Court Opinion

ID: 9579434
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:55:08.240594+00
Date Added: 2024-06-11T13:35:30.592917
License: Public Domain

On Motion for Rehearing.
Movant/appellee urges that under the terms of the consumer collateral note it was entitled to apply the proceeds of the sale first to interest and attorney fees and lastly to principal so that the entire remaining sum of $24,100.34 (after deduction of $58,200.00 proceeds of sale) was principal against which interest at 9 % could be charged.
OCGA § 7-4-17 (former Code § 57-109) provides: “When a payment is made upon any debt, it shall be applied first to the discharge of any interest due at the time, and the balance, if any, shall be applied to the reduction of the principal.” Pindar points out that a party exercising a power of sale in a security deed “may apply the fund first to the costs of the sale, attorney’s fees, and the interest and principal of the secured indebtedness.” Pindar, Ga. Real Estate Law, *846p. 833, § 21-88. There is, however, no statutory requirement that credit for proceeds must be applied to attorney fees first. Presumably this matter is one which may be contractually agreed to by the parties. See Rice-Stix Dry Goods Co. v. Friedlander, 30 Ga. App. 312 (117 SE 762) [affirmed in Friedlander v. Rice-Stix Dry Goods Co., 158 Ga. 303 (122 SE 890)] which held that even OCGA § 7-4-17 (Code Ann. § 57-109) does not prohibit a creditor from applying payment on the principal first. Accord, First Nat. Bank v. Appalachian Indus., 146 Ga. App. 630, 632 (247 SE2d 422) [“in the absence of an agreement to the contrary, prepayments on a loan must first be applied to interest . . .”]. See in this connection OCGA § 13-4-42 (former Code § 20-1006) as to appropriation of payments.
The note in question with regards to the application of the proceeds from a sale provides:. “Any proceeds of any disposition of Collateral may be applied by the Holder to the payment of expenses in connection with the Collateral, including reasonable attorney fees and legal expenses, and any balance of such proceeds may be applied by the Holder toward the payment of such of the Liabilities, and in such order of application, as the Holder may from time to time elect.” The deed to secure debt on which the note is based contains the following language: “The proceeds of the sale are to be applied first to said indebtedness and expenses of sale, and the remainder, if any, to the said first party.”
We therefore find movant’s argument to be subject to two salient objections. One, the security deed would apply proceeds first to the indebtedness which creates an apparent conflict with the terms of the note. Secondly, assuming that the proceeds could be applied first to attorney fees before the principal indebtedness, still the contract does not automatically so provide but requires affirmative action on the part of the holder of the note to elect to so apply such proceeds.
In support of the motion appellee has carefully set forth the credit from the proceeds of the sale, applied it first to interest, leaving a balance of credit which is next applied to attorney fees, and then the balance of credit is applied to the principal, leaving a sum owing. However, prior to this time in all its listings in the lower court this method was not used. Appellee’s pleadings opted for a straight deduction of the proceeds from the total amount owed with no indication as to an election as to the order in which the proceeds would be applied. This is true both as to the action for confirmation of the sale and as to the present action to recover the deficit. Moreover, there is no evidence that appellee elected as to the application of the proceeds. We can not assume an election was made from a silent record.

*847
Rehearing denied.