A previous post discussed the non-judicial foreclosure procedure used in Georgia. This post discusses the steps that a Florida bank doing business in Georgia, or with clients owning property in Georgia, must take to obtain a deficiency judgment against the debtor.

A power-of-sale foreclosure is truly non-judicial; the procedure does not contemplate any involvement of a judge or clerk, to “approve” the sale or otherwise. That is, unless the bank wishes to pursue a deficiency judgment. A deficiency action in Georgia is not non-judicial and actually comprises two court proceedings.

The first of these is to obtain an order confirming the sale.

To do so, the bank must file a “Report of Sale and Petition for Confirmation” within 30 days of the sale. The Report and Petition must be filed with a judge of the superior court of the county in which the sale took place. It is important to note that the Report and Petition should be submitted to the judge personally, rather than simply filed with the clerk. Courts have found that submitting to the judge’s secretary in chambers is sufficient, but it is a good idea to call chambers well ahead of the 30-day deadline in order to determine the judge’s availability and preferred method of submission.

The Report and Petition should address the particulars of notice, publishing, and the sale itself. It should aver that the Notice of Sale was provided to the debtor and published in accordance with applicable statutes, that the sale was conducted in accordance with applicable statutes, and that the sale brought the fair market value of the property.

The Report and Petition does not need to be served on the debtor.

Concurrently with the Report and Petition, the bank should also submit a proposed order setting a hearing on the Report and Petition. The subsequent order must be personally served on the debtor, together with any other party that may be liable for the debt, at least 5 days before the scheduled hearing. Note that the order setting a hearing must emanate from the judge, rather than the bank or its counsel.

The hearing is evidentiary in nature, and the bank should arrange for its appraiser to testify. The debtor does not have the right to a jury trial. At the hearing, the judge must determine and make findings of fact that the property was sold for its fair market value and that the notice, advertisement, and sale were “regular.” The primary issue is valuation of the property, and many courts are concerned with the notice, advertisement, and sale only to the extent that any irregularity “chilled” bidding.

If the judge finds that the sale should not be confirmed, he may order resale, but is not required to do so.

The second step in the deficiency action process is to file a complaint for breach of note. The complaint should reference the judge’s order confirming sale.

Of note, a bank wishing to shorten its litigation timeline should consider filing suit on the note at the same time that it commences power-of-sale foreclosure proceedings (and amending its complaint once the confirmation proceedings are complete). Under Georgia law, foreclosure and suit on the note are not mutually exclusive and may be pursued in any order or concurrently. Likewise, a bank wishing to avoid confirmation proceedings altogether may consider filing suit and obtaining a judgment on the note first and only then beginning power-of-sale foreclosure proceedings. The statute that applies to deficiency actions has been interpreted to require confirmation only as a condition precedent to future deficiency actions.