Ameris Bank v. Russack

Filing 31

ORDER granting 11 Motion for Partial Summary Judgment. Signed by Judge B. Avant Edenfield on 8/22/14. (bcw)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
STATESBORO DIVISION
AMERIS BANK as assignee of the
Federal Deposit Insurance Corporation,
receiver of Darby Bank and Trust Co.,
Plaintiff,
6:14-cv-2

V.

IRA RUSSACK,
Defendant.
SIJ1 ') a
I. INTRODUCTION
Ameris Bank ("Ameris") brings this
action against Ira Russack to recover unpaid
bank loans pursuant to personal guaranty
agreements. ECF No. 1. Russack has raised
many defenses as to the enforceability of the
contracts. ECF No. 7. Ameris now moves
for partial summary judgment on the issue
of whether Russack waived defenses
available to him under O.C.G.A. §§ 10-7-21
and 10-7-22. ECF No. 11. The Court
concludes that on the face of the guaranties,
Russack has waived certain defenses
available to him, so the Court GRANTS the
motion. However, Russack may continue to
defend the case on a theory that the
guaranties fail entirely, or that the guaranties
limit his liability.
II. BACKGROUND
In 2003, Russack formed a business
relationship with Richard Yates to develop
real estate in Florida and Georgia. ECF No.
17 at 3. A supplier to their venture,
Crossroads Homes, Inc. ("Crossroads"), ran

into financial trouble and was unable to pay
its debt to Darby Bank and Trust Co.
("Darby"). Id. "In order to capitalize
Crossroads so that the much-needed prefabricated homes could be obtained,
G.T.O.T. (which stood for 'Get Terry Out of
Trouble') was formed." Id. Darby then
loaned G.T.O.T. money on several
occasions and Ameris claims that Russack
signed personal guaranties to repay funds.
ECF No. 17 at 4-5; see also ECF Nos. 1; 1-1
et seq.
Darby then ran into financial trouble
around 2010 and the Georgia Department of
Banking and Finance took possession of the
bank. ECF No. 1 at 3. The Federal Deposit
Insurance Commission ("FDIC") accepted
appointment as receiver of Darby, and a
court entered an order providing for FDIC to
have rights and powers pursuant to the
Federal Deposit Insurance Act. Id. The
FDIC then conveyed nearly all of the rights
Id.
and interests of Darby to Ameris.
Ameris alleges that G.T.O.T. has not repaid
the loans. ECF No. 1 at 2-3.
Ameris now seeks to enforce the rights
assigned from Darby against Russack and
collect on G.T.O.T.'s defaulted obligations.
III. ANALYSIS
The Motion for Partial Summary
Judgment asks the Court for a ruling that
Russack waived statutory defenses pursuant
to O.C.G.A. §§ 10-7-21 and 10-7-22. ECF
No. 11 at 2. Russack vigorously defends
against this motion, arguing that Darby's
failed loan practices are indicative of its

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Russack avoids mentioning who formed G.T.O.T.,
but that fact is irrelevant. See ECF No. 17 at 3.

unscrupulous business dealings. ECF No.
17 at 1-2.
A. Summary Judgment Standard
Courts "shall grant summary judgment if
the movant shows that there is no genuine
dispute as to any material fact and the
movant is entitled to judgment as a matter of
law." Fed. R. Civ. P. 56(a). In ruling on
summary judgment, the Court views the
facts and inferences from the record in the
light most favorable to the non-moving
party. See Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587
(1986); Reese v. Herbert, 527 F.3d 1253,
1271 (11th Cir. 2008).
B. Advisory Opinion
Russack describes the Motion for Partial
Summary Judgment as a request for an
advisory opinion. ECF No. 17 at 2. Ameris
responds that the Court may enter partial
summary judgment if it "it serves the
purpose of speeding up litigation by
eliminating before trial matters wherein
there is no genuine issue of fact." ECF No.
21 at 2-3 (quoting Subaru of Am., Inc. v.
DDB Worldwide Commc 'ns Grp., Inc., No.
08-6218, 2010 WL 1257732, at *1 (D.N.J.
Mar. 25, 2010)).
"The federal courts established pursuant
to Article III of the Constitution do not
Golden v.
render advisory opinions."
Zwickler, 394 U.S. 103, 108 (1969)
(alterations omitted). "[T]he question in
each case is whether the facts alleged, under
all the circumstances, show that there is a
substantial controversy, between parties
having adverse legal interests, of sufficient
immediacy and reality to warrant the

issuance of a declaratory judgment."
(internal quotations omitted).

Id.

