Whisenant v. Fulton Federal Sav. & Loan Ass'n of Atlanta, A91A0226

• Decision Date: 11 June 1991
• Docket Number: No. A91A0226,A91A0226
• Citation: 406 S.E.2d 793,200 Ga.App. 31
• Parties: WHISENANT v. FULTON FEDERAL SAVINGS & LOAN ASSOCIATION OF ATLANTA.
• Court: Georgia Court of Appeals

Page 793

406 S.E.2d 793

200 Ga.App. 31

WHISENANT v. FULTON FEDERAL SAVINGS & LOAN ASSOCIATION OF ATLANTA.

No. A91A0226.

Court of Appeals of Georgia.

June 11, 1991.

Davis, Matthews & Quigley, Ron L. Quigley, J. Charles Olderman, Atlanta, for appellant.

Cashin, Morton & Mullins, A.L. Mullins, Jr., Swift, Currie, McGhee & Hiers, Jeffrey Y. Lewis, Jane C. Barwick, Powell, Goldstein, Frazer & Murphy, G. Patrick Watson, Atlanta, for appellee.

Prior report: 194 Ga.App. 192, 390 S.E.2d 100 (1990).

BANKE, Presiding Judge.

The appellant sued the appellee seeking damages for the latter's alleged breach of a contractual commitment to make a residential mortgage loan to him on certain specified terms. He also sought damages under the Georgia Fair Business Practices Act, OCGA § 10-1-390 et seq., based on allegations that the appellee had engaged in the unfair and deceptive trade practice of soliciting residential mortgage applications from the public through the offer of interest rate commitments (referred to as "lock-ins") which it had no intention of honoring in the event market interest rates rose pending final approval of the applications. The case is before us on appeal from an order granting summary judgment to the appellee on claims.

The appellant is the president of a real estate development firm and has previous employment experience in commercial banking. In early 1987, he undertook to refinance the mortgage loan on his personal residence, which he had purchased in November of 1985 for $795,000. Prior to contacting the appellee, he had already submitted an application for such refinancing to another lender, Citicorp. However, Citicorp was not willing to commit, or "lock-in," to a fixed interest rate pending approval of the loan. The appellee was willing to do so, and because market interest rates were rising at the time, the appellant considered this willingness to be of substantial potential benefit.

On April 1, 1987, the appellant spoke by telephone with Brad Driver, a loan originator employed by the appellee, and discussed applying for a mortgage loan in the amount of $675,000. Driver orally agreed at that time to a 45-day "lock-in" at an annual interest rate of 9.5 percent; and on April 7, 1987, the two men met to fill out the necessary application documents. The application was signed by both of them and contained the following provision, which both initialed: "If the 45-day lock-in period expires, the interest and discount points may be subject to change to the prevailing market rate quoted by [the appellee]." The application was predated April 1, 1987, and specified that the "lock-in" period would expire on May 16, 1987.

The appellee's normal fee for such a loan application would have been $265, consisting of a $225 appraisal fee and a $40 credit report fee. However, because the appellant had recently applied to Citicorp to refinance the mortgage and had paid Citicorp for an appraisal of his home in connection with that application, and because that appraisal had been performed by an appraiser (Daniel Karski) who was also on the appellee's list of approved appraisers, the appellee agreed to use the Karski appraisal and accordingly charged the appellant only the $40 fee for the credit report.

It was the appellee's policy to require a 60 percent debt-equity ratio on residential real estate loans, meaning that it would not approve such a loan for more than 60 percent of the appraised value of the real estate. Since the appellant was seeking to borrow $675,000, this meant that the appraised value of the property would have to be at least $1,125,000 in order for the loan to be approved. Coincidentally, this was precisely the value arrived at by Karski in the appraisal he had performed for Citicorp.

The loan committee did not meet on the application until May 19, 1987, which was three days after the "lock-in" expiration date specified on the application. Because market interest rates had continued to rise since the date of the application, the appellant had previously expressed concern to Driver about the possibility that the loan might not be approved by the deadline. The latter had responded by assuring him that so long as the loan committee approved the loan on the terms specified in the application, the appellee "would extend his lock-in date through the closing date...." However, the loan committee did not approve the loan on the terms set forth in the application, for the stated reason that it found the Karski appraisal to be unacceptable "due to location and the fact that the closest comparable was 17 miles away." Instead, the committee approved an adjustable rate loan to the appellant, in an amount equal to 60 percent of value based on an "acceptable appraisal." The appellant alleges that the appellee's failure to approve the loan on the terms specified in the application was not prompted by a good-faith concern over the validity of Karski's appraisal but by a desire to avoid honoring its "lock-in" commitment during a period of rising market interest rates. Held:

1. "It is a well-recognized principle of contract law 'that both parties are under an implied duty of good faith in carrying out the mutual promises of their contract.' [Cits.] A duty of good faith and fair dealing is implied in all contracts in this state. [Cit.] Thus, ...