GA Code § 44-14-1 (2021)
2021 Georgia Code|Title 44 - Property|Chapter 14 - Mortgages, Conveyances to Secure Debt, and Liens|Article 1 - In General|§ 44-14-1. Operation of "Open-End" Clauses; Limited to Ex Contractu Obligations Between Parties

  As used in this Code section, the term "original party" means, without limitation, any bank, trust company, or other corporation into which the grantee of any real estate mortgage or deed conveying realty as security for a debt shall be merged or consolidated. In addition to the foregoing, the term "original party," as used in this Code section, shall also include, without limitation, any bank, trust company, or other corporation, whether organized and existing under the laws of the United States or this state, into which the grantee of any real estate mortgage or deed conveying realty as security for a debt shall be converted.   Except as provided in subsection (c) of this Code section, the operation of "open-end" clauses contained in real estate mortgages or deeds conveying realty as security for a debt, which clauses provide that, in addition to securing the debt named or described in the instrument, such instruments or the property thereby conveyed shall also secure any other debt or obligation that may be or become owing by the mortgagor or grantor, is limited to other debts or obligations arising ex contractu, as distinguished from those arising ex delicto, between the original parties to the security instrument.   A transferee or assignee of an original party to a home equity line of credit agreement or contract who makes additional advances or disbursements on a home equity line of credit shall have the benefit of the security under the deed if the disbursements, made after the assignment, were authorized by the original parties to the home equity line of credit agreement or contract.    (Ga. L. 1958, p. 655, § 1; Ga. L. 1978, p. 1705, § 4; Ga. L. 1980, p. 1550, § 1; Ga. L. 1980, p. 1765, § 1; Ga. L. 1997, p. 712, § 1; Ga. L. 1998, p. 128, § 44.)   Cross references.   - Ambiguous terms and rules of construction of instruments, § 11-3-118.    Strict construction of powers of sale in deeds of trust, mortgages, and other instruments, § 23-2-114.   Editor's notes.   - Ga. L. 1962, p. 156, § 1, provides that any provision of Code Sections 44-14-1, 44-14-2, 44-14-4, 44-14-7 through 44-14-12, 44-14-100, and 44-14-160, and Arts. 2 and 3, Ch. 14, of this title which conflicts with T. 11 shall yield to and be superseded by T. 11. See Code Section 11-10-103.   Law reviews.   - For note discussing how an open-end or dragnet clause within a deed to secure debt ensnares subsequent purchasers of real property, in light of Commercial Bank v. Readd, 240 Ga. 519, 242 S.E.2d 25 (1978), see 30 Mercer L. Rev. 363 (1978).   JUDICIAL DECISIONS   Federal tax liens.   - Since a federal tax lien is wholly a creature of federal law, the consequences of a lien that attaches to property interests, e.g., priority determinations, are matters of federal law; consequently, it is federal law which provides for the priority and validity of federal tax liens, not Georgia law. United States ex rel. IRS v. Georgia Bank & Trust Co. (In re Littleton), 177 Bankr. 407 (Bankr. S.D. Ga. 1995).   O.C.G.A.    § 44-14-1 is not vague, uncertain or indefinite. - O.C.G.A. § 44-14-1 is not so vague, indefinite and uncertain as to be null, void and of no effect. The purpose and meaning of the words employed are neither vague, indefinite or uncertain. Hill v. Perkins, 218 Ga. 354, 127 S.E.2d 909 (1962).   Variance between title and subject matter of Ga. L. 1958, p. 655 not unconstitutional.    - O.C.G.A. § 44-14-1 is not unconstitutional under Ga. Const. 1945, Art. III, Sec. VII, Para. VIII (see, now, Ga. Const. 1983, Art. III, Sec. V, Para. III) because the title of Ga. L. 1958, p. 655 is broader than the body of subject matter. Hill v. Perkins, 218 Ga. 354, 127 S.E.2d 909 (1962).   Section does not grant unconstitutional privileges and immunities to mortgagors.    - O.C.G.A. § 44-14-1 is not unconstitutional under Ga. Const. 1945, Art. I, Sec. III, Para. II (see, now, Ga. Const. 1983, Art. I, Sec. I, Para. X) and Ga. Const. 1945, Art. I, Sec. I, Para. II, (see, now, Ga. Const. 1983, Art. I, Sec. I, Para. II) as granting special privileges and immunities to mortgagors at the expense of mortgagees. Hill v. Perkins, 218 Ga. 354, 127 S.E.2d 909 (1962).   Limitation on dragnet clauses.    - O.C.G.A. § 44-14-1 authorizes dragnet clauses but limits their effectiveness to ex contractu debts between original parties to such security instrument. Willis v. Rabun County Bank, 249 Ga. 493, 291 S.E.2d 715 (1982).   Dragnet clause contained in the deed to secure debt did not secure subsequent individual debts of debtors. In re Felker, 181 Bankr. 1017 (Bankr. M.D. Ga. 1995).    