Editor: David Reiss
Brooklyn Law School

June 12, 2013

Don’t Show Me The Note in Georgia!

By David Reiss

The Georgia Supreme Court recently decided You v. JP Morgan Chase, No. S13Q0040 (May 20, 2013) which held that the “law does not require a party seeking to exercise a power of sale in a deed to secured a debt [a deed of trust] to hold, in addition to to the deed, the promissory note evidencing the underlying debt.” (1) The Georgia Supreme Court thus joins the Arizona Supreme Court which reached the same result in Hogan v. Wash. Mut. Bank, 277 P.3d 781 (Ariz. 2012). I discuss Hogan and cases reaching the opposite result in Show Me The Note!

The Georgia Supreme Court reached this result after reviewing the history of non-judicial foreclosure in Georgia.  It found nothing in recent statutory enactments that was inconsistent with the longstanding practice of allowing foreclosure on the mortgage alone.  The Court dismissed a number of arguments, including the contention that the UCC “prohibits a party who does not hold the note from exercising the power of sale in the deed securing the note.” (12) The Court notes that Chase is just seeking to enforce the deed of trust, not the note. The Court also acknowledges that it might be more sensible not to split the note from the mortgage, but it also notes that the Georgia legislature did not take that approach.

The court concludes the opinion with something of a cri de coeur, the type of statement one sees from a court that feels that its conscience is being constrained by binding authority:

As members of this State’s judicial branch, it is our duty to interpret the laws as they are written. See Allen v. Wright, 282 Ga. 9(1), 644 S.E.2d 814 (2007). This Court is not blind to the plight of distressed borrowers, many of whom have suffered devastating losses brought on by the burst of the housing bubble and ensuing recession. While we respect our legislature’s effort to assist distressed homeowners by amending the non-judicial foreclosure statute in 2008, the continued ease with which foreclosures may proceed in this State gives us pause, in light of the grave consequences foreclosures pose for individuals, families, neighborhoods, and society in general. Our concerns in this regard, however, do not entitle us to overstep our judicial role, and thus we leave to the members of our legislature, if they are so inclined, the task of undertaking additional reform.





(HT William Hart)

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