SECOND DI VI SI ON

A NDREWS, P. J.

, M I LLER and BRA NCH, JJ.

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.

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Jul y 8, 2015



# I n th e Co u r t o f

A p p eals o f

G eo r g ia

A1 5 A0 28 4 . GAUSE et al . v . FIDELITY BANK.

M I LLE R , J u d ge.

Th i s cas e ari s es fro m W i l l i am L. Gau s e an d Gau s e Co n s t ru ct io n Co m p an y ,

In c’ s (co l l ect i vel y “ Defen d an t s ”) d efau l t on a p r o m is s o ry n o t e an d u n co nd i t i o n al

g u aran ty

. Fi del i t y Ban k

, t h e h o l d er o f th e n o te an d gu aran t y , s u ed t h e Defen d an t s fo r

b reach o f t h e n o te an d g u aran t y

. Defen d an t s co un t ercl ai m ed fo r, in t er al i a, set -o ff an d

reco u p m en t

. T h e t ri al co urt s u b s eq u en t l y g ran t ed su m m ary ju d g m en t t o Fi d el i t y , an d

t h e D efen d an t s ap p eal

, co n ten d i n g t h at (1 ) t h e tri al co u rt erred i n g ran t in g s u m m ary

ju d g m en t t o Fi d el i ty o n t h e g u a r a n t y a nd n o t e, (2 ) t h e t ri al co urt erred in g ran t i n g

s u m m ary ju d g m en t t o Fi del i t y o n t h e Defen d an t s ’ co u n t ercl ai m s fo r s et -o ff an d

reco u p m en t

, an d (3 ) t he tri al co u rt ab u s ed i t s di s cret i o n i n co n s i d eri n g an d rel y i n g o ncert ai n de p o s i t i o n t es t i m o n y

. Fo r t h e reas o ns t h at fo l lo w, we affi rm in p art an d

rev ers e i n p art

.

S u m m a r y ju d g m en t i s p ro p er w h en t h ere is n o g en u i n e i s s u e o f

m at eri al fact an d t h e m o van t i s en t i t l ed to ju dg m en t as a m at t er o f l aw.

A d e n o v o s t an dard o f rev i ew ap p l i es t o an ap peal fro m a [g ran t o r]

d en i a l o f s u m

m ary ju d g m en t

, an d we v i ew t h e ev i d en ce, an d al l

reas o n ab l e co n cl u s i o n s an d i n feren ces d rawn fro m i t , i n t h e l i g h t m o s t

fav o rab le t o th e n on m o v an t

.

(Ci t at i o n s an d fo o tn o t e o m i t t ed .) GEICO Gen

. In s

. Co

. v. W r i g h t

, 2 9 9 Ga. Ap p

. 2 8 0,

2 8 1 (6 82 SE2 d 3 6 9 ) (2 0 0 9 ).

So v i ewed , t h e ev i d en ce s h o ws t h at Gau s e o b t ai n ed a $ 1 .1 m i l l i o n l o an fro m

Fi d el i t y ’ s p red eces so r i n i n t eres t

, Secu ri t i es Ex ch an g e Ban k (“ SEB”) 1 o n A u g u s t 1 1,

2 0 0 8

, fo r t h e p u rch a s e o f 2 5 l o t s i n a s u bd i v i s i o n

. 2 Th e l o an was ev i d en ced b y a

co n tem p o ran eo u s p r o m i s so ry n o t e s i g ned b y Gau s e (h erei n aft er t h e “ N o t e”). T h at

s am e d ay , as p art o f t he s ecu ri ty fo r t h e l oan , Gau s e s i g n ed an u nco n d i t i o n al g u aran t y

o f t h e n o te o n beh al f o f Gau s e Co n s t ru ct i o n (h erei n aft er t he “ G u aran t y ”), as wel l as

1 Aft er SEB fai l ed an d wen t in t o recei v ers h ip

, Fi d el it y p u rch as ed SEB’ s as s et s fro m t h e FDIC.

2 In co n n ect i o n wi t h t he l o an , Gau s e al s o s i g n ed a wai v er o f ri g ht s t o n o t i ce an d

h eari n g i n t h e ev en t o f d efau l t

.

