Monday, December 20, 2010

Court Steps on “Standing” in Confirmation Actions

Hugh Wood, Atlanta, Georgia

Standing may not be challenged in an OCGA § 44-14-161 confirmation action post non-judicial foreclosure. Or, so Boring v. State Bank and Trust Company, Georgia Court of Appeals, A10A1106 (GACA), November 24, 2010, [1] holds.

While seeming peculiar that a defendant is precluded from challenging the “legal standing,” of a secured creditor (“Bank”) that files a foreclosure action against its debtor, the doctrine arises out of the “summary,” nature of the judicial proceeding. The Court of Appeals explained that the only issues before the Court in an OCGA § 44-14-161 deficiency judgment hearing are, generally: was notice given pursuant to the Deed to Secure Debt, were the proper notices mailed and or served as required by law, was a proper legal advertisement run in the legal organ for the statutory period of time, was the sale conducted during the legal hours for sale on the first Tuesday of the month on the Courthouse steps and can the Bank establish by admissible evidence the “true market value,” bid at the non-judicial foreclosure sale? If these elements are proven by the Bank at the hearing, it will be entitled to a Decree or an Order from the Superior Court “confirming,” a deficiency judgment against its debtor.

This same doctrine may be found in a landlord tenant summary dispossessory action. A tenant is precluded from challenging a landlord’s “title” to the property, since (presumably) the tenant has paid rent to the landlord in the past. Ergo, why did you pay the landlord if you didn’t think he had “title?” Or, so goes the legal argument. [2]

While not stated in Boring, supra, the argument might be: “Why did you (debtor) continue to pay the secured creditor, if you determined that it did not own the debt?” While perhaps a correct statement of the current law, it overlooks the current bizarre reality that no one – not even the Bank – seems to know who owns the debt at the time it goes into default. Even the most sophisticated of us are puzzled by the byzantine assignments to MERS and the various NATIONAL BANKING ASSOCIATIONAS TRUSTEE FOR THE CERTIFICATEHOLDERS OF MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2007-QR6, and other curious owners who file on the Courthouse records as Plaintiffs in confirmation actions.

Since the Order granting confirmation does not “result in a personal judgment,” Boring, supra, how does a debtor challenge the standing of a Bank that it alleges does not own the Note? Well, that is somewhat unclear in the face of Boring, supra.

If “standing” cannot be challenged at confirmation, then “standing,” will need to be challenged at suit on the note or enforcement of the promissory note. While this author does not want to swim upstream against this opinion, he recalls a number of FiFas that have issued post-confirmation. Since, absent the logic of Boring (which is logical, by the way) the issuance of a FiFa would seem to be a natural outflow of a postforeclosure “confirmation,” deficiency judgment.

However, if a debtor does determine, absolutely, that the Bank that does not own the foreclosed debt (most likely in the current economy due to a non-existent or ‘busted’ assignment), the debtor is going to have to affirmatively file some action at the time of the debt enforcement. That action is beyond the scope of this comment. The action may be a wrongful foreclosure action that seeks to challenge the validity of the foreclosure or perhaps it is some type of filing to “quash” enforcement of a defective judgment or levy to which the debtor asserts the “creditor,” has no true ownership.

Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
twitter: USALawyer_
Phone: 404-633-4100
Fax: 404-633-0068


Boring et al. v. State Bank And Trust Company, Court of Appeals of Georgia, Third Division, November 24, 2010 (No. A10A1106)

Barnes, Presiding Judge.

Richard M. Boring and Mechanical Equipment and Supply, Inc (hereinafter collectively “Boring”), appeal from the trial court’s order confirming the foreclosure sale of certain properties that State Bank and Trust Company held as security for commercial loans Boring guaranteed. Upon our review, we affirm.

