July 27

How to Torpedo Your Debt Collection Suit in Georgia–Mistake 1

Believe it or not, one of the biggest mistakes I see occurs when the employee in charge of hiring the attorney to file the commercial debt collection lawsuit in Georgia does not actually know the true legal name of the company where he/she works! You would think this is a rare issue, but it has come up more than I would like to remember. Often times companies merge or are sold, and the longtime employee continues to call the company by its “old” or “former” name. A lawsuit should be brought in the name of the proper company, and, ideally, not in a trade name for the company. A good credit manager will provide the attorney with a copy of the company’s current registration with the Secretary of State at the time the case is placed for collection.

July 17

When can you collect against the property of individual members of an unincorporated association in Georgia?

When you sue an unincorporated association in Georgia, “No such judgment shall be enforced against the individual property of any member of an unincorporated association unless the member has personally participated in the transaction for which the action was instituted and has been served with process as provided by law.” OCGA §9-2-25(d) [see Piney Grove Baptist Church v. Goss]. When the organization is formed for profit purposes, it is deemed a partnership in Georgia, and all members can be held liable for its debts. We will discuss non-profit organizations below.

As to non-profit associations, let’s break this code section (9-2-25) out further so it is easier to understand. In order to collect against an individual member, they should be served with process (and preferably named as a Defendant). Second, the individual must have personally participated in the transaction for which the action was instituted. What does it mean to personally participate in the transaction? There are not many cases to provide guidance in answering this question. Certainly, if an association member signed mortgage documents on behalf of the church, then they would have personally participated in the transaction. If the member assisted in the procurement or negotiation of the terms of the mortgage, then they likely have personally participated. What about if the member voted in favor of taking out the mortgage in question when the issue was put to a vote? I believe this would be considered participation, though I wouldn’t call it a slam dunk. Others have argued that even knowledge of the transaction without objecting to the transaction may be enough to hold a member liable. If you are a creditor of such an origination or church, naming as many members as feasible as defendants would increase your chances of collecting your judgment. Good record keeping may assist in your recovery. We would recommend listing the reasons why a particular member materially participated in the transactions directly in your Complaint.

This article also shows the dangers of becoming a member of an unincorporated association. The costs of forming a corporation or LLC are relatively low in relation to the risks involved in many of these transactions.

If you have any questions about this article, please contact David Stuart by email at jdavidstuart@stuartattorneys.com.

July 16

Can you sue an Unincorporated Association in Georgia?

Surprisingly to me, the answer to this question is YES! I had always thought that, as far as any unincorporated group goes, you could sue the principals of the group doing business as the group name. Turns out, you can sue the group directly . OCGA 9-2-25 states that “Actions may be maintained against and in the name of any unincorporated organization or association for any cause of action for or upon which the plaintiff therein may maintain such an action against the members of the organization or association.” The most common application of suing an unincorporated association are actions against religious groups and churches (there is apparently, I have learned, a significant group of people than think incorporating your church is ungodly), but there are other organizations out there that are not incorporated. We have found instances where title to real estate is held in the name of the unincorporated association, so naming this association as a defendant would allow us greater access to assets that may be used to pay a judgment. Of course, some courts charge an additional filing fee for an additional defendant, and every defendant still must be served with process, so you should make sure it is cost efficient to name an additional entity before moving forward. If you have any questions about this article, please contact David Stuart by email.

May 27

What is a Contract Under Seal?

Have you ever signed a contract that says SEAL after your name on the signature line and not known what that meant? Under Georgia law, a contract under seal has a 20 year statute of limitations (the time that the other side has to file a lawsuit against you under the law). [See O.C.G.A. §9-3-23]. In other states, the time periods may be longer or shorter, but in general you have a longer statute of limitations for a contract signed under seal than a contract that is not under seal. This means if you default on a loan under seal, the creditor would have 20 years to sue you on the debt! Consider a “regular” contract is limited by a six year statute of limitations. It’s really a wonder why every contract doesn’t attempt to include the appropriate language to be a contract “under seal”!

Let’s examine what makes a contract a contract under seal. Generally, the word “seal” has to be in the body of the document, or the end of the signature line must include “(SEAL)” or “(L.S.)”. In most contracts where the writing is included in the body of the document, we usually see language such as “singed under hand and seal” in one of the last few lines of the contract, usually just above the signature line, though it may be possible to include the language elsewhere in the contract. As stated, when on the signature line it must say SEAL or LS at the end of the signature line. Only recently did I learn of the “L.S.” designation myself, which may make it a more powerful way to place a document under seal, as it does not use the word “seal” and thus someone with a basic knowledge of contracts may not realize they have signed the contract under seal.

Some good general advice that ties in well with this subject is if you are presented a contract and do not understand the meaning of some word, letters, or phrase, either get proper legal advice, or cross out the confusing language and see if the other side will still accept the contract without the language in the contract.

What is the bottom line? While a creditor only has six years to sue on a contract in Georgia, if the contract is under seal, this time limit is extended to twenty years.