author: Branch, Judge.

text:
    A15A0356.
    FULTON COUNTY BOARD OF TAX ASSESSORS v. PIEDMONT PARK CONSERVANCY.
    (775 S.E.2d 742)
   Branch, Judge.

Appellant Fulton County Board of Tax Assessors (“the Board”) denied appellee Piedmont Park Conservancy (“the Conservancy”) a charitable tax exemption as to a building in the Atlanta park owned by the Conservancy but occupied in part by lessees operating two restaurants. The Conservancy appealed to the Fulton County Board of Equalization, which also denied the exemption, and then to the superior court, which granted the Conservancy a tax exemption as to those portions of the building not occupied by the restaurants. On this appeal, the Board asserts that the superior court erred when it granted the Conservancy the proportional tax exemption because such exemptions are not authorized by law and because the Conservancy has failed to prove that it is entitled to such an exemption. We find no error and affirm.

The relevant facts are not in dispute. The Conservancy, which is recognized by the Internal Revenue Service and the Georgia Secretary of State as a Section 501 (c) (3) charitable corporation, purchased the property at issue, which includes one building, from the American Legion in 1999. In March of that year, the Conservancy applied for a tax exemption for the property on the basis of the Conservancy’s status as a “purely public charity” and represented to the Board that a portion of the building would be provided to the City of Atlanta police as a precinct “without charge.” The Conservancy also stated that fees arising from activities held at the property, such as evening courses, “would only cover expenses associated with programs” and “[would] not constitute a ‘lease’ or ‘rent.’ ” On the basis of these representations, the Board granted the Conservancy a full tax exemption as to the building in 1999. The police did not use any portion of the building as a precinct, however, and soon vacated the space given to them.

In 2001, after learning that visitors to the Park sought food services there, the Conservancy leased 18.57% of the building to Willy’s Mexicana Grill for ten years in exchange for more than $50,000 annual rent and a profit-sharing arrangement under which the Conservancy would receive 6% of gross sales in excess of $1,000,000. In 2002, the Conservancy leased an additional 9.73% of the building to a second restaurant for ten years in exchange for more than $28,000 annual rent and 6% of gross sales in excess of $850,000. All of the income received by the Conservancy from the restaurants during the years at issue has been devoted to the Conservancy’s charitable purposes, which include the preservation and enhancement of the park and the provision of recreational and educational services to the public; no part of the Conservancy’s earnings is distributed to private persons or shareholders. The portion of the building not leased to the restaurants, amounting to 71.7% of its square footage and known as the Piedmont Park Community Center, consists of office space for the Conservancy, an environmental education center, and a room used for Conservancy events and community meetings. The Conservancy also uses the Center for events including summer camp programs and an open-air community market.

In 2005, and in response to an inquiry from the Board, the Conservancy represented that it continued to use the property for charitable purposes. In January 2013, after an appraiser observed the restaurants in operation at the property, the Board notified the Conservancy that its entire tax exemption as to the property was denied for the tax years 2010, 2011, and 2012, and requested that the Conservancy complete an exemption application concerning its use of the property for the tax years 2010 and 2011. The Conservancy did not complete the application; instead, it appealed to the Board of Equalization, which also denied the exemption. The Conservancy then appealed to the superior court, which granted an exemption as to the 71.7% of the building not leased to the restaurants.

On appeal from this ruling, the Board argues that Georgia law does not authorize a tax exemption for any portion of a property owned by a charitable organization engaged in commercial activities on that same property. The Board also argues that the Conservancy did not present evidence as to the charitable use of the remainder of the property. We disagree with these contentions.

OCGA § 48-5-41 (a) (4) provides an exemption for “all ad valorem property taxes” to “[a]ll institutions of purely public charity [.]” Under the Georgia Constitution of 1945 and a 1946 amendment to it, charitable institutions were authorized to use a portion of their property to generate income as long as the property’s “primary purpose” remained charitable. See Ga. Const, of 1945, Art. VII, Sec. I, Par. IV; Ga. L. 1946, p. 13, § 1 (a), now codified as OCGA § 48-5-41 (d) (1); Nuci Phillips Mem. Foundation v. Athens-Clarke County Bd. of Tax Assessors, 288 Ga. 380, 389-390 (2) (703 SE2d 648) (2010) (Nahmias, J., concurring specially). As subsections (c) and (d) (1) of the same statute explain:

(c) The property exempted by this Code section... shall not be used for the purpose of producing private or corporate profit and income distributable to shareholders in corporations owning such property or to other owners of such property, and any income from such property shall be used exclusively for religious, educational, and charitable purposes or for either one or more of such purposes and for the purpose of maintaining and operating such religious, educational, and charitable institutions.
(d) (1) Except as otherwise provided in paragraph (2) of this subsection [quotedbelow], this Code section... shall not apply to real estate or buildings which are rented, leased, or otherwise used for the primary purpose of securing an income thereon and shall not apply to real estate or buildings which are not used for the operation of religious, educational, and charitable institutions. Donations of property to be exempted shall not be predicated upon an agreement, contract, or other instrument that the donor or donors shall receive or retain any part of the net or gross income of the property.

(Emphasis supplied.) OCGA § 48-5-41 (c), (d). And the Supreme Court of Georgia has long granted tax exemptions to charities even when the commercial activity at those charities’ properties have generated income, as long as that income is used exclusively for religious, educational, or charitable purposes. In Elder v. Henrietta Egleston Hosp. for Children, 205 Ga. 489 (53 SE2d 751) (1949), for example, our Supreme Court upheld an ad valorem exemption for a hospital that charged patients for varying proportions of their medical care, but used all of the income generated for charitable purposes, on the ground that such charges did not destroy the hospital’s status as a “purely public charity,” with “the fact that patients who are able to pay are charged for services rendered” not altering “its character as such.” Id. at 490-491 (citing the 1947 predecessor of OCGA § 48-5-41). Likewise, in Church of God of the Union Assembly v. City of Dalton, 216 Ga. 659 (119 SE2d 11) (1961), the Court upheld an ad valorem exemption for a church building containing a restaurant used primarily to feed members of the church, visiting church personnel, and persons in need, but which was also open to paying customers. Because the evidence “demanded a verdict so exempting” the building, including the restaurant, the Court ordered that a verdict be modified so as to grant the building an exemption. Id. at 660, 662 (citing the 1947 and 1953 predecessors to OCGA § 48-5-41).

