DJ Mortgage, LLC v. Synovus Bank
325 Ga. App. 382
Ga. Ct. App.2013Background
- D J Mortgage, LLC (DJ) obtained a revolving line of credit from Synovus Bank (the Bank) to fund short‑term “hard money” loans; the loan was memorialized by a 2009 Loan and a Collateral Assignment (which incorporated a 2007 assignment agreement).
- The collateral for DJ’s line consisted of DJ’s underlying promissory notes and deeds to secure debt on loans DJ made to real‑estate borrowers; the collateral assignment addressed whether assignments would be held in escrow or recorded.
- At renewal/closing in 2009 the parties disputed whether the Bank could record assignments immediately or only upon DJ’s default; the Bank thereafter caused some assignments to be recorded, which hindered DJ’s ability to foreclose on defaulted underlying loans.
- DJ complained that the Bank (1) recorded assignments improperly, (2) failed to timely review advance requests, (3) refused to cooperate in foreclosure/reassignment efforts, and (4) ultimately stopped funding DJ. DJ and a personal guarantor sued; the trial court granted summary judgment to the Bank on all claims.
- The Court of Appeals reversed summary judgment as to claims (1)–(3) because ambiguities and disputed facts about contract meaning, waiver, the Bank’s duty to “endeavor” and to preserve collateral, and causation exist; it affirmed summary judgment for the Bank on claim (4) because undisputed breaches by DJ permitted the Bank to stop advances.
- Because genuine fact issues remain on breach, damages, and whether Bank conduct constituted gross negligence/willfulness, the court vacated the Bank’s attorney‑fees award and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Whether the 2009 agreement permitted immediate recording of assignments or required holding them in escrow until default | DJ: agreement (via incorporated 2007 collateral assignment) required assignments be held in escrow and recorded only upon certain events (default) | Bank: 2009 agreement’s definitional provisions require recording for "notes receivable"; later provisions control | Ambiguous conflict in text; parol evidence is mixed; issue for jury whether recording breached agreement and whether DJ waived rights by conduct |
| 2. Whether Bank breached obligation to review funding requests in specified time by its duty to “endeavor” to review | DJ: “endeavor” imposes an obligation to make a reasonable, diligent effort to review within stated timeframes; Bank’s delays harmed DJ | Bank: the time language imposes no enforceable deadline and Bank had broad discretion to advance | “Endeavor” has ordinary meaning — require some effort; disputed facts whether Bank made such effort; jury question on breach |
| 3. Whether Bank had duty to cooperate in foreclosure or otherwise preserve collateral and breached it | DJ: Collateral Assignment imposes duty to use reasonable care in custody/preservation; Bank’s refusal to reassign or assist impaired DJ’s ability to realize collateral value | Bank: no contractual duty to assist DJ in foreclosure; recording conferred rights | Agreement (incorporating collateral assignment) imposed duty of reasonable care; disputed facts about Bank’s conduct and impact — jury question on breach and damages |
| 4. Whether Bank breached by ceasing advances on May 17, 2011 | DJ: stopping advances violated agreement | Bank: agreement permits Bank to stop advances after an Event of Default; DJ breached covenants allowing cutoff | Bank entitled to stop advances where an Event of Default existed; undisputed evidence DJ breached at least one covenant — summary judgment for Bank affirmed on this claim |
Key Cases Cited
- City of Baldwin v. Woodard & Curran, Inc., 293 Ga. 19 (2013) (three‑step contract construction framework: clear language, apply construction rules, then jury if ambiguity remains)
- McGuire Holdings v. TSQ Partners, 290 Ga. App. 595 (2008) (ambiguity arises when contract reasonably supports more than one interpretation)
- Cohen v. Sandy Springs Crossing Assoc., 238 Ga. App. 711 (1999) (parties’ construction of a contract by their conduct may be persuasive)
- Smith v. Gordon, 266 Ga. App. 814 (2004) (elements and limits of waiver by conduct; voluntary relinquishment required)
- Stuart Enterprises Intl. v. Peykan, Inc., 252 Ga. App. 231 (2001) (parties have common‑law duty to diligently and in good faith seek to comply with contract terms)
- Currid v. DeKalb State Court Probation Dept., 274 Ga. App. 704 (2005) (when gross negligence is contested, degree is for jury)