The Georgia Court of Appeals enforced a personal guarantee against two individuals, one of which sold his economic interest in the company subject to the breached agreement, after the company defaulted on a lease. Sage Atlanta Properties, Ltd. v. Diner Grp. of Georgia, LLC, No. A21A1128, 2021 WL 3087570, at *2 (Ga. Ct. App. July 22, 2021). The Court held that a personal guaranty will remain enforceable after a renewal of the lease agreement even if one of the individuals personally guaranteeing the agreement is no longer associated with the entity under agreement. Id. The relevant language of the identical guaranties stated:
THIS GUARANTY SHALL CONTINUE IN FULL FORCE AND EFFECT DURING THE TERM OF THE LEASE AND FOR ANY RENEWAL OR EXTENSION THEREOF, AND SHALL NOT BE AFFECTED BY ANY MODIFICATIONS, CHANGES, ALTERATIONS OR REVISIONS TO THE LEASE
In Georgia, a party may consent in advance to the conduct of future transactions and will not be heard to claim his own discharge upon the occurrence of that conduct. Bank South v. Grizzle, 218 Ga. App. 462, 462 (2), 462 S.E.2d 170 (1995) (citation and punctuation omitted). The guaranties bind the guarantors to the renewal of the lease, and they cannot claim that the renewal discharged them. Sage Atlanta 2021 WL 3087570, at *3 citing Bank South, 218 Ga. App. at 462. Specifically, a guarantor is liable for a subsequent lease renewal if it consented in a guaranty to "modifications, extensions, [and] amendments" of the lease. Id. citing Southeastern Hose v. Prudential Ins. Co., 167 Ga. App. 356, 357-358 (2), 306 S.E.2d 308 (1983).
The Court also rejected the guarantors' argument that the renewal was a novation because the guarantors explicitly agreed that the guaranties would continue in full force and effect during any renewals of the lease and that the guaranties would not be affected by any modifications, changes, alterations, or revisions to the lease. Id. citing Builders Development Corp. v. Hughes Supply, 242 Ga. App. 244, 245, 529 S.E.2d 388 (2000).
While the Court did not directly discuss the legal significance of the fact that one of the individuals that personally guaranteed the agreement had sold his interest to a third party individual (who happened to be the individual that signed the lease renewal), the Court notes the fact that he had sold his shares. Acknowledging the fact without further discussion indicates that a guarantors' sale of his or her ownership interest is of no significance to future enforcement against that guarantor upon a breach if the guaranty survives the renewal, modification, alteration, etc.
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