O.C.G.A. § 10-3-1 (2019)

Annotations

JUDICIAL DECISIONS ANALYSIS GENERAL CONSIDERATION CONSTRUCTION AND APPLICATION EFFECT OF TRANSFER ENFORCEMENT OF RIGHTS 1. IN GENERAL 2. JOINDER OF PARTIES 3. RES JUDICATA General Consideration Express assignment not affected. - This section refers to implied transmission of title to the security, but does not purport to exclude transmission

by express written assignment of the notes and security, or to qualify the effect of such written assignment. Cross v. Citizens’ Bank & Trust Co., 160 Ga. 647, 128 S.E. 898, 1925 Ga. LEXIS 222 (1925);

General Consideration (Cont’d) Georgia Land & Sec. Co. v. Citizens Bank, 164 Ga. 852, 139 S.E. 557, 1927 Ga. LEXIS 289 (1927). All or part of debt and security transferrable. - If land has been conveyed by security deed, the creditor may transfer the whole or any part of the debt and with it the real estate as security. Hunt v. New England Mtg. Sec. Co., 92 Ga. 720, 19 S.E. 27, 1893 Ga. LEXIS 238 (1893); Moss & Co. v. Stokely, 107 Ga. 233, 33 S.E. 61, 1899 Ga. LEXIS 37 (1899); Cumming v. McDade, 118 Ga. 612, 45 S.E. 479, 1903 Ga. LEXIS 633 (1903). Defense of conversion of collateral in suit on note. - In a suit brought upon a note which recites that certain collateral is given to secure its payment and in which suit the collateral is neither tendered nor satisfactorily accounted for, it is error to strike a defense which alleges that such collateral was actually deposited and in which the ability of the plaintiff to produce the collateral is denied. Such an allegation practically amounts to an allegation that the collateral has been converted, and if this was true, the defendant would have the right to recoup the value of the converted security, as against the payment of the note. Turner v. Commercial Sav. Bank, 17 Ga. App. 631, 87 S.E. 918, 1916 Ga. App. LEXIS 822 (1916). Construction and Application “Otherwise” defined. - Word “otherwise” includes any form of security which may be taken for the purpose of securing an indebtedness evidenced by a series of notes. Merchants’ & Citizens’ Bank v. Bogle, 174 Ga. 612, 163 S.E. 489, 1932 Ga. LEXIS 102 (1932). Word “otherwise,” in this section, covers notes secured by a security deed. Alley v. First Nat’l Bank, 46 Ga. App. 527, 168 S.E. 317, 1933 Ga. App. LEXIS 133 (1933). Section is applicable to security deed when title is transferred to the mortgagee. In re R.H. Elrod & Son, 215 F. 253, 1913 U.S. Dist. LEXIS 1890 (D. Ga. 1913). This section says that transfer of notes secured by a mortgage or otherwise con-

veys to transferee the benefit of the security. Alley v. First Nat’l Bank, 46 Ga. App. 527, 168 S.E. 317, 1933 Ga. App. LEXIS 133 (1933). Title transferred by transfer of secured note. - Whether or not the purported transfer of the security deed by the executors of an estate was effectual either in law or equity, when it appears that the executors also transferred the note secured by the deed, as a result of such transfer the transferee acquired an equitable title to the security. Chapman v. McPherson, 184 Ga. 618, 192 S.E. 423 (1937). Effect of Transfer Endorsement of note conveys mortgage lien. - Endorsement by a payee of the payee’s name on the back of a mortgage note, for value, conveyed such note together with the mortgage lien to the holder thereof, and the transferee could foreclose the note in the transferee’s own name. Setze v. First Nat’l Bank, 140 Ga. 603, 79 S.E. 540, 1913 Ga. LEXIS 195 (1913). Restricted endorsement. - This section applies when the transfer is by endorsement of the note without recourse as well as when the endorsement is not restricted. Berry v. Van Hise, 148 Ga. 27, 95 S.E. 690, 1918 Ga. LEXIS 175 (1918). Delivery of note reserving title to personalty. - Mere delivery of a note containing a reservation of title to personalty, while sufficient to transfer the evidence of the debt, is insufficient to establish such privity between the maker of the note and the transferee as will continue or keep alive the right of retaking the chattel. Swann Davis Co. v. Stanton, 7 Ga. App. 668, 67 S.E. 888, 1910 Ga. App. LEXIS 454 (1910). Transfer of purchase money note without recourse. - When purchase money notes are transferred by the vendor of land without recourse or without guaranty, the notes lose their character as purchase money notes, insofar as the notes entitle the holder to a lien on the property. McLeod v. Bank of Abbeville, 147 Ga. 33, 147 Ga. 333, 92 S.E. 645, 1917 Ga. LEXIS 35 (1917). Transfer of purchase money note with reserved title. - When a

