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Randolph County Ga. v. Settles Bros. Inc.

The defendant was discharged from liability on a promissory note to the extent of the value of the secured collateral after the plaintiff failed to renew or continue its UCC-1 financing statement as agreed.

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Randolph County appeals from the trial court’s order on summary judgment finding that Settles Brothers, Inc. occupied a surety-like position on a note owed to the County and that the County’s failure to maintain its security interest in property pledged as security on the note discharged Settles Brothers from liability to the extent of the value of the property. For the following reasons we affirm the trial court.

The County loaned Settles Brothers $194,000 in September 1992 and took a promissory note from Settles Brothers in the amount of the loan along with a perfected security interest in machinery owned by Settles Brothers.1 Settles Brothers made the required payments on the note until March 1995 at which time Settles Brothers, the County, and Settles Precision Manufacturing, Inc. entered into an agreement whereby Settles Precision assumed the remaining indebtedness on the note and purchased Settles Brothers’s assets including the machinery pledged as security for the note. Under the agreement, Settles Brothers remained liable on the note. The agreement also provided that a new UCC-1 financing statement would be recorded as “a renewal or a continuation of the original UCC-1 . . . as required by law” in order for the County to continue its perfected security interest in the machinery.

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