Gutherie v. Ford Equipment Leasing Co.

• Decision Date: 13 November 1992
• Docket Number: No. A92A1074,A92A1074
• Citation: Gutherie v. Ford Equipment Leasing Co., 424 S.E.2d 889, 206 Ga.App. 258 (Ga. App. 1992)
• Parties: GUTHERIE et al. v. FORD EQUIPMENT LEASING COMPANY.
• Court: Georgia Court of Appeals

Page 889

424 S.E.2d 889

206 Ga.App. 258

GUTHERIE et al. v.FORD EQUIPMENT LEASING COMPANY.

No. A92A1074.

Court of Appeals of Georgia.

Nov. 13, 1992.

William F. Lozier, Lightmas & Delk, Frank A. Lightmas, Jr., Atlanta, for appellants.

W. Dan Greer, Covington, for appellee.

SOGNIER, Chief Judge.

Ford Equipment Leasing Company conducted a nonjudicial foreclosure under a power of sale contained in a deed to secure debt executed by Thomas Gutherie to secure a loan made by Ford to Greensboro Lumber Company(GLC).Ford then instituted this confirmation proceeding.After a hearing, the superior court entered an order confirming the sale.Gutherie and GLC appeal.

The property at issue comprised a 300 acre farm and the residence and outbuildings of appellant Gutherie.At the time of the foreclosure sale, appellants were indebted to appellee in the amount of $1,078,587.Darryl Gossett was the high bidder at the December 1991 sale, acquiring the property for his bid of $200,000.The sale was made subject to other nondischarged debts and delinquent taxes totalling $261,297.

At the confirmation hearing, appellants did not challenge the validity of the notices and advertisements made by appellee, but instead contended that the sale did not bring the true market value of the property as required for confirmation under OCGA § 44-14-161(b).Appellee's appraiser opined that the market value of the property was $919,450 if given two or more years to sell; however, he testified that he discounted this market value to $460,000 because he was instructed by appellee to calculate a "quick sale" value rather than a "market time sale" value.Appellants' two appraisers arrived at valuations of $950,000 and $985,000.While they agreed with appellee that a sale of such a property ordinarily would take six months to three years, they disagreed with the "quick sale" approach.One appraiser opined that while the rapid timing of the foreclosure sale might justify some discounting of the valuation, a 50 percent reduction was excessive, while the other appraiser stated that a quick sale value was not the same as true market value.The trial court found the total value bid at auction, $461,297, equalled the true market value and confirmed the sale.

1.OCGA § 44-14-161(b) provides that "[t]he court shall require evidence to show the true market value of the property sold under the powers [of sale contained in the deed to secure debt] and shall not confirm the sale unless it is satisfied that the property so sold brought its true market value on such foreclosure sale.""True market value," which is used interchangeably with "fair market value,"Aaron v. Life Ins. Co. of Ga., 138 Ga.App. 286(1), 226 S.E.2d 96(1976), is "the price which (the property) will bring when it is offered for sale by one who desires, but is not obliged, to sell it, and is bought by one who wishes to buy, but is not under a necessity to do so."(Citations, punctuation, and emphasis omitted.)Wheeler v. Coastal Bank, 182 Ga.App. 112, 114, 354 S.E.2d 694(1987).Although as a general rule the price brought at a public sale is prima facie evidence of the market value (absent chilling of the bidding, fraud, or any other element adversely affecting the sale), id. at 113(1), 354 S.E.2d 694, this general rule does not apply to confirmation of foreclosures under power of sale, for the confirmation statute requires separate analysis of the value independent of the sum bid at the public sale.Id.The lender bears the burden of proving that the foreclosure sale brought at least the true market value of the property.Id. at 114, 354 S.E.2d 694.

The question presented in the case sub judice is whether a "quick sale value" may constitute competent evidence of the "true market value" of real property within the meaning of OCGA § 44-14-161(b).Our courts have held that in determining true market value, a trial court may consider market conditions in general at the time of the sale under power and the effect of depressed market conditions on the value of a subject property.Gunnells v. Crump, 172 Ga.App. 607, 608, 323 S.E.2d 903(1984);seeWall v. Federal Land Bank, 240 Ga. 236, 238(3), 240 S.E.2d 76(1977).However, the parties have not cited, and our extensive research has not uncovered, any case that has condoned discounting the value of a foreclosed property on the basis that the sale was conducted in a shortened time frame.Accordingly, we will consider the view taken by our courts of the use of "quick sale" valuations in other contexts as well as authority in other jurisdictions.

In Parks v. Assoc. Commercial Corp., 181 Ga.App. 235-236, 237(1), 351 S.E.2d 661(1986), this court addressed the use of a "quick sale value" in the context of repossession and disposal of secured collateral under the UCC.The record in Parks established that the price paid for the collateral at the public sale was equal to its "quick sale value" but substantially less than the price at which the collateral subsequently was resold.Considering this discrepancy together with evidence that the creditor had known prior to the sale that other prospective buyers were willing to pay more for the collateral than the bid-in price, we held that "these facts raise a serious question concerning whether the sale of the collateral was conducted in a commercially reasonable manner as required by OCGA § 11-9-504(3)," and accordingly found the debtors had properly raised that ground as a defense.Id. at 237(1), 351 S.E.2d 661.

The definition of "fair market value" established by the Internal Revenue Service for use in valuation of real property for estate taxes is also instructive."Fair market value" is defined as "the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.The fair market value of a particular item of property ... is not to be determined by a forced sale price.Nor is the fair market value ... to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public...."Treas.Reg. § 20.2031-1(b).The first sentence of this definition is consistent with the willing buyer, willing seller definition used in Georgia.SeeWheeler, supra;see alsoWright v. MARTA, 248 Ga. 372, 375, 283 S.E.2d 466(1981).Upon reviewing Georgia law on the computation of fair market value and considering the language and purpose of the confirmation statute, we are persuaded that the entirety of the IRS definition of fair market value is consistent with Georgia law and...