Capital City Developers, LLC v. Bank of N. Ga.

316 Ga.App. 624

730 S.E.2d 99

12 FCDR 2340

CAPITAL CITY DEVELOPERS, LLC, et al.

v.BANK OF NORTH GEORGIA.

No. A12A0414.

Court of Appeals of Georgia.

July 5, 2012.

Jared Wesley Heald, John A. Christy, Brooke Franklin Voelzke, Atlanta, Robert Henry Snyder Jr., for Appellant.

Thomas McCarty Barton, Aaron Paul Michael Tady, for Appellee.

MIKELL, Presiding Judge.

The Bank of North Georgia (the “Bank”) sued borrowers Capital City Developers, LLC; Anderson Avenue Partners, LLC; Giles Properties, LP; and Benjamin Michael Giles, along with guarantors Benjamin J. Giles, Jr.; Harold T. Pounders; and Keith D. Kantor (collectively, “Appellants”) to collect money owed, alleging that Appellants had defaulted on 24 promissory notes and related guaranties. The trial court granted summary judgment in favor of the Bank and entered a final judgment against all Appellants in the total amount of $3,288,969.08 in principal, interest, and attorney fees. On appeal, Appellants asserted that the trial court erred because: 1) their affirmative defense of estoppel precludes a grant of summary judgment in the Bank's favor; and the Bank failed to establish the amounts owed through proper tendering of evidence into the record. We affirm as to the first issue; as to the second issue, we affirm the judgment as to liability, but reverse the amount of damages and remand for further proceedings consistent with this opinion.

A grant of summary judgment is appropriate when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. ¹ “On summary judgment, after the movant makes a prima facie showing of its entitlement to judgment as a matter of law, the burden then shifts to the respondent to come forward with rebuttal evidence. To do so, the respondent must set forth specific facts showing the existence of a genuine issue of disputed fact.” ² On appeal from the grant or denial of a motion for summary judgment, we apply a de novo standard of review, viewing the evidence and all reasonable inferences and conclusions drawn from it in the light most favorable to Appellants as the non-moving parties.³

So viewed, the evidence shows that Appellants began acquiring real estate for the purpose of constructing single-family dwellings. In early- through mid–2009, they obtained acquisition and construction loans from a predecessor-in-interest to the Bank. For each acquisition of real estate, one of the borrowers executed a promissory note secured by the real estate purchased, and a subset of one or more guarantors executed related guaranties. In October 2009, the Bank issued notices of default and demanded payment, and later sued for recovery on breach of the notes and guaranties. Appellants answered, denying that they owed the debt.⁴ The trial court, without holding a hearing, granted the Bank's motion for summary judgment as to liability only. The trial court then entered a final judgment, from which this appeal arises, setting forth the amounts awarded to the Bank under the notes.

1. As a threshold matter, we note that the Bank provided the authenticated loan and guaranty documents evincing a debt, and Appellants did not dispute their authenticity. A plaintiff suing on promissory notes establishes a prima facie right to judgment as a matter of law by producing the notes and showing they were executed,⁵ and the trial court found that the Bank had met this burden. Appellants do not challenge the trial court's finding of a prima facie case. Rather, “[t]heir argument goes to the issue of the amount of money owed, not to liability vel non.” ⁶ They contend that the trial court erred in granting the Bank's motion for summary judgment because the Bank failed to establish the amounts owed under the notes with admissible evidence. We agree.

“Admissibility of evidence on motion for summary judgment is governed by the rules relating to form and admissibility of evidence generally.” ⁷ “A trial court's decision to admit evidence as an exception to the hearsay rule will not be disturbed absent an abuse of discretion.” ⁸

With its motion for summary judgment, the Bank submitted the affidavit of its vice president, David O'Rear, the custodian of the Bank's business records related to claims and loans at issue. In his affidavit, O'Rear averred that he was personally familiar with the Bank's routine practice for maintaining those business records and calculating amounts owed; that the loan documents and records were made and kept in the ordinary course of business; and that it was the Bank's routine practice to record payments and changes in amounts owed at or near the time the relevant events occurred. His affidavit was accompanied by what appear to be computer printouts listing the current balance, daily interest charges, late charges, and other fees. He testified that the printouts are bank records reflecting current amounts owed.

