Tampa Inv. Grp., Inc. v. Branch Banking & Trust Co.

• Decision Date: 19 March 2012
• Docket Number: Nos. S11G1728,S11G1729.,s. S11G1728
• Citation: 723 S.E.2d 674,290 Ga. 724,12 FCDR 944
• Parties: TAMPA INVESTMENT GROUP, INC. et al. v. BRANCH BANKING AND TRUST COMPANY, INC.Legacy Communities Group, Inc. et al. v. Branch Banking and Trust Company, Inc.
• Court: Georgia Supreme Court

12 FCDR 944

290 Ga. 724

723 S.E.2d 674

TAMPA INVESTMENT GROUP, INC. et al.

v.BRANCH BANKING AND TRUST COMPANY, INC.Legacy Communities Group, Inc. et al.

v.Branch Banking and Trust Company, Inc.

Nos. S11G1728

S11G1729.

Supreme Court of Georgia.

March 19, 2012.

Chilivis, Cochran, Larkins & Bever, John K. Larkins, Jr., John Durand Dalbey, Fellows LaBriola LLP, Eugenia Wooten Iredale, Steven Marc Krushner, for appellant.

Jennifer Brown Moore, Mark G. Trigg, Lee Bennett Hart, Greenberg Traurig, LLP, for appellee.

CARLEY, Presiding Justice.

From 2005 to 2008, Branch Banking & Trust Company (BB & T) and its predecessors made 16 loans for residential housing development to two companies (Borrowers) which executed promissory notes and deeds to secure debt. The notes were guaranteed by various other companies (Guarantors) which, along with Borrowers, were all controlled by the same individuals. After default on the notes, BB & T gave Borrowers notice of foreclosure as to nine of the notes and purportedly conducted non-judicial foreclosures on June 2, 2009. BB & T was the sole and winning bidder but, three days later, notified Borrowers that it rescinded any notices or actions taken with respect to the foreclosure and that the foreclosure sale had not been and would not be consummated. On June 22, 2009, BB & T brought suit against Borrowers and Guarantors (Appellants) for more than $19 million then due under the notes. BB & T also raised fraudulent transfer claims, and the trial court entered an interlocutory injunction to preserve the status quo, which was affirmed by this Court in SRB Investment Services v. Branch Banking and Trust Co., 289 Ga. 1, 709 S.E.2d 267 (2011). On cross-motions for partial summary judgment, the trial court held that BB & T's claims as to the nine notes were barred as improper deficiency actions due to its foreclosure sales on properties securing those notes and its failure to seek confirmation within 30 days of those sales as required by OCGA § 44–14–161(a). The trial court further held that the Statute of Frauds does not bar BB & T's claims that the guaranty agreements entered in 2008 by three Guarantors (2008 Guarantors) made them liable not only on the notes executed in 2008 but also as additional guarantors on the notes which were executed prior to 2008.

The Court of Appeals reversed with respect to the former ruling and affirmed with respect to the latter. In Division 1 of its opinion, the Court of Appeals determined that acceptance of a bid at a foreclosure sale under power creates an oral contract which is subject to the Statute of Frauds, that BB & T, either as Borrowers' attorney-in-fact or as the creditor on the notes, never executed a deed under power conveying Borrowers' interest to itself or any writing showing that it had applied any foreclosure proceeds, and that rescinding the foreclosures did not harm Borrowers but left them in the same position as before the auctions. Legacy Communities Group v. Branch Banking & Trust Co., 310 Ga.App. 466, 469–470(1), 713 S.E.2d 670 (2011). Under these circumstances, the Court of Appeals ruled, the transfer of Borrowers' rights of possession and equity of redemption to BB & T as the foreclosure sale purchaser never occurred and, thus, there had been no foreclosure sale, confirmation was therefore not required, and the failure to seek confirmation could not bar BB & T's claims. Legacy Communities Group v. Branch Banking & Trust Co., supra at 470–471(1), 713 S.E.2d 670. In Division 2 of its opinion, the Court of Appeals held that, although the 2008 guaranties failed to identify the pre–2008 notes with the specificity required under the Statute of Frauds, the 2008 Guarantors are estopped by BB & T's part performance from asserting that defense because BB & T performed an act essential to the contract by extending credit pursuant to the 2008 notes and because the 2008 Guarantors enjoyed the benefit of the bargain. Legacy Communities Group v. Branch Banking & Trust Co., supra at 474–475(2), 713 S.E.2d 670. In Case Number S11G1728, we granted certiorari to consider Appellants' contention that the Court of Appeals erred in Division 1. We granted certiorari in Case Number S11G1729 to consider the 2008 Guarantors' contention that the Court of Appeals erred in Division 2.

Case Number S11G1728

1. Appellants argue that the Court of Appeals, in holding that no valid foreclosure sale occurred, erroneously relied on its determination that BB & T did not satisfy the Statute of Frauds.

“A sale under the powers contained in a deed to secure debt divests the grantor of all title, and right of equity of redemption, to the lands described in the deed. [Cits.]” Cummings v. Johnson, 218 Ga. 559, 561(3), 129 S.E.2d 762 (1963). See also Federal Land Bank of Columbia v. Bank of Lenox, 192 Ga. 543, 546(2), 16 S.E.2d 9 (1941).

