LEE Et Al. v. PARK ( 2017 )

SECOND DIVISION
DOYLE, C. J.,
MILLER, P. J., and REESE, J.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
May 9, 2017
In the Court of Appeals of Georgia
A17A0519. LEE et al. v. PARK.
REESE, Judge.
Keum Soon Lee and her attorney, Kennon Peebles, Jr. (collectively, “Lee”),
appeal from the trial court’s order directing them to pay $9,570 in attorney fees to Ai
Sook Park.1 Lee contends that the court abused its discretion in finding that her
claims lacked substantial justification and, based upon that finding, awarding Park
attorney fees under OCGA § 9-15-14 (b). For the reasons that follow, infra, we agree
and reverse.
The record shows that, in June 2012, Lee and Sok Sun Yun bought an existing
Atlanta business known as “Spring Spa.” Although Lee and Yun had no formal
agreement, they operated the business as an equal partnership, sharing management
1
This Court granted Lee’s application for discretionary review.
responsibilities. In February 2013, they executed a four-year lease for the premises
that listed the tenant as “Spring Spa, L.L.C.” The lease was signed by the “tenants,”
Yun and Anthony Parumal, who was Lee’s boyfriend; Parumal also initialed each
page of the lease. On May 30, 2013, however, Yun sold 100 percent of the ownership
of the business to Park for $55,000, without Lee’s knowledge or consent. Park
immediately took possession of the premises.
A few days later, Lee learned about the sale and contacted Park to inform her
of her (Lee’s) ownership interest in the spa. According to Parumal, Park told them
that, on the day she purchased the spa, she had heard that Yun had a partner in the
business, but when she asked Yun about it, Yun responded, “Oh, I will take care of
it.”
In August 2014, Lee filed suit against Yun and Park. Against Yun, she asserted
claims for breach of contract, fraud, and conversion. She also sought a declaratory
judgment that Park’s purchase of the business was void and a permanent injunction
barring Park from the premises. In addition, she asserted a claim for unjust
enrichment against Park, seeking reimbursement for rent and insurance payments for
the business that she had made after the sale, while she was still asserting her
ownership interest in the spa.
2
During a bench trial, Yun testified that the first time she met or spoke with Park
about selling the business was on the day the sale contracts were executed and the
sale was closed, May 30, 2013. According to Yun, Lee never had an ownership
interest in the spa, so Yun did not tell Park that Lee was a part-owner of the business.
Yun also testified that she called the business’ landlord on the day of the sale to tell
him that Park was purchasing the spa and would be assuming the lease for the
premises. The landlord was out of town, however, and he told Yun that he would
address the issue when he returned to Atlanta.2
Park testified that she had wanted to purchase a spa in Atlanta and that a friend
told her about Yun’s business. According to Park, Yun reduced the initial asking
price for the spa because Yun wanted to have a “quick sale.” Park admitted that she
first met Yun, signed the sales contract, and closed on the purchase of the spa in a
single day, May 30, 2013. When questioned about the lease, which contained the
signatures of two tenants – Yun and Parumal – Park first testified that she did not see
Parumal’s signature, adding that if she had seen his signature, then she would not
2
The record shows that the landlord never approved a change to the lease to
name Park as the tenant, nor did Park execute a new lease. According to the landlord,
he had forgotten about the issue by the time he returned to Atlanta, and no one
contacted him about changing the lease, so he believed that the situation had returned
to the status quo.
3
have purchased the business. After her counsel showed her the lease, however, she
admitted that she had seen the signature, but assumed that Parumal was a landlord and
ignored his signature. She explained that the first page of the lease identified the
tenant as “Spring Spa” and that, because she was buying the business from a Korean
person (Yun), she only paid attention to the Korean names on the contract. Park also
admitted that she did not investigate to see if the business had any outstanding
expenses or taxes due prior to buying the spa. And, although she was purchasing an
established business, Park presented no evidence that she asked to see Yun’s purchase
agreement to ensure that Yun was the spa’s sole owner, that she inquired about the
business’ income and expense history, or that she asked to review the business’ past
checking account statements or accounting records.
