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Smart Summary

Factual and Procedural Background

In December 1991 Bower agreed to sell real property to Gentile subject to an existing first security deed. The parties signed a sales contract requiring Bower to convey marketable title by general warranty deed at closing and requiring Gentile to reconvey a wrap-around security deed and to execute two promissory notes: one covering the existing first security deed and a separate $36,000 note for Bower's equity. They closed in January 1992; Gentile executed the security deeds and notes but, Gentile contends, Bower never delivered the general warranty deed. Gentile sued for fraud; Bower counterclaimed for payment on the $36,000 promissory note. The trial court granted summary judgment to Bower on both Gentile's claim and Bower's counterclaim. Gentile appeals only the grant of summary judgment on the $36,000 counterclaim.

Legal Issues Presented

  1. Whether the trial court erred in granting summary judgment to Bower on his counterclaim for the balance due on the $36,000 promissory note where Gentile asserted an affirmative defense of failure of consideration based on Bower's alleged failure to deliver the warranty deed.

Arguments of the Parties

Appellant's (Gentile) Arguments

  • Gentile asserted he was relieved of liability on the $36,000 promissory note because Bower failed to deliver the warranty deed promised in the real estate sales contract, raising the affirmative defense of failure of consideration.
  • Gentile supported this defense with the sales contract and deposition testimony that he did not receive the warranty deed at closing.

Appellee's (Bower) Arguments

  • Bower contended delivery of the warranty deed was not part of the consideration for the $36,000 note, asserting that the warranty deed would not be provided until the wrap-around note was paid in full; his summary judgment papers included an affidavit reflecting this position.
  • Bower relied on production of the executed $36,000 promissory note to establish a prima facie right to judgment.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Moore v. Food Assoc., Inc., 210 Ga. App. 780 (437 S.E.2d 832) (1993) De novo review on appeal from grant of summary judgment. The court applied the de novo standard in reviewing the trial court's grant of summary judgment.
Lau's Corp. v. Haskins, 261 Ga. 491 (405 S.E.2d 474) (1991) Summary judgment standard: moving party must demonstrate no genuine issue of material fact and entitlement to judgment as a matter of law. Used to state the governing summary judgment standard.
Kelly v. Pierce Roofing Co., 220 Ga. App. 391, 392-393 (2) (469 S.E.2d 469) (1996) Burden-shifting: movant's prima facie showing shifts burden to respondent to produce rebuttal evidence. Explained that once Bower produced the note, the burden shifted to Gentile to assert an affirmative defense.
Abdalla v. DDCB, Inc., 216 Ga. App. 667, 668 (455 S.E.2d 598) (1995) If respondent produces rebuttal evidence in the form of an affirmative defense, burden shifts back to movant; movant's papers are scrutinized and doubts resolved against movant. Applied to conclude that, having asserted failure of consideration, Gentile shifted the burden back to Bower to show no genuine issue remained, and Bower's papers were scrutinized.
Kinsey v. State, 219 Ga. App. 204, 205 (464 S.E.2d 648) (1995) Appellate briefs must cite relevant record; courts will not search the record without citation. Applied in criticizing Gentile's counsel for failing to cite the record to support assertions in the brief.
Toledo v. State, 216 Ga. App. 480, 482 (455 S.E.2d 595) (1995) When multiple errors are asserted in a single enumeration, appellate court may choose whether to review none, one, or both. Invoked in noting counsel's improper grouping of errors and the court's discretion regarding review.
Jay Gleason Advertising Svc. v. Gleason, 193 Ga. App. 445 (388 S.E.2d 43) (1989) Production of an executed promissory note establishes a prima facie right to judgment. Used to explain that Bower established a prima facie right by producing the executed $36,000 note.
Emerson v. Cousins Mtg. c., 145 Ga. App. 883, 884 (244 S.E.2d 890) (1978) Makers of promissory notes can plead failure of consideration as a defense. Supported the proposition that Gentile could assert failure of consideration in defense to the note.
Jones v. Conlin, 171 Ga. App. 346 (320 S.E.2d 188) (1984) A defendant need not answer a counterclaim to assert an affirmative defense at trial and may assert it in response to a summary judgment motion with supporting evidence. Applied to hold Gentile could assert failure of consideration in response to the summary judgment motion by presenting evidence.
Jaraysi v. Soloway, 215 Ga. App. 531, 533 (1) (451 S.E.2d 521) (1994) A promissory note stating only "for value received" is ambiguous and does not specify the consideration. Used to justify inquiry into the real consideration for the $36,000 note.
Dunson Bros. Co. v. Smith Seed Co., 26 Ga. App. 585 (106 S.E. 914) (1921) Where a note recites no consideration except "for value received," the real consideration may be inquired into as necessary to the defense pleaded. Applied to permit inquiry into the real consideration where failure of consideration was pleaded.