In distributing insurance proceeds following the postpetition destruction of Chapter 13 debtors' home, a dragnet clause in the security agreement did not preclude the bank from retaining amounts owed on the debtors' prior notes under O.C.G.A. § 44-14-1(b). The security deed demonstrated a clear intent for the real estate to secure the individual liabilities of the debtors. In re Ryles, 457 Bankr. 138 (Bankr. M.D. Ga. 2011).   Section inapplicable to security deeds executed before March 25, 1958.    - The provisions of O.C.G.A. § 44-14-1 confining the operation of open-end clauses do not apply to a security deed executed before March 25, 1958. Poole v. Smith, 226 Ga. 259, 174 S.E.2d 430 (1970).    Phrase "original parties" simply means that dragnet clause in security deed limits operation of security deed to debts of parties to security deed. Willis v. Rabun County Bank, 249 Ga. 493, 291 S.E.2d 715 (1982).    Bank resulting from a merger is an original party, within the meaning of O.C.G.A. § 44-14-1, to a security deed executed to one of the merging banks and, accordingly, can enforce an open-end clause in such a deed. Georgia R.R. Bank & Trust Co. v. McCullough, 241 Ga. 456, 246 S.E.2d 313 (1978).    A merged bank is considered an original party to the security instruments of its constituent banks; they do not lose their existences in the merger, merely their identities. Guthrie v. Bank S., 195 Ga. App. 123, 393 S.E.2d 60 (1990).   Merged bank cannot retroactively secure loan.    - Although O.C.G.A. § 44-14-1(a) provides that the term "original party" includes merged banks, a merger following a loan will not operate to secure that loan with the open end provisions of an earlier instrument granted to one of the predessor banks, and the merged bank cannot use the later merger to retroactively secure a loan it has already made. United States ex rel. IRS v. Georgia Bank & Trust Co. (In re Littleton), 177 Bankr. 407 (Bankr. S.D. Ga. 1995).   Duration of deeds with open-end or dragnet clauses.    - Deeds to secure debt with open-end or dragnet clauses continue to be effective so long as there exists indebtedness between the grantor and the grantee. Citizens & S. DeKalb Bank v. Hicks, 232 Ga. 244, 206 S.E.2d 22 (1974).    A security deed containing an open-end or dragnet clause will continue to be effective so long as an indebtedness arising out of contract between the original parties to the deed continuously exists from the deed's date. Brinson v. McMillan, 263 Ga. 802, 440 S.E.2d 22 (1994).   Determination that a payment was intended to satisfy the total debt of debtors required a determination that a security deed was satisfied upon the bank's loan closing and, although the security deed remained of record, the dragnet clause did not remain effective when the complete debt amount was satisfied. Regions Bank v. Wachovia Bank ( In re Goldberg), 248 Bankr. 201 (Bankr. S.D. Ga. 2000).   Lack of intent, at time of execution, to tack contract onto lien.    - It is immaterial whether or not the parties to a contract of guaranty intended at the time of its execution that it be tacked onto the original lien, since this can be legally done under O.C.G.A. § 44-14-1. Citizens & S. Nat'l Bank v. Gilbert, 130 Ga. App. 219, 202 S.E.2d 718 (1973).   Extension of deed to cover other debts where it identifies a particular debt.    - Where the deed to secure debt identifies a particular debt, it cannot be extended to cover other debts except by a new agreement between the parties, subject to the rules governing recording and priorities. Bob Parrott, Inc. v. First Palmetto Bank, 133 Ga. App. 447, 211 S.E.2d 401 (1974).   Effect of provision in open-end clause applying security to subsequent parties.   - Even if deed to secure debt contained an open-end clause which applied the security to subsequent debts, such a provision would operate only between original parties. FDIC v. Willis, 497 F. Supp. 272 (S.D. Ga. 1980).    Failure to satisfy untacked judgment from proceeds of foreclosure sale of security deed not a "deficiency" under O.C.G.A. § 44-14-161. - When defendant-assignee was assigned a note that was in default and a security deed by defendant-assignor, the assignee's judgment, not being a contractual obligation, did not tack on to the note and become one obligation; since the judgment does not tack, the failure to satisfy the judgment from the proceeds of a foreclosure sale of the security deed under a power of sale contained therein does not constitute a "deficiency" within the meaning of O.C.G.A. § 44-14-161. Cook v. F & M Bank, 247 Ga. 661, 279 S.E.2d 199 (1981).   Indebtedness to transferees.   - A transferee may not enforce under an open-end clause a new indebtedness between the transferee and an original party to the deed. FDIC v. Willis, 497 F. Supp. 272 (S.D. Ga. 1980).    A transferee of a security deed with an open-end provision cannot have the benefit of the security under the deed for prior indebtedness owing to the transferee or for additional advances to the maker beyond those provided in O.C.G.A. § 44-14-2. Bowen v. Kicklighter, 124 Ga. App. 82, 183 S.E.2d 10 (1971).   