Eddie Denhardt appealed a district court order granting Wells Fargo Bank's motion to dismiss his complaint regarding excess funds from a tax sale of real property in Augusta, Georgia. The property was originally owned by Jimmy and Ruthie Loftin, who had granted a security deed to Wachovia Bank (later Wells Fargo) to secure a loan. When the property was sold at a tax sale in 2020, the proceeds exceeded the taxes and fees, leaving $56,639.33 in excess funds held by the county. Wells Fargo, as the successor to the original lender, claimed these funds. Denhardt, who had acquired the Loftins' interest in the excess funds through assignment, argued that the security deed only covered real property and not the personal property represented by the excess funds. The district court dismissed the case, ruling that Wells Fargo had a superior legal right to the funds under Georgia law.
The Eleventh Circuit reviewed the case de novo, applying Georgia substantive law. The central legal question was whether a holder of a security deed is entitled to excess funds from a tax sale before the property is redeemed. Denhardt relied on the Georgia Supreme Court's decision in DLT List, which held that a redeeming creditor's statutory priority lien does not extend to excess funds because they are personal property, not real property. However, the Eleventh Circuit found DLT List distinguishable because it addressed the scope of a lien after redemption, whereas this case concerned the entitlement of a security deed holder before redemption. The court turned to intermediate Georgia appellate courts, specifically Home Equity Credit Series 2021, LLC v. Labat and Performance Food Group, Inc. v. Davis. In Labat, the Georgia Court of Appeals interpreted O.C.G.A. § 48-4-5(a), which mandates that notice of excess funds be given to 'the record owner of the property… and to the record owner of each security deed.' The court reasoned that this plain language recognizes security deed holders as 'owners' with entitlement to the funds. Furthermore, under O.C.G.A. § 44-14-60, a security deed conveys actual title to the grantee (the lender) until the debt is paid, distinguishing them from mere lienholders. The court concluded that, absent convincing evidence that the Georgia Supreme Court would decide otherwise, it must follow the reasoning in Labat and Performance Food Group, which hold that security deed holders are entitled to excess funds.
The decision clarifies that under Georgia law, a security deed holder has a superior claim to excess funds from a tax sale compared to assignees of the record owner, provided the property has not yet been redeemed. This ruling resolves a split in authority by following intermediate appellate decisions that prioritize the statutory text of O.C.G.A. § 48-4-5. The case was affirmed, and the district court's dismissal of Denhardt's claims for conversion and money had and received stands. The court declined to certify the question to the Georgia Supreme Court, leaving the interpretation of intermediate appellate decisions as the controlling law for now.