McLemore v. Southwest Georgia Farm Credit, ACA

• Decision Date: 06 January 1998
• Docket Number: No. A97A1693,A97A1693
• Citation: 495 S.E.2d 335,230 Ga.App. 85
• Parties: , 98 FCDR 163 McLEMORE et al. v. SOUTHWEST GEORGIA FARM CREDIT, ACA.
• Court: Georgia Court of Appeals

Page 335

495 S.E.2d 335

230 Ga.App. 85, 98 FCDR 163

McLEMORE et al. v. SOUTHWEST GEORGIA FARM CREDIT, ACA.

No. A97A1693.

Court of Appeals of Georgia.

Jan. 6, 1998.

Jerry D. Sanders, Columbus, for appellants.

Kirbo & Kendrick, David A. Kendrick, Bainbridge, for appellee.

SMITH, Judge.

Southwest Georgia Farm Credit, ACA brought suit against Bill and Cindy McLemore on a note. The McLemores answered, raising several defenses, including fraud and misrepresentation. The trial court granted Farm Credit's motion for summary judgment and the McLemores appeal. We agree with Farm Credit that no genuine issues of material fact remain for jury resolution, and we therefore affirm the judgment.

The record shows that in January 1994 the McLemores borrowed $277,900 from Farm Credit to purchase farm property in Marion County, signing a promissory note and pledging as security both the farm property and their residence in Columbus. The note called for an interest-only payment on July 1, 1994 and semi-annual payments of principal and interest on January 1 and July 1 of each year thereafter. The security deed required the McLemores to purchase and retain insurance coverage on the farm acreage and buildings, naming Farm Credit as loss payee.

In May 1995, the McLemores' insurance coverage for the farm property lapsed. In October 1995, the McLemores contracted with a third party to sell the farm property for the outstanding balance on the loan. When Farm Credit learned in November 1995 that the McLemores had allowed the insurance policy covering the farm to lapse, Farm Credit purchased and paid for replacement coverage. The McLemores did not make the January 1, 1996 semi-annual payment, and Farm Credit accelerated the note.

Several of the farm buildings were damaged extensively by a storm in March 1996. Farm Credit made a claim under the policy it had purchased. The insurance proceeds checks were made out to both Farm Credit and Bill McLemore as payees, and McLemore endorsed the checks. Farm Credit applied these proceeds to the delinquent loan. Farm Credit then sought the balance of the indebtedness from the McLemores. When it was not paid, Farm Credit brought this suit, seeking the remainder of the principal, interest, and attorney fees as permitted by the note.

1. The McLemores contend the trial court erred in entering summary judgment against them because genuine issues of material fact remained regarding whether Farm Credit made material misrepresentations that prevented them from paying off their debt by selling the farm. They argue that the security deed gave them the right to elect to apply insurance proceeds to repairs of covered structures and that Farm Credit represented to Bill McLemore that the insurance proceeds would be applied to such repairs in order to obtain McLemore's endorsement on the checks, even though Farm Credit had no intention of allowing the proceeds to be used for that purpose.

We note initially the security deed's provision that insurance proceeds may be used for reconstruction of destroyed or damaged covered property at the option of the insured "[s]ubject to the rules and regulations of lender." Farm Credit's written rules and regulations provide that it may elect to turn insurance proceeds over to the insured, use proceeds to pay down or satisfy the loan, advance the proceeds as repairs or construction are completed, or any combination thereof.

The record shows, and the parties agree, that William M. Wills, principal loan officer for Farm Credit, took the checks on July 3, 1996, to Bill McLemore's place of business in Columbus to obtain McLemore's endorsement. The parties disagree, however, as to whether Wills told McLemore that the proceeds would be made available to repair the farm structures. Wills stated in an affidavit submitted in support of Farm Credit's motion for summary judgment that no such representations were made; in fact, shortly before receiving the checks representing the insurance policy proceeds, he wrote to the McLemores and informed them specifically that the proceeds would be applied to their delinquent loans. A copy of that letter was attached to the motion for summary judgment. Wills also stated in his affidavit that he told Bill McLemore again when he took the checks to Columbus for endorsement that the proceeds would be applied to the loan, and that he provided the McLemores with documentation after the fact that this had been done.

In opposition to the motion for summary judgment, the McLemores submitted their own affidavits, in which they stated they never received either the letter informing them that the proceeds would be applied to the loan or the documentation showing that the proceeds had been applied to the loan. Bill McLemore also...