FOURTH D I VI SI ON

DI LLA R D, C. J.

, D OYLE, P. J.

, and M ERCI ER, J.

N O T IC E : M otions for r e c ons i de r a tion m us t be

ph y sic a l ly r e ce iv ed i n our c le r k ’s offic e w ithin te n

da y s of the da te of de c is ion to be de e m ed tim e ly file d.

http://w w w .ga a ppe a l s .us /r ule s

June 21, 2018



# I n th e Co u r t o f

A p p eals o f

G eo r g ia

A1 8 A0 44 0 . PERFORM ANCE FOOD GROUP, INC., v . DAVIS. DO-0 1 5

D O Y LE , Pres i d i n g J u d g e.

Th i s cas e ari ses fro m a p et i t i o n fo r i n t erp l ead er, OCGA § 48 -4 -5 (b ), fi l ed o n

Oct o b er 1 4, 2 0 1 6

, b y Terres a Dav i s

, i n h e r c a p aci t y as Pi erce Co u n t y Tax

Co m m i s s i o n er, fo l lo w i n g th e s al e o f 5 3 4 Go rd o n St reet (“ t he Pro p ert y ”) at a t ax s al e

fro m wh i ch ex c es s fu n d s were g en erat ed

. Th e t w o res p on d en t s t o t h e i n t erp l ead er

w e r e Pri m eSo u t h Ban k (“ t h e Ban k ”) an d Perfo rm an ce Fo o d Gro u p (“ PFG”). T h e

Ban k m o v ed fo r s u m

m ary ju d g m en t

, as s ert i n g a cl ai m fo r t h e ex ces s fu n d s

, an d aft er

a h eari n g

, t h e t r ial co u rt gran t ed t h e Ban k ’ s m ot i o n

. PFG ap peal s

, arg ui n g t h at t h e

t ri al co urt erred b y gran t in g t h e Ban k ’ s m o ti o n b ecau s e (1 ) th e Ban k ’ s p u rch as e o f t h e

Pro p ert y at t he t ax s al e an d t h e Ban k ’ s su b seq u en t fo recl o s u re o n i t s d eed t o s ecu re

d eb t aft er t h e ta x s al e res u lt ed i n a m erg er o f es t at es s u ch t h at t h e Ban k ’ s s ecu ri t yd eed n o l o n g er had p ri o ri t y fo r p u rp o s es o f t h e ex ces s t ax sal e fu n d s ; (2 ) t h e r e s u l t

t h at t h e Ban k g et s b o t h t h e p ro p ert y an d th e ex ces s t ax s al e fu nd s i s i n eq u i t ab l e; an d

(3 ) t h e Ban k ’ s m o ti o n fo r su m m ary ju d g m en t w as n o t s u pp o rt ed b y co m p et en t

ev i d en ce o f t h e ex i s t i n g d eb t

. Becau s e t h e Ba n k ’s m o ti o n was n o t s u pp o rt ed by

co m p et en t ev i d en ce, we are co n s t rai n ed to rev ers e th e g ran t o f s u m m ary ju d g m en t in

i t s fav or.

Su m

m ary ju dg m en t i s p ro p er i f t he p l ead i ng s an d ev i d en ce s h o w

t h at t h ere is n o g en u i n e i s s u e as t o an y m at eri al fact an d t h at t h e m o v i n g

p art y is en t i t l ed t o a ju d g m en t as a m at t er o f l aw. On ap p eal fro m a t ri al

co u rt ’ s g ran t o f su m

m ary ju d g m en t

, we co n d u ct a de n o vo r e v i e w,

co n s t r u i n g a l l reas o n ab l e i n feren ces i n th e l i g h t m o s t fav o rab le t o th e

