Tower Financial Services, Inc. v. Smith

• Decision Date: 08 July 1992
• Docket Number: A92A0069,Nos. A92A0068,s. A92A0068
• Citation: 423 S.E.2d 257,204 Ga.App. 910
• Parties: TOWER FINANCIAL SERVICES, INC. et al. v. SMITH, et al. SMITH, et al. v. TOWER FINANCIAL SERVICES, INC. et al.
• Court: Georgia Court of Appeals

Page 257

423 S.E.2d 257

204 Ga.App. 910

TOWER FINANCIAL SERVICES, INC. et al. v. SMITH, et al.

SMITH, et al. v. TOWER FINANCIAL SERVICES, INC. et al.

Nos. A92A0068, A92A0069.

Court of Appeals of Georgia.

July 8, 1992.

Reconsideration Denied July 31, 1992.

Certiorari Denied Oct. 2, 1992 in No. A92A0069.

Freeman & Hawkins, T. Ryan Mock, Jr., Kevin W. Pendley, and Spix, Krupp & Reece, Spencer J. Krupp, Atlanta, for appellants.

Robert P. Wilson, Decatur and Gary C. Harris, Atlanta, for appellees.

ANDREWS, Judge.

In this appeal and cross appeal, Tower Financial Services, Inc., appeals the denial of its motion for summary judgment and grant of plaintiffs' (the Smiths) motion on two counts of a six-count complaint. The Smiths appeal summary judgment to Tower on four other counts and limitation of recoverable damages on the counts where liability was determined in their favor by summary judgment.

The following facts are undisputed. On August 16, 1985, the Smiths borrowed $8,091.50 from Tower, using as collateral their property at 164 Moreland Avenue. The promissory note was secured by an August 16, 1985 deed to secure debt on that property which was recorded in DeKalb County Deed Book 5335, p. 290. That same day, the Smiths gave Tower a deed to secure debt on their residence located at 432 East Pharr Road, recorded at DeKalb County Deed Book 5282, p. 18 as additional security.

On August 21, 1986, the Smiths borrowed $46,000 from Tower, executing a promissory note and a deed to secure debt on both the Moreland Avenue and East Pharr Road properties, which was recorded in DeKalb County Deed Book 5566, p. 95.

In October 1986, the Smiths defaulted on both loans. A Chapter 13 bankruptcy petition was filed in December 1986. The stay was lifted in order to allow foreclosure. In July 1987, Tower retained attorney Weber, third-party defendant, to foreclose on the secured properties. It was the intention of Weber and Tower to foreclose on the deed to secure the $46,000 debt, recorded at Deed Book 5566, p. 95 and listing both the Moreland Avenue and East Pharr Road properties. Instead, due to a clerical error in Weber's office, the required foreclosure notice and advertisement referred to the first deed given to secure the $8,091.50 loan listing only the Moreland Avenue property and recorded in Deed Book 5335, p. 290. On August 4, 1987, Weber conducted the foreclosure on the DeKalb County courthouse steps and cried out a bid on behalf of Tower of $65,728.94. There were no other bids. The bid, as calculated by Tower and Weber, represented the payoff amount of $59,486.13 for both of the outstanding loans; ten percent attorney fees of $5,948.61; plus advertising charges, transfer tax, and recording fees totaling $294.

Tower executed a deed under power transferring 164 Moreland Avenue to itself and then sold that property on November 25, 1987 to a private purchaser for $20,000.

On August 6, 1987, Weber notified the Smiths that Tower had foreclosed on the East Pharr Road property and demanded possession of their home. A week later, Tower filed a dispossessory action against them, alleging that it was entitled to possession because it had foreclosed on the East Pharr Road property and the Smiths were tenants at sufferance who had failed to make rental payments. On August 26, 1987, a pro se answer was filed stating that there was no rent involved in the situation and the Smiths were going to sell rental property and refinance their home, the East Pharr Road property. Tower obtained an order that, pending resolution, rent would be paid into the registry of the court. The Smiths paid the November 1987 rent into court, although the clerk incorrectly applied it to another dispossessory pending between the same parties. On December 8, a writ of possession was issued to Tower although it was vacated by court order of December 14, 1987 which acknowledged the clerical error in posting. Pursuant to the December 8 writ, Tower's agents entered the East Pharr Road residence in the Smiths' absence and removed all the furniture and personal belongings to the curb where they were left.

After vacation of the December 8 writ, Tower moved for summary judgment in the dispossessory proceeding. It was granted on January 28, 1988, on the basis of factual assertions by Tower that it had foreclosed on the East Pharr Road property on August 4, 1987. On May 31, 1988, Tower sold the East Pharr Road property for $62,000 to a private purchaser.

