Georgialina Enters. Inc. v. Frakes

Jury questions remained as to whether the parties intended for a subsequent promissory note to extinguish the security interest created in the parties' original note.

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Lawrence and Patricia Frakes bought a carwash from Georgialina Enterprises, Inc. and partially financed the purchase by borrowing $100,000 from the sellers, evidenced by a purchase-money promissory note and a deed to secure debt on the property. Six months later, Sunset Landings, Inc., a corporation formed by Mr. Frakes, entered into a promissory note in favor of Georgialina, which stated that it “superseded” the earlier note but that it was secured by the same deed to secure debt. The main issue on appeal is whether the second note functioned as a complete novation of the earlier note and thereby also nullified the deed to secure debt so that Georgialina no longer has any rights against the Frakes or the property.

Sunset Landings signed the second note in 1996. Two years later after Georgialina concluded that someone failed to make payments, it issued a demand letter to the Frakes in which it purported to accelerate the balance due. In response, the Frakes filed suit against Georgialina and Wayne Raiford, its president, alleging that they fraudulently induced the Frakes into buying the car wash. Georgialina and Raiford answered and counterclaimed on the note, and for fraud in connection with a lake-front lot that was allegedly part of the consideration for the sale. They then sought summary judgment on the Frakes’ claims and on their first counterclaim, i.e., the note. In response, the Frakes amended their complaint to assert that the first note had been “extinguished, superseded and discharged” by the second note and that the deed to secure debt should be canceled. The Frakes then filed a cross-motion for summary judgment on the same issues. The Frakes later dismissed their fraud claim against Georgialina, but not against Raiford.

Georgialina Enters. Inc. v. Frakes

Jury questions remained as to whether the parties intended for a subsequent promissory note to extinguish the security interest created in the parties' original note.

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