n o n m o v i n g p art y

. 1

Vi ewed i n t h i s l i g h t

, t h e reco rd s ho ws t h at As h l e y D. L ee an d Dan a Lars o n

Bo wen ap peared as reco rd t it l e ho l d e r s t o t he Pro p ert y

, fo r wh i ch $ 1 8

, 3 8 5 .1 6 in

d el i n q u en t p ro p ert y t ax was o w ed

. On J u l y 5

, 2 0 16

, D av i s h el d a t ax s al e o f t h e

p ro p ert y

, w h i ch g en erat ed $ 8 9 ,1 0 0 an d an ex ces s o f $ 70 ,7 1 4

. 8 4

, o f wh i ch fu nd s

1 (Ci tat i o n s an d p u nct u at io n o m i t t ed

. ) R o b er t s v. Co mmu n i t

y & S o ut h er n Ba nk

, 3 3 1 Ga. Ap p . 3 6 4 (7 71 SE2 d 6 8 ) (2 0 1 5 ).

2Dav is n o t i fi ed t h e Ban k, PFG, an d v ari o u s ot h er i n t eres t ed p art i es

. 2 At t he t i m e o f t h e

s al e, t h e Ban k h el d a deed t o secu re d eb t on t h e pro p ert y

, wh i ch o ri g i n al l y was fi l ed

i n 2 0 0 7 an d was m od ifi ed i n 20 1 2 i n an am o u n t o v er $ 4 0 0 ,0 0 0

, 3 an d PFG h el d a l i en

b as ed o n a wri t o f fi eri faci as i n t h e am o u n t o f $ 7 4,2 9 2 .9 0 fi l ed i n 2 0 1 4

.

In s u p p o rt o f i t s m o t i o n fo r s u m m ary ju dg m en t

, t he Ban k s ub m i t t ed t h e

affi d av i ts o f b an k em

p l o y ees To n y Crews an d Ch ri s Si n cl ai r t o s up p o rt t h e am o u nt

rem ai n i n g u n p ai d o n t h e n o t e; Crews an d Si n cl ai r, h o wev e r

, m e r el y av erred t h at

Bo wen an d Lee “ owed m o re t h an Fo u r Hu n d red T ho u san d ($ 4 0 0 ,0 0 0 ) t o [t he] Ban k

u n d er t h e Pro m i ss o ry No t e at t h e t i m e o f t h e Tax Sal e.” Nei t h er affi d av i t co n t ai n s a

referen ce t o o r at t ach es an y Ban k d ocu m en t s t o s u p p o rt t hi s o u t s t an d i n g b al an ce, an d

n ei t h er affi d av it co n t ai n s an av erm en t t o a s p eci fi c o u t s t an d i ng bal an ce at t h e t i m e t h e

affi d av i ts were p rep ared

.

Pri o r t o t h e en d o f t h e red em p t i o n p eri o d

, t h e Ban k fo recl o s ed on th e Pro p ert y

p u rs u an t t o i t s d eed t o s ecu re d eb t an d p u rch as ed t he p ro p ert y fo r $ 2 0 ,0 0 0

.

2 Hu dd l e Ho u s e, In c., al s o res p o n d ed t o t h e i n t erp l ead er act io n wi t h cl ai m s o n

t h e ex ces s fu n d s , b u t t h ey h av e n o t ap p eal ed fro m

t he t ri al co u rt d eci si o n

.

3 In i t s cl ai m l et t er, th e Ban k co n t en d ed t h at t h e p ro m i s s o r y n ot e w as fo r an

“ o ri g i n al p ri nci p al am o u n t o f $ 4 0 5 ,2 7 8

. 1 4 ” a n d a s o f Au g u st 1, 2 0 1 6

, “ m o re t h an ”

$ 4 0 0 ,0 0 0 was o wed

.

31

. As an i ni t i al m at t er, we n o te t hat t h e t ri al co u rt ’ s o rd er, wh i ch was en t ered

o n J u n e 2 0

, 2 0 17

, rel ied on t h i s Co u rt ’ s d eci si on i n DLT Li s t, LLC v. M7 VEN

S u p p o r t i ve Ho u si n g & Dev. G r o u p

, 4 fo r t h e p ro p o s i t i o n th at t h e d i st ri b u t i o n o f ex ces s

fu n d s s h o u l d b e m ad e bas ed o n t h e ri g h t to t h e fu n d s at th e t im e o f t he t ax s al e. Bu t