In Peachtree on Peachtree Inn v. Camp, 120 Ga. App. 403 (170 SE2d 709) (1969), this Court held that although a small portion of a building owned by the Georgia Baptist Convention and used by two retail stores “would not be tax exempt” because “[t]he area where the stores are located is being used to gain rental [income] and not for the primary purpose of operating the [home],” that portion of the same building actually used as a home for the aged was tax-exempt, even though its residents paid rent. Id. at 411. Thus, and although prior precedent had recognized that income-producing operations could occur on a property without destroying the charitable status of any part of that property, see Elder, 205 Ga. at 490-491; Church of God of the Union Assembly, 216 Ga. at 660-662, Peachtree on Peachtree ratified a charitable tax exemption as to those portions of a property not used to produce income. 120 Ga. App. at 411 (citing predecessor statute to OCGA § 48-5-41 as well as Church of God, supra).

In 1991, the Supreme Court of Georgia reaffirmed that OCGA § 48-5-41 authorized ad valorem tax exemptions for property owned by a “purely public charity” under a three-part test: “First, the owner must be an institution devoted entirely to charitable pursuits; second, the charitable pursuits of the owner must be for the benefit of the public; and third, the use of the property must be exclusively devoted to those charitable pursuits.” York Rite Bodies of Freemasonry of Savannah v. Bd. of Equalization of Chatham County, 261 Ga. 558 (2) (408 SE2d 699) (1991). In the wake of York Rite, this Court continued to hold that proportional exemptions as to those portions of a property not engaged in income-producing activities were consistent with OCGA § 48-5-41’s provision of exemptions to “purely public charities.” See, e.g., Lamad Ministries v. Dougherty County Bd. of Tax Assessors, 268 Ga. App. 798, 804-806 (3) (602 SE2d 845) (2004) (reversing trial court’s denial of exemption as to home for the aged when the court’s aggregation of property “deprived that portion of the property used primarily as a place of worship from tax exemption”; tax assessors were “fully capable of separating the tax exempt property from nonexempt property” and assessing each accordingly) (footnote omitted).

In Nuci Phillips, decided in 2010, a plurality of the Supreme Court of Georgia summarized the history of OCGA § 48-5-41 through 2006 as follows:

Under the exemption statutes from 1946 to 2006, those institutions that qualified as purely public charities were allowed to use their property to produce income as long as the primary purpose of the property was not to secure income, the income-producing activity was consistent with its charitable activities, and the income was used exclusively for the institution’s charitable purposes. As long as these three income rules were satisfied, then a charitable organization that raised income would be considered as using its property “exclusively’ for its charitable purposes and thus remain a purely public charity.

(Citation omitted; emphasis supplied.) 288 Ga. at 381-382 (1). As the Nuci Phillips plurality also noted, subsection (d) (2) was added to OCGA § 48-5-41 in 2006, providing that

real estate or buildings which are owned by a charitable institution that is exempt from taxation under Section 501 (c) (3) of the federal Internal Revenue Code and used by such charitable institution for the charitable purposes of such charitable institution may be used for the purpose of securing income so long as such income is used exclusively for the operation of that charitable institution.

Ga. L. 2006, pp. 376, 377, § 1. Only one year later, however, the legislature replaced this version of subsection (d) (2) with one providing that

a building which is owned by a charitable institution that is otherwise qualified as a purely public charity and that is exempt from taxation under Section 501 (c) (3) of the federal Internal Revenue Code and which building is used by such charitable institution exclusively for the charitable purposes of such charitable institution, and not more than 15 acres of land on which such building is located, may be used for the purpose of securing income so long as such income is used exclusively for the operation of that charitable institution.

Ga. L. 2007, p. 341, § 1 (emphasis supplied); Nuci Phillips, 288 Ga. at 382 (1).

The Nuci Phillips special concurrence noted that “[t]he only substantial change made by the 2007 amendment was to limit — to the building owned by the charity and not more than 15 acres on which the building sits — the extent of property that may be used primarily to generate income.” 288 Ga. at 394 (4) (Nahmias, J., concurring) (emphasis supplied). “The reason for this limitation is not apparent from the statute, but its effect is to prevent a charity from receiving the tax exemption if it owns a large amount of income-producing land.” Id. Notwithstanding these observations, an outright majority of the Nuci Phillips Court agreed that with the 2006 and 2007 amendments to the statute, “the General Assembly intended to broaden the ability of charitable institutions to use their property to raise income.” 288 Ga. at 383 (1) (emphasis supplied) (plurality); see also id. at 392 (3) (Nahmias, J., concurring) (the 2006 amendment to OCGA § 48-5-41 (d) “expanded the existing tax exemption” by deleting the “ ‘primary’ purpose qualifier present in the old subsection (d)”) (emphasis' supplied).

In the face of this legislative and interpretative history, the Board argues that the plain language of subsections (c) and (d) (2) of the statute forbids the Conservancy from using any portion of the property at issue for income-producing activity while maintaining tax-exempt status. This argument runs contrary to at least forty years of Georgia law.

We remain bound by our Supreme Court’s decision in York Rite as applied by the plurality in Nuci Phillips, to the effect that “three factors must be considered and must coexist” in order for a court to conclude that “property qualifies as an institution of ‘purely public charity’ ” under OCGA § 48-5-41 (a) (4): “First, the owner must be an institution devoted entirely to charitable pursuits; second, the charitable pursuits of the owner must be for the benefit of the public; and third, the use of the property must be exclusively devoted to those charitable pursuits.” York Rite, 261 Ga. at 558 (2). As the York Rite Court also noted, “the requirements of OCGA § 48-5-41 (c) and (d) must also be complied with by any institution that qualifies under subsection (a) (4) as an institution of purely public charity in order to entitle that institution to exemption from ad valorem taxation.” Id. at 559 (3) (a), n. 3. Specifically, an institution seeking an ad valorem tax exemption as to a property must show that “any income from such property shall be used exclusively for religious, educational, and charitable purposes,” OCGA § 48-5-41 (c); that the property is not “rented, leased, or otherwise used for the primary purpose of securing an income thereon,” id. at (d) (1); and that any income earned by that property “is used exclusively for the operation of that charitable institution.” Id. at (d) (2).