Appellants contend that the printouts are “summaries” unaccompanied by the underlying business records on which they are based, and that as such, they are inadmissible hearsay evidence. The documents at issue are accompanied by the relevant guaranty or guaranties, the original loan documents, and default letters from the Bank.

OCGA § 24–3–14(b) defines the type of writings admissible as a hearsay exception under the business records exception as follows:

[a]ny writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence, or event shall be admissible in evidence in proof of the act, transaction, occurrence, or event, if the trial judge shall find that it was made in the regular course of any business and that it was the regular course of such business to make the memorandum or record at the time of the act, transaction, occurrence, or event or within a reasonable time thereafter.⁹

These printouts are not such records; they are summaries of such records. They were not made at or near the time of the transactions at issue. They were generated and printed between January 27 and February 4, 2011, yet they purportedly represent amounts owed on loans whose terms commenced between July 9, 2008, at the earliest and June 5, 2009, at the latest.¹⁰

“[A]lthough a summary prepared in support of a demand for payment may not qualify as a business record under OCGA § 24–3–14, ... summarized statements of what records show are admissible if the records themselves are accessible to the court and the parties.” ¹¹ Here, the Bank's summaries were accompanied by some business records, but a search of the record reveals that crucial underlying business records related to fees and interest were not available to the this Court or Appellants.

Most of the summaries list “late charges,” but are unaccompanied by business records showing from what relevant dates and on what underlying amounts the late charges accrued. Some summaries list “other fees” that are not explained, and the Bank has pointed us to no supporting business records. Neither the Bank's briefing nor O'Rear's affidavit identifies any provision in the notes or guaranties obligating Appellants to pay the “other fees.” Additionally, all the summaries list “interest” charges and indicate the daily rate of accrual. The notes, however, provide that interest is variable based upon “Lender's Prime” plus one percent prior to maturity, and a fixed rate after maturity. The summaries are unaccompanied by business records showing pre-maturity interest calculations and rate variations.

“[W]here, as in this case, such [documents] are neither introduced in evidence nor accounted for, it is erroneous to admit in evidence such summarized statement[s].” ¹² Absent evidence to establish a variable interest rate, judgment as to amount in favor of the lender would be improper in the face of a denial by the debtors as to the amount sought. ¹³ Further, where business records do not adequately show a requirement to pay fees, the amount of damages has not been established. ¹⁴

We find that the trial court abused its discretion by considering these summaries in its determination of the amounts awarded. We affirm judgment as to liability, but reverse the award of damages and remand for further proceedings consistent with this opinion.

2. Appellants argue that because they tendered into the record facts supporting the affirmative defense of estoppel, the trial court erred in granting summary judgment to the Bank. We disagree.

Summary judgment law does not require the movant to show that no issue of fact remains but only that no genuine issue of material fact remains; and, while there may be some shadowy semblance of an issue, the case may nevertheless be decided as a matter of law where the evidence shows clearly and palpably that the jury could reasonably draw but one conclusion.¹⁵

Appellants contend that when they could not keep up their loan payments, Pounders, a guarantor, spoke with O'Rear and his superior, Terence Lewis. Pounders deposed that Lewis and O'Rear agreed to accept offers from third-party buyers of $70,000 “per house” regardless of the amount owed. The record shows that Appellants had found third-party buyers for three of the notes. Pounders deposed that O'Rear told him the Bank had accepted the offer from the third-party buyers, but the Bank later reneged on the deal. Invoking both the doctrines of equitable estoppel and promissory estoppel, Appellants argue that they were prejudiced by the Bank's refusal to sell the notes because the potential third-party buyers of the three notes also were planning to buy the remaining loan portfolio for $70,000 per completed house. Appellants further allege that both the Bank and the third-party buyers had agreed not to pursue Appellants for any deficiency. The Bank denies agreeing to sell the notes and denies any agreement not to pursue Appellants for a deficiency.

“In order for equitable estoppel to arise, there must generally have been some...