Corbin v. Regions Bank

• Decision Date: 20 November 2002
• Docket Number: No. A02A1443.,A02A1443.
• Citation: 258 Ga. App. 490,574 S.E.2d 616
• Parties: CORBIN v. REGIONS BANK.
• Court: Georgia Court of Appeals

574 S.E.2d 616

258 Ga. App. 490

CORBIN v. REGIONS BANK.

No. A02A1443.

Court of Appeals of Georgia.

November 20, 2002.

James E. Staples, Jr., for appellant.

Jerry C. Tootle, Jr., Duluth, for appellee.

RUFFIN, Presiding Judge.

Regions Bank ("Regions") sued Earl M. Corbin to recover a deficiency under a retail installment contract after it repossessed and sold the vehicle securing that contract. Corbin counterclaimed, asserting, among other causes of action, claims for wrongful repossession, conversion, and defamation.¹ The trial court granted partial summary judgment to Regions on these counterclaims, and Corbin appeals. For the reasons that follow, we affirm the trial court's grant of summary judgment to Regions on Corbin's defamation counterclaim, but we reverse as to Corbin's wrongful repossession and conversion counterclaims.

In reviewing a grant of summary judgment, we conduct a de novo review of the evidence.² To prevail at summary judgment under OCGA § 9-11-56(c), Regions must demonstrate the absence of any genuine issue of material fact and that the undisputed facts, viewed most favorably toward Corbin, warrant judgment as a matter of law.³

When so considered, the evidence shows that on October 17, 1995, Corbin entered into a 60-month retail installment contract (the "contract") with Duvall Ford Company, Inc. ("Duvall") to purchase a used 1995 Chevrolet S10 truck. The contract contained an option to purchase credit disability insurance, and Corbin elected to obtain the insurance at a cost of $1,090.65. Duvall was an authorized agent of Life of the South, which issued the disability policy. Corbin's monthly payment of $336.62 included the cost of financing the insurance over the life of the loan. After executing the contract, Duvall assigned it for value to the Bank of Clayton. Regions ultimately became the secured party under the contract when the Bank of Clayton's successor merged with Regions in June 1996.

In 1997, Corbin suffered two heart attacks, two strokes, and a broken leg. Corbin's medical problems prevented him from working, and he was unable to pay the monthly installments due under the contract. In May 1997, Regions mailed Corbin a notice of repossession. According to notations entered in Regions' collection file, Corbin was told that he had to turn the truck in at the branch office. In June 1997, Corbin gave the keys to Jerry Rogers, the branch vice-president. Corbin told Rogers he was "disabled by his doctors" and unable to make the payments, and Rogers expressed his sympathy.

When Corbin surrendered his truck to Regions, he did not mention the disability policy or submit any written documentation indicating that he was disabled. Corbin testified that he was never mailed a copy of the policy, and that he voluntarily turned the truck in because he did not remember purchasing the insurance.

Regions had no actual knowledge of the policy. Richard J. Malcolm, Jr., Region's vice-president of recovery operations, testified that Corbin's loan was an "indirect loan" made through a dealership where the dealer is the creditor on the loan. Malcolm explained that after Regions purchases such a loan from a dealership, no entry is made in the bank's computer system about credit disability insurance. However, Carol Jackson, a debt collector employed by Regions, testified that Corbin's account file had a copy of the installment contract and a copy of the certificate of insurance issued by Life of the South.⁴

In July 1997, Regions notified Corbin by certified mail that it planned to sell the truck at a public sale and recover any deficiency. Corbin did not respond to the notification, and Regions sold the truck at a private, dealers-only auction which resulted in the recovery of $6,390 after expenses. That amount was applied to the remaining loan balance.

Notwithstanding its repossession and sale of the truck, Regions' collection department continued to contact Corbin demanding payment. In August 2000, more than three years after Regions repossessed the truck, it sued Corbin for the deficiency. After being served with the complaint, which incorporated a copy of the contract, Corbin realized that he had purchased credit disability insurance. Corbin returned to Regions with his son-in-law and again met with Rogers. Corbin testified that when Rogers read the contract, he suggested that Corbin obtain a claim form from Regions' main office and take it to his doctor. According to Corbin, Rogers offered to mail the completed paperwork personally. Ultimately, Corbin's attorney submitted the claim form to Life of the South, and the insurance company paid the policy limits of $13,992.18 into the registry of the court.