Here, the Conservancy remains “devoted entirely” to its mission of furthering recreational and educational activities in the Park, and these activities continue to be undertaken “for the benefit of the public,” such that the first two requirements of York Rite are satisfied. See York Rite, 261 Ga. at 558 (2), citing OCGA § 48-5-41 (a) (4). Further, the Conservancy’s use of income generated at the property is “used exclusively for the operation” of the Conservancy such that York Rite’s third requirement is satisfied. YorkRite, 261 Ga. at 558 (2). Specifically, any income earned by the Conservancy is used in furtherance of its “religious, educational, and charitable purposes,” OCGA § 48-5-41 (c); 71.7% of the building at issue remains “exclusively devoted to” the Conservancy’s charitable purposes, such that the property’s “primary purpose” remains charitable, id. at (d) (1); and such income earned by the Conservancy is used “exclusively for the operation of” the Conservancy. Id. at (d) (2); see also York Rite, 261 Ga. at 558 (2). In the language of the Nuci Phillips plurality, the tax-exempt status of the Conservancy building at issue is not abrogated simply because a part of that property is used to produce income because the property has never been used “ ‘for the primary purpose of securing an income thereon.’ ” Id. at 385 (emphasis supplied), quoting OCGA § 48-5-41 (d) (1). Rather, and because the statute “permits the securing of income by non-charitable activities if used exclusively for the operation of the charitable institution^]” Nuci Phillips, 288 Ga. at 387 (2), the Conservancy is entitled to a proportional tax exemption concerning the building at issue. Id.; see also id. at 398 (7) (Nahmias, J., concurring) (foundation’s property was “exclusively devoted to those charitable pursuits” when income from the property was “used exclusively for the operation of the charitable institution”) (citations and punctuation omitted). Compare First Congregational Church v. Fulton County Bd. of Tax Assessors, 320 Ga. App. 868, 878 (2) (c) (740 SE2d 798) (2013) (physical precedent only) (church was not entitled to exemption as to its parking lot used to produce income approximately 85% of the time); H.O.P.E. Through Divine Interventions v. Fulton County Bd. of Tax Assessors, 318 Ga. App. 592, 598-599 (734 SE2d 288) (2012) (charity that did not use any of the subject property for its stated charitable purposes during the two-year period at issue was not entitled to an exemption for that period).

The Board also argues that the Conservancy is not entitled to a proportional exemption under the circumstances of this case because it failed to provide evidence of the charitable use of that portion of the building not occupied by the restaurants and because the restaurants are turning a profit, generating “more income than what is paid for rent.” The first of these contentions is belied by the record, which includes an unrefuted affidavit stating that the Community Center occupies 71.7% of the building at issue and that the Center is used for purposes consistent with the Conservancy’s charitable mission. And the profitability of the tenant restaurants has no bearing on the question whether the Conservancy is entitled to a proportional exemption as to the space not occupied by these tenants.

Citing the Nuci Phillips special concurrence, the Conservancy argues that it is entitled to a charitable exemption as to 100% of the building at issue. We have no jurisdiction over this question, however, because the Conservancy did not cross-appeal the trial court’s imposition of ad valorem tax on the 28.3% of the building dedicated to income-producing activities. See OCGA § 5-6-38 (a) (a civil appellee may institute a cross-appeal “by filing notice thereof within 15 days from service of the notice of appeal by the appellant,” thus presenting “for adjudication on the cross appeal all errors or rulings adversely affecting him”); Reliance Ins. Co. v. Cobb County, 235 Ga. App. 685, 686 (510 SE2d 129) (1998) (dismissing appellee’s direct appeal in light of availability of both interlocutory and cross-appeal procedures).

Decided July 16, 2015.

Cheryl M. Ringer, Frank M. Gaither, Jr., for appellant.

Alston & Bird, Clark R. Calhoun, Andrew W. Yates, for appellee.

For all these reasons, the trial court did not err when it construed OCGA § 48-5-41 as authorizing a proportional tax exemption for that portion of the building at issue not devoted to producing income for the Conservancy.

Judgment affirmed.

Andrews, R J., and Miller, J., concur.

       See OCGA § 48-5-41 (a) (4).

       The Nuci Phillips special concurrence suggested that income-generating activities having the “sole purpose of raising funds to be used for [an] organization’s charitable services” should not bar that organization from an exemption “even if the property were used for the primary purpose of securing such income.” 288 Ga. at 398 (Nahmias, J., concurring specially). By contrast, the plurality continued to consider whether the “primary purpose” of the property was “not to raise income but to provide services for those seeking mental health assistance.” 288 Ga. at 386 (2). We also note that the General Assembly has not accepted our Supreme Court’s invitation in Nuci Phillips to amend OCGA § 48-5-41 (d) (2). See 288 Ga. at 398-399 (8) (plurality’s imposition of “primary” purpose restriction on “non-charitable” and “charitable” income-producing activities “will he our effective precedent, governing the outcome of future cases raising this issue”); Ga. L. 2014, p. 679, § 1, eff. Jan. 1, 2015 (amending only subsection (a) (1) (F) as to private property “primarily used for student housing or parking” by the Board of Regents of the University System of Georgia).


source: Caselaw Access Project

author: PHIPPS, Presiding Judge.

license: Public Domain

text:
    A15A0405.
    BARNES v. ROSEBURG FOREST PRODUCTS COMPANY et al.
    (775 S.E.2d 748)
   PHIPPS, Presiding Judge.

We granted Willie Barnes’s application for discretionary appeal in this workers’ compensation case involving a catastrophic injury. Barnes appeals the superior court’s order affirming the decision of the appellate division of the State Board of Workers’ Compensation (the “Board”), which had adopted the decision of the administrative law judge (“ALJ”) denying Barnes’s claim for recommencement of temporary total disability income benefits. Barnes contends that, contrary to the decision of the Board (as affirmed by the superior court), neither the two-year statute of limitation for change in condition claims nor the one-year statute of limitation for fictional new accident claims barred his claim. He also cites as error the Board’s failure to address his motion for attorney fees. For the reasons that follow, we reverse and remand with direction.

In resolving this appeal, we must keep in mind the various standards of review applicable in this case____When reviewing awards in workers’ compensation cases, both the appellate court and the superior court must construe the evidence in the light most favorable to the party prevailing before the Board. . . . The Board’s decisions based on erroneous legal theories are subject to the de novo standard of review. The question of whether the superior court applied the correct legal standard in evaluating the evidence is one of law, which this court reviews de novo.

