Underwood v. Colony Bank
| Decision Date | 10 February 2022 |
| Docket Number | A21A1639 |
| Parties | ROBERT L. UNDERWOOD, JR. v. COLONY BANK. |
| Court | Georgia Court of Appeals |
RICKMAN, C.J. PINSON, J., and SENIOR APPELLATE JUDGE PHIPPS
Robert Underwood was indebted to Colony Bank under a series of loans, some of which were secured by the mortgage on his home. When Underwood fell behind on his loan payments, he and Colony signed a forbearance agreement, which set out a payment schedule and imposed other conditions. After Underwood missed a payment under the forbearance agreement schedule, Colony granted him another extension, in exchange for which Underwood tendered a deed to his home in lieu of foreclosure. Over the next few months, Underwood made a series of late and partial payments, which Colony accepted. Then, after Underwood made no payments for two months, Colony told him he had five days to pay one loan in full and bring another loan current; if he did not, Colony would file the deed in lieu of foreclosure and take possession of his home.
Underwood sued Colony. The trial court granted summary judgment in Colony's favor on all counts. We affirm as to Underwood's claims for promissory estoppel, to set aside the deed in lieu of foreclosure, and for conversion or trover. But we reverse the grant of summary judgment on Underwood's breach of contract claim, because the evidence creates issues of material fact as to whether he and Colony, through their course of conduct, mutually departed from their contractual agreement, and whether Colony gave him adequate notice before enforcing the letter of the agreement.
Robert Underwood was indebted to Colony Bank under three separate promissory notes. The first (the "Underwood note") named Underwood as the debtor. The second (the "ATech note") named Underwood's company, ATech Communications, LLC, as the primary debtor, with Underwood personally guaranteeing the loan. The third (the "Kayla note") named Underwood's wife, Kayla Underwood, as the debtor. Both the Underwood note and the ATech note were secured by Underwood's home, and the ATech note was further secured by ATech's accounts receivable. The Kayla note was secured only by the accounts receivable. The combined original principal amount of the three notes was about $413, 000.
By July 2019, both the Underwood note and the ATech note were in default. Colony, through counsel, informed Underwood by letter that it was accelerating the notes and that the loans were now immediately due. Colony also began the non-judicial foreclosure process, scheduling the sale of Underwood's home for September 3, 2019. Underwood attests that he never received the letter of default or any notice of foreclosure and that he learned of the foreclosure only when he went to meet with Nic Worthy, the senior vice president of Colony, to "renew" the notes as he had done in the past.
In early August, a few weeks before the foreclosure sale, Colony and Underwood signed a forbearance agreement. Under the agreement, Colony would forbear collecting amounts due under the notes so long as the following conditions were met: (1) Underwood would make payments of $25, 000 to Colony on August 8 (the date of the forbearance agreement), August 30, September 30, and October 31; (2) Underwood would pay off the ATech note in full; (3) Colony could apply the $25, 000 payments at its discretion to the ATech or Kayla notes; (4) Underwood would stay current with the Underwood note; (5) the Underwood and ATech notes would both remain accelerated and due in full until the terms of the agreement were satisfied; and (6) the foreclosure of the real property that secured the Underwood and ATech notes would go forward on September 3, unless and until Underwood made the first two $25, 000 payments, in which case Colony would discontinue the sale. The forbearance agreement provided that it could not be modified except by writing signed by the parties.
Underwood apparently made the first $25, 000 payment on August 8 as required. But he fell behind again, and as of September 3, the date of the foreclosure sale, Underwood was once again in arrears. That day, Underwood met again with Worthy.
At the meeting, Underwood presented Worthy with a deed to his home in lieu of foreclosure. The deed in lieu provided that it was given for consideration of $10, and that it was conveyed "in lieu of foreclosure upon" Colony's security deed to Underwood's home. The deed in lieu further stated that it was an "absolute conveyance" of the home and that "no other agreements, oral or written, exist[ed] with respect to the [p]roperty" between Underwood and Colony.
