ERNEST A. THOMPSON v. APEX BANK F/K/A BANK OF CAMDEN , 349 Ga. App. 285 ( 2019 )

SECOND DIVISION
MILLER, P. J.,
BROWN and GOSS, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
March 8, 2019
In the Court of Appeals of Georgia
A18A1467. APEX BANK v. THOMPSON et al.
A18A1468. THOMPSON et al. v. APEX BANK.
BROWN, Judge.
We have consolidated these interlocutory appeals arising from a trial court’s
order on cross-motions for summary judgment. In the underlying action, Apex Bank
(“Apex”) sued Ernest A. Thompson and Douglas O. Thompson (the “Thompsons”)
for a deficiency judgment following a non-judicial foreclosure sale of the real
property collateralizing the loan, alleging that they were guarantors of the debt
remaining on a promissory note. In Case No. A18A1467, Apex contends that the trial
court erred by failing to grant summary judgment in its favor on the issue of the
Thompsons’ liability for the difference between the amount due on the note and the
foreclosure proceeds based upon their alleged waiver of the requirements of the
confirmation statute, OCGA § 44-14-161. In Case No A18A1468, the Thompsons
contend, in part, that the trial court erred by denying their cross-motion for summary
judgment on the issue of liability based upon Apex’s failure to comply with the
requirement that it obtain confirmation of the sale under OCGA § 44-14-161 before
filing suit for a deficiency judgment. For the reasons explained below, we affirm the
trial court’s denial of summary judgment in Apex’s favor in Case No. A18A1467, and
reverse the trial court’s denial of summary judgment in favor of the Thompsons in
Case No. A18A1468.
“On appeal, we review the grant or denial of summary judgment de novo,
construing the evidence and all inferences in a light most favorable to the nonmoving
party.” (Citation and punctuation omitted.) Seki v. Groupon, Inc., 333 Ga. App. 319
(775 SE2d 776) (2015). So viewed, the record shows that in November 2007, Direct
Land & Development, LLC (“the LLC”) executed a security deed in favor of the
Bank of Valdosta that encumbered real property owned by the LLC in connection
with a $208,000 promissory note. The security deed was signed by the Thompsons
in their capacity as members of the LLC. Although a copy of the 2007 note is not a
part of the record before us, the Thompsons state in their briefs that they were not a
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party to this loan, either individually or as guarantors. In its appellate brief, Apex
objects to this characterization of the facts in the Thompsons’ brief, stating:
Apex objects to the statement that the Thompsons were not individually
parties to the original loan made when the security deed was executed
November 8, 2007 (the “Security Deed”). (R. 12). The promissory note
providing the underlying debt for the Security Deed when the original
loan was made is not at issue in the lower court action, as it was
replaced during a subsequent refinancing of the debt. The subject
promissory note is dated October 26, 2011.
In October 2011, the LLC refinanced the 2007 note. The Thompsons “jointly
and severally promise[ed] to pay” the lender,1 and signed the new note in both their
individual capacity and as members on behalf of the LLC. On the same day, the
Thompsons signed, in their capacity as members on behalf of the LLC, a
Modification of Security Deed which deleted the definition of note in the original
security deed and replaced it with the new October 2011 note. Additionally, Douglas
O. Thompson granted the lender a security interest in $14,393.09 placed in a
certificate of deposit account through an “Assignment of Deposit Account.” The
1
Apex asserts that the Bank of Valdosta changed its name to Sunrise Bank on
July 30, 2010. Sunrise Bank is listed as the lender in the 2011 and 2012 agreements
signed by the Thompsons. The 2012 “Change in Terms Agreement” identifies the
Bank of Valdosta “as predecessor to Sunrise Bank.”
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“Assignment of Deposit Account” states that it was “made and executed among
Douglas O. Thompson (“Grantor”), [the LLC], Douglas O. Thompson and Ernest A.
Thompson (“Borrower”); and Sunrise Bank (“Lender”). In December 2012, the
Thompsons signed a “Change in Terms Agreement,” in both their individual capacity
and as members on behalf of the LLC, that extended the due date for payment of the
loan an additional six months.
In 2013, the Federal Deposit Insurance Corporation, in its capacity as the
receiver for Sunrise Bank, assigned the 2007 security deed to the Bank of Camden.
