Suntrust Bank v. Venable

In the Supreme Court of Georgia
Decided: September 12, 2016
S16G0664. SUNTRUST BANK v. VENABLE.
THOMPSON, Chief Justice.
We issued a writ of certiorari in this appeal which arises out of a
deficiency action brought by appellant SunTrust Bank (“SunTrust”) as the
assignee under a motor vehicle conditional sales contract following its
repossession and sale of a motor vehicle purchased by appellee Mattie Venable.
The issue to be decided is whether the four year statute of limitation set forth in
OCGA § 11-2-725 (1) applicable to actions on contracts for the sale of goods
or the six year statute of limitation generally applicable to actions on simple
written contracts applies to the deficiency action filed by SunTrust. See OCGA
§ 9-3-24. We conclude that the action is subject to the four year statute of
limitation found in § 11-2-725 (1).
This appeal comes before us from the Court of Appeals’ reversal of the
grant of summary judgment in favor of SunTrust on its deficiency claim. See
Venable v. SunTrust Bank, 335 Ga. App. 344 (780 SE2d 793) (2015). “On
appeal from the grant of summary judgment this Court conducts a de novo
review of the evidence to determine whether there is a genuine issue of material
fact and whether the undisputed facts, viewed in the light most favorable to the
nonmoving party, warrant judgment as a matter of law.” (Citation and
punctuation omitted.) Giles v. Swimmer, 290 Ga. 650 (1) (725 SE2d 220)
(2012). See OCGA § 9-11-56 (c).
Viewed in that light, the evidence on summary judgment showed that in
March 2006, Venable entered into a “Simple Interest Conditional Sale Contract
with Options for Balloon Payment and Vehicle Return” (the “Contract”), when
she purchased a minivan from Team Ford of Marietta (the “dealership”). The
Contract identified the dealership as the “Seller” and Venable as the “Purchaser”
and granted the dealership a security interest in the purchased vehicle, which
interest it assigned to SunTrust shortly after the Contract was executed. After
Venable stopped making payments in November 2007, SunTrust repossessed
the minivan, sold it at auction for an amount less than the amount owed under
the Contract, and filed suit against Venable on October 15, 2012 to recover the
deficiency amount. Venable answered, and in defense, she asserted that the
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deficiency action was barred by the four year statute of limitation applicable to
contracts for the sale of goods. See OCGA § 11-2-725 (1). Without expressly
addressing the question of the applicable statute of limitation, the trial court
granted SunTrust’s motion for summary judgment. The Court of Appeals
reversed, concluding that SunTrust’s deficiency action was barred by § 11-2-
725 (1)’s four year period of limitation, and therefore, SunTrust was not entitled
to summary judgment on its deficiency claim. We granted SunTrust’s petition
for writ of certiorari, and for the reasons set forth below, we affirm the decision
of the Court of Appeals.
OCGA § 9-3-24 sets out a general six year period of limitation applicable
in actions on a simple written contract. It provides, in pertinent part, that
[a]ll actions upon simple contracts in writing shall be brought
within six years after the same become due and payable. However,
this Code section shall not apply to actions for the breach of
contracts for the sale of goods under Article 2 of Title 11.
OCGA § 9-3-24. Article 2 of Title 11, Georgia’s enactment of the Uniform
Commercial Code, applies to actions for the breach of a contract involving the
sale of goods and requires such actions to “be commenced within four years
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after the cause of action has accrued.”1 OCGA § 11-2-725 (1). Resolution of
this appeal, therefore, turns on the determination of whether the Contract
between Venable and the dealership constitutes a contract for the sale of a good.
The Court of Appeals, applying well-established Georgia law, concluded
that Article 2's four year statute of limitation applied because the primary
purpose of the conditional sales contract executed by Venable was the sale of
a good. See Venable, 335 Ga. App. at 347. This Court has not previously
considered the issue of which statute of limitation applies to a deficiency action
arising from a contract for the sale of a motor vehicle that also granted a security
interest. It is well established, however, that the provisions of Article 2 are
applicable both to a contract that involves only the sale of goods and a contract
that contains a blend of sale and non-sale elements “if the dominant purpose
behind the contract reflects a sales transaction.” (Citation and punctuation
omitted.) Ole Mexican Foods, Inc. v. Hanson Staple Co., 285 Ga. 288, 290 (676
SE2d 169) (2009). To make the determination of the “dominant purpose,” a
1
Expressly exempted from this provision is any transaction “intended to operate only
as a security transaction[.]” (Emphasis added.) OCGA § 11-2-102. SunTrust correctly does
not contend that the contract in this case, involving both the sale of a motor vehicle and the
grant of a security interest, comes within this exemption.
