Construction Lien Errors–Including the Lien Costs in the Total Due

One of the most basic ways in which a creditor can destroy their chances of collecting on a construction lien is to include the costs of filing the lien itself in the total that is due on the project. Georgia law holds that the amount on the lien cannot exceed the contract price, and adding the lien costs into the total due will violate this provision. A lien is supposed to be for the labor services, or materials actually furnished on the particular job; legal and administrative expenses incurred in filing a lien do not count as services provided on a construction job. While you might be able to seek to recover such amounts directly from the contractor or owner in collections or in the event of litigation, you can’t collect the fees as part of any lien recovery. While there are some loopholes to this rule that may not doom your case in the event you included the lien fee in the total due, these loopholes are not cheap to use and not 100% perfect. At the end of the day, this is an avoidable error, and not including the lien fee in your total due could save you from a large headache. If you have any questions about construction liens, please contact our firm for advice specific to your particular case. All advice on this blog is general in nature and not intended as specific advice to your particular case or situation.

How to Torpedo Your Debt Collection Lawsuit in Georgia–Mistake 4

One common mistake we find is where the credit manager sends over a file for litigation without an updated spreadsheet or accounting showing each and every charge and payment made by the Defendant back to the point where the Defendant had a zero balance. We have seen cases where a client will allow a customer to buy $2o,000 or $50,000 worth of product every month, never paying off the previous balance in full before the next order is placed. Unraveling the payment stream can become a nightmare and is not the task best left to your attorney. If the case is an hourly case, the attorney will bill you significant time trying to decode your accounting system. If the case is a contingency case, the attorney will spend unnecessary hours on the case, and become discouraged from the paperwork. Worse, your opponent will turn the messy paperwork against you, accusing you of poor bookkeeping, claiming they have paid the bill. Even worse, the Judge is not going to spend the time it takes to decode a complex payment history, and may deny the creditor summary judgment, forcing a case to trial. In the long run, the creditor will either have to straighten out its own books or accept less money than it is owed to settle the account. Having a clean set of books increases a creditor’s chances of being paid in full, and a proper spreadsheet or summary bill increases the creditor’s chances of being paid.

How to Torpedo Your Debt Collection Lawsuit in Georgia–Mistake 3

The third mistake we see when it comes to filing and collecting a debt in Georgia with a lawsuit is the credit manager not updating and keeping current information on the customer. We see cases in which the creditor did business with “Joe’s Tires” for ten years, but in that ten years the original “Joe’s Tires, LLC” was dissolved and the customer reopened as “Joe’s Tires of Kennesaw, LLC”, often without skipping a beat and with no major difference seen by customers or suppliers to the tire shop. While we can still file suit on the debt as an open account, we may lose many of the preferential legal provisions in the credit agreement, thus potentially making a lawsuit take longer and cost more money. Additionally, often the original credit agreements contain serious penalties for late payment, interest on unpaid balances, and attorney’s fees in the event the creditor hires an attorney to collect the debt by filing a lawsuit. If I have to proceed simply as an open account, these add-on charges may be lost. It is important for a credit manager to update its customer’s credit applications on a regular basis.

How to Torpedo Your Debt Collection Suit in Georgia–Mistake 2

Another common mistake we find is that the credit manager did not record and bill the debt in the proper legal name of the customer. We recommend, along with taking a credit application, that the credit manager pull up the corporate name supplied by the customer and verify the name of the company with the Secretary of State’s office. Additionally, it’s generally a good idea to see if the owners of the company have opened any new companies or similarly named companies. It’s particularly troubling to get a judgment against Joe’s Tires, LLC to find out that the business lease and assets are held by Joe’s Tires of Marietta, LLC, and that the customer applied for credit in the name of an entity with little to no assets. A simple check with the Secretary of State may prevent such a catastrophic error. A credit manager that takes steps to properly “know the customer” at the beginning of the relationship makes my job in collecting a debt much easier.

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.

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

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.

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.

Enforcing Out of State Judgments in Georgia

What happens when your judgment debtor moves to Georgia without paying the judgment? Or when all the debtor’s assets are in Georgia? Is the out of state judgment enforceable in Georgia? NO, unless the judgment is properly domesticated in Georgia.

In this article, we will discuss entering a judgment in State Court or Superior Court in Georgia. For Federal Court there are different procedures. The judgments of foreign countries may, in certain instances, be entered, but we will also save discussion of that for another day.