promissory note for the purchase money of personal property which contains a reservation of title until the note is paid is by the payee transferred for value to a third person without recourse, the title reserved for securing the payment is divested. If at the time of such transfer the title is not likewise transferred to the purchaser of the note as security in the purchaser’s hands, it vests in the maker, and the transferee becomes an ordinary creditor of such maker. Mills v. Pope, 20 Ga. App. 820, 93 S.E. 559, 1917 Ga. App. LEXIS 1105 (1917). “Payment guaranteed” endorsed on note with signature transfers security. - Words “payment guaranteed,” signed by the payees and entered upon the back of a promissory note which contains a retention of title to property therein described, to secure the note’s payment, is sufficient as an endorsement to transfer the title both of the note and of the property. Hendrix v. Bauhard Bros., 138 Ga. 473, 75 S.E. 588, 1912 Ga. LEXIS 586 (1912); Hooper v. Bank of Hiawassee, 29 Ga. App. 459, 116 S.E. 32, 1923 Ga. App. LEXIS 64 (1923). Loss of status as purchase money notes does not apply to mortgage. - Decisions such as that in Neal v. Murphey & Co., 60 Ga. 388 (1978), to the effect that when purchase money notes for land for which bond for title has been given are transferred by the vendor without recourse, the notes lose their character as purchase money notes insofar as the notes entitle the vendor to an interest in the land, and have no application to the case of a transfer of a note secured by mortgage. Berry v. Van Hise, 148 Ga. 27, 95 S.E. 690, 1918 Ga. LEXIS 175 (1918). Delivery of note transfers security represented by bond for title to land. - Assignee of a note given by the holder of a bond for title for part of the purchase-money of land, payable to the vendor or bearer, and transferred by the vendor by delivery, is subrogated to the rights of the vendor, and is entitled to a lien against the land for the purchase-money. The principle of this section applies when a note is indorsed without recourse. This principle applies when the note is payable to a named

payee or order, and is transferred by mere delivery. Holbrook v. Adams, 166 Ga. 871, 144 S.E. 657, 1928 Ga. LEXIS 423 (1928). General personal verdict against transferor without recourse not authorized. - When note secured by mortgage is transferred without recourse to one who transferred to another and suit was instituted thereon by the last transferee to recover a general judgment and set up the mortgage lien upon the property, while it was proper, under the disputed facts, to direct a verdict setting up a mortgage lien on the property for the amount of the note, it was erroneous to direct a general verdict in personam against the mortgagee who had transferred the note without recourse. Berry v. Van Hise, 148 Ga. 27, 95 S.E. 690, 1918 Ga. LEXIS 175 (1918). Transferee of one of several notes preferred. - Since a security deed secured several notes, and one of the notes was transferred to the mortgagee’s creditor, the latter was entitled to preference out of the proceeds of the sale of the property. In re R.H. Elrod & Son, 215 F. 253, 1913 U.S. Dist. LEXIS 1890 (D. Ga. 1913). Transferee has preference over secured payee. - Transfer of notes which are in any wise secured conveys to the transferee the benefit of the security, and if several notes thus secured are executed and delivered to a creditor as payee and the latter transfers some and retains others, the holder of the transferred notes has a preference over the secured payee, if the security is insufficient to pay all the notes. Merchants’ & Citizens’ Bank v. Bogle, 174 Ga. 612, 163 S.E. 489, 1932 Ga. LEXIS 102 (1932). In the absence of a special contract, when a mortgagee or grantee in a security deed transfers one of the secured notes and the transferee brings an equitable foreclosure thereon, the transferee will have priority over the mortgagee or grantee in the security deed holding the untransferred notes, if the amount realized at the foreclosure sale is insufficient to pay all the notes. Rembert v. Ellis, 195 Ga. 807, 25 S.E.2d 681, 1943 Ga. LEXIS 297 (1943). Security need not be transferred to give transferee preference. - Holder

