HBC2018, LLC v. Paulding Cnty. Sch. Dist.

• Decision Date: 21 December 2020
• Docket Number: A20A1993
• Citation: 358 Ga.App. 28,852 S.E.2d 884
• Parties: HBC2018, LLC v. PAULDING COUNTY SCHOOL DISTRICT.
• Court: Georgia Court of Appeals

358 Ga.App. 28

852 S.E.2d 884

HBC2018, LLC

v.PAULDING COUNTY SCHOOL DISTRICT.

A20A1993

Court of Appeals of Georgia.

December 21, 2020

The Barnes Law Group, Roy E. Barnes, John R. Bartholomew IV, Benjamin R. Rosichan, for appellant.

Harben Hartley & Hawkins, Phillip L. Hartley, Hieu M. Nguyen, for appellee.

Pipkin, Judge.

Georgia Heritage Bank (the "Bank") filed a complaint alleging, among other things, a claim for inverse condemnation against the Paulding County School District (the "District").¹ The trial court granted summary judgment in favor of the District on this claim. The Bank appeals this ruling. As the trial court's order is sound, we affirm.

Summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Thus, to prevail on a motion for summary judgment, the moving party must demonstrate that there is no genuine issue of material fact, so that the party is entitled to judgment as a matter of law. When reviewing the grant or denial of a motion for summary judgment, this court conducts a de novo review of the law and the evidence.

(Citations and punctuation omitted). Solid Equities v. City of Atlanta , 308 Ga. App. 895, 895, 710 S.E.2d 165 (2011).

Here, the relevant facts are largely undisputed. In February 2008, the Paulding County School Board (the "Board") voted to allow the construction of a field house at East Paulding High School (the "School"). The Board allocated $450,000 of taxpayer funds for the project, and Board minutes reflect an understanding that the remainder of the $900,000 cost would be paid by private donations. A contract for construction was awarded to LTP Construction Company.

Lee Paris and Ben Paris – principals of LTP Construction – were also officers of the East Paulding High School Booster Club (the "Booster Club"). Lee Paris, in his capacity as the president of the Booster Club, obtained a $450,000 loan from the Bank, which was used to complete the construction of the field house. The collateral for the loan was listed as the "accounts receivable, inventory, equipment, rents and leases now owned or hereafter acquired."² Lee and Ben Paris served as guarantors on the loan.³ Following its construction, the School used the field house both for sports teams and classes.

From the outset, the Booster Club had difficulty meeting its loan obligations. In 2010, over $440,000 of the debt was restructured to require a yearly principal payment of $10,000 plus interest for four years followed by a balloon payment estimated to be over $390,000. Lee Paris signed the agreement in his capacity as president of the Booster Club.

In 2013, Amanda Harmon – with the encouragement of the Parises – took over as Booster Club president. At the time, she was unaware of the loan obligation, which was not current. The balloon payment came due in 2014, and Harmon was pressured to sign a new loan agreement in her capacity as Booster Club president. Harmon met with various School officials to discuss repayment of the loan. Although the School refused to take over the loan, the principal agreed to use discretionary funds to pay a portion of the obligation.

Notwithstanding the School's assistance, the Booster Club still could not meet its loan obligations. Booster Club membership dropped off, and the remaining members resented having to repay the loan. When Harmon's tenure as Booster Club president ended, no one was willing to succeed her, and the club ceased functioning.⁴

In late 2016, Board members began to question the use of School funds to repay a loan it was not legally obligated to repay. In early 2017, the Board voted to disallow use of the School's discretionary funds to repay the loan.

The Bank filed suit against the District, alleging a claim for inverse condemnation.⁵ According to the Bank, the School's continued use of the property without payment of the debt constitutes an unconstitutional taking. The parties filed cross-motions for summary judgment, and the trial court granted summary judgment in favor of the District, finding no taking as a matter of law. The Bank appeals this ruling.

As a threshold matter, we note that the Bank appears to conflate an inverse condemnation claim with a takings claim. See City of Tybee Island v. Live Oak Group , 324 Ga. App. 476, 479, 751 S.E.2d 123 (2013) (concluding that appellants had failed to raise an inverse condemnation claim and declining to address whether a constitutional taking claim had been raised). An inverse condemnation claim ordinarily involves affirmative government action that causes a nuisance or a trespass, which diminishes the value of private property. See id. (no inverse condemnation claim where there was no affirmative act by the City). Here, there is no suggestion that the District caused a nuisance or trespass; it thus appears the complaint, in substance, alleges an unconstitutional taking claim, and we construe it as such. See Forest City Gun Club v. Chatham County , 280 Ga. App. 219, 220, 633 S.E.2d 623 (2006) (courts construe pleadings according to their substance and function rather than by nomenclature).

"Basic principles of constitutional law require that when property is taken for a public purpose by any governmental entity, including a county (or a subdivision or agency thereof), fair and adequate compensation must be paid to the owner of the property." Brown v. Penland Constr. , 276 Ga. App. 522, 524 (1), 623 S.E.2d 717 (2005), reversed on other grounds, 281 Ga. 625, 641 S.E.2d 522 (2007). Such "[a]n unconstitutional taking claim requires the taking of a valid property interest." Layer v. Barrow County , 297 Ga. 871, 873 (2), 778 S.E.2d 156 (2015). Here, however, it is undisputed that the Bank has no property interest in the field house. Instead, the Bank contends it has "a cognizable property interest in being repaid for the loan used to construct the field house." Assuming that the Bank's interest in repayment is a cognizable interest, the Bank has pointed to no evidence establishing that the School's use of the field house has frustrated the Bank's right to seek repayment of the debt; indeed, the Bank has secured a default judgment against the obligor on the loan and has released the guarantors. Moreover, the uncontradicted evidence establishes that the District was not a party to the loan agreement and is under no legal obligation to repay the Bank. See, e. g., Willard v. Stewart Title Guar. Co. , 264 Ga. 555, 555, 448 S.E.2d 696 (1994) (partner who had not...