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                                                                        July 13, 2015




In the Court of Appeals of Georgia
 A15A0486. CLARK v. AGGEORGIA FARM CREDIT ACA.


      MCMILLIAN, Judge.

      Appellant Donald Clark (“Donald”) filed a complaint, as amended and recast

several times, against appellee AgGeorgia Farm Credit ACA (“AgGeorgia”)1 seeking

damages arising from the alleged breach of certain deeds to secure debt and the

wrongful foreclosure of a 278 acre farm in Wilcox County, Georgia (the “Farm”) that

Donald jointly owned2 with his brother Harris Edwin Clark (“Edwin”; collectively

referred to as “the Brothers”). The trial court granted partial summary judgment to




      1
          As the name implies, AgGeorgia makes loans for agricultural purposes.
      2
          The Brothers each owned a one half undivided interest in the Farm.
AgGeorgia, and Donald timely filed an appeal to this Court.3 Having carefully

considered the issues raised in this appeal, we now reverse.

      The underlying facts are essentially undisputed. The Brothers jointly purchased

the Farm sometime during the 1980’s and operated the Farm together for many years.

In 1997, the Brothers obtained individual loans from AgGeorgia’s predecessor, at

which time they jointly executed two deeds to secure debt pledging the Farm as

security for the loans (collectively referred to as the “1997 Deeds”).

      According to AgGeorgia, the 1997 Deeds were set to expire on December 1,

2004, and in October 2004, the Brothers jointly executed two new security deeds

(DSD No. 1 and DSD No. 2; collectively referred to as the “2004 Deeds”) pledging

the Farm to secure certain identified existing loans, which AgGeorgia had

individually extended to the Brothers. More specifically, DSD No. 1 identified an

existing loan to Donald, who was named as the sole “Borrower” under that deed, and

DSD No. 2 identified an existing loan to Edwin, who was listed as the sole

“Borrower” in DSD No. 2. Donald and Edwin, who were defined as the

“Undersigned, whether one or more,” jointly executed the 2004 Deeds. The 2004


      3
       Donald also moved for partial summary judgment, and the trial court denied
his motion in the same order.

                                          2
Deeds were in many respects identical to the 1997 Deeds4 and contained many of the

same terms and conditions, including “open end” and “dragnet” clauses, which made

additional loans, advances, and other indebtedness subject to the 2004 Deeds under

certain conditions.

      Edwin paid off the debt identified in DSD No. 2 in January 2005, and Donald

paid off the debt identified in DSD No. 1 in February 2005. In the summer of 2004,

the Brothers had a disagreement over a matter unrelated to their farming operations,

and in the ensuing months their relationship deteriorated to the point that they ceased

farming together shortly after the notes were paid off. However, the Brothers

continued to farm separately, and in April 2005 Donald obtained another loan from

AgGeorgia, which was evidenced by a promissory note in favor of AgGeorgia for

$80,000. In 2007, Donald obtained two additional loans and executed two additional

promissory notes in favor of AgGeorgia.5

      In 2008, AgGeorgia notified Donald that he was in default on his Subsequent

Loans and warned him that it intended to initiate a foreclosure action if he did not

      4
          The 1997 Deeds and 2004 Deeds will be collectively referred to as “the
Deeds.”
      5
       The April 2005 and 2007 loans will be referred to as “Donald’s Subsequent
Loans.”

                                          3
satisfactorily restructure the loans. Donald failed to cure the default or otherwise

restructure the loans, and in April 2009, AgGeorgia notified Edwin and Donald that

Donald was in default on his Subsequent Loans as well as an additional note he

executed in March 5, 2004,6 and that it intended to initiate judicial foreclosure

proceedings under the terms of DSD No. 1 if Donald did not satisfy the outstanding

debt, which at that time was slightly over $193,000 including interest and fees, within

ten days. Although Edwin apparently did not have any outstanding loans to

AgGeorgia at that time, after he was notified of the pending foreclosure he requested

and received a $190,000 loan from AgGeorgia, which was evidenced by a promissory

note he signed on April 9, 2009 (hereinafter referred to as “Edwin’s Subsequent

Loan”). AgGeorgia did not provide notice to Donald of Edwin’s Subsequent Loan,

nor did it attempt to obtain Donald’s written consent prior to extending the loan.

