17 F. Supp. 3d 1289
N.D. Ga.2014Background
- Alexander SRP borrowed ~$17M from Regions; executed a Security Deed, an Assignment of Leases and Rents (ALR) (revocable license to collect rents that becomes revoked automatically on default), and an Assignment of Construction Documents.
- Alexander defaulted after a forbearance period in January 2012, continued to collect ~$372,175 in post-default rents, and filed Chapter 11 in March 2012; bankruptcy court lifted stay to allow foreclosure.
- Loan and loan documents were transferred through a chain (Regions → Trust → Wells Fargo → LSREF); two intermediate assignments were executed by Hudson representatives, but the record lacks clear documentary proof Hudson had authority to bind the assignors.
- LSREF foreclosed and, at the foreclosure sale, sold realty (credit bid $16.73M) and then split out personalty; LSREF purchased the personal property with a credit bid of $25,000. An appraisal proffered value for certain personalty (clubhouse furniture, appliances, model furniture) in the low hundreds of thousands.
- Alexander sued: (1) LSREF seeks declaratory judgment entitling it to the Rents; (2) Alexander asserted wrongful-foreclosure counterclaim alleging LSREF (and Hudson) chilled bidding, producing grossly inadequate price for personal property. LSREF & Hudson moved for summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether LSREF is entitled to post-default rents under the ALR (assignment chain) | LSREF: ALR automatically revoked borrower’s license on default; LSREF is successor-holder of ALR via assignments and thus entitled to rents | Alexander: Assignments to LSREF from Trust/Wells Fargo were executed by Hudson without proof Hudson could bind assignors; thus LSREF has not shown valid assignment | Denied LSREF SJ — genuine dispute whether Hudson had authority to effect intermediate assignments, so LSREF hasn’t proved entitlement as a matter of law |
| Whether LSREF acquired rents by purchasing foreclosure estate | LSREF: alternatively, rents became part of foreclosure estate and were bought at sale | Alexander: ALR unambiguously granted immediate entitlement on default; rents were not part of foreclosure estate if ALR remained in prior assignee | Denied LSREF SJ on this theory — court treats ALR as giving immediate rights; foreclosure purchase does not automatically defeat assignment question |
| Wrongful-foreclosure claim against LSREF (bid-chilling of personalty sale) | Alexander: LSREF abruptly split sale, failed to disclose personalty value, opened at $25,000 despite evidence LSREF knew personalty worth >> $25k — conduct chilled bidding causing grossly inadequate price | LSREF: sale procedures lawful; confirmation of realty sale and lack of identical issue precludes relitigation; no damages proof | Denied LSREF SJ — triable issues: price appears grossly inadequate for some items and conduct (late split, low opening bid, nondisclosure) could have chilled bidding; damages evidence exists for furniture/model items |
| Wrongful-foreclosure claim against Hudson | Alexander: Hudson advised split and bid and participated; should be liable as agent | Hudson: acted only as advisor/servicer, did not conduct sale; no evidence Hudson took operative role at auction | Granted SJ in favor of Hudson — insufficient record to attribute sale-day conduct to Hudson; dismissed as to Hudson |
Key Cases Cited
- Montgomery v. Bank of Am., 740 S.E.2d 434 (Ga. Ct. App. 2013) (debtor who is not a party to assignment lacks standing to challenge assignment in affirmative wrongful-foreclosure claim)
- Giordano v. Stubbs, 184 S.E.2d 165 (Ga. 1971) (to prevail on bid-chilling wrongful-foreclosure claim, plaintiff must show grossly inadequate price plus misconduct such as fraud, mistake, surprise)
- Padgett v. Butler, 66 S.E.2d 194 (Ga. Ct. App. 1951) (where assignment of rents is unconditional on default, creditor entitled to rents upon default)
- Anderson v. Liberty Lobby, 477 U.S. 242 (1986) (summary judgment standard: genuine issue for trial exists if reasonable jury could return verdict for nonmoving party)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (movant need not disprove opponent’s case; must show lack of evidentiary support)