Ward v. Pembroke State Bank

• Decision Date: 08 March 1994
• Docket Number: No. A93A2386,A93A2386
• Parties: WARD v. PEMBROKE STATE BANK.
• Court: Georgia Court of Appeals

Page 691

441 S.E.2d 691

212 Ga.App. 322

WARD v. PEMBROKE STATE BANK.

No. A93A2386.

Court of Appeals of Georgia.

March 8, 1994.

Edenfield, Stone & Cox, Susan W. Cox, E. Lee Davis, Jr., for appellant.

George A. Waters, for appellee.

COOPER, Judge.

Plaintiff/appellee Pembroke State Bank brought this action against defendant/appellant Jim Ward, Jr., to collect on a promissory note secured by a deed to secure debt. The trial court granted summary judgment to plaintiff and defendant appeals.

In March 1988, defendant executed a promissory note in favor of plaintiff in the amount of $12,000. The note was secured by a deed to secure debt covering a 42-acre tract of land in Bulloch County. The purpose of the note was indicated on the note by the following notations: "Consumer" and "Purchase Land." The security deed contained an "open-end" or dragnet clause providing that it would also secure any additional loans made by plaintiff to defendant. ¹ In November 1988, defendant executed a second promissory note to plaintiff in the amount of $11,003. This note specified that it was secured by the same deed to secure debt covering the Bulloch County tract and a 1987 Dodge pickup truck. The purpose of this note was indicated by the notation "Consumer."

When defendant defaulted on the first note, plaintiff exercised its power of sale in the security deed and sold the property to itself at foreclosure for $12,000, the amount of the first note. Plaintiff did not obtain confirmation of the sale. Defendant subsequently defaulted on the second note and plaintiff accelerated payment of all unpaid monthly installments. Plaintiff eventually filed the instant suit to collect on the second note. Defendant moved for summary judgment on the ground the instant action was a suit for a deficiency judgment and was barred by OCGA § 44-14-161 due to plaintiff's failure to obtain confirmation of the sale. The trial court denied the motion, finding that the two notes were independent of one another. Plaintiff then moved for summary judgment which was granted by the trial court.

Defendant argues the trial court erred in granting summary judgment to plaintiff because this case is controlled by C.K.C., Inc. v. Free, 196 Ga.App. 280(2), 395 S.E.2d 666 (1990), in which we held that the creditor's action to recover on one note was a deficiency judgment which was barred by the creditor's failure to obtain confirmation of the foreclosure sale under another note where both notes were related and secured by the same security deed. However, the trial court found the facts of C.K.C., Inc., distinguishable from this case and, instead, relied on this court's decisions in Clements v. Fleet Finance, 206 Ga.App. 736, 426 S.E.2d 910 (1992), and Devin Lamplighter, Ltd. v. American Gen. Finance, 206 Ga.App. 747, 426 S.E.2d 645 (1992), wherein we held that the creditor's failure to obtain confirmation of the foreclosure sale under a prior note did not bar it from suing on a subsequent note where there were two separate debts, evidenced by two separate notes, and secured by two separate security deeds. We agree with the defendant that the facts of this case are more analogous to those of C.K.C., Inc. and find that it is controlling in this case.

We first note that pursuant to OCGA § 44-14-161(a), when a creditor sells real estate pursuant to the foreclosure powers contained in the security deed, confirmation of the sale is required in order to obtain a deficiency judgment if the sale "does not bring the amount of the debt secured by the deed...." (Emphasis supplied.) Although the two notes herein may evidence two different debts, both notes were secured by the same deed to secure debt on the same piece of property; hence, plaintiff appears to be seeking a deficiency judgment on the debt secured by the deed inasmuch as the one deed secured both debts. See Clements, supra, 206 Ga.App. at 739, 426 S.E.2d 910 (Carley, P.J., concurring specially). In fact, under the "open-end" clause, which provided that the property conveyed secured any subsequent debts between the parties, the two debts effectively merged into one another and became one debt for the purposes of foreclosure. See id.; see also United States v. Yates, 774 F.Supp. 1368 (M.D.Ga.1991).

Moreover, as noted above, the facts of this case are analogous to those of C.K.C., Inc. In that case, two purchase money promissory notes which were executed at the same time were secured by the same deed to secure debt on the property purchased. Upon the debtor's default under both notes, the creditor purchased the property at foreclosure under the larger note, but did not obtain confirmation and brought suit to recover under the smaller note. In holding that the suit on the smaller note was a deficiency judgment, we specifically stated that "both notes are clearly secured by the same deed and the same property." Id., 196 Ga.App. at 282, 395 S.E.2d 666. Thus, contrary to the trial court's holding, our decision in C.K.C., Inc. did not rest solely on the fact that the two notes represented one debt, but in large part on the fact that they were secured by the same deed on the same property. See id. at 282-283, 395 S.E.2d 666. Here, as in C.K.C., Inc., "[t]he two debts, secured by the same property, held by the same creditor ... are owed by the same debtor and are inextricably intertwined. They are not independent of each other, and a foreclosure of one affects the other. If the whole of the property is exhausted in foreclosing the first there is still a secured debt for which the holder desired to obtain a deficiency judgment." (Citation and punctuation omitted.) Id. at 283. The foreclosure in this case under the deed securing both the first and second notes embraced both notes. "When the instrument sued upon is embraced by the previous foreclosure, it is a deficiency judgment." Redman Indus. v. Tower Properties, 517 F.Supp. 144, 152...