MELTON, Justice.
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.
In some of the separate guaranties, each of the guarantors pledged to remain unconditionally liable on the indebtedness, irrespective of Hoschton's own liability or ultimate discharge. In addition, the guarantors waived their legal and equitable defenses, other than payment of the indebtedness. The guarantors waived "any and all rights or defenses ... based on any `one action' or `antideficiency' law or any law which prevents [PNC] from bringing any action, including claim for deficiency against [the guarantors], before or after [PNC's] completion of any foreclosure action...." The guarantors also acknowledged PNC's right of foreclosure and agreed to remain liable for the indebtedness even if post-foreclosure confirmation did not occur.
On April 18, 2013, following the Hoschton's default, PNC sent Hoschton and all of the guarantors notice of its intent to accelerate the maturity of the note and to declare the entire unpaid principal and interest then due immediately due and payable. On June 28, 2013, PNC conveyed notice of its intent to foreclose, and the property was subsequently disposed of at a foreclosure sale. Ultimately, PNC chose not to obtain confirmation of this sale pursuant to OCGA § 44-14-161. Thereafter, PNC filed the present action against the guarantors for a deficiency, claiming that they have waived any and all defenses to this action which seeks all principal, interest, late
2. The first question we have been asked to answer is whether a lender's compliance with the requirements contained in OCGA § 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. We find that such compliance is required.
In First Nat. Bank & Trust Co. v. Kunes, 230 Ga. 888, 890-891, 199 S.E.2d 776 (1973), we considered the question of whether two individuals who acted as sureties were entitled to notification prior to foreclosure confirmation proceedings. We summarized:
Id. at 889, 199 S.E.2d 776.
Id. Our conclusion was also supported by the expansive definition of "debtor" in what is now OCGA § 18-2-1 ("Whenever one person, by contract or by law, is liable and bound to pay to another an amount of money, certain or uncertain, the relation of debtor and creditor exists between them.") PNC's argument that Kunes stands only for the proposition that guarantors must receive notice of a confirmation proceeding is untenable. There would be no need to extend notice to guarantors as "debtors" under OCGA § 44-14-161(c) if they were not entitled to some right as "debtors" under OCGA § 44-14-161(a). Indeed, in Kunes, we pointed out that notice was required to enable sureties and guarantors "an opportunity to contest the approval of the [foreclosure] sales." Id.
3. The second question we have been asked to answer is whether a guarantor can waive the condition precedent requirement of the confirmation statute by virtue of waiver clauses in the loan documents. Guarantors may waive the condition precedent.
(Footnote omitted.) HWA Properties, supra, 322 Ga.App. at 887(2)(b), 746 S.E.2d 609. The Court of Appeals reached the same result in Community & Southern Bank v. DCB Investments, LLC, 328 Ga.App. 605, 760 S.E.2d 210 (2014). Again, the Court of Appeals found that the guarantor waived any rights under the confirmation statute based on explicit language in the guaranty agreement. In doing so, the Court of Appeals noted that the result is in line with the fundamental principle that the freedom of contract is sacrosanct, and that freedom should not be limited absent some important public policy reason. Id. at 610(2), 760 S.E.2d 210. We agree. This result creates an appropriate balance between the statutory protections of the confirmation statute and the freedom of a guarantor to enter contracts deemed beneficial. See, e.g., Redman Industries v. Tower Properties, 517 F.Supp. 144 (N.D.Ga.1981).
(b) Contrary to the arguments of the guarantors herein, this result does not violate OCGA § 1-3-7. That statute provides that "[l]aws made for the preservation of public order or good morals may not be dispensed with or abrogated by any agreement. However, a person may waive or renounce what the law has established in his favor when he does not thereby injure others or affect the public interest." The confirmation statute's requirements help preserve the public order by ensuring that borrowers are not unduly stripped of their property and left destitute after their assets are subjected to a deficiency action. These principles, however, do not apply in the same manner to guarantors, who are, most often, volunteers to the transaction. As such, guarantors face neither the same disparity of bargaining power nor the same type of risk as borrowers. For this reason, a guarantor's waiver of the requirements of the confirmation statute does not clearly "injure others or affect the public interest." Id.
