WILLIAM C. O'KELLEY, Senior District Judge.
The court has before it for consideration Patricia Harp and Angela Baldasare's "Motion for Summary Judgment" [19] and defendants'"Amended Motion for Summary Judgment" [39].
This lawsuit arose from the financial failure of a residential subdivision. On August 6, 2007, each defendant executed and delivered a personal guaranty to Appalachian Community Bank, FSB ("FSB"), which guaranteed the prompt payment of a note from Blue Ridge Georgia Capital Partners, LLC ("Borrower")
Ultimately, the subdivision development failed and the Property was foreclosed upon. However, the proceeds from the foreclosure sale failed to satisfy the remaining balance on the Note. (Mem. Supp. Defs.' Mot. Summ. J. 2.) On April 29, 2011, plaintiff (the successor-in-interest to FSB) filed a complaint in the Superior Court of Fannin County, Georgia, to collect the deficiency owed on the Note. (See Compl., ECF No. 1-1.)
Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "An issue of fact is `material' if, under the applicable substantive law, it might affect the outcome of the case." Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259 (11th Cir.2004). "An issue of fact is `genuine' if the record taken as a whole could lead a rational trier of fact to find for the nonmoving party." Id. at 1260.
The moving party may demonstrate the absence of a genuine dispute of material fact by "citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations... admissions, interrogatory answers, or other materials." Fed.R.Civ.P. 56(c)(1)(A). In addition to the materials cited by the parties, the court may also refer to other materials in the record. Fed.R.Civ.P. 56(c)(3). The moving party "always bears the initial responsibility of informing the district court of the basis for its motion" by "identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quotation marks omitted).
This initial responsibility is discharged when the movant shows that the nonmoving party has failed to present evidence in support of some element of its case on which it bears the ultimate burden of proof. Id. at 322, 106 S.Ct. 2548. Once the moving party has met this initial burden, the nonmoving party must "go beyond the pleadings" and, utilizing its own evidentiary submissions or those already filed, demonstrate that there is a genuine dispute of material fact such that a trial is required. Id. at 324, 106 S.Ct. 2548. "The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
If "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party," summary judgment is appropriate. Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir.1997) (quotation marks omitted). Thus, the moving party is entitled to "judgment as a matter
In their amended motion for summary judgment, defendants allege that plaintiff is statutorily precluded from seeking a deficiency judgment against them because plaintiff failed to comply with the confirmation procedures set forth in O.C.G.A. § 44-14-161. Although this argument was not raised in defendants' original motion for summary judgment, it potentially disposes of this entire action and therefore the court will address it first.
At the time the Note was made, the loan amount was larger than the legal limit FSB could lend on its own. (Pl.'s Br. Resp. to Defs.' Am. Mot. Summ. J. 2, ECF No. 31.) Accordingly, FSB presented the Note to Appalachian Community Bank in Ellijay, Georgia ("ACB"), to see if ACB would purchase part of the loan. (Id.) On July 9, 2008, FSB and ACB entered into a participation agreement, whereby ACB purchased 82.107 percent of the loan and FSB retained ownership of 17.893 percent and the responsibility for administering the loan. (Id. at 2-3, Ex. A.)
Although both FSB and ACB had the words "Appalachian Community Bank" in their titles, they were separate and distinct legal entities.
While the Note and guaranties were executed in the name of FSB, the security deeds executed for the Property simply identified the grantee as "Appalachian Community Bank."
In addition to sharing ownership of the Note, FSB and ACB were both represented by the firm of Thompson, O'Brien, Kemp & Nasuti, P.C. ("TOKN"). (Id. at 4.) On October 6, 2009, TOKN conducted a foreclosure sale of the Property in the name of "Appalachian Community Bank." (Id.) Although the foreclosure notice failed to specify which Appalachian Community Bank was conducting the foreclosure sale, plaintiff contends and defendants do not dispute that it was conducted by FSB.
A petition for confirmation was then filed in the Superior Court of Fannin County, Georgia, with the petitioner simply identified as "Appalachian Community Bank" (the "Confirmation Action"). (Id. at Ex. D.) The Confirmation Action was significantly delayed by the serial bankruptcy filings of the Note's various guarantors. (Id. at 4.) While the Confirmation Action was pending, ACB went into receivership, and its assets were sold to Community &
In summary, the foreclosure sale was conducted by FSB but the confirmation proceedings were initiated in the general name of "Appalachian Community Bank," making it impossible to tell whether FSB or ACB was the party petitioning for confirmation. This ambiguity was then clarified, albeit erroneously, by the Superior Court's order designating CSB as the "real party petitioner in interest" nunc pro tunc. (Id. at 20.) The confirmation order was then entered on behalf of "Appalachian Community Bank," rather than CSB. However, because CSB had been designated the "real party petitioner in interest" nunc pro tunc by order of the court, it was CSB who received confirmation of the foreclosure sale.
