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Mae v. Las Colinas Apartments, LLC

Court of Appeals of Georgia, First Division

June 27, 2018

FANNIE MAE
v.
LAS COLINAS APARTMENTS, LLC et al.

          BARNES, P. J., MCMILLIAN and REESE, JJ.

          Reese, Judge.

         Fannie Mae appeals from an order of the Superior Court of Cobb County denying its motion for summary judgment and granting the cross motion for summary judgment filed by Las Colinas Apartments, LLC, and Allen Gross (collectively, "Appellees") in Fannie Mae's action seeking a deficiency judgment after confirmation of a foreclosure sale. For the reasons set forth, infra, we reverse the order of the trial court and remand the case for proceedings consistent with this opinion.

         Viewed in the light most favorable to Fannie Mae, [1] the evidence shows the following. In April 2008, Las Colinas refinanced a loan with HSBC Realty Credit Corporation in the principal amount of $12, 500, 000, and executed a Multifamily Note ("Note") in HSBC's favor. Gross executed an "Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability" (hereinafter, "Guaranty") that was attached to the Note. The loan was secured by property commonly known as Las Colinas Apartments ("Property"), located in Marietta, as set forth and legally described in a "Multifamily Deed to Secure Debt, Assignment of Rents and Security Agreement" ("Security Deed"). On the same day the loan was executed, HSBC endorsed the Note and assigned the Security Deed to Fannie Mae. The Note, Guaranty, and Security Deed are collectively referred to as the "Loan Documents."

         In 2009 and the first half of 2010, several vendors recorded materialman's liens against the Property. In its amended responses to Fannie Mae's requests for admission, Las Colinas admitted that it "did not pay or remediate" the liens of Competitive Services, LLC, Atlanta's Reliable Roofing Company, Wilmar Industries, and Newscapes, LLC "within thirty days of [their] creation."

         In addition, Las Colinas failed to make payments as required under the terms of the Note, and Fannie Mae foreclosed on the Property on October 5, 2010. The Superior Court of Cobb County confirmed the foreclosure sale, finding, inter alia, that the Property, which had sold to the highest bidder for $5, 000, 000, brought at least its fair market value of $3, 300, 000 at the time of sale.

         Fannie Mae filed a complaint for a deficiency judgment against Las Colinas and Gross, pursuant to the Guaranty he had executed, for the satisfaction of the entire unpaid indebtedness under the Loan Documents. Fannie Mae alleged that Appellees were jointly and severally liable on the Note because the recorded materialman's liens constituted prohibited "Transfers" of the Property and were therefore "Events of Default" under the Security Deed.

         The trial court granted summary judgment in favor of the Appellees, and Fannie Mae appealed.

To prevail at summary judgment under OCGA § 9-11-56, the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law. On appeal from the grant of summary judgment [the appellate court] conducts a de novo review of the evidence to determine whether there is a genuine issue of material fact and whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.[2]

         Further,

the construction of an unambiguous [security] deed, like the construction of any other contract, is a question for determination by the court. The cardinal rule of construction is, of course, to ascertain the intention of the parties, as set out in the language of the contract. In this regard, contract disputes are particularly well suited for adjudication by summary judgment because construction of contracts is ordinarily a matter of law for the court.[3]

         With these guiding principles in mind, we turn now to Fannie Mae's claims of error.

         1. Fannie Mae argues that the trial court erred in finding that its recovery on the Note was limited to the foreclosure sale proceeds. We agree with Fannie Mae that the Loan Documents clearly and unambiguously provided for the personal liability of Appellees on the Note.

It is well established that contract construction entails a three-step process, beginning with the trial court's determination as to whether the language is clear and unambiguous. If no construction is required because the language is clear, the court then enforces the contract according to its terms. But if there is ambiguity in some respect, the court then proceeds to the second step, which is to apply the rules of contract construction to resolve the ambiguity. Finally, in the third step, if the ambiguity remains after applying the rules of construction, the issue of what the ambiguous language means and what the parties intended must be resolved by a jury. Importantly, as an initial matter, the existence or nonexistence of an ambiguity is a question of law for the court. Should the court ...

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