Court's Reasoning and Analysis

The court reviewed the summary judgment de novo and stated the governing summary judgment standard. It found Bower made a prima facie showing by producing the executed $36,000 promissory note, shifting the burden to Gentile to produce rebuttal evidence. Gentile did so by asserting failure of consideration and attaching the sales contract and deposition testimony showing he did not receive the warranty deed at closing. Because the note recited only "for value received," the court treated the note as ambiguous and permitted inquiry into the real consideration. Once Gentile produced evidence of an affirmative defense, the burden shifted back to Bower to show there was no genuine issue of material fact as to that defense. The court determined Bower failed to meet that burden: his affidavit and motion did not support the contention that delivery of the warranty deed was postponed until payment of the wrap-around note, and the record contained no evidence to support that assertion. Any contrary evidence would conflict with the express terms of the sales contract, creating a material factual dispute. Consequently, summary judgment on the counterclaim was erroneous.

Holding and Implications

Judgment reversed.

Direct effect: the trial court's grant of summary judgment to Bower on the $36,000 promissory note counterclaim is reversed. The opinion does not announce any new legal precedent beyond applying existing principles of summary judgment, burden shifting, and inquiry into consideration for ambiguous notes.

GENTILE v. BOWER.

RUFFIN, Judge.

Anthony Gentile appeals the trial court's order granting summary judgment to Paul Bower for the balance due on a $36,000 promissory note that Gentile executed in connection with a real estate sales contract. We reverse.

On appeal from a trial court's grant of summary judgment, this court conducts a de novo review of the evidence. Moore v. Food Assoc., Inc., 210 Ga. App. 780 ( 437 S.E.2d 832) (1993). In order to prevail at summary judgment under OCGA § 9-11-56, "the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law. [Cit.]" Lau's Corp. v. Haskins, 261 Ga. 491 ( 405 S.E.2d 474) (1991). "The movant has the original burden of making this showing. Once the movant has made a prima facie showing that it is entitled to judgment as a matter of law, the burden shifts to the respondent to come forward with rebuttal evidence." (Citation and punctuation omitted.) Kelly v. Pierce Roofing Co., 220 Ga. App. 391, 392-393 (2) ( 469 S.E.2d 469) (1996). However, if the respondent successfully produces such rebuttal evidence in the form of an affirmative defense, the burden shifts back to the movant to establish the non-existence of a genuine issue of fact as to each affirmative defense. Abdalla v. DDCB, Inc., 216 Ga. App. 667, 668 ( 455 S.E.2d 598) (1995). Furthermore, the movant's "papers are carefully scrutinized and all doubts are resolved against [him], while [the respondent's] papers are treated with considerable indulgence. [Cits.]" (Punctuation omitted.) Id. at 669.

The record in this case shows that in December 1991, Bower agreed to sell property to Gentile, subject to an existing first security deed. The parties signed a sales contract which provided that Bower would convey marketable title by general warranty deed to Gentile at the time of closing. The contract further required Gentile to reconvey to Bower a "wrap around" security deed and a promissory note covering the balance Bower owed on the existing first security deed, as well as a second security deed and a separate promissory note in the amount of $36,000 covering Bower's equity in the property. In January 1992, approximately three weeks after the parties signed the sales contract, they closed the sale. At the closing, Gentile executed and delivered the security deeds and promissory note described in the sales contract, but Bower apparently never delivered the general warranty deed to Gentile.

Following the closing, Gentile brought this action for fraud, alleging that Bower made false representations regarding the property. Bower then counterclaimed against Gentile, demanding payment on the $36,000 promissory note. The trial court granted Bower summary judgment both on Gentile's fraud claim and on his own counterclaim for the balance due on the $36,000 promissory note. Gentile appeals only the trial court's grant of summary judgment on Bower's counterclaim.

Before addressing the merits of this appeal, we note that Gentile's counsel has violated the rules of this Court in preparing his brief. In particular, the brief fails to conform to Court of Appeals Rule 27 (c) (1), which requires that the sequence of arguments presented in the briefs "shall follow the order of the enumeration of errors, and shall be numbered accordingly." The brief also fails to comply with Court of Appeals Rule 27 (c) (3), mandating that a party support its arguments with specific reference to the record or transcript. "It is not the function of appellate judges to engage in the insipid search for support of alleged error without citation to relevant parts of the record." Kinsey v. State, 219 Ga. App. 204, 205 ( 464 S.E.2d 648) (1995). Gentile's brief contained no reference to the record supporting his contention that Bower failed to deliver the warranty deed to him at the time of the closing.

Furthermore, Gentile's counsel raises two different errors within a single enumeration, citing the code sections for both summary judgment and the parole evidence rule. When an appellant asserts more than one error within a single enumeration, this Court may exercise the discretion to review none, one or both of the errors asserted. Toledo v. State, 216 Ga. App. 480, 482 ( 455 S.E.2d 595) (1995). Thus, in addition to making it difficult for us to address the merits of Gentile's claim, counsel's failure to follow the rules of this Court is potentially prejudicial to his client. Needless to say, we expect all counsel practicing in this Court to know and to follow its rules. We are, accordingly, requiring by separate order that Gentile's counsel show cause why he should not be cited for contempt for failure to comply with this Court's rules.