Where a sale of land is made under a power contained in a security deed, and by permission of the grantor contained in the deed the grantee purchases the land at such sale, the grantor can not defeat the purchaser's right to have the sale fully consummated, by tender of the amount of his indebtedness to the grantee before the actual execution of the deed pursuant to the terms of the sale.

Carrington v. Citizens' Bank of Waynesboro, 144 Ga. 52, 53(4), 85 S.E. 1027 (1915). Such grantor becomes “a tenant at sufferance of [the grantee] by the terms of the security deed and operation of law when [the grantee] bid[s] in the property at the foreclosure sale. [Cit.]” McKinney v. South Boston Sav. Bank, 156 Ga.App. 114, 116(4), 274 S.E.2d 34 (1980). Based on the foregoing precedent from this state's appellate courts, United States Bankruptcy Courts have concluded that, under Georgia law, a debtor's equity of redemption terminates on the date that the foreclosure auction is held when the high bid is received. In re Williams, 393 B.R. 813, 820 (Bankr.M.D.Ga.2008); Sanders v. Amsouth Mortgage Co. (In re Sanders), 108 B.R. 847, 849 (Bankr.S.D.Ga.1989); Pearson v. Fleet Finance Center (In re Pearson), 75 B.R. 254, 255 (Bankr.N.D.Ga.1985). Under that analysis, therefore, the Statute of Frauds is irrelevant to the determination of when the right of redemption held by a grantor of a security deed is extinguished. See In re Pearson, supra at 256 (On Motion to Reconsider). On the other hand, the Statute of Frauds is not irrelevant to all determinations in the foreclosure context. A sale under power of real estate at public outcry does not become binding as between the mortgagee and the purchaser unless a memorandum is made as prescribed by the Statute of Frauds.

Seymour v. Nat. Bldg. and Loan Assn., 116 Ga. 285(1), 42 S.E. 518 (1902). See also James v. Safari Enterprises, 244 Ga.App. 813, 814, 537 S.E.2d 103 (2000). Appellants argue that counsel for BB & T prepared such memoranda in the present case. However, even if the Statute of Frauds was satisfied in that way, the memoranda alone do not preclude a subsequent suit by BB & T against Appellants.

“[T]his Court has long held that a creditor holding a promissory note secured by real property may either sue on the note or foreclose ‘ “until the debt is satisfied.” ’ [Cit.]” (Emphasis omitted.) SRB Investment Services v. Branch Banking and Trust Co., supra at 6(3)(a), 709 S.E.2d 267. Indeed, such creditor “is not put to an election of remedies as to whether he shall sue upon the note or exercise a power of sale contained in the deed, but he may do either, or ‘pursue both remedies concurrently until the debt is satisfied.’ [Cits.]” Oliver v. Slack, 192 Ga. 7, 8(2), 14 S.E.2d 593 (1941). See also REL Development v. Branch Banking & Trust Co., 305 Ga.App. 429, 431(1), 699 S.E.2d 779 (2010); 5 Baxter Dunaway, L. Distressed Real Est. § 67A:17. Thus, if the creditor first obtains a money judgment, he may thereafter exercise the power of sale so long as that judgment has not been successfully enforced by execution or the underlying debt otherwise satisfied. Taylor v. Thompson, 158 Ga.App. 671, 672, 282 S.E.2d 157 (1981); Norwood Realty Co. v. First Fed. Sav. and Loan Assn., 99 Ga.App. 692, 694(1), 109 S.E.2d 844 (1959). Conversely, if the creditor first elects to exercise the power of sale, he may subsequently proceed to sue on the note if the foreclosure sale is not fully consummated and as a result none of the underlying debt is satisfied. Federal Deposit Insurance Corp. v. Dye, 642 F.2d 837, 843(II) (5th Cir.1981) (applying Georgia law). Of course, if the foreclosure sale is consummated and a portion of the underlying debt is thereby satisfied, then pursuant to OCGA § 44–14–161(a) the creditor must timely seek confirmation before a deficiency action is authorized. Compare Georgia R. Bank & Trust Co. v. Griffith, 176 Ga.App. 198, 200(2), 335 S.E.2d 417 (1985) (confirmation not required if creditor had already obtained money judgment prior to foreclosure); Taylor v. Thompson, supra at 673, 282 S.E.2d 157.

This analysis is entirely consistent with OCGA § 44–14–161(a), as that statute explicitly applies only “[w]hen any real estate is sold on foreclosure” and, being in derogation of common law, must be strictly construed. Taylor v. Thompson, supra at 672, 673, 282 S.E.2d 157. Thus, we cannot infer any requirement for confirmation where a foreclosure sales contract is formed but the sale is never consummated. See 129 Acres v. Atlanta Business Bank, 311 Ga.App. 462, 463, 716 S.E.2d 536 (2011). Until a deed under power is transferred and consideration is passed, “the sale itself has not occurred; there is only a contract to buy and sell.” Federal Deposit Insurance Corp. v. Dye, supra. See also Champs–Elysses v. Fulton Fed. Sav. & Loan Assn., 247 Ga. 127, 129(2), 274 S.E.2d 482 (1981) (quoting Smith v. Oliver, 219 Ga. 720, 724(4), 135 S.E.2d 862 (1964)); 5 Dunaway, supra at § 67A:32; Frank S. Alexander, Ga. Real Estate Finance and Foreclosure Law § 8:9 (2011–2012 ed.) (“The deed under power of sale is the...