LEE et al.
C. J., MILLER, P. J., and REESE, J.
Soon Lee and her attorney, Kennon Peebles, Jr. (collectively,
"Lee"), appeal from the trial court's order
directing them to pay $9, 570 in attorney fees to Ai Sook
Park. Lee contends that the court abused its
discretion in finding that her claims lacked substantial
justification and, based upon that finding, awarding Park
attorney fees under OCGA § 9-15-14 (b). For the reasons
that follow, infra, we agree and reverse.
record shows that, in June 2012, Lee and Sok Sun Yun bought
an existing Atlanta business known as "Spring Spa."
Although Lee and Yun had no formal agreement, they operated
the business as an equal partnership, sharing management
responsibilities. In February 2013, they executed a four-year
lease for the premises that listed the tenant as "Spring
Spa, L.L.C." The lease was signed by the "tenants,
" Yun and Anthony Parumal, who was Lee's boyfriend;
Parumal also initialed each page of the lease. On May 30,
2013, however, Yun sold 100 percent of the ownership of the
business to Park for $55, 000, without Lee's knowledge or
consent. Park immediately took possession of the premises.
days later, Lee learned about the sale and contacted Park to
inform her of her (Lee's) ownership interest in the spa.
According to Parumal, Park told them that, on the day she
purchased the spa, she had heard that Yun had a partner in
the business, but when she asked Yun about it, Yun responded,
"Oh, I will take care of it."
August 2014, Lee filed suit against Yun and Park. Against
Yun, she asserted claims for breach of contract, fraud, and
conversion. She also sought a declaratory judgment that
Park's purchase of the business was void and a permanent
injunction barring Park from the premises. In addition, she
asserted a claim for unjust enrichment against Park, seeking
reimbursement for rent and insurance payments for the
business that she had made after the sale, while she was
still asserting her ownership interest in the spa.
a bench trial, Yun testified that the first time she met or
spoke with Park about selling the business was on the day the
sale contracts were executed and the sale was closed, May 30,
2013. According to Yun, Lee never had an ownership interest
in the spa, so Yun did not tell Park that Lee was a
part-owner of the business. Yun also testified that she
called the business' landlord on the day of the sale to
tell him that Park was purchasing the spa and would be
assuming the lease for the premises. The landlord was out of
town, however, and he told Yun that he would address the
issue when he returned to Atlanta.
testified that she had wanted to purchase a spa in Atlanta
and that a friend told her about Yun's business.
According to Park, Yun reduced the initial asking price for
the spa because Yun wanted to have a "quick sale."
Park admitted that she first met Yun, signed the sales
contract, and closed on the purchase of the spa in a single
day, May 30, 2013. When questioned about the lease, which
contained the signatures of two tenants - Yun and Parumal -
Park first testified that she did not see Parumal's
signature, adding that if she had seen his signature, then
she would not have purchased the business. After her counsel
showed her the lease, however, she admitted that she had seen
the signature, but assumed that Parumal was a landlord and
ignored his signature. She explained that the first page of
the lease identified the tenant as "Spring Spa" and
that, because she was buying the business from a Korean
person (Yun), she only paid attention to the Korean names on
the contract. Park also admitted that she did not investigate
to see if the business had any outstanding expenses or taxes
due prior to buying the spa. And, although she was purchasing
an established business, Park presented no evidence that she
asked to see Yun's purchase agreement to ensure that Yun
was the spa's sole owner, that she inquired about the
business' income and expense history, or that she asked
to review the business' past checking account statements
or accounting records.
Lee's unjust enrichment claim seeking reimbursement for
rent and insurance payments she had made after Park purchased
the business, Park asserted for the first time at
trial that she had paid business expenses that
had been incurred prior to her purchase of the spa. According
to Park, these expenses included $5, 880 in property taxes,
"about maybe $2, 000" for the water bill, $520 for
telephone service, $600 for gas and electricity, $500 for
landscaping, and "a little over $2, 000" in payroll
trial court subsequently entered judgment in favor of Lee on
her claims against Yun based upon its conclusion that Lee had
a 50 percent ownership interest in the spa, and it awarded
her both damages and attorney fees. With respect to Lee's
claims against Park, however, the court ruled that Park was a
bona fide purchaser for value who "did not have any
reason to suspect that [Lee] or anyone else claimed an
interest in the Spring Spa at the time she purchased the
business." The court further ruled that Park's
purchase of the spa was valid and binding. Finally, on
Lee's unjust enrichment claims, the court ruled that the
rent and insurance payments that Lee made after the sale were
voluntarily paid after she had notice of her potential claims
and that Lee's payments were "properly set off
against payments made by Defendant Park for debts owed by the
business prior to Park purchasing it."
entry of the judgment, Park filed a motion for attorney fees
under OCGA § 9-15-14. The court granted the motion,
ruling that Park was entitled to fees under OCGA §
9-15-14 (b) because Lee's claims against her "lacked
substantial justification in that they were
'substantially frivolous, substantially groundless, and
substantially vexatious.'" The court found that
"[n]o credible evidence was presented that would
indicate Defendant Park was placed on notice of Lee's
claim of ownership or that Park failed to exercise due
diligence regarding ownership of the business prior to
purchasing Spring Spa." In addition, the court
reiterated its previous finding that Lee's post-sale
payments on behalf of the business were properly set-off by
Park's payment of the business' pre-sale debts.
Accordingly, the court awarded Park attorney fees in the
amount of $9, 570, jointly and severally against Lee and her
trial counsel. This appeal followed.
§ 9-15-14 (b) gives a trial court the discretion to
award attorney fees in several circumstances, including where
"an attorney or party brought or defended an action, or
any part thereof, that lacked substantial
justification[.]" "[L]acked substantial
justification means substantially frivolous, substantially
groundless, or substantially vexatious." We review a trial
court's award of attorney fees under OCGA § 9-15-14
(b) for an abuse of discretion. With these guiding principles in
mind, we turn now to Lee's specific claims of error.
argues that the trial court abused its discretion in awarding
Park attorney fees based upon a finding that her equitable
claims against Park lacked substantial justification. With
respect to the claims for a declaratory judgment and
injunctive relief, Lee maintains that she presented evidence
that created a legitimate factual dispute as to whether Park
was a bona fide purchaser for value. We agree.
fide purchaser for value is protected against outstanding
interests in a purchased property of which he or she had no
notice. "To qualify as a bona fide purchaser
for value without notice, a party must have neither actual
nor constructive notice of the matter at
issue." "Notice sufficient to excite
attention and put a party on inquiry shall be notice of
everything to which it is afterwards found that such inquiry
might have led. Ignorance of a fact due to negligence shall
be equivalent to knowledge in fixing the rights of
parties." Whether the circumstances were sufficient
to put a party on notice of an alleged fraudulent transfer
and the opposing party's interest in the property at
issue is a question of fact to be determined by the trier ...