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court “must look to the primary or overall purpose of the transaction.” (Citation
and punctuation omitted.) Id. at 290.
“When presented with two elements of a contract, each absolutely
necessary if the subject matter is to be of any significant value to the
purchaser, it is a futile task to attempt to determine which
component is 'more necessary.' Thus, [we must look] to the
predominant purpose, the thrust of the contract as it would exist in
the minds of reasonable parties. There is no surer way to provide for
predictable results in the face of a highly artificial classification
system.” [Cit.]
J. Lee Gregory v. Scandinavian House, L.P., 209 Ga. App. 285, 288 (1) (433
SE2d 687 (1993).
Applying these principles in this case, we conclude that the primary
purpose of the contract between Venable and the dealership was the sale of a
good. It is undisputed that the minivan constituted a “good,”2 that the Contract,
which was labeled “Conditional Sale Contract,” identified the dealership and
Venable as “Seller” and “Purchaser,” and that the Contract provided for the sale
of the minivan in exchange for Venable’s agreement to pay a sum certain.
Although the Contract also granted the dealership a security interest in the
vehicle sold, it, by its plain language, constituted both a sales transaction and a
2
See OCGA § 11-2-105 (1) (defining “goods”).
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secured transaction, creating a dual relationship between Venable and the
dealership as both buyer and seller and obligor and secured party. Its
predominant purpose of selling a good, however, is evidenced by its title, the
designation of the parties as buyer and seller, Venable’s testimony that her
primary reason for executing the Contract was to purchase the minivan, and the
fact that the sales price of the vehicle was $29,626.00, whereas no separate fee
was required for the granting of the security interest to be held by the dealership.
See Ole Mexican Foods, Inc., 285 Ga. at 291 (stating that although “the label
the contracting parties affix to an agreement is not necessarily determinative of
the agreement’s predominant purpose,” it “‘is a good barometer of the parties’
intentions’” and “can constitute potent evidence of that purpose.”); Paramount
Contracting Co. v. DPS Industries, Inc., 309 Ga. App. 113, 116 (709 SE2d 288)
(2011) (finding sale of good was the predominant purpose of a contract
providing for both the sale and delivery of dirt, in part because the contract did
not provide separate pricing for the delivery of the dirt and the delivery cost
accounted for, at best, only 20 percent of the value of the dirt); Southern Tank
& Equipment Co. v. Zartic, Inc., 221 Ga. App. 503, 505 (471 SE2d 587) (1996)
(holding the predominant purpose of a contract containing both sale and non-
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sale aspects was the sale of goods in part because the portion of the cost
attributable to non-sale elements was less than one half of the total contract
price); J. Lee Gregory, 209 Ga. App. at 288 (1) (predominant purpose of
contract for sale and installation of windows was sale of a good where two-
thirds of the cost of the transaction was allocated to the sale of the windows and
contract failed to segregate the price of the windows from the price for services
to be rendered).
Our determination that the predominant purpose of the Contract was the
sale of a good is also supported by our consideration of the nature of the action
filed by SunTrust. SunTrust’s deficiency action reflects its decision to seek
payment of the full purchase price, an element we find more closely related to
the sales aspect of the Contract. As described by the New Jersey Supreme Court
in Associates Discount Corp. v. Palmer, 219 A2d 858, 861 (N.J. 1966), a
deficiency suit
is nothing but a simple in personam action for that part of the sales
price which remains unpaid after the seller has exhausted his rights
[as the holder of a security interest] by selling the collateral; it is an
action to enforce the obligation of the buyer to pay the full sale
price to the seller, an obligation which is an essential element of all
sales and which exists whether or not the sale is accompanied by a
security arrangement.
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We agree with this characterization of a deficiency action and with those courts,
like Palmer, which have described deficiency actions as “an attempt to enforce
an obligation arising out of the sales contract component of a retail installment
contract after the remedies created by the security agreement component of that
contract have been exhausted.” D.A.N. Joint Venture, III v. Clark, 218 S.W.3d
455, 459 (Ct. App. Missouri 2006). See also DaimlerChrylser Services North
America, LLC v. Quimette, 830 A2d 38, 41-42 (Vt. 2003), and cases cited
therein. See generally 68A AmJur 2d Secured Transactions § 565 (2016) (“An
action to recover a deficiency judgment is not governed by Article 9 [relating
to secured transactions] because it is merely an ordinary action seeking to
enforce the underlying obligation. Thus, the action of the creditor to recover a
deficiency judgment from a credit buyer of goods is in substance an action to
recover the balance of the purchase price and is therefore subject to the statute
of limitations applicable to such actions.”).
