Sadler v. Trust Co. Bank of South Georgia, N.A.

• Decision Date: 08 April 1986
• Docket Number: No. 72206,72206
• Citation: 344 S.E.2d 694,178 Ga.App. 871
• Parties: , 2 UCC Rep.Serv.2d 1009 SADLER v. TRUST COMPANY BANK OF SOUTH GEORGIA, N.A.
• Court: Georgia Court of Appeals

Page 694

344 S.E.2d 694

178 Ga.App. 871, 2 UCC Rep.Serv.2d 1009

SADLER v. TRUST COMPANY BANK OF SOUTH GEORGIA, N.A.

No. 72206.

Court of Appeals of Georgia.

April 8, 1986.

Rehearing Denied April 30, 1986.

Frank C. Vann, Camilla, for appellant.

Donald T. Robinson, Pelham, for appellee.

POPE, Judge.

In a suit on promissory note, appellee Trust Company Bank of South Georgia, N.A., successor to Farmer's Bank of Pelham, obtained summary judgment against the maker, appellant Curtis E. Sadler, in the amount of $270,897.76 principal, plus interest to the date of judgment of $21,764.62 and court costs. Appellant contends that the trial court erroneously awarded summary judgment to appellee bank because there existed genuine issues of material fact as to whether the bank failed to mitigate its damages and whether it impaired the collateral left in its possession. We find appellant's claims to be meritless.

Appellant has admitted his execution of the promissory note as well as the fact that the note is in default and he is unable to repay the bank. As collateral for the note, the bank held security deeds on certain parcels of real estate owned by appellant, as well as appellant's interest in a particular parcel owned jointly by appellant and his wife. Appellant now claims that if the bank had instituted foreclosure proceedings on the collateral immediately upon his default on the note, the proceeds therefrom would have materially reduced his indebtedness. In an affidavit appellant averred that the selling price of the real estate had materially decreased since the maturity date of the note. Thus, he contends that the bank failed to mitigate its damages. In addition, appellant's wife offered to purchase from the bank appellant's one-half interest in the jointly held real estate at a price that he claims was favorable to the bank; the bank declined the offer. He is now unable to sell the property because he cannot convey clear title. As a result, appellant claims that the bank impaired the collateral.

1. The language of the promissory note, admittedly signed by appellant, put him on notice as to the remedies available to the bank in the event of his default: "In the event of a default hereunder ... [the Bank] may exercise from time to time any and all rights and remedies available to it under any instrument or document relating to any of the Liabilities or Collateral and any applicable law." The bank's obligation with respect to the collateral was provided for as well: "Bank shall be under no duty to enforce payment by proceeding against the Collateral or by exercising any of its other rights hereunder ... Bank may compromise any Collateral and receive less than the amount due thereon, and any such compromise shall be binding upon all parties hereto. Should the Bank undertake to collect the Collateral, or any part thereof, it shall not be liable for mistakes in judgment or for negligence of its agents." By its language the note confers on the bank the option of releasing collateral or proceeding directly against the note.

The maker of a promissory note may consent in advance to "impairment" of collateral by the holder. Reeves v. Hunnicutt, 119 Ga.App. 806, 168 S.E.2d 663 (1969). Appellant has done just that. He has contracted away his right to assert such a claim. Under the terms of the note, the bank was under no obligation to undertake foreclosure proceedings or to accept payment for release of the collateral. A secured creditor has an option of either proceeding to suit on the note or foreclosing on the collateral. Homes of Tomorrow v. Fed. Deposit Ins. Corp., 149 Ga.App. 321 (2), 254 S.E.2d 475 (1979). After specifically authorizing the bank to elect its options with regard to the collateral, appellant cannot now complain of the bank's judgment in that regard.

2. For similar reasons, we reject appellant's claim that his defense of mitigation created a genuine issue of material fact. As noted in Division 1, supra, the bank was under no duty to appellant to proceed against the collateral to collect payment on the note. It thus can be fairly inferred that the bank had no obligation to mitigate its damages in relation to the collateral. Cf. Nelson...