The defendant appeals from the grant of plaintiff's motion for summary judgment. On September 7, 1978 the defendant executed and delivered to plaintiff a promissory note secured by a deed to secure debt, which note provided for payment in the principal amount of $63,132.00, together with interest at the rate of 9% per annum from date until paid in full, together with all costs of collection including 15% as attorney's fees if collected by law or through an attorney at law. The defendant failed to make any payments on the note and on January 7, 1980 the plaintiff notified the defendant by letter that defendant was in default and the plaintiff intended to enforce the provisions of the note with respect to attorney's fees as provided in Code Ann. 20-506 (OCGA 13-1-11
) and further to foreclose the deed to secure debt and obtain a confirmation of the foreclosure in order to pursue the deficiency judgment if necessary. The foreclosure sale was had but confirmation of the sale was denied and the property ordered to be resold. Thereafter, on June 3, 1980 the plaintiff again notified the defendant that because of defendant's default the plaintiff demanded the principal plus the interest on the note and the defendant was further notified that unless the principal sum due as well as the interest was paid not later than ten days from receipt of this letter that the plaintiff intended to foreclose on the property and if necessary seek confirmation of the sale and to recover attorney's fees and court costs in addition to the principal and interest. The defendant failed to make payment on the note within the time prescribed and on July 1," 1980 foreclosure sale was had on the property. This sale was subsequently confirmed by the trial court. The property brought $58,200.00 on the sale and the total indebtedness including principal, interest, attorney's fees and costs of foreclosure as $84,565.28. Thus, the present suit was brought by the plaintiff to recover the deficiency.
The plaintiff moved for summary judgment and after a hearing at which pleadings and affidavits were considered by the trial judge the following judgment in favor of the plaintiff was entered. The sums involved were as follows: The principal due on the note was $63,132.00, the interest which had accrued up to that time was in the amount of $8,433.52, giving a balance owed on the note of $71,565.52. Fifteen percent of the amount owed as attorney's fees equaled $10,734.82. This gave a total of $82,300.34. The trial judge in his order deducted the amount of the sale, to wit, $58,200.00 from that sum to reach a principal amount of $24,100.34. He then computed interest on the principal amount at the rate of 9% per annum from July 1, 1980 (the date of the sale) through June 21, 1982 (the date the judgment in favor of the plaintiff was entered). This resulted in a sum of $4,282.74 which when added to the principal equaled $28,383.08. From this sum the trial judge deducted a setoff, which the plaintiff conceded, in the sum of $1,750.00 and added to this sum interest at the rate of 7% per annum from March 3, 1980 (the date of the first foreclosure sale which was not confirmed) through June 21, 1982 and arrived at a total of $2,035.94 which was subtracted from the $28,383.08 to reach a total amount owed by the defendant to the plaintiff in the sum of $26,347.14.
The defendant appeals from that judgment and enumerates as error the trial judge's imposition of interest on the 15% attorney's fees which were included in the principal balance owed by the defendant to the plaintiff. The defendant contends that interest could not be charged on attorney's fees and that such sum should be deducted from the judgment and the recomputed amount would be the proper amount owed by the defendant to the plaintiff. Held:
Code Ann. 57-110 (OCGA 7-4-15
) provides: "All liquidated demands, whereby agreement or otherwise the sum to be paid is fixed or certain, bear interest from the time the party shall become liable and bound to pay them. . . ." Certainly, at the time of the sale of the property the obligation to pay attorney's fees to the plaintiff had become fixed and certain. Therefore, from that time forward interest on such sum began to run. However, there was no provision in the contract nor in our law that the interest rate would be 9% per year. Instead, since there was no provision as to the percentum per annum, the interest on the liquidated sum would be the legal rate as provided in Code Ann. 57-101 (now OCGA 7-4-2
), which as of 1980 would have been 7% per annum.
Hence, it was the error of the trial court to impose the interest rate of 9% per annum on the unpaid attorney's fees. Instead the trial court should have separated the unpaid attorney's fees from the other amount and computed interest on the unpaid attorney's fees at the rate of 7% per annum from July 1, 1980 to June 21, 1982.
The case must therefore be reversed with the direction that the trial court vacate the judgment and recompute the interest on attorney's fees in conformity with the dictates of this opinion.
ON MOTION FOR REHEARING.
Movant/appellee urges that under the terms of the consumer collateral note it was entitled to apply the proceeds of the sale first to interest and attorney fees and lastly to principal so that the entire remaining sum of $24,100.34 (after deduction of $58,200.00 proceeds of sale) was principal against which interest at 9% could be charged.
(former Code 57-109) provides: "When a payment is made upon any debt, it shall be applied first to the discharge of any interest due at the time, and the balance, if any, shall be applied to the reduction of the principal." Pindar points out that a party exercising a power of sale in a security deed "may apply the fund first to the costs of the sale, attorney's fees, and the interest and principal of the secured indebtedness." Pindar, Ga. Real Estate Law, p. 833, 21-88. There 18, however, no statutory requirement that credit for proceeds must be applied to attorney fees first. Presumably this matter is one which may be contractually agreed to by the parties. See Rice-Stix Dry Goods Co. v. Friedlander, 30 Ga. App. 312 (117 SE 762)
[affirmed in Friedlander v. Rice-Stix Dry Goods Co., 158 Ga. 303 (122 SE 890)
] which held that even OCGA 7-4-17
(Code Ann. 57-109) does not prohibit a Creditor from applying payment on the principal first. Accord, First Nat. Bank v. Appalachian Indus., 146 Ga. App. 630
, 632 (247 SE2d 422
) ["in the absence of an agreement to the contrary, prepayment on a loan must first be applied to interest . . ."]. See in this connection OCGA 13-4-42
(former Code 20-1006) as to appropriation of payments
The note in question with regards to the application of the proceeds from a sale provides: "Any proceeds of any disposition of Collateral may be applied by the Holder to the payment of expenses in connection with the Collateral, including reasonable attorney fees and legal expenses, and any balance of such proceeds may be applied by the Holder toward the payment of such of the Liabilities, and in such order of application, as the Holder may from time to time elect." The deed to secure debt on which the note is based contains the following language: "The proceeds of the sale are to be applied first to said indebtedness and expenses of sale, and the remainder, if any, to the said first party."
We therefore find movant's argument to be subject to two salient objections One, the security deed would apply proceeds first to the indebtedness which creates an apparent conflict with the terms of the note. Secondly, assuming that-the proceeds could be applied first to attorney fees before the principal indebtedness, still the contract does not automatically so provide but requires affirmative action on the part of the holder of the note to elect to so apply such proceeds.