Construing the evidence in the light most favorable to the party prevailing before the Board, the facts relevant to this appeal are as follows. In August 1993, Barnes was working at Georgia-Pacific Corporation’s wood processing plant when his leg went through rotten flooring and he landed in an auger, causing an immediate amputation of his left leg below the knee. Georgia-Pacific and its workers’ compensation insurance servicing agent, CCMSI, accepted Barnes’s claim as catastrophic and began paying him temporary total disability (“TTD”) income benefits. Barnes was fitted with a prosthetic leg, and he returned to work at Georgia-Pacific in January 1994. At that time, his TTD benefits were replaced with permanent partial disability (“PPD”) benefits.

When Barnes was unable to perform the duties his former position required, he was transferred to a position with duties he was able to perform. Although the new duties were also difficult and caused pain, he continued working in a light-duty position until 2008. Barnes’s last PPD payment was issued in May 1998, as “[t]he entire [PPD] benefit ha[d] been paid.” He did not receive any workers’ compensation income benefits thereafter.

In 2006, while Barnes was still working in a light-duty/supervisory position, Georgia-Pacific sold the plant to Roseburg Forest Products Company, which assumed Georgia-Pacific’s assets and liabilities. In 2008, Roseburg Forest eliminated positions at the plant, including Barnes’s supervisory position. Barnes continued working at the plant, but in a position that was more physically demanding and caused pain in and swelling of his injured leg. Over time, the new duties exacerbated his injury. On September 10, 2009, Roseburg Forest instituted a second round of lay-offs, this time terminating Barnes. Shortly after he was terminated, Barnes consulted CCMSI to find out whether he was eligible for a recommencement of workers’ compensation benefits; he was told he was not eligible.

In August 2012, after consulting an attorney who reportedly told him he was eligible for benefits, Barnes filed with Georgia-Pacific a notice of claim to resume TTD income benefits. Asserting a 1993 date of injury, Barnes claimed that he had remained catastrophically injured since 1993 (though he had continued to work, with limitations) and that, as a catastrophically injured worker, he was entitled to receive benefits beginning on the date he no longer had a job. He also requested attorney fees and a hearing. Georgia-Pacific (as “Emp/ insurer”) controverted the claim, asserting that, inter alia, Barnes was no longer an employee. Later, Roseburg Forest also controverted the claim, asserting that, inter alia, the statute of limitation set out in OCGA § 34-9-104 (b) had expired.

In November 2012, Barnes filed a separate notice of claim with Roseburg Forest and CCMSI, asserting a second theory of recovery. Barnes alleged an injury date of September 11, 2009 and, citing OCGA § 34-9-82, contended that the job termination constituted a fictional new accident.

After a hearing, the ALJ denied Barnes’s claim as barred by the statute of limitation periods set out in OCGA §§ 34-9-104 (b) and 34-9-82. The Board adopted the ALJ’s ruling, and the superior court affirmed the Board’s decision.

1. Barnes contends that the Board erred by finding that the two-year statute of limitation set out in OCGA § 34-9-104 (b) barred his claim. Asserting a 1993 injury date, he contends that he had experienced a change in condition when he returned to work in January 1994, and had experienced another change in condition when he was terminated in September 2009. He argues that OCGA § 34-9-261 must be interpreted as authorizing an employee whose injury has been accepted as catastrophic to assert a claim for reinstatement of benefits when he experiences a change in condition pursuant to OCGA § 34-9-104 (a) (1), even if that change occurs more than two years after the last benefit payment was made. Barnes contends that he is being penalized for having worked, with limitations, despite his catastrophic injury. We agree that the Board erred by adopting the ALJ’s ruling that the two-year statute of limitation in OCGA § 34-9-104 (b) barred Barnes’s catastrophic injury claim.

OCGA § 34-9-104 (b), which addresses modification of a prior final workers’ compensation decision, pertinently permits a party to apply for another decision because of a change in condition, provided that “at the time of application not more than two years have elapsed since the date the last payment of income benefits pursuant to Code Section 34-9-261... was actually made.” As used in OCGA § 34-9-104,

the term “change in condition” means a change in the wage-earning capacity, physical condition, or status of an employee or other beneficiary covered by this chapter, which change must have occurred after the date on which the wage-earning capacity, physical condition, or status of the employee or other beneficiary was last established by award or otherwise.

OCGA § 34-9-261 provides:

. . . The weekly benefit under this Code section shall be payable for a maximum period of 400 weeks from the date of injury; provided, however, that in the event of a catastrophic injury . . . the weekly benefit under this Code section shall be paid until such time as the employee undergoes a change in condition for the better as provided in [OCGA § 34-9-104 (a) (l)].

Barnes’s situation is one that the Workers’ Compensation Act apparently did not contemplate — where an employee has returned to work with significant limitations, despite a catastrophic injury designation, and then, more than two years after the last benefit payment was issued, has tried to resume the payment of benefits after his job was eliminated.

It is undisputed that Barnes’s injury was catastrophic, and that the injury continued to be catastrophic at the time of the ALJ’s decision; notably, Barnes’s “catastrophic” injury designation had not been removed. And, in its appellate brief, Roseburg Forest/CCMSI concedes that Barnes “underwent a change in condition for the worse when [he was] laid off by [his] employer[ ].”

As set out in OCGA § 34-9-261, the cap on weekly TTD benefits does not apply to an employee who has suffered a catastrophic injury, until he has undergone the requisite change for the better. Given the statute’s cap on benefits for noncatastrophic injuries, and the absence of a cap on benefits for catastrophic injuries, it is clear that the legislature intended to treat workers who received catastrophic injuries differently from workers who were less severely injured, allowing the former to receive benefits indefinitely so long as they remain catastrophically injured.

We reiterate that “[t]he Workers’ Compensation Act is a humanitarian measure that should be liberally construed to effectuate its purpose.” Under the circumstances, we conclude that Barnes’s claim was not barred by the two-year statute of limitation set out in OCGA § 34-9-104 (b), and that the ALJ erred by ruling otherwise. Because the ALJ made an error of law, and the Board adopted that ruling, the superior court judgment affirming the Board’s decision must be reversed.

2. Barnes contends that the Board erred by finding that his claim based on a fictional new accident* was filed outside the one-year statute of limitation set out in OCGA § 34-9-82 (a). We agree with Barnes.

OCGA § 34-9-82 (a) provides:

The right to compensation shall be barred unless a claim therefor is filed within one year after injury, except that if payment of weekly benefits has been made or remedial treatment has been furnished by the employer on account of the injury the claim may be filed within one year after the date of the last remedial treatment furnished by the employer or within two years after the date of the last payment of weekly benefits.

