Katherine Hicks v. William Gabor

THIRD DIVISION
DILLARD, P. J.,
GOBEIL and HODGES, JJ.
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
March 12, 2020
In the Court of Appeals of Georgia
A19A1648. HICKS v. GABOR et al.
GOBEIL, Judge.
Katherine Hicks appeals from several orders issued by the trial court in the
instant interpleader action filed by Auto-Owners Insurance Company (“AOIC”).She
contends that the trial court erred in: (1) dismissing AOIC’s complaint against her;
(2) (a) dismissing her counterclaim against AOIC, and (b) awarding attorney fees and
sanctions to AOIC against her; (3) denying her motions for attorney fees and
sanctions against the other parties in the action; and (4) “in effect” denying her
motion for partial summary judgment. For the reasons explained below, we reverse
in part and affirm in part the trial court’s orders.
AOIC is a corporation that, among other things, acts as a corporate surety
issuing bonds to used motor vehicle dealerships. Pursuant to OCGA § 43-47-8, every
used car dealership in Georgia is required to acquire a bond of at least $35,000 in
order to receive its license to do business. In 2012, AOIC issued a used motor vehicle
dealers bond (the “Bond”) to Automobiles, Holdings & Acquisitions, Inc. (the
“Dealership”), a used car dealership located in Dekalb County. The Bond was in the
amount of $35,000, and was “for the use and benefit of any purchasers of any used
motor vehicles and their vendees or successors in title” as required by OCGA § 43-
47-8. The Bond indemnifies for “all loss, damages, and expenses that may be
sustained by any purchasers of any used motor vehicle and their vendees or
successors in title by reason of any fraudulent misrepresentation as to liens against
or titles to any used motor vehicle[.]”
In 2017, AOIC paid $8,012 to Auction Insurance Agency to settle a claim
against the Bond. As a result, the remaining value of the Bond was $26,988. After
receiving multiple additional claims against the Bond, AOIC sent written notices via
certified mail to claimants Hicks, William Gabor, and Paul Williams invoking OCGA
§ 10-7-24,1 and notifying them that they had only three months to file a lawsuit
1
OCGA § 10-7-24 allows a corporate surety to send “notice in writing” to
creditors informing them that they have three months “to proceed to collect the debt
from the principal[,]” and if the creditor fails to commence an action within three
months, the surety shall be discharged from its obligation.
2
against the Dealership to preserve their right to recover funds from the Bond. The last
of these notices was mailed on December 18, 2017.
On March 23, 2018, AOIC filed the instant Complaint for Interpleader and to
Discharge Surety and Cancel the Bond. In the Complaint, AOIC stated that the claims
against the Bond exceeded its remaining balance, and asked the trial court to
determine how to distribute the funds. The trial court ordered AOIC to deposit the
remaining $26,988 of the Bond into the registry of the court.
1. On appeal, Hicks’s first set of claims relate to the trial court’s orders
dismissing her from the action and/or dismissing AOIC’s interpleader claim against
her. As discussed more fully below, because we agree with Hicks that the trial court
treated the motions to dismiss as motions for summary judgment, we conduct a de
novo review, construing the record in the light most favorable to Hicks as the non-
movant. See Howerton v. Harbin Clinic, LLC, 333 Ga. App. 191, 191-192 (776 SE2d
288) (2015).
Williams was the first claimant to answer the Complaint, and he simultaneously
filed a motion for partial dismissal, asserting that Hicks should be dismissed from the
action, as she had failed to file an action against the Dealership within three months
of AOIC’s notice, and thus her claim against the Bond had been discharged. He asked
3
the court to take judicial notice of Dekalb County court records, which revealed that
Hicks had not commenced an action against the Dealership as required by OCGA §
10-7-24, as outlined in AOIC’s notice. Accordingly, Williams argued that AOIC’s
complaint did not state a valid action against Hicks. Gabor also answered the
complaint, and filed a motion to dismiss Hicks from the action, raising essentially the
same argument as Williams regarding Hicks’s failure to preserve her right to the
Bond proceeds by failing to file a timely lawsuit against the Dealership.
