Bridges v. Collins-Hooten, A16A1029

• Decision Date: 01 November 2016
• Docket Number: A16A1029
• Parties: BRIDGES et al. v. COLLINS–HOOTEN et al.
• Court: Georgia Court of Appeals

339 Ga.App. 756

792 S.E.2d 721

BRIDGES et al.

v.COLLINS–HOOTEN et al.

A16A1029

Court of Appeals of Georgia.

November 1, 2016

Reconsideration Denied December 7, 2016

John Bailey Antoine Ayoub, John George Mansour, Carolina Dallal Bryant, Atlanta, Ayoub & Mansour, Martin Jeremy Lynch, Albany, for Appellants.

William Spencer Lee IV, Albany, Robert Lige Walker, Jenkins & Bowen, Cartersville, for Appellees.

McMillian, Judge.

Eric Bridges appeals the trial court's order disbursing excess tax sale funds in this interpleader action, asserting in related enumerations of error that the trial court erred (1) in ordering the excess funds to be disbursed to the Georgia Department of Revenue and (2) in awarding attorney fees beyond those allowed in an interpleader action. For the reasons set forth below, we affirm in part and reverse in part.

On December 4, 2001, Dougherty County conducted a non-judicial tax sale of the property at 3111 Winterwood Avenue (the "Property") for unpaid taxes. Heartwood 11, Inc. ("Heartwood"), purchased the Property at the tax sale, which, after payment of all past due taxes and costs, generated $45,274.54 in excess funds (the "Funds"). On November 26, 2002, Fairbanks Capital Corporation ("FCC") redeemed the Property from Heartwood, and a quitclaim deed was recorded in Dougherty County identifying FCC as the redeeming party.

Over eleven years later, in January 2014, Denver Collins–Hooten, acting as the tax director of Dougherty County (the "Tax Director"), filed an interpleader action in the Superior Court of Dougherty County and deposited the Funds into the court's registry. The Tax Director named Otis Bridges, Eric Bridges,¹ FCC, and the Georgia Department of Revenue as respondents with a potential interest in the Funds. The trial court granted the Tax Director's motion to serve all respondents by publication, and Eric responded in July 2014, asserting his claim to the Funds. The following month, Eric filed a "Motion to Disburse Proceeds or in the Alternative for Grant of Summary Judgment," noting that he was entitled to the Funds and that no other persons or entities had made any claim to the Funds.

On September 2, 2014, the Tax Director filed a separate motion to disburse, acknowledging that Eric was the only respondent to respond to the interpleader action. In her motion, the Tax Director also included a claim for attorney fees relative to the filing of the interpleader action in the amount of $3,735 and requested a hearing to determine which of the respondents should receive the Funds. On September 10, 2014, the trial court entered an order granting Eric's motion to disburse the Funds, awarding the full amount to Eric, subject only to the Tax Director's filing of a bill of costs.

The Tax Director thereafter filed an emergency motion to set aside the order and halt the disbursement of the Funds on the grounds that the trial court did not allow it a full 30 days to respond to Eric's motion to disburse, which she characterized as a motion for summary judgment. The same day, the Tax Director moved for an extension of time to respond to Eric's motion, as well as for leave to substitute party defendant FCC with Select Portfolio Servicing, Inc. ("SPS").² The trial court then entered separate orders halting any disbursement of the Funds, setting aside its previous order awarding the Funds to Eric, and granting the Tax Director's motion to substitute.

Following a hearing, the trial court entered an order denying Eric's motion to disburse the Funds and a subsequent order finding that SPS is the entity with a priority interest in the Funds. However, because SPS did not make a claim for the Funds, the trial court ordered the Funds to be disbursed to the Georgia Department of Revenue³ after payment of attorney fees totaling $8,183.57 to the Tax Director. This appeal followed.

1. In his first two enumerations of error, Eric asserts that the trial court erred in finding that SPS has a priority interest in the Funds. Whether SPS has a priority interest in the Funds under the relevant statutes is a question of law, which we review de novo. See City of Atlanta v. Hotels.com , 289 Ga. 323, 325 (1), 710 S.E.2d 766 (2011).

Under Georgia law, if a property owner fails to pay county property taxes, the county may conduct a sale of the property to satisfy the unpaid taxes. See OCGA § 48–4–1. Following a tax sale, the tax deed vests the purchaser with a defeasible fee interest in the property that continues for a one-year period during which time other interested parties retain a statutory right of redemption. Land USA, LLC v. Ga. Power Co. , 297 Ga. 237, 239 (1), 773 S.E.2d 236 (2015) (delinquent taxpayer or party holding interest in or lien on property may redeem property by paying to tax sale purchaser the purchase price plus taxes paid and interest). "If the property is redeemed, the tax sale is essentially rescinded and a quitclaim deed is executed by the tax sale purchaser back to the owner of the property at the time of levy and sale." Nat. Tax Funding, L.P. v. Harpagon Co., LLC , 277 Ga. 41, 42 (1), 586 S.E.2d 235 (2003).

