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Branch Banking and Trust Co. v. Cooke

United States District Court, N.D. Georgia, Atlanta Division

September 15, 2017



          THOMAS W. THRASH, JR., United States District Judge

         This is an action to enforce a personal guaranty. It is before the Court on the Plaintiff Branch Banking and Trust's (“BB&T”) Motion for Summary Judgment [Doc. 22] and the Defendant Mitchell Cooke's Motion to Strike Certain Portions of the Declaration of La'Torrie Williams [Doc. 25]. For the reasons stated below, BB&T's Motion for Summary Judgment [Doc. 22] is GRANTED and Cooke's Motion to Strike [Doc. 25] is DENIED.

         I. Background

         On June 7, 2006, DHSS Properties, LLC signed a promissory note (the “Original Note”) under seal in exchange for a loan of $5, 823, 725.00 from Main Street Bank.[1] The Plaintiff BB&T subsequently acquired Main Street Bank, along with the Original Note, which was secured by real property located in Marietta, Georgia.[2]When the Original Note matured on May 7, 2009, DHSS had not paid off the balance and was in danger of falling into default. BB&T agreed to modify the Original Note extending the due date to July 7, 2009, [3] but in exchange, BB&T required that the Defendant Mitchell Cooke sign a personal guaranty (the “Guaranty”).[4]

         The Guaranty contains a number of provisions in which the Defendant agreed to waive certain defenses and to take on primary responsibility for the debt. In particular, the Defendant agreed to waive “the defense of the statute of limitations in any action hereunder, ” as well as “any other legal or equitable defenses whatsoever to which the undersigned might be entitled, to the extent permitted by law, unless such defenses are based upon the willful misconduct of the Bank.”[5]

         DHSS and Cooke eventually defaulted on the Note and Guaranty, respectively, by failing to pay the Note in full on its new maturity date of July 7, 2009.[6] BB&T foreclosed on the property securing the Note and sold it at auction to one of its wholly-owned subsidiaries, Atlas NC I SPE, LLC, for a credit bid of $5, 260, 000.00.[7]BB&T credited the sale price against the principal amount of the indebtedness owed by DHSS and Cooke as of the foreclosure sale.[8] BB&T commenced a confirmation action in the Superior Court of Cobb County, Georgia, but dismissed it in July after Atlas sold the property for $3, 900, 000.00 on June 16, 2010.[9]

         Over six years later, BB&T filed its Complaint for Damages against Cooke on November 2, 2016.[10] The Complaint seeks the remaining principal balance on the note of $563, 450.00;[11] accrued interest of $422, 940.03; per diem interest after June 2, 2017 through judgment in the amount of $82.17; fees of $5, 494.34; and attorney's fees of $98, 664.00 plus per diem interest after June 2, 2017 through judgment of $8.217.[12]BB&T now moves for summary judgment.

         II. Legal Standard

         Summary judgment is appropriate only when the pleadings, depositions, and affidavits submitted by the parties show no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law.[13] The court should view the evidence and any inferences that may be drawn in the light most favorable to the nonmovant.[14] The party seeking summary judgment must first identify grounds to show the absence of a genuine issue of material fact.[15] The burden then shifts to the nonmovant, who must go beyond the pleadings and present affirmative evidence to show that a genuine issue of material fact does exist.[16] “A mere ‘scintilla' of evidence supporting the opposing party's position will not suffice; there must be a sufficient showing that the jury could reasonably find for that party.”[17]

         III. Discussion

         “In a suit to enforce a promissory note, a plaintiff establishes a prima facie case by producing the note and showing that it was executed...Similarly, in a suit on a personal guaranty, when the signature is admitted or established, production of the instrument entitles the holder to recover on it unless the defendant establishes a defense.”[18] In this case, both parties acknowledge that Cooke executed the Guaranty. Thus, BB&T has established a prima facie right to a recovery, and the burden shifts to Cooke to establish a valid defense.

         A. Affirmative Defenses

         In his Answer to the Complaint, Cooke asserted the affirmative defenses of: (1) laches, (2) statute of limitations, (3) illegality based on BB&T's dismissal of the Confirmation Action, (4) payment and satisfaction by foreclosure, (5) waiver, (6) estoppel, and (7) release.[19] Each of these defenses fails as a matter of law.

         1. Laches

         The Defendant's first affirmative defense listed in his Answer is that the Plaintiff's action is barred by the doctrine of laches because of the significant gap in time between the Defendant's default and the commencement of this action. Under the doctrine of laches, “courts of equity may interpose an equitable bar whenever, from the lapse of time and laches of the complainant, it would be inequitable to allow a party to enforce his legal rights.”[20] However, “[i]t is a longstanding and well-established rule that the doctrine of laches is an equitable defense which is not applicable to actions at law...”[21] Actions to recover amounts owed under personal guaranties and promissory notes, like this one, are actions at law.[22] Consequently, the defense of laches does not apply.

         2. Statute of Limitations

         The Defendant's second affirmative defense simply states that BB&T's claims are barred by the applicable statue of limitations. It goes without saying that before determining whether an action is barred by a statute of limitations, a court must first determine which statute actually applies. Written contracts are generally governed by a six-year statute of limitations in Georgia; but when an instrument is under seal, the limitation extends to twenty years.[23] “Under Georgia law, ‘to constitute a sealed instrument, there must be both a recital in the body of the instrument of an intention to use a seal and the affixing of the seal or scroll after the signature.'”[24] The Guaranty contained the recital “Witness the signature and seal of each of the undersigned, ” and the word “seal” after the Defendant Cooke's signature, making the Guaranty an instrument under seal.[25] Since the Guaranty is an instrument under seal, it is governed by the twenty year statute of limitations contained in O.C.G.A. § 9-3-23. As the Plaintiff's action was commenced well within twenty years, whatever the point of accrual, the Plaintiff's action is not barred by the statute of limitations.[26]

         3. Remaining Affirmative Defenses

         The Defendant's remaining defenses of illegality, payment and satisfaction by foreclosure, waiver, estoppel, and release also fail as a matter of law because they were effectively waived by the Defendant in the Guaranty. Under normal circumstances, Georgia law requires that a foreclosure sale be confirmed by the superior court of the county in which the sale was conducted before a deficiency judgment can be obtained.[27] This means that a lender must show evidence that it received a fair market value for the property before it can pursue a borrower for any balance remaining on a loan. However, this requirement can be contractually waived in advance by a guarantor.[28]

         In addition to a number of specific waivers, the language of the Guaranty in this case states that Cooke agreed to waive “any other legal or equitable defenses whatsoever to which the undersigned might be entitled...”[29] Other courts have repeatedly held that identical or highly similar language constituted a waiver of the confirmation requirement.[30] Based upon this language, and upon other courts' interpretation of similar language, the Court finds that Cooke waived any requirement for BB&T to first confirm the foreclosure sale.

         Cooke's remaining affirmative defenses ultimately derive from his argument that BB&T should have confirmed the foreclosure sale. Because Cooke waived the confirmation requirement, any defenses based upon that requirement were also waived. Thus, Cooke's remaining defenses of illegality, payment and ...

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