Hicks answered AOIC’s Complaint. Regarding her failure to file a lawsuit
against the Dealership, she did not contest that AOIC sent the notice via certified mail
to her correct address, but she stated that she never received it. She attached a copy
of the certified mail sent by AOIC with a postal stamp stating “return to sender[,]
attempted - not known[,] unable to forward[.]” She also stated that she did not receive
a copy of the notice via e-mail, even though the notice stated that it was being sent
via certified mail and e-mail. Accordingly, she argued that OCGA § 10-7-24 did not
apply to her, as she did not receive actual notice of the three-month deadline to file
an action against the Dealership. Hicks repeated these arguments in responding to
Williams’s and Gabor’s respective motions to dismiss.
4
The parties proceeded to a hearing, after which the court issued several orders
resolving the pending motions. First, the court granted Gabor’s motion to dismiss
Hicks from the action. The court found that AOIC sent its notice to Hicks’s correct
address via certified mail, but she “failed to retrieve the Hicks Notice, so such notice
was returned to sender as undeliverable.” The court also took judicial notice of court
records and found that Hicks had failed to commence a lawsuit against the Dealership
within three months after AOIC sent her the notice.
Regarding the sufficiency of the notice sent to Hicks, the court concluded that
“OCGA § 10-7-24 does not require actual notice be provided to the Defendant. If that
were the case, potential Claimants could simply avoid delivery of the certified mail
notice until it was convenient for them to begin the three-month limitations period.”
The court then noted that a recipient’s failure to accept certified mail is sufficient to
show notice for many other Georgia statutes, and the Georgia Supreme Court has held
that the intention of the legislature in drafting the statute, as reflected in the relevant
text, is paramount. As a result, the court concluded that OCGA § 10-7-24 did not
have an actual notice requirement as written. And inserting one into the statute would
have unreasonable consequences not contemplated by the legislature, as a claimant
could simply refuse to retrieve a properly mailed notice in order to avoid the
5
limitations period. Additionally, the court concluded that AOIC did not have an
affirmative duty to ensure Hicks received its notice. Accordingly, the court found
that, in order to preserve her right to proceeds from the Bond, Hicks was required to
file suit against the Dealership within three months of December 18, 2017, which she
did not do. Thus, AOIC’s claim against Hicks, which assumed that she was eligible
for Bond proceeds, was due to be dismissed.
In a parallel order filed on the same day, the court also granted Williams’s
motion for partial dismissal of AOIC’s complaint for failure to state a claim against
Hicks, based on generally the same reasoning. This appeal follows.
(a) First, Hicks contends that the trial court erred in considering Gabor’s and
Williams’s motions to dismiss her from AOIC’s interpleader action, as their motions
were not based on typical dismissal grounds under OCGA § 9-11-12 (b) (6).
However, this is an interpleader action. The relevant interpleader statute, OCGA § 23-
3-90 (a), states:
Whenever a person is possessed of property or funds or owes a debt or
duty, to which more than one person lays claim of such a character as to
render it doubtful or dangerous for the holder to act, he may apply to
equity to compel the claimants to interplead.
6
An interpleader action consists of two phases. First, it must be determined
whether the complainant had a right to interplead, and, second the interpleading
defendants are required to litigate matters in dispute between themselves. Smith v.
Folsom, 190 Ga. 460, 473-474 (8) (9 SE2d 824) (1940). During this second stage,
“each defendant then occupies the position of a plaintiff as against the others, and
should state his claim plainly, clearly, and distinctly, and as far as he can, take issue
with the claims of others.” Whatley v. Alto Corp., 211 Ga. 718, 724 (2) (88 SE2d 398)
(1955). Accordingly, after AOIC filed its interpleader action, named the parties who
potentially had claims against the Bond, and deposited the funds into the court’s
registry, Hicks, Gabor, and Williams were required to litigate against each other, and
were free to take issue with each other’s claims to the Bond proceeds. Thus, we find
no error in the trial court’s considering these motions to dismiss filed by Williams and
Gabor against their codefendant in the interpleader action, Hicks.
(b) Next, Hicks argues that the trial court’s dismissal orders were replete with
facts outside of the pleadings and thus were not proper dismissal orders. We agree
that the trial court converted the motions to dismiss into motions for summary
judgment by considering matters outside the pleadings, but find no reversible error.
7
In deciding the motions to dismiss, the trial court relied on evidence other than
the pleadings, including several exhibits attached to the Complaint and the court’s
judicial notice of its own docket. Thus, the trial court converted the motions to
dismiss into motions for summary judgment. See Cox Enterprises, Inc. v. Nix, 273
Ga. 152, 153 (538 SE2d 449) (2000) (if, in deciding a motion to dismiss for failure
to state a claim, a trial court considers evidence other than what is contained in the
pleadings, the motion is converted into a motion for summary judgment).