In confirming a nonjudicial foreclosure sale under OCGA § 44-14-161, the trial court “shall require evidence to show the true market value of the property sold under the powers and shall not confirm the sale unless it is satisfied that the property so sold brought its true market value on such foreclosure sale.” OCGA § 44-14-161 (b). In such proceedings, the trial court sits as the trier of fact, and its findings and conclusions have the effect of a jury verdict. See Wilson v. Prudential Indus. Properties, 276 Ga.App. 180 (1) (622 S.E.2d 890) (2005), citing McCain v. Galloway, 267 Ga.App. 505 (600 S.E.2d 449) (2004). Thus, we will not disturb the trial court’s decision if there is any evidence to support it. Oates v. Sea Island Bank, 172 Ga.App. 178 (1) (322 S.E.2d 291) (1984). Additionally, “we do not determine witness credibility or weigh the evidence and we view the evidence in the light most favorable to the trial court’s judgment.” (Citation omitted.) McCain, supra.

So viewed, the evidence shows that in March of 2005, SouthBank gave Sierra Vista of Habersham, LLC, a commercial loan in the amount of $1, 420, 000.00 to purchase certain real property in Habersham County, and the company gave SouthBank a deed to secure debt on the property. Contemporaneously with the execution of the promissory note, Richard Boring, Sierra Vista’s registered agent and managing member, executed a guaranty in favor of SouthBank, personally guaranteeing the debt. In June of 2005, SouthBank changed its name to Security Bank of North Metro. The note and Boring’s guaranty were renewed several times during 2006 and 2007. In September of 2007, Richard Boring and Mechanical Equipment and Supply, Inc., each executed a guaranty of the Sierra Vista loan renewal.

In July of 2009, Security Bank was closed and the FDIC was appointed as Receiver for the bank, and became the successor-in-interest to the Note, security deed, guaranty, and renewals. In September of 2009, the FDIC assigned its interest in the Sierra Vista note, Boring’s guaranty, the security deed, and the renewals to State Bank. Sierra Vista defaulted on the loan, and in August of 2009, State Bank accelerated the loan, declaring the principal balance due immediately.

State Bank foreclosed on the property, and in October of 2009, purchased the approximately 10 acres of land secured by the note for $600, 000.00 as the highest bidder for cash. State Bank, thereafter, filed a petition to have the sale confirmed and approved for the purposes of pursuing a deficiency judgment against Boring. Boring filed its answer and a motion to dismiss, challenging the standing of State Bank to seek confirmation.

The parties stipulated as to the legality of the notice and the foreclosure sale itself. At the confirmation hearing, State Bank presented evidence on the true market value of the property through the testimony of its witness George Galphin, a certified general appraiser. Galphin testified that he had arrived at his valuation of the property through the use of the “sales comparison approach, ” comparing the property to five similar, recently sold properties. Galphin also testified that, of the five comparable properties, only one of them had been a “distressed sale, ” which required him to make adjustments to the property’s sale value in order to use it as a comparison to the property at issue.

The trial court admitted Galphin’s testimony and appraisal into evidence and found that State Bank had made out its prima facie case that the foreclosure sale price represented the true market value of the property, entering an order confirming and approving the sale pursuant to OCGA § 44-14-161.

1. Boring first contends that the trial court erred in holding that State Bank had the requisite “legal standing” to bring its confirmation action against the guarantors, and in holding that the issue of standing was irrelevant to a confirmation proceeding under OCGA § 44-14-161. We do not agree.

OCGA § 44-14-161 (a) provides that

[w]hen any real estate is sold on foreclosure, without legal process, and under powers contained in security deeds, ... no action may be taken to obtain a deficiency judgment unless the person instituting the foreclosure proceedings shall, within 30 days after the sale, report the sale to the judge of the superior court of the county in which the land is located for confirmation and approval and shall obtain an order of confirmation and approval thereon. (emphasis supplied.)

At the confirmation hearing, Boring challenged State Bank’s standing to bring the confirmation action because State Bank did not show that it had been properly assigned the guarantees.. The trial court found that such standing issues were “outside the scope of a confirmation hearing, ” citing this court’s opinion in Sparti v. Joslin, 230 Ga.App. 346 (496 S.E.2d 490) (1998). We agree.