Under the Confirmation Statute,
O.C.G.A. § 44-14-161(a). This statute "applies to both primary debtors and guarantors; an action for the balance remaining on a note following a foreclosure sale against a guarantor ... is barred if no confirmation was obtained." U.S. v. Yates, 774 F.Supp. 1368, 1372 (M.D.Ga.1991) (citations omitted).
"Only the `person instituting the foreclosure proceedings' can seek confirmation of a sale." Cheek v. Savannah Valley Prod. Credit Ass'n, 244 Ga. 768, 262 S.E.2d 90, 92 (1979). The Georgia Court of Appeals has interpreted "the person instituting the foreclosure proceedings" to mean "the entity given the right to institute the proceedings under the terms of the instrument." Darby & Assocs., Ltd. v. Fed. Deposit Ins. Corp., 141 Ga.App. 78, 232 S.E.2d 615, 617 (1977), disapproved of on other grounds by Cartersville Developers, LLC v. Ga. Bank & Trust, 292 Ga.App. 375, 664 S.E.2d 783 (2008). As the Confirmation Statute is in derogation of common law, it "requires strict construction." Wachovia Bank, Nat. Ass'n v. ASF Enters., LLC, No. 1:09-CV-03571-JOF, 2010 WL 2595012, at *6 (N.D.Ga. June 25, 2010) (Forrester, J.).
Here, the security deed listed simply "Appalachian Community Bank" as the grantee. This created an ambiguity in the terms of the instrument because it failed to identify which Appalachian Community Bank, ACB or FSB, was the grantee. However, the Note and guaranties were executed in the name of FSB and the security deed is being corrected by means of a scrivener's affidavit to reflect that FSB, not ACB, was the grantee. (Pl.'s Br. Resp. to Defs.' Am. Mot. Summ. J. 3.)
While the foreclosure sale was confirmed, it was not FSB but CSB (ACB's successor-in-interest) that instituted the confirmation proceedings and received the confirmation order. FSB, the "person instituting the foreclosure proceedings" within the meaning of the Confirmation Statute, did not receive the confirmation order. See O.C.G.A. § 44-14-161(a); Darby, 232 S.E.2d at 617. The court must decide whether this error statutorily bars plaintiff (as FSB's successor-in-interest) from seeking a deficiency judgment under the language of the Confirmation Statute. First, however, the court must address whether defendants are legally entitled to assert this defense.
Plaintiff argues that defendants have waived their ability to assert this defense because they failed to appear at the confirmation hearing, object to ACB's authority to obtain confirmation, or appeal the confirmation order. According to plaintiff, this failure bars defendants from asserting any defenses they may have had regarding the "appropriateness of the party conducting the foreclosure sale." (Pl.'s Br. Resp. to Defs.' Am. Mot. Summ. J. 8-9.) However, plaintiff cites to no authority for this proposition, and even if defendants had appeared at the confirmation hearing and contested ACB's authority to pursue confirmation, it is unlikely that the issue would have been resolved at that time.
The focus of a confirmation proceeding is limited to ensuring that "a nonjudicial foreclosure sale was properly advertised and brought the fair market value of the land." McCain v. Galloway, 267 Ga.App. 505, 600 S.E.2d 449, 450 (2004). "Matters which do not address the questions of the true market value of the real property, or the procedural regularity of the foreclosure sale, are not within the scope of the confirmation proceeding." FRANK S. ALEXANDER, GEORGIA REAL ESTATE FINANCE AND FORECLOSURE LAW, § 9:1 (2012-13 ed.). A confirmation proceeding "does not result in a personal judgment and it does not adjudicate the title of the property sold." White Oak Homes, Inc. v. Cmty. Bank & Trust, 314 Ga.App. 502, 724 S.E.2d 810, 812 (2012). "Except as to the confirmed amount of the sale, it does not establish the liability of any party with regards to the indebtedness." Id. "Issues of standing" or whether the person seeking confirmation is the "real party in interest" are not relevant to confirmation proceedings. Id. at 813. Therefore, whether ACB or CSB was the appropriate party to foreclose on the Property and pursue confirmation was not and could not have been put in issue during the Confirmation Action. Instead, these issues "must be raised either in a suit to enjoin the initial foreclosure or in a subsequent suit concerning a deficiency." ALEXANDER at § 9:1. See also Alexander v. Weems, 157 Ga.App. 507, 277 S.E.2d 793, 794 (1981) ("Issues which go to the heart of the underlying obligation itself should be raised within the confines of a subsequent suit for a deficiency judgment."). Accordingly, defendants have not waived this defense and instead have properly raised it at this time.
