TITLE 44 PROPERTY

Section 14. Mortgages, Conveyances to Secure Debt, and Liens, 44-14-1 through 44-14-613.

ARTICLE 1 IN GENERAL

44-14-2. What advances secured by mortgage or conveyance to secure debt; effect of recorded transfer of property subject to "open-end" clause; notice of transfer.

Whether or not it contains clauses providing therefor, a real estate mortgage or deed conveying realty as security for a debt shall secure advances made:
1. To pay taxes;
2. To pay premiums on insurance on the property;
3. To pay sums due to the holder of a deed to secure debt or lien on the property without which payment the secured position of the holder of the mortgage or deed to secure debt advancing such payment would be jeopardized;
4. To repair, maintain, or preserve the property; and
5. To complete improvements on the property,
  whether such advances were made by the original owner or by any subsequent owner of the mortgage or deed to secure debt and whether the property is still owned by the original mortgagor or grantor or is owned by a subsequent purchaser of such property. Such mortgage or deed to secure debt shall secure all expenses incident to the collection of the debt thereby secured and the foreclosure thereof by an action in any court or by the exercise of the power of sale therein contained.
Except for the advances set out in subsection (a) of this Code section, any extension of credit to the mortgagor or grantor after July 1, 1980, as to any debt or obligation arising subsequent to the actual notice of transfer of property or any valuable interest therein as provided in this subsection shall not be secured by virtue of the operation of an "open-end" clause described in Code Section 44-14-1 if the grantor of the instrument containing the "open-end" clause has transferred the property subject to such instrument or has transferred any valuable interest in such property and if the instrument effecting such transfer has been filed for record and actual notice of such transfer has been given to the holder of such instrument. In addition to other means of furnishing actual notice and for the purpose of this subsection, actual notice shall be deemed to have been given to the holder of such instrument upon evidence that:
1. A properly stamped envelope which contained a copy of the recorded transfer and was addressed to the holder at its principal office was placed in the United States mail for registered or certified delivery and that the holder or an officer, agent, employee, or representative of the holder acknowledged receipt thereof on a United States Postal Service return receipt form for registered or certified mail delivery; or
2. The recorded transfer was sent to the holder at its principal office by statutory overnight delivery and a receipt therefor obtained as provided in Code Section 9-10-12.
Notwithstanding subsections (a) and (b) of this Code section and the occurrence of any of the events, acts, or conditions described therein, a real estate mortgage or deed conveying realty as security for a debt shall continue to secure any debt or obligation named or described therein and any advance permitted by this Code section.

(Ga. L. 1980, p. 1550, § 2; Ga. L. 1982, p. 3, § 44; Ga. L. 2000, p. 1589, § 12.)

The 2000 amendment, effective July 1, 2000, in subsection (b), inserted a colon following "instrument upon evidence that", designated the language following "instrument upon evidence that" as paragraph (1), and added paragraph (2).

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 conflict with T. 11 shall yield to and be superseded by T. 11. See Code Section 11-10-103.

Ga. L. 2000, p. 1589, § 16, not codified by the General Assembly, provided that the Act is applicable with respect to notices delivered on or after July 1, 2000.

JUDICIAL DECISIONS

Advances made by the assignee of a junior security deed to the holder of a senior security deed, in order to protect the assignee's secured position, are secured by the junior security deed. Mason v. Bates, 251 Ga. 241, 304 S.E.2d 724 (1983).

O.C.G.A. § 44-14-2 extends to costs incidental to foreclosure, but which do not grow out of a suit on the foreclosure proceeding itself. Tobler v. Yoder & Frey Auctioneers, Inc., 462 F. Supp. 788 (S.D. Ga. 1978), aff'd, 620 F.2d 508 (5th Cir. 1980).

Advertising costs of foreclosure sales are ordinarily recoverable. Tobler v. Yoder & Frey Auctioneers, Inc., 462 F. Supp. 788 (S.D. Ga. 1978), aff'd, 620 F.2d 508 (5th Cir. 1980).

Notice required for collection of attorney's fees.

- A provision in a security deed in respect to collection of attorney's fees does not dispense with the notice required by O.C.G.A. § 13-1-11 to collect such fees. Tobler v. Yoder & Frey Auctioneers, Inc., 462 F. Supp. 788 (S.D. Ga. 1978), aff'd, 620 F.2d 508 (5th Cir. 1980).

Cost of removal of a complaint to federal district court is not taxable against a mortgagee, under O.C.G.A. § 44-14-2. Tobler v. Yoder & Frey Auctioneers, Inc., 462 F. Supp. 788 (S.D. Ga. 1978), aff'd, 620 F.2d 508 (5th Cir. 1980).

