Ameris Bancorp v. Ackerman

• Decision Date: 24 February 2009
• Docket Number: No. A08A1588.,A08A1588.
• Citation: 296 Ga. App. 295,674 S.E.2d 358
• Parties: AMERIS BANCORP v. ACKERMAN.
• Court: Georgia Court of Appeals

674 S.E.2d 358

296 Ga. App. 295

AMERIS BANCORP v. ACKERMAN.

No. A08A1588.

Court of Appeals of Georgia.

February 24, 2009.

Moore, Clarke, DuVall & Rodgers, James H. Moore III, Albany, Allen H. Olson, for appellant.

Kevin Todd Butler, for Appellee.

DOYLE, Judge.

This interlocutory appeal arises from Janet Ackerman's suit to recover money she paid Ameris Bancorp (the "Bank") as a guarantor on a note. Following the denial of its motion for judgment on the pleadings, the Bank contends that the trial court erred by failing to enforce certain exculpatory clauses in the guaranty and a related lease agreement. For the reasons that follow, we disagree and affirm.

"On appeal, we review de novo the trial court's decision on a motion for judgment on the pleadings, and we construe the complaint in a light most favorable to the appellant, drawing all reasonable inferences in his favor."¹ "When deciding a motion for judgment on the pleadings, the issue is whether the undisputed facts appearing from the pleadings entitle the movant to judgment as a matter of law. All well-pleaded material allegations by the nonmovant are taken as true, and all denials by the movant are taken as false."²

So viewed, the record shows that, in 1985, to finance the construction of a veterinary clinic, the City of Cairo Development Authority (the "City") borrowed $130,000 from the Bank³ and executed a note obligating it to make monthly payments toward the principal plus interest based on an adjustable rate over a 20-year term. The same day, the City executed a lease entitling Ackerman⁴ to occupy the premises of the new veterinary clinic as lessee and obligating her to make monthly lease payments to the City in an amount equal to the amount due under the note. The lease likewise obligated the City to promptly deliver the payment to the Bank (as payment for the note). In connection with the lease, Ackerman executed a separate two-page guaranty obligating her to make the note payments and pay any balance remaining at maturity if the City failed to pay. Also, as part of the lease, Ackerman obtained an option to purchase the property (for an amount equivalent to the balance due under the note plus $1)⁵ at or prior to expiration of the lease, which followed the same 20-year term as the note. Finally, the City assigned its interest in the lease to the Bank, so Ackerman was essentially making lease payments to the Bank directly, in an amount equal to the debt on the note. The Bank retained a security deed securing the note.

After the transaction closed, Ackerman began adequately performing her obligation to make lease payments as billed and when due. Over time, however, the Bank failed to adjust the amount due each month in accordance with the variable interest rate on the note. Because the applicable interest rate fluctuated, there remained a stated unpaid balance of $26,306.62 on the date of the maturity of the note. After the Bank demanded payment, Ackerman ultimately paid the Bank $27,106.12 (accounting for interest on the late payment) under protest.

Ackerman sued the Bank for breach of contract and money had and received, alleging that the $26,306.62 figure represents principal that wrongly went unpaid because more of her monthly payments went to interest than should have occurred under the terms of the note. Relying on language in the guaranty and lease, the Bank unsuccessfully moved for judgment on the pleadings, and this Court granted the Bank's application for interlocutory appeal.

The Bank contends that, regardless of any mistake in the billing by the Bank, Ackerman's claims against the Bank fail due to language limiting her claims in her guaranty of the note and her lease with the City (which was assigned to the Bank). We disagree.

1. Enforceability of the exculpatory language in the lease. The lease executed by Ackerman contains "Release and Indemnification Covenants" she agreed to as part of the lease agreement with the City, which assigned its interest to the Bank. The Bank argues that Ackerman's claims are barred by this language, which provides, in relevant part:

If the [Indemnified Persons are] made a party defendant to any litigation concerning the Project or any part thereof, or concerning the occupancy thereof by Lessee [Ackerman], or concerning the issuance of the Note, the Lessee agrees to indemnify, defend and hold Indemnified Persons harmless from and against any and all liability by reason of such litigation....

It is the intention of the parties that the Indemnified Persons shall not incur pecuniary liability by reason of the terms of this Lease or by reason of the undertakings of the Indemnified Persons required hereunder in connection with the issuance of the Note or execution of this Lease, the Security Deed, or the Lease Assignment or in connection with the performance of any act by the Indemnified Persons requested by the Lessee or in any way arising from the transaction with which this Lease is a part arising [sic] in any manner in connection with the Project or financing of the Project; nevertheless, if any of the Indemnified Persons should incur any such pecuniary liability, then in such event the Lessee shall indemnify and hold the Indemnified Persons harmless against all claims by and on behalf of any person arising out of the same....

The provisions of this section shall not apply to any claim of liability resulting from the acts of gross negligence, bad faith, fraud or deceit of any of the Indemnified Persons, or for any claim or liability which the Lessee was not given the opportunity to contest.

The lease defined Indemnified Persons to include the City and its successors and assigns, so the Bank became an Indemnified Person upon assignment.

As this exculpatory language is in a lease, our focus here is on the law governing exculpatory clauses in such documents. "As a general rule a party may contract away liability to the other party for the consequences of his own negligence without contravening public policy, ... except when such an agreement is prohibited by statute."⁶ This Court has held that OCGA § 13-8-2(b) (now and as written at the time of this contract) applies to exculpatory clauses in lease contracts⁷ and

unequivocally holds that a covenant, promise, agreement or understanding with reference to the construction and maintenance of a building or other structure "purporting to indemnify or hold harmless the [landlord] against liability for damages arising out of bodily injury to persons or damage to property caused by or resulting from the sole negligence of the [landlord], his agents or employees or indemnitee is against public policy and is void and unenforceable."⁸

Here, the indemnity broadly states that "Lessee shall indemnify and hold the Indemnified Persons harmless against all claims by and on behalf of any person arising out of" the terms of the lease "or in any way arising from the transaction." "Though the words of the indemnification do not expressly refer to [the Bank's] sole negligence, the logic is irrefutable that the agreement sought to indemnify [the Bank] from any and all claims (which necessarily includes claims emanating from injuries caused solely by [the Bank's] negligence)....⁹

This attempt to "shift[] all liability ... no matter the origin of the claim or who is at fault," violates the public policy of the State of Georgia as expressed in OCGA § 13-8-2(b).¹⁰ It is therefore void and unenforceable.

That the indemnity provision here, as a matter of fact, is not invoked specifically against liability for damage arising out of bodily injury or damage to property does not render the exculpatory provision enforceable. The provision as written is violative of OCGA 167; 13-8-2(b) and as such is void by the terms of that Code section. A...