Susan K. Wells v. Regions Bank

FOURTH DIVISION
DOYLE, P. J.,
COOMER and MARKLE, 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
June 20, 2019
In the Court of Appeals of Georgia
A19A0404. WELLS v. REGIONS BANK.
MARKLE, Judge.
Susan Wells1 appeals from the trial court’s order granting summary judgment
to Regions Bank and denying her motion for summary judgment in Regions Bank’s
breach of contract suit for money due on a line of credit following foreclosure of the
property. On appeal, Wells argues that the trial court erred because Regions Bank was
required to seek judicial confirmation of the foreclosure before filing the breach of
contract suit. After a thorough review of the record, and for the reasons that follow,
we affirm the trial court’s order denying Wells’s motion for summary judgment,
1
Susan and Gordon Wells divorced in 2008 and she is now known by her
maiden name, Williams. Because the case style in the trial court and this Court refer
to her as Susan Wells, we use that name in the opinion.
vacate the trial court’s order granting summary judgment to Regions, and remand the
case for further proceedings.
“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 omitted.) LeCroy v. Bragg, 319 Ga. App. 884, 885 (1) (739 SE2d 1)
(2013).
So viewed, the record shows that in 1998, Susan and her then-husband Gordon
Wells (collectively “the Wellses”) purchased property in Gainesville, Georgia. The
following year, they obtained a construction loan in the amount of $459,750 to build
a house on the property, and they executed a security deed in favor of Regions using
the property as collateral. Later that year, they modified this loan to increase the
amount of funds to $479,200.
In May 2002, the Wellses opened a revolving line of credit in the amount of
$100,000. They executed a second security deed in favor of Regions, using the same
property to secure the loan. They used these funds to repair stucco and make other
home improvements. The following month, the Wellses purchased the adjacent
lakefront property.
2
In 2005, they opened a second line of credit (“the 2005 line of credit”), and
Regions modified the May 2002 security deed to increase the amount of the loan to
$240,000 to reflect the new line of credit. This 2005 line of credit was used to pay off
the initial line of credit obtained in 2002 and build a dock on the adjacent property.2
Susan and Gordon divorced in 2008. Under the terms of the divorce settlement,
Gordon retained the marital property and was to remove Susan’s name from the
mortgage and sell or refinance the property.
Although the Wellses initially made all the payments on the 2005 line of credit,
Gordon experienced financial problems after the divorce and ceased making
payments, leaving a debt in excess of $200,000. In 2010, Regions entered into a
forbearance agreement with the Wellses regarding the outstanding debt on the 2005
line of credit. In this agreement, the Wellses promised to make monthly payments
with a final balloon payment due at the end of the term. Additionally, per the terms
of this agreement, any default would result in the entire amount being due
2
Although Regions and the Wellses both contend, and the trial court found,
that the 2005 line of credit was used to purchase the adjacent property, the records
show that the purchase occurred in 2002, prior to the execution of the modification
to the security deed for the 2005 line of credit that is at issue in this appeal. This
inconsistency only strengthens our conclusion that factual questions remain regarding
the purpose of the various loans.
3
immediately in full. Gordon made the payments under the forbearance agreement as
required until August 2012 when he defaulted.
During this same time, Gordon also failed to make the required payments on
the construction loan. As a result of the default on the construction loan, Regions
foreclosed on the property, selling it at public auction by deed under power of sale
for $335,000. Regions then filed a breach of contract action against the Wellses,
seeking to collect on the outstanding amount of the 2005 line of credit under the
forbearance agreement.
Both Regions and Susan moved for summary judgment.3 Susan argued that the
failure to seek judicial confirmation of the foreclosure waived any right to collect the
debt under OCGA § 44-14-161 (a) and barred the instant breach of contract claim. In
response, Regions argued that the confirmation requirement in OCGA § 44-14-161
(a) did not apply because the instant suit was not a post-foreclosure deficiency action,
and the two loans at issue were not inextricably intertwined such that confirmation
would be required. Thus, Regions argued that it was entitled to summary judgment
on its breach of contract claim.
3
Susan also filed a cross-claim against Gordon.
4
Following a hearing, the trial court denied Susan’s motion and granted
Regions’s motion.4 The trial court found that Regions’s suit was not a deficiency
action, and the construction loan and 2005 line of credit were not inextricably
intertwined because they did not serve the same purpose, and therefore confirmation
was not required under OCGA § 44-14-161 (a). Thus, the trial court concluded that
the Wellses breached the forbearance agreement and were liable for the outstanding
debt.5 This appeal followed.
