The Coastal Bank v. G. Glen Martin
17-11998
11th Cir.Nov 20, 2017Background
- Sterling Bluff Investors executed a $6.25M promissory note secured by real property; G. Glen Martin and Arthur G. Scanlan signed personal guaranties for portions of the indebtedness.
- Guaranties contained broad waiver clauses expressly waiving defenses and stating guarantors remain liable for any deficiency after foreclosure to the fullest extent permitted by law.
- Sterling Bluff defaulted; Ameris (successor to The Coastal Bank) foreclosed, purchased the collateral at public sale for $3.8M, leaving a roughly $2.5M deficiency.
- Ameris sued the guarantors to recover the deficiency; the district court granted summary judgment for Ameris, relying on the guaranties’ waiver language and an affidavit establishing damages.
- Defendants argued Georgia law (O.C.G.A. § 44-14-161(a)) requires judicial confirmation of the foreclosure sale as fair market value before a deficiency can be recovered; they claimed the guaranties could not waive that requirement and raised public-policy and vagueness challenges.
- The Eleventh Circuit affirmed, holding guarantors can waive the confirmation requirement under Georgia law and concluding the appeal was frivolous; the court remanded for assessment of costs and attorneys’ fees under Fed. R. App. P. 38.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether guarantors can be pursued for a deficiency absent judicial confirmation of the foreclosure sale under O.C.G.A. § 44-14-161(a) | Ameris: Guaranties waived the confirmation requirement; thus Ameris may recover deficiency from guarantors | Martin/Scanlan: Confirmation is a statutory prerequisite and cannot be waived to pursue a deficiency | Guarantors can waive the confirmation requirement; summary judgment for Ameris affirmed (PNC Bank controls) |
| Whether the guaranties’ waiver violates or is precluded by § 44-14-161(a) | Ameris: § 44-14-161’s no-waiver protection applies to borrowers/owners, not guarantors | Defendants: Statute bars waiver and protects against deficiency claims without confirmation | Court: Georgia Supreme Court holds statute’s no-waiver scope is limited to borrowers/owners; guarantors may waive |
| Public-policy challenge to enforcing waiver of confirmation requirement | Ameris: Freedom of contract governs; no overriding public policy prevents guarantor waiver | Defendants: Waiver would eviscerate statutory protections intended to protect property owners/borrowers | Court: No controlling public-policy reason to bar guarantor waiver; enforcement permitted under state law |
| Vagueness / enforceability of waiver language | Ameris: Waiver language is clear and comparable to upheld waivers in Georgia cases | Defendants: Waiver is vague and unenforceable (not raised below) | Not preserved on appeal; alternatively, courts found language sufficiently clear and enforceable |
Key Cases Cited
- HWA Properties, Inc. v. Community & Southern Bank, 322 Ga. App. 877 (2013) (Georgia Court of Appeals holding guaranty waiver can preclude reliance on lack of judicial confirmation to defeat deficiency claim)
- Community & Southern Bank v. DCB Investments, LLC, 328 Ga. App. 605 (2014) (Georgia Court of Appeals applying waiver reasoning to bar confirmation-defense against guarantor)
- PNC Bank, Nat’l Ass’n v. Smith, 298 Ga. 818 (2016) (Ga. Supreme Ct. holding § 44-14-161’s no-waiver protection applies to borrowers/owners but does not preclude guarantor waiver)
- Haynes v. McCalla Raymer, LLC, 793 F.3d 1246 (11th Cir. 2015) (summary judgment standard cited for de novo review)