      After providing additional notice of default and advertising the sale, AgGeorgia

foreclosed on the 2004 Deeds in August 2009, at which time Donald’s outstanding

debt amounted to approximately $198,748.70 and Edwin’s outstanding debt

amounted to $191,838.21. Edwin entered the highest bid at the foreclosure sale,

      6
       The purpose of the March 4, 2004 loan was to finance Donald’s share of the
purchase price of an irrigation pivot he had purchased with Edwin, and AgGeorgia
was granted a security interest in the pivot to secure the loan.

                                          4
purchasing the Farm for $392,480. Donald was present at the foreclosure sale but did

not object or challenge the sale at that time.

      Over three years after the foreclosure sale, Donald instituted the present

proceedings, contending, among other things, that AgGeorgia improperly exercised

the power of sale in the 2004 Deeds because DSD No. 1 did not secure his previous

indebtedness other than indebtedness specifically identified in the deed, and neither

his nor Edwin’s subsequent indebtedness was secured by the 2004 Deeds because

AgGeorgia did not obtain the consent of the “non-borrowing” brother to the other

brother’s loans. Further, Donald also challenged the foreclosure on the basis that

AgGeorgia was not the holder of either the notes or the 2004 Deeds at the time it

instituted the foreclosure proceedings.7 Both parties filed motions for partial summary

judgment, and following a hearing, the trial court entered a written order denying

Donald’s motion for partial summary judgment and granting partial summary

judgment to AgGeorgia on Donald’s claims for breach of contract and wrongful

foreclosure. We agree with Donald that the trial court erred by granting summary



      7
       Pursuant to a General Financing Agreement, AgGeorgia assigned the notes
and deeds to AgFirst Farm Credit Bank (“AgFirst”), which provided funding for
AgGeorgia’s loans through a line of credit.

                                           5
judgment to AgGeorgia and denying Donald’s motion on these claims and

accordingly reverse.

      1. The 2004 Deeds contain three sections that set out the indebtedness secured

by the deeds. Section One of each deed identifies a specific pre-existing individual

note for a specific loan made to each brother for which the Farm was pledged as

security; Section Two addresses only subsequent “additional” loans made to the

“Borrower” that are evidenced by a note or notes; and Section Three applies to both

pre-existing indebtedness as well as indebtedness that may be “contracted” after the

execution of the Deeds. As stated above, the specifically identified indebtedness of

each brother specified in Section One has been satisfied, and thus is not at issue here.

However, we must determine whether the Brothers’ Subsequent Loans were secured

under Section Two, and whether Donald’s March 2004 loan was secured under

Section Three.

      “Under Georgia law, a security deed which includes a power of sale is a

contract and its provisions are controlling as to the rights of the parties thereto and

their privies.” Stewart v. Suntrust Mtg., Inc., ___ Ga. App.___ (3) (Case No.

A14A2047, decided March 27, 2015). And [t]he construction of an unambiguous

deed, like the construction of any other contract, is a question for determination by

                                           6
the court.” Turk v. Jeffreys-McElrath Mfg. Co., 207 Ga. 73, 76 (2) (60 SE2d 166)

(1950). Under Georgia law, the cardinal rule of contract construction is to ascertain

the intention of the parties, as set out in the language of the contract. Shepherd v.

Greer, Klosic & Daugherty, 325 Ga. App. 188, 189-190 (750 SE2d 463) (2013) (the

overarching consideration “is to effectuate the intent of the parties as set out in the

language of the agreement”).

      [I]f that intention is clear and it contravenes no rule of law and sufficient
      words are used to arrive at the intention, it shall be enforced irrespective
      of all technical or arbitrary rules of construction. Further, the
      construction which will uphold a contract in whole and in every part is
      to be preferred, and the whole contract should be looked to in arriving
      at the construction of any part. Moreover, no construction is required or
      even permitted when the language employed by the parties in the
      contract is plain, unambiguous, and capable of only one reasonable
      interpretation.


(Citations and punctuation omitted.) Id. at 190.

      (a) Section Two and Subsequent Loans. Under Section Two (“open end

clause”) of the Deeds, the Farm was pledged to secure not only the loans specifically

identified in the Deeds, but also

      (2) all additional loans and advances that may subsequently be made to
      Borrower (or to any one or more of the parties designated as

                                           7
      Undersigned or Borrower, with the written consent of the remainder of
      said Undersigned or Borrower), by Lender, which will be evidenced by
      a note or notes . . .”