Underwood attests that Colony told him that tendering the deed in lieu would "give me more time to pay." Neither party contends that this representation was in writing. But a contemporaneous letter from Colony's counsel to Underwood's counsel memorialized what was agreed to at the September 3 meeting. According to the letter, Colony agreed to continue to forbear collecting on the notes, but Colony's counsel would hold onto the deed in lieu; if Underwood failed to make the remaining three payments under the forbearance agreement, Colony was authorized to record the deed and thus take possession of the home. The parties also agreed to push the deadline for the second payment from August 30 (which had already passed) to September 9. The letter stated: "This letter will constitute acceptance on behalf of your client to this additional term of the forbearance."
Over the next few months, Underwood made four more payments, none of which complied with the payment schedule of the forbearance agreement. Underwood paid Colony $20, 000 on September 10; $12, 500 on October 31; $2, 200 on November 4; and $12, 500 on December 23. Colony accepted these payments and applied them to the Kayla note-the one that was not secured by Underwood's home-until that note was paid in full. During this time, Underwood told Colony that he owned a convenience store that he could sell to pay off all remaining indebtedness.
Underwood now says Colony told him that the sale would "solve the problems" but also told him "not to worry." Underwood did not actually sell the convenience store until more than a year later, in March 2021.
The parties do not dispute that Underwood made no payments to Colony between December 23, 2019 and February 21, 2020. In a letter dated February 21, 2020, Colony's counsel informed Underwood's counsel that the Underwood and ATech notes were still in default, and that Underwood now had five days from the date of the letter to pay the ATech note in full and to make current his payments under the Underwood note. At the time, the outstanding balance of the ATech note was $46, 187.90, and Underwood was $7, 612.53 in arrears on the Underwood note, so the total payment for compliance was $53, 800.43. Underwood attests that this letter was sent by first class mail and that he did not receive it until February 27 -after the due date for payment-although Colony points out that the letter was addressed to Underwood's lawyer, not to Underwood personally. In any event, Underwood did not make further payments. On February 28, Colony recorded the deed in lieu.
Underwood sued Colony for breach of contract, promissory estoppel, to set aside the deed in lieu of foreclosure, and conversion or trover of real property. Colony moved for summary judgment on all of Underwood's claims, which the trial court granted. Underwood appealed.
In reviewing a grant or denial of summary judgment, "we owe no deference to the trial court's ruling and we review de novo both the evidence and the trial court's legal conclusions." Mitchell & Assocs., Inc. v. Global Sys. Integration, Inc., 356 Ga.App. 200, 200 (844 S.E.2d 551) (2020) (punctuation omitted). For each issue, the ultimate question is whether, viewing the evidence in the light most favorable to the party opposing summary judgment (here, Underwood), a genuine issue of material fact remains and thus precludes judgment as a matter of law. Blondell v. Courtney Station 300 LLC, ___ Ga.App. ___ (Case Nos A21A0731 et al., decided November 2, 2021).
1. Underwood first contends that the trial court erred in granting summary judgment to Colony on Underwood's breach of contract claim. Underwood argues that Colony, through oral representations and course of conduct, modified the terms of the written forbearance agreement, and that Colony later breached the modified agreement when it announced without warning that it was going ahead with the foreclosure. We agree that an issue of fact exists under which a jury could find that Colony breached the parties' modified, quasi-contractual agreement.
(a) As an initial matter, we must address Colony's contention that the forbearance agreement itself is not an enforceable contract. See SunTrust Bank v. Bickerstaff, 349 Ga.App. 794, 799 (824 S.E.2d 717) (2019) (). We conclude that the forbearance agreement is enforceable.
(i) The written forbearance agreement is enforceable. We disagree with Colony's argument on appeal that the agreement is not supported by consideration from Underwood. See OCGA § 13-3-1 (). Colony correctly observes that the requirement of consideration is not satisfied by a party's promise to do what he is already obligated to do. See, e.g., Riverview Condo. Assn. v. Ocwen Fed. Bank FSB, 285 Ga.App. 7, 9-10 (2) (b) (645 S.E.2d 5) (2007); Llop v. Nat. Bank of Ga., 154 Ga.App. 504,...
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