During preparations for this sale, Tower became aware of problems regarding the foreclosure on the East Pharr Road property. Karen Horner, Weber's associate, then conducted a foreclosure sale on July 5, 1988 under the deed to secure debt dated August 21, 1986, Deed Book 5566, p. 95, which listed both the Moreland Avenue and East Pharr Road properties. There being no other bids, Horner acquired the East Pharr Road property for Tower for a bid of $81,798.56, the payoff of $73,953.56 plus ten percent attorney fees and expenses. On July 7, 1988, Tower recorded its deed under power at DeKalb Deed Book 6178, p. 722. The Smiths' bankruptcy petition was dismissed in November 1988.

The present suit was filed by the Smiths on April 16, 1990, containing four counts. The first two sought to recover the alleged surplus due from the foreclosure of, respectively, 164 Moreland Avenue and the East Pharr Road properties, based on the difference between the amount owed and paid by bid for the two properties. Counts 3 and 4 sought punitive damages and attorney fees. Weber was joined by Tower as a third-party defendant. In addition, on June 18, 1990, Tower filed a counterclaim, alleging unjust enrichment and seeking "equitable reformation" of the foreclosure proceedings.

On September 10, 1990, the Smiths filed an extraordinary motion for new trial in the dispossessory action on the basis of newly discovered evidence that they were entitled to possession at the time of the dispossession because Tower did not have title to the property through foreclosure, an intrinsic defect which did not appear on the face of the record. The motion was denied by the dispossessory court on January 15, 1991. As far as the record before us indicates, no appeal was taken from either the original issuance of the writ of possession or the denial of the motion for extraordinary new trial.

On September 25, 1990, the pre-trial order was entered in the present case. On December 17, 1990, the Smiths filed an amendment to their complaint, adding as Count 5 a claim for wrongful dispossession. They also filed a motion for partial summary judgment as to the liability of Tower and Weber for surplus from the sales. On February 1, 1991, another amendment was filed adding Count 6, seeking recovery of the fair market value of the East Pharr Road house ($66,500) plus interest. On December 12, 1990, Tower and Weber moved for summary judgment and filed a supplemental brief in support on February 13, 1991, in which it was pointed out that no order amending the pretrial order to allow the addition of Counts 5 and 6 had been entered and objecting to consideration of these claims.

The court granted the Smiths' motion for partial summary judgment on Count 1, finding they were entitled to the surplus from the sale, finding that the legal description and the recorded deed to secure debt advertised referred only to the first deed to secure debt ($8,091.50) on the Moreland Avenue property "although Tower Financial intended to foreclose on both deeds to secure debt and against both properties." ¹ The court allowed the following costs: foreclosure costs were advertising $208; transfer tax $65.70; recording fee $20.50; and 10 percent attorney fees of the loan amount actually foreclosed on of $801.15, not the $5,948.61 claimed. Total charges against the bid price of $65,728.94 were $9,194.85, leaving a surplus of $51,394.63 to be applied against the indebtedness which was $46,000 plus interest totalling $5,394.63, or a payoff of the two loans of all debt, interest, costs and lawful attorney fees of $60,581.48. Because Tower and Weber took $5,948.61 attorney fees improperly, this left a surplus of $5,147.40 due the Smiths on the Moreland Avenue transaction.

The court further found that, without providential cause or excusable neglect, Tower did not foreclose against the Pharr Road property and obtain title to it but did extinguish all indebtedness on it and owe the Smiths the $5,147.70 surplus. In addition, Tower and Weber then went through a foreclosure on the Pharr Road property in 1988 when Tower had no legal right to do so, having earlier satisfied the entire indebtedness, although in error. The Smiths were not entitled to the bid price of $81,798.86, but, instead, on Count 2, to the fair market value of the Pharr Road property free and clear of the $46,000 note reflected at Deed Book 6178, p. 722. (The 1988 Deed Under Power of Sale.) The court found liability, leaving the fair market valuation for the jury. The court granted Tower and Weber summary judgment on Counts 3 and 4, punitive damages and attorney fees.

Having concluded that the fair market value was the proper measure of damages on Count 2, the court did not further address Count 6.

On Count 5, wrongful dispossession, the court found this claim barred by res judicata, collateral estoppel and estoppel by judgment because Tower ultimately prevailed in the dispossessory proceedings because the Smiths were found in default in those proceedings. Those issues, therefore, could not be relitigated as long as that judgment had not been set aside pursuant to OCGA § 9-11-60 which was unavailable since three years had elapsed from the judgment of possession.

In Case No. A92A0068, Tower and Weber contend the trial court erred in denying their motion for summary judgment because 1) undisputed facts show there was no surplus because Tower simply paid itself in a "paper transaction" for each piece of property; 2) the...