Okefenokee Aircraft, Inc. v. Primesouth Bank
296 Ga. App. 782, 68 U.C.C. Rep. Serv. 2d (West) 576, 676 S.E.2d 394 (2009)
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Rule of Law:
Under the Uniform Commercial Code, a secured creditor's remedies upon a debtor's default are cumulative and may be exercised simultaneously, permitting the creditor to retain possession of repossessed collateral while pursuing an independent judicial action for a money judgment on the underlying note.
Facts:
- On September 9, 2005, Okefenokee Aircraft, Inc. (OAI) borrowed $161,306.25 from PrimeSouth Bank to purchase an airplane, executing a promissory note.
- The airplane served as collateral securing the note.
- Joseph E. Rimes III executed a personal guarantee for the payment of the note.
- OAI subsequently defaulted on its payments under the note.
- The Bank made a demand for payment on both OAI and Rimes, but neither party paid the amount due.
- Following the non-payment, the Bank repossessed the airplane.
- The Bank did not dispose of the airplane after repossessing it.
Procedural Posture:
- PrimeSouth Bank filed suit against Okefenokee Aircraft, Inc. and Joseph E. Rimes III in a trial court to enforce the promissory note.
- The Bank filed a motion for summary judgment.
- The trial court granted the Bank's motion for summary judgment, finding that the Bank's possession of the collateral was not a defense to the lawsuit on the note.
- Okefenokee Aircraft, Inc. and Joseph E. Rimes III, as appellants, appealed the trial court's decision to the Georgia Court of Appeals, where PrimeSouth Bank was the appellee.
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Issue:
Does the Uniform Commercial Code permit a secured creditor to sue for the full amount of a debt on a promissory note while simultaneously holding possession of the repossessed collateral securing that note?
Opinions:
Majority - Bernes, Judge
Yes. The Uniform Commercial Code permits a secured creditor to sue for a money judgment on a note while simultaneously retaining possession of the collateral. The court reasoned that the UCC, specifically OCGA § 11-9-601(c), expressly states that a secured creditor's rights and remedies are cumulative and may be exercised simultaneously. The court cited precedent, including McCullough v. Mobiland, to affirm that the purpose of the UCC was to broaden, not limit, a creditor's options after default, rejecting the old theory of 'election of remedies.' The court distinguished the Bank's action for a money judgment on the note from an action for a deficiency judgment, which would require prior disposition of the collateral. Any claim by the debtor that the creditor's handling of the collateral is commercially unreasonable is a separate potential cause of action for damages, not a defense to the suit on the note itself.
Analysis:
This decision reaffirms the powerful position of secured creditors under the Uniform Commercial Code. It clarifies that a creditor is not forced to choose between repossessing collateral and suing on the note; it can do both at the same time. This significantly increases the pressure on defaulting debtors, as they can be deprived of the collateral's use while also facing a money judgment that can be enforced against their other assets. The ruling places the burden on the debtor to initiate a separate legal action if they believe the creditor's retention or handling of the collateral is commercially unreasonable, rather than allowing it as a direct defense to the primary debt collection suit.