      As set out above, Section Two consists of two parts – a parenthetical and

language outside the parenthetical. According to the language outside the

parenthetical, the property pledged in the deeds acts as security under the following

circumstances: 1) all subsequent loans, 2) evidenced by a note or notes, and 3) made

to the “Borrower.” However, in situations where the language inside the parenthetical

applies, an additional requirement – written consent by the “remainder” of the

Undersigned or Borrower – is clearly imposed as a condition for the deed to secure

a subsequent debt. Thus, we cannot simply ignore the language inside the

parenthetical because clearly that language applies in some circumstances. The key

question then is under what circumstances does the consent requirement apply.

      We first examine whether this question can be answered solely by reference to

the language of the 2004 Deeds. AgGeorgia seizes on the fact that the parenthetical

refers to “parties,” in the plural rather than “party” in the singular, and urges that

consent is only required when 1) there are multiple “parties” who have been identified

as Borrower, or 2) when there are multiple parties identified as Undersigned and none


                                          8
of them is also the sole identified Borrower. Thus, AgGeorgia argues that Section

Two comes into play in only two circumstances – where an additional loan is made

to a Borrower, and there are multiple persons designated as Borrower, or when an

additional loan is made to an Undersigned, and there are multiple persons designated

as Undersigned and the Undersigned who receives the additional loan is not also the

sole borrower. But AgGeorgia’s reading of Section Two on the one hand appears to

ignore that the phrase “or to any one or more” immediately precedes the word

“parties,” and on the other hand appears to read into the clause conditions that do not

appear in the parenthetical.

      Donald argues that the proper meaning of Section Two is best understood by

inserting the proper names of the parties into the deeds. For example, according to

Donald, DSD No. 1 secured all subsequent loans “made to [Donald] (or to any one

or more of the parties designated as [Edwin and Donald] or [Donald] with the written

consent of the remainder of said [Edwin and Donald] or [Donald]).” Thus, Donald

argues, under this interpretation, the consent of the non-borrowing brother was

required.

      Although both of these interpretations are strained and appear to read language

into or out of the parenthetical in order to reach their interpretation, we cannot say

                                          9
that either interpretation is unreasonable. Further, any interpretation we place on the

section would suffer from the same defects. “[W]e have defined ambiguity to mean

‘duplicity, indistinctness, an uncertainty of meaning or expression used in a written

instrument, and it also signifies being open to various interpretations.” (Citation and

punctuation omitted.) Shepherd, 325 Ga. App. at 190. Horwitz v. Weil, 275 Ga. 467,

468 (569 SE2d 515) (2002) (“Ambiguity in a contract is defined as duplicity,

indistinctness or an uncertainty of meaning or expression.”). In other words, “[a]

word or phrase is ambiguous when its meaning is uncertain and it may be fairly

understood in more ways than one.” Freund v. Warren, 320 Ga. App. 765, 769, n.4

(740 SE2d 727) (2013). Accordingly, we conclude that Section Two is ambiguous to

the extent that it fails to specify when consent to subsequent loans is required as a

condition precedent to a subsequent debt being secured by the deed.

      Because Section Two is ambiguous, we must now attempt to resolve that

ambiguity by applying the statutory rules of construction to ascertain the intent of the

parties. See OCGA § 13-3-2. “If a term used in a contract is of uncertain meaning and

may be fairly understood in more ways than one, it is ambiguous, and we apply the

rules of contract construction in an effort to resolve the ambiguity. The proper

construction of a contract is a question of law for a court to determine.” (Citations and

                                           10
punctuation omitted.) Garrett v. Southern Health Corp. of Ellijay, Inc., 320 Ga. App.

176, 182 (1) (739 SE2d 661) (2013). Thus, “it is only when the ambiguity remains

after applying the rules of construction that a jury must resolve the issue of what the

ambiguous language means.” Shepherd, 325 Ga. App. at 192.

      One primary rule of statutory construction requires us to construe any

ambiguity most strongly against the party who drafted the agreement. Hertz Equip.

Rental Corp. v. Evans, 260 Ga. 532 (397 SE2d 692) (1990); See also Willesen v.

Ernest Communications, Inc., 323 Ga. App. 457, 460 (1) (746 SE2d 755) (2013). It

is undisputed in this case that AgGeorgia drafted the 2004 Deeds, and thus as an

initial matter the Deeds must be construed against AgGeorgia.

      Further, if a party intends to contract away a substantial right, such as having

future encumbrances placed on their property interests without their knowledge or

consent, such must plainly appear from the contract. Covington v. Brewer, 101 Ga.

