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York v. Res-Ga Ljy LLC

Supreme Court of Georgia

April 17, 2017

YORK et al.
v.
RES-GA LJY, LLC.

          PETERSON, Justice.

         Last year, we held that compliance with OCGA § 44-14-161, Georgia's confirmation statute, "is a condition precedent to the lender's ability to pursue a guarantor for a deficiency after foreclosure has been conducted, but a guarantor retains the contractual ability to waive the condition precedent requirement." PNC Bank National Ass'n v. Smith, 298 Ga. 818, 824 (3) (b) (785 S.E.2d 505) (2016). We granted certiorari in this case to consider additional questions regarding creditors' ability to pursue deficiency actions against guarantors. We conclude that Jim L. York and John A. Drillot ("the Guarantors") waived any defense based on the failure of creditor RES-GA LJY, LLC ("RES-GA") to confirm the relevant foreclosure sales, and thus we affirm the Court of Appeals decision that upheld deficiency judgments against them.

         1. Background

         The relevant facts are undisputed. The Community Bank loaned money to several entities ("the Borrowers") over the course of several years. The Borrowers executed five promissory notes, granting the bank a security interest in real estate located in three different counties. To further secure the loans, the Guarantors signed commercial guaranties ("the Guaranties") in which they guaranteed full payment of the notes.[1] The Guaranties each included an identical[2] waiver provision ("the Waiver"), which provides in relevant part:

Guarantor also waives any and all rights or defenses based on suretyship or impairment of collateral including, but not limited to, any rights or defenses arising by reason of (A) the provisions of O.C.G.A. Section 10-7-24 concerning Guarantor's right to require Lender to take action against Borrower or any "one action" or "anti-deficiency" law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender's commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; . . . or (F) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness.

         The promissory notes and Guaranties were later assigned to RES-GA.

         In 2011, RES-GA foreclosed on and bought the properties that were serving as collateral. It then filed confirmation actions in the three counties in which the secured properties were located. In each instance, the court entered an order refusing to confirm the sale, finding that RES-GA had failed to prove that it obtained the fair market value of the property in question, and refusing to allow a resale. RES-GA appealed two of those orders, and the Georgia Court of Appeals affirmed in each case. See RES-GA LJY, LLC v. South Crestview Drive, LLC, 326 Ga.App. XXIII (March 10, 2014) (Rule 36 decision); RES-GA LJY, LLC v. Y.D.I., Inc., 322 Ga.App. 607 (745 S.E.2d 820) (2013).

         In July 2013, the Court of Appeals issued its decision in HWA Properties, Inc. v. Community & Southern Bank, 322 Ga.App. 877 (746 S.E.2d 609) (2013), finding that a creditor's failure to obtain a valid confirmation of a foreclosure sale[3] did not impair its authority to obtain a deficiency judgment against the loan's personal guarantor. Id. at 885-888 (2) (b). RES-GA then filed this deficiency action against the Guarantors. The trial court denied the Guarantors' motion for summary judgment and granted summary judgment to RES-GA, concluding that the Guarantors had waived any defense based on RES-GA's failure to confirm the sales. At RES-GA's suggestion, the trial court calculated RES-GA's damages as the difference between the amount due on the notes and the higher values of each property as contended by the Guarantors' appraisers in testimony submitted during the confirmation proceedings. In all, the court entered judgment against York for $12, 381, 103.09, plus $44, 432.22 in attorney fees, and entered judgment against Drillot in the amount of $1, 505, 772.10.

         The Guarantors appealed to the Court of Appeals, which affirmed. York, 336 Ga.App. 253. Pointing to our decision in PNC Bank, the panel noted that the confirmation requirement of OCGA § 44-14-161 (a) can be waived by a guarantor. Id. at 255. The panel rejected the Guarantors' argument that, because a defense arising out of OCGA § 44-14-161 (a) is not "based on suretyship, " the Waiver did not encompass such a defense. Id. at 255-256. The panel concluded that the Guaranties are themselves contracts of suretyship and that the Waiver explicitly applies to defenses arising from laws that prevent a lender from pursuing a deficiency claim against a guarantor. Id. We granted the Guarantors' petition for certiorari and directed the parties to address (1) whether the Court of Appeals erred in its determination that the Guarantors waived their rights under OCGA § 44-14-161 (a); and (2) whether RES-GA retained the power to pursue a deficiency judgment against the Guarantors after RES-GA sought and was denied judicial confirmation under the statute.

         2. The Guarantors waived their rights under OCGA § 44-14-161 (a).

         In Georgia, guaranty agreements are to be construed strictly, "and the surety's liability will not be extended by implication or interpretation." OCGA § 10-7-3. As with other contracts, the construction of a guaranty agreement is a question of law that we review de novo. United Gov't of Athens-Clarke Co. v. Stiles Apts., 295 Ga. 829, 832 (1) (764 S.E.2d 403) (2014). The Guarantors argue that the Waiver does not encompass just any defense in law and equity, but only those "rights or defenses based on suretyship or impairment of collateral[.]" And they argue that their rights under OCGA § 44-14-161 do not fall within the meaning of that provision. We agree with the Guarantors that the Waiver is not as broad as RES-GA says it is, as the Waiver's reference in subsection (F) to "any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness" cannot expand the meaning of the Waiver beyond the other types of rights or defenses specifically named. "[W]hen a statute or document enumerates by name several particular things, and concludes with a general term of enlargement, this latter term is to be construed as being ejusdem generis (i.e., of the same kind or class) with the things specifically named, unless, of course, there is something to show that a wider sense was intended." Ctr. for a Sustainable Coast v. Coastal Marshlands Prot. Comm., 284 Ga. 736, 737-738 (1) (670 S.E.2d 429) (2008) (citation omitted); see also Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 199-213 (2012). But we do not agree with the Guarantors that their rights under OCGA § 44-14-161 are not "rights or defenses based on suretyship or impairment of collateral[.]"

         Georgia law extends to guarantors certain protections from post-foreclosure deficiency actions, and there is no distinction between sureties and guarantors relevant to this case. OCGA § 10-7-1 defines a "contract of suretyship or guaranty" as "one whereby a person obligates himself to pay the debt of another in consideration of a benefit flowing to the surety or in consideration of credit or indulgence or other benefit given to his principal, the principal in either instance remaining bound therefor." "There shall be no distinction between contracts of suretyship and guaranty."[4] Id. OCGA § 44-14-161 (a) provides:

When any real estate is sold on foreclosure, without legal process, and under powers contained in security deeds, mortgages, or other lien contracts and at the sale the real estate does not bring the amount of the debt secured by the deed, mortgage, or contract, no action may be taken to obtain a deficiency judgment unless the person instituting the foreclosure proceedings shall, within 30 days after the sale, report the sale to the judge of the superior court of the county in which the land is located for confirmation and approval and shall obtain an order of confirmation and approval thereon.

         Georgia law extends to guarantors the right to insist on compliance with OCGA § 44-14-161 (a) as a condition precedent to the lender's ability to pursue the guarantor for a ...


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