Heritage Creek Dev. Corp. v. Colonial Bank

• Decision Date: 07 July 2004
• Docket Number: No. A04A0067.,A04A0067.
• Parties: HERITAGE CREEK DEVELOPMENT CORPORATION v. COLONIAL BANK, et al.
• Court: Georgia Court of Appeals

601 S.E.2d 842

268 Ga. App. 369

HERITAGE CREEK DEVELOPMENT CORPORATION v. COLONIAL BANK, et al.

No. A04A0067.

Court of Appeals of Georgia.

July 7, 2004.

Karl M. Washington, East Point, for Appellant.

McCalla, Raymer, Padrick, Cobb Nichols & Clark, Carol V. Clark, Roswell; Weissman, Nowack, Curry & Wilco, Frank O. Brown, Jr., Atlanta; Swift Currie McGhee & Hiers, Christopher D. Balch, Atlanta, for appellees.

JOHNSON, Presiding Judge.

Heritage Creek Development Corporation obtained a loan from Colonial Bank to fund the construction of a 24-lot residential subdivision. The loan was secured by a security deed covering the subject real property. Heritage Creek defaulted on the loan. In January 2000, Colonial Bank notified Heritage Creek that it was accelerating and declaring due and payable the entire balance of the loan, as permitted by the loan instruments. In the letter, the bank also notified Heritage Creek that it planned to initiate foreclosure proceedings if the debt was not paid in full.

As a result of subsequent negotiations, Colonial Bank permitted Heritage Creek to cure the default by paying all the arrearage to bring the account current. The parties then executed an agreement modifying some of the terms of their loan and security agreements.

Later, Heritage Creek again defaulted on the loan. Acting in accordance with the loan and security agreements as amended, Colonial Bank accelerated the loan, and notified Heritage Creek by letter in April, 2000. Heritage Creek did not cure the default, so, in May, Colonial Bank advertised the property for foreclosure sale.

On the Friday before the foreclosure sale was to occur, a representative of Heritage Creek contacted Colonial Bank and made an offer to bring the loan current by paying the past due amount and late fees. At that time, however, because the full balance of the loan was due under the terms of the loan agreement, the bank refused Heritage Creek's request to reinstate the loan upon payment of only the arrearage, and the foreclosure sale took place on June 6, 2000, as advertised.

At the foreclosure sale, Colonial Bank itself was the only bidder. The property was sold to the bank for $235,000, representing the full amount of the debt. Sometime after the sale, Heritage Creek's representative contacted Colonial Bank by letter requesting an opportunity to purchase the property from the bank. Colonial Bank responded by letter through its counsel, and offered to resell the subject property to Heritage Creek for $240,000, representing the amount of principal together with accrued interest, fees and expenses related to the foreclosure, provided Heritage Creek tendered payment of the full purchase price by June 16, 2000. The deadline passed, and Heritage Creek never made a tender of the purchase price. On July 7, 2000, Colonial Bank sold the property to RMT Construction, Inc. for $220,000.

Although Heritage Creek admits that it defaulted on the loan on more than one occasion, that its indebtedness was properly accelerated under the terms of its loan agreements, that Colonial Bank had the legal right to foreclose upon the subject property, that Colonial Bank had the right to purchase the property at the foreclosure sale, and that Heritage Creek never tendered payment of the purchase price of the property when given the opportunity to buy it after the foreclosure sale, it sued Colonial Bank, RMT Construction, and Gray & Gilliland, the law firm that handled the foreclosure. Heritage Creek claimed in this lawsuit that it was entitled to damages for, among other things, loss of equity in the eight subdivision lots which were the subject of the foreclosure sale.¹

Heritage Creek moved for partial summary judgment on its actions for wrongful foreclosure and for damages for failure to cancel a security deed, arguing that the bank was liable as a matter of law because the foreclosure advertisement contained errors, and claiming that it was authorized under OCGA § 44-14-3 to recover damages for Colonial Bank's failure to timely transmit to the clerk of superior court a cancellation of the security deeds to two previously sold lots.² Colonial Bank, RMT Construction, and Gray & Gilliland filed cross-motions for summary judgment as to all counts of the amended complaint. The trial court denied Heritage Creek's motion for partial summary judgment, and granted motions for summary judgment made by Colonial Bank, RMT Construction, and Gray and Gilliland. From these rulings on the motions, Heritage Creek brings this appeal. For the reasons set forth below, we affirm the judgments of the trial court. And because we find this appeal so wholly lacking merit as to be frivolous, we assess a penalty of $1,000 against Heritage Creek and its attorney pursuant to Court of Appeals Rule 15(b).