App. 724, 729 (3) (115 SE2d 368) (1960) (“since contracts must be construed

according to the intention of the parties at the time of their execution it will not be

presumed that parties intend to contract away their legal rights in regard to a subject

matter not clearly appearing therein”). Additionally, “[t]he laws which exist at the

time and place of the making of a contract, enter into and form a part of it; and the

                                          11
parties must be presumed to have contracted with reference to such laws and their

effect on the subject matter.” (Citations and punctuation omitted.) Magnetic

Resonance Plus, Inc. v. Imaging Systems Intl., 273 Ga. 525, 527 (2) (543 SE2d 32)

(2001).

      Pursuant to OCGA § 44-14-1 (b), “open-end” or “dragnet” clauses contained

in mortgages or deeds conveying realty to secure a debt have been limited to “debts

or obligations arising ex contractu, . . . between the original parties to the security

instrument.” (Emphasis supplied.) Thus, “[u]nless the security instrument clearly

contemplates joint and several liability, all of the grantors to the security instrument

containing the open-ended clause must be parties to the separate indebtedness, though

not all of the parties to the separate indebtedness must be parties to the security

instrument.” (Footnotes omitted.) Frank S. Alexander, Georgia Real Estate Finance

and Foreclosure Law, p. 37, § 2-3 (2014-2015 ed.). See also Hill v. Perkins, 218 Ga.

354 (127 SE2d 909) (1962); Cordele Banking Co. v. Powers, 217 Ga. 616, 619 (1)

& (2) (124 SE2d 275) (1962) (the individual indebtedness of one of the grantors is

not the debt of both of grantors and does not fall within the open-end clause of the

security deed); In re Felker, 181 Bankr. 1017 (Bankr. M.D. Ga. 1995); Americus

Finance Co. v. Wilson, 189 Ga. 635 (1) (7 SE2d 259) (1940); cf. Sutton v. Atlantic

                                          12
Bank & Trust Co., 167 Ga. App. 861, 863 (307 SE2d 746) (1983) (subsequent debts

were deemed secured where it was clear that the grantors included either the singular

or the plural grantors and that it was uncontradicted that all the parties to the deed

intended that the debts of one borrower would be secured by deed). As our Supreme

Court has explained, “it is obvious that an additional debt of one creditor cannot

operate as a hook to grab a dragnet which carries with it the property interests of a

party other than the creditor in the separate transaction.” Willis v. Rabun County

Bank, 249 Ga. 493, 494 (291 SE2d 715) (1982).

      In this case, the 2004 Security Deeds were expressly “made . . . between H.

Edwin Clark and Donald L. Clark,” as “Undersigned, . . . and AgGeorgia.” Both

Edwin and Donald are the Grantors under the 2004 Deeds and they, along with

AgGeorgia, as the Grantee, are the original parties to the deeds. The consent

requirement, as asserted by Donald, is thus wholly consistent with existing law in that

without the express consent of the non-borrowing brother, the property would not be

automatically pledged to secure the debt of the borrowing brother.8

      8
        If AgGeorgia wanted to avoid the limitation without obtaining the express
consent of the other brother, it could have included language in the deed specifically
referencing OCGA § 44-14-1 and plainly and unambiguously provided that the non-
borrowing brother consented to his share of the realty acting as security for the other
brother’s future loans.

                                          13
      Additionally,”[t]he parties’ interpretation is entitled to great, if not controlling,

influence, and will generally be adopted and followed by the courts, particularly when

the parties’ interpretation is made before any controversy, or when the construction

of one party is against his interest.” (Citations and punctuation omitted.) Anderson

v. Anderson, 274 Ga. 224, 226 (2) (552 SE2d 801) (2001). Thus, “the construction

placed upon a contract by the parties thereto, as shown by their acts and conduct, is

entitled to much weight and may be conclusive upon them.” (Citations and

punctuation omitted.) Cohen v. Sandy Springs Crossing Assocs., L.P., 238 Ga. App.

711, 712-713 (520 SE2d 17) (1999).

      Although not expressly acknowledged by AgGeorgia, it appears undisputed

that AgGeorgia had routinely obtained the non-borrowing brother’s consent to loans

extended to the other brother under the virtually identical Section Two of the 1997

deeds,9 and the only reason that appears in the record to explain why AgGeorgia

ceased obtaining the written consents was testimony by an AgGeorgia former

employee that due to changes in its computer program, the consents were no longer

      9
        One such consent, executed by Edwin in 2002, is contained in the record.
That consent provides: “[t]he undersigned (whether one or more), having an interest
in the real property described in the security instrument above referenced, hereby
consent to the making of an advance in the amount of $217,300.00 and acknowledge
that such is secured by the security instrument.”