In a series of inter-related arguments, Susan contends that the trial court erred
in denying her motion for summary judgment and in granting Regions’s motion
because the loans were inextricably intertwined, and thus the instant suit was barred
4
There is no transcript of this hearing. But given that the purpose of the
hearing is to have argument rather than to admit evidence, the absence of a transcript
does not hinder our review. See League v. Citibank (South Dakota), 291 Ga. App.
866, 867-868 (1) (663 SE2d 266) (2008).
5
After the hearing, Susan moved to supplement the record with additional
documents to show the two loans were intertwined. The trial court did not explicitly
rule on this motion, but did refer to the documents in its order denying her motion for
summary judgment. To the extent that Susan argues the trial court erred in not
supplementing the record, we discern no error. The trial court referenced the
documents in its order, and the information in those documents appears elsewhere in
the record.
5
by the failure to seek judicial confirmation of the foreclosure sale.6 We conclude that
Susan has raised a factual issue that precluded summary judgment.
“A deficiency judgment is the imposition of personal liability on mortgagor for
unpaid balance of mortgage debt after foreclosure has failed to yield full amount of
due debt.” (Citation omitted.) Iwan Renovations, Inc. v. North Atlanta Nat. Bank, 296
Ga. App. 125, 127 (1) (673 SE2d 632) (2009). As we have explained, OCGA § 44-
14-161 (a) provides that
when any real estate is sold on foreclosure, without legal process, and
under powers contained in security deeds, mortgages, or other lien
contracts and at the sale the real estate does not bring the amount of the
debt secured by the deed, mortgage, or contract, no action may be taken
to obtain a deficiency judgment unless the person instituting the
foreclosure proceedings obtains a judicial confirmation of the sale.
6
Susan appears to argue that the loans were inextricably intertwined because
the loan documents contained dragnet clauses. We have explained that a dragnet
clause secures “any and all other indebtedness which said grantor may now or may
hereafter owe said grantee.” Martin v. Fairburn Banking Co., 218 Ga. App. 803, 804
(3) (463 SE2d 507) (1995). No such language appears in the deed under the
construction loan or the modified security deed under the 2005 line of credit or in any
of the loan documents. Nor do the loans include language that would merge the two
loans. Compare Oakvale Road Assoc., LTD. v. Mtg. Recovery Fund-Atlanta Pools,
231 Ga. App. 414, 417-418 (499 SE2d 404) (1998) (physical precedent only).
Additionally, there is no merit to Wells’s argument that it was error to place the
burden of proof on her. As the party raising the defense, Wells bears the burden of
proof. OCGA § 24-14-1.
6
(Citation, punctuation, and emphasis omitted.) 3 West Investments, LLC v. Hamilton
State Bank, 316 Ga. App. 796, 799 (728 SE2d 843) (2012). Thus, under Georgia law,
“a creditor may not seek a deficiency judgment with respect to any real estate sold on
foreclosure unless a confirmation of the sale is obtained.” (Citation and punctuation
omitted.) Id.
We have also applied the judicial confirmation requirement where the two
separate debts at issue were inextricably intertwined. As we explained, “[d]ebts that
are secured by the same property, held by the same creditor and with the assumption
of the debt, and owed by the same debtor are inextricably intertwined. They are not
independent of each other, and a foreclosure of one affects the other.” (Citations and
punctuation omitted.) 3 West Investments, 316 Ga. App. at 800. Thus, “debts are
‘inextricably intertwined’ where those debts were incurred for the same purpose,
secured by the same property, held by the same creditor, and owed by the same
debtor.” (Citation and punctuation omitted.) Bryant v. Optima Intl., Inc., 339 Ga.
App. 696, 703 (2) (a) (792 SE2d 489) (2016); see also Iwan Renovations, 296 Ga.
App. at 128 (1). The purpose of the confirmation statute is “to protect debtors from
deficiency judgments when their property is sold at a foreclosure sale for less than its
7
market value.” (Citation omitted.) Bank of North Ga. v. Windermere Dev., Inc., 316
Ga. App. 33, 38 (1) (728 SE2d 714) (2012).
The dispute here is whether the construction loan and the 2005 line of credit
were inextricably intertwined so as to trigger the requirement of judicial confirmation
before Regions could file suit against Susan for breach of contract. Without question,
the debts were secured by the same property, always held by the same creditor, and
owed by the same debtors. Bryant, 339 Ga. App. at 703 (2) (a).
As to whether the debts were incurred for the same purpose, Susan submitted
her own affidavit and an affidavit from Gordon explaining that they obtained an
equity loan in 2002 to repair stucco on the house, and that they increased this equity
line in 2005 to pay off the first line of credit and make further improvements,
specifically to purchase the adjacent property and build a dock on it.7 Indeed, when
the Wellses used the 2005 line of credit to pay off the first line of credit, Regions
modified the security deed instead of filing a new one. Additionally, the records
submitted show that the purpose of the construction loan was to build a home on the
property. The disbursement request for the 2002 line of credit shows that its purpose
7
In her affidavit, Susan also admitted that they violated the forbearance
agreement, but she explained that it was signed post-divorce and Gordon was
responsible for all mortgage payments.
