Georgia Court of Appeals Holds That Guarantors May Waive Foreclosure Confirmation as a Defense to Deficiency Liability
A recent Georgia Court of Appeals opinion may have significantly altered future strategy and litigation under Georgia’s confirmation statute. In HWA Properties, Inc. v. Community & Southern Bank 1, the Court of Appeals held, on the basis of express waiver language contained within a personal guaranty, that the failure of the mortgage lender to first obtain confirmation of a foreclosure sale of real property securing the underlying loan did not bar an action against the guarantor for a deficiency judgment. 2
The opinion is significant for several reasons. First, it seems to implicitly reject a federal district court decision holding that compliance with the confirmation statute is jurisdictional and, therefore, cannot be waived. 3 Second, it provides the option to lenders of avoiding the fees and costs of foreclosure confirmation where the only or primary target for collection is the guarantor. Following default, lenders may now either (i) pursue a judgment prior to foreclosure 4 or (ii) foreclose prior to judgment and pursue the guarantor for any remaining deficiency under a waiver theory—assuming the appropriate waiver is included within the guaranty.
HWA Properties does not address whether similar waivers will be enforceable against principal obligors. However, as a practical matter, a guarantor waiver may be more beneficial with respect to lenders where the borrower’s only asset has already been liquidated through the foreclosure process. In light of HWA Properties, lenders should review their form loan documents and assess whether sufficient waiver language exists.
1 322 Ga. App. 877 (2013), cert. denied, 2013 Ga. LEXIS 980 (Nov. 18, 2013).
2 Id. at 888 (“In fact, the guaranty specifically provides that Albright shall remain liable for any deficiency remaining after the foreclosure of any property securing the note, ‘whether or not the liability of Borrower or any other obligor for such deficiency is discharged pursuant to statute or judicial decision. [Albright] shall remain obligated, to the fullest extent permitted by law, to pay such amounts as though the Borrower’s obligations had not been discharged.’”).
3 See Archer Capital Fund, LP v. TKW Partners, LLC, 2009 U.S. Dist. LEXIS 64827 (N.D. Ga. July 27, 2009).
4 Taylor v. Thompson,158 Ga. App. 671 (1981).
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