Nelson v. Hamilton State Bank

Citations: 331 Ga. App. 419; 771 S.E.2d 113; 2015 Ga. App. LEXIS 168Docket: A14A1921

Court: Court of Appeals of Georgia; March 20, 2015; Georgia; State Appellate Court

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Jimmy R. Nelson executed a commercial promissory note for $2,977,019.70 in favor of Bartow County Bank (BCB). After Nelson defaulted, Hamilton State Bank (HSB), the successor to BCB, sued for repayment and was awarded $2,866,990.37 plus post-judgment interest by the trial court. Nelson contested both the amount owed and claimed HSB's actions against his business partner, Dolph Nelson, affected his ability to pay. The court affirmed liability but reversed the damage award. Summary judgment was deemed appropriate as there were no genuine issues of material fact. 

The case details show that Nelson and Dolph jointly owned corporate entities linked to a family furniture business that took out a $3.9 million loan from BCB in 2005, due by February 2010. Dolph had previously secured a residential loan from BCB, which included a "dragnet clause" tying it to other debts. In 2007, he refinanced this loan with an equity line of credit, yet the original security deed remained intact. In 2010, both Nelson and Dolph took out personal loans from BCB to renew the business loan, with Nelson's amounting to $2,977,019.70. Nelson indicated BCB required personal loans due to banking regulations. 

The furniture business made 16 monthly payments before ceasing in October 2011, coinciding with BCB's closure by the Georgia Department of Banking and Finance and the assignment of Nelson's note to HSB. Dolph paid off his equity line in October 2011, after which HSB initiated separate lawsuits against both Nelson and Dolph for the outstanding balances on their loans, with the trial court granting summary judgments in favor of HSB in both cases. Dolph has appealed separately, represented by the same legal counsel.

Nelson argues that the trial court incorrectly dismissed his defense regarding the connection between his and Dolph's 2010 promissory notes, claiming he should be excused from payment due to HSB's actions affecting Dolph. He alleges HSB breached its contract with Dolph regarding security on his home, improperly exerting leverage through a dragnet clause that should have been nullified after Dolph paid off his mortgage in November 2007. Nelson contends there are factual issues about HSB's intentions concerning Dolph's residence as security for the 2010 notes. However, the court finds this argument lacks merit, noting that Nelson was neither a party nor a third-party beneficiary of Dolph's mortgage or notes, thus lacking standing to make claims based on those transactions. The court cites precedents affirming that individuals not in privity of contract cannot assert claims arising from contract violations. 

Additionally, Nelson contests the judgment amount, admitting execution of the note but disputing the amount awarded by the court. The court acknowledges that a factual dispute persists regarding the amount owed, emphasizing that the plaintiff must prove damages with reasonable certainty in such cases. This reiterates the burden of proof on the party claiming damages to establish the debt's amount definitively.

A plaintiff seeking summary judgment for the amount owed on a note must provide sufficient documentation and testimony to substantiate their calculations. In this case, HSB's claim for damages of $2,866,990.37 lacked adequate support, as they failed to present a breakdown of principal and interest, an amortization schedule, or any witness testimony. The trial court's judgment was based solely on HSB's counsel's statements and a proposed order, which does not meet the necessary evidentiary standards. HSB attempted to justify the amount with four pieces of evidence, including a discovery response and deposition testimony from Nelson, but none convincingly established the precise outstanding principal amount. Consequently, the appellate court affirmed the trial court's finding of liability against Nelson but reversed the damage award due to insufficient evidence and remanded the case for further proceedings.

Barnes, P. J. and Boggs, J. agree on the ruling. On the date the security deed was recorded, Dolph transferred his interest in the residence to his wife. Under OCGA § 9-2-20, legal actions on contracts must be initiated by the party holding the legal interest, while beneficiaries of contracts can bring actions against the promisor. The court has applied OCGA § 44-14-161 (a) in foreclosure cases involving intertwined debts to prevent creditors from evading the statute's provisions by making successive loans on the same property. HSB has waived its claims for interest, expenses, and fees, resulting in the trial court awarding only the principal amount. The note specifies a 5.25 percent interest rate on the principal from June 7, 2010, requiring 35 payments of $20,227.36 beginning July 20, 2010, with a balloon payment due on May 20, 2013, using an "actual/360" accrual method. It is acknowledged that Nelson made 16 payments.