And when "a creditor of the original taxpayer redeems the property, the amount paid by the redeeming creditor becomes a first lien on the property. The redeeming creditor then has first priority to repayment—a ‘super-lien’ for the redemption price—and may proceed to foreclose against the property based upon that lien."

Nat. Tax Funding , 277 Ga. at 42–43 (1), 586 S.E.2d 235. Other lienholders at the time of the sale that have not been fully paid—through excess funds or otherwise—retain their presale liens on the property. See DLT List, LLC v. M7 ven Supportive Housing & Dev. Group , 335 Ga.App. 318, 321 (1), 779 S.E.2d 436 (2015).

When a tax sale generates additional funds more than those necessary to satisfy the tax lien, OCGA § 48–4–5 (a) governs the payment of excess tax sale proceeds. That statute provides:

If there are any excess funds after paying taxes, costs, and all expenses of a sale made by the tax commissioner, ... the officer selling the property shall give written notice of such excess funds to the record owner of the property at the time of the tax sale and to the record owner of each security deed affecting the property and to all other parties having any recorded equity interest or claim in such property at the time of the tax sale. Such notice shall be sent by first-class mail within 30 days after the tax sale. The notice shall contain a description of the land sold, the date sold, the name and address of the tax sale purchaser, the total sale price, and the amount of excess funds collected and held by the tax commissioner, tax collector, sheriff, or other officer. The notice shall state that the excess funds are available for distribution to the owner or owners as their interests appear in the order of priority in which their interests exist.⁴

The Tax Director argued below, and the trial court agreed, that SPS has a priority interest in the Funds, relying on this Court's decision in Wester v. United Capital Financial of Atlanta, LLC , 282 Ga.App. 392, 638 S.E.2d 779 (2006), which held that the interest of the redeeming creditor takes priority over any claims on the property, including the property owner's interest. However, shortly after the trial court entered its order, Wester was expressly overruled by DLT List , 335 Ga.App. at 320, 779 S.E.2d 436.⁵ In DLT List, this Court explained that Wester had incorrectly expanded the holding of Nat. Tax Funding to mean that the redeeming creditor could both redeem the property and receive excess funds from the tax sale to pay for the priority lien created by the redemption:

Instead, Nat. Tax Funding held that following a tax sale, the holder of a lien has two options—it may either file a claim to collect against any proceeds from the sale, or it may assert its rights following the tax sale via a statutory claim for redemption, in which case it obtains a first priority lien on the property, which it may then enforce by levy and sale.

(Citation and punctuation omitted; emphasis in original) 335 Ga.App. at 323 (1), 779 S.E.2d 436. Thus, the trial court erred in relying on Wester to find that SPS, as the redeeming creditor, had a priority interest in the Funds and in denying Eric's motion to disburse on that basis.

The question then is whether the trial court properly granted the Tax Director's motion to disburse the Funds on grounds now asserted by the Tax Director—that SPS had a separate recorded security interest on the property at the time of the 2001 tax sale. Based on our review of the record, SPS's purported security interest is only referenced in the quitclaim deed executed upon the redemption sale. The security deed is not in the record nor is there any evidence of the actual amount of the security interest. To the contrary, in support of his motion to disburse the Funds, Eric submitted the affidavit of a title examiner who averred that he examined the real property records for the Property for the period 1981 to 2014 and found that Otis had, over the years, secured payment of borrowed money with several individuals and banks, including NationsCredit,⁶ but that each of the respective security deeds had been satisfied of record and that there were no outstanding security deeds under or in his name secured by the Property. Although the Tax Director now argues on appeal that there was insufficient evidence presented to the trial court to support a finding that SPS's security deed was cancelled, at the hearing on the parties' cross motions to disburse, the Tax Director, through counsel, conceded that any outstanding security deeds had been paid even before the Property's several subsequent sales. This argument has therefore been waived. See Reed v. State , 294 Ga. 877, 879 (2), n.2, 757 S.E.2d 84 (2014) ; Hollberg v. Spalding County , 281 Ga.App. 768, 774–75 (2) (b), 637 S.E.2d 163 (2006) ( "Admissions of fact, made by a party's counsel...