Regarding Lee’s unjust enrichment claim seeking reimbursement for rent and
insurance payments she had made after Park purchased the business, Park asserted for
the first time at trial3 that she had paid business expenses that had been incurred prior
to her purchase of the spa. According to Park, these expenses included $5,880 in
3
The record shows that Park did not assert a set-off defense in her answer, did
not file a counterclaim for her payment of the expenses, and did not raise the issue of
set-off or claim any damages in the pre-trial order. In fact, during the hearing, the
court specifically asked Park’s counsel whether he was asserting a counterclaim
against Lee, and he replied that he was not.
4
property taxes, “about maybe $2,000” for the water bill, $520 for telephone service,
$600 for gas and electricity, $500 for landscaping, and “a little over $2,000” in
payroll taxes.4
The trial court subsequently entered judgment in favor of Lee on her claims
against Yun based upon its conclusion that Lee had a 50 percent ownership interest
in the spa, and it awarded her both damages and attorney fees. With respect to Lee’s
claims against Park, however, the court ruled that Park was a bona fide purchaser for
value who “did not have any reason to suspect that [Lee] or anyone else claimed an
interest in the Spring Spa at the time she purchased the business.” The court further
ruled that Park’s purchase of the spa was valid and binding. Finally, on Lee’s unjust
enrichment claims, the court ruled that the rent and insurance payments that Lee made
after the sale were voluntarily paid after she had notice of her potential claims and
that Lee’s payments were “properly set off against payments made by Defendant Park
for debts owed by the business prior to Park purchasing it.”
4
Although the record shows that the total of these payments equals $11,600,
the total is actually $11,500. Notably, only the amount of the property tax payment
was supported by any documentary evidence. Park’s testimony as to the amounts she
paid on the remaining bills appears to be her approximations.
5
Following entry of the judgment, Park filed a motion for attorney fees under
OCGA § 9-15-14. The court granted the motion, ruling that Park was entitled to fees
under OCGA § 9-15-14 (b) because Lee’s claims against her “lacked substantial
justification in that they were ‘substantially frivolous, substantially groundless, and
substantially vexatious.’” The court found that “[n]o credible evidence was presented
that would indicate Defendant Park was placed on notice of Lee’s claim of ownership
or that Park failed to exercise due diligence regarding ownership of the business prior
to purchasing Spring Spa.” In addition, the court reiterated its previous finding that
Lee’s post-sale payments on behalf of the business were properly set-off by Park’s
payment of the business’ pre-sale debts. Accordingly, the court awarded Park attorney
fees in the amount of $9,570, jointly and severally against Lee and her trial counsel.
This appeal followed.
OCGA § 9-15-14 (b) gives a trial court the discretion to award attorney fees in
several circumstances, including where “an attorney or party brought or defended an
action, or any part thereof, that lacked substantial justification[.]” “[L]acked
substantial justification means substantially frivolous, substantially groundless, or
substantially vexatious.”5 We review a trial court’s award of attorney fees under
5
OCGA § 9-15-14 (b).
6
OCGA § 9-15-14 (b) for an abuse of discretion.6 With these guiding principles in
mind, we turn now to Lee’s specific claims of error.
1. Lee argues that the trial court abused its discretion in awarding Park attorney
fees based upon a finding that her equitable claims against Park lacked substantial
justification. With respect to the claims for a declaratory judgment and injunctive
relief, Lee maintains that she presented evidence that created a legitimate factual
dispute as to whether Park was a bona fide purchaser for value. We agree.
