Suntrust Bank v. Venable

In the Supreme Court of Georgia



                                            Decided:    September 12, 2016


               S16G0664. SUNTRUST BANK v. VENABLE.


      THOMPSON, Chief Justice.

      We issued a writ of certiorari in this appeal which arises out of a

deficiency action brought by appellant SunTrust Bank (“SunTrust”) as the

assignee under a motor vehicle conditional sales contract following its

repossession and sale of a motor vehicle purchased by appellee Mattie Venable.

The issue to be decided is whether the four year statute of limitation set forth in

OCGA § 11-2-725 (1) applicable to actions on contracts for the sale of goods

or the six year statute of limitation generally applicable to actions on simple

written contracts applies to the deficiency action filed by SunTrust. See OCGA

§ 9-3-24. We conclude that the action is subject to the four year statute of

limitation found in § 11-2-725 (1).

      This appeal comes before us from the Court of Appeals’ reversal of the

grant of summary judgment in favor of SunTrust on its deficiency claim. See
Venable v. SunTrust Bank, 335 Ga. App. 344 (780 SE2d 793) (2015). “On

appeal from the grant of summary judgment this Court conducts a de novo

review of the evidence to determine whether there is a genuine issue of material

fact and whether the undisputed facts, viewed in the light most favorable to the

nonmoving party, warrant judgment as a matter of law.” (Citation and

punctuation omitted.) Giles v. Swimmer, 290 Ga. 650 (1) (725 SE2d 220)

(2012). See OCGA § 9-11-56 (c).

      Viewed in that light, the evidence on summary judgment showed that in

March 2006, Venable entered into a “Simple Interest Conditional Sale Contract

with Options for Balloon Payment and Vehicle Return” (the “Contract”), when

she purchased a minivan from Team Ford of Marietta (the “dealership”). The

Contract identified the dealership as the “Seller” and Venable as the “Purchaser”

and granted the dealership a security interest in the purchased vehicle, which

interest it assigned to SunTrust shortly after the Contract was executed. After

Venable stopped making payments in November 2007, SunTrust repossessed

the minivan, sold it at auction for an amount less than the amount owed under

the Contract, and filed suit against Venable on October 15, 2012 to recover the

deficiency amount. Venable answered, and in defense, she asserted that the

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deficiency action was barred by the four year statute of limitation applicable to

contracts for the sale of goods. See OCGA § 11-2-725 (1). Without expressly

addressing the question of the applicable statute of limitation, the trial court

granted SunTrust’s motion for summary judgment. The Court of Appeals

reversed, concluding that SunTrust’s deficiency action was barred by § 11-2-

725 (1)’s four year period of limitation, and therefore, SunTrust was not entitled

to summary judgment on its deficiency claim. We granted SunTrust’s petition

for writ of certiorari, and for the reasons set forth below, we affirm the decision

of the Court of Appeals.

      OCGA § 9-3-24 sets out a general six year period of limitation applicable

in actions on a simple written contract. It provides, in pertinent part, that

      [a]ll actions upon simple contracts in writing shall be brought
      within six years after the same become due and payable. However,
      this Code section shall not apply to actions for the breach of
      contracts for the sale of goods under Article 2 of Title 11.

OCGA § 9-3-24. Article 2 of Title 11, Georgia’s enactment of the Uniform

Commercial Code, applies to actions for the breach of a contract involving the

sale of goods and requires such actions to “be commenced within four years




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after the cause of action has accrued.”1 OCGA § 11-2-725 (1). Resolution of

this appeal, therefore, turns on the determination of whether the Contract

between Venable and the dealership constitutes a contract for the sale of a good.

       The Court of Appeals, applying well-established Georgia law, concluded

that Article 2's four year statute of limitation applied because the primary

purpose of the conditional sales contract executed by Venable was the sale of

a good. See Venable, 335 Ga. App. at 347. This Court has not previously

considered the issue of which statute of limitation applies to a deficiency action

arising from a contract for the sale of a motor vehicle that also granted a security

interest. It is well established, however, that the provisions of Article 2 are

applicable both to a contract that involves only the sale of goods and a contract

that contains a blend of sale and non-sale elements “if the dominant purpose

behind the contract reflects a sales transaction.” (Citation and punctuation

omitted.) Ole Mexican Foods, Inc. v. Hanson Staple Co., 285 Ga. 288, 290 (676

SE2d 169) (2009). To make the determination of the “dominant purpose,” a


       1
         Expressly exempted from this provision is any transaction “intended to operate only
as a security transaction[.]” (Emphasis added.) OCGA § 11-2-102. SunTrust correctly does
not contend that the contract in this case, involving both the sale of a motor vehicle and the
grant of a security interest, comes within this exemption.

