YORK Et Al. v. RES-GA LJY, LLC

FIRST DIVISION
DOYLE, C. J.,
PHIPPS, P. J., and BOGGS, J.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
March 16, 2016
In the Court of Appeals of Georgia
A15A2254. YORK et al. v. RES-GA LJY, LLC.
PHIPPS, Presiding Judge.
RES-GA LJY, LLC (“RES-GA”) sued Jim L. York and John A. Drillot
(collectively, “the defendants”) for amounts owed on several commercial guaranties.
The trial court granted summary judgment to RES-GA, and the defendants appeal.
For reasons that follow, we affirm.
Summary judgment is appropriate when the “pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.”1 We review the grant of summary judgment
1
Community & Southern Bank v. DCB Investments, 328 Ga. App. 605 (760
SE2d 210) (2014) (punctuation and footnote omitted).
de novo, construing the evidence and all reasonable inferences in favor of the non-
movant.2
So viewed, the record shows that at various points from 2005 to 2009, The
Community Bank (“TCB”) loaned money to several entities affiliated with the
defendants (“the borrowers”). As security, the borrowers executed five promissory
notes and granted TCB a security interest in real estate located in DeKalb County,
Gwinnett County, and Paulding County. To further secure the loans, the defendants
signed commercial guaranties, through which they “guarantee[d] full and punctual
payment and satisfaction of the [i]ndebtedness.” The promissory notes and guaranties
were later assigned to RES-GA.
When the borrowers failed to pay off the loans, RES-GA foreclosed on and
bought the properties serving as collateral. It then sought judicial confirmation that
it had purchased the parcels at fair market value. Courts in the counties where the
properties were located reviewed the sales, and each ultimately refused to confirm
2
Id. at 605-606.
2
that RES-GA had paid fair market value. Two orders denying confirmation were
appealed to this Court, and we affirmed.3
RES-GA subsequently sued the defendants as guarantors of the amounts still
owed by the borrowers on the promissory notes. The defendants moved for summary
judgment, arguing that because RES-GA failed to secure confirmation of the
foreclosure sales, it could not recover a deficiency judgment. RES-GA responded
with its own summary judgment motion. It agreed that it sought the deficiency
between the unpaid principal indebtedness and the price it paid for the properties at
foreclosure. But it claimed that the defendants had waived the confirmation
requirement, permitting recovery. The trial court granted RES-GA’s motion, and this
appeal followed.
Pursuant to OCGA § 44-14-161 (a),
When any real estate is sold on foreclosure, without legal process, and
under powers contained in security deeds . . . and at the sale the real
estate does not bring the amount of the debt secured by the deed, . . . no
action may be taken to obtain a deficiency judgment unless the person
instituting the foreclosure proceedings shall, within 30 days after the
3
See RES-GA LJY v. South Crestview Drive, 326 Ga. App. XXIII (A13A1810,
decided March 10, 2014); RES-GA LJY v. Y. D. I., Inc., 322 Ga. App. 607 (745 SE2d
820) (2013).
3
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.
Without dispute, RES-GA bought the properties at issue for less than the
amounts owed. Although it sought confirmation of these sales, its efforts failed. RES-
GA concedes, therefore, that OCGA § 44-14-161 (a) prevents it from pursuing the
borrowers for any deficiency. It contends, however, that it can recover the deficiency
from the defendants, who guaranteed payment under the promissory notes and
waived, as part of the guaranties:
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.
4
The trial court agreed with RES-GA, concluding that the defendants had
waived the confirmation defense. We find no error. As our Supreme Court recently
explained, compliance with OCGA § 44-14-161 (a) “is a condition precedent to the
lender’s ability to pursue a guarantor for a deficiency after a foreclosure has been
conducted, but a guarantor retains the contractual ability to waive the condition
precedent requirement.”4 The confirmation requirement, therefore, can be waived.5
And pursuant to the guaranties, the defendants agreed to waive “any and all rights or
defenses based on suretyship.”
On appeal, the defendants argue that the guaranties “do not contain an express
or clearly stated waiver of the confirmation requirement” because a defense arising
out of OCGA § 44-14-161 (a) is not “based on suretyship.” According to the
defendants, a defense is “based on suretyship” only if it appears within the statutory
provisions setting forth a surety’s rights and obligations.6 In their view, the
4
PNC Bank v. Smith, ___ Ga. ___ (3) (S15Q1445, decided Feb. 22, 2016). See
also DCB Investments, supra at 613-614 (2) (guarantor may waive confirmation
requirement); HWA Properties v. Community & Southern Bank, 322 Ga. App. 877,
887-888 (2) (b) (746 SE2d 609) (2013) (same).
5
PNC Bank, supra.
6
See OCGA § 10-7-20 et seq.
5
confirmation requirement, which is part of the statutory framework governing
foreclosures, rather than suretyship, falls outside the waiver.
We disagree. The defendants’ guaranties are contracts of suretyship.7 Such
contracts must be strictly construed, and a “surety’s liability will not be extended by
implication or interpretation.”8 Ultimately, however, construction of a surety contract
“is a question of law for the court based on the intent of the parties as set forth in the
contract.”9 And nothing in the waiver’s language indicates that the parties intended
to limit its reach to any particular statutory defenses. By its plain terms, the phrase
“defenses based on suretyship” means just that – defenses based on or arising out of
a suretyship.10
7
See OCGA § 10-7-1 (“The contract of suretyship or guaranty is 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.”). See also OCGA § 11-1-201 (b) (39) (for purposes of the
commercial code, the term “surety” includes “a guarantor or other secondary
obligor”).
8
OCGA § 10-7-3.
9
Citrus Tower Boulevard Imaging Center v. David S. Owens, MD, PC, 325 Ga.
App. 1, 5 (1) (752 SE2d 74) (2013) (punctuation, footnote, and emphasis omitted).
10
See id. at 8 (2) (a contract is not ambiguous – and must be enforced
according to its plain terms – “where, examining the contract as a whole and
affording the words used therein their plain and ordinary meaning, the contract is
6
The defendants claim that they are not liable to RES-GA because a lender must
confirm a foreclosure sale before suing a guarantor for a deficiency. This
confirmation defense depends upon the defendants’ status as a surety or guarantor.
By any reasonable interpretation, it is based on the suretyship and included within the
waiver, which explicitly applies to defenses arising from laws that prevent a lender
from pursuing a deficiency claim against a guarantor. To find otherwise would restrict
the waiver beyond its plain meaning.11 The trial court, therefore, properly granted
summary judgment to RES-GA.12
Judgment affirmed. Doyle, C. J., and Boggs, J., concur.
capable of only one reasonable interpretation”) (punctuation and footnote omitted).
11
See Dyson v. Washington Telephone Co., 157 Ga. 67, 83 (121 SE 105)
(1923) (appellee’s restrictive reading of contract unreasonable where nothing in
contract language limited provision in manner advocated by appellee). See also PNC
Bank, supra (permitting waiver of a confirmation defense “creates an appropriate
balance between the statutory protections of the confirmation statute and the freedom
of a guarantor to enter contracts deemed beneficial”).
12
See DCB Investments, supra (guarantors waived confirmation defense where,
under guaranty, they were responsible for deficiency following foreclosure sale,
regardless of whether borrower was discharged pursuant to statute or judicial
decision).
7