A bona fide purchaser for value is protected against outstanding interests in a
purchased property of which he or she had no notice.7 “To qualify as a bona fide
purchaser for value without notice, a party must have neither actual nor constructive
notice of the matter at issue.”8 “Notice sufficient to excite attention and put a party
6
DeKalb County v. Adams, 263 Ga. App. 201, 203 (587 SE2d 302) (2003).
7
See OCGA §§ 23-1-19 (“If one with notice sells to one without notice, the
latter shall be protected.”); 23-1-20 (“A bona fide purchaser for value without notice
of an equity will not be interfered with by equity.”); 23-2-34 (“Equity will grant relief
as between the original parties or their privies in law, in fact, or in estate, except bona
fide purchasers for value without notice.”); see also Montgomery v. Barrow, 286 Ga.
896, 897 (1) (692 SE2d 351) (2010).
8
Virginia Highland Civic Assn. v. Paces Properties, 250 Ga. App. 72, 74 (550
SE2d 128) (2001) (footnote omitted). Accord Rolan v. Glass, 305 Ga. App. 217, 218
(1) (699 SE2d 428) (2010).
7
on inquiry shall be notice of everything to which it is afterwards found that such
inquiry might have led. Ignorance of a fact due to negligence shall be equivalent to
knowledge in fixing the rights of parties.”9 Whether the circumstances were sufficient
to put a party on notice of an alleged fraudulent transfer and the opposing party’s
interest in the property at issue is a question of fact to be determined by the trier of
fact.10 And an award of attorney fees under OCGA § 9-15-14 (b) is not warranted
where the claim at issue is dependent upon the resolution of a factual or legal
dispute.11
9
Whiten v. Murray, 267 Ga. App. 417, 421 (2) (599 SE2d 346) (2004) (citation
and punctuation omitted). See Montgomery, 286 Ga. at 897 (1) (holding that “any
circumstance which would place a man of ordinary prudence fully upon his guard,
and induce serious inquiry, is sufficient to constitute notice of a prior unrecorded
deed.”) (citation and punctuation omitted).
10
R. W. Holdco, Inc. v. SCI/RW Holdco, Inc., 250 Ga. App. 414, 415 (1) (551
SE2d 825) (2001).
11
See Brown v. Gadson, 298 Ga. App. 660, 661-662 (680 SE2d 682) (2009);
DeKalb County, 263 Ga. App. at 203-204; see also Exec. Excellence v. Martin Bros.
Investments, 309 Ga. App. 279, 286-288 (2) (710 SE2d 169) (2011) (award of
attorney fees under OCGA § 9-15-14 was not authorized because the plaintiffs made
an evidentiary showing which, if accepted by the factfinder, would have authorized
a judgment in their favor); see generally Marino v. Clary Lakes Homeowners Assn.,
331 Ga. App. 204, 211 (3) (770 SE2d 289) (2015) (when genuine issues of fact
remain that preclude summary judgment, an award of attorney fees under OCGA §
9-15-14 (b) is not warranted except in unusual cases).
8
To support her argument that there was a legitimate factual dispute as to
whether Park was a bona fide purchaser for value, Lee points to the evidence she
presented at trial (shown above) and to Park’s interrogatory responses, which support
a finding that Park failed to conduct any investigation to confirm the ownership of the
business or perform other due diligence before purchasing the business. For example,
in her interrogatory responses, Park conceded that she did not meet Yun until the day
she purchased the business, she never had contact with the landlord before attempting
to assume the lease the same day, and she never consulted an attorney or real estate
agent prior to or during the closing.12
Further, the evidence at trial showed that Park had the opportunity to read the
lease agreement that she was going to be assuming. It is undisputed that the lease was
initialed and signed by Parumal, and Park specifically testified that she saw his
signature but disregarded it, instead of simply asking who Parumal was and why he
had signed the lease. Parumal’s signature on the lease supports a finding that Park had
at least constructive notice that someone else had an interest in the business, and her
12
In fact, Park admitted that the handwritten sales contract executed by the
parties was based upon a generic sales contract obtained by her boyfriend from the
Internet, which he then transcribed into the Korean language.
