AmirfazlivVATACSGroupIncGACOA07212011

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Amirfazli v. Vatacs Group Inc. (Ga. App., 2011)

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AMIRFAZLI

v.

VATACS GROUP, INC.;and

vice versa.

A11A1165

A11A1166MC-051MC-052

Court of Appeals of Georgia

July 21, 2011

FOURTH DIVISION

PHIPPS, P. J.,

ANDREWS and MCFADDEN, JJ.

NOTICE: Motions for reconsideration mustbe physically received in our clerk's officewithin ten days of the date of decision to bedeemed timely filed.

(Court of Appeals Rule 4 (b) and Rule 37(b), February 21, 2008)

McFadden, Judge.

These appeals arise out of a non-judicialforeclosure sale under power. MohammedAmirfazli ("the debtor") sued VATACS Group,Inc. ("the secured creditor") to set aside theforeclosure sale, alleging fraud, bad faith, andunjust enrichment. Both parties moved forsummary judgment, and the trial court set asidethe foreclosure after concluding that, as a matterof law, the sale did not comply with advertisingrequirements. It then held a bench trial regardingoutstanding amounts owed by the debtor on theunderlying promissory note. Based on theevidence presented, the trial court enteredjudgment for the secured creditor in the amountof $63,096.32.

In Case No. A11A1166, the securedcreditor appeals from the trial court's summaryjudgment order setting aside the foreclosure sale.It argues that the sale was conducted fairly andcomplied with Georgia law. The debtor appealsin Case No. A11A1165, challenging the money judgment entered following the bench trial. He

claims that the trial court erred in refusing toconsider his fraud claim, improperly found himliable for property taxes and interest on thosetaxes, and erred in awarding the secured creditorinterest on the promissory note. Because

questions of fact remain regarding the fairness ofthe foreclosure sale, we agree that the trial courterred in setting aside the sale on summaryjudgment. Accordingly, we reverse the judgmentin Case No. A11A1166. Moreover, because thefinal money judgment in Case No. A11A1165was entered in reliance on the order setting asidethe foreclosure, it must be vacated.

Case No. A11A1166

1. The debtor argues that we should dismissthe secured creditor's appeal for failure tocomply with Court of Appeals Rule 25, whichrequires an appellant to support its claims oferror with record citations. He notes that thesecured creditor's brief contains recordreferences, but that they do not correspond to therecord in Case No. A11A1165. In its notice ofappeal, however, the secured creditor clearlystated that it would submit a record appendixpursuant to Supreme Court Rule 67 and Court ofAppeals Rule 17. The references in the securedcreditor's brief are supported by that recordappendix. Dismissal is not warranted.

2. Summary judgment is appropriate whenno genuine issues of material fact remain and themovant is entitled to judgment as a matter oflaw. OCGA 9-11-56 (c). We review the grantof summary judgment de novo, construing theevidence and all reasonable inferences drawnfrom it in the light most favorable to the


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nonmovant. See Bassett v. Jasper Banking Co.,278 Ga. App. 698, 699 (629 SE2d 434) (2006).

Viewed in this manner, the record showsthat in December 1992, the debtor purchasedland in Gwinnett County with financing from

First Capital Bank f/k/a Central Gwinnett Bank("the bank"). As security, the debtor granted thebank a deed to secure debt in the property. Thedebtor refinanced the loan in February 1997,giving the bank a promissory note secured bythe original deed to secure date. His businesspartner guaranteed the indebtedness.

The debtor missed payments in March andApril 1997, and the bank wrote him and hispartner on April 17, 1997, informing them thatthey needed to pay the past due amounts.

Payment, however, was not received. On May 6,1997, the bank again wrote the partners,declaring the loan in default, accelerating theindebtedness, and demanding immediatepayment within ten days. The letter included aNotice of Sale Under Power and indicated thatabsent payment, the property securing the notewould be sold at an upcoming foreclosure sale.