As a general rule, where the trial court elects to treat a motion to dismiss as a
motion for summary judgment, that court “has the burden of informing the party
opposing the motion that the court will consider matters outside the pleadings and
that, if the opposing party so desires, the party has no less than 30 days to submit
evidence in response to the motion for summary judgment.” Davis v. Phoebe Putney
Health Systems, Inc., 280 Ga. App. 505, 507 (2) (634 SE2d 452) (2006) (citation and
punctuation omitted). The party opposing the motion, however, “may waive the right
to the 30-day notice by acquiescing in the movant’s submission of evidence in
support of the motion to dismiss.” Morrell v. Wellstar Health Systems, Inc., 280 Ga.
App. 1, 2 (1) (633 SE2d 68) (2006). See also Cox Enterprises, Inc., 273 Ga. at 153-
154. Such a waiver occurs where the opposing party also chooses to rely on evidence
8
outside the pleadings to support its position. See Davis, 280 Ga. App. at 507-508 (2).
Under those circumstances, “[a]ll the parties, in effect, treated the motion to dismiss
as being converted to a motion for summary judgment, and no party was denied an
opportunity to respond to evidence submitted.” Morrell, 280 Ga. App. at 2 (1)
(citations omitted).
Here, the record shows that Hicks, like the other parties, relied on evidence
outside the pleadings throughout the litigation. Specifically, Hicks attached her own
affidavit to her answer, as well as correspondence between herself and AOIC. She
further relied on these exhibits in responding to Gabor’s and Williams’s motions to
dismiss. .
Given Hicks’s reliance on extrinsic evidence in opposing the motions at issue,
“there is no indication [that Hicks suffered] prejudice due to the trial court’s failure
to give notice” that the motions were being treated as ones for summary judgment.
Cox Enterprises, Inc., 273 Ga. at 154 (citation and punctuation omitted).
Accordingly, the trial court did not commit reversible error in considering matters
outside of the pleadings. Id. See also Davis, 280 Ga. App. at 507-508 (2); Morrell,
280 Ga. App. at 2 (1).
9
(c) Having determined that the trial court converted the motions to dismiss into
motions for summary judgment, we now consider whether such motions for summary
judgment were properly granted. Because there are disputed issues of material fact
concerning Hicks’s notice under OCGA § 10-7-24, we reverse the grant of summary
judgment.
Constitutional due process of law under both the Georgia and the Unites States
Constitutions “includes notice and a hearing as a matter of right where one’s property
interests are involved.” Sikes v. Pierce, 212 Ga. 567, 568 (2) (94 SE2d 427) (1956).
Our Supreme Court has explained that notice can be either express, constructive, or
implied. Hamilton v. Edwards, 245 Ga. 810, 811 (267 SE2d 246) (1980). Express
notice embraces “that which is communicated by direct information.” Id..
“Constructive notice is information or knowledge of a fact imputed by law because
the fact could have been discovered by proper diligence and the situation was such
as to cast upon a person the duty to inquire into it.” Id. at 811-812. Finally, “[i]mplied
notice is that notice which is inferred or imputed to a party by reason of [her]
knowledge of facts or circumstances collateral to the main fact, of such a character
as to put [her] upon inquiry, and which, if inquiry were followed up with due
10
diligence, would lead [her] directly to the knowledge of the main fact.” Id. at 812
(citations omitted).
To determine what kind of notice is required under OCGA § 10-7-24, we begin
with the language of the statute, which provides, in pertinent part:
Any surety . . . , at any time after the debt on which he or she is liable
becomes due, may give notice in writing to the creditor . . . , to proceed
to collect the debt from the principal or any one of the several principals
liable therefor; and, if the creditor or holder refuses or fails to commence
an action for the space of three months after such notice (the principal
being within the jurisdiction of this state), the . . . surety giving the
notice, as well as all subsequent endorsers and all cosureties, shall be
discharged. To comply with the requirements of this Code section, the
notice must specifically state that the creditor loses his or her rights to
pursue the surety, guarantor, or endorser, as well as any cosureties,
coguarantors, or endorsers, if the creditor does not commence legal
action within three months after receiving the notice. Further, any notice
which does not state the county in which the principal resides shall not
be considered to be in compliance with the requirements of this Code
section.