Barnes filed the notice of claim on November 30,2012, which was within one year of the December 2011 replacement of his prosthetic leg (paid for by CCMSI). Accordingly, the “remedial treatment” exception applied, and the statute of limitation did not bar the claim. As with the statute of limitation issue discussed in Division l, to hold otherwise would be to penalize a claimant for having continued working (with limitations) even though he remained catastrophically injured.

Notwithstanding, Roseburg Forest/ACE American contends that the provision of medical treatment in 2011 • — • furnished as part of the 1993 claim with the employer’s previous insurer — cannot be imputed to ACE American (the second insurer) to toll the statute of limitation. The contention is without merit, because the insurer is the alter ego of the employer under the Workers’ Compensation Act. That, considered in conjunction with the language of OCGA § 34-9-82 (a), makes clear that medical treatment furnished by one of the employer’s insurers on behalf of that employer is medical treatment provided by the employer.

Also without merit is Roseburg Forest/ACE American’s argument that the last remedial treatment did not toll the statute of limitation in OCGA § 34-9-82 (a) because the remedial treatment was not commenced within one year of the injury or within one year of the previous treatment. The case of Poissonnier v. Better Business Bureau of West Georgia-East Alabama, upon which Roseburg Forest/ ACE American relies, is inapposite, as it addressed the connection between an employer’s failure to post a panel of physicians as required by the Act and a claimant’s reliance on the “remedial treatment furnished by the employer” exception to the one-year bar. Unlike in the instant case, the remedial treatment relied upon by the claimant in Poissonnier had not actually been furnished by the employer but was only deemed to have been so furnished because the employer had failed to post the required panel of physicians. The issues before the court were different.

Decided July 16, 2015

Kermit S. Dorough, Jr., for appellant.

Speed, Seta, Martin & Trivett, Eric L. Trivett, Danielle R. Taylor; Swift, Currie, McGhee & Pliers, Michael Rosetti, for appellees.

Georgia Legal Foundation, Dylan A. Bess, Todd K. Maziar, Pamela M. Orenstein, amici curiae.

The statute of limitation did not bar Barnes’s claim.

3. Because the ALJ’s decision was based on its finding that Barnes’s claim was not timely filed, the ALJ (and consequently, the Board and superior court) did not fully consider other arguments Barnes had made before the ALJ and has reiterated in this appeal (e.g., whether Barnes had experienced a change in condition or had suffered a fictional new accident; if the presumption of permanent total disability had been rebutted; and if Barnes is entitled to an award of attorney fees). Accordingly, we reverse the superior court’s judgment and remand the case to the Board for consideration of said issues.

Judgment reversed and case remanded with direction.

Doyle, C. J., and Boggs, J., concur.

       See OCGA § 34-9-104 (b).

       See OCGA § 34-9-82.

        JMJ Plumbing v. Cudihy, 319 Ga. App. 158-159 (735 SE2d 148) (2012) (punctuation and footnotes omitted); see Howard v. Peachbelt Health & Rehab. Center, 314 Ga. App. 319-320 (1) (723 SE2d 718) (2012).

       Pursuant to OCGA § 34-9-200.1 (g) (2), a catastrophic injury includes “[ajmputation of an arm, a hand, a foot, or a leg involving the effective loss of use of that appendage.”

       An order substituting Roseburg Forest Products as employer and CCMSI as servicing agent was entered in April 2013. Georgia Conversion Primary Insurance Company had been the employer’s insurer at the time of the 1993 injury. ACE American Insurance Company was the employer’s insurer in 2009, when Barnes was terminated. CCMSI was the servicing agent for the insurers in 1993 and 2009. Roseburg Forest/CCMSI has filed a brief as appellee regarding the 1993 injury (change in condition). Roseburg Forest/ACE American has filed a brief as appellee regarding the 2009 injury (fictional new accident).

       OCGA § 34-9-104 (a).

       (Emphasis supplied.)

       See OCGA § 34-9-200.1 (i) (in pertinent part, permitting a party to request a new determination as to the catastrophic or noncatastrophic nature of the employee’s injury).

        City of Waycross v. Holmes, 272 Ga. 488, 489 (532 SE2d 90) (2000) (citation omitted); see Ray Bell Constr. Co. v. King, 281 Ga. 853, 854 (642 SE2d 841) (2007); DeKalb Collision Center v. Foster, 254 Ga. App. 477, 482 (562 SE2d 740) (2002).

       See Renu Thrift Store v. Figueroa, 286 Ga. App. 455, 456 (649 SE2d 528) (2007) (“erroneous applications of law to undisputed facts, as well as decisions based on erroneous theories of law, are subject to the de novo standard of review”) (citation and footnote omitted).

       See R.R. Donnelley v. Ogletree, 312 Ga. App. 475, 478-479 (718 SE2d 825) (2011) (explaining that a fictional “ ‘new accident’ occurs when there is the intervention of new circumstances imposed upon the claimant,” while “a [‘jchange in condition[’] occurs when the claimant’s disability results from his performance of ‘usual,’ ‘normal,’ or ‘ordinary’ work duties”); Central State Hosp. v. James, 147 Ga. App. 308, 309 (1) (a) (248 SE2d 678) (1978) (in the case of a “new accident,” “the one-year statute of limitation begins to run from the date the claimant was forced to cease his employment. . . . [T]his holding [is based] on the theory that the date of the ‘new accident’ is the date that the disability manifests itself.”).

       (Emphasis supplied.)

       OCGA § 34-9-82 (a).

       Supra.

       See Aetna Casualty & Sur. Co. v. Cagle, 106 Ga. App. 440 (126 SE2d 907) (1962).

        Anderson v. Aragual, Sanders Carter & Swain, 163 Ga. App. 610, 612-613 (295 SE2d 750) (1982).

       180 Ga. App. 588 (349 SE2d 813) (1986).

       Id. at 588-589.

       Id.

       See generally ABF Freight System v. Presley, 330 Ga. App. 885, 887 (769 SE2d 611) (2015) (physical precedent only), citing Trucks, Inc. v. Trowell, 302 Ga. App. 488, 491 (1) (690 SE2d 880) (2010); Cho v. Mountain Sweet Water, 322 Ga. App. 400, 402-403 (745 SE2d 663) (2013); Stokes v. Coweta County Bd. of Ed., 313 Ga. App. 505, 507, 511 (722 SE2d 118) (2012); OCGA § 34-9-108 (b) (1) (regarding attorney fees).


author: MCMILLIAN, Judge.

text:
    A15A0431.
    COMMUNITY & SOUTHERN BANK v. CLEAR CREEK PROPERTIES et al.
    (775 S.E.2d 752)
   MCMILLIAN, Judge.