1. Heritage Creek contends the trial court erred in denying its motion for partial summary judgment, urging that the trial court erred in holding that Heritage Creek was required to show that the bank caused it to default on the loan. This enumeration is without merit.

In denying Heritage Creek's motion for partial summary judgment, the trial court agreed that the foreclosure advertisement was technically defective in that it included descriptions of two subdivision lots which had previously been sold to third parties.³ But the trial court also found that Heritage Creek had not shown any causal connection between this technical defect and Heritage Creek's alleged injury, the loss of its equity in the eight lots which had not been released from the security deed and were the lots actually sold in the foreclosure sale.

Georgia law requires a plaintiff asserting a claim of wrongful foreclosure to establish a legal duty owed to it by the foreclosing party, a breach of that duty, a causal connection between the breach of that duty and the injury it sustained, and damages.⁴ The trial court correctly ruled that even where a borrower has established duty and breach of duty, it still needs to show a causal connection between the defective notice and the alleged injury.⁵

Aside from the very real question of whether there is any evidence that Colonial Bank had breached any legal duty it owed to Heritage Creek under the circumstances of this case, the trial court correctly pointed out that the undisputed evidence shows that Heritage Creek's alleged injury was solely attributable to its own acts or omissions both before and after the foreclosure. Not only did Heritage Creek default on the loan payments on multiple occasions, it failed to cure the default pursuant to the terms of the loan agreement; it received the foreclosure notice, but did not bid on the property at the foreclosure sale; and it requested and was granted an opportunity to repurchase the property after the foreclosure sale, then failed to tender the purchase price required by the terms of Colonial Bank's offer to sell the property back. Heritage Creek does not deny any of this, and it did not produce even a scintilla of evidence which shows any wrongdoing by the bank, or that any act or omission by the bank caused it to lose its equity in the eight lots which were sold in foreclosure.

Not every irregularity or deficiency in a foreclosure advertisement will void a sale.⁶ Heritage Creek has not shown it was harmed in any way by the inclusion of two unavailable lots in the foreclosure ad's property description. Indeed, it had already sold those lots to third parties and had received full value for them years before the foreclosure occurred.⁷ As the trial court noted, Heritage Creek failed to show in any particular how the end result would have been different had the appellees not included in the advertisement descriptions of the lots which had already been sold.

The trial court did not err in denying Heritage Creek's motion for partial summary judgment.⁸

2. The trial court agreed with Heritage Creek that Colonial Bank had failed to timely release lots 16 and 22 from its deed to secure debt as required by OCGA § 44-14-3. These are the same two lots discussed above. Despite this finding of the trial court, Heritage Creek was not entitled to summary judgment based on a violation of OCGA § 44-14-3.

OCGA § 44-14-3(b)(1) provides, in relevant part, that when a secured debt is paid in full, the holder of the security deed shall, within 60 days of the date of full payment, transmit to the superior court clerk documentation authorizing the cancellation of the security instrument of record. OCGA § 44-14-3(c) provides that upon the failure of the holder to transmit the cancellation, the holder shall, upon written demand, be liable to the grantor for liquidated damages of $500 plus additional sums for losses caused to the grantor. OCGA § 44-14-3(c.1) provides that if a holder fails to transmit a cancellation document to authorize the clerk to cancel the instrument of record within 60 days after a written notice is mailed to the holder, the clerk is authorized and directed to cancel the instrument.

These lots were sold to third parties in 1997 and 1998. Heritage Creek paid Colonial Bank in full for the lots soon after the sales but, according to Heritage Creek's own appellate brief, it made no written demand for cancellation documents until October 23, 2002, more than four years after the property was sold. On January 17, 2003, less than three months after the written demand was made, the bank transmitted to the court clerk the cancellation documents.

Had Heritage Creek made a written demand for the documents soon after the properties sold, the bank might have been liable under the statute. But in 1999 and 2000, long before Heritage Creek filed this suit and made its written demand, it signed loan modification documents acknowledging that it had "no claims of any nature whatsoever, at law, in equity, or otherwise, against Lender as a result of any acts or omissions by Lender," that Heritage Creek ...