t h at d eci s i o n h ad al read y b een d i s ap pro v ed of i n p art b y t h e Geo rg i a Su prem e Co u rt

aft er i t g ran t ed cert i o rari i n t h at cas e. 5

PFG’ s arg u m en t t h at t h e Ban k ’ s pu rch as e o f t h e t ax d eed m erg ed wi t h i t s d eed

t o secu re d eb t aft er th e t ax s al e, t h ereb y m ak i n g fi rs t i n l i n e PFG’ s cl ai m t o th e ex ces s

t ax s al e fu n d s v i a i ts l i en , i s wi t h o u t m eri t

.

Th e d o ct ri ne o f m erg er ap p l ies wh ere t h e l eg al an d eq u i t a b l e

i n t eres t s i n p ro p ert y b eco m e m erg ed i n t h e s am e p ers o n

. Un les s t h ere i s

an ag reem en t t o t he co n trary o r i t i s t he i nt en t i o n o f t he p art y i n wh om

t h e eq u it ab l e an d l eg al es t at es u n i t e t h at t h ere b e n o m erg er, t h e m erg er

res u lt s

. Th e p ers o n co n t en d i n g t h at no s u ch m erg er t oo k p l ace has th e

b u rd en o f p ro of. 6

4 3 3 5 Ga. Ap p . 3 1 8 (7 7 9 SE2 d 4 3 6 ) (2 0 1 5 ).

5 See DLT Li

s t

, LLC v. M7 VEN S u

p po r t i ve Ho u s i n g & Dev. Gr ou p

, 3 0 1 Ga.

1 3 1 , 1 3 5 -1 3 6 (2 ) (8 0 0 SE2 d 3 6 2 ) (2 0 1 7 ) (“ DLT Li s t II ”).

6 B a r r o n B u i ck v. Ken n e s a w Co

. , 1 05 G a. A p p

. 45 1

, 45 4 -4 5 5 (2 ) (1 2 4 SE2 d

9 1 8 ) (1 9 6 2 ).

4Aft er a t ax s al e o f p ro p ert y en cu m b ered b y l i en s

, t h e p u rch as er o f th e t ax d eed

h as a d efeas i b l e fee i n t h e p ro p ert y

, w h i ch b e c o m e s a f e e s i m p l e i n teres t i f t h e

p ro p ert y i s n o t red eem ed d u ri n g t h e s t at u to ry p eri o d aft er t h e t ax s al e. 7 As fo r t h e

ex ces s p ro ceed s fro m t he t ax sal e, t hey s h o ul d h av e b een d i s t ri bu t ed fi rs t t o t h e Ban k,

as t h e tri al co u rt fo u n d

, an d t h en t o an y ot h er reco rd ed l ien h o l d er, s u ch as PFG. 8 No

cas e l aw s u p p o rt s PFG’ s arg u m en t t h at t h e Ban k ’ s fi rs t -p ri ori t y s e c u r i t y l i en was

m erg ed i nt o th e i r t a x d eed p u rch as e fo r p u rp os es o f di v es ti n g t h e Ban k ’ s p ri o ri t y

cl ai m t o t h e ex ces s fu n ds

. In deed

, cas e l aw s u p p o rt s th e o p p o s i te co n cl u s i o n

. “ [If] t h e

cred i t o r b u y s i n t h e p ro p ert y at t h e s al e t o pro t ect h i m s el f, i t wo u l d b e u n reas o n ab l e

t o h ol d t h a t

, b y u n i t i n g t he l eg al an d eq u i t ab l e i n t eres t

, he i n t en d ed t o ad v an ce a

s u b o r d i n a t e cl ai m t o pri o ri t y o v er h i s o w n cl ai m .” 9 M o reo v er, at t h e t i m e t h at t h e

Ban k p u rch as ed t h e t ax deed t o t h e p ro pert y , i t d i d n o t o wn t h e ri g ht o f red em p t i o n

— t h e o t h er i nt eres ted p art i es i n cl u d i n g PFG co u ld h av e red eem e d t h e p ro p ert y

,

t h ereb y d i v es t i n g t h e tax d eed fro m t h e Ban k an d ret u rn i n g t h e i n t eres t vi a qu i t -cl ai m

7 See Na t

. Ta x Fu n di n g v. Ha r p a g o n Co

. , 2 7 7 G a. 4 1

, 42 -4 3 (1 ) (5 86 SE2 d

2 3 5 ) (2 0 0 3 ).