Costs of bankruptcy proceedings filed with intent to hinder or delay.

- An award of costs and expenses by the court is allowed in a case where an insolvent mortgagor files a bankruptcy proceeding with the intent to hinder and delay the mortgagee in foreclosing the security deed. The mortgagee must appear therein to protect the mortgagee's right to the exercise of the power of sale. Tobler v. Yoder & Frey Auctioneers, Inc., 462 F. Supp. 788 (S.D. Ga. 1978), aff'd, 620 F.2d 508 (5th Cir. 1980).

Duty to keep expenses of sale within reason.

- It is the duty of a mortgagee in conducting sale under a power contained in a security deed or mortgage to keep the expenses of collection within reasonable bounds. Tobler v. Yoder & Frey Auctioneers, Inc., 462 F. Supp. 788 (S.D. Ga. 1978), aff'd, 620 F.2d 508 (5th Cir. 1980).

Burden of showing actual notice received not met.

- Debtors failed to carry their burden of demonstrating that the debt fell within the scope of O.C.G.A. § 44-14-2(b) where there was no evidence that any debt was incurred after the bank received notice of insurance coverage showing the existence of a second mortgage. In re Felker, 181 Bankr. 1017 (Bankr. M.D. Ga. 1995).

Cited in Citizens Fed. Sav. & Loan Ass'n v. Andrews, 114 Ga. App. 94, 150 S.E.2d 301 (1966).

OPINIONS OF THE ATTORNEY GENERAL

Application of O.C.G.A. § 44-14-2(b) to "open-end" clauses in security deeds executed prior to July 1, 1980, cannot be assured, because such application arguably would impair obligation of contracts in violation of constitutional guarantees. 1981 Op. Att'y Gen. No. 81-98.

Application of phrase "transfer of property or any valuable interest therein."

- Phrase "transfer of property or any valuable interest therein" seems clearly to refer to situation where equity owner of encumbered property transfers some or all of the equity owner's interest subject to first security deed. In this situation, O.C.G.A. § 44-14-2(b) protects purchaser of equity from loss in event original owner borrows more money from first security deed holder. 1981 Op. Att'y Gen. No. 81-98.

Phrase "transfer of property or any valuable interest therein" would appear also to refer to a secondary security deed conveyance, because a secondary security deed unquestionably conveys a valuable interest in property. 1981 Op. Att'y Gen. No. 81-98.

Department of Banking and Finance in its examinations should not regard debt secured by secondary security deed as being senior to debts under "open-end" clause in first security deed executed prior to July 1, 1980, unless holder of first security deed has agreed that subsequent advances will not be senior to secondary security deed indebtedness. 1981 Op. Att'y Gen. No. 81-98.

RESEARCH REFERENCES

Am. Jur. 2d.

- 55 Am. Jur. 2d, Mortgages, §§ 65 et seq., 83 et seq.

C.J.S.

- 59 C.J.S., Mortgages, § 154 et seq.

ALR.

- Application of insurance moneys received by mortgagee, 11 A.L.R. 1295.

Duty of mortgagee, or one holding title as security, to protect the interests of third persons in respect to insurance, 41 A.L.R. 1283; 130 A.L.R. 598.

Right of mortgagee to benefit of insurance taken out by purchaser of equity of redemption, 47 A.L.R. 1011.

Liability of mortgagee under mortgage clause for insurance premium, 47 A.L.R. 1126; 56 A.L.R. 679; 83 A.L.R. 105.

Right of mortgagee to be reimbursed for, or credited with, amount of taxes paid by him after judgment, but before sale, 60 A.L.R. 425.

Validity, construction, applicability, and effect of provision in real estate mortgage regarding payment of taxes or assessments by mortgagee, 74 A.L.R. 506.

Adjustment of loss by agreement between mortgagor and insurer as affecting mortgagee under loss-payable clause, 111 A.L.R. 697.

Independent contract theory or creditor-beneficiary theory as regards status of mortgagee under mortgage clause in policy fire insurance, 124 A.L.R. 1034.

Optional advance under mortgage as subject to lien intervening between giving of the mortgage and making the advance, 138 A.L.R. 566.

Limit of amount specified in mortgage for future advances as affected by repayment of part of the advances, 152 A.L.R. 566.

Priority between mechanics' liens and advances made under previously executed mortgage, 80 A.L.R.2d 179.

Rights in funds representing "escrow" payments made by mortgagor in advance to cover taxes or insurance, 50 A.L.R.3d 697.

Failure to keep up insurance as justifying foreclosure under acceleration provision in mortgage or deed of trust, 69 A.L.R.3d 774.

Debts included in provision of mortgage purporting to cover all future and existing debts (dragnet clause) - modern status, 3 A.L.R.4th 690.

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