Radioshack Corp. v. Cascade Crossing II, LLC

653 S.E.2d 680, 282 Ga. 841, 2007 Fulton County D. Rep. 3253, 2007 Ga. LEXIS 788

• Court: Supreme Court of Georgia
• Decided: October 29, 2007
• Docket: S07Q0957
• Status: Published

Opinions

CARLEY, Justice.

Pursuant to a written commercial lease agreement executed in 1995, RadioShack Corporation leases space at a shopping mall owned by Cascade Crossing II, LLC. That agreement contains an exclusivity clause, which permits RadioShack either to reduce its rent payments or to terminate the agreement if Cascade leases space at the mall to another tenant for a business which is similar to RadioShack’s. The lease agreement also authorizes the prevailing party in any legal action to recover all reasonable expenses including attorney’s fees. In 2000, RadioShack informed Cascade that its 1996 lease with another tenant violated the exclusivity clause. RadioShack also purported to exercise its right to reduce its rent payments retroactively.

Cascade brought suit against RadioShack in the United States District Court for the Northern District of Georgia for declaratory judgment, back rent, and attorney’s fees and costs. On appeal from the grant of partial summary judgment, the United States Court of Appeals for the Eleventh Circuit determined that RadioShack had waived all of its rights under the exclusivity clause and that Cascade, as the only prevailing party, was entitled to attorney’s fees and costs. Cascade Crossings II v. RadioShack Corp., 131 FAppx. 191 (11th Cir. 2005). On remand, the parties agreed that the amount of back rent owed was $172,039, and the district court awarded Cascade the full amount of its attorney’s fees and costs, which was approximately $280,000. On a second appeal, the Eleventh Circuit required the district court to explain the basis for its conclusion that OCGA § 13-1-11 (a) (2) did not limit attorney’s fees to 15% of the first $500 collected and 10% of the remaining amount. Cascade Crossing II v. RadioShack Corp., 171 FAppx. 329 (11th Cir. 2006). On the second remand, the district court explained that OCGA § 13-1-11 did not apply because Cascade sought not only past due rent, but also a declaration of rights under the lease agreement, as in Insurance Indus. Consultants v. Essex Investments, 249 Ga. App. 837, 844 (4) (549 SE2d 788) (2001). On a third appeal, the Eleventh Circuit certified the following question to this Court:

Whether OCGA § 13-1-11 applies to and limits the award of attorneys’ fees and costs in this particular case •— where the landlord under a commercial lease agreement filed suit against a tenant seeking the collection of past due rent as well as a declaration of other contractual rights of the parties — and, therefore, precludes an award of full attorneys’ fees and costs as provided in the lease agreement.

Cascade Crossing II v. RadioShack Corp., 480 F.3d 1228, 1232 (11th Cir. 2007).

By its terms, OCGA§ 13-1-11 (a) applies to “[obligations to pay attorney’s fees upon any note or other evidence of indebtedness” which is collected through an attorney after maturity. We must first address whether a lease comes within this language, because the dissent has raised that issue and urged us to depart from settled Georgia law. Since the issue was first addressed in 1977, the Court of Appeals has repeatedly held that a lease constitutes an “evidence of indebtedness” under OCGA § 13-1-11. Ranwal Properties v. John H. Harland Co., 285 Ga. App. 532, 536 (3) (646 SE2d 730) (2007); Logistics Intl. v. RACO/Melaver, 257 Ga. App. 879, 881 (2) (572 SE2d 388) (2002); Insurance Indus. Consultants v. Essex Investments, 249 Ga. App. 837, 844 (4) (549 SE2d 788) (2001); Georgia Color Farms v. K.K.L., 234 Ga. App. 849, 852 (3) (507 SE2d 817) (1998); Holmes v. Bogino, 219 Ga. App. 858, 859 (2) (467 SE2d 197) (1996); Burgess v. Clermont Properties, 141 Ga. App. 112 (2) (232 SE2d 627) (1977). “In other cases, OCGA § 13-1-11 has been applied unquestioningly to provisions in leases authorizing the landlord to recover attorneyfs] fees against a tenant in default. [Cits.]” Holmes v. Bogino, supra. Furthermore, the Court of Appeals has always included “commercial” leases in its holdings, and clearly has recognized that, in applying OCGA § 13-1-11 to a lease, “[t]he rent and other charges which the lease required tenants to pay constituted the principal amount of their debt.” Holmes v. Bogino, supra at 860 (2).

This three-decade long line of consistent, uncontradicted precedent should not be swept aside based merely on a new analysis of the text and purpose of OCGA § 13-1-11 which differs from that enumerated in the many decisions cited above. We are not writing on a clean slate and, once the appellate courts interpret a statute,

“ ‘ “ ‘the interpretation... has become an integral part of the statute.’ (Cits.) This having been done, (over a long period of history) any subsequent ‘reinterpretation’ would be no different in effect from a judicial alteration of language that the General Assembly itself placed in the statute. ...” (Cit.)’ (Cit.)” [Cit.]