8 See DLT Li st

II , 3 0 1 Ga. at 1 3 4 -1 3 6 (2 ).

9 Ba r r o n Bu i ck , 1 0 5 Ga. Ap p . at 4 56 -4 5 7 (2 ).

5d eed t o Le e an d Bo wen

, l eav i n g t he Ban k ’ s s ecu ri t y d eed i n p l ace i n t h e o rd er o f

p ri o ri t i es g o i n g fo rward

. 1 0

W e al so reject PFG’ s co n t en t i o n th at t he Ban k ’ s l at er s ecu ri t y d eed fo recl o s u re

o n t h e p ro p ert y p ro h i b it ed i t fro m cl ai m i n g t h e p ro ceed s

. At t h e t i m e o f t h e t ax s al e,

t h e Ban k ’ s s ecu ri t y d eed w as i n fo rce an d i n fi rs t p r i o r i t y p o s i t i o n

. W h at m ay h av e

o ccu rred aft er t h at ti m e d o e s n o t a f f e ct t h e p ro p er p ay m en t o f ex ces s fu n ds i n t h e

ev en t t h at t h e Ban k ’ s i n t eres t was v al i d at t h e t i m e o f t h e t ax s al e. 1 1

W e al s o d i s ag ree wi th PFG’ s arg u m en t th at t h e res u l t i s i n eq u it ab l e. 1 2 PFG

co u ld h av e b i d o n th e Pro p ert y at t h e Ban k ’ s s ecu ri t y deed fo recl o s u re s al e i n o rd er

t o g ai n un en cu m

b ered o wn ers h i p o f t h e Pro pert y an d l at er s el l i t t o co v er t h e p u rch as e

p ri ce an d l i en am o u nt s

, b u t i t ch o s e n ot t o tak e t h at ri s k

. 1 3 P F G a l s o co u l d h av e

red eem ed t h e p ro pert y

, b u t i n t h at cas e, t h e res u l t wo u l d h a v e been t hat t h e ex ces s

p ro ceed s were p ai d t o t h e Ban k fo r i t s s ecu ri t y d eed

, an d th e Ban k wo u l d h av e h ad

1 0 See Na t. Ta x Fu n d in g , 2 7 7 Ga. Ap p. at 4 2 -4 3 (1 ).

1 1 See DLT Li s t

II , 3 0 1 Ga. at 1 3 4 -1 3 6 (2 ).

1 2 See Ba r r o n Bu i ck

, 10 5 Ga. Ap p

. at 4 5 6 -4 5 7 (2 ) (“ In eq u i t y [,] t he ru l es o f l aw

are n o t fo l l o wed

, an d t he d o ct ri n e o f m erg er i s n o t fav o red .”) (p u n ct u at i o n o m i t t ed ).

1 3 See Ra y v. At ki ns

, 2 0 5 Ga. Ap p. 8 5

, 8 9 (3 ) (4 2 1 SE2 d 3 1 7 ) (1 9 9 2 ), q u o t i n g

S wea t v. Ar l i ne , 1 8 6 Ga. 4 6 0, 4 6 1 (2 ) (1 97 SE 8 9 3 ) (1 9 3 8 ).

6a s u p er l i en fo r t h e t ax -s al e p ri ce o n t h e p ro p ert y g o i n g fo rward , wh i ch wo u l d h av e

b een h ig h er in pri o ri t y t h an th at o f PFG. 1 4 In t h es e ci rcu m s t an ces

, PFG’ s l i en

, as

u s u al l y i s t h e cas e wi t h s ub o rd i n at e i n t eres t s

, g oes u np ai d v i a t h e ex ces s p ro ceed s an d

t h e p ro ceed s fro m

t he l at er fo recl o s u re s al e.