2a co rp o rat e res o l u t i on au t ho ri zi n g h im t o ex ecu t e t h e Gu aran t y an d a co rp o rat e W -9

fo rm

. 3 O n A p r i l 2 8

, 2 0 1 0

, G au s e ren ewed t h e No t e fo r a two -y ear term i n t h e

p ri n ci p al am o u n t o f $ 1 ,1 0 0,9 0 0. Gau s e an d Gau s e Co n s t ru ct i o n ad m i t t ed l y fai l ed to

p ay t h e No t e i n fu l l b y

t he d u e d at e, Ap ri l 2 8 , 2 0 1 2

.

1

. Th e Defen d an t s co n t en d t h at t he t ri al c o u r t erred i n gran t i ng s u m m ary

ju d g m en t t o Fi del i t y o n t h e No t e an d Gu aran t y . W e ag ree i n p art

.

(a) Gau s e’ s Breach o f t h e No t e

“ A p ro m i s s o ry

n o t e i s an u n co n d it i on al co n tract wh ereb y t h e m ak er en g ag es

t h at h e wi l l p a y t h e i n s t ru m en t acco rd i ng t o i t s t en o r.

. . . Th e n o t e b ei n g an

u n co nd i t io n al p ro m i s e, t h e co n t ract i s co m p l et e as wri t ten [.] ” (Ci t at i o n s a n d

p u n ct u a t i o n o m i t t ed .) Devi n La mp l i g ht er

, Lt d

. v. Amer ica n Gen

. F

i n a nce , 2 0 6 Ga.

Ap p . 7 4 7 , 7 4 9 (2 ) (4 2 6 SE2 d 6 4 5 ) (1 9 9 2 ).

A pl ai n t i ff s eek i n g t o en fo rce a p ro m i s s o ry n o t e es tab l is h es a

p ri m a faci e cas e by pro d u ci ng t h e n o te an d s h o wi n g t h at it w as

ex ecu t ed

. On ce t h at p ri m a faci e cas e h as b een m ad e, th e p l ai n t i ff i s

en t i t l ed t o ju d g m en t as a m at t er o f l a w u n les s t h e d efen d an t can

es t ab l i sh a d efen s e.

3 Th e l o an s ecu ri t y al s o i n c l u d ed a s ecu ri ty d eed o n th e 2 5 l ot s an d an

as s i g n m en t o f ren t s an d l eas es

.

3(Fo o tn o te o m i t t ed ) Co r e La Vi s t a

, LLC v. Cu mmi n g , 3 0 8 Ga

. Ap p

. 7 9 1, 7 9 5 (1 ) (b )

(7 0 9 SE2 d 3 3 6 ) (2 0 1 1 ).

Defen d an t s arg u e t h at a q u es t i o n o f fact rem ai n s reg ard i ng m u tu al as s en t t o t h e

Gu aran ty an d

, t h erefo re, t h e t ri al co u rt erred i n fi n d i n g th at t h e No t e i s a s ep arat e,

i n d ep en den t an d en fo rceab l e co n t ract . Co nt rary t o Defen d an t s ’ arg u m en t

, a

g u aran t y , wh et h er en t ered i n t o o n t h e sam e o r an o th er i n s t ru m en t as t hat

o f t h e ori gi n al o b li g at i o n, wh et h er ex ecu t ed at t h e s am e o r a d ifferen t

t i m e, an d w h et h er o r n o t p u rp ort i ng t o be t h e s ep arat e o b l i g at i o n o f th e

s i gn er . . . i s a s ep arat e [an d en fo rceab l e] co n t ract [.]

(Ci t at io n s o m i t ted .) Bea r d en v. Eb ca p S u p p l y Co

. , 1 0 8 G a. Ap p

. 3 7 5 (1 3 3 SE2 d 6 2 )

(1 9 6 3); s ee al s o OCGA § 1 0 -7 -1 (d efi n i n g g u aran ty co n t ract an d p r o v i d i n g t h at

p ri n ci p al rem ai n s b o u n d fo r it s deb t reg ard l es s o f wh et h er g u aran t y i s g i v e n in

co n si d erat io n fo r b e n e fi t fl o wi n g t o g u aran to r o r fo r b en efi t g iv en t o p ri n ci p al ).