On June 27, 2001, Regions voluntarily dismissed its deficiency action against Corbin. Shortly thereafter, Regions sought summary judgment on Corbin's counterclaims. Relying upon evidence that indicated Corbin had "voluntarily returned the vehicle to plaintiff's parking lot," the trial court awarded summary judgment to Regions on Corbin's wrongful repossession claim. For the same reason, the court found Corbin's claim for conversion necessarily failed. As to the claim for defamation, the trial court observed, "the record shows that defendant failed to make payments on the contract, and the vehicle was repossessed. Truth is a defense to a defamation claim." This appeal ensued.

1. Corbin contends that the trial court erred in concluding, as a matter of law, that he consented to the repossession of his

truck so as to bar his claim for wrongful repossession. We agree.

"Unless otherwise agreed a secured party has on default the right to take possession of the collateral,"⁵ without judicial process provided that it can do so without breach of the peace.⁶ However, a wrongful repossession occurs when the repossession is accompanied by "an act that is in contravention of some legal duty owed to the party from whose possession the vehicle is being taken."⁷ In the context of a wrongful repossession, a wrongful act means "any act which in the ordinary course will infringe upon the rights of another to his damage, unless it is done in the exercise of an equal or superior right."⁸ When the term wrongful is "used as an element of this tort, [it] is used in its more comprehensive sense to include that conduct which is in contravention of some legal duty owed to the party from whose possession the vehicle is being taken."⁹

In this case, a jury could conclude that Regions breached its legal duty to Corbin under the contract when it repossessed the truck without first seeking payment under the credit disability insurance. The contract shows on its face that Corbin purchased the optional credit disability insurance. The contract also provides that the "Creditor may claim benefits" under these optional insurance contracts. Regions paid Duvall for the contract and became the holder. The contract states that the holder is subject to defenses which could be asserted against the seller.

Rights and duties under a contract are generally freely assignable.¹⁰ Regions had a right under the contract to payments from Corbin. In addition, Regions received a certificate from Life of the South showing that it was the creditor beneficiary and loss payee under the disability insurance policy. The contract gives Regions the right to repossess the truck if Corbin fails to make his payments or "break any of the agreements in this contract (default)."

What constitutes a default must be determined from the context of the agreement.¹¹ For example, we recently considered a contract that allowed the secured party to repossess the collateral, a truck, if it "was damaged, destroyed, or stolen."¹² The contract also required the debtor to insure the collateral and name the creditor a loss payee. After the truck was damaged in a collision, the creditor repossessed it, relying in part on the damage default clause, and the debtor sued for wrongful repossession of the collateral. The trial court granted summary judgment to the creditor, but we reversed.¹³ We found that, notwithstanding the damage default clause, "the agreement clearly contemplate[d] that insurance proceeds would be used to repair the collateral in a reasonable and timely fashion without the damage constituting an automatic default."¹⁴

This case involves similar circumstances. Although the contract allowed Regions to repossess the collateral if Corbin failed to make timely payments, it also provided Corbin with credit disability insurance naming the creditor as the loss payee. Thus, in light of evidence showing that Corbin notified Regions that he could not make payment due to a disability, a jury could find that no default occurred—the agreement contemplated that the credit disability insurance would remedy Corbin's inability to pay. ¹⁵

Regions argues that it was Corbin's responsibility to make a claim under the insurance policy. This argument would be more persuasive if Corbin had purchased the insurance on his own. However, Corbin purchased the insurance as part of the contract, and the contract gives Regions the right to claim benefits under the insurance policy. Regions has not pointed to evidence showing that Corbin had expressly agreed, either under the contract or the insurance policy,¹⁶ to initiate a disability claim with the insurer. Under the circumstances, a jury could conclude that the insurance was such an integral part of the contract that the holder was obligated to look first to the insurance for payment if it was aware that Corbin was disabled. It follows that the evidence would allow a jury to conclude that Regions had no right to repossess Corbin's truck under the contract.

Although the issue of whether a creditor is obligated to seek payment under a credit disability insurance policy sold with an automobile financing contract appears to be one of first impression in Georgia, other state appellate court decisions...