Harvey v. J. H. Harvey Co., 276 Ga. 762, 763 (582 SE2d 88) (2003). Application of this principle of statutory construction is not limited to those common instances where the same appellate court has already construed the statute, or “ ‘ “ ‘where an amendment is presented to the legislature and ... the statute is amended in other particulars.’ ” [Cit.]’ [Cit]" Abernathy v. City of Albany, 269 Ga. 88, 89 (495 SE2d 13) (1998) (recognizing that the statute is “particularly” applicable in the latter situation). It is a logical fallacy to make the most common circumstances in which the rule may be employed the exclusive determinant of its application. This Court does properly consider the legislature’s presumed knowledge of a Court of Appeals’ opinion interpreting a statute. Hart v. Owens-Illinois, 250 Ga. 397, 400 (297 SE2d 462) (1982). When the General Assembly acquiesces in the construction of a statute by the Court of Appeals, the effect is not to bind this Court with that court’s precedents in violation of the Constitution. To the contrary, the result is to establish the legislative intent of the General Assembly which binds this Court, as well as all others, in construing the statutory provision in issue. “ ‘The cardinal rule in construing a legislative act, is “ ‘to ascertain the legislative intent and purpose in enacting the law, and then to give it that construction which will effectuate the legislative intent and purpose.’ ” (Cit.)’ [Cit.]” Cox v. Fowler, 279 Ga. 501, 502 (614 SE2d 59) (2005). Thus, it is sufficient that, in the 30 years since the decision in Burgess, “[t]here has been no attempt on the part of the legislature to alter the construction of” OCGA § 13-1-11 therein. Georgia R. and Banking Co. v. Brown, 86 Ga. 320, 323 (12 SE 812) (1890).

Where a statute has, by a long series of decisions, received a judicial construction in which the General Assembly has acquiesced and thereby given its implicit legislative approval, the courts should not disturb that settled construction. [Cits.] “(E)ven those who regard ‘stare decisis’ with something less than enthusiasm recognize that the principle has even greater weight where the precedent relates to interpretation of a statute.” [Cit.] A reinterpretation of a statute after the General Assembly’s implicit acceptance of the original interpretation would constitute a judicial usurpation of the legislative function.

Abernathy v. City of Albany, supra at 90. Accordingly, a “reinterpretation” of OCGA § 13-1-11, accomplished through the failure to adhere to the long line of cases applying that provision to leases, would constitute an unauthorized change in an “integral” part of the statute. See Abernathy v. City of Albany, supra. If OCGA§ 13-1-11 is to be revised so as to exclude “commercial leases,” “the General Assembly, rather than the courts, must take that action.” Harvey v. J. H. Harvey Co., supra at 764.

Moreover, even if this Court could decide anew the proper construction of OCGA § 13-1-11, we would still arrive at the same conclusion as that which has long been expressed by the Court of Appeals. The phrase “evidence of indebtedness” cannot be considered a well defined term of art where, as here, there is an absence of express legislative guidance. Stillwell Enterprises v. Interstate Equipment Co., 266 SE2d 812, 816 (N.C. 1980) (construing the same phrase). The phrase clearly has a broader meaning than the term “note,” and contemplates application of the statute to a variety of documents other than notes. See Stillwell Enterprises v. Interstate Equipment Co., supra. Interpretation of the expression “evidence of indebtedness” so as to encompass both commercial paper and other documents is not foreclosed by unrelated instances in which that expression appears in connection with a statutory reference to commercial paper, and there are not any cases which draw a different conclusion. The only terminology in the statute which is ordinarily limited to commercial paper is “maker” and “endorser,” and those terms are only used with the alternative “or party sought to be held on said obligation.” OCGA § 13-1-11 (a) (3). Alessee obviously can be an obligor to whom the statute applies. Furthermore, the Court of Appeals has already demonstrated that the terms “principal,” “interest,” and “maturity,” which are also found in the statute, can be and are properly used with respect to monetary obligations in leases. Holmes v. Bogino, supra; Kasum Communications v. CPI North Druid Co., 135 Ga. App. 314 (217 SE2d 492) (1975).

A broad interpretation of the phrase “evidence of indebtedness” is also entirely consistent with subsection (b) of OCGA § 13-1-11, by which the statute is made applicable to “[obligations to pay attorney’s fees contained in security deeds and bills of sale to secure debt.” The express addition of the word “leases” was simply unnecessary. Leases are normally the only evidence of a tenant’s debt, whereas a bill of sale or “deed to secure a note is probably not an evidence of indebtedness ([cit.]) ” Demere v. Germania Bank, 116 Ga. 317, 318 (42 SE 488) (1902). Furthermore, the primary purpose for the enactment of subsection (b) was

to provide for the collection of attorney’s fees in cases where sales were made under powers of sale in instruments named____ [Subsection (b)], though not as specific as it might be, means that a liability for attorney’s fees may be established where property is sold under powers of sale, without the necessity of obtaining a judgment for the fees.