Fi d el i t y es t ab l i sh ed a p ri m a faci e cas e b y pro d uci n g t h e No t e; t he u n d i s p u t ed

ev i d en ce s h o wed th at t he No t e was d u l y ex ecu t ed an d w as ad m i t t ed l y i n d efau l t ; an d

Defen d an t s fai l ed t o es t ab l i s h a d efen s e t o en fo rcem en t o f t h e No t e. Acco rd i n g l y , t h e

t ri al co u rt p ro p erl y d et erm i n ed t h at Fi d el i t y was en t i t l ed to s u m m ary ju d g m en t o n i t s

cl ai m fo r b reach o f t h e No t e.

(b ) Gau s e Co n s t ru ct i o n ’ s Breach o f t he Gu aran t y

4In a s ui t on a g u aran t y , p ro d u ct i o n o f t he i n s t ru m en t en t it l es t h e ho l d er to

reco v er on i t wh en t he si g n at u re i s ad m i t t ed o r es t ab l is h ed an d t h e defen d an t d o es n ot

e s t a b l i s h a d efen se. See L. D. F. Fa mi l y Fa r m, In c. v. Ch ar t er b a n k

, 3 26 Ga. Ap p

.

3 6 1 , 3 6 3 (7 5 6 SE2 d 59 3 ) (2 0 1 4 ).

Here, F ide lity pr oduc e d the c on t em p o ran eo u s Gu aran t y wh i ch i d en t i fi es Gau s e

Co n s t ru ct i o n as t h e g u aran t o r. Th e Gu aran t y i s i n co rp o rat ed i nt o t h e No t e; t h e

Gu aran ty p ro v id es t h at i t was g i v en i n co n si d erat io n o f t h e N o t e an d o th er fi n an ci al

acco m m o d at i o n s m ad e b y

Fi del i t y wh i ch are o f d i rect i n t eres t an d b en efi t t o Gau s e

Co n s t ru ct i o n as t h e g u aran t o r; an d t h e Gu a ran t y p ro v i d es t h at Gau s e Co ns t ru ct i o n

“ u n co n di t i on al l y gu a r a n t e e s t h e fu l l an d p ro m p t p ay m en t ” o f th e No te wh en d ue.

M o reo v er, t h e cl o s i n g at t o rn ey , wh o prep ared t h e l oan do cu m en t s , i n cl u d i n g t h e No t e

an d Gu aran t y , t es ti fi ed i n h i s d ep o s i t io n t h at t h e G u aran t y was p rep ared u n d er h i s

s u p erv i s i o n at SEB’ s di rect i o n an d t h at Gau s e s ig n ed t h e Gu aran t y at t h e l oan cl o s i n g.

Defen dan t s n ev ert h el es s arg ue t h at a que stion of f a c t rem ai n s reg ard i n g m

u t u al

as s en t t o t h e Gu aran ty

. Sp eci fi cal l y, D e f e n d an t s arg u e t h at t h ey h av e d is p u t ed t h e

au t h en t i ci t y an d v al i d i t y o f t he Gu aran t y fro m t h e beg i n ni n g of t h i s cas e, an d arg u e

t h at t h e p ag e b eari n g Gau s e’ s g en ui n e s i g n at ure o n t h e Gu aran t y wa s at t ach ed

5wi t h o u t h i s kn o wl ed ge o r co n s e n t

. I n t h ei r defen s e, Defen d an t s p o i n t to Gau s e’ s

t es t i m o ny

.

Gau s e i n i t i al ly d ep o s ed t h at h e d i d n ot recal l ex ecu t i n g t h at i n s t ru m en t

. In h i s

s u b s eq u en t affi d av i t

, Gau s e av erred t h at

,

Si n ce m y d ep o s i t i o n, I h av e carefu ll y ex a m i n e d t h e co py o f th e

p u rp o rt ed Au g u s t 1 1

, 2 0 0 8 Gu aran t y Ag reem en t h an ded to m e an d

a t t ach ed t o Fi d el i t y Ban k ’ s Co m p l ai n t

. I am cert ai n t hat I d i d n o t

ex ecu t e t h e Gu aran t y

. W h i l e i t d o es ap p ear t o b ear m y s i g n at u re o n th e

l as t p ag e, I b el i ev e t h e s i g n at u re p ag e m ay h av e [s i c] co m e fro m an o t h er

d o cu m en t an d [was ] at t ach ed t o g i v e t h e ap p earan ce t h at I s i g n ed i t

.