1. Gentile first contends that the trial court erred in granting Bower's motion for summary judgment because there are genuine issues of material fact as to his liability under the $36,000 promissory note. We agree.

In an action on a promissory note, a claimant may establish a prima facie right to judgment as a matter of law by producing the promissory note and showing that it was executed. Jay Gleason Advertising Svc. v. Gleason, 193 Ga. App. 445 (1) ( 388 S.E.2d 43) (1989). In this case, Bower established such a prima facie right to judgment by producing the executed $36,000 promissory note. Accordingly, on Bower's motion for summary judgment, the burden shifted to Gentile to establish an affirmative defense to Bower's claim. See Kelly, supra.

Contrary to Bower's contentions, Gentile did meet this burden. In his response to Bower's summary judgment motion, Gentile claimed that he was relieved of his liability under the promissory note because Bower failed to deliver the warranty deed referred to in the real estate sales contract, thus implicitly raising the affirmative defense of "failure of consideration." Furthermore, Gentile does not merely rely on his pleadings to establish this affirmative defense. As evidence in support of this contention, Gentile attached the real estate sales contract, which provides that Bower was to deliver the warranty deed to Gentile at the time of the closing. In addition, Gentile provided deposition testimony specifically showing he did not receive the warranty deed at the time of the closing.

As a general rule, "the maker [of a promissory note] can always plead failure of consideration in defense to a suit on the promissory note. [Cits.]" Emerson v. Cousins Mtg. c., 145 Ga. App. 883, 884 ( 244 S.E.2d 890) (1978). Furthermore, although failure of consideration is an affirmative defense (see OCGA § 9-11-8 (c)), Gentile "was not required to answer [Bower's] counterclaim [under OCGA § 9-11-12 (a)], and under OCGA 9-11-12 (b) [he] could assert [his] defense of [failure of consideration] at trial. If [Gentile] could assert the defense at trial without a responsive pleading, it follows that [he] could assert it in response to a motion for summary judgment by presenting evidence of [the consideration agreed upon]." Jones v. Conlin, 171 Ga. App. 346 ( 320 S.E.2d 188) (1984).

The text of the promissory note itself does not describe the specific consideration for which it was given, stating only that it was given "for value received." Such a note "is not complete on its face and is ambiguous as it does not specify the consideration received by [Gentile] in exchange for the note." Jaraysi v. Soloway, 215 Ga. App. 531, 533 (1) ( 451 S.E.2d 521) (1994). Furthermore, this court has held that "[w]here a promissory note recites no consideration except in the words `for value received,' and suit is brought thereon by the payee against the maker, the real consideration of the note may be inquired into as far as may be necessary to the defense pleaded." Dunson Bros. Co. v. Smith Seed Co., 26 Ga. App. 585 ( 106 S.E. 914) (1921). Where the defense pleaded is failure of consideration, as in this case, such an inquiry into the real consideration agreed upon is clearly necessary. Thus, Gentile successfully established an affirmative defense in rebutting Bower's prima facie right to judgment.

As a result, the burden shifted back to Bower to establish the non-existence of any genuine issue of fact as to Gentile's affirmative defense. Bower did not meet this burden. Bower apparently contends that delivery of a warranty deed was not part of the consideration for the promissory note, asserting that "Bower was not to provide Gentile with a warranty deed until the wrap around note was paid in full." Bower's contention, however, is completely unsupported by the record. Although Bower's motion for summary judgment was accompanied by an affidavit, the affidavit does not support the assertions set forth in the summary judgment motion on this issue. While the motion cites the "wrap around note," which covers the principal balance on the property and which is not due in full until the year 2018, the affidavit presumably refers to the $36,000 promissory note in stating, "We agreed that I would not record the wrap around security deed and warranty deed until the second mortgage note was paid." (Emphasis supplied.) In his motion, Bower apparently confuses the two promissory notes involved in the real estate transaction, referring to the "wrap around note" instead of the $36,000 note. There is absolutely no evidence in the record to support the contention in the summary judgment motion that the deed was not to be delivered until the wrap around note was paid in full. In addition, even if such evidence existed, it would merely contradict the express terms of the real estate sales contract, still creating a material issue of fact.

Thus, there appears to be a contested issue of material fact as to the consideration agreed upon by the parties in return for the promissory note. The fact that Gentile did not appeal the trial court's order granting Bower summary judgment on the main claim for fraud and breach of the real estate sales contract does not operate to foreclose Gentile's affirmative defense as to the counterclaim since the two claims involve separate contracts that must be dealt with individually. Since Bower held the burden of establishing the non-existence of any genuine issue of fact regarding Gentile's liability under the $36,000 promissory note, and Bower failed to meet this burden, summary judgment was erroneously granted in his favor.

2. Because we reverse the trial court's ruling for the reasons discussed above, we need not address Gentile's remaining enumerations of error.

3. Bower's motion for damages, alleging Gentile filed a frivolous appeal, is denied.

Judgment reversed. McMurray, P.J., and Johnson, J., concur.

RUFFIN, Judge.

DECIDED SEPTEMBER 12, 1996.
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GENTILE v. BOWER
(Sep 12, 1996)