Effect of Transfer (Cont’d) of notes of a series to whom the notes have been transferred has a preference over the secured payee who retains a portion of the evidence of indebtedness, if the security is insufficient to pay all the note, and there need not be a transfer of the security in order to entitle the transferee to this preference. Merchants’ & Citizens’ Bank v. Bogle, 174 Ga. 612, 163 S.E. 489, 1932 Ga. LEXIS 102 (1932). Transferee takes general power of sale. - When one becomes owner of title conveyed by security deed and of indebtedness secured thereby, and the power of sale is not expressed in the deed as limited to the grantee, but is conferred upon the grantee or “assigns,” one is entitled to exercise the power to the same extent as the grantee. Universal Chain Theatrical Enters., Inc. v. Oldknow, 176 Ga. 492, 168 S.E. 239, 1933 Ga. LEXIS 207 (1933). Waiver of transferee’s right to preference. - Generally, the transferee of one or more of several notes secured by deed to a single tract of land is entitled to preference in payment to the payee of the mortgage or security deed, but this preference may be waived. Such transferee of one of the notes may not only expressly waive one’s right to preference in the distribution of funds arising from the sale of the land given as security for the payment of the debt, but one may also expressly contract that preference in the payment of the proceeds of such sale shall be retained by the holder of the security deed, and thereby agree and contract that a distribution of the proceeds of the sale of the land securing both notes shall be different from that ordinarily enforceable by law. Ottauquechee Sav. Bank v. Elliott, 172 Ga. 656, 158 S.E. 316, 1931 Ga. LEXIS 170 (1931). Enforcement of Rights 1. In General Transferee may subject land to debt. - Under former Civil Code 1910, §§ 6037 and 6039, the transferee and holder of a promissory note given for the

purchase money of land may, in appropriate proceedings, subject the land to the transferee’s debt. Guarantee Trust & Banking Co. v. American Nat’l Bank, 15 Ga. App. 778, 84 S.E. 222, 1915 Ga. App. LEXIS 61 (1915). Recovery of personalty when title reserved. - If one sells personal property, taking a purchase money note reserving title in the property until the note is paid, the holder of such note may recover the property in an action of trover upon failure of the maker of the note to pay the note. Jordan Mercantile Co. v. Brooks, 149 Ga. 157, 99 S.E. 289, 1919 Ga. LEXIS 170 (1919); Hooper v. Bank of Hiawassee, 29 Ga. App. 459, 116 S.E. 32, 1923 Ga. App. LEXIS 64 (1923). Any transferee may foreclose. - If one or more of several notes secured are held by one person and others of the secured notes are held by other parties, each of the noteholders is entitled to the security executed to secure all the notes, and any one of the holders may foreclose, giving the notice required by law to all holders concerned. Irons v. American Nat’l Bank, 178 Ga. 160, 172 S.E. 629, 1933 Ga. LEXIS 34 (1933). Enforcement of landlord’s lien despite payment to transferor. - If a tenant gives two negotiable promissory notes payable to the landlord for rent and the landlord transfers one of the notes and retains the other, in the absence of any agreement to the contrary, the lien right is split, and the interests of the landlord and the transferee in the security provided by the landlord’s liens are several, and the interest of the transferee is not subject to the control of the landlord. If in such a case the tenant sells and disposes of a part of the crops raised upon the premises during the year and pays the entire proceeds to the landlord, who does not produce the transferred note, and if such sale and disposition of the proceeds are without the authority or consent of the transferee, the latter will not be estopped by such application of the proceeds from asserting the fact of such sale and removal as ground for distraining for the amount of rent represented by the transferred note before the note’s maturity.

