Current financial circumstances provide a difficult time for borrowers and a fertile field for review and development of Georgia foreclosure law. Summaries of a few selected recent cases follow.

Iwan Renovations, Inc. v. North Atlanta National Bank, 296 Ga. App. 125, 673 S.E.2d 632 (2009). Bank extended loans to a builder evidenced by two notes and two security deeds on the same property. The bank filed suit on the notes when the builder defaulted. While that suit was pending, the bank foreclosed on the first security deed and amended its complaint to recover only the amount due on the second. Both parties moved for summary judgment. The trial court granted the bank’s and denied the debtors’.

The debtors argued on appeal that because the two notes were “inextricably intertwined” the Bank’s amended complaint equated to a claim for a deficiency judgment requiring confirmation under O.C.G.A. § 44-14-161 (a). The Bank countered that its foreclosure under the first security deed render the second debt unsecured and that lack of confirmation did not bar suit on that independent unsecured debt. The Court of Appeals agreed with the debtors and reversed the trial court’s rulings on that issue.

Belans v. Bank of America, N.A., 303 Ga.App. 35, 692 S.E.2d 694 (2010); Belans v. Bank of America, N.A., 303 Ga.App. 654, 694 S.E.2d 725 (2010). The Court of Appeals reversed the trial court’s confirmation of foreclosure sales for failure of the bank to submit evidence of the true market value of the property as required by O.C.G.A. § 44-14-161. At the confirmation hearings, the Bank submitted appraisal reports but did not put the appraiser, who was present, on the stand. Instead, bank’s counsel simply stated that the properties had sold at fair market value as of the date of the foreclosure sale and that the bank had relied on an expert appraiser in arriving at the values. The trial court reviewed the reports and confirmed the sales. The Court of Appeals held that the statements by bank’s counsel did not satisfy the requirements of the confirmation statute:

In certain situations, we have stated that “

[a]ttorneys are officers of the court and their statements in their place, if not objected to, serve the same function as evidence.” But “this principle cannot be extended to convert otherwise incompetent hearsay into competent evidence.”

Belans, 692 S.E.2d at 697 (citations and footnotes omitted).

Ly v. Jimmy Carter Commons, LLC, 286 Ga. 831, 691 S.E.2d 852 (2010). Lender extended a loan to a Georgia limited liability company having two member/managers. Having worked directly with James Byun, only one of the member/managers, the lender learned prior to closing that the company’s operating agreement required consent from both. Byun therefore produced for closing a consent purportedly signed by the other member/manager, Jin Choi. The loan went into foreclosure and the borrower filed an action to enjoin and cancel the security deed. The trial court granted the injunction and subsequently the borrower’s request for summary judgment. The trial court found undisputed that Byun acted without authority in light of the operating agreement provision, that Choi’s signature was forged and that the loan documents where therefore ineffective.

The Georgia Supreme Court reversed in a full bench opinion, relying on O.C.G.A. § 14-11-301(b) (2) to conclude that

even if all that is true, there is still a genuine issue of material fact as to whether [the lender] had knowledge that the unanimous consent documents were ineffective and did not give Byun the authority to act alone. . . . Consequently, even if Byun acted beyond his authority as a manager of Jimmy Carter Commons, the limited liability company may still be bound by his actions if [lender] did not know that he lacked such authority.

Decision One Mortgage Company, LLC v. Victor Warren Properties, Inc., Case No. A10A0247 (Ga. App. June 14, 2010). Decision One conducted a nonjudicial foreclosure sale at which Warren Properties was the high bidder. Before leaving the courthouse steps, Warren Properties paid the funds and Decision One gave a receipt. Several weeks later, Decision One returned the funds to Warren Properties purporting to rescind the sale. Warren Properties demanded performance and sued alternatively for damages and specific performance. Decision One defended that its calculation of the opening bid had been a mistake and asked the court to invoke its equitable power to grant relief. The trial court granted Warren Properties’ motion and ordered Decision One to deliver the deed.