As t h e n o n m o vi n g p art y t o Fi d el i t y ’ s s u m m ary ju d g m en t m ot i o n , t h e

Defen d an t s were n o t req u i red to p res en t co n cl u s i v e p ro o f t h at Gau s e’ s si gn at u re was

i n v al i d

. Lee v. S

u n t r u s t B a n k

, 31 4 Ga. Ap p. 6 3, 6 5 (7 2 2 SE2 d 4 7 0 ) (2 0 1 2 ). Rat h er,

Defen d an t s o nl y h ad to p o i n t to ev i d en ce g i vi n g ri s e t o a t ri ab l e i s s ue o f m at eri al fact

,

wh i ch t h e y d i d b y s u bm it t i n g Gau s e’ s affi dav i t av erri n g t h at h e d id n o t s i g n t h e

Gu aran ty . Id

.

No t wi t h s t an d i n g co n s i d erab l e ev i d en ce i n t h e reco rd t o th e co nt rary , i n cl u d i n g

t h e cl o s i n g at t orn e y’s t es t i m o n y , we are co n s t rai n ed t o co n cl u d e t h at Gau s e’ s

affi d av i t t es t i m o n y s tat i n g t h at h e d i d n o t ex ecu t e t h e G u aran t y i s s u ffi ci en t t o creat e

6a g en u i n e i ss u e of fact wi t h reg ard t o t h e en fo rceab i l i t y o f t h at in s t ru m en t

. See Vi r g i l

v. Ka p p l in

, 1 87 Ga. Ap p

. 2 06

, 20 7 (1 ) (3 6 9 SE2 d 8 0 8 ) (1 9 8 8) (g u aran t o r’ s affi d av i t

s t at i n g t h at h e d i d n o t s i g n g u aran t ees at i ss u e rai sed g e n u i n e i ss u e o f fact ); Lee

,

s u p ra, 3 1 4 Ga. Ap p

. at 6 5 (affi d av i t d en y i ng v al i d i t y o f s i g n at u re creat ed fact u al

d i s p u t e fo r t ri al ). 4 A cco rd i n g l y , we rev ers e t h e g ran t o f s u m m ary ju d g m en t t o Fi d el i t y

o n i t s cl ai m

fo r b reach o f t h e Gu aran t y

.

2

. Defen d an t s co n t en d th at t h e t ri al co u rt erred i n g ran t i n g s u m m ary ju d g m en t

o n t h e Defen d an t s’ s co u n t ercl ai m s fo r s et off an d reco u p m en t . W e d o n o t ag ree.

Un d er Geo rg i a l aw, a s et -o ff

. . . al l o ws t h e d efen d an t t o s et o ff a

d e b t o wed h i m b y th e p l ai nt i ff ag ai n s t t he cl ai m o f t h e p l ai n t i f f

. A

reco up m en t i s a ri g h t o f t h e d efen d a n t t o hav e a d ed uct i o n fro m th e

am o u nt o f t he pl ai n t i ff’ s d am ag es b ecau se th e p l ai n ti ff has n ot co m p l ied

wi t h t h e cro s s -o b l i gat i o n s o r i nd ep en d en t co v en an t s a r i s i n g un d er th e

co n t ract b ei n g s u ed u p o n.

4 Si n ce Gau s e i n i t ial l y d ep o s ed t h at he d i d n o t r ememb er s i g n i n g t he Gu aran t y , h i s affi d av i t t es t i m o ny

s t at i n g t h at h e cer t a in l

y d i d n o t s i g n t he Gu aran t y

can n o t b e

co n st ru ed as co n t rad ict o ry , an d we m u st co n st ru e h i s affi d av i t t es t i m o n y i n t h e l i g ht

m o st fav orab l e t o hi m as t h e n o n -m o v an t

. See Pr o p h ecy Co r

p

. v. Ch a r l es Ro s s i

g n o l

, In c. , 25 6 Ga. 2 7

, 2 8-3 0 (1 ) (3 4 3 SE2 d 6 80 ) (1 9 8 6 ); Vi r g i l

, s u pra, 1 8 7 G a. Ap p

. at 2 0 7 (1 ).