Acco rd i ng l y

, w e d is cern n o erro r i n t h e t ri al co u rt ’ s fi n di n g t h at n o m erg er

o ccu rred h ere.

2

. PFG arg u es th at t he t ri al co u rt erro n eo u s l y rel ied u p o n t h e affi dav i t s o f

Crews an d Si n cl ai r t o h o l d t h at t h e Ban k ’ s d eed t o s e c u r e d e b t was o u ts t an d i n g.

Pret erm i t t i n g wh et h er t h e t ri al co u rt sh o ul d h av e al l o wed Si n cl ai r’ s affi d av it

, n ei t h er

t h e affi d av i t o f Crews o r Si n cl ai r p ro v i d e a s p eci fi c fi gu re fo r t h e o ut s t an d i n g

b al an ce, b u t av er t hat “ o v er $ 4 0 0

, 0 0 0 ” was o u t st an d i n g on th e s ecu ri t y d eed

, an d

n ei t h er affi d av i t at t ach es bu s in es s reco rd s t o s up p o rt t he s t at em en t s reg ard i n g

r e m a i n i n g b al an ces

. A l t ho u g h t h ere is l i t t l e cas e l aw reg ard in g t h e b u rd en o f p ro o f

rel at ed t o rem ai n i ng l i en i n t eres t s in i n t erp l ead er act i o n s

, t h es e b are affi dav i t s wo u ld

b e an i n s u ffi ci en t s h o wi n g i n o rd er t o co l l ect o n t h e s ecu ri t y d eed ag ai n s t a d eb t o r. 1 5

1 4 See DLT Li s t

II , 3 0 1 Ga. at 1 3 4 -1 3 6 (2 ).

1 5 Cf. Ro b er t

s

, 3 3 1 Ga. Ap p

. at 3 7 0 -3 7 1 (2 ); W a r e v. Mu l t i b a n k 2 0 0 9 -1

RES -ADC Ven t u r e, LLC

, 3 27 Ga. Ap p . 2 4 5 , 2 4 9 -2 51 (2 ) (7 5 8 SE2 d 1 45 ) (2 0 1 4 ).

7Th e Ban k was req u i red t o sh o w t h at i t h ad a v al i d p ri o ri t y i n t eres t in th e ex ces s fu n d s

,

an d b ecau s e i t fai l ed t o p ro vi de p ro o f o f an o u t s t an di n g b al an ce, we m u st rev ers e t h e

g ran t o f s u m

m ary ju d g m en t

. 1 6

Ju d g men t r ever sed . Di l l a r d

, C. J., a n d Mer ci er

, J., co n cu r

.

1 6 See OCGA § 4 8 -4 -5 (b ) (“ [E] x ces s fu n d s s hal l be d is t ri bu t ed b y t he s u p eri o r

co u rt t o t h e i n t en d ed p art i es

, i n cl u d i n g t h e o wn er, as th ei r i n t eres t s ap p ear an d i n t h e

o rd er o f p ri o ri t y i n wh i ch th ei r i n t eres t s exi s t .”) (em ph as i s s u p p l i ed ). Cf. S

a l a s v. JP

Mo r g a n Ch a s e Ba n k, N.A.

, 33 4 Ga. Ap p

. 2 74

, 2 8 3 (4 ) (7 7 9 SE2 d 48 ) (2 0 1 5) (“ a p art y

s eek i n g ju d g m en t o n a s u i t o n a n o t e i s n ot en t it l ed t o s u m m ary ju d g m en t as t o t h e

am ou n t o f t h e d eb t w h ere i t o ffers n o t es t im o n y o r an y do cu m en t at i o n ex p l ai n i n g i t s

m et h o d o f cal cu lat i n g t h e s peci fi c am o u n t s s o u g h t s u ch t h at t h e t ri al co u rt is u n ab l e

t o co n fi rm t h e p art y ’ s cal cu l at i on o f t h e p u rp o rt ed d am ag es ”) (p u n ct uat i o n o m i t t ed ).

8