The question presented in this case is whether properly mailed, but
undelivered, certified mail constitutes notice under OCGA § 10-7-24. We have, in
other contexts, concluded that undelivered certified mail constitutes “notice” as a
11
matter of law. However, our holdings in those cases are not dispositive to the issue
now before us. As an initial matter, unlike the statutes in these prior holdings, OCGA
§ 10-7-24 does not include specific language explaining how notice should be
provided. See, e.g., King v. State, 179 Ga. App. 184, 184-185 (345 SE2d 902) (1986)
(notice sent by certified mail that was marked delivered but was not conclusively
received by the defendant was deemed sufficient, where statute at issue, OCGA § 40-
5-58 (b) (1991), specifically provided that “notice given by certified mail with return
receipt requested mailed to the person’s last known address shall be prima-facie
evidence that such person received the required notice”) (citation and punctuation
omitted); Williams v. Runion, 173 Ga. App. 54, 59-60 (5) (325 SE2d 441) (1984)
(notice sent by registered mail that was returned to sender was sufficient, where
statute at issue, OCGA § 51-12-14 (c), provides that interest begins to accumulate
after written notice is “mail[ed] or deliver[ed]”).
Nor is there evidence in the record regarding whether Hicks refused to accept
or deliberately avoided the certified mail sent by AOIC. Cf. Hill v. Fed. Employees
Credit Union, 193 Ga. App. 44, 45-46 (2) (b) (386 SE2d 874) (1989) (undelivered
certified mail was sufficient notice where there was evidence in the record of multiple
attempted deliveries to correct address and statute at issue, OCGA § 10-1-36, did not
12
have a requirement that the debtor receive notice); Crenshaw v. Ga. Underwriting
Assn., 202 Ga. App. 610, 611 (1) (414 SE2d 915) (1992) (“refusal to accept a letter
delivered to the proper address with adequate postage is the equivalent of receipt of
notice”). Finally, additional factors which have been held sufficient to impute
knowledge of the litigation onto the addressee are also not present in the record on
appeal in the instant case. See Five Star Steel Contractors, Inc. v. Colonial Credit
Union, 208 Ga. App. 694, 696 (431 SE2d 712) (1993) (undelivered certified mail was
sufficient to notify garnishee of default judgment against him, where he was
personally served at the initiation of the lawsuit, and thus due process was not
frustrated by later notice of post-judgment proceedings going unreceived); Williams,
173 Ga. App. at 59-60 (5) (once a litigant is “apprised of the pendancy of a lawsuit[,]”
her constitutional right to notice is satisfied by service by mail) (citation omitted).
Turning to the specific evidence in the instant case, it is undisputed that Hicks
did not have express notice in this case. We therefore must consider whether the
evidence in the record was sufficiently conclusive to resolve the issue of whether
Hicks had constructive or implied notice. At the hearing before the trial court, the
parties disagreed over whether Hicks was required to retrieve her own certified mail,
and they speculated as to whether she actively avoided receipt of the notice. In its
13
orders, the trial court failed to address these factual disputes, summarily stating that
Hicks “failed to retrieve the Hicks Notice[.]” However, “[i]n ruling on a motion for
summary judgment, the opposing party should be given the benefit of all reasonable
doubt, and the court should construe the evidence and all inferences and conclusions
arising therefrom most favorably toward the party opposing the motion.” Sunamerica
Financial v. 280 Peachtree Street, Inc., 202 Ga. App. 790, 793 (2) (a) (415 SE2d 677)
(1992) (citation omitted; emphasis supplied), disapproved on other grounds by
Atlanta Market Center Mgmt., Co. v. McLane, 269 Ga. 604 (503 SE2d 278) (1998).
Here, there is an absence of evidence concerning Hicks’s level of knowledge, her
duty of inquiry or due diligence, and whether she exercised such required level of due
diligence. Construing the evidence most favorably toward Hicks, as we must at this
stage, the absence of such evidence left the trial court with a disputed fact regarding
whether the notice was properly sent in compliance with OCGA § 10-7-24. See
Hamilton, 245 Ga. at 811-812. Accordingly, the evidence as it stands in this record
does not authorize the trial court’s decision granting summary judgment, and we must
reverse. See Ga. Canoeing Assn. v. Henry, 263 Ga. 77, 78-79 (428 SE2d 336) (1993)
(where disputed issues of fact remain, summary judgment is inappropriate).
