Bldg. Block Enters., LLC v. State Bank & Trust Co.

12 FCDR 622

314 Ga.App. 147

723 S.E.2d 467

BUILDING BLOCK ENTERPRISES, LLC et al.

v.STATE BANK AND TRUST COMPANY.

No. A11A1819.

Court of Appeals of Georgia.

Feb. 16, 2012.Certiorari Denied May 29, 2012.

Robinson & Blazer, John E. Robinson, Gregory Huson Blazer, Decatur, for appellants.

Quirk & Quirk, Debra E. Baker, for appellee.

McFADDEN, Judge.

Building Block Enterprises, LLC and Waheed Malik appeal the declaratory judgment granted to State Bank and Trust Company in this action relating to efforts to collect a defaulted loan. After Building Block defaulted on the loan, which Malik had guaranteed, State Bank, as successor to the original lender, pursued an action in state court to recover the outstanding loan amount. It also foreclosed on the property securing the note. It conducted two nonjudicial foreclosure sales, because the first took place before the assignment of the loan to State Bank had been recorded.

We hold that State Bank never consummated its successful bid at the first nonjudicial foreclosure sale of the property securing the loan because the transfer of the borrower's right of possession and its equity of redemption to the bank as the foreclosure sale purchaser never occurred. We therefore affirm the trial court's ruling that this sale was not completed. We also affirm the ruling that the later nonjudicial foreclosure sale was valid. Finally, we reverse the superior court's ruling that State Bank was not required to confirm the foreclosure sale before pursuing an action for a deficiency judgment against Malik. This ruling amounted to an advisory opinion since State Bank did, in fact, file a confirmation petition, which is pending in superior court.

Building Block borrowed more than $1.4 million from Security Bank of North Metro and executed a deed to secure debt, pledging certain property as security for its obligation under the note. Malik guaranteed the obligation.

Building Block defaulted; and on April 3, 2009, Security Bank filed an action in DeKalb County State Court to recover the outstanding loan amount. On July 24, 2009, Security Bank failed. The Federal Deposit Insurance Corporation acted as receiver for Security Bank and assigned certain of its assets, including the Building Block note and security deed, to State Bank. The assignment was not executed and recorded in superior court until November 25, 2009.

On August 4, 2009—after the assignment was made but before it was recorded—the state court substituted State Bank as the plaintiff in the state court action against Building Block and Malik. That same day, the state court entered a default judgment in favor of State Bank against Building Block and Malik for the total indebtedness, more than $3.5 million. Twenty-five minutes later, State Bank held a foreclosure sale of the property securing the note and bid in the amount of $2.12 million.

At some point, State Bank discovered that the assignment of the loan had not yet been executed or recorded. It then stopped any efforts to consummate the foreclosure sale. It did not apply the proceeds of the sale to the loan, nor did it execute or record a deed under power of sale conveying title to the property.

After the assignment of the loan and security deed was recorded on November 25, 2009, State Bank re-advertised the property for foreclosure. State Bank foreclosed on the property on January 5, 2010, and it was the only bidder. It bid $800,000, less than half the price it had bid for the property just five months earlier. State Bank applied the funds to the outstanding indebtedness and recorded a deed under power of sale. State Bank filed an action in superior court to confirm the foreclosure sale. That action remains pending.

In the meantime, on May 20, 2010, the state court set aside the default judgment against Malik as to the amount of damages only, finding that Malik had not been properly notified of the damages hearing and that this constituted a nonamendable defect on the face of the record, requiring a set aside under OCGA § 9–11–60(d). That action remains pending.

Building Block and Malik filed this action seeking declaratory relief and damages. They sought declarations to the effect that the August 2009 foreclosure sale was valid and the January 2010 foreclosure sale was void, so that State Bank was estopped from denying the much higher property value as established in the August 2009 foreclosure sale. They also sought a declaration that State Bank could not seek a deficiency judgment against Malik. Building Block and Malik sought damages for wrongful foreclosure and for breaches of fiduciary duty and the duty of good faith. They also sought bad faith attorney fees and litigation expenses.

State Bank answered and filed a counterclaim, seeking declarations that the August 4, 2009 foreclosure sale was never consummated and the January 5, 2010 foreclosure sale—and the property value it established—was valid. State Bank also sought bad faith attorney fees and litigation expenses under OCGA §§ 13–6–11 and 9–15–14.

The trial court ruled that the August 4, 2009 sale was not valid because the assignment had not been recorded at the time of the sale and because the sale was not consummated. Therefore, the court ruled, once the assignment had been recorded on November 25, 2009, State Bank could properly foreclose again on the property. The trial court also ruled that State Bank was not required to seek confirmation of the January 5, 2010 foreclosure sale because at the time the sale occurred, State Bank had a valid money judgment for the full amount of the indebtedness against Building Block and Malik. Building Block and Malik filed this appeal.

1. We must first address our jurisdiction. Dixie Group v. Shaw Indus. Group, 303 Ga.App. 459, n. 1, 693 S.E.2d 888 (2010). We have jurisdiction, although the order on appeal is not final, because it entails a declaratory judgment. Building Block and Malik sought a declaratory judgment, damages and attorney fees. State Bank counterclaimed for a declaratory judgment and attorney fees. The trial court's order entered a declaratory judgment in favor of State Bank; it did not address Building Block and Malik's claim for damages, nor the parties' claims for attorney fees. Therefore, it appears that the trial court's order is not final, and the case is pending below. This is true even if the declaratory judgment in favor of State Bank amounted to an implicit denial of Building Block and Malik's claims because State Bank's claim for attorney fees apparently remains pending.

Nonetheless, the trial court's order is directly appealable because “[d]eclaratory judgments ‘have the force and effect of (final judgments) and (are) reviewable as such.’ OCGA § 9–4–2(a).” Sunstates Refrigerated Svcs. v. Griffin, 215 Ga.App. 61, 62(1), 449 S.E.2d 858 (1994) (denying motion to dismiss appeal on the ground that order was neither a final judgment disposing of all claims nor an express refusal of the appellant's request for injunctive relief because declaratory judgments are reviewable as final judgments). This is so even if other issues remain pending below. Id.

2. Building Block and Malik assert various arguments in support of their contentions that the August 4, 2009 foreclosure sale was valid and the higher price bid at that sale is binding on the bank, and that the January 2010 sale, with its lower bid price, was void. But our recent decision in Legacy Communities Group v. Branch Banking & Trust Co., 310 Ga.App. 466, 713 S.E.2d 670 (2011), rev'd in part on other grounds, Tampa Investment Group v. Branch Banking & Trust Co., 290 Ga. ––––, ––– S.E.2d –––– (Case Nos. S11G1728, S11C1729, decided March 19, 2012), controls the issue adversely to them. In Legacy, a bank conducted a nonjudicial foreclosure sale, which we found to be not consummated. We explained that

[w]hen a borrower gives a lender a deed to secure debt, the borrower grants and conveys outright legal title in the subject real property to the lender (the grantee) and takes a bond for title back to the grantor upon the payment of the debt. Thus, the borrower retains the right to regain or redeem legal title by payment of the secured indebtedness; the borrower also retains the right of possession.

(Citations and punctuation omitted.) Id. at 469(1), 713 S.E.2d 670. The lender bank in Legacy, acting in its capacity as the borrower's attorney in fact, accepted the bid it made at a foreclosure sale but did...