                                           14
automatically generated when the loan documents were generated. Further, Donald

testified and averred that AgGeorgia had requested that he take a consent form to

Edwin to sign for one of his subsequent loans. Accordingly, AgGeorgia’s own

practices demonstrate that at least up until a certain point, it had adhered to the

language inside the parenthetical when extending a loan to one of the Brothers.

      Application of these well-established rules of statutory construction resolves

the ambiguity in this case in favor of the construction placed on Section Two by

Donald. Accordingly, we conclude that Section Two required written consent from

the non-borrowing brother in order for the Farm to be pledged as security for future

loans to the other brother. It follows that AgGeorgia wrongfully foreclosed on

Donald’s Subsequent Loans and Edwin’s 2009 Loan because no consent was

obtained and none of those debts were secured by the 2004 Deeds.

      (b) Section Three and the March 2004 Loan. But that does not end our analysis

because AgGeorgia argues that even if AgGeorgia was required to obtain consent

under Section Two, its failure to do so did not render the foreclosure “wrongful”

because Donald’s March 2004 loan was secured by Section Three of DSD No. 1,

which did not contain any consent requirement. Once again, however, the parties

place varying interpretations on this provision of the deed.

                                         15
      Section Three provides in relevant part that “all other indebtedness of Borrower

to Lender, now due or to become due, (whether directly or indirectly) or hereafter to

be contracted, . . .” is secured under the terms of the deed. Donald argues that because

Section Three refers to “other” loans, both pre-existing and those that might occur

later, and Section Two refers to subsequent loans that are evidenced by a note,

Section Three must necessarily refer only to loans which are not evidenced by a note

or notes. In contrast, AgGeorgia directs our attention to the word “other” and argues

that the use of this word merely distinguishes the debts covered by Section Three

from those covered by Sections One and Two.

      However, we need not belabor the meaning of Section Three, because we

believe the March 2004 note was unsecured for another reason. As explained in

Division 1, OCGA § 44-14-1 (b) specifically limits the operation of such open-end

or dragnet clauses to “the original parties to the security instrument,” and thus neither

the pre-existing nor the subsequent debts of the individual brothers were secured by

the note without a clear and unambiguous expression of such an intent. See Sutton,

167 Ga. App. at 863. Here, the March 2004 loan was obtained for an express purpose

of securing a certain piece of farm equipment, and the farm equipment purchased with

the loan proceeds was pledged as security for the loan. Only one outstanding loan was

                                           16
specified in the deed, and Donald testified that the parties never discussed the Farm

being pledged as additional security for the March 2004 equipment loan.

      Because none of the notes declared in default were secured by the 2004 Deeds,

AgGeorgia had no authority to foreclose under the terms of those deeds. Accordingly,

the trial court erred by granting partial summary judgment to AgGeorgia; instead,

partial summary judgment should have been granted to Donald.

      2. Because of our holdings in Divisions 1 and 2, we need not reach the question

of whether AgGeorgia improperly exercised the power of sale contained in the deeds

because it had assigned both the notes and the 2004 Deeds to AgFirst prior to

instituting the foreclosure proceedings.

      Judgment reversed. Andrews, P. J., Dillard and Boggs, JJ., concur. Barnes, P.

J., Phipps, P. J., and Ray, J., dissent.




                                           17
 A15A0486. CLARK v. AGGEORGIA FARM CREDIT ACA.

      RAY, Judge, dissenting.

      While I agree with the majority's decision to reverse the summary judgment

which was granted in favor of AgGeorgia, although I do not necessarily agree with

everything that was written in support of that conclusion, I must dissent from the

majority's decision that the trial court should have instead granted summary judgment

in favor of Donald. In my view, the entirety of this dispute should be resolved in a

jury trial. Due to the inherent inconsistency in the applicable clauses in the loan

documents, as well as the unique circumstances of this case wherein Donald's claims

have evolved during the litigation to cast himself in a position of even greater harm

despite the implicit acknowledgment in his original complaint that some action by

AgGeorgia as to the subject property was proper given his indebtedness thereto, and

the fact that ambiguity remains as to both the meaning of the contract provisions and

the intent of the parties even after the application of the normal rules of construction,
I would instead return this case to the trial court to allow the parties to present their

claims to a jury to sort out the respective contract rights and equities of the situation.

      I am authorized to state that Presiding Judge Barnes and Presiding Judge

Phipps join in this dissent.




                                            2
