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Georgia Courts: A Corporate Guaranty Is A Corporate Guaranty

Score one for the little guy.   In Citrus Tower Boulevard Imaging Center v. David S. Owens MD PC, the Georgia Court of Appeals strictly enforced a corporate guaranty agreement against a creditor. It held that where a doctor signed a guaranty agreement only in the name of his professional corporation, the creditor could not enforce the guaranty agreement against the doctor personally—even though previous Georgia cases have recognized that “a corporate guaranty of corporate debt is all but meaningless.”

In Citrus, the defendant, Dr. Owens, leased certain diagnostic equipment through his professional corporation. He signed a guaranty agreement securing the lease payments for the diagnostic equipment. But he signed the guaranty agreement on behalf of his professional corporation, “David Owens, MD, PC,” not in his individual capacity. When the professional corporation defaulted on the lease, the lessor sued Dr. Owens to enforce the guaranty agreement.

Both the trial court and the Court of Appeals agreed that the creditor could not sue the doctor individually since he did not sign the guaranty agreement in an individual capacity. The appellate court stated:

“Just as we do not give a guarantor a pass when he fails to read the guaranty before signing it, we likewise will not save a creditor fromthe consequences resulting from its failure to carefully inspect the guaranty to ensure that the proper ‘personal capacity’ designations and signatures have been made. To be sure, this Court has previously suggested in dicta that a corporate guarantee of corporate debt is all but meaningless, and that this fact might serve as an additional justification for imposing personal liability on a signatory to a guaranty.But any inquiry into the ‘meaninglessness’ of a corporate guaranty of corporate debt is entirely inappropriate, and indeed runs contrary to our charge to strictly construe guaranties, when a guarantor has—as in this case—explicitly signed the guaranty ina corporate capacity. As such, we take this opportunity to strongly caution trial courts against relying on any of our decisions employing such dicta as a justification for imposing personal liability on a signatory to a guaranty when the clear and unambiguous language of same indicates the exact opposite. And here, because Owens unambiguously signed the Guaranty in a corporate capacity, he was entitled to summary judgment.

The lesson: the rule of strict construction cuts both ways. Despite corporate guaranties being “all but meaningless,” Georgia courts will not save creditors who fail to obtain truly personal guaranties, as the creditor in Citrus failed to do.

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