The Notice, which identified the bank asthe foreclosing party, ran in the Gwinnett DailyPost on May 9, May 16, May 23, and May 30,1997. On May 19, 1997, in the midst of thisadvertising period, the bank sold and assignedthe indebtedness to VATACS, the securedcreditor that is a party to this appeal. Anassignment document referencing the securedcreditor and the security deed was filed with theclerk of the Gwinnett County Superior Court onMay 30, 1997.

The secured creditor conducted theadvertised foreclosure sale on June 3, 1997, bidon the property itself, and purchased it for$61,100. A few days later, the debtor sued the

secured creditor to set aside the foreclosure,asserting that the sale was not conducted in goodfaith, was infected by fraud, and resulted in aprice significantly lower than the property's fairmarket value. Apparently, however, no writtenorder was entered in that case for five years, andthe complaint was dismissed by operation of

law. See OCGA 9-2-60 (b). The debtor filedthe instant action within the six month renewalperiod following the dismissal. See OCGA 9-2-60 (c); OCGA 9-11-41 (e).

The parties subsequently filed cross-

motions for summary judgment. Addressing theforeclosure issue, the trial court determined thatthe foreclosure proceedings were fatally flawedbecause the two advertisements published afterthe assignment to the secured creditor listed thebank - rather than the secured creditor - as theforeclosing party. It thus set aside theforeclosure sale.

It is true that "[i]f a notice or advertisementof a foreclosure sale under power does notsubstantially meet the legal requirements, the

sale should be set aside." Williams v. SouthCentral Farm Credit, 215 Ga. App. 740, 742 (2)(452 SE2d 148) (1994). To void a sale, however,irregularities or errors in the advertisement mustchill the price bid for the property. Id. "Errorsthat would not confuse the bidding intentions ofany potential bidder of sufficient mentalcapacity to enter a binding contract for the saleof the real property do not show a chilling of thesale so that a fair market value bid was notobtained." Id.

The trial court found that the sale in thiscase was chilled as a matter of law because theMay 23 and May 30 advertisements inaccuratelyidentified the bank as the foreclosing party. Tosupport this conclusion, it cited Cummings v.Anderson, 173 B. R. 959 (Bankr. N. D. Ga.1994), aff'd, 112 F3d 1172 (11th Cir. 1997), abankruptcy court decision from the NorthernDistrict of Georgia. But Cummings isdistinguishable on its facts, and we thereforedecline to follow it. There, a creditor acceleratedthe indebtedness remaining on a promissory notefollowing default and advertised the property for

a foreclosure sale. On the day of the sale, thecreditor assigned the indebtedness to a thirdindividual, who conducted the sale andultimately purchased the property.

The bankruptcy court in Cummings setaside the foreclosure sale, finding numerous


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problems with the proceedings. Among otherthings, it determined that the advertising for thesale was inadequate, given the last-minuteassignment. As explained by the court, theforeclosure "was conducted by a party and anattorney who did not advertise for foreclosure

and gave no notice to anyone prior toforeclosure." Cummings, supra at 963. The courtconcluded that these circumstances chilled thebidding process by "effectively prevent[ing] theborrower, plaintiff, or anyone else, fromreaching [the party conducting the sale],obtaining information concerning theforeclosure, or attending the foreclosure sale."Id.

Relying on Cummings, the trial courtdetermined that potential bidders were led to

believe that the bank was the foreclosing lenderin this case and thus "had no way to eithercontact [the secured creditor] about theimpending foreclosure or appear at the [securedcreditor's] foreclosure sale." Unlike inCummings, however, the evidence demonstratesthat interested bidders and parties had notice ofthe secured creditor's involvement, despite theadvertising error. The debtor testified that he andhis partner knew about the assignment before theforeclosure sale. Moreover, the assignmentdocument recorded in Gwinnett County on May

30, 1997, informed the public that the bank hadtransferred the indebtedness to the securedcreditor. See, e.g., Leeds Building Products v.Sears Mortgage Corp., 267 Ga. 300, 302 (1)(477 SE2d 565) (1996) ("[I]n the absence offraud, a deed which, on its face, complies withall statutory requirements is entitled to berecorded, and once accepted and filed with theclerk of court for record, provides constructivenotice to the world of its existence."). Althoughthe filing occurred only four days before thesale, some notice was given.

