Legacy Communities Group Inc. v. Branch Banking & Trust Co..Branch Banking & Trust Co. v. Tampa Inv. Group Inc.

• Decision Date: 01 July 2011
• Docket Number: Nos. A11A0696,A11A0697.,s. A11A0696
• Citation: 713 S.E.2d 670,310 Ga.App. 466
• Court: Georgia Court of Appeals
• Parties: LEGACY COMMUNITIES GROUP, INC. et al.v.BRANCH BANKING & TRUST COMPANY.Branch Banking & Trust Companyv.Tampa Investment Group, Inc. et al.

310 Ga.App. 466

713 S.E.2d 670

11 FCDR 2237

LEGACY COMMUNITIES GROUP, INC. et al.

v.BRANCH BANKING & TRUST COMPANY.Branch Banking & Trust Company

v.Tampa Investment Group, Inc. et al.

Nos. A11A0696

A11A0697.

Court of Appeals of Georgia.

July 1, 2011.

Fellows & LaBriola, Steven Marc Kushner, Eugenia Wooten Iredale, Chilivis, Cochran, Larkins & Bever, John K. Larkins, Atlanta, for appellants.Greenberg Traurig, Jennifer Brown Moore, Mark G. Trigg, Lee Bennett Hart, Atlanta, appellee.ELLINGTON, Chief Judge.

In this litigation pending in the Superior Court of Fulton County, Branch Banking & Trust Company asserts claims, inter alia, for the breach of a series of promissory notes against the borrowers and against parties that guaranteed the notes, which are all related corporate entities. The parties filed cross-motions for partial summary judgment. After a hearing, the trial court entered partial summary judgment in favor of the bank on certain issues and in favor of the borrowers and guarantors on others, as detailed below. Both sides appeal part of the trial court's ruling. For the reasons explained below, we affirm in part and reverse in part.

In order to prevail on a motion for summary judgment under OCGA § 9–11–56,

the moving party must show that there exists no genuine issue of material fact, and that the undisputed facts, viewed in the light most favorable to the nonmoving party, demand judgment as a matter of law. Moreover, on appeal from the denial or grant of summary judgment the appellate court is to conduct a de novo review of the evidence to determine whether there exists a genuine issue of material fact, and whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.

(Citations omitted.) Benton v. Benton, 280 Ga. 468, 470, 629 S.E.2d 204 (2006).

At issue are 16 promissory notes executed between 2005 and 2008 by the bank as the lender and by either Legacy Investment Group, LLC (“Legacy Investment”) or Tampa Investment Group, Inc. (“Tampa Investment”) as the borrower for the development of residential subdivisions in Georgia. The notes were secured by deeds to secure debt and were guaranteed by either two or three of the following entities: Legacy Communities, LLC (“Legacy Communities”), Tampa Financial Company, Inc. (“Tampa Financial”), Legacy Communities Group, LLC (“Legacy Group”), SRB Investment Services, LLLP (“SRB Investment”), and SFB Investment, LP (“SFB Investment”). After the borrowers defaulted on the notes, the bank provided notice of foreclosure as to nine of the notes and, at foreclosure auctions conducted on June 2, 2009, was the sole and winning bidder. Three days later, the bank notified the borrower that it rescinded any actions taken with respect to foreclosure and that the foreclosures were not and would not be consummated. On June 22, 2009, the bank filed the instant action against the borrowers and guarantors. Because of common issues on appeal, we consider the notes in the following related groups:

(A) Three notes executed in 2005, 2006, or 2007, either by Legacy Investment ¹ or by Tampa Investment ² as the borrower and guaranteed by Tampa Financial and either by Legacy Communities³ or by Legacy Group, ⁴ which were foreclosed upon and the properties sold at auction on June 2, 2009.

(B) Five notes executed in 2005, 2006, or 2007, either by Legacy Investment ⁵ or by Tampa Investment ⁶ as the borrower and guaranteed by Tampa Financial and by either Legacy Communities⁷ or by Legacy Group, ⁸ which were not the subject of foreclosure proceedings.

(C) Six notes executed in 2008, by Tampa Investment as the borrower and guaranteed by Legacy Group, SRB Investment, and SFB Investment (the “2008 guarantors”), which were foreclosed upon and the properties sold at auction on June 2, 2009.⁹

(D) Two notes executed in 2008, by Tampa Investment as the borrower and guaranteed by the 2008 guarantors, which were not the subject of foreclosure proceedings.¹⁰

In its complaint, the bank asserted claims against the borrower and against the guarantors for amounts due under each of the notes.

After a hearing on the parties' motions for summary judgment, the trial court determined that, because the bank failed to seek confirmation of the foreclosure sales within 30 days after the auctions, the bank's claims as to the Group A and Group C notes were barred as improper deficiency actions under OCGA § 44–14–161(a).¹¹ Accordingly, the trial court granted the borrowers' and guarantors' motions for partial summary judgment and denied the bank's motion as to those nine notes. In Case No. A11A0697, the bank appeals, and, for the reasons explained in Division 1, infra, we reverse in part.