Community & Southern Bank (the “Bank”) appeals after a jury returned a verdict in favor of Garry Haygood (“Haygood”) and Hay-good Family Investments, LLC (“HFI”) in the Bank’s contract action against them. For the reasons set forth below, we reverse.

“On appeal following a jury verdict and judgment, this Court must construe the evidence with every inference and presumption in favor of upholding the verdict, and after judgment, the evidence must be construed to uphold the verdict even where the evidence is in conflict.” (Citation and punctuation omitted.) One Bluff Drive, LLC v. K. A. P., Inc., 330 Ga. App. 45, 45 (766 SE2d 508) (2014).

So viewed the evidence shows that HFI and Haygood, along with Clear Creek Properties, LLC (“Clear Creek”), Legacy Mountain Properties, LLC (“Legacy”), A. S. Dover Development, Inc. (“A. S. Dover”), Dover-Pfister, LLC n/k/a Dover Development, LLC (“Dover Development”), and Alan S. Dover (“Dover”), executed nine promissory notes and numerous commercial guaranties in favor of Gilmer County Bank (“GCB”) in connection with real estate development projects, including a project known as “Falling Waters.” Haygood and Dover both held a percentage ownership interest in Legacy and Clear Creek, and both men participated in borrowing money to finance Falling Waters. Ultimately, Clear Creek, HFI, Legacy, A. S. Dover, Dover Development, Haygood, and Dover all defaulted on their repayment obligations under their respective promissory notes and guaranties. The Georgia Department of Banking and Finance closed GCB in March 2010, and the loans were assigned and transferred to the Bank pursuant to a Purchase and Assumption Agreement with the Federal Deposit Insurance Corporation (“FDIC”).

At the pertinent time, Dover was a real estate developer and a director at GCB, serving on the loan committee. Dover originally purchased the land for the Falling Waters project for around $36 million in August 2006. He borrowed the money for this purchase from GCB and did not put up any of his own money to fund the transaction. Dover was the largest borrower at GCB, and his loan requests were routinely approved. Additionally, he was sometimes present at loan committee meetings in which his loans were approved, although he did not vote on his own loans. Dover did not provide his financial information to GCB in connection with his loan applications, and GCB did not maintain any financial information on him.

Nevertheless, GCB routinely renewed Dover’s loans over a period of 13 years. Over time, as Dover’s loans approached or exceeded legal lending limits, GCB sold portions of the loans to other banks pursuant to participation agreements. As one former GCB loan officer explained, federal banking laws provide that a single borrower can only borrow a certain percentage of a bank’s capital. If the borrower exceeds that limit, the bank must divest itself of the loans. Once GCB divested itself of some of Dover’s loans, it could then lend him additional funds.

Haygood also was involved in real estate development and construction during the relevant period. At issue in this appeal is a $3 million loan GCB extended to Haygood individually on September 21, 2007 in connection with the Falling Waters project (the “Haygood Loan”). (See Addendum “A” for a list of the other promissory notes and guaranties at issue at trial, hereinafter referred to collectively as the “Other Notes.”) Haygood testified that he was solicited by Dover to invest money in Falling Waters in or around September 2007. Dover first suggested that Haygood buy a 49 percent interest in the project, but Haygood had “no interest in that at all.” Dover later suggested that Haygood buy 25 percent of the project for $5.2 million. Haygood was hesitant; he did not have much cash at the time because he had recently paid off all of his debt. Nevertheless, he told Dover that he could raise about $2 million to invest. Dover knew that Haygood owned real property on Rackley Road in Hall County (the “Rackley Road Property”) debt-free, and he suggested that Haygood use the property as collateral to apply for a loan at GCB. Haygood ultimately agreed to the $5.2 million investment, if he could borrow $3 million from GCB on the Rackley Road Property.

In connection with the Haygood Loan, GCB ordered an appraisal on the Rackley Road Property at Haygood’s expense. That appraisal, dated September 13, 2007, set the value for the Rackley Road Property at $2,640,000, which was not high enough to support the loan as GCB required an 85 percent loan-to-value ratio. GCB subsequently ordered another appraisal, from the same appraiser, which reflected a value for the Rackley Road Property of $3,510,000 as of September 20, 2007. Because Dover needed the funds quickly, the Haygood Loan closed the next day, and Haygood was not provided a copy of either appraisal, although GCB’s policy was to give the borrower an appraisal three days before closing. Also in connection with the Haygood Loan, Haygood signed a Security Deed and Agreement dated September 21, 2007, which contained a dragnet clause providing that any subsequent debt incurred by Haygood could be consolidated under its terms, allowing foreclosure on the Rackley Road Property in connection with such debt. Haygood gave Dover the proceeds of the Haygood Loan and $2.2 million in cash to fund his $5.2 million investment in Falling Waters.

In December 2008, Adam Teague, chief loan officer at GCB, informed Haygood of a problem with the loans relating to Falling Waters, and he scheduled a meeting to discuss the matter with Haygood, Dover, GCB president Tracy Newton and Joseph C. Hensley, a member of the GCB board of directors, who served on GCB’s Audit Committee. Hensley, a CPA, also worked for Dover. At the meeting, GCB informed Haygood that Unity Bank had entered into a participation agreement with regard to a portion of a $7.5 million loan issued to Legacy in connection with the purchase of the Falling Waters property. (See Note 5 in Addendum “A”) Although GCB had renewed the loan several months earlier, Unity was no longer willing to participate in it, and GCB was unable to carry the full loan on its books because Dover had reached his legal lending limits. Accordingly, GCB told Haygood that unless the loan was paid in full, GCB would have to foreclose on the Falling Waters property. Haygood was asked to assume $3 million of the loan. Prior to this meeting, Haygood was unaware of Unity Bank or any problems with Dover’s loans.

At first, Haygood refused to assume any portion of the loan, but later, on behalf of HFI, he signed a December 23, 2008 promissory note in the principal amount of $4,623,000, plus interest (“First HFI Note”). Haygood stated that he signed the loan documents because “[i]t was just a function, basically, to... get the bank out of trouble and to keep the project from going into foreclosure and [to keep the loan] current.” He stated that the loan also gave the Falling Waters project some operating money. Haygood said that if he had not signed the loan, the Falling Waters project would have been “dead,” and he would have lost the money he invested.