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court “must look to the primary or overall purpose of the transaction.” (Citation

and punctuation omitted.) Id. at 290.

      “When presented with two elements of a contract, each absolutely
      necessary if the subject matter is to be of any significant value to the
      purchaser, it is a futile task to attempt to determine which
      component is 'more necessary.' Thus, [we must look] to the
      predominant purpose, the thrust of the contract as it would exist in
      the minds of reasonable parties. There is no surer way to provide for
      predictable results in the face of a highly artificial classification
      system.” [Cit.]

J. Lee Gregory v. Scandinavian House, L.P., 209 Ga. App. 285, 288 (1) (433

SE2d 687 (1993).

      Applying these principles in this case, we conclude that the primary

purpose of the contract between Venable and the dealership was the sale of a

good. It is undisputed that the minivan constituted a “good,”2 that the Contract,

which was labeled “Conditional Sale Contract,” identified the dealership and

Venable as “Seller” and “Purchaser,” and that the Contract provided for the sale

of the minivan in exchange for Venable’s agreement to pay a sum certain.

Although the Contract also granted the dealership a security interest in the

vehicle sold, it, by its plain language, constituted both a sales transaction and a


      2
          See OCGA § 11-2-105 (1) (defining “goods”).

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secured transaction, creating a dual relationship between Venable and the

dealership as both buyer and seller and obligor and secured party.               Its

predominant purpose of selling a good, however, is evidenced by its title, the

designation of the parties as buyer and seller, Venable’s testimony that her

primary reason for executing the Contract was to purchase the minivan, and the

fact that the sales price of the vehicle was $29,626.00, whereas no separate fee

was required for the granting of the security interest to be held by the dealership.

See Ole Mexican Foods, Inc., 285 Ga. at 291 (stating that although “the label

the contracting parties affix to an agreement is not necessarily determinative of

the agreement’s predominant purpose,” it “‘is a good barometer of the parties’

intentions’” and “can constitute potent evidence of that purpose.”); Paramount

Contracting Co. v. DPS Industries, Inc., 309 Ga. App. 113, 116 (709 SE2d 288)

(2011) (finding sale of good was the predominant purpose of a contract

providing for both the sale and delivery of dirt, in part because the contract did

not provide separate pricing for the delivery of the dirt and the delivery cost

accounted for, at best, only 20 percent of the value of the dirt); Southern Tank

& Equipment Co. v. Zartic, Inc., 221 Ga. App. 503, 505 (471 SE2d 587) (1996)

(holding the predominant purpose of a contract containing both sale and non-

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sale aspects was the sale of goods in part because the portion of the cost

attributable to non-sale elements was less than one half of the total contract

price); J. Lee Gregory, 209 Ga. App. at 288 (1) (predominant purpose of

contract for sale and installation of windows was sale of a good where two-

thirds of the cost of the transaction was allocated to the sale of the windows and

contract failed to segregate the price of the windows from the price for services

to be rendered).

      Our determination that the predominant purpose of the Contract was the

sale of a good is also supported by our consideration of the nature of the action

filed by SunTrust. SunTrust’s deficiency action reflects its decision to seek

payment of the full purchase price, an element we find more closely related to

the sales aspect of the Contract. As described by the New Jersey Supreme Court

in Associates Discount Corp. v. Palmer, 219 A2d 858, 861 (N.J. 1966), a

deficiency suit

      is nothing but a simple in personam action for that part of the sales
      price which remains unpaid after the seller has exhausted his rights
      [as the holder of a security interest] by selling the collateral; it is an
      action to enforce the obligation of the buyer to pay the full sale
      price to the seller, an obligation which is an essential element of all
      sales and which exists whether or not the sale is accompanied by a
      security arrangement.

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We agree with this characterization of a deficiency action and with those courts,

like Palmer, which have described deficiency actions as “an attempt to enforce

an obligation arising out of the sales contract component of a retail installment

contract after the remedies created by the security agreement component of that

contract have been exhausted.” D.A.N. Joint Venture, III v. Clark, 218 SW3d

455, 459 (Ct. App. Missouri 2006). See also DaimlerChrylser Services North

America, LLC v. Quimette, 830 A2d 38, 41-42 (Vt. 2003), and cases cited

therein. See generally 68A AmJur 2d Secured Transactions § 565 (2016) (“An

action to recover a deficiency judgment is not governed by Article 9 [relating

to secured transactions] because it is merely an ordinary action seeking to

enforce the underlying obligation. Thus, the action of the creditor to recover a

deficiency judgment from a credit buyer of goods is in substance an action to

recover the balance of the purchase price and is therefore subject to the statute

of limitations applicable to such actions.”).