In addition, the trial court determined that guaranties executed in 2008 by the 2008 guarantors in connection with the Group C and Group D notes (collectively, the “2008 notes”) were effective under the Statute of Frauds to make the 2008 guarantors liable as additional guarantors of the Group A and Group B notes (collectively, the “pre–2008 notes”). Accordingly, the trial court granted the bank's motion for partial summary judgment and denied the 2008 guarantors' motion on this issue. Because the trial court otherwise granted partial summary judgment in favor of the borrowers and guarantors on the three pre–2008 notes as to which the bank offered the winning bid at the foreclosure auctions (the Group A notes), the trial court granted judgment to the bank only as to the five pre–2008 notes as to which the bank had not initiated foreclosure proceedings (the Group B notes). In Case No. A11A0696, the 2008 guarantors appeal, and, for the reasons explained in Division 2, infra, we affirm in part.

Case No. A11A0697

1. The bank contends that, although it offered the winning bid at auction as to the Group A and Group C notes, it abandoned foreclosure proceedings before consummating any foreclosure sale. As a result, the bank contends, the trial court erred in ruling that the bank's claims as to those notes were barred as improper deficiency actions by the bank's failure timely to seek confirmation under OCGA § 44–14–161(a). We agree.

When a borrower gives a lender a deed to secure debt, the borrower grants and conveys outright legal title in the subject real property to the lender (the grantee) and takes “a bond for title back to the grantor upon the payment of the debt.” OCGA § 44–14–60; see also West Lumber Co. v. Schnuck, 204 Ga. 827, 835(1), 51 S.E.2d 644 (1949). Thus, the borrower retains the right to regain or redeem legal title by payment of the secured indebtedness; the borrower also retains the right of possession. West Lumber Co. v. Schnuck, 204 Ga. at 835(1), 51 S.E.2d 644; C & S Bank v. Realty Savings, etc., 167 Ga. 170, 171–172(1), 144 S.E. 893 (1928); Boyer v. Whiddon, 264 Ga.App. 137, 138, 589 S.E.2d 709 (2003).¹² The borrower's equitable estate or title may be assigned or subjected to payment of the borrower's other debts. C & S Bank v. Realty Savings, etc., 167 Ga. at 171–172(1), 144 S.E. 893. A deed to secure debt generally gives the lender a power of attorney authorizing it to sell the property if the borrower defaults on the secured debt, applying the proceeds first to the satisfaction of the debt. Daniel F. Hinkel, 2 Pindar's Ga. Real Estate Law and Procedure, § 21–2 (6th ed., updated 2011). A properly conducted sale on foreclosure under power transfers the borrower's right of possession and its equitable estate to the foreclosure sale purchaser. Cummings v. Johnson, 218 Ga. 559, 561(3), 129 S.E.2d 762 (1963).¹³

When a person who is conducting a nonjudicial foreclosure sale pursuant to a power of sale in a security deed accepts a bid, an oral contract is created. Moody v. Mendenhall, 238 Ga. 689, 690, 692–693(6), 234 S.E.2d 905 (1977); James v. Safari Enterprises, 244 Ga.App. 813, 814–815, 537 S.E.2d 103 (2000). Because such a contract conveys an interest in land, it is subject to the Statute of Frauds unless it falls into one of the recognized exceptions. James v. Safari Enterprises, 244 Ga.App. at 814–815, 537 S.E.2d 103; OCGA § 13–5–30(4); ¹⁴ see OCGA §§ 13–5–31; ¹⁵ 23–2–131.¹⁶ In this case, the bank, acting in its capacity as the borrower's attorney-in-fact, accepted the bids it made at the foreclosure auctions as to the Group A and Group C notes, but it did not in that capacity execute a deed under power or any other document conveying the borrower's interest to itself. In addition, the bank, acting in its capacity as the creditor on the promissory notes, did not execute any writing showing that it had applied any foreclosure proceeds to eliminate or reduce the borrower's obligations under the secured promissory notes. Rather, three days after the auctions, the bank, as the creditor and as the winning bidder, notified the borrower that it rescinded any actions taken with respect to foreclosure and that the foreclosures were not and would not be consummated. The borrower was not harmed by the aborted foreclosure proceedings but, rather, was left in exactly the same position as it was in before the auctions. Although the bank conducted and bid at foreclosure auctions of the real property that secured the Group A and Group C notes, we conclude that, under the circumstances, the conveyance which defines a nonjudicial foreclosure, that is, the transfer of the borrower's right of possession and its equity of redemption to the bank as the foreclosure sale purchaser,¹⁷ never occurred.¹⁸ Because, by definition, the confirmation procedure has no application where there has been no foreclosure sale, OCGA § 44–14–161(a), the trial court erred in ruling that the bank's claims were barred as to the Group A and Group C notes by the bank's failure to seek confirmation after the June 2, 2009 foreclosure auctions.

Case No. A11A0696

2. The 2008 guarantors contend that the 2008 guaranties did not identify the pre–2008 notes with the specificity...