The State of Georgia is, in theory, required to give full faith and credit to judgments of other states. In practice, you have two options 1) Filing a lawsuit to enter the foreign judgment in Georgia (domestication suit), or 2) filing to register the judgment under the Uniform Enforcement of Foreign Judgments Act. Under a new suit, the defendant would have to be personally served, and would have certain defenses to payment available, despite the sister state judgment. Under a registration, at least in theory the registration is a ministerial act, and the court must enter the judgment with the defendant receiving notice via regular and certified mail. The Defendant is not entitled to a hearing, but can challenge the registration in certain circumstances. In practice, most of the metro Atlanta counties have the court clerk enter the judgment without judicial involvement, unless the clerk sees something suspect in the registration. In about half of the counties, particularly rural counties where this type of filing is not done regularly, the Court will require a court order be signed by the Judge entering the foreign judgment before completing the registration process. Thus, it may take a few days or a few months to get a judgment registered, depending on the county. This is not how the process was intended, but certainly how it works.

Georgia’s version of the Uniform Enforcement of Foreign Judgments Act, located at O.C.G.A. 9-12-130 to 9-12-138, is rather standard. It requires the registration of a sister state judgment that has adopted the law in a manner substantially similar to Georgia. California and Vermont, with perhaps one other state, have not adopted the uniform act, and you have to use the “long” procedure for judgments from those states. A few states have adopted the act but do not recognize default judgments. I also ran across a strange quirk in Tennessee that has extra requirements before it will enter a foreign judgment for defamation. Nonetheless, 99% of the cases are simple contract cases in which the Uniform Act will apply.

The act requires the filing of an “authenticated” copy of the judgment. Many people call this copy a “triple seal” because in many states the clerk of court will adorn this authenticated copy with three signatures and/or multiple gold foil seals, though this is not the case in every state. If you need our services in entering a sister state judgment in Georgia, please go ahead and request the authenticated copy from your court system to avoid delays. This filing must be sent to the defendant at the time the request to register is made. Provided the defendant does not raise one of the few valid defenses, the court will sign the registration, and we can move on to the next steps of collecting the judgment and/or placing liens on the assets of the Defendant.

Our firm has filed foreign judgments coming from Pennsylvania, New Jersey, Florida, and Tennessee. We make these filings on a regular basis, and would be glad to assist you with such efforts. If you have any questions about the process, please contact our firm.

HOA security guards pulling people over as if they were cops!

Our firm works for homeowner associations (HOA), primarily doing collection work but sometimes advising associations as to other legal matters.  A few days ago I ran across this story on WSB where several local HOAs were having their security guards attempt to “pull over” those the guards felt violated their speed limits or ran stop signs.  Technically since they aren’t cops they do not have the legal right to stop someone, and I can see how this behavior could easily escalate into a major confrontation.  Nonetheless, if you do not comply or pay their “ticket” they may ban you from the association property, which includes the streets of the subdivision or country club.  I can’t recommend this to anyone due to the liability it causes.

See the WSB Story.


Help Me Help You Collect!

Once we are awarded a judgment, if the Defendant does not voluntarily agree to pay the debt (in full or in installments), then the real work begins. In order to collect, we must first determine if we can locate any of the Defendant’s assets or, in the case of an individual, locate the person’s place of employment. At this stage we often contact our clients and ask the client what information they have retained about the Defendant. Those companies and individuals that kept the best business records have the best chance of recovery. Taking the time to have the customer complete a credit application may make all the difference in the world in whether you ever recover any money. Keeping detailed records on any payments made to you by the Defendant will greatly assist our recovery efforts. Any information that any employees can remember about the Defendant, such as their address, place of employment, spouse’s name, clubs that the Defendant may belong to, the Defendant’s church, the Defendant’s vehicles, whether the Defendant spoke of any boats, jet ski’s, RV trips, and more may be the difference in collecting the money due and collecting nothing.

If you are a credit grantor and you have any questions about credit applications and business records, please contact the firm for further assistance. In the past we have revised credit applications for customers to improve the customer’s chances of getting paid.

Make a Book or Special Place For Your Important Documents and Passwords!

A great article in today’s AJC by financial planner Wes Moss about the importance of creating a place for all of your critical documents and passwords. A will or trust is of no value if no one ever finds it after your death. Your health care wishes may be ignored if the medical provider is not furnished a copy of your advance directive. In order to use it, someone has to be able to find it. Please do your loved ones a favor and spare them the stress of having to locate your essential information.

Business clients should also pay attention, if your critical passwords cannot be located, your business may suffer mightily in the event you are medically unable to attend to matters.