On Monday, September 14, 2015, the Georgia Supreme Court heard oral arguments in the case of PNC Bank, National Assoc. vs. Kenneth D. Smith, et al., Case No. S15Q1445.

As noted in our prior blog post, this case is of great interest to banks operating in Georgia which are involved in real estate lending.  At issue is whether a lender may conduct a non-judicial foreclosure on real estate serving as collateral, and then pursue a guarantor without first pursuing a confirmation of the sale.  In addition, the Court is being asked to consider whether a guarantor may waive such a requirement.  In an earlier case, HWA Properties, Inc. v. Cmty. & S. Bank, 322 Ga. App. 877 (2013), the Court of Appeals held that a confirmation following a foreclosure sale is no longer a prerequisite to suing the guarantor for a deficiency when the guaranty waives such a confirmation.  Several other panels of the Court of Appeals have since reached a similar conclusion.

The arguments yesterday were dominated by questions from the bench, most of which came from Justice David Nahmias.  The questions asked by the Court revolved primarily around the following topics:

  • Whether the word “debtor” in the Confirmation Statute should be construed to include guarantors;
  • Whether the legislative history indicated that the General Assembly intended the Confirmation Statute to include protections for guarantors;
  • The exact scope of the holding in an earlier decision by the Court, First Nat. Bank & Trust Co. v. Kunes, 230 Ga. 888 (1973), and whether the Court had already held that the protections of the Confirmation Statute extended to guarantors;
  • The ramifications to lenders and borrowers from these holdings (as the Court put it, “the parade of horribles” alleged by each side); and
  • Whether the sanctity of the right to contract by guarantors and lenders should be recognized in such circumstances.

It was not at all clear from the proceedings which way the Court may rule.  Many of the justices did not ask any questions at all, and Justice Nahmias did not tip his hand during his usual intense questioning of both sides.  A decision is likely within the next few months.