Devin Lamplighter, Ltd. v. American General Finance, Inc., A92A0892

• Decision Date: 04 December 1992
• Docket Number: No. A92A0892,A92A0892
• Citation: 206 Ga.App. 747,426 S.E.2d 645
• Parties: DEVIN LAMPLIGHTER, LTD. et al. v. AMERICAN GENERAL FINANCE, INC.
• Court: Georgia Court of Appeals

Page 645

426 S.E.2d 645

206 Ga.App. 747

DEVIN LAMPLIGHTER, LTD. et al. v. AMERICAN GENERAL FINANCE, INC.

No. A92A0892.

Court of Appeals of Georgia.

Dec. 4, 1992.

Reconsideration Denied Dec. 16, 1992.

Certiorari Denied March 19, 1993.

Schreeder, Wheeler & Flint, John A. Christy, J. Christopher Desmond, Atlanta, for appellants.

Prior & Buser, Thomas E. Prior, O. Byron Meredith, III, Atlanta, Charles G. Barger, Jr., Miami, FL, for appellee.

JOHNSON, Judge.

American General Finance, Inc. ("American General") brought this action against Devin Lamplighter, Ltd. and its general partners ("the defendants") seeking recovery on a promissory note secured by a deed to secure debt. The parties filed cross-motions for summary judgment. The trial court granted American General's motion, and denied the defendants' motion. We affirm.

The pertinent facts are not in dispute. The defendants executed a promissory note in favor of American General. The note, which we will refer to as the "third note" for clarity, was secured by a deed to secure debt. The property given as security for the third note was also encumbered by two superior liens, a first in priority deed to secure debt in favor of Federal Home Loan Mortgage Corporation and a second in priority deed to secure debt in favor of Southern Diversified Properties, Inc. Southern subsequently assigned its note and security deed to American General. This left American General in the second priority position, holding both the second and third mortgages on the subject property.

Acting under the power of sale provision of the second in priority deed to secure debt obtained by the assignment from Southern, in May 1990, American General foreclosed on the property secured by the two deeds to secure debt and purchased the property back at the foreclosure sale. It applied the proceeds from the sale to the indebtedness secured by the second in priority security deed. It never confirmed this foreclosure sale as contemplated by OCGA § 44-14-161. Six months following this foreclosure, the holder of the first in priority security deed foreclosed on the subject property, effectively eliminating any interest of American General in the property. Subsequently, American General brought the instant action against the defendants seeking to collect on the third note and summary judgment was granted in its favor.

1. The defendants contend that American General's suit against them was a deficiency action which was barred because American General failed to have the foreclosure sale confirmed, and, therefore, that the trial court erred both in granting American's motion for summary judgment and in denying their motion for summary judgment.

Citing C.K.C., Inc. v. Free, 196 Ga.App. 280, 395 S.E.2d 666 (1990), the defendants argue that a lender who holds two notes secured by the same property and forecloses on one note without confirming the foreclosure sale pursuant to OCGA § 44-14-161 is barred from suing on the other note because such a suit constitutes the pursuit of a deficiency judgment which cannot be obtained absent judicial confirmation. However, C.K.C., Inc. v. Free is distinguishable. In that case, there was but one purchase money debt, evidenced by two separate notes and secured by one security deed. Under those circumstances, it is clear that foreclosure under the one security deed would encompass the one debt, notwithstanding that that one debt had been evidenced by two separate notes.

In the instant case, there are two separate debts, evidenced by two separate notes and secured by two separate security deeds. Until American General purchased the second mortgage from Southern, there were two creditors. Thus, American General was owed not only the debt secured by the third security deed, but, by assignment, was also owed the debt secured by the second security deed. The defendants were in default on both notes which evidenced the two separate debts. American General foreclosed only under the second security deed and failed to obtain confirmation. In failing to obtain confirmation, American General is now barred from seeking a deficiency judgment as to the debt that had been secured by the second security deed. However, American General's actions and inactions with regard to foreclosure under the second security deed merely had the effect of rendering the debt that...