Plaintiff next argues that defendants are barred from disputing the validity of the confirmation order because such orders may not be collaterally attacked. To support this proposition, plaintiff cites Weems v. McCloud, 619 F.2d 1081 (5th Cir.1980).
The court finds plaintiff's arguments on this point to be without merit. First, plaintiff claims that defendants are attacking the validity of the confirmation order itself. This improperly characterizes defendants' arguments. Defendants do not dispute that the foreclosure sale was properly advertised or that it brought the fair market value of the Property. Instead, defendants argue that plaintiff never obtained a confirmation order as required by the Confirmation Statute and is therefore statutorily barred from seeking a deficiency judgment. Whether the confirmation order received by CSB is valid or invalid is irrelevant.
To the extent defendants' argument can be properly characterized as a collateral attack, that attack is limited to whether the confirmation order was received by the proper party. In Dorsey, the trial court held that the plaintiff was barred from suing to set aside the foreclosure sale by the doctrine of res judicata because her suit sought to relitigate matters already decided in the confirmation proceedings that confirmed the sale. 547 S.E.2d at 788. The Georgia Court of Appeals reversed. After discussing the limited scope of confirmation proceedings, the court concluded that "issues regarding [whether the security deed was properly executed] could not have been put in issue and determined in the confirmation proceeding." Id. at 789. Accordingly, plaintiff was not barred from collaterally attacking the confirmation order as to those issues. Id.
The court finds Dorsey's reasoning persuasive. Whether a party is the real party in interest or has standing to seek confirmation is beyond the scope of a confirmation proceeding. See White Oak Homes, 724 S.E.2d at 813 ("The issues of standing and assignment were irrelevant to the confirmation proceeding."). Accordingly, even if the court chose to characterize defendants' argument as a collateral attack on the confirmation order, that attack is not barred by the doctrine of res judicata because the basis for the attack, whether CSB was the proper party to seek confirmation, is not an issue that could have been determined during the confirmation proceeding. Dorsey, 547 S.E.2d at 789 ("[B]y law, a confirmation proceeding is limited to determining whether the sale was properly advertised and brought the fair market value of the land."). Having determined that defendants are entitled to
While the Confirmation Statute addresses the procedure by which a secured creditor may seek to have its foreclosure sale confirmed, it does not explicitly address proceedings to collect a deficiency judgment or who may bring these proceedings. Accordingly, plaintiff argues that as long as a debtor is afforded the protections set forth in the Confirmation Statute, the identify of the plaintiff in the suit for deficiency judgment is not the Confirmation Statute's concern. (Pl.'s Br. Resp. to Defs.' Am. Mot. Summ. J. 7-8.) This argument misses the point.
Under the Confirmation Statute, "no action may be taken to obtain a deficiency judgment unless the person instituting the foreclosure proceedings shall ... report the sale ... for confirmation and approval and shall obtain an order of confirmation and approval thereon." O.C.G.A. § 44-14-161. Since the Confirmation Statute's inception, Georgia courts have consistently acknowledged that it must be strictly construed. See Titshaw v. Ne. Ga. Bank, 304 Ga.App. 712, 697 S.E.2d 837, 839 (2010); Peachtree Homes, Inc. v. Bank of Am., N.A., 315 Ga.App. 243, 726 S.E.2d 737, 738 (2012); Tampa Inv. Grp., Inc. v. Branch Banking & Trust Co., 290 Ga. 724, 723 S.E.2d 674, 678 (2012); Taylor v. Thompson, 158 Ga.App. 671, 282 S.E.2d 157, 158 (1981). A strict construction requires the "person instituting the foreclosure proceedings" to be the same entity that reports the sale and obtains the confirmation order. See Cheek, 262 S.E.2d at 92 ("Only the `person instituting the foreclosure proceedings' can seek confirmation of a sale."); Titshaw, 697 S.E.2d at 840 (noting under a strict construction of the statute, assignees would be the improper party to pursue a confirmation order if they were assigned the underlying note after the foreclosure occurred). If they are not the same entity and there is no reason for the court to decline to strictly construe the statute, then "no action may be taken to obtain a deficiency judgment." O.C.G.A. § 44-14-161.
Here, the entity that instituted the foreclosure proceedings (FSB) was not the entity who reported the sale for confirmation or received the confirmation order (CSB). This fails to comply with the literal requirements of the Confirmation Statute. Accordingly, "no action may be taken to obtain a deficiency judgment" unless plaintiff falls under one of the limited exceptions recognized by Georgia courts. O.C.G.A. § 44-14-161. Unfortunately, it does not. Neither CSB nor ACB is plaintiff's (or FSB's) successor or assignee. See Titshaw, 697 S.E.2d at 840 (holding assignees may pursue confirmation); Darby, 232 S.E.2d at 617 (holding successors-in-interest through bankruptcy or death may pursue confirmation). FSB and ACB were separate and distinct legal entities. Thus, plaintiff is statutorily barred from pursuing a deficiency judgment against defendants.