14
2. Hicks next contends that the trial court erred in granting AOIC’s motion to
strike or dismiss her counterclaim and awarding AOIC attorney fees and sanctions
against her.
After answering the Complaint, Hicks filed a counterclaim against AOIC. She
asserted that, by naming her as a defendant in the interpleader action, AOIC admitted
that she had a valid claim against the Bond. Hicks therefore sought a declaratory
judgment under OCGA § 9-4-1 for $35,000. Hicks also claimed that AOIC acted in
bad faith by filing the interpleader action, rather than paying her claim against the
Bond. She asserted that AOIC’s attorneys made false statements in the Complaint, by
stating that she agreed to waive service of process, when she had not.2 Accordingly,
she asked for her litigation expenses, including attorney fees under OCGA §§ 13-6-11
and 9-15-14.
2
Throughout her answer and counterclaim, Hicks made personal accusations
against some of the attorneys working for AOIC. For example, Hicks stated that one
attorney left the firm representing AOIC shortly after working on this case, and
“[e]vidently [the attorney’s] mind was not on her tasks for [AOIC].” Hicks stated that
another attorney had “no excuse for the bald misstatements in the Complaint.” She
further attached as exhibits to her answer personal LinkedIn profiles for two AOIC
attorneys. In her prayer for relief, Hicks asked that specific attorneys be ordered to
pay her sanctions for their conduct.
15
Hicks twice amended her counterclaim within the next month. In both filings,
Hicks maintained her counterclaim to include a request for a declaratory judgment
and a bad faith claim against AOIC, and asked for expenses of litigation and attorney
fees pursuant to OCGA § 13-6-11, removing any mention of OCGA § 9-15-14.
After Hicks filed her second-amended counterclaim, on August 24, 2018,
AOIC filed a motion to strike and/or dismiss Hicks’s counterclaim as well as its own
counter-motion for an award of attorney fees and sanctions against Hicks pursuant to
OCGA § 9-15-14. AOIC argued that Hicks’s claim for attorney fees was precluded
by law, as there is a specific statute – OCGA § 10-70-30 (b)3 – that provides the only
remedy by which a claimant may sue a surety for bad faith and attorney fees, and
Hicks proceeded under the wrong statute. Moreover, AOIC argued, Hicks had not met
the pre-filing requirements of the surety bad faith statute, and thus could not replead
her claim under the correct statute. AOIC further argued that Hicks’s counterclaim
was meritless because a pleading which seeks the recovery of attorney fees and costs
3
OCGA § 10-7-30 (b) provides that, in the event that a corporate surety refuses
to make a payment to an obligee in accordance with the terms of a suretyship, an
obligee may file notice of default or demand for suretyship with the surety. If the
surety does not remedy the default within 60 days, and upon a finding that the
surety’s refusal to pay was in bad faith, the surety shall be liable to pay the obligee,
in addition to the loss, not more than 25 percent of the liability of the surety for the
loss and all reasonable attorney fees for the prosecution of the case against the surety.
16
under OCGA § 13-6-11, without the assertion of a separate, substantive cause of
action, cannot stand.
Finally, AOIC sought attorney fees of its own, pursuant to OCGA § 9-15-14
(a) and (b), arguing that Hicks’s counterclaim was frivolous and without any
justiciable issue of law or fact. AOIC described that it contacted Hicks in an effort to
have her dismiss her frivolous counterclaim without requiring AOIC to expend
further resources by filing a response with the court, but she refused. AOIC argued
that Hicks unnecessarily expanded and escalated the litigation by continuing to
pursue meritless claims.
Approximately one month after AOIC moved to strike or dismiss her
counterclaim, on September 21, 2018, without leave of court, Hicks attempted to
amend her counterclaim for the third time. Hicks’s third amendment raised several
claims: (1) a claim on the bond, (2) penalty and attorney fees under OCGA § 10-7-30,
(3) fraud prior to the filing of the Complaint based on a lack of notice, (4) a
declaratory judgment under OCGA § 9-4-1, (5) expenses of litigation, including
reasonable attorney fees, pursuant to OCGA § 13-6-11, and (6) punitive damages. She
also sought sanctions and attorney fees of her own.