The dispositive question is whether thesecured creditor exercised the power of sale"fairly and in good faith." Aikens v. Wagner,231 Ga. App. 178, 180 (2) (498 SE2d 766)(1998). The May 19 and May 30 advertisementscontained inaccurate information regarding theforeclosing party. But other evidence shows that

interested persons had at least constructivenotice of the proper party prior to the sale. Sothe record does not demonstrate that, as a matterof law, the bidding was chilled or the sale wasunfair; and the trial court erred in setting asidethe foreclosure sale on summary judgment.

We cannot agree with the secured creditor,however, that it was entitled to summary judgment regarding the validity of theforeclosure sale. As noted above, the securedcreditor did not file the assignment documentuntil four days before the sale. Moreover, it haspointed to no evidence conclusively showingthat, as a matter of law, the misinformation inthe advertisement did not impact the bidding orthat the sale was otherwise conducted fairly andin good faith. Simply put, questions of fact

remain as to the sale's validity. Accordingly, wereverse the judgment in Case No. A11A1166and remand for further proceedings on theforeclosure issue. See id. at 181 (factual issuesremained as to whether foreclosure sale shouldbe set aside).

Case No. A11A1165

3. In his appeal, the debtor challenges themoney judgment entered for the secured creditoron the promissory note. Given our decision inDivision 2, we agree that the money judgmentcannot stand.

The trial court addressed the issue of taxesand amounts owed under the promissory notesolely because it set aside the foreclosure sale,invalidated the foreclosure deed, and reinstatedthe note. Had it left the foreclosure sale in place,the court would not have addressed these issues.Accordingly, because we reversed the ordersetting aside the foreclosure sale in Case No.A11A1166, we must vacate the money judgmententered for the secured creditor. In so doing, we

express no opinion on the merits of the debtor'senumerated errors regarding the money judgment. We find only that because factualissues remain as to the validity of the foreclosuresale, the money judgment must be vacated. SeeBassett, 278 Ga. App. at 702 (2) (vacating ruling


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that depended on trial court finding that wasreversed on appeal).

4. Finally, the debtor argues that the trialcourt erred in refusing to consider his fraudclaim, which the court found to be insufficiently

pled. Pretermitting whether any error occurred,we note that "a party may amend his pleading asa matter of course and without leave of court atany time before the entry of a pretrial order."OCGA 9-11-15 (a). Absent a pretrial order, theright to amend ends only when trial begins.Nelson v. Zant, 261 Ga. 358, 359 (2) (405 SE2d250) (1991).

The record shows that the trial courtentered a pretrial order in this case. The securedcreditor, however, objected to the order, and the

trial court sustained the objection after findingthat the order "as entered, is inconsistent,unclear and not properly adjusted to thepleadings and/or the Order on SummaryJudgment." At this point, therefore, no pretrialorder exists. And although a trial was held, weare vacating the resulting judgment andremanding for new proceedings on theforeclosure and promissory note issues.

Under these circumstances, the debtor hasthe right to amend his complaint in accordancewith OCGA 9-11-15 (a), and he may cure anydeficiencies in his fraud allegations. See KaceInvestments v. Hull, 278 Ga. App. 477, 482 (1)(a) (629 SE2d 26) (2006) (broad right to amend

may not be exercised "after a case has been triedand a judgment rendered therein which has notbeen set aside or vacated") (punctuation omitted;emphasis supplied); see also OCGA 9-11-15(c) (when a claim asserted through an amendedpleading "arises out of the conduct, transaction,or occurrence set forth or attempted to be setforth in the original pleading, the amendmentrelates back to the date of the originalpleading"); Cochran Mill Associates v.Stephens, 286 Ga. App. 241, 248-249 (3) (648SE2d 764) (2007) (claim added through

amendment to renewal complaint relates back tooriginal action).

Judgment in Case No. A11A1165 vacated.Judgment in Case No. A11A1166 reversed.Phipps, P. J., and Andrews, J., concur.

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