In 2015, the Bank of Camden changed its name to Apex Bank. In December 2016,
Apex foreclosed upon the property securing the loan and was the highest bidder at a
non-judicial foreclosure sale with a bid in the amount of $118,900. It is undisputed
that Apex Bank did not file for confirmation of the foreclosure sale within 30 days
under the procedure provided by OCGA § 44-14-161.
In 2017, Apex filed a complaint against the Thompsons seeking a deficiency
judgment. Based upon the Thompsons’ alleged status as guarantors who waived their
right to the protection provided by the confirmation statute in the 2011 and 2012 loan
documents, Apex moved for summary judgment in its favor. The Thompsons filed a
cross-motion for summary judgment asserting that they were debtors entitled to the
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protection of the confirmation statute, that the 2011 and 2012 agreements do not
include valid waivers of their rights under the statute, and that an alleged requirement
for a separate guaranty agreement was not met. After both sides presented argument
in a hearing, the trial court entered an order denying each of the pending motions for
summary judgment without an explanation of its reasoning.
1. In Case No. A18A1467, Apex asserts that the trial court erred “by failing to
rule that the contractual waiver language found in the Thompson[s’] loan documents
was sufficient to waive the defense of compliance with the [c]onfirmation [s]tatute.”
See OCGA § 44-14-161 (a) (“no action may be taken to obtain a deficiency judgment
unless the person instituting the foreclosure proceedings, shall, within 30 days after
the sale, report the sale to the judge of the superior court of the county in which the
land is located for confirmation and approval and shall obtain an order of
confirmation and approval thereon”). In Case No. A18A1468, the Thompsons
contend the opposite – that the trial court should have granted their motion for
summary judgment because the loan documents failed to include an adequate waiver
of the confirmation process required by OCGA § 44-14-161. We agree with the
Thompsons.
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It is well-established that a lender cannot obtain a deficiency judgment against
a guarantor without complying with the foreclosure confirmation requirements of
OCGA § 44-14-161, unless the guarantor has waived its right to insist on compliance.
See York v. RES-GA LJY, 300 Ga. 869, 872-873 (2) (799 SE2d 235) (2017); PNC
Bank v. Smith, 298 Ga. 818, 822 (3) (a) (785 SE2d 505) (2016). In HWA Properties
v. Community & Southern Bank, 322 Ga. App. 877 (746 SE2d 609) (2013), we
outlined the following provisions in a guaranty agreement and concluded that “these
provisions” showed a waiver of the guarantor’s right to confirmation under OCGA
§ 44-14-161:
[the] personal guaranty includes an express and comprehensive waiver
of any and all defenses to [the guarantor’s] liability on the entire balance
due on the note. Further, even absent this broad waiver of defenses, the
guaranty expressly gives [] consent for the “Lender” to collect on other
collateral and to apply the proceeds to the amount due on the note and
that “[s]uch application of receipts shall not reduce, affect or impair the
liability of [the guarantor].” In fact, the guaranty specifically provides
that [the guarantor] shall remain liable for any deficiency remaining
after the foreclosure of any property securing the note,
whether or not the liability of Borrower or any other
obligor for such deficiency is discharged pursuant to
statute or judicial decision. [Guarantor] shall remain
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obligated, to the fullest extent permitted by law, to pay
such amounts as though the Borrower’s obligations had
not been discharged.
(Punctuation omitted; emphasis in original.) Id. at 887 (2) (b).
Relying upon HWA Properties, Apex Bank points to various language
contained within the 2011 note, the 2011 agreement assigning the deposit account,
and the 2012 change in terms agreement, all of which were signed by the Thompsons
in their individual capacities, to support its claim of waiver. We will therefore
examine each of these agreements in turn.
(a) 2011 Note. Apex relies upon the following italicized language to support
its claim of waiver in the 2011 Promissory Note :
GENERAL PROVISIONS. This Note is payable on demand. The
inclusion of specific default provisions or rights of Lender shall not
preclude Lender’s right to declare payment of this Note on its demand.
