MIKE’S FURNITURE BARN, INC. Et Al. v. SMITH
342 Ga. App. 558
Ga. Ct. App.2017Background
- In 2002 Cheryl Smith borrowed money from Mike’s Furniture Barn (MFB), executing a promissory note (the Note) and a deed to secure a debt (the Deed) that named Michael G. Miller as grantee and contained a power of sale. The Deed fixed a final payment date in 2005.
- Smith defaulted. In 2016 (more than seven years after the stated maturity), MFB commenced a nonjudicial foreclosure and purchased the property at the sale.
- Smith sued to set aside the foreclosure and to enjoin MFB and related parties, arguing (1) MFB was not the holder of the Deed and (2) title had reverted to her under the seven‑year statutory reversionary rule because the Deed contained no affirmative statement extending the reversionary period to 20 years.
- The trial court granted relief: it set aside the foreclosure sale and issued a permanent injunction, finding (a) MFB was not the holder of the Deed and (b) the Deed (alone or with the Note) lacked the affirmative statement needed to extend the reversionary period beyond seven years.
- MFB appealed. The Court of Appeals affirmed the trial court.
Issues
| Issue | Smith's Argument | MFB's Argument | Held |
|---|---|---|---|
| 1. Who could lawfully foreclose? | Only the deed holder may foreclose; Miller was not shown to have assigned the Deed to MFB, so MFB had no authority. | MFB proceeded with foreclosure and purchased the property (implying authority or otherwise arguing procedural sufficiency). | Court: Only the deed holder may foreclose. Miller (not MFB) was the record holder and no assignment to MFB appeared; foreclosure by MFB was unauthorized—sale set aside. |
| 2. Whether the Deed (or Deed + Note) contained an "affirmative statement" to extend the statutory reversionary period to 20 years under OCGA § 44‑14‑80. | The Deed lacks an affirmative statement; therefore title reverted to Smith seven years after maturity and foreclosure is barred. | The Note and Deed contain dragnet/open‑end language and survival language that, viewed together, show intent to create an indefinite/perpetual security interest extending the reversionary period. | Court: Neither the Deed alone nor the Deed together with the Note contained the required affirmative statement. Open‑end clauses plus a fixed maturity and fixed loan terms created ambiguity, not the clear affirmative statement required; reversion to Smith after seven years applies—injunction proper. |
| 3. Scope of open‑end/dragnet clauses in extending reversionary period | N/A (issue framed by MFB) | Open‑end clauses should be able to extend the reversionary period (and MFB urges such clauses be read broadly, not limited to revolving credit). | Court: Open‑end clauses can, in some circumstances (e.g., true revolving credit with clear affirmative language), supply the affirmative statement, but here the presence of a fixed maturity and loan for a sum certain made the transaction unlike a revolving line of credit; clause did not suffice. |
Key Cases Cited
- Ames v. JP Morgan Chase Bank, 298 Ga. 732 (recognizing only deed holder may initiate foreclosure)
- You v. JP Morgan Chase Bank, 293 Ga. 67 (same principle on holder’s authority to foreclose)
- Stearns Bank, N.A. v. Mullins, 333 Ga. App. 369 (open‑end clause in context of revolving credit may constitute affirmative statement extending reversionary period)
- Matson v. Bayview Loan Servicing, LLC, 339 Ga. App. 890 (deed with fixed maturity plus renewal language did not show required affirmative statement)
- Clark v. AgGeorgia Farm Credit ACA, 333 Ga. App. 73 (definition and treatment of open‑end/dragnet clauses)