332 Ga. App. 175
Ga. Ct. App.2015Background
- In July 2006 Hildebrand purchased a condominium and executed an "80-20" loan: a first-priority note/deed for $205,100 and a second-priority note/deed for $51,280 (both dated July 31, 2006).
- The second (subordinate) deed contained a clause requesting notice from any superior lienholder of default/foreclosure; the first deed lacked such a notice obligation.
- The two notes/deeds were later assigned to different entities: the first note ultimately to Cenlar (which foreclosed) and the second to Bank of America (serviced by Green Tree).
- Cenlar non-judicially foreclosed the first-priority deed in June 2011, sold the property, and did not obtain judicial confirmation of that foreclosure sale.
- Bank of America sued Hildebrand in August 2012 on the second promissory note for ~ $50,844; the trial court granted summary judgment for the bank. Hildebrand appealed.
Issues
| Issue | Hildebrand's Argument | Bank of America’s Argument | Held |
|---|---|---|---|
| Whether the two loans were "inextricably intertwined" so that the holder of the subordinate note is barred from suing on the note after the senior lienholder's unconfirmed nonjudicial foreclosure | The two mortgages originated together and remain linked; therefore the subordinate note is effectively a deficiency and plaintiff cannot collect absent confirmation of the foreclosure | The notes were owned by different entities at foreclosure; the subordinate noteholder was not the foreclosing creditor and may sue on its note | The loans were not inextricably intertwined at the time of foreclosure because they were held by different entities; judgment for Bank of America affirmed |
| Whether the subordinate noteholder had any right to seek confirmation of the senior foreclosure sale | Hildebrand: linkage should allow subordinate holder to benefit from confirmation protections even if loans were later sold | Bank: only the foreclosing creditor or its assignee can seek confirmation; Bank of America (holder of second note) had no authority to confirm Cenlar’s sale | Subordinate holder could not seek confirmation of Cenlar’s foreclosure; lack of confirmation did not bar Bank’s action on the note |
| Whether the second deed’s request-for-notice clause imposed enforceable rights against the senior lienholder | Hildebrand: clause shows intended linkage and notice/rights between lienholders | Bank: clause is a unilateral request; nothing in the senior deed/note required the senior holder to provide notice or to protect subordinate holder’s remedies | The notice request did not create rights that prevented the senior holder from foreclosing without involving the subordinate holder |
| Whether Hildebrand’s counterclaims under the Fair Business Practices Act survived summary judgment | Hildebrand: counterclaim depends on loans being intertwined and Bank’s pursuit of the note being improper | Bank: viability of counterclaim fails if loans are not intertwined and Bank was permitted to sue on its note | Because loans were not inextricably intertwined, the counterclaim fails and summary judgment on it was proper |
Key Cases Cited
- Bank of N. Ga. v. Windermere Dev., Inc., 316 Ga. App. 33 (creditor cannot recover on related debts after unconfirmed foreclosure where debts were incurred for same purpose, secured by same property, held by same creditor)
- Iwan Renovations v. North Atlanta Nat’l Bank, 296 Ga. App. 125 (assignee/creditor that foreclosed cannot later sue on other related debts without confirmation)
- Titshaw v. Northeast Georgia Bank, 304 Ga. App. 712 (assignee of the foreclosing creditor is the proper party to seek confirmation of a foreclosure sale)
- First Nat’l Bank & Trust Co. v. Kunes, 230 Ga. 888 (discussion of the confirmation statute’s debtor-protective purpose and historical background)