Regarding the narrow applicability of the confirmation statute, our Supreme Court has explained:

The only purpose of the confirmation statute is to subject the creditor’s potential deficiency claim to the condition that the foreclosure sale under power be given judicial approval. The confirmation proceeding does not result in a personal judgment and it does not adjudicate the title of the property sold. Except as to the confirmed amount of the sale, it does not establish the liability of any party with regards to the indebtedness.

(Citation and punctuation omitted; emphasis supplied) Vlass v. Security Pacific Nat. Bank, 263 Ga. 296, 297 (1) (430 S.E.2d 732) (1993).

In McCain v. Galloway, 267 Ga.App. 505 (600 S.E.2d 449) (2004), McCain argued that Galloway failed to prove that Bartow County Bank had assigned the note and security deed to before he foreclosed on the property, and thus Galloway lacked standing to bring the confirmation action. Citing Sparti, this Court reaffirmed that the confirmation proceeding is a limited statutory proceeding, in which an assignment issue was not relevant to the confirmation proceeding.

Similarly here, “[t]he issue [of] whether [State Bank] was a real party in interest is not relevant to this confirmation proceeding, which was commenced in accordance with OCGA § 44-14-161 (a) by the person instituting the foreclosure proceedings.” Sparti v. Joslin, supra at 346 (1).

Accordingly, the trial court did not err in finding that the issue of standing was not relevant to the confirmation proceeding.

2. Although Boring also challenges the valuation evidence, we find no error.

Boring contends that Galphin, the appraiser, did not testify with specificity regarding the accuracy of his comparables, and did not verify the accuracy of information he utilized in valuing the property, but that he relied on inadmissable conclusions and opinions of unidentified third parties from his file.

While an “expert witness must not be permitted to serve merely as a conduit for hearsay, ” Whatley v. Terry, 284 Ga. 555 (668 S.E.2d 651) (2008), an expert witness’s assessment of market value is placed in a special category as it is “exclusively a matter of opinion even though expressed as a fact.” Unified Govt of Athens-Clarke County v. Watson, 255 Ga.App. 1, 4 (564 S.E.2d 453) (2002). Such an opinion “may rest wholly or in part upon hearsay, provided the witness has had an opportunity of forming a correct opinion.” Id.

Here, the record reflects that Galphin relied on the factual data collected by his staff for his valuation, not on their opinions as to the value of the properties in question. There being no evidence that his valuation was based on sheer speculation, we will not second-guess his methodology. Fayette Promenade v. Branch Banking &c. Co., 258 Ga.App. 323, 327 (574 S.E.2d 319) (2002). “‘As a general rule the price brought at a public sale, after proper and lawful advertisement, is prima facie the market value of the property sold, absent anything to indicate that there was chilling of the bidding, fraud, or the like adversely affecting the sale.’ Thompson v. Maslia, [supra, ] and cit.” Wachovia Mtg. Co. v. Moore, 138 Ga.App. 101 (225 S.E.2d 460) (1976), overruled on other grounds, Fed. Deposit Ins. Corp. v. Ivey-Matherly Constr. Co., 144 Ga.App. 313, 315 (1) (241 S.E.2d 264) (1977). Based on the evidence more fully set forth above, sufficient evidence supported the trial court’s confirmation of the foreclosure sale. Marett Properties v. Centerbank Mtg. Co., 204 Ga.App. 265, 267 (419 S.E.2d 113) (1992).

Boring argues that due to “the current great real estate recession” this Court should establish an evidentiary rule to the effect that an expert witness for the foreclosing party must introduce or rely on admissible evidence to show that comparable properties used in the assessment of the value of the foreclosure property were not “distressed sales.” He does not suggest, however, under what authority such a rule might be based, except for some generalized notion of the trial judge as gatekeeper of the admissibility of evidence, such as that related to expert witnesses in Condra v. Atlanta Orthopaedic Group, 285 Ga. 667, 671 (681 S.E.2d 152) (2009).

