February 23, 2016
Authored by: Curtis Romig, Jerry Blanchard and Leah Fiorenza McNeill
On Monday, February 22, 2016, in a case closely watched by commercial real estate lenders, borrowers and guarantors, the Supreme Court of Georgia issued its opinion in PNC Bank, N.A. v. Smith, et al., S15Q1445. The case was before the Supreme Court on two certified questions from the United States District Court for the Northern District of Georgia. The two Certified Questions were: (1) Is a lender’s compliance with the requirements contained in OCGA § 44-14-161 a condition precedent to the lender’s ability to pursue a borrower and/or guarantor for a deficiency after a foreclosure has been conducted?; and (2) If so, can borrowers or guarantors waive the condition precedent requirements of such statute by virtue of waiver clauses in the loan documents?
In answering the first question in the affirmative, the Georgia Supreme Court upheld its reasoning in First Nat. Bank & Trust Co. v. Kunes, 230 Ga. 888, 890-91 (1973). The Georgia Supreme Court echoed the reasoning in Kunes by stating “that notice to both sureties and guarantors is necessary to satisfy the purpose of the confirmation statute— ‘to limit and abate deficiency judgments in suits and foreclosure proceedings on debts’ and to enable sureties and guarantors ‘an opportunity to contest the approval of the [foreclosure] sales.”