978-1285770178 Case Problem Case CPC-21-05

676 S.E.2d 394

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296 Ga.App. 782, 676 S.E.2d 394, 68 UCC Rep.Serv.2d 576, 09 FCDR 1129

(Cite as: 296 Ga.App. 782, 676 S.E.2d 394)

Ga.App.,2009.

Okefenokee Aircraft, Inc. v. PrimeSouth Bank

296 Ga.App. 782, 676 S.E.2d 394, 68 UCC Rep.Serv.2d 576, 09 FCDR 1129

Court of Appeals of Georgia.

OKEFENOKEE AIRCRAFT, INC. et al.

v.

PRIMESOUTH BANK.

No. A08A1926.

March 20, 2009.

balance due on loan following repossession of collateral that secured loan without first having to dispose of collat-

eral.

Affirmed.

349Ak240 k. Deficiency and Personal Liability. Most Cited Cases

Secured creditor was statutorily authorized to seek money judgment on balance due on loan following repossession

of collateral that secured loan without first having to dispose of collateral. West’s Ga.Code Ann. § 11-9-601.

[2] Secured Transactions 349A 226

[3] Secured Transactions 349A 1

349A Secured Transactions

349AI Nature, Requisites, and Validity

676 S.E.2d 394

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296 Ga.App. 782, 676 S.E.2d 394, 68 UCC Rep.Serv.2d 576, 09 FCDR 1129

(Cite as: 296 Ga.App. 782, 676 S.E.2d 394)

[4] Secured Transactions 349A 1

with an immediate source of recovery in addition to the standard remedies of an unsecured creditor.

[5] Secured Transactions 349A 161

349A Secured Transactions

349AVII Default and Enforcement

349Ak229 Disposition of Collateral

349Ak231 k. Manner of Disposition in General. Most Cited Cases

The Uniform Commercial Code (UCC) includes a mandate that the creditor act in a commercially reasonable man-

ner. West’s Ga.Code Ann. § 11-9-101 et seq.

Secured Transactions 349A 231

349A Secured Transactions

349AVII Default and Enforcement

349Ak242 Wrongful Enforcement

349Ak242.1 k. In General. Most Cited Cases

Once a creditor has possession of collateral that was security for a note, he must act in a commercially reasonable

manner toward sale, lease, proposed retention, where permissible, or other disposition, and if such disposition is not

676 S.E.2d 394

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296 Ga.App. 782, 676 S.E.2d 394, 68 UCC Rep.Serv.2d 576, 09 FCDR 1129

(Cite as: 296 Ga.App. 782, 676 S.E.2d 394)

**395 Cohen, Pollock, Merlin & Small, Gus H. Small, Jr., Karen F. White, Atlanta, for appellants.

Kopp & Conner, Neal L. Conner, Jr., Waycross, for appellee.

while seeking an independent action for money judgment and therefore affirm.

The following facts are undisputed. On or around September 9, 2005, the Bank issued a loan to OAI for the purchase

of an airplane. OAI executed a promissory note (the “Note”) in favor of the Bank in the principal amount of

$161,306.25 plus interest. Rimes executed a personal guarantee on the Note, guaranteeing the payment of sums due

The Bank moved for summary judgment, arguing that the facts of the case were undisputed and that the only issue

for the trial court’s consideration was OAI‘s admitted default and non-payment of the indebtedness under the Note;

therefore, the Bank argued that it was entitled to the relief sought as a matter of law. The Bank considered irrelevant

its repossession of the collateral to the fact that it was entitled to a money judgment against the appellants for the

a genuine issue of material fact as to whether the Bank acted in a commercially reasonable manner as required by

the Uniform Commercial Code.

The trial court agreed with the Bank and, given that the existence of the loan, the default, and the guarantee were

undisputed, granted its motion for summary judgment. The trial court specifically held that “[t]he potential breach of

collateral and credits the net proceeds of the sale to the indebtedness.

[1] Appellants’ arguments are misplaced. The present lawsuit dealt only with the Note that OAI signed and that

Rimes guaranteed; the undisputed facts established both the appellants’ default in payment and the amount of the

underlying debt. Appellants did not file a counterclaim or otherwise present any evidence that the Bank’s handling or

676 S.E.2d 394

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296 Ga.App. 782, 676 S.E.2d 394, 68 UCC Rep.Serv.2d 576, 09 FCDR 1129

(Cite as: 296 Ga.App. 782, 676 S.E.2d 394)

not disposing of the collateral itself gave rise to a factual issue as to the reasonableness of its conduct. But, as illus-

trated below, the applicable statutory and case law authorizes the Bank to simultaneously *784 repossess and retain

its collateral while at the same time seeking a money judgment for the full amount of the outstanding debt.

Terryphone Corp. v. Modems Plus, 171 Ga.App. 710, 711-712(2), 320 S.E.2d 784 (1984). To the contrary, the Code

expressly states that the rights and remedies afforded a secured creditor “are cumulative and may be exercised sim-

ultaneously.” OCGA § 11-9-601(c).

FN1. The Note specifically provided that, in the event of default, the Bank “may use any remedy ... under

state or federal law.”

creditor. The intent of the [C]ode was to broaden the options open to a creditor after default rather than to limit

them under the old theory of election of remedies.

(Citation and punctuation omitted.) McCullough, 139 Ga.App. at 263(2), 228 S.E.2d 146. See ITT Terryphone

Corp., 171 Ga.App. at 711-712(2), 320 S.E.2d 784.

file suit on the [Note] without first disposing of the collateral was not improper under the terms of the [Note] or of

the Uniform Commercial Code.” *785 ITT Terryphone Corp., 171 Ga.App. at 712(2), 320 S.E.2d 784. Nor did the

Bank’s repossession of the collateral impact the amount of the OAI’s outstanding debt under the Note. See id.;

McCullough, 139 Ga.App. at 263(2), 228 S.E.2d 146.FN2

FN2. We note that other jurisdictions that have considered this issue have reached the same result. See gen-

in possession of collateral, including a mandate that the creditor act in a commercially reasonable manner. FN3 As

this Court has previously explained:

676 S.E.2d 394

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296 Ga.App. 782, 676 S.E.2d 394, 68 UCC Rep.Serv.2d 576, 09 FCDR 1129

(Cite as: 296 Ga.App. 782, 676 S.E.2d 394)

FN3. See, e.g., OCGA §§ 11-9-207(a) (“[A] secured party shall use reasonable care in the custody and

pose of collateral, “[e]very aspect of a disposition of collateral, including the method, manner, time, place,

and other terms, must be commercially reasonable.”).

It would be unfair to allow a creditor to deprive the debtor of the possession and use of the collateral for an unrea-

sonable length of time and not apply the asset or the proceeds from its sale toward liquidation of the debt. Moreo–

a right of recovery.

(Citation and punctuation omitted; emphasis in original.) ITT Terryphone Corp., 171 Ga.App. at 712(3), 320 S.E.2d

784.

Thus, if the Bank fails to proceed in a commercially reasonable manner with respect to its handling of the repos-

answer that question in the positive. See Ricker, 215 Ga.App. at 794-795, 452 S.E.2d 583; ITT Terryphone Corp.,

171 Ga.App. at 711-712(2), 320 S.E.2d 784; McCullough, 139 Ga.App. at 263(2), 228 S.E.2d 146. Accordingly, we

affirm the judgment of the trial court.

Judgment affirmed.

END OF DOCUMENT