Moreover, OCGA § 44-14-161 (b) simply states that “[t]he court shall require evidence to show the true market value of the property sold [in foreclosure] and shall not confirm the sale unless it is satisfied that the property so sold brought its true market value on such foreclosure sale.” The statute does not preclude any specific method of property appraisal.

Judgment affirmed.

Smith, P.J. and Blackwell, J., concur fully and specially.

Blackwell, Judge, concurring fully and specially.

I concur fully in the majority opinion, but I write separately to explain why we do not scrutinize more carefully the methodology that the appraisal expert in this case used. In the majority opinion, we say that, because there is no evidence that the expert testimony about valuation was speculative, “we will not second-guess [the expert’s] methodology.” And that is appropriate in this case, I think, because no one filed a motion to exclude the testimony of this expert, no one objected at the hearing to his testimony on valuation, and no one moved to strike his testimony on valuation. Instead, after the expert testified about the value of the property without objection, [1] Boring simply argued that the expert testimony was insufficient to establish value because the methodology of the expert was, according to Boring, flawed. Accordingly, only the sufficiency of the evidence adduced at the confirmation hearing - not the admissibility of that evidence - was preserved for our review on appeal. In these circumstances, and because the confirmation statute specifies no particular means for appraising the true market value of the property at issue, I think that we correctly refrain from second-guessing the methodology used by the appraisal expert.

But when objection is timely and properly made to the admissibility of expert testimony in a civil action under OCGA § 24-9-67.1, second-guessing the methodology of the expert is precisely what the trial court is supposed to do. Enacted as part of the Tort Reform Act of 2005, OCGA § 24-9-67.1 permits a trial court to admit expert testimony in a civil case only when the testimony “will assist the trier of fact in any cause of action to understand the evidence or to determine a fact in issue” and only to the extent that “[t]he testimony is the product of reliable principles and methods” and “[t]he witness has applied the principles and methods reliably to the facts of the case.” OCGA § 24-9-67.1 (b). When objection is timely and properly made to the testimony of an expert witness, the trial court must function as a gatekeeper, see Condra v. Atlanta Orthopaedic Group, 285 Ga. 667, 671 (681 S.E.2d 152) (2009), and the trial court must scrutinize the methodology used by the expert and determine whether it is scientifically valid and, therefore, reliable before admitting the expert testimony. See Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579, 592-93 (113 S.C. 2786, 125 L.Ed.2d 469) (1993). [2]

Nothing in our decision today should be understood as a retreat from our obligation to ensure that the trial courts fulfill their role as a gatekeeper. And nothing in our decision today should be construed as a holding that the ordinary standards for the admissibility of expert testimony in civil cases do not apply to appraisal experts or in confirmation proceedings. Because the admissibility of the expert testimony in this case was not preserved for our review, we are not required to, and we do not, address such things.

I am authorized to state that Presiding Judge Smith joins in this opinion.



[1] Boring did object once on hearsay grounds when the expert was explaining his methodology and relating discussions that he had with certain public officials, and the trial court overruled the objection. This objection, however, did not pertain to the testimony about valuation - which the expert already had given without objection - and it is not, therefore, material to our assessment of whether the evidence of valuation was sufficient to sustain the confirmation of the sale.

[2] We look to Daubert and its progeny in construing OCGA § 24-9-67.1 See OCGA § 24-9-67.1(f); Mason v. Home Depot U.S.A.., 283 Ga. 271, 279 (5) (658 S.E.2d 603) (2008).


Holy Fellowship Church Of God In Christ v. Greater Travelers Rest Baptist Church, 236 Ga. App. 177, 511 SE2d 280 (1999).
BARNES, Judge.

Dispossessory action. DeKalb State Court. Before Judge Leshaw, pro hac vice.

After foreclosing on a security deed executed in its favor, Greater Travelers Rest Baptist Church ("Greater Travelers") filed a dispossessory action against Holy Fellowship Church of God in Christ ("Holy Fellowship"). Holy Fellowship appeals from the trial court's order granting a writ of possession, contending that the trial court erred when it found that OCGA 44-7-9 precluded Holy Fellowship from disputing Greater Travelers' ownership of the subject property. We agree and reverse the judgment of the trial court.

