Georgia Court Reiterates that Creditors Seeking Deficiency Judgments Must Adhere to 30-Day Foreclosure Sale Confirmation Rule


In a recent opinion, the Georgia Court of Appeals reaffirmed that creditors who wish to seek deficiency judgments following a non-judicial foreclosure must seek to have the sale confirmed within 30 days of the sale.

The case, HWA Properties, Inc., v. Community & Southern Bank, involved a suit by a creditor to collect on a promissory note and a guaranty. While this suit was pending, the creditor conducted a non-judicial foreclosure sale of the property securing the loan. In a separate proceeding, the creditor sought court confirmation of the foreclosure sale pursuant to O.C.G.A. §44-14-161(a), which provides that before a creditor may seek a deficiency judgment against the debtor, the creditor must seek and obtain court confirmation and approval of the sale. To confirm the sale, the court must find that the evidence proved that the property was purchased for true market value and that the sale was lawfully advertised and conducted with regularity.

The creditor initially obtained an order confirming the sale in the confirmation proceeding. However, the confirmation order was reversed on appeal because it was based on inadmissible hearsay. While an appeal in the confirmation proceeding was pending, the trial court in HWA granted summary judgment to the creditor on the creditor’s suit to collect on the promissory note, finding that the debtor was liable for the difference between the amount due on the note and the proceeds of the foreclosure sale. However, after the confirmation of the foreclosure sale was reversed, the debtor argued on appeal that the deficiency judgment was invalid because the foreclosure sale was not confirmed by a valid order.

The Georgia Court of Appeals agreed with the debtor. The court found that under well-settled Georgia law, a creditor may only obtain a deficiency judgment against a debtor if the creditor complies with the confirmation requirements of O.C.G.A. § 44-14-161. Under the clear language of the statute, because the sale was not confirmed by a valid order, the debtor could not be liable for a deficiency judgment.

Many creditors elect not to pursue deficiency judgments in Georgia because confirmation proceedings must be initiated within 30 days of a sale. Marshaling sufficient admissible evidence to prove that the property sold at true market value within this short time period often is challenging. However, in those instances where creditors want the option to pursue a deficiency judgment, HWA serves as a reminder to creditors that the statutory confirmation requirements must be adhered to strictly in Georgia.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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