Contrary to SunTrust’s argument in this case, the fact that the Contract
also granted a secured interest in the vehicle sold does not, by itself, transform
the predominant purpose of the Contract and does not take it outside the
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coverage of Article 2.3 We find no authority for the proposition that the mere
presence of a secured transaction aspect within a contract automatically triggers
application of OCGA § 9-3-24's six year limitation period for general contract
claims. In addition, while the grant of a security interest may have been a
necessary component of the overall transaction between Venable and the
dealership, it clearly was not the predominant purpose of the Contract, there
being no reason for the dealership to retain a security interest in the absence of
a sale. See Iler Group, Inc. v. Discrete Wireless, Inc., 90 FSupp3d 1329, 1336
(1) (ND Ga. 2015) (concluding that the predominant purpose of a contract
involving the sale of both goods and services was the sale of goods because the
services to be provided were related to and dependent upon the sale of the
goods).
Our review of case law from other jurisdictions demonstrates that a
3
We specifically reject SunTrust’s invitation to hold that OCGA § 10-1-31 (a) (9)’s
definition of a “retail installment contract” as that term is used in the Motor Vehicle Sales
Finance Act (“MVSFA”), OCGA § 10-1-30 et seq., controls our determination of the
Contract’s “predominant purpose.” The MVSFA is limited in its scope to the regulation of
motor vehicle financing agencies and the formation of motor vehicle retail installment
contracts. There is no evidence that the legislature intended, when defining the category of
contracts to which the MVSFA’s requirements would apply, to define the term “contract” as
it may be used throughout the Georgia Code or to establish by implication the limitation
period applicable to all contracts for the sale of a motor vehicle.
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majority of courts have rejected this same argument when considering their
state’s enactment of the Uniform Commercial Code (UCC) and similar
contracts.4 For example, the court in First of America Bank v. Thompson, 552
NW2d 516, 520-522 (Mich. App. 1996), concluded, under facts virtually
identical to those here, that the four year limitation period set out in Article 2 of
the UCC applied to a deficiency action arising out of a contract for the sale of
a motor vehicle that also granted a secured interest. In reaching this conclusion,
the court found persuasive the numerous cases holding that the UCC’s four year
statute of limitation applies to an action brought by a creditor following the sale
of a good purchased subject to a security agreement because these suits are
primarily related to the sales aspect of the transaction. See, e.g., First Hawaiian
Bank v. Powers, 998 P2d 55, 67 n.8 (Haw. App. 2000) (applying Article 2's four
year limitation period to bank’s action to recover a deficiency judgment arising
out of an automobile sales contract that also granted a security interest);
Citizen’s Nat’l Bank of Decatur v. Farmer, 395 NE2d 1121, 1123 (Ill. App.
1979) (deficiency action brought by assignee under retail installment contract
4
Our decision in this case thus promotes one of the underlying purposes of the
Uniform Commercial Code and Title 11 of the Georgia Code, to “make uniform the law
among the various jurisdictions.” See OCGA § 11-1-103 (a) (3).
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for sale of motor vehicle following repossession); Massey-Ferguson Credit
Corp. v. Casaulong, 62 Cal. App. 3d 1024, 1027 (Cal. App. 1976) (deficiency
action arising from sale of farm equipment); Palmer, 219 A2d at 860-861.
Because the predominant purpose of the Contract was the sale of a good,
we agree with the Court of Appeals that it is governed by § 11-2-725 (1)'s four
year statute of limitation. It is undisputed that SunTrust’s deficiency claim
seeking a deficiency judgment was filed more than four years after the cause of
action accrued. See Radha Krishna, Inc. v. Desai, 301 Ga. App. 638, 641 (2)
(689 SE2d 78) (2009) (holding that limitation period begins to run at the time
of the breach). Accordingly, SunTrust’s claim is barred under the applicable
statute of limitation, and we find no error in the Court of Appeals’ decision
reversing the trial court’s grant of summary judgment in SunTrust’s favor.
Judgment affirmed. All the Justices concur.
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