Cochran v. Bank of Hancock County, 118 Ga. App. 100, 104-105 (3) (162 SE2d 765) (1968). This concern obviously does not apply to leases. Thus, subsection (b) was added to address security deeds and bills of sale to secure debt in light of their unique characteristics, and not to exclude leases or other documents which some might argue fall outside their narrow construction of the expression “evidence of indebtedness.”

Accordingly, there is nothing in the language of OCGA § 13-1-11 to support a departure from the settled construction of the phrase “evidence of indebtedness” as used therein. Instead, the statutory language supports that long held construction. “ ‘[T]hese provisions indicate, either explicitly or implicitly, that an evidence of indebtedness ... is a writing which acknowledges a debt or obligation and which is executed by the party obligated thereby.’ ” Stillwell Enterprises v. Interstate Equipment Co., supra at 817 (construing a statute very similar to OCGA§ 13-1-11). See also Broun v. Bank of Early, 243 Ga. 319, 320, n. 2 (253 SE2d 755) (1979) (“A guaranty contract is an ‘evidence of indebtedness’ within the meaning of [OCGA § 13-1-11], [Cit.]”). Compare T.F. James Co. v. Vakoch, 628 NW2d 298, 301 (II) (A) (N.D. 2001) (construing a statute which declared attorney’s fees provisions in evidences of debt void, distinguishing jurisdictions such as Georgia and North Carolina, which “have concluded a lease is evidence of debt, but their conclusions allowed, rather than disallowed, attorney fees”).

An analysis of the intent of OCGA § 13-1-11 also indicates that the phrase “evidence of indebtedness” should be construed broadly so as to encompass leases.

[T]his statute is not one which must be strictly construed____ [A]n undertaking to pay attorney’s fees in addition to principal and interest is in the nature of an agreement for a penalty, and the statute under consideration is to take away the penalty in certain cases, and is remedial.

Demere v. Germania Bank, supra. Thus, the purpose of OCGA § 13-1-11 is to prevent a contractual provision for attorney’s fees from constituting a penalty for failure to pay an indebtedness. General Elec. Credit Corp. of Ga. v. Brooks, 242 Ga. 109, 113 (249 SE2d 596) (1978). In its current form, the statute accomplishes this purpose in subsections (a) (1) and (2) by limiting the amount of attorney’s fees, and in subsection (a) (3) by giving the debtor notice and “an opportunity to meet his obligation without incurring additional expenses in the nature of attorneyf’s] fees.” General Elec. Credit Corp. of Ga. v. Brooks, supra at 114. See also Talmadge v. Respess, 224 Ga. App. 768, 773 (4) (b) (482 SE2d 709) (1997). Obviously, a tenant who is sued for failure to pay rent may have as great a need for all of these protections, and as little bargaining power to avoid the insertion of an unreasonable provision for attorney’s fees, as an obligor on a note or other commercial paper.

Consistent with the statutory intent, our holding encompasses commercial leases as well as residential and other non-commercial leases. Nothing in the language of OCGA § 13-1-11 limits its benefits to non-commercial debtors. Likewise, the statute applies to all notes and other commercial paper without regard to the nature of the underlying transaction. Moreover, an ordinary business debtor may have unequal bargaining power and a need for the protections of OCGA § 13-1-11 which is comparable to that of a typical individual debtor. In any event, a distinction between commercial and other leases is without any basis in either logic or the statutory text.

Accordingly, we hold that the term “evidence of indebtedness,” as used in OCGA § 13-1-11,

has reference to any printed or written instrument, signed or otherwise executed by the obligor(s), which evidences on its face a legally enforceable obligation to pay money. Such a definition ... does no violence to any of the statute’s specific provisions and accords well with its general purpose ....

Stillwell Enterprises v. Interstate Equipment Co., supra. That definition includes all written leases which impose on the lessee an obligation to pay money. The lease in this case imposed such an obligation on RadioShack, which is being enforced by the federal district court pursuant to a consent order awarding past due rent and interest to Cascade. Thus, OCGA § 13-1-11 is applicable even though Cascade also sought a declaration of contractual rights, and Radio-Shack is continuing to possess and pay rent for the leased property. The statute applies at least where, as here, past due rent is recovered, and the only other relief is declaratory and governs the future enforceability or amount of the tenant’s rent obligation. Compare Insurance Indus. Consultants v. Essex Investments, supra at 844 (4). To hold otherwise would create distinctions that have no basis in the statutory language and purpose. Therefore, OCGA§ 13-1-11 applies to the lease between Cascade and RadioShack and requires that the certified question posed by the Eleventh Circuit be answered in the affirmative.

Certified question answered.

All the Justices concur, except Sears, C. J., Benham and Thompson, JJ., who dissent.