A creditor does not have to produce the agreement to prove that a guarantor is responsible for the debt

Georgia Court of Appeals recently held that a creditor does not have to produce the credit line agreement to prove that a guarantor is responsible for an outstanding debt.

On September 2, 2021, the Georgia Court of Appeals affirmed the trial court’s decision in Brancewicz v. SMS Fin. P (Ga. App. 2021)

In the case, SMS Financial P, LLC (“SMS”) sued Leonard J. Brancewicz [the “Defendant”] for a debt on a business credit line, and the trial court granted summary judgment to SMS. Defendant appealed the decision. Defendant’s only contention was that the trial court erred because the record did not contain the underlying written contract.

The facts of the case are as follows:

Defendant applied for a “Small Business Credit Application” [the “Application”] for Penn Beaver Pharmacy Inc. [the “Company”], requesting a credit line from National City Bank [the “Bank”]. [The Bank later merged with PNC Bank, National Association, which assigned and sold the subject loan to SMS.]

Defendant signed the Application as both an authorized representative (the Company owner) and a guarantor of the credit line. The Application stated that by signing the Application, Defendant agreed to be bound by all applicable agreements containing the terms and conditions

Based on the Application, a credit line account was opened, and the Company received account statements from 2007 to 2015. These statements showed account activity, including cash advances, convenience checks, payments, and interest and fees. Following the January 2015 statement, the account went unpaid.

In February 2019, SMS sued Defendant, claiming that Defendant was indebted to SMS for $99,119.66 principal, plus interest. The trial court ultimately granted SMS’s motion for summary judgment, which Defendant appealed.

Defendant’s only argument was that the trial court erred by granting summary judgment because SMS did not establish the existence and terms of the underlying contract. Specifically, Defendant asserted that “Small Business Premium Credit Line Agreement” [the “Agreement”] that is referred to in the Application claim depends on is not in the record, and SMS cannot prove the Defendant’s personal liability without producing the Agreement.

The Court disagreed.

The Court followed the holding in Davis v. Discover Bank, 277 Ga.App. 864 (627 S.E.2d 819) (2006). In Davis, the plaintiff produced evidence of the credit card issuance and use; statements with the defendant’s name and address; and account statements showing the balance due. Id. The Court held that a contract resulting in debt was not effectuated at the time the credit card application was signed; rather, the issuance of the card to the defendant was merely a credit card offer that only went into effect after the defendant made use of the credit card. Id. at 865.

In this case, SMS produced evidence showing that (1) Defendant applied for and obtained a credit line account on behalf of the Company, (2) the Defendant personally guaranteed the account, (3) the line of credit was used, (4) the Company received and paid account statements, (5) the Company stopped paying on the account, and (6) the account ultimately accumulated an outstanding balance.

Based on this evidence, the Court held that there was an outstanding debt and that Defendant, as the guarantor, was responsible for that debt.

The Court also noted that Defendant did not produce any rebuttal evidence and cited no binding authority standing for his position that a copy of the credit agreement is required for Plaintiff to prove its case.