Open-end clauses regarding future advances valid.    - Open-end or "dragnet" clauses regarding future advances in deeds to secure debt are valid and enforceable. Tedesco v. CDC Fed. Credit Union, 167 Ga. App. 337, 306 S.E.2d 397 (1983).    Additional debt of one creditor cannot operate as a hook to grab a dragnet which carries with it property interests of party other than creditor in separate transaction. Willis v. Rabun County Bank, 249 Ga. 493, 291 S.E.2d 715 (1982).   Individual debt of one of parties executing deed.    - Where the "grantor" consisted of three individuals who executed the security deed, a note signed by only one of them for a personal debt was not an indebtedness of the grantor within the meaning of the security deed. Americus Fin. Co. v. Wilson, 189 Ga. 635, 7 S.E.2d 259 (1940).    Where "first parties" as used in a security deed referred to two individuals, a promissory note signed by one of them and a third party was not an indebtedness of the "first parties" within the meaning of the deed to secure debt. Bank of LaFayette v. Giles, 208 Ga. 674, 69 S.E.2d 78 (1952).    Where both the husband and wife were designated in a deed to secure debt by singular number as "party of the first part," the individual debt owed to the bank by the husband alone was not the debt of the "party of the first part," which fell within the operation of the deed's dragnet clause. Cordele Banking Co. v. Powers, 217 Ga. 616, 124 S.E.2d 275 (1962).    Where in security deed two parties were designated as "party of the first part" and the open-end clause provided that the deed was to secure not only the debt stated in the deed but any other debt thereafter owing to the defendant "by party of first part," the individual indebtedness of one of the parties to the defendant was not the debt of the "party of the first part," the two parties, and did not fall within the open-end clause of the security deed. Hill v. Perkins, 218 Ga. 354, 127 S.E.2d 909 (1962).    Individual loan to one of several grantors is included under dragnet clause of original deed to secure debt where it is clear from the language of the deed that "grantor" included either the plural or the singular grantors, and where it is established that all the parties to the contract at all times intended that any later obligations incurred by one of the grantors alone would be fully secured by the original jointly and severally executed instrument. Sutton v. Atlantic Bank & Trust Co., 167 Ga. App. 861, 307 S.E.2d 746 (1983).   Successor corporation.    - Dragnet clause in security agreement on house that husband and wife executed to third party to secure loan to husband's corporation was effective to bring debt of successor corporation, which both assumed prior debt and obtained new debt, within security agreement where wife signed hypothecation agreement with third party authorizing corporation to pledge house as collateral and even though wife was never personally liable for a debt to the third party. Fleming v. First Am. Bank & Trust Co., 171 Ga. App. 295, 319 S.E.2d 119 (1984).   Cancellation of open-end claused deeds.    - A deed to secure debt with an "open-end" clause is not cancelled immediately upon payment of the initial debt. Tedesco v. CDC Fed. Credit Union, 167 Ga. App. 337, 306 S.E.2d 397 (1983).   Effectiveness of "open-end" clause.    - Plaintiff's failure to provide actual notice of plaintiff's own subsequent security deed to the defendant sustained the effectiveness of the "open-end" clause contained in defendant's first security deed, blocking plaintiff's efforts to limit defendant's recovery to the original debt. First Nat'l Bank v. Charuhas, 207 Ga. App. 333, 427 S.E.2d 831 (1993).   Merger of debts.    - The open end or dragnet clause in the first note effectively merged the two debts into one debt for foreclosure; such a clause merges the debt secured by the second note into the debt secured by the first note to the extent that it satisfies the requirements of O.C.G.A. § 44-14-1 and the notes were secured by the same property. Oakvale Rd. Assocs. v. Mortgage Recovery, 231 Ga. App. 414, 499 S.E.2d 404 (1998).    Cited in Reisman v. Jacobs, 107 Ga. App. 200, 129 S.E.2d 338 (1962); Pacific Ins. Co. v. R.L. Kimsey Cotton Co., 114 Ga. App. 411, 151 S.E.2d 541 (1966); Shaw v. Walter E. Heller & Co., 385 F.2d 353 (5th Cir. 1967); Courson v. Atkinson & Griffin, Inc., 230 Ga. 643, 198 S.E.2d 675 (1973); Hamlin v. Timberlake Grocery Co., 130 Ga. App. 648, 204 S.E.2d 442 (1974); Vaughn & Co. v. Saul, 143 Ga. App. 74, 237 S.E.2d 622 (1977); Mason v. Bates, 251 Ga. 241, 304 S.E.2d 724 (1983).   RESEARCH REFERENCES   Am. Jur. 2d.   - 55 Am. Jur. 2d, Mortgages, § 69 et seq.   C.J.S.   - 59 C.J.S., Mortgages, § 157 et seq.   ALR.   - Debts included in provision of mortgage purporting to cover all future and existing debts (dragnet clause) - modern status, 3 A.L.R.4th 690.