L. D. F. Family Farm, Inc. v. Charterbank
326 Ga. App. 361
Ga. Ct. App.2014Background
- In June 2008 L.D.F. Family Farm ("Family Farm") executed a $3,104,211.33 promissory note (renewal) secured by real property; Lindy Farmer, Jr. executed a personal guaranty.
- Community Bank (original lender) failed in June 2009; Charterbank purchased the note and guaranty that month.
- Family Farm defaulted; in July 2010 the parties executed a forbearance agreement requiring payment by September 8, 2011; Family Farm did not pay and the lender foreclosed.
- Charterbank purchased the foreclosed property at sale and then sued to recover the deficiency on the note and guaranty; it moved for summary judgment with the note and guaranty attached.
- Family Farm and Farmer admitted execution and nonpayment but opposed summary judgment, asserting defenses based on breach of the covenant of good faith and fair dealing, mutual modification/forbearance as a new agreement, and frustration of purpose.
- Trial court granted summary judgment for Charterbank; the court of appeals affirmed, finding the defenses legally insufficient and parol evidence inadmissible to alter the unconditional note and guaranty.
Issues
| Issue | Plaintiff's Argument (Charterbank) | Defendant's Argument (LDF / Farmer) | Held |
|---|---|---|---|
| 1) Enforceability of note/guaranty on summary judgment | Note and guaranty produced; entitlement to judgment as a matter of law | Admitted signatures but asserted defenses preclude enforcement | Judgment for Charterbank; plaintiff made prima facie case and defendants failed to raise a valid defense |
| 2) Breach of covenant of good faith and fair dealing | No breach; enforcement consistent with written agreements | Lender made oral promises to "work with" and refused to extend forbearance or accept short sale | Rejected; covenant cannot create independent liability apart from contract terms; parol evidence barred |
| 3) Mutual departure / modification by conduct | No mutual agreement to alter payment obligations | Party conduct (forbearance, requests to maintain/market property) created a new agreement excusing payment | Rejected; no evidence lender agreed to allow nonpayment or to renew forbearance beyond its term |
| 4) Frustration / excuse of performance | Performance not excused; no conduct by lender made performance impossible | Market collapse and lender's conduct frustrated the loan's purpose, excusing nonperformance | Rejected; defendants failed to show lender's conduct caused performance to be useless or impossible |
Key Cases Cited
- Myers v. First Citizens Bank & Trust Co., 324 Ga. App. 293 (2013) (summary judgment and enforcement of note/guaranty principles)
- Lovell v. Ga. Trust Bank, 318 Ga. App. 860 (2012) (parol evidence and unconditional promissory notes)
- Quintanilla v. Rathur, 227 Ga. App. 788 (1997) (mutual departure/modification by conduct requires evidence of mutual intent)
- Lewis v. Citizens & Southern Nat. Bank, 174 Ga. App. 847 (1985) (renewal of a note cuts off defenses known at that time)
- Bridges v. Reliance Trust Co., 205 Ga. App. 400 (1992) (agreements to negotiate or future commitments unenforceable absent complete terms)
- Carter v. Moody, 236 Ga. App. 262 (1999) (summary judgment standard and appellate review)