3 Personal Property Foreclosures

3. PERSONAL PROPERTY FORECLOSURES

3.01 CHECKLIST

1. Is there a lease or written security agreement (see 3.2)?

If no, then personal property foreclosure is not the proper action. The proper action may be an action in trover.

2. Property valued less than $15,000 (see 3.33)?

If no, then transfer to the proper court.

3. Filed where debtor or property located (see 3.34)?

If not, transfer to proper county.

4. Is service proper (tack and mail only after attempting personal service (see 3.39)?

5. Was answer timely filed within seven days or default opened within additional seven days (see 3.4)? If not, issue default judgment.

6. If no appearance for Defendant at hearing, issue default judgment.

7. OPTIONAL: At call of the calendar, you may allow Plaintiffs to indicate if they believe no legal defense has been raised.

8. If case is continued beyond seven days from date of answer require payment of rent into court (see 3.53).

9. Examine answer. If no legal defense or counterclaim has been raised then verify absence of legal defense and prepare judgment (see 3.55). If counterclaim beyond jurisdiction of court (see 1.11) then transfer case.

10. Trial - Plaintiff must show:

a. Existence of lease or written security interest

b. Default in terms of contract.

11. Consider defenses and counterclaims.

12. If finding for Plaintiff, enter writ of possession and issue turnover order (no money judgment). Have Plaintiff elect remedy after writ (see 3.55).

If finding for Defendant, dismiss complaint, may award money judgment on counterclaim.

13. Appeal procedure (see 3.54).

3.1 PURPOSE - To recover personal property where there has been a violation of the terms of a LEASE or SECURITY AGREEMENT.

3.2 SECURITY AGREEMENTS

3.21 Definition:

A form of interest in personal property - typically to secure payment of a loan or the balance of the purchase price where buying "on time." The interest attaches to collateral described in the security agreement.

3.22 Requirements O.C.G.A. §11-9-203

A. Must be in writing and signed by the debtor - description of secured property must be attached; a signed security interest is an absolute prerequisite to foreclosure - sales receipts referring to a security agreement are insufficient proof. Grier v. Skinner’s Furniture Store of Newnan, Inc., 180 Ga. App. 607, 349 SE2d 826 (1986); AND

B. Must be given for value (not gift); AND

C. The debtor has rights to the collateral he/she is pledging.

NOTE - A person may have an oral security interest where he/she has possession of the property (e.g., a pawnshop). However, in that case the secured party would not be filing a foreclosure action. Possession of an automobile title is not enough to validate the oral pledge of an automobile as security Holloway v. Farmers & Merchants Bank, 151 Ga. App. 424, 260 SE2d 380 (1979); McDonald v. Peoples Auto. Loan & Finance Corp., 115 Ga. App. 483, 487, 154 SE2d 886 (1967). O.C.G.A. § 40-3-50 et seq. provides exclusive method for perfecting security interest, but only affects third parties, not the debtor and creditor Spoon v. Herndon, 167 Ga. App. 794, 307 SE2D 693 (1983).

3.23 May Be a Lease with an Option to Buy:

Whether such a lease is intended as a security agreement depends on the facts of each case - however, whether a lease or a security agreement, a personal property foreclosure may be filed upon default.

3.24 Collateral - Definition and Description:

A. Collateral is the term given to designate personal property subject to a security interest. The most common types are: goods, instruments, chattel paper, documents, accounts, general intangibles, and rental property (personal property leased or rented in a rental transaction) O.C.G.A. § 44-14-230(b)(2); see O.C.G.A. § 11-9-108.

B. Legal sufficiency of description - a description is sufficient if it reasonably identifies the collateral by any method, which is objectively determinable, including specific listing, category, type, quantity, computational or allocation formula or procedure. Exceptions:

$ Super generic descriptions such as "all the debtor's assets" do not adequately describe property;

$ Property in consumer transactions, consumer goods, a security entitlement, a securities account, or a commodity account.

CAUTION - A legally sufficient description may not be sufficiently clear to enforce without a real danger of tort liability for conversion Dierkes v. Crawford Orthodontic Care, P.C., 284 Ga. App. 96, 643 SE2d 364 (2007). (general description of inventory and equipment of dental office where dentist borrowed property from his wife and fellow dentist)].

3.3 USE OF FORECLOSURE PROCESS

3.31 Self-help OK:

Unlike dispossessory actions, unless otherwise agreed, a secured party or lessor has on default the right to take possession of collateral without judicial process if this can be done without a breach of the peace O.C.G.A. § 11-9-503.

3.32 Purposes:

To obtain possession of collateral or leased property and to foreclose debtor's interest in collateral.

3.33 Jurisdiction:

Magistrate court has jurisdiction over foreclosures in which the value of the property claimed does not exceed $15,000. A counterclaim exceeding the jurisdiction of the court may be filed requiring transfer to another court.

3.34 Venue: O.C.G.A. § 44-14-231

A. Petition may be filed in the county where:

1. the debtor may reside;

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