Senate Committee Considers Guaranty Bill
The Senate Banking and Financial Institutions Committee held a hearing on
SB 37 by committee chair
William Ligon (R-Brunswick) this week. The legislation is intended to restore the proper method of releasing or rescinding a written guaranty. Opposition to the bill surfaced from Sen.
Jesse Stone (R-Waynesboro) as the bill as drawn could be interpreted to apply to areas other than of concern to us. Sen. Ligon is looking at options to narrow the scope of the bill and we expect to see another draft soon. Our thanks to GBA’s counsel,
Bill Custer of
Bryan Cave Leighton Paisner, for testifying at the hearing on our behalf. As background, a 2018 Georgia Court of Appeals case,
Crop Production Services, Inc. v T. E. Moye, reversed two cases going back nearly three decades which held that the Statute of Frauds barred oral evidence that a written guaranty had been released or rescinded. In
Moye, the court held that a written guaranty may be rescinded by a mutual oral agreement, even though the guaranty itself is subject to the Statue of Frauds and contains a provision requiring that notice of revocation must be in writing. Because the creditor technically “won” this case because the summary judgment granted to the guarantor was reversed and remanded to the trial court to determine a question of fact, an appeal is unlikely. Therefore, legislation is needed to correct this decision that could have a profound impact on lending in Georgia.