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Apex Bank v. Thompson

Court of Appeals of Georgia, Second Division

March 8, 2019

APEX BANK
v.
THOMPSON et al. THOMPSON et al.
v.
APEX BANK.

          MILLER, P. J., BROWN and GOSS, JJ.

          Brown, Judge.

         We have consolidated these interlocutory appeals arising from a trial court's order on cross-motions for summary judgment. In the underlying action, Apex Bank ("Apex") sued Ernest A. Thompson and Douglas O. Thompson (the "Thompsons") for a deficiency judgment following a non-judicial foreclosure sale of the real property collateralizing the loan, alleging that they were guarantors of the debt remaining on a promissory note. In Case No. A18A1467, Apex contends that the trial court erred by failing to grant summary judgment in its favor on the issue of the Thompsons' liability for the difference between the amount due on the note and the foreclosure proceeds based upon their alleged waiver of the requirements of the confirmation statute, OCGA § 44-14-161. In Case No A18A1468, the Thompsons contend, in part, that the trial court erred by denying their cross-motion for summary judgment on the issue of liability based upon Apex's failure to comply with the requirement that it obtain confirmation of the sale under OCGA § 44-14-161 before filing suit for a deficiency judgment. For the reasons explained below, we affirm the trial court's denial of summary judgment in Apex's favor in Case No. A18A1467, and reverse the trial court's denial of summary judgment in favor of the Thompsons in Case No. A18A1468.

         "On appeal, we review the grant or denial of summary judgment de novo, construing the evidence and all inferences in a light most favorable to the nonmoving party." (Citation and punctuation omitted.) Seki v. Groupon, Inc., 333 Ga.App. 319 (775 S.E.2d 776) (2015). So viewed, the record shows that in November 2007, Direct Land & Development, LLC ("the LLC") executed a security deed in favor of the Bank of Valdosta that encumbered real property owned by the LLC in connection with a $208, 000 promissory note. The security deed was signed by the Thompsons in their capacity as members of the LLC. Although a copy of the 2007 note is not a part of the record before us, the Thompsons state in their briefs that they were not a party to this loan, either individually or as guarantors. In its appellate brief, Apex objects to this characterization of the facts in the Thompsons' brief, stating:

Apex objects to the statement that the Thompsons were not individually parties to the original loan made when the security deed was executed November 8, 2007 (the "Security Deed"). (R. 12). The promissory note providing the underlying debt for the Security Deed when the original loan was made is not at issue in the lower court action, as it was replaced during a subsequent refinancing of the debt. The subject promissory note is dated October 26, 2011.

         In October 2011, the LLC refinanced the 2007 note. The Thompsons "jointly and severally promise[ed] to pay" the lender, [1] and signed the new note in both their individual capacity and as members on behalf of the LLC. On the same day, the Thompsons signed, in their capacity as members on behalf of the LLC, a Modification of Security Deed which deleted the definition of note in the original security deed and replaced it with the new October 2011 note. Additionally, Douglas O. Thompson granted the lender a security interest in $14, 393.09 placed in a certificate of deposit account through an "Assignment of Deposit Account." The "Assignment of Deposit Account" states that it was "made and executed among Douglas O. Thompson ("Grantor"), [the LLC], Douglas O. Thompson and Ernest A. Thompson ("Borrower"); and Sunrise Bank ("Lender"). In December 2012, the Thompsons signed a "Change in Terms Agreement," in both their individual capacity and as members on behalf of the LLC, that extended the due date for payment of the loan an additional six months.

         In 2013, the Federal Deposit Insurance Corporation, in its capacity as the receiver for Sunrise Bank, assigned the 2007 security deed to the Bank of Camden. In 2015, the Bank of Camden changed its name to Apex Bank. In December 2016, Apex foreclosed upon the property securing the loan and was the highest bidder at a non-judicial foreclosure sale with a bid in the amount of $118, 900. It is undisputed that Apex Bank did not file for confirmation of the foreclosure sale within 30 days under the procedure provided by OCGA § 44-14-161.

         In 2017, Apex filed a complaint against the Thompsons seeking a deficiency judgment. Based upon the Thompsons' alleged status as guarantors who waived their right to the protection provided by the confirmation statute in the 2011 and 2012 loan documents, Apex moved for summary judgment in its favor. The Thompsons filed a cross-motion for summary judgment asserting that they were debtors entitled to the protection of the confirmation statute, that the 2011 and 2012 agreements do not include valid waivers of their rights under the statute, and that an alleged requirement for a separate guaranty agreement was not met. After both sides presented argument in a hearing, the trial court entered an order denying each of the pending motions for summary judgment without an explanation of its reasoning.

         1. In Case No. A18A1467, Apex asserts that the trial court erred "by failing to rule that the contractual waiver language found in the Thompson[s'] loan documents was sufficient to waive the defense of compliance with the [c]onfirmation [s]tatute." See OCGA § 44-14-161 (a) ("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"). In Case No. A18A1468, the Thompsons contend the opposite - that the trial court should have granted their motion for summary judgment because the loan documents failed to include an adequate waiver of the confirmation process required by OCGA § 44-14-161. We agree with the Thompsons.

          It is well-established that a lender cannot obtain a deficiency judgment against a guarantor without complying with the foreclosure confirmation requirements of OCGA § 44-14-161, unless the guarantor has waived its right to insist on compliance. See York v. RES-GA LJY, 300 Ga. 869, 872-873 (2) (799 S.E.2d 235) (2017); PNC Bank v. Smith, 298 Ga. 818, 822 (3) (a) (785 S.E.2d 505) (2016). In HWA Properties v. Community & Southern Bank, 322 Ga.App. 877 (746 S.E.2d 609) (2013), we outlined the following provisions in a guaranty agreement and concluded that "these provisions" showed a waiver of the guarantor's right to confirmation under OCGA § 44-14-161:

[the] personal guaranty includes an express and comprehensive waiver of any and all defenses to [the guarantor's] liability on the entire balance due on the note. Further, even absent this broad waiver of defenses, the guaranty expressly gives [] consent for the "Lender" to collect on other collateral and to apply the proceeds to the amount due on the note and that "[s]uch application of receipts shall not reduce, affect or impair the liability of [the guarantor]." In fact, the guaranty specifically provides that [the guarantor] shall remain liable for any deficiency remaining after the foreclosure of any property securing the note,
whether or not the liability of Borrower or any other obligor for such deficiency is discharged pursuant to statute or judicial decision. [Guarantor] shall remain obligated, to the fullest extent permitted by law, to pay such amounts as though the Borrower's obligations had not been discharged.

(Punctuation omitted; emphasis in original.) Id. at 887 (2) (b).

         Relying upon HWA Properties, Apex Bank points to various language contained within the 2011 note, the 2011 agreement assigning the deposit account, and the 2012 change in terms agreement, all of which were signed by the Thompsons in their individual capacities, to support ...


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