If any part of this Note cannot be enforced, this fact will not affect the
rest of the Note. Lender may delay or forgo enforcing any of its rights
or remedies under this Note without losing them. Each Borrower
understands and agrees that, with or without notice to Borrower, Lender
may with respect to any other Borrower (a) make one or more additional
secured or unsecured loans or otherwise extend additional credit; (b)
alter, compromise, renew, extend, accelerate, or otherwise change one
or more times the time for payment or other terms of any indebtedness,
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including increases and decreases of the rate of interest on the
indebtedness; (c) exchange, enforce, waive, subordinate, fail or decide
not to perfect, and release any security, with or without the substitution
of new collateral; (d) apply such security and direct the order or
manner of sale thereof, including without limitation, any non-judicial
sale permitted by the terms of the controlling security agreements, as
Lender in its discretion may determine; (e) release, substitute, agree not
to sue, or deal with any one or more of Borrower’s sureties, endorsers,
or other guarantors on any terms or in any manner Lender may choose;
and (f) determine how, when and what application of payments and
credits shall be made on any other indebtedness owing by such other
Borrower. Borrower and any other person who signs, guarantees or
endorses this Note, to the extent allowed by law, waive presentment,
demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All
such parties waive any right to require Lender to take action against any
other party who signs this Note as provided in O.C.G.A. Section 10-7-24
and agree that Lender may renew or extend (repeatedly and for any
length of time) this loan or release any party or guarantor or collateral;
or impair, fail to realize upon or perfect Lender’s security interest in the
collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree
that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The
obligations under this Note are joint and several.
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(Bold in original; italics supplied.) We disagree.
Language providing that a change in the terms of the note will not release a
party who has signed the note from liability unless it is expressly stated in writing is
not and should not be construed as a waiver of a guarantor’s right to insist upon
compliance with the confirmation statute. Likewise, language regarding a lender’s
right to change the collateral and exercise discretion over which collateral it might
foreclose upon first and how it chooses to apply the proceeds also fails to show a
waiver of a guarantor’s rights under the confirmation statute.
(b) 2011 Assignment of Deposit Account. Apex contends that language in the
“Assignment of Deposit Account” agreement, executed on the same day as the 2011
note, waived the Thompsons’ rights under the confirmation statute. This agreement
provides, in relevant part:
ASSIGNMENT. For valuable consideration, Grantor assigns and grants
to Lender a security interest in the Collateral, including without
limitation the deposit accounts described below, to secure the
indebtedness and agrees that Lender shall have the rights stated in this
Agreement with respect to the Collateral, in addition to all other rights
which Lender may have by law.
COLLATERAL DESCRIPTION. . . . In addition, the word
“Collateral” includes all of the Grantor’s property . . . in Lender’s
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possession . . . including without limitation . . . property to which Lender
acquires title or documents of title. . . .
CROSS-COLLATERALIZATION. In addition to the Note, this
Agreement secures all obligations, debts, and liabilities . . . of either
Grantor or Borrower to Lender, or any one or more of them, as well as
claims by Lender against Borrower and Grantor or any one or more of
them, whether now existing or hereafter arising, whether related or
unrelated to the purpose of the Note, whether voluntary or otherwise,
whether due or not due, direct or indirect, determined or undetermined,
absolute or contingent, liquidated or unliquidated, whether Borrower or
Grantor may be liable individually or jointly with others, whether
obligated as guarantor, surety, accommodation party or otherwise, and
whether recovery upon such amounts may be or hereafter may become
barred by any statute of limitations, and whether the obligation to repay
such amounts may be or hereafter may become otherwise unenforceable.
BORROWER’S WAIVERS AND RESPONSIBILITIES. Except as
otherwise required under this Agreement or by applicable law, (A)
Borrower agrees that Lender need not tell Borrower about any action or
inaction Lender takes in connection with this Agreement; (B) Borrower
assumes the responsibility for being and keeping informed about the
Collateral; and (C) Borrower waives any defenses that may arise
because of any action or inaction of Lender, including without
limitation any failure of Lender to realize upon the Collateral or any
delay by Lender in realizing upon the Collateral; and Borrower agrees
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to remain liable under the Note no matter what action Lender takes or
fails to take under this Agreement.
DEFINITIONS. The following capitalized words and terms shall have
the following meanings when used in this Agreement. . . .
Agreement. The word “Agreement” means this
Assignment of Deposit Account, as this Assignment of
Deposit Account may be amended or modified from time
to time, together with all exhibits and schedules attached to
this Assignment of Deposit Account from Time to Time.
Grantor. The word “Grantor” means Douglas O[.]
Thompson. . . .
Note. The word “Note” means the Note executed by Direct
Land & Development LLC, Douglas O Thompson and
Ernest A Thompson in the principal amount of
$196,553.20 dated October 26, 2011, together with all
renewals of, extensions of, modifications of, refinancings
of, consolidations of, and substitutions for the note or
credit agreement.
(Emphasis in italic supplied; emphasis in bold in original.)