7(Fo o tn o tes o m it t ed .) Au t o ma t ed Pr i n t v. Ed g a r , 2 8 8 Ga. Ap p

. 3 2 6

, 3 30 (2 ) (6 5 4 SE2 d

4 1 3 ) (2 0 0 7 ). Th e D efe n d a n t s a rg u e t h at t h ey are en t i t l ed t o s et o ff an d reco u p m en t

b as ed o n $ 2 0 0,0 0 0 i n l o an s t o SEB wh i ch Gau s e m ad e b et ween Decem b er 3 0

, 2 0 0 8

an d J an u ary 2

, 2 0 0 9

. G au s e’ s o wn d ep o s i t io n tes t i m on y , h o wev er, sh o w s t h at t h e

l o an s i n q u es ti on were m ad e t o a s ep arat e an d d is t in ct en t i t y , SEB Ban co rp , In c., an d

n o t to Fi d el i t y ’ s p red eces so r i n i n t eres t

, SEB. Acco rd i n g l y , th e t ri al co u rt di d n o t err

i n gran t i n g s u m

m ary ju d g m en t t o Fi d el it y o n t h e Defen d an t s ’ s co u nt ercl ai m s fo r s et

o ff an d reco u p m en t

.

3

. Defen d an t s co n t en d t h at t h e t ri al co u rt erred i n c o n s i d e r i n g t he cl o s i n g

at t o rn ey ’ s d ep o s i t i o n t es t im o n y . W e d i s cern n o erro r.

Th e reco rd b el i es Defen d an t s ’ arg u m en t t h at t h ey were u n aware t hat Fi d el i t y

i n t en d ed t o t ak e t h e cl o s i n g at t o rn ey ’ s d ep o s i t i o n

. N o t ab l y, t h e r eco rd s h o ws t h at

,

m o re th an a week pri o r t o t ak i n g t h e d ep o s i t i o n , Fi d el i t y s e r v e d D efen d an t s wi t h a

co p y of t h e su bp o en a req ui ri n g t h e cl o s i n g at t o rn ey t o ap p ear fo r h is d ep o si t i o n , as

wel l as t h e n o t ice o f t h e dep o s i t i o n , an d Fi d el i t y fi l ed th es e d o cu m en t s w i t h t h e t ri al

co u rt t h e d ay aft er s u ch s erv i ce. M o reo v er, Defen d an t s ad m i t t ed at t h e h eari n g i n t h i s

cas e t h at t h ey h ad n o t i ce o f t h e cl o si n g at to rn ey ’ s d ep o si ti o n , b u t d i d n o t p art i ci p at e

i n o r at t en d t h e d ep os i ti o n

.

8Defen d an t s al s o arg u e t hat t h e t ri al co u rt erred i n fai l in g t o s t ri k e t he cl o s i n g

at t o rn ey ’ s d ep o si t i o n fro m th e reco rd b ecau se i t was t ak en aft er t h e cl o s e o f fo rm al

d i s co v ery i n t h is cas e. “ A t ri al co u rt has wi d e d i s cret i on t o s ho rt en , ex t en d

, o r reo p en

t h e t i m e fo r d is co v ery , an d i t s d eci s i o n wi l l n o t b e r ev ers ed u n l es s a cl ear ab u s e o f

t h at di s cret io n is s ho wn .” (Ci t at i o n s o m i t t ed .) W oel p er v. Pi ed

mo n t Co tt o n Mi l l

s , 2 6 6

Ga. 4 7 2

, 4 7 3 (1 ) (4 6 7 S E 2 d 5 1 7 ) (1 9 9 6 ). Defen d an t s h av e n o t s h own t h at t h e t ri al

co u rt ab u s ed it s d i s cret i o n in fai l i n g t o s t ri ke t h e cl o s i n g at t o rn ey ’ s d ep o s i t i o n

t es t i m o ny

.

Ju d g men t af fi r med i n p a r t a n d r ever s ed i n p a rt

. A n d

r ews

, P

. J

., c o n cu r s

.

Br a nch

, J., co n cu rs in j u d g m e n t o n l

y a s t o Di vi s i o n 1 (b

) a n d co n cu r

s f ul l y a s to

Di vi s i o n s 1 (a

), 2 a n d 3

.

9