The record shows that Holy Fellowship's defense to the dispossessory action was based upon its claim that Greater Travelers no longer owned the property at the time it filed the dispossessory action. According to Holy Fellowship, Greater Travelers held a second mortgage on the property which was subordinate to a first mortgage jointly held by J. Mark Britain, Trustee, and Church Loans and Investment Trust ("Britain"). 1 Thus, Holy Fellowship argues, Britain's foreclosure on the subject property three months after Greater Travelers' foreclosure divested Greater Travelers of any ownership interest in the subject property.

During a hearing held on February 25, 1998, Greater Travelers asserted that Holy Fellowship's "title" defense was not a valid defense based upon OCGA 44-7-9, which provides: "The tenant may not dispute his landlord's title or attorn to another claimant while he is in actual physical occupation, while he is performing any active or passive act or taking any position whereby he expressly or impliedly recognizes his landlord's title, or while he is taking any position that is inconsistent with the position that the landlord's title is defective." Based upon a suit Holy Fellowship filed against Britain in another jurisdiction that contested Britain's right to foreclose on the property, the trial court found that Holy Fellowship had taken an inconsistent position and was therefore barred from contesting Greater Travelers' title to the property. The trial court apparently granted a writ of possession to Greater Travelers based on this conclusion.

1. In this appeal, Holy Fellowship contends the trial court erred when it found OCGA 44-7-9 barred its defense that Greater Travelers no longer owned the property at the time it filed the dispossessory action. We agree. "The defense of lack of landlord-tenant relationship is a proper defense to a dispossessory action; if the defendant so answers, a trial of the issues shall be had in a civil court of record." (Citations omitted.) Bread of Life Baptist Church v. Price, 194 Ga. App. 693-694 (392 SE2d 15) (1990). See also Womack v. Columbus Rentals, 223 Ga. App. 501, 503 (2) (a) (478 SE2d 611) (1996).

In Raines v. Hindman, 136 Ga. 450, 452-453 (71 SE 738) (1911), the Supreme Court of Georgia explained the difference between an improper defense based upon a defect in the original grant of title to the landlord and a legitimate defense based upon a later transfer of ownership or title by the landlord. "[O]ne who holds land rented from another will be estopped from claiming that at the time the property was rented the landlord did not have title thereto. This doctrine however, can not be so extended as to prevent the tenant from showing that during the term of the tenancy the landlord's title expired by limitation, or that the same has been divested by judicial sale, or that the landlord has voluntarily parted with title during the tenancy. Showing that the landlord has . . . parted with title during the tenancy does not involve a dispute of the landlord's title at the time the contract for rent was made, but is an implied admission that the landlord had such title." Id.

This is a proper defense to a dispossessory action and Holy Fellowship is therefore entitled to a trial on the issue of whether a landlord-tenant relationship exists between the parties. See Thomas v. Wells Fargo Credit Corp., 200 Ga. App. 592, 593 (2) (409 SE2d 71) (1991). As a result, we reverse the trial court's grant of a writ of possession to Greater Travelers.

2. We cannot consider the portion of Holy Fellowship's enumeration that relates to the trial court's April 15, 1998 order because this order was entered after Holy Fellowship filed a notice of appeal from the trial court's February 25, 1998 order. Costanzo v. Jones, 200 Ga. App. 806, 811 (3) (409 SE2d 686) (1991).

Giddens, Davidson & Mitchell, Bobby L. Giddens, for appellee.

1 Greater Travelers disputes this claim and asserts that it held a first mortgage on the property because its security deed was filed before Britain's security deed.
Newton H. Purvis, John A. Pickens, for appellant.


My apologies to Cecil John Rhodes (1853 – 1902).  I could not find a photo that conveyed the concept of “standing.”  This drawing is from a Cartoon by Edward Linley Sambourne, published in Punch after Rhodes announced plans for a telegraph line from Cape Town to Cairo.  Wiki.

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