17
After a hearing, the trial court granted AOIC’s motion to strike and dismissed
all of Hicks’s counterclaims. First, the court found that Hicks’s bad faith counterclaim
failed to state a claim under which relief could be granted, as she did not proceed
under OCGA § 10-7-30, the surety bad faith statute. The court found further that
Hicks’s OCGA § 13-6-11 claim failed because she did not assert any independent
claims separate from the attorney fee claim. The court alternatively struck the claim,
finding that, because Hicks had no legal support for the claim, it was immaterial, and
it could have no possible bearing on the the subject matter of the litigation.
Next, the court considered Hicks’s new claims raised in her third-amended
counterclaim filing. The court found that it could not be considered an amendment
of her previously filed counterclaim, as it did not incorporate the prior claims, but
raised new claims. The court thus found that the filing of these previously omitted
counterclaims could be made only through leave of court, which Hicks did not seek.
Accordingly, the court dismissed these claims as well.
In a separate order, the trial court granted AOIC’s counter-motion for an award
of attorney fees and sanctions against Hicks. The trial court found that Hicks’s twice-
amended counterclaim against AOIC for bad faith lacked substantial justification, was
interposed for delay, and unnecessarily expanded the litigation by improper conduct.
18
The court found further that Hicks asserted claims of law and fact that showed a
complete absence of any justiciable issue that she could not reasonably have believed
the court would have accepted. In making these findings, the court referred back to
its previous order dismissing Hicks’s claims, reiterating that Hicks’s counterclaim for
bad faith was destined to fail, as she ignored the statutory requirements to sue a surety
for bad faith, and she failed to meet the basic pleading requirements under OCGA §
13-6-11. The court noted that AOIC twice informed Hicks of the deficiencies of her
claim, and requested that she dismiss them, but Hicks only amended her claim
without acknowledging its deficiencies. Regarding the attempted third amendment
of Hicks’s counterclaims, the court found that the newly raised counterclaims lacked
substantial justification and unnecessarily expanded the litigation because they were
filed without leave of court.
Finally, the court found that Hicks’s “multiple accusations and disparaging
remarks” made about opposing counsel had “no place in public documents” and “no
merit to the allegations raised in [AOIC’s] interpleader action.” The court found these
remarks “highly unprofessional” and “sanction worthy.” Accordingly, the court found
that Hicks took actions “interposed for harassment[.]” The court then reviewed
AOIC’s fee affidavit and awarded AOIC $6,448.20 in attorney fees under both
19
OCGA § 9-15-14 (a) and (b) associated with responding to Hicks’s sanctionable
conduct.
(a) On appeal, Hicks first argues that the trial court abused its discretion in
striking her counterclaim, as AOIC’s motion to strike was not timely filed.4 She also
argues that the trial court’s order was contrary to law, as her counterclaim was
relevant to the subject matter of the action.
Pretermitting whether the trial court correctly struck Hicks’s counterclaim, we
affirm the trial court’s order, as it alternatively dismissed her counterclaim pursuant
to OCGA § 9-11-12 (b) (6). “We review de novo a trial court’s ruling on a motion to
dismiss.” Pinnacle Benning LLC v. Clark Realty Capital, LLC, 314 Ga. App. 609,
612 (724 SE2d 894) (2012) (citation and punctuation omitted).
A motion to dismiss made pursuant to OCGA § 9-11-12 (b) (6) will not be
sustained unless:
(1) the allegations of the complaint disclose with certainty that the
claimant would not be entitled to relief under any state of provable facts
asserted in support thereof; and (2) the movant establishes that the
4
OCGA § 9-11-12 (f) requires that a motion to strike be filed within 30 days
of service of the contested pleading.
20
claimant could not possibly introduce evidence within the framework of
the complaint sufficient to warrant a grant of the relief sought.
Osprey Cove Real Estate, LLC v. Towerview Const., LLC, 343 Ga. App. 436, 437 (1)
(808 SE2d 425) (2017) (citation and punctuation omitted).
Here, Hicks’s counterclaim asserted that AOIC engaged in bad faith by failing
to pay her what she was owed from the Bond, and so she sought attorney fees
pursuant to OCGA § 13-6-11. As previously stated, however, a surety’s bad faith in
failing to pay a debt under a suretyship is governed by OCGA § 10-7-30. Georgia
courts have long held that “where the General Assembly has provided a specific
procedure and a limited penalty for noncompliance with a specific enactment[,] . . .
the specific procedure and limited penalty were intended by the General Assembly
to be the exclusive procedure and penalty, and recovery under general penalty
provisions will not be allowed.” McCall v. Allstate Ins. Co., 251 Ga. 869, 871 (2)
(310 SE2d 513) (1984). Accordingly, if Hicks wished to raise a bad faith claim
against AOIC for failing to meet its obligations under the suretyship, she was required
to bring such claim pursuant to OCGA § 10-7-30, the specific procedure and penalty
created by the General Assembly for such a claim. See Ayers Enterprises, Ltd. v.