      Contrary to SunTrust’s argument in this case, the fact that the Contract

also granted a secured interest in the vehicle sold does not, by itself, transform

the predominant purpose of the Contract and does not take it outside the



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coverage of Article 2.3 We find no authority for the proposition that the mere

presence of a secured transaction aspect within a contract automatically triggers

application of OCGA § 9-3-24's six year limitation period for general contract

claims. In addition, while the grant of a security interest may have been a

necessary component of the overall transaction between Venable and the

dealership, it clearly was not the predominant purpose of the Contract, there

being no reason for the dealership to retain a security interest in the absence of

a sale. See Iler Group, Inc. v. Discrete Wireless, Inc., 90 FSupp3d 1329, 1336

(1) (ND Ga. 2015) (concluding that the predominant purpose of a contract

involving the sale of both goods and services was the sale of goods because the

services to be provided were related to and dependent upon the sale of the

goods).

       Our review of case law from other jurisdictions demonstrates that a


       3
         We specifically reject SunTrust’s invitation to hold that OCGA § 10-1-31 (a) (9)’s
definition of a “retail installment contract” as that term is used in the Motor Vehicle Sales
Finance Act (“MVSFA”), OCGA § 10-1-30 et seq., controls our determination of the
Contract’s “predominant purpose.” The MVSFA is limited in its scope to the regulation of
motor vehicle financing agencies and the formation of motor vehicle retail installment
contracts. There is no evidence that the legislature intended, when defining the category of
contracts to which the MVSFA’s requirements would apply, to define the term “contract” as
it may be used throughout the Georgia Code or to establish by implication the limitation
period applicable to all contracts for the sale of a motor vehicle.

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majority of courts have rejected this same argument when considering their

state’s enactment of the Uniform Commercial Code (UCC) and similar

contracts.4 For example, the court in First of America Bank v. Thompson, 552

NW2d 516, 520-522 (Mich. App. 1996), concluded, under facts virtually

identical to those here, that the four year limitation period set out in Article 2 of

the UCC applied to a deficiency action arising out of a contract for the sale of

a motor vehicle that also granted a secured interest. In reaching this conclusion,

the court found persuasive the numerous cases holding that the UCC’s four year

statute of limitation applies to an action brought by a creditor following the sale

of a good purchased subject to a security agreement because these suits are

primarily related to the sales aspect of the transaction. See, e.g., First Hawaiian

Bank v. Powers, 998 P2d 55, 67 n.8 (Haw. App. 2000) (applying Article 2's four

year limitation period to bank’s action to recover a deficiency judgment arising

out of an automobile sales contract that also granted a security interest);

Citizen’s Nat’l Bank of Decatur v. Farmer, 395 NE2d 1121, 1123 (Ill. App.

1979) (deficiency action brought by assignee under retail installment contract

      4
        Our decision in this case thus promotes one of the underlying purposes of the
Uniform Commercial Code and Title 11 of the Georgia Code, to “make uniform the law
among the various jurisdictions.” See OCGA § 11-1-103 (a) (3).

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for sale of motor vehicle following repossession); Massey-Ferguson Credit

Corp. v. Casaulong, 62 Cal. App. 3d 1024, 1027 (Cal. App. 1976) (deficiency

action arising from sale of farm equipment); Palmer, 219 A2d at 860-861.

      Because the predominant purpose of the Contract was the sale of a good,

we agree with the Court of Appeals that it is governed by § 11-2-725 (1)'s four

year statute of limitation. It is undisputed that SunTrust’s deficiency claim

seeking a deficiency judgment was filed more than four years after the cause of

action accrued. See Radha Krishna, Inc. v. Desai, 301 Ga. App. 638, 641 (2)

(689 SE2d 78) (2009) (holding that limitation period begins to run at the time

of the breach). Accordingly, SunTrust’s claim is barred under the applicable

statute of limitation, and we find no error in the Court of Appeals’ decision

reversing the trial court’s grant of summary judgment in SunTrust’s favor.

      Judgment affirmed. All the Justices concur.




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