Additionally, the court does not find this to be a situation where a strict construction of the Confirmation Statute is improper. In Titshaw, the court declined to strictly construe the Confirmation Statute because doing so would lead to an "absurd result": assignees of the underlying debt, who had received "all ancillary remedies and rights of action which the assignor had or would have had for the enforcement of the right or chose assigned" would be barred from being able to obtain confirmation of the foreclosure or a deficiency judgment. Titshaw, 697 S.E.2d at 840-41. Although ACB held an ownership interest in
Finally, the court recognizes that the law generally disfavors situations where an individual or entity owed a debt loses the right to collect it. See, e.g., Titshaw, 697 S.E.2d at 840-41. Failing to write the full, legal name of a party may seem like a small and technical mistake, but "a little neglect may breed great mischief." Benjamin Franklin, The Way to Wealth (1758). Had FSB been properly named in the security deeds, foreclosure notice, or confirmation petition, CSB might not have been mistakenly substituted as the "real party petitioner in interest" by TOKN in the Confirmation Action. (Defs.' Am. Mot. Summ. J. 20.) Further, had FSB's attorneys reviewed the Superior Court's record after they were substituted as counsel in the Confirmation Action, they might have discovered the improper substitution of CSB and could have corrected it appropriately at that time. They failed to do so, the confirmation order was petitioned for and received by the wrong entity, and plaintiff is now statutorily barred from pursuing a deficiency judgment against defendants.
Finally, plaintiff suggests an additional ground for straying from a strict construction of the Confirmation Statute: the legislative purpose underlying the Confirmation Statute — protecting the debtor by requiring a judicial determination that the notice, advertisement, and regularity of the sale were proper and that the property was sold at a fair value — has been satisfied in this case. Therefore, plaintiff suggests that it should be permitted to pursue a deficiency judgment despite its failure to technically comply with the Confirmation Statute, especially since that failure is procedural rather than substantive. (See Pl.'s Br. Resp. to Defs.' Am. Mot. Summ. J. 7 ("The protections to the borrower mandated by the confirmation statute have been given. Therefore, an action to obtain a judgment for the deficiency may proceed.").)
While the court acknowledges plaintiff's argument, this is not the law. In Georgia, courts are required to strictly construe the language of the Confirmation Statute unless it "will result in unreasonable consequences or absurd results not contemplated by the legislature." Titshaw, 697 S.E.2d at 841. The court does not believe that it is either unreasonable or absurd to require lenders to strictly comply with the procedures set forth in the Confirmation Statute or face the consequences that result, especially when those consequences arise from the lender's own negligent conduct.
In the original motion for summary judgment, the Wives allege that they are
For the foregoing reasons, the court hereby
However, in response to the court's inquiry, a supplemental statement of material facts was submitted after the telephone conference. This document revealed that FSB and ACB were both "wholly owned subsidiaries of a holding company with the legal name of Appalachian Bancshares, Inc." (Pl.'s Supp. Resp. to Defs.' Second SMF ¶ 1, ECF No. 44.) ACB was incorporated in 2001 and was "known locally as Gilmer County Bank." (Id.) FSB was incorporated second in 2007. (Id.) While FSB's employees considered ACB to be the parent of FSB, "the relationship was actually that of a sister bank." (Id.)
The court takes this opportunity to note that resolving this motion has been hindered, rather than helped, by counsel's (and particularly plaintiff's counsel's) failure to properly research and confirm the facts underlying this action before submitting them to the court. As discussed infra, this issue arose solely because of the negligence of bank attorneys and/or employees. While the court recognizes counsel are not necessarily responsible for the negligent acts underlying this lawsuit, their own negligent failure to properly and thoroughly research the facts before presenting them to the court has wasted valuable judicial resources and exacerbated the overwhelming amount of negligence that has already occurred in this case.
However, plaintiff submitted a supplemental statement of material facts the next day which clarified that the address listed in the security deed, 2835 Scenic Drive, P.O. Box 2469, Blue Ridge, GA 30513, was the location of a branch of ACB. (Pl.'s Supp. Resp. to Defs.' Second SMF ¶ 2.) Apparently, after FSB was incorporated, it "continued to use the pre-printed security deed forms of its sister organization," ACB. (Id.) ACB's address was mistakenly left on the security deed form when it was executed by FSB. Thus, even by examining the addresses as plaintiff argued, it would be impossible to tell which Appalachian Community Bank executed the security deed.