Exterior Designing, Inc., 829 FSupp. 1330, 1332 (B) (N.D. Ga. 1993) (applying
21
Georgia law to affirm grant of summary judgment, where defendant’s bad faith
counterclaim against a surety was brought pursuant to OCGA § 13-6-11 rather than
OCGA § 10-7-30).
Further, OCGA § 10-7-30 requires a notice of default or demand for payment
to be sent to the surety 60 days before filing suit. Even if Hicks sought relief under
the proper statute, her claim was due to be dismissed for failing to follow the proper
procedure. See Columbus Fire & Safety Equip. Co. v. Am. Druggist Ins. Co., 166 Ga.
App. 509, 510 (1) (304 SE2d 471) (1983) (bad faith claim under OCGA § 10-7-30
was barred because plaintiff failed to wait 60 days after filing demand to file suit).
Additionally, Hicks’s counterclaim also failed under OCGA § 13-6-11, as
“[t]hese damages are available to a defendant only where the defendant has brought
a counterclaim asserting a claim for relief wholly independent of any assertion as to
plaintiff’s bad faith, litigiousness, and/or harassment in bringing the underlying
action.” Steele v. Russell, 262 Ga. 651, 651 (2) (424 SE2d 272) (1993). In her original
counterclaim and first two amendments, Hicks raised the bad faith claim alone,
without any independent claim to support the grant of sanctions or fees.5 Accordingly,
5
Hicks’s original and twice-amended counterclaim did raise a claim for a
declaratory judgment pursuant to OCGA § 9-4-1. However, such claim was based on
AOIC’s failure to pay out her claim against the Bond, and instead filing the
22
Hicks’s claim under OCGA § 13-6-11 failed to plead sufficient facts to state a claim,
and we affirm the trial court’s dismissal of Hicks’s bad faith counterclaim for this
reason as well.
Hicks’s attempt to save her OCGA § 13-6-11 claim from dismissal – by
attempting to amend her counterclaim for a third time to include additional,
independent claims after AOIC moved to dismiss and without leave of court – was
unavailing. “When a pleader fails to set up a counterclaim through oversight,
inadvertence, or excusable neglect, or when justice requires, he may by leave of court
set up the counterclaim by amendment. OCGA § 9-11-13 (f). However, where a
defendant seeks but does not receive permission before filing additional
counterclaims, the trial court may in its discretion dismiss them. See Douglas Asphalt
Co. v. Martin Marietta Aggregates, 339 Ga. App. 435, 438 (3) (793 SE2d 615) (2016)
(trial court did not err in dismissing additional counterclaims based on new theories
not originally pleaded); EarthLink, Inc. v. Eaves, 293 Ga. App. 75, 78-79 (4) (666
interpleader action. Accordingly, such claim was not “wholly independent” of the
assertion as to AOIC’s bad faith in “bringing the underlying action.”Steele, 262 Ga.
at 651 (2). See also Brown v. Baker, 197 Ga. App. 466, 467 (3) (398 SE2d 797)
(1990) (“[i]t is well settled that the bad faith contemplated by OCGA § 13-6-11 is bad
faith connected with the transaction and dealings out of which the cause of action
arose, rather than bad faith in defending or resisting the claim after the cause of action
has already arisen”) (citation and punctuation omitted).
23
SE2d 420) (2008) (leave to amend counterclaims is within trial court’s discretion).
Accordingly, we also affirm the trial court’s dismissal of Hicks’s third-amended
counterclaim filing.
(b) Hicks next argues that the trial court erred in granting attorney fees to
AOIC. She argues that her filings contained only substantive and verifiable claims
and facts, and her conduct did not warrant sanctions.
OCGA § 9-15-14 (a) and (b) both allow a trial court to award attorney fees
under certain circumstances.