International Agric. Corp. v. Powell, 31 Ga. App. 348, 120 S.E. 668, 1923 Ga. App. LEXIS 942 (1923). Equity will give effect to transferee’s rights. - If the security is a deed conveying the legal title, the transfer carries with the transfer an equitable interest in the security, though not the legal title; and a court of equity will give effect to the transferee’s rights in the premises. Henry v. McAllister, 93 Ga. 667, 20 S.E. 66, 1894 Ga. LEXIS 382 (1894); Van Pelt v. Hurt, 97 Ga. 660, 25 S.E. 489, 1895 Ga. LEXIS 548 (1895); Carter v. Johnson, 156 Ga. 207, 119 S.E. 22, 1923 Ga. LEXIS 228 (1923); First Nat’l Bank v. Pounds, 163 Ga. 551, 136 S.E. 528, 1927 Ga. LEXIS 25 (1927). When the transferee of a purchase money note reduces the note to judgment, it is the duty of the vendor to convey the land by quitclaim deed to the purchasers, to enable the transferee to levy upon and sell the land under an execution issued upon the judgment obtained for the purchase money; and upon refusal of the vendor to make such conveyance when requested to do so by a transferee, a court of equity will compel the vendor to make such conveyance. Holbrook v. Adams, 166 Ga. 871, 144 S.E. 657, 1928 Ga. LEXIS 423 (1928). Lien enforceable without regard to equitable principles. - Under former Civil Code 1910, §§ 3346 and 4276, a transferee of notes may ask in a court of law, without asking for intervention of equitable principles, that a judgment rendered on such notes be declared to be a special lien on the land or other property which is described in the instrument securing such notes. Alley v. First Nat’l Bank, 46 Ga. App. 527, 168 S.E. 317, 1933 Ga. App. LEXIS 133 (1933). 2. Joinder of Parties Transferees joinable with mortgagor. - Petition was not rendered multifarious by the joinder of the holders of a transferred note with the mortgagor, because the petition set forth one connected interest among them all, centering in the point in issue in the

cause. Conley v. Buck, 100 Ga. 187, 28 S.E. 97, 1897 Ga. LEXIS 25 (1897). Immaterial whether note preferred or not. - It is immaterial whether the note is preferred or postponed in payment to those held by the mortgagee. Willingham & Cone v. Huguenin, 129 Ga. 835, 60 S.E. 186, 1908 Ga. LEXIS 205 (1908). All transferees must be made parties, if possible. - All the holders of notes secured by a mortgage must be brought before the court as defendants before a decree is made; it is best, both for the holders of the notes and the mortgagor, that the foreclosure sale shall remove the whole lien from the property, so that contemplating purchasers may bid with the assurance that the lien of the mortgagor will be entirely divested from the land, but this is not to be understood as requiring the impossible; it was not intended to require the exercise of that extraterritorial jurisdiction which is forbidden by law. Irons v. American Nat’l Bank, 178 Ga. 160, 172 S.E. 629, 1933 Ga. LEXIS 34 (1933). 3. Res Judicata Decrees and orders bind grantee made party or subsequent transferees. - If a foreclosure proceeding by a transferee of one of the secured notes has been completed and the grantee in the security deed was a party to the proceeding, the decree and orders therein are res judicata as to any further rights of the grantee or the grantee’s transferees who may acquire title after such decree and orders. Rembert v. Ellis, 195 Ga. 807, 25 S.E.2d 681, 1943 Ga. LEXIS 297 (1943). When the transferee of a note secured by a deed forecloses thereon in equity and makes the receiver of the insolvent assignor a party, and the receiver raises no question as to a partly erroneous description of the property in the petition and proceedings, but acknowledges service of a petition and rule nisi to confirm the sale of the property, as correctly advertised, sold, and described in the petition for confirmation, and the sale is thus con-

Enforcement of Rights (Cont’d) 3. Res Judicata (Cont’d) firmed with a correct deed to the purchaser, one who subsequently buys another note secured by the same deed is bound by such foreclosure. One cannot maintain on one’s note a second foreclosure on the theory that the first proceed-

ing was void because the pleadings and procedure therein contained the partly erroneous description of the property since one was a privy of the insolvent assignor and its receiver. Accordingly, the judge properly found for the defendants on their pleas of res judicata and estoppel. Rembert v. Ellis, 195 Ga. 807, 25 S.E.2d 681, 1943 Ga. LEXIS 297 (1943).

RESEARCH REFERENCES Am. Jur. 2d. 55 Am. Jur. 2d, Mortgages, § 1069 et seq. C.J.S. 10 C.J.S., Bills and Notes; Letters of Credit, § 163 et seq.

ALR. Assumption of mortgage by grantee as affecting right of mortgagee to proceed against mortgagor, 41 A.L.R. 317.