The Court of Appeals rejected Decision One’s mistake argument under the general rule that “equity does not operate to rescind a contract based upon a unilateral mistake ‘where the party claiming mistake, by exercising reasonable diligence, could have discovered the truth.’” (citations omitted). Decision One countered that even negligence should not prevent relief if Warren Properties would not be prejudiced. The Court observed in response that Decision One had proffered no evidence showing how Warren Properties would not be prejudiced. The Court went on to dismiss Decision One’s arguments based on inadequacy of price and arguments based on inapposite cases permitting rescission. In short, the Court of Appeals affirmed the trial court.

Colbert v. Branch Banking and Trust Company, 302 Ga.App. 687, 691 S.E.2d 598 (2010). Colbert petitioned to void foreclosure by the bank, which he claimed failed to notify him properly in accordance with O.C.G.A. § 44-14-162.2 (a). The loan documents specified a post office box as his notice address. Colbert subsequently discontinued use of the box, implemented a change of address with the postal service to an address on Laurel Street and, by phone, notified the bank of the new address. He subsequently filed for bankruptcy. His bankruptcy case named the bank as a creditor and specified the Laurel Street address. The bank obtained relief from stay and foreclosed after sending notice to the post office box address in the loan documents and advertising in the Effingham Herald. The Court of Appeals affirmed the trial court’s ruling that the bank gave proper notice, since O.C.G.A. § 44-14-162.2(a) provides that the required notice must be sent to the property address or to such other address as the debtor designates by written notice to the lender.

REL and Associates, LLC v. Federal Deposit Ins. Corp., 304 Ga.App. 33, 695 S.E.2d 370 (2010). Debtor argued, and the Court of Appeals rejected, several points against the trial court’s determination at confirmation that the foreclosure sale brought the property’s true market value. The Court began with the statement of the applicable standard of review: “Our review of the trial court’s determination of true market value is ‘whether the record contains any evidence to support the findings of the trial court’ and not whether the evidence upon which the findings were based is the most accurate.” (footnotes omitted).

First, the debtor argued that that lender’s only appraisal, upon which the trial court relied, incorrectly incorporated an assumption that the property did not have sewer service. The Court dismissed this argument, noting that the evidence in the record that the debtor had installed a lift station that “could have serviced the property” was not inconsistent with the appraiser’s assumption. Second, the debtor argued that the trial court incorrectly applied a “degree of deviation” analysis. The Court determined that the trial court evaluated various pertinent factors and that the appraisal was not based on sheer speculation. Lastly, the debtor argued that the confirmation was improper because the FDIC failed to report the sale to a Rockdale Superior Court judge within 30 days of the sale as required by O.C.G.A. §44-14-161 (a). The Court determined that (a) the FDIC properly reported the sale to a Rockdale State Court Judge who was sitting by designation as a Rockdale Superior Court Judge and (b) the statute does not require that the report be made to the same judge that later presides over the confirmation hearing. Debtor loses.

Vines v. LaSalle Bank Nat. Ass’n, 302 Ga.App. 353, 691 S.E.2d 242 (2010). The Vines appealed from a trial court order granting the bank a writ of possession after foreclosure by the bank. They argued that the foreclosure was wrongful because they had paid the mortgage in full. The Court of Appeals affirmed, citing the principle that a challenge to a foreclosure sale may not be asserted as a defense to a subsequent dispossessory proceeding. Even if such a challenge were cognizable, the Vines had failed to include a trial transcript in the appeal record, thereby precluding review by the Court of Appeals.

DuBarton Enterprises, LLC v. Appalachian Community Bank, Case No. A10A0858 (Ga. App. June 1, 2010). Dubarton defaulted on its loan from Appalachian, which began foreclosure proceedings. Dubarton, alleging negligence and fraud, filed suit to enjoin the foreclosure. The trial court denied relief. On appeal, among other claims, Dubarton argued the fraudulent failure by the bank to enter into another loan agreement to fund satisfaction of the defaulted loan. The Court of Appeals, quoting Shiva Management v. Walker, 283 Ga. 338, 340, 658 S.E.2d 726 (2008), rejected this contention. The bank had the right under the security deed to foreclose, rendering irrelevant any subsequent actions by the bank that made more difficult the debtor’s repaying the loan.