from the deed and circumstances of the transaction and contravenes no rule of law, it should be enforced. The whole instrument is to be construed together so as to give effect, if possible, to the entire deed[, ] and ...

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