The Supreme Court's statement exactly
describes this case. This is a classic dispute
between a debtor and a lender. Ameris
wants its money, and it wants its money
now. Furthermore, Ameris wishes to avoid
excessive discovery, and the case is in the
discovery period. See ECF No. 27. Partial
summary judgment here will resolve a very
real controversy over available defenses.
The Court rules that this decision is not an
advisory opinion, and thus the Court has
authority to consider the matter at this time.
C. Georgia Statutory Defenses
Available to Russack
Georgia provides two statutory escape
hatches for guarantors. "Any change in the
nature or terms of a contract is called a
'novation'; such novation, without the
consent of the surety, discharges him."
O.C.G.A. § 10-7-21. An act of a creditor
which injures the guarantor or increases his
risk also discharges him. Id. at § 10-7-22.
Georgia courts expressly allow for a waiver
of these defenses. Baby Days, Inc. v. Bank
of Adairsville, 463 S.E.2d 171, 174 (Ga. Ct.
App. 1995) ("A guarantor may consent in
advance to a course of conduct which would
otherwise result in his discharge, and this
includes the waiver of defenses otherwise
available to a guarantor.").
Ameris points to the language of each
guaranty as sufficient to prove a valid
waiver by Russack. ECF Nos. 1-2; 1-3; 1-4
1-6; 1-8. Each of the guaranties contains, in
relevant part, the following language:
Guarantor . . . waives any and all
rights or defenses arising by reason

of (A) the provisions of O.C.G.A.
Section 10-7-24. . . or any other law
which may prevent Lender from
bringing any action, including a
claim for deficiency, against
Guarantor; . . . (D) any right to
claim discharge of the Indebtedness
on the basis of unjustified
impairment of any collateral for the
Indebtedness; . . . (F) any defenses
given to guarantors at law or in
equity other than actual payment and
performance of the Indebtedness.

13-2-1 ("The construction of a contract is a
question of law for the court."); In re
Netbank, Inc., 729 F.3d 1344, 1349 (11th
Cir. 2013) (discussing ambiguity as a
question of law in Georgia). And the Court
need not even consider if all of the language
of the guaranties is unambiguous to rule on
this motion.
To that end, Russack's contentions of
fact are irrelevant here, and the Court need
not address the arguments of fraud, lack of
consideration, lack of mutual assent,
equitable estoppel, and unconscionability.
Russack may save those defenses for
another day. Russack's defense of
ambiguity focuses on whether each guaranty
is 1) limited or unlimited; and 2) open or
closed. ECF No. 17 at 16-18.

Id.
Russack raises six arguments in
response: (1) the Guaranties were
fraudulently obtained; (2) the Guaranties fail
for lack of consideration; (3) the Guaranties
fail for lack of mutual assent; (4) the
Guaranties are ambiguous; (5) Ameris is
equitably estopped from enforcing its waiver
claims due to Darby's gross negligence and
constructive fraud; and (6) enforcement of
the waiver provisions would be
unconscionable. ECF No. 17 at 2. Russack
also contends that "Ameris' entire argument
presupposes that the Guaranties are
enforceable." Id.

The Court follows Georgia's three-step
process to interpret the waivers in the
guaranty contracts.
First, the court decides if the contract
language is unambiguous, and if so
the court enforces the contract's
clear terms. Second, if the contract is
ambiguous, the court must apply the
rules of contract construction to
resolve the ambiguity. And third, if
the ambiguity remains after use of
the construction rules, the meaning
of the contract must be decided by a
jury.

As a threshold matter, the Court
highlights that Ameris seeks only a ruling
that "the language in the guaranties
precludes the ability to claim a discharge of
indebtedness pursuant to O.C.G.A. §§ 10-721 or 10-7-22." ECF No. 11 at 6. The
Court's analysis today considers the waiver
language of the guaranties only on its face.
The Court need not presuppose that the
guaranties are enforceable to interpret the
contract as a matter of law. See O.C.G.A. §

Netbank, 729 F.3d at 1349-50. Georgia
courts have ruled on these waivers,
upholding their validity. See Ramirez v.
Golden, 478 S.E.2d 430, 430 (Ga. Ct. App.
1996) (upholding waiver where defendant
agreed to forego "any legal or equitable

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defenses whatsoever to which Guarantor
might otherwise be entitled").
Here, the guaranties provide a much
greater recitation of the waived defenses
than the summary waiver in Ramirez. And
Russack's argument that the guaranties have
markings that make them closed or partially
enforceable does not refer directly to the
waiver language. The Court concludes that
the waiver language is reasonably subject to
only one interpretation and is not
ambiguous. See Caswell v. Anderson, 527
S.E.2d 582, 582 (Ga. Ct. App. 2000)
("Contract language is unambiguous if it is
capable of only one reasonable
interpretation.").
So, in the event that the guaranties are
enforceable, the defenses of O.C.G.A. §
10-7-21 and 10-7-22 will be unavailable to
Russack. But the Court reserves any ruling
on that contentious issue for a different day.
IV. CONCLUSION
The Court determines that Russack's
waiver of Georgia statutory defenses is
unambiguous, and if the guaranties are
enforceable, the defenses will be unavailable
to Russack. The Motion for Partial
Summary Judgment, ECF No. 11, is
GRANTED to that extent.

This

day of August 2014.

BYAVAI'I1 EDENFIELD, JUDGE I
UNITED STATES DISTRICT COUkT
SOUTHERN DISTRICT OF GEORIA

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