Northside Bank v. Mountainbrook of Bartow Cnty. Homeowners Ass'n, Inc.

• Decision Date: 14 July 2016
• Docket Number: A16A0220,A16A0005
• Citation: 789 S.E.2d 378,338 Ga.App. 126
• Parties: Northside Bank v. Mountainbrook of Bartow County Homeowners Association, Inc. and vice versa.
• Court: Georgia Court of Appeals

338 Ga.App. 126

789 S.E.2d 378

Northside Bank

v.Mountainbrook of Bartow County Homeowners Association, Inc. and vice versa.

A16A0005

A16A0220

Court of Appeals of Georgia.

July 14, 2016

Leon Strickland Jones, Cameron M. McCord, Atlanta, for Appellant in A16A0005 and Appellee in A16A0220.

Fred D. Bentley Jr., Marietta, Benjamin Blake Hungerford, for Appellee in A16A0005.

Fred D. Bentley Jr., Marietta, for Appellant in A16A0220.

Barnes, Presiding Judge.

These companion appeals arise from the trial court's grant of summary judgment to Mountainbrook of Bartow County Homeowners Association, Inc., formerly known as Mountainbrook Property Owners Association (hereinafter “Mountainbrook”). Northside Bank foreclosed on six lots in the Mountainbrook subdivision and when, after several years, Northside did not pay homeowners association assessments on the lots, Mountainbrook filed an action against Northside to foreclose on the property liens and collect the unpaid assessments, interest, late fees and attorney fees. The trial court granted summary judgment to Mountainbrook and awarded $190,904.68 for the unpaid assessments, interest, and late fees, and $65,834.02 in attorney fees.

In Case No. A16A0005, Northside contends that the trial court erred by granting Mountainbrook 18 percent interest on the assessments, by granting Mountainbrook actual attorney fees, rather than “reasonable” attorney fees under OCGA § 13–1–11, and by granting Mountainbrook late fees. In Case No. A16A0220, Mountainbrook contends that the trial court erred by abating post-judgment interest in its order granting Mountainbrook's motion for supercedeas bond.

Summary judgment is proper only if the pleadings and evidence “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.” OCGA § 9–11–56 (c). On appeal from a trial court's grant or denial of summary judgment, we “conduct a de novo review, construing all reasonable inferences in the light most favorable to the nonmoving party.” Bank of North Ga. v. Windermere Dev. , 316 Ga.App. 33, 34, 728 S.E.2d 714 (2012). Viewed under this standard, the record reveals that in September of 2007, Northside took title by foreclosure to six lots in the Mountainbrook subdivision. Northside failed to timely pay the homeowners association assessments owed pursuant to Mountainbrook's Declaration of Covenants, Conditions, Restrictions and Easements (the “Declaration”) and on May 26, 2009, Mountainbrook filed a complaint for an award of damages and judicial foreclosure of its liens against Northside to collect the past due assessments. Northside answered, asserting multiple counterclaims, including slander of title and breach of covenants, and also filed a third-party complaint against the president of Mountainbrook's Board of Directors. Northside further requested the appointment of a receiver to determine if the assessments were being used for the proper purpose.

Mountainbrook filed a motion for summary judgment, which the trial court denied. In the same order, the trial court granted Northside's request for the appointment of a receiver to “conduct a full and comprehensive audit of [Mountainbrook's] fund” to determine if the assessments were proper in “form and substance.” Subsequent to the filing of the receiver's report, Mountainbrook filed a renewed motion for summary judgment and damages in the amount of $190,904.68 for “past due annual and special assessments, late fees and interest,” $1,443.11 for costs, and $65,834.02 for attorney fees. Following a hearing, at which the trial court noted that it had adopted all of the receiver's findings, the trial court granted Mountainbrook's motion for summary judgment.

Case No. A16A0005

1. Northside contends that because the Declaration does not specify an interest rate, the trial court erred in granting Mountainbrook 18 percent interest on the assessments, rather than the 7 percent interest allowed by law pursuant to OCGA § 7–4–2. We agree.

Mountainbrook's entitlement to interest on the past due assessments is governed by the contract between the parties, in this case the Declaration. “[T]he parties may establish any rate of interest, expressed in simple interest terms as of the date of the evidence of the indebtedness, ... where the principal amount involved is more than $3,000.00.” OCGA § 7–4–2 (a) (1) (A). “The requirement that the rate of interest be expressed in simple interest terms does not mandate numerical terminology but is met by the expression of the method of computation of interest by reference to ‘prime’ or other indices such as ‘base.’ ” (Citation and punctuation omitted.) 1600 Capital Co. v. Bankers First Fed. &c. Assn. , 187 Ga.App. 504, 506, 370 S.E.2d 668 (1988). However, unless the relevant agreement specifies otherwise, interest is to be awarded at a rate of 7 percent per year. Quintanilla v. Rathur , 227 Ga.App. 788, 490 S.E.2d 471 (1997) ; OCGA § 7–4–2 (a) (1) (A).

