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PNC Bank NA v. Smith

A lender's compliance with the requirements contained in Georgia's foreclosure confirmation statute, O.C.G.A. § 44-14-161, 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 by virtue of waiver clauses in the loan documents.

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In this case regarding the requirements of Georgia’s foreclosure confirmation statute, OCGA § 44 14 161,1 the United States District Court for the Northern District of Georgia has certified two questions: 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 2 If so, can borrowers or guarantors waive the condition precedent requirement of such statute by virtue of waiver clauses in the loan documents For the reasons set forth below, with regard to guarantors, we answer both questions affirmatively.2

1. In relevant part, the record shows that PNC Bank, National Association holds a promissory note on certain commercial property in Jackson County, Georgia. The note is related to an original loan dated May 6, 2004, and a deed to secure debt and security agreement encumbering the property. The borrower of the loan is Hoschton Towne Center, LLC, which is not a party to the current action. Kenneth D. Smith, William R. Dooley, Terry W. Dooley, Robert McNaughton, Chris Dooley, Timothy R. Sterritt, and New South Vision Properties, LLC guaranteed the original loan and its subsequent modifications.3 The deed to secure debt gives PNC the right to exercise the power of sale in case of default, and PNC may also pursue other collateral, including contracts of guaranty. Finally, the deed to secure debt grants PNC the right to exhaust its remedies either concurrently or independently, and in such order as PNC may determine.

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