9
failure to inquire about it is sufficient to create an issue of fact as to whether Park
exercised due diligence prior to the purchase.13
In an effort to show that she exercised due diligence prior to the purchase, Park
contended that Yun and two others present at the closing indicated to her that Yun
was the sole owner of the business. Parumal testified, however, that Park told him
shortly after the sale that, on the day of the closing, she learned that Yun had a partner
in the business, but when she asked Yun about it, Yun told Park that she would take
care of it. This conflicting evidence presented an issue of fact regarding Park’s
constructive notice that had to be resolved at trial.
Park also apparently relies on the fact that Yun’s name was the only one on the
business checking account for her conclusion that Yun was the sole owner of the
business. A factfinder could have concluded that such reliance demonstrated a lack
of due diligence, however, given the absence of any evidence that Park reviewed past
bank statements, income and expense reports, or other accounting records of the
ongoing business enterprise that she was purchasing and was intending to continue
operating under the same name.
13
See footnotes 9 and 10, supra, regarding constructive notice and due
diligence.
10
Finally, although Park testified that she checked the Georgia Secretary of
State’s records for the corporation, she later admitted that she did so after she had
purchased the business. Moreover, there is no evidence that she contacted the
registered agent for the corporation, who is identified as “Kenny S. K. Lee,” to
confirm the ownership of the business.
Thus, the evidence presented several genuinely disputed factual issues that had
to be resolved before the court could determine whether Park was a bona fide
purchaser for value. The fact that the trial court ultimately ruled in favor of Park on
that disputed issue does not mandate a finding that Lee’s equitable claims were
substantially frivolous, groundless, or vexatious.14
As previously stated, a court is not authorized to award attorney fees under
OCGA § 9-15-14 (b) where a ruling on the claim at issue is dependent upon the
14
See Campbell v. The Landings Assn., 311 Ga. App. 476, 483 (6) (716 SE2d
543) (2011) (“A prevailing party is not perforce entitled to an award of attorney fees”
under OCGA § 9-15-14 (b).) (punctuation and footnote omitted); see also Rescigno
v. Vesali, 306 Ga. App. 610, 616 (4) (703 SE2d 65) (2010) (finding that the trial court
did not abuse its discretion in denying the defendant an award of attorney fees under
OCGA § 9-15-14 (b), because there was some evidence to support the plaintiff’s case,
even though the jury ultimately found in favor of the defendant); see generally Brown
v. Kinser, 218 Ga. App. 385, 387 (1) (461 SE2d 564) (1995) (Even when a trial court
grants summary judgment to a party prior to trial, the prevailing party is not
automatically entitled to attorney fees under OCGA § 9-15-14.).
11
resolution of a factual or legal dispute. Thus, we conclude that the trial court abused
its discretion in concluding that Lee’s equitable claims were without substantial
justification, and the award of attorney fees under OCGA § 9-15-14 (b) for defending
against these claims must be reversed.
2. Lee also challenges the portion of attorney fees that were awarded to Park
for defending against Lee’s unjust enrichment claim. The record shows that not only
was there a legitimate factual dispute about the funds Lee paid, but the trial court set
off the amount due to Lee with expenditures claimed by Park for expenses that were
incurred prior to her purchase of the business. Because Park did not actually prevail
on Lee’s unjust enrichment claim, the court abused its discretion in awarding Park
attorney fees under OCGA § 9-15-14 (b) for defending against this claim.15
Judgment reversed. Doyle, C. J., and Miller, P. J., concur.
15
See Sierra-Corral Homes v. Pourreza, 308 Ga. App. 543, 548 (7) (708 SE2d
17) (2011) (OCGA § 9-15-14 (b) “only permits attorney fees to be awarded for claims
that are successful.” Because the defendant did not prevail on any claim, it was not
entitled to attorney fees.) (footnote omitted).
12