Here, Article VI, Section 8 of Mountainbrook's Declaration provided that for assessments not paid “within five (5) days after the due date, the assessment shall bear ... interest from the date of delinquency at the maximum legal rate per annum .” (Emphasis supplied.) in its order granting Mountainbrook's motion for summary judgment, the trial court found “the proper rate of interest for the unpaid assessments to be 18 percent per annum as the maximum allowable by law provided for in Article VI, Section 8 of the Declaration and based upon the holding in Noons v. Holiday Hospitality Franchising , 307 Ga. App. 351 [705 S.E.2d 166 (2010) ].”

The trial court's reliance on Noons is misplaced. In Noons, the contract provided for the lesser of an interest rate of 1.5 percent per month, which is 18 percent a year, or the maximum interest rate allowed by law. 307 Ga.App. at 355 (3), 705 S.E.2d 166. We held that Holiday Inn was entitled to the interest rate designated by the specific terms of the contract of 1.5 percent per month or 18 percent per annum. Id. Although not argued in Noons, OCGA § 7–4–2 did not apply in that case because the parties expressed the rate of interest in the contract (1.5 percent per month or 18 percent per annum), unlike in the Declaration at issue in this case.

Here, contrary to Mountainbrook's contention, an interest rate of “the maximum legal rate per annum” is not a rate that is definite and ascertainable. Unlike a reference to the “prime rate” which, while not of specific numerical value, is easily computable, the “maximum legal rate per annum” provides no set and certain base for computation. See Stewart v. Nat. Bank of Ga. , 174 Ga.App. 892, 893, 332 S.E.2d 19 (1985). In this case, the term “maximum legal rate” as used in the Declaration is vague and, as such, renders the interest rate indefinite.

Although Mountainbrook maintains that the maximum legal amount under Georgia law is 18 percent pursuant to OCGA § 7–4–16, that statute establishes the maximum interest rate on commercial accounts. The Declaration is not a commercial account. Per OCGA § 7–4–16, a “ ‘[c]ommercial account’ means an obligation for the payment of money arising out of a transaction to sell or furnish, or the sale of, or furnishing of, goods or services other than a ‘retail installment transaction.’ ”

OCGA § 7–4–2 governs the rate of interest in contracts where the interest rate is not specified. Because, “the maximum legal rate” specified in the Declaration was not definite and ascertainable, the trial court erred in awarding 18 percent interest rather than the 7 percent provided for by OCGA § 7–4–2. Accordingly, that portion of the judgment must be vacated, and the case remanded for recalculation of the interest rate pursuant to OCGA § 7–4–2.

2. Northside also contends that the trial court erred in calculating the attorney fees owed under the Declaration because the amount of fees was governed and limited by OCGA § 13–1–11. We do not agree.

“The general rule is that expenses of litigation, including attorney [ ] fees, are not recoverable by a litigant against the opposite party except in those cases which are specifically provided for by contract or by statute. [Cit.]” Hickman v. Frazier , 128 Ga.App. 552, 197 S.E.2d 441 (1973). Here, Article 6, Section 5 of the Declaration provides, in relevant part, that [e]ach such assessment, together with the interest thereon and cost of collection thereof, including reasonable attorney's fees , shall be the personal obligation of the ... Owner.” Article 6, Section 8, provides that in an action to collect delinquent assessments, “interest, cost and reasonable attorney [ ] fees of any such action shall be added to the amount of such assessment.” Northside contends that because the Declaration only provided for reasonable attorney fees without specifying the amount, the award should be calculated pursuant to OCGA § 13–1–11, and the trial court erred in awarding reasonable attorney fees pursuant to the Declaration.

OCGA § 13–1–11 provides in relevant part that,

[i]f such note or other evidence of indebtedness provides for the payment of reasonable attorney[ ] fees without specifying any specific percent, such provision shall be construed to mean 15 percent of the first $500.00 of principal and interest owing on such note or other evidence of indebtedness and 10 percent of the amount of principal and interest owing thereon in excess of $500.00[.]

OCGA § 13–1–11 (a) (2).

The trial court found that “based upon the language ... of the Declaration, that the award of reasonable attorney[ ] fees ... [was] proper” and awarded Mountainbrook $65,834.02 for “reasonable attorney[ ] fees.” Mountainbrook asserts that OCGA § 13–1–11 does not apply to the Declaration because it “is not a ‘note or other evidence of indebtedness' that creates a promise to repay a fixed debt upon its creation.” Mountainbrook also contends that its argument is bolstered by the statutory authority of the Property Owners' Association...