On April 21, 2009, the FDIC issued an “Order to Cease and Desist” (the “Order”) against GCB directing it to cease and desist from a list of “unsafe or unsound banking practices and violations of law and/or regulations.” Haygood did not receive a copy of the Order and was unaware of it when, on August 27, 2009, he signed another promissory note in the principal amount of $4,022,286.50, plus interest, on behalf of HFI (the “Second HFI Note”). The proceeds of that loan were used to bring all the other loans current. Haygood stated that he would never have signed the Second HFI Note if he had known of the Order. Haygood did not receive any of the proceeds of the two HFI loans.

At trial, Haygood asserted the defense of illegality to the Hay-good Loan based on this evidence, and the Bank moved for a directed verdict on that defense, which the trial court denied. The jury subsequently returned a verdict in favor of Haygood on the Haygood Loan and in favor of Haygood and HFI on the First and Second HFI Notes and the Other Notes.

The Bank first asserts that the trial court erred in denying its motion for directed verdict on Haygood’s illegality defense. We agree.

Under Georgia law, “[a] contract to do an immoral or illegal thing is void. If the contract is severable, however, the part of the contract which is legal will not be invalidated by the part of the contract which is illegal.” OCGA § 13-8-1. And “[t]he character of the contract in such case is determined by the intention ofthe parties.” OCGA § 13-1-8 (b). But OCGA § 13-8-1 “has been held inapplicable where the object of the contract is not illegal or against public policy, but where the illegality or immorality is only collateral or remotely connected to the contract.” (Citation and punctuation omitted; emphasis in original.) Kelley v. Cooper, 325 Ga. App. 145, 147 (1) (751 SE2d 889) (2013).

In connection with that defense, Haygood’s counsel argued to the jury that the Bank’s actions with regard to the Haygood Loan constituted the crime of residential mortgage fraud in violation of OCGA § 16-8-102(2).In particular,counsel argued thatthe appraisal used to acquire the loan was fraudulent, which he argued violated the statute. He also argued that the Bank entered into the Haygood Loan to get around the cap on Dover’s lending limits and as part of a “scheme” to avoid having the regulators investigate the Bank’s practices. Haygood’s counsel further argued that the illegality of the Haygood Loan “infected every one of the later loans.” We find that any alleged illegality is only collateral to the Haygood Loan, and therefore does not render the Haygood Loan, the HFI Notes, or the Other Notes void.

In reaching this conclusion, we find the case of Scott v. Citizens Bank of Americus, 188 Ga. App. 618 (373 SE2d 633) (1988), to be instructive.* * In that case, the bank was being investigated by state banking examiners for entering into a number of “ ‘criticized loans,’ ” as the bank continued to operate pursuant to a “ ‘memorandum of understanding.’ ” Id. at 618. After the state bank examiners completed their investigation, bank officials found a defaulted real estate loan that the examiners had failed to discover. The bank’s president and its loan officer decided not to disclose this loan to the examiners, but instead they “devised a plan to remove this defaulted loan from the [b] ank’s books before it was discovered.” Id. Under the plan, the appellant, who was “a close personal friend of the [b] ank’s president,” signed a promissory note in favor of the bank, and the funds from that note were given to a third party, who used them to purchase the property underlying the defaulted loan. Id. “The president and the loan officer of the [b]ank acknowledged that their plan was to create a ‘paper trail’ and to use appellant ‘as sort of a strawman, third party, just as somebody to sign the notes and create the documents to satisfy banking requirements.’ ” Id. The appellant denied any knowledge of this plan or his role in it, and he subsequently defaulted on the note. Id. at 618-619.

When the bank sued to collect on the note, the appellant, on appeal, apparently raised the defense of illegality based on the bank officials’ plan to remove the loan from their books. However, this Court found that the appellant’s defense of illegality was not viable as to the note at issue. As the Court explained:

The underlying transaction at issue was merely an advancement of funds which appellant agreed to repay as evidenced by his execution of the note. This transaction was no more illegal than any other loan transaction evidenced by a promissory note. It may have been intended that the transaction serve as a means for removing a defaulted real estate loan from the [b]ank’s books, but this would not render the transaction illegal. Financial institutions are certainly authorized to arrange for the removal of such loans from its books under the most favorable terms that can be negotiated. There may have been an element of unethical behavior underlying this particular transaction, because it was timed so as to remove the defaulted loan from the [b]ank’s books prior to its discovery by the bank examiners. However, this unethical behavior would not render the note unenforceable against appellant.

Scott, 188 Ga. App. at 620 (2).

Here, Haygood’s illegality defense centered on the illegal appraisals in connection with the Haygood Loan in September 2007, which he argued tainted all subsequent loans. We disagree. It is apparent from the record that GCB advanced the funds to Haygood to facilitate his purchase of a 25 percent interest in Legacy and/or Clear Creek and thereby invest in Falling Waters. In signing the note, Haygood agreed to repay the funds borrowed. And, indeed, shortly after signing the Haygood Loan, on October 11, 2007, Haygood and Dover signed a “Transfer and Assignment of Membership Interest,” which transferred a 25 percent interest in Legacy to HFI in exchange for consideration of $5,128,205; an amendment to Legacy’s operating agreement, reflecting that HFI owned 25 percent of the company; and an “Indemnity and Guaranty Agreement,” under which HFI agreed to indemnify A. S. Dover for certain listed loans signed in connection with Falling Waters. Additionally, the evidence at trial indicated that Haygood sought legal advice before entering into this investment. These events occurred approximately one year before Unity Bank decided that it would no longer participate in Dover’s loans and approximately one year and one-half before the Order.

Accordingly, “[t]his transaction was no more illegal than any other loan transaction evidenced by a promissory note.” Scott, 188 Ga. App. at 620 (2). And no evidence exists that the contract was based on illegal or immoral consideration. Dover was legally entitled to seek other investors to support the Falling Waters project and to reduce his own debt. Haygood had the legal right to invest in the Falling Waters project, and the Bank was legally entitled to loan him money for that purpose. No evidence exists that Haygood was approaching his lending limits with the Bank; to the contrary, he indicated that he had just paid down his debt.