While this document contains a specific waiver of defenses, we cannot say,
after reading this document as a whole, that it includes a waiver of the Thompsons’
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defenses under the confirmation statute. “Agreement” is clearly defined to mean only
the “Assignment of Deposit Account,” and the agreement of the Thompsons “to
remain liable under the Note no matter what action Lender takes or fails to take under
this Agreement” cannot be read to apply to Apex’s failure to comply with the
requirements of the confirmation statute. The collateral covered by this agreement
applied only to the particular identified deposit account and other property owned by
the Grantor, Douglas O. Thompson, in the possession of Apex. The foreclosed-upon
property, on the other hand, was owned by the LLC, not Douglas O. Thompson.
Apex also points to some of the language in the “Cross-Collateralization”
paragraph as evidence that the Thompsons waived their rights under the confirmation
statute. We disagree as this paragraph provides, in essence, that no matter what
eventuality might occur, the security interest provided by the agreement will not be
affected. For example, Apex would still have the right to apply the deposit account
(the security) to amounts owed under the note even if “the obligation to repay such
amounts may hereafter become otherwise unenforceable.”
The Thompsons’ agreement to “waive any defenses that may arise because of
any action or inaction of [Apex], including without limitation any failure of Lender
to realize upon the Collateral or any delay by Lender in realizing upon the Collateral”
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presents a closer question. (Emphasis supplied.) While this language could be broadly
interpreted to apply to Apex’s failure to seek confirmation of the foreclosure sale, we
cannot ignore that it is included within an agreement providing that a deposit account
with an approximate balance of $14,000 would provide additional collateral for the
note. Accordingly, it could also be interpreted to mean that the Thompsons were only
waiving defenses to enforcement of the collateral agreement, not defenses to a
deficiency judgment based upon Apex’s failure to seek confirmation of the
foreclosure sale. The Thompsons correctly assert that a guaranty contract cannot be
“extended by implication or interpretation,” OCGA § 10-7-3, and must be strictly
construed. York, supra, 300 Ga. at 871 (2). Based upon this well-established law, we
decline to find that the language at issue waived the Thompsons’ rights under the
confirmation statute.
(c) 2012 Change in Terms Agreement. Apex relies upon the following language
in the “Change In Terms Agreement” to establish a waiver:
CONTINUING VALIDITY. Except as expressly changed by this
Agreement, the terms of the original obligation or obligations, including
all agreements evidenced or securing the obligation(s), remain
unchanged and in full force and effect. Consent by Lender to this
Agreement does not waive Lender’s right to strict performance of the
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obligation(s) as changed, nor obligate Lender to make any future change
in terms. Nothing in this Agreement will constitute a satisfaction of the
obligation(s). It is the intention of Lender to retain as liable parties all
makers and endorsers of the original obligation(s), including
accommodation parties, unless a party is expressly released by Lender
in writing. Any maker or endorser, including accommodation makers,
will not be released by virtue of this Agreement. If any person who
signed the original obligation does not sign this agreement below, then
all persons signing below acknowledge that this Agreement is given
conditionally, based on the representation to Lender that the non-signing
party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.
MISCELLANEOUS PROVISIONS. . . . Lender may delay or forgo
enforcing any of its rights or remedies under this Agreement without
losing them. . . . Upon any change in the terms of this Agreement, and
unless otherwise expressly stated in writing, no party who signs this
Agreement, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability.
(Bold in original; italic supplied.)
These provisions also fail to establish a waiver. As we have previously stated,
an agreement that a change in the terms of the note will not release a party who has
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signed the note from liability unless it is expressly stated in writing is not and should
not be construed as a waiver of a guarantor’s rights or defenses under the
confirmation statute. Likewise, the statement in the “Continuing Validity” paragraph
about the intent of the Lender when executing an agreement to extend the maturity
date of a loan an additional six months should not be construed as a waiver of a
guarantor’s defenses under the confirmation statute. Finally, the Lender’s decision to
delay or forgo “its rights or remedies under this Agreement” also fails to show a
guarantor’s waiver of defenses.
Having carefully examined all of the contractual provisions Apex claims
established a waiver and finding that all of them fall short, we must reverse the trial
court’s denial of summary judgment in favor of the Thompsons and affirm its denial
of summary judgment to Apex.
2. Based upon our holding in Division 1, we need not address the Thompsons’
remaining claims. .
Judgment affirmed in Case No. A18A1467. Judgment reversed in Case No.
A18A1468. Miller, P. J., and Goss, J., concur.
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