Pursuant to OCGA § 9-15-14 (a), the trial court shall award attorney
fees when a party asserted a claim, defense or other position with such
a complete absence of any justiciable issue of law or fact that the party
could not reasonably have believed that the court would accept it. We
affirm an award under subsection (a) if there is any evidence to support
it. Pursuant to OCGA § 9-15-14 (b), the court may award attorney fees
if a party brought or defended an action that lacked substantial
justification or was interposed for delay or harassment, or if the court
finds that an attorney or party unnecessarily expanded the proceeding by
other improper conduct. We review a subsection (b) fee award for abuse
of discretion.
Shoenthal v. Dekalb County Employees Retirement System Pension Bd., 343 Ga. App.
27, 30 (805 SE2d 650) (2017) (citation and punctuation omitted). Before awarding
24
attorney fees under OCGA § 9-15-14, “[t]he trial court must conduct a hearing on a
motion for attorney fees and make findings of fact that specify the conduct upon
which the award is made.” DeRossett Enterprises, Inc. v. Gen. Elec. Capital Corp.,
275 Ga. App. 728, 731 (4) (621 SE2d 755) (2005) (citation omitted).
For the reasons explained further above, supra Division 2 (a), we conclude that
Hicks’s counterclaim for bad faith had no factual merit and did not present a
justiciable issue of law. See Doster v. Bates, 266 Ga. App. 194, 196 (1) (596 SE2d
699) (2004) (in reviewing an award of attorney fees under OCGA § 9-15-14 (a), we
determine whether the claim or defense asserted below had some factual merit or
presented a justiciable issue of law). Hicks’s bad faith claim against AOIC as a
corporate surety was not only brought under an inapplicable statute, namely OCGA
§ 13-6-11, but also failed to meet the basic pleading requirements under OCGA § 13-
6-11.
Further, the trial court’s order contained sufficient findings of fact and cited
specific examples of the conduct authorizing the award. See Cohen v. Rogers, 341
Ga. App. 146, 152 (2) (b) (798 SE2d 701) (2017) (“To permit meaningful appellate
review of an award of fees and expenses [under OCGA § 9-15-14], the trial court’s
order cannot be too vague and conclusory, such as where it fails to cite examples of
25
conduct that authorize the award.”) (citation and punctuation omitted). The court
related the award of fees to Hicks’s sanctionable conduct, rather than simply
awarding a lump-sum fee. See Roylston v. Bank of America, N. A., 290 Ga. App. 556,
562-563 (2) (a) (660 SE2d 412) (2008) (“In cases involving OCGA § 9-15-14 (a) or
(b), the trial court must limit the fees award to those fees incurred because of the
sanctionable conduct. Lump sum attorney fees awards are not permitted in Georgia.”)
(citation and punctuation omitted). Accordingly, we affirm the trial court’s award of
attorney fees to AOIC.
3. Hicks also contends that the trial court abused its discretion in denying her
motion under OCGA § 9-15-14 for attorney fees and sanctions against the other
parties. Hicks sought attorney fees and sanctions against the other parties in multiple
filings throughout the litigation, The trial court denied her motion for attorney fees
against AOIC, and did not address her requests for attorney fees against Williams or
Gabor.
However, as we have determined that Gabor and Williams were within their
rights as interpleader defendants to challenge Hicks’s claim to the Bond proceeds,
and that AOIC was entitled to attorney fees for Hicks’s frivolous counterclaim, we
find that the trial court did not err in denying Hicks attorney fees in this case.
26
Rescigno v. Vesali, 306 Ga. App. 610, 615-616 (4) (703 SE2d 65) (2010) (we review
the denial of attorney fees under OCGA § 9-15-14 (a) if there is any evidence to
support the trial court’s order, and we review the denial of attorney fees under OCGA
§ 9-15-14 (b) for an abuse of discretion). Accordingly, we affirm the trial court’s
order.
4. Finally, Hicks contends that the trial court erred by “in effect” denying her
motion for partial summary judgment on her counterclaim. In this motion, Hicks
argued that because the language of the Bond was ambiguous, it could be construed
as requiring a $35,000 payment to each claimant, as opposed to a total pool of
$35,000 to split between all claimants. However, because the trial court never reached
this issue in any of its orders, we do not reach it in the first instance here. Williamson
v. Strickland & Smith, Inc., 296 Ga. App. 1, 6 (7) (673 SE2d 858) (2009) (“[W]here
the trial court has not ruled on an issue, we will not address it.”) (citation and
punctuation omitted).
Judgment affirmed in part; reversed in part. Dillard, P. J., and Hodges, J.,
concur.
27