TermNet Merchant Services, Inc. v. Phillips, S03G1157.

• Decision Date: 10 November 2003
• Docket Number: No. S03G1157.,S03G1157.
• Citation: 277 Ga. 342,588 S.E.2d 745
• Parties: TERMNET MERCHANT SERVICES, INC. v. PHILLIPS.
• Court: Georgia Supreme Court

588 S.E.2d 745

277 Ga. 342

TERMNET MERCHANT SERVICES, INC. v. PHILLIPS.

No. S03G1157.

Supreme Court of Georgia.

November 10, 2003.

Freed & Berman, P.C., Gary S. Freed, William J. Piercy, Benjamin I. Fink, Atlanta, for appellant.

Gregory R. Crochet, Carr, Tabb, Pope & Freeman, LLP, W. Pitts Carr, Atlanta for appellee.

SEARS, Presiding Justice.

We granted certiorari to consider whether a trial court has discretion to deny a claim for attorney fees brought pursuant to OCGA § 13-1-11, despite undisputed compliance with the requirements of that statute. Based upon the statute's language and legislative history, we conclude that attorney fees sought under OCGA § 13-1-11 are mandatory where the statute's conditions have been clearly satisfied. Therefore, we reverse.

In 1996, appellee Andrew Phillips entered into both an employment agreement and a stock purchase agreement with appellant TermNet Merchant Services, Inc. ("TermNet"). At roughly the same time, Phillips executed a promissory note payable to TermNet in the principal amount of $150,000, with interest set at 11.5 percent per year. The note provided that if the creditor brought suit to collect an unpaid balance, it was entitled to receive all reasonable costs, including attorney fees. Pursuant to the note, Phillips received $150,000 from TermNet. Disputes then arose between Phillips and TermNet relating to both the employment contract and the stock purchase agreement, and Phillips's employment was terminated.

TermNet made a demand on Phillips to pay the balance of the note and put Phillips on notice that if the note was not paid in full within 10 days of the demand letter's receipt, TermNet would enforce the note's attorney fees provision. When its demand was not satisfied, TermNet sued Phillips for, among other things, contract breach and failure to make payments under the note. The trial court bifurcated the case, and ordered that all claims arising from the employment contract and stock purchase agreement—both of which contained arbitration provisions—be submitted to binding arbitration. At the same time, the trial court retained jurisdiction over the claims pertaining to the note, which contained no arbitration provision.

The trial court found that Phillips was liable on the note for the principal, interest and late fees, and granted TermNet partial summary judgment.¹ At that time, the trial court reserved judgment on whether to award TermNet attorney fees under OCGA § 13-1-11, as requested. One month later, the arbitration panel entered an award in TermNet's favor on its claims pertaining to the stock option and employment contracts. The arbitration panel's award included an award of attorney fees. The trial court then confirmed the panel's award, but denied TermNet's request for statutory attorney fees under OCGA § 13-1-11 with regard to its efforts to collect on the note.

TermNet appealed the denial of its request for attorney fees. Even though the Court of Appeals found that TermNet had satisfied all of OCGA § 13-1-11's requirements, it nonetheless affirmed the trial court's denial of TermNet's request for fees.² The Court of Appeals reasoned that the trial court must have deemed the arbitration award—which, as stated, included an award of attorney fees—sufficient to compensate TermNet for fees it incurred in pursuing all of its claims, including those pertaining to the note. TermNet's petition for certiorari was granted so that this Court could consider whether a trial court has discretion to deny a request for attorney fees pursuant to OCGA § 13-1-11 despite undisputed compliance with all the conditions of that statute.

1. OCGA § 13-1-11(a) provides in pertinent part that:

Obligations to pay attorney['] fees upon any note or other evidence of indebtedness, in addition to the rate of interest specified therein, shall be valid and enforceable and collectible as a part of such debt if such note or other evidence of indebtedness is collected by or through an attorney after maturity....

This provision is enforceable so long as: (1) the note's terms include an obligation to pay attorney fees; (2) the debt owed under the note has matured; (3) notice was given to the debtor informing him that if he pays the debt within ten days of the notice's receipt, he may avoid attorney fees; (4) the ten day period has expired without payment of the principal and interest in full; and (5) the debt is collected by or through an attorney.³ As stated in the Code section quoted above, once these conditions are established, contractual provisions to pay attorney fees in connection with a creditor's efforts to collect on a note "shall be valid and enforceable."⁴

When construing statutory phrases, of course, we look diligently for the General Assembly's intention, bearing in mind relevant old laws, evils sought to addressed and remedies interposed.⁵ In this regard, we note that "`[i]n its ordinary signification, "shall" is a word of command, and the context ought to be very strongly persuasive before that word is softened into a mere permission.'"⁶ When read in its entirety, there is nothing in OCGA § 13-1-11 that suggests the legislature intended the use of the word "shall" in subsection (a) to denote a permissive rather than a mandatory meaning. Furthermore, the legislative history of section 13-1-11 establishes that mandatory attorney fee provisions in notes are looked upon favorably and are valid and enforceable, so long as the statutory conditions outlined above have been satisfied.⁷

Accordingly, based upon the clear language of the statute and its history, we conclude that where a party complies with the requirements of OCGA § 13-1-11, the party is entitled to receive statutory attorney fees. Because the language of the statute is mandatory rather than permissive, we further hold that the trial court is without discretion to deny fees under section 13-1-11 when all the conditions of that statute are unquestionably satisfied.⁸ It follows that the Court of Appeals erred in holding that the trial court in this case had discretion to deny TermNet's claim for fees under section 13-1-11, despite its undisputed compliance with the statute's requirements.

2. Turning to the facts of this particular matter, it is clear that TermNet satisfied all of the requirements of section 13-1-11. As noted above, the note included an obligation to pay reasonable attorney fees and costs if the creditor was forced to bring suit to collect the unpaid balance; the debt secured by the note had matured; Phillips was given notice that if he paid the debt and interest in full within ten days of the notice's receipt, he would not be...