Hwa Properties, Inc. v. Community and Southern Bank

CourtCourt of Appeals of Georgia
DecidedJuly 15, 2013
DocketA13A0047
StatusPublished

This text of Hwa Properties, Inc. v. Community and Southern Bank (Hwa Properties, Inc. v. Community and Southern Bank) is published on Counsel Stack Legal Research, covering Court of Appeals of Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hwa Properties, Inc. v. Community and Southern Bank, (Ga. Ct. App. 2013).

Opinion

FIRST DIVISION PHIPPS, C. J., ELLINGTON, P. J., and BRANCH, J.

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/

July 15, 2013

In the Court of Appeals of Georgia A13A0047. HWA PROPERTIES, INC. et al. v. COMMUNITY & SOUTHERN BANK.

ELLINGTON, Chief Judge.

HWA Properties, Inc. (“HWA”) and Harry Albright (collectively, “the

appellants”) appeal from an order of the Superior Court of Fulton County granting

summary judgment to Community & Southern Bank (“CSB”) and awarding the bank

a judgment on its suit to collect on a note and a guaranty. The appellants contend that

the trial court erred in ruling in favor of CSB, arguing that CSB failed to prove that

it was entitled to enforce the note or the guaranty. They also assert that the court erred

in awarding CSB a “deficiency judgment” for the difference between the amount due

on the note and the proceeds of the nonjudicial foreclosure sale of certain collateral,

arguing that this Court recently reversed a separate order confirming the foreclosure sale. For the following reasons, we affirm the court’s order as to Albright’s liability

on his unconditional personal guaranty of the note, but reverse as to HWA’s liability

for a deficiency judgment on the note.

“Summary judgment is proper when there is no genuine issue of material fact

and the movant is entitled to judgment as a matter of law. We review the grant of

summary judgment de novo, construing the evidence in favor of the nonmovant.”

(Citations and punctuation omitted.) White v. Ga. Power Co., 265 Ga. App. 664, 664-

665 (595 SE2d 353) (2004).

Viewed in this light, the record shows the following undisputed facts. In June

2008, HWA and Appalachian Community Bank executed a note for approximately

$4 million. The note was secured by about 188 acres of real property in Fannin

County, as well as a contemporaneous, unconditional, personal guaranty executed by

Albright. In October 2008, HWA renewed the note for a smaller principal balance of

approximately $2.7 million. The renewed note matured on October 24, 2009, but

HWA defaulted on the entire principal balance.

In February 2010, Appalachian Community Bank sued HWA on the note and

Albright on his guaranty in Fulton County. In May 2010, Appalachian Community

Bank filed a motion to substitute CSB as the party plaintiff, attaching a March 19,

2 2010 Gilmer County consent order appointing the Federal Deposit Insurance

Corporation (“FDIC”) receiver of the former bank’s business and property, as well

as the purchase and assumption agreement of the former bank by CSB, executed the

same day. The appellants did not object to the motion or challenge the supporting

documents on the basis that they constituted hearsay or were not authenticated. The

trial court granted the motion and substituted CSB as the “real party plaintiff in

interest” in this action, based upon its finding that CSB was “the successor in interest

to the Federal Deposit Insurance Corporation as receiver for Appalachian Community

Bank[.]”1

Over the next 16 months, the appellants did not move to set aside the

substitution order. Then, in September 2011,2 they filed a joint answer to the suit,

admitting, inter alia, that Albright had executed the renewed note on behalf of HWA

and his personal guaranty, that the principal amount of the note was $2,683,534, and

1 See OCGA § 9-11-25 (c) (“In case of any transfer of interest, the action may be continued by or against the original party unless the court, upon motion, directs the person to whom the interest is transferred to be substituted in the action or joined with the original party.”). 2 Between July 2010 and July 2011, the parties agreed to at least ten stipulations extending the time for the appellants to answer or otherwise respond to the suit on the note and guaranty.

3 that HWA had defaulted on the note. The appellants challenged CSB’s right to collect

on the note, however, asserting that CSB was not the payee on the note nor the named

beneficiary of the guaranty.

On November 1, 2011, while the suit on the note was pending in Fulton

County, CSB conducted a nonjudicial foreclosure sale of the Fannin County real

property that had secured the note, and the property was sold for $1.59 million.

Following a hearing on the confirmation petition filed by CSB, the Superior Court of

Fannin County entered a foreclosure confirmation order on March 28, 2012.3 The

appellants appealed the order the same day (hereinafter, “the confirmation appeal”),

contending that the Fannin County court improperly relied on inadmissible hearsay

in finding that the foreclosure sale brought the fair market value of the property. See

HWA Properties v. Community & Southern Bank, 320 Ga. App. 334 (739 SE2d 770)

(2013). Despite their earlier claim that CSB was not the payee on the note, however,

3 See OCGA § 44-14-161 (a) (requiring confirmation and approval of a nonjudicial foreclosure sale before the party conducting the sale can pursue a deficiency judgment against the debtor); (b) (before confirming the sale, the court must find that the evidence proved that the sale brought the true market value of the property); (c) (before confirming the sale, the court must find that the evidence proved the legality of the notice and advertisement and the regularity of the sale).

4 the appellants never sought to set aside the foreclosure sale of the property that had

secured the note, nor did they file suit against CSB for wrongful foreclosure.

While the confirmation appeal was pending in this Court, CSB moved for

summary judgment in the Fulton County suit on the note and the guaranty, asserting

that it was entitled to a judgment for the difference between the amount due on the

note and the proceeds of the foreclosure sale. According to CSB, after it applied the

foreclosure proceeds to the outstanding balance on the note, the remaining principal

balance was approximately $1.09 million, plus interest on the note, fees and other

expenses. In response to the summary judgment motion, the appellants filed a motion

to stay the trial court’s consideration of CSB’s motion until this Court issued a ruling

in the confirmation appeal.

On June 7, 2012, the Fulton County trial court entered an order in which it

denied the appellants’ motion to stay the proceedings pending the confirmation

appeal. It also granted CSB’s motion for summary judgment, reasserting its earlier

conclusion that CSB was the real party plaintiff in interest in this action. Further,

because it was undisputed that Albright had executed the $2.7 million renewed note

on behalf of HWA, that he had executed his unconditional personal guaranty of the

note, and that HWA had defaulted on the note, the court awarded CSB a judgment for

5 the amount of the difference between the proceeds of the foreclosure sale and the total

amount of principal due on the note. According to the court, the difference at that

time was $1,093,534.38 in principal, plus interest on the note, late fees, expenses, and

attorney fees. The appellants timely appealed the summary judgment order

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