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Lee v. Park

Court of Appeals of Georgia, Second Division

May 9, 2017

LEE et al.

          DOYLE, C. J., MILLER, P. J., and REESE, J.

          REESE, JUDGE.

         Keum 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.[1] 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.

         The 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.

         A few 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."

         In 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.

         During 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.[2]

         Park 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.

         Regarding 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[3] 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 taxes.[4]

         The 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."

         Following 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.

         OCGA § 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."[5] We review a trial court's award of attorney fees under OCGA § 9-15-14 (b) for an abuse of discretion.[6] With these guiding principles in mind, we turn now to Lee's specific claims of error.

         1. Lee 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.

         A bona fide purchaser for value is protected against outstanding interests in a purchased property of which he or she had no notice.[7] "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."[8] "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."[9] 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 ...

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