At that time, the General Assembly also considered whether the protections of the 1935 Act should be waivable. The legislature decided in Section 5(b) that "[n]o waiver or release of the notice requirements of this Act shall be valid when made in or contemporaneously with the security instrument containing the power of nonjudicial foreclosure sale" — notice requirements plural, meaning Section 1's required notice of the confirmation proceeding as well as Section 4's required notice of the foreclosure sale. (That reference was being made in Section 5(b) to all of the notice requirements in the Act is made clearer by Section 5(a), which refers specifically to "[t]he requirement of Section 4 of this Act.)
Thus, in 1981 the General Assembly made the express policy decision to prohibit waivers of the confirmation proceeding protections only for borrowers (and their successors), not guarantors. See Villanueva v. First Am. Title Ins. Co., 292 Ga. 630, 632, 740 S.E.2d 108 (2013) ("The legislative enactment of a statute is a conclusive expression of public policy....").
Therefore, for all of the reasons set forth above, we find that a lender's compliance with the requirements contained in OCGA § 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.
Questions answered.
All the Justices concur.
NAHMIAS, Justice, concurring.
I join the Court's opinion in full, as it properly applies current Georgia law in answering the two questions presented. But I write to express concern about an issue lurking in today's decision.
As the Court explains, our opinion in First National Bank & Trust Co. v. Kunes, 230 Ga. 888, 199 S.E.2d 776 (1973), equated guarantors of loans secured by real estate with borrowers and their sureties under Georgia's 1935 foreclosure confirmation statute, which is now codified as OCGA §§ 44-14-161 and -162.
I also agree with the Court's conclusion that, under current law, a guarantor may, through clear and explicit contractual language, waive the confirmation protection afforded by OCGA § 44-14-161. The confirmation provision does not affect the jurisdiction of a court to decide a deficiency action. And as the Court explains, in making amendments to the confirmation statute in 1981, the General Assembly directly addressed this waiver issue and determined, as the public policy of Georgia, that while lenders may not extract waivers of confirmation rights from borrowers (or their successor property owners), this protection from waivers does not extend to guarantors.
As alluded to in footnote 9 of the Court's opinion, there is a significant question whether, in reorganizing the 1935 act as amended in 1981 into the Official Code of Georgia that took effect in 1982, the protection that borrowers had against waivers of the confirmation proceeding notice requirement was properly eliminated. The face of the Code indicates that this protection no longer exists, but the codifiers were not supposed to be making any substantive revisions to the prior law. See OCGA § 1-1-2; Brophy v. McCranie, 264 Ga. 187, 188-189, 442 S.E.2d 230 (1994). There is no textual argument, however, that the General Assembly has ever extended the no-waiver protection to encompass guarantors. That is enough to resolve the waiver question presented in this case.
Nevertheless, the potential conflict between the statutes enacted by the General Assembly and the Official Code of Georgia Annotated is important to note. If one relies only on the face of the Code as compiled, then given Kunes's equation of guarantors and borrowers, if guarantors can waive the protections of the confirmation statute, it would seem to follow that borrowers too can waive those protections. And if that is the case, then it may well be — given the imbalance in bargaining power between lenders and many borrowers — that before long, virtually every security deed in Georgia, particularly for residential home buyers, will include such a waiver, and the confirmation requirement of OCGA § 44-14-161 could become a dead letter for those whom it was most clearly designed to protect. Perhaps the Code does not accurately reflect the law, for the reasons I have outlined or for other reasons. But if the General Assembly still considers judicial confirmation of non-judicial foreclosure sales to be necessary to protect borrowers, or even only residential borrowers, it should avoid any uncertainty by amending the Code to distinctly allow, prohibit, or regulate contractual waivers of the confirmation requirement of OCGA § 44-14-61. With this concern noted, I join the Court's opinion.
I am authorized to state that Justice BLACKWELL joins in this concurrence.
OCGA § 44-14-161(a).
Instead, the condition precedent to a deficiency action against a borrower or guarantor established by the confirmation statute is in the nature of an element of that sort of contract claim, which if not pled and proved may result in the lender losing the lawsuit but which may normally be waived. The only authority holding that OCGA § 44-14-161 establishes a "jurisdictional" requirement is Archer Capital Fund, L.P. v. TKW Partners, LLC, No. 1:08-CV-2747-TWT, 2009 WL 2356072 (N.D.Ga. July 27, 2009), an unpublished federal district court opinion that based its brief analysis of the issue on cases, like Foster, dealing with a different sort of statute. Archer is not persuasive, much less binding, on this point.
OCGA § 44-14-162.1.