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WOODS et al. v. STATE OF GEORGIA et al.
Award of attorney's fees. Laurens Superior Court. Before Judge Ward.
BELL, Presiding Judge.
The payee in a promissory note, secured by a security deed on realty, after maturity and default in payment, is not precluded from giving notice to the maker so as to bind the maker for the payment of attorney's fees as provided in the note where a receivership proceeding has been instituted against a third person who had acquired the realty from the maker subsequently to the execution of the instruments and the recording of the deed. On expiration of 10 days without payment from the giving of the notice, as provided by Code Ann. 20-506, the obligation of the maker of the note to pay the attorney's fees is fixed and is protected by the security deed.
This case is an outgrowth from an equitable receivership proceeding in the trial court. Because of the equitable nature of the main case, this court caused the record to be transferred to the Supreme Court with the thought in mind that in any doubtful case that court should determine its own jurisdiction rather than have it decided for them. In returning the case and holding that the Court of Appeals had the original appellate jurisdiction, the Supreme Court said: "The bill does not disclose any pending equitable issues dependent upon a ruling in this case. The only question at issue is whether the court erred in awarding a sum of money as attorney's fees out of funds in the hands of the receiver less than the amount claimed. This is a law question over which the Court of Appeals alone has jurisdiction." Woods v. State of Ga., 219 Ga. 503 (133 SE2d 865).
On May 10, 1962, Hamilton Kellam borrowed money from and executed his promissory note to Mrs. Evelina K. Woods, securing it by a security deed on certain real estate. Thereafter, the property was acquired by T. J. Hobbs. For some reason, which does not appear from the record, title to the property remained in Kellam (subject to the security deed to Mrs. Woods) so far as the deed records disclosed, until he conveyed it to the receiver for Hobbs on March 18, 1963. The indebtedness represented by the Kellam note became in default, and Mrs. Woods employed counsel to enforce collection in her behalf. Her attorneys personally served Kellam with a notice to bind him for the payment of attorney's fees, as required by Code Ann. 20-506, the service having been made November 27, 1962. Payment of the balance of principal and interest due on the note was not made within the ten days following service of the notice, and Mrs. Woods asserts her claim to 15 percent of that amount in accordance with the provisions of the note.
On October 29, 1962, creditors of Hobbs filed a petition for a receiver of his assets, alleging him to be an insolvent debtor. On this petition a permanent receiver was appointed January 17, 1963.
The petition alleged that the property described in the security deed from Kellam to Woods belonged to Hobbs but recognized that it was subject to the security deed. Later, the permanent receiver by a separate petition alleged that the value of the property exceeded the amount of the debt and prayed that Mrs. Woods be enjoined from exercising the power of sale and be required to intervene and state her claim in the receivership proceeding. These prayers were granted. The receiver also sought and was granted authority to sell the realty.
The receiver sold the property for an amount in excess of the claim of Mrs. Woods. The receiver conceded that she was entitled to receive full payment of the principal and interest due under her note, but objected to the payment of the 15 percent claimed as attorney's fees. The court directed payment of the principal and interest, without prejudice as to her right to have the attorney's fees paid. Later, after hearing, the court ordered the sum of $300 paid as full satisfaction of her claim in that respect. She excepts, asserting that she is entitled to have the full 15 percent, or $978.
We conclude that Mrs. Woods' position is well taken. While Code 28-405 provides that no creditor shall acquire any preference under proceedings commenced after the filing of a receivership petition, it must be observed that the receivership here was not against Kellam, the debtor of Mrs. Woods, and that Mrs. Woods was not a creditor of Hobbs, the insolvent debtor for whose estate a receiver was appointed. If Hobbs had been the maker of the note instead of Kellam, it can be seen that to allow Mrs. Woods to give the 10-days notice and increase her claim by adding 15 percent to the obligation as attorney's fees might be allowing her to acquire a preference against his other creditors in violation of Code 28-405.
But here, although required by the court to desist from exercising her power of sale from Kellam and to set up her claim by way of intervention in the proceedings, Mrs. Woods was not asserting any claim against Hobbs or his estate, nor did she become his creditor. As between Mrs. Woods and Kellam, there was nothing to prevent her from giving the 10-days notice to him so as to bind him for payment of attorney's fees.
Mrs. Woods' claim against Kellam is conceded by all to have been based on a separate contractual relationship not connected with the receivership proceedings. It is also acknowledged that her security deed was a valid conveyance pre-existing the receivership proceedings. The interest of Hobbs in the property was nothing more than the equity which Kellam had owned in which was only that sum over and above the amount sufficient to pay Mrs. Woods in full. The provision for payment of attorney's fees was in the note when Kellam executed it. That obligation and the right to enforce it were secured by the security deed. When Hobbs acquired the property, he took it subject to all rights held by Mrs. Woods under her security deed--including the right held against Kellam to enforce payment of attorney's fees as the note provided.
The receiver succeeded only to the rights of Hobbs in the real estate. Neither he nor the creditors of Hobbs could take any steps or do anything adversely affecting the rights of Mrs. Woods which arose from her contractual transaction with Kellam.
The case of Strickland v. Williams, 215 Ga. 175 (109 SE2d 761), is not in point. In Strickland the obligation for the payment of attorney's fees was in a note from Parramore, against whom the receivership was brought, and the payee in the note, Strickland, attempted to enforce it by giving of notice to Parramore and after the appointment of the receiver to the receiver himself. The maker of the note there was the insolvent debtor. Here the maker is a third party.
The right of Mrs. Woods to receive 15 percent of the principal and interest due as attorney's fees having been perfected at the expiration of 10 days from the service of the notice under Code Ann. 20-506, she was entitled to have that amount paid in full, and the court erred in awarding the lesser sum of $300.
Judgment is reversed with direction to the trial court to enter judgment for Mrs. Evelina K. Woods for the full amount of the attorney's fees as provided in the note.
Judgment reversed with direction. Jordan and Eberhardt, JJ., concur.
Eugene Cook, Attorney General, William L. Harper, Olin O. Rambo, Assistant Attorneys General, G. Wesley Channell, Beverly B. Hayes, H. Dale Thompson, Nelson & Nelson, contra.
Nelson & Nelson, Carl K. Nelson, Jr., for plaintiffs in error.
Friday May 22 22:00 EDT

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