8
was “home improvements.” The 2005 line of credit was for “Personal, Family,
Household Purposes or Personal Investment Purposes” and “Personal Expense.”
Regions acknowledges that the 2005 line of credit paid off the first line of
credit and all parties seem to agree that it also funded the purchase of the adjacent
property and the construction of the dock. Regions contends, however, that a stated
“purpose” of the 2005 line of credit was personal expenses regardless of the loan’s
actual “use” related to home improvement or construction. We are not persuaded by
Regions’s argument that the “purpose” was not the same as the “use.” One definition
of the verb “to use” is “to carry out a purpose.” See https://www.merriam-
webster.com/dictionary/purpose. Moreover, the “purpose” language is not a matter
of statutory interpretation, but rather is a judicially created analysis. We have never
held – and we do not do so here – that the analysis is as rigid as Regions suggests.
Instead, we conclude that the Wellses have created a genuine issue of fact with
regard to whether the construction loan and second line of credit were for similar and
related purposes, namely to improve the secured property. See Bryant, 339 Ga. App.
at 703-704 (2) (summary judgment improper because fact question existed regarding
whether loans were for same purpose); see also Oakvale Road Assoc., Ltd. v. Mtg.
Recovery Fund-Atlanta Pools, 231 Ga. App. 414, 416 (499 SE2d 404) (1998) (loans
9
that were for a different but related purpose triggered confirmation requirement)
(physical precedent only). We find additional support for this conclusion from the
manner in which Regions treated the loans when it modified the 2002 security deed
to reflect the 2005 line of credit. Regions used the same property to secure each of the
three loans, and it accepted that the 2005 line of credit was used to purchase the
adjacent property – a transaction that occurred years earlier – and construct a dock on
it.
Additionally, we note that the 2005 line of credit contains language allowing
Regions to charge to the credit line costs or expenses including “payments to cure
defaults under any existing liens on your principal dwelling,” and explaining that the
borrower can be in default due to failure “to pay and perform the terms of any other
deed of trust, mortgage or lease of the property.” It further permits Regions to
terminate the line of credit and accelerate the payment in the event of foreclosure of
another lien. Cf. Bank of North Ga., 316 Ga. App. at 36, 39 (1) (debt to develop
subdivision and subsequent debt to build infrastructure were inextricably intertwined,
noting that the loan documents contained cross-default and acceleration provisions);
C. K. C., Inc. v. Free, 196 Ga. App. 280 (395 SE2d 666) (1990) (debts were
inextricably intertwined where they were secured by the same property and the same
10
deed, and the note included an acceleration clause). When we consider this language
in the 2005 line of credit documents, along with the Wellses’ affidavits and Regions’s
acknowledgment that the second line of credit was used to pay off the first and to
enable the purchase of adjacent property, we conclude that there remains a genuine
issue of fact as to the “purpose” of the loans and whether the 2005 line of credit was
inextricably intertwined with the construction loan. See Baby Days, Inc. v. Bank of
Adairsville, 218 Ga. App. 752, 754 (1) (463 SE2d 171) (1995) (at summary judgment
stage, “[a]ny doubt as to the existence of a genuine issue of material fact is resolved
against the movant.” (citation omitted)). To conclude otherwise would ignore the
purpose of the confirmation statute. We decline to reach such a result.8
Accordingly, because factual issues remain, we affirm the trial court’s denial
of Susan’s motion for summary judgment, vacate the trial court’s grant of Regions’s
8
The cases Regions cites in support of its argument are inapposite because the
issue in those cases was not whether the loans held the same purpose, and neither case
contains any analysis of this prong. See Devin Lamplighter, Ltd. v. American Gen.
Finance, Inc., 206 Ga. App. 747 (426 SE2d 645) (1992) (loans were not inextricably
intertwined when there were two separate debts, secured by two separate security
deeds, and two different creditors); Clements v. Fleet Finance, Inc., 206 Ga. App. 736
(426 SE2d 910) (1992) (loans not inextricably intertwined where there were two
separate debts, secured by two separate deeds, made at different times, to different
creditors, for different collateral purposes) (physical precedent only).
11
motion for summary judgment, and remand the case for further proceedings
consistent with this opinion.
Judgment affirmed in part; vacated in part; and case remanded. Doyle, P. J.,
and Coomer, J., concur.
12