Although the Bank may have asked for a second, higher appraisal to support the Haygood Loan, which Haygood contends was fraudulent and even criminal, and may have engaged in other subsequent illegal activity, any such illegal activity was, at most, merely collateral to the Haygood Loan; it was not the object of the loan. As our Supreme Court explained in R.R.R. Ltd. Partnership v. Recreational Svcs., Inc., 264 Ga. 494 (448 SE2d 211) (1994), such incidental illegality is insufficient to render an otherwise valid promissory note unenforceable. There, the Court rejected the defense of illegality in connection with a promissory note, where the borrower alleged that the lender threatened violence if the loan was not repaid promptly, resulting in an extortionate extension of credit in violation of 18 USC § 892 (c). The Supreme Court explained that

the federal statute upon which appellee relies merely serves to criminalize the lender’s alleged act of making an “extortionate extension of credit.” 18 USC § 892 (a). Nothing whatsoever in that federal statute purports to render the underlying loan agreement itself illegal and civilly unenforceable against the borrower. In this state, a contract to do an illegal thing is void [under] OCGA § 13-8-1. However, there is nothing inherently “illegal” in an agreement whereby one party merely agrees to lend money and the other party merely agrees to repay it.

(Citations and punctuation omitted; emphasis in original.) Id. Thus, the Supreme Court found that the breach of the statute was not a viable defense to the borrower’s obligation to repay the loan in full, noting that

[t]he rule that an agreement in violation of law is invalid does not always apply where the existence of the thing in question is due to a violation of law only in the sense that incidentally some law was violated in its production, where it might have been created without such violation. Here, the contract was for a legal purpose, and did not require a violation of any statute in order for [the borrower] to perform under the contract. There may or may not have been a violation of the federal criminal statute, but such violation was not required by the contract and was incidental to contractual performance.

(Citation and punctuation omitted; emphasis in original.) Id. at 496-497 (2). And, here, even if the Bank violated the law in connection with obtaining the appraisals to support the Haygood Loan or subsequently violated Georgia banking laws, any such violation was not required by the Haygood Loan and was merely incidental to its purpose.

Accordingly, we find that the trial court erred in denying the Bank’s motion for directed verdict as to Haygood’s defense of illegality. See R.R.R. Ltd. Partnership, 264 Ga. at 495-496 (2); Crooke v. Gilden, 262 Ga. 122, 123 (2) (414 SE2d 645) (1992); Smith v. Saulsbury, 286 Ga. App. 322, 323-324 (1) (b) (649 SE2d 344) (2007); Douglas v. Bigley, 278 Ga. App. 117, 124 (1) (d) (628 SE2d 199) (2006); Boot v. Beelen, 224 Ga. App. 384, 386 (1) (480 SE2d 267) (1997) (where promise to be enforced is one to pay a debt, parties’ meretricious relationship was incidental to the contract). Compare Minor v. McDaniel, 210 Ga. App. 146 (435 SE2d 508) (1993) (promissory note between broker and client to reimburse broker for monies borrowed to pay part of closing costs was illegal where broker induced client to falsely certify that the residence was free and clear of all liens, that she would not have any other outstanding unpaid obligations in connection with the mortgage transaction, and that she had paid all the closing costs and client knew such certifications were false); Southern Flour & Grain Co. v. Smith, 31 Ga. App. 52, 53 (120 SE 36) (1923) (contract illegal where terms of contract directly involved sale of “concentrated commercial feeding-stuffs” in non-standard weight bags, a direct infraction of a civil statute).

Therefore, we also agree with the Bank that the trial court erred in denying its directed verdict on the First and Second HFI Notes and the Other Notes, in submitting the issue of whether the Bank had violated OCGA § 16-8-102 to the jury, and in charging the jury on the statute. Moreover, because Haygood offered his expert’s testimony in connection with his affirmative defense of illegality, we need not reach the issue of whether the trial court properly applied the standard under Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (113 SCt 2786, 125 LE2d 469) (1993). Accordingly, we reverse the judgment in favor of Haygood and HFI and remand for entry of judgment in favor of the Bank on the Haygood Note, the HFI Notes and the Other Notes in accordance with this opinion.

Judgment reversed.

Barnes, P. J., and Ray, J., concur.

Decided July 16, 2015

Busch White Norton, Bryan E. Busch, Shane P. Stogner, Laura H. Mirmelli, Tawana B. Johnson, for appellant.

Addendum “A” — Other Notes

Clear Creek Notes

The record indicates that Clear Creek signed the following three promissory notes in favor of GCB:

— a December 14, 2007 promissory note in the principal amount of $3,000,000, plus interest (“Note 1”);
— a September 26, 2008 promissory note in the principal amount of $800,000, plus interest (“Note 2”); and
— an August 27, 2009 promissory note in the principal amount of $3,087,000, plus interest (“Note 3”).

Legacy, A. S. Dover, Dover Development, HFI, Haygood, and Dover entered into commercial guaranties with GCB guaranteeing repayment of Notes 1, 2, and 3.

Legacy Notes

Legacy also entered into two promissory notes in favor of GCB, as follows:

— an August 30, 2008 promissory note in the principal amount of $1,000,000, plus interest (“Note 4”); and
— an August 30, 2008 promissory note in the principal amount of $7,500,000, plus interest (“Note 5”).

A. S. Dover, Dover Development, and Dover executed commercial guaranties with GCB guaranteeing repayment of these notes.

Dover Development

On March 26, 2009, Dover Development entered into a promissory note with GCB in the principal amount of $111,380.86, plus interest (“Note 6”). Dover entered into a guaranty of this note with GCB, guaranteeing repayment of the note.

Chilivis, Cochran, Larkins & Bever, Thomas D. Bever; Spears & Robl, Michael D. Robl; Mitchell & Shapiro, William R. Joiner, for appellees.

       GCB was a division of Appalachian Community Bank (“ACB”).

       Dover testified that Dover Development owned Legacy and Clear Creek, and in connection with Haygood’s investment in Falling Waters, he received a 25 percent stake in Legacy and Clear Creek.

       The evidence indicated that fraudulent loans made by GCB president Tracy Newton and chief loan officer Adam Teague ultimately led to the bank’s failure.

       Haygood served on the board of directors of a Cherokee County bank and was a shareholder in GCB, having invested $75,000.

       The Haygood Loan apparently was renewed on two occasions, and the Bank ultimately brought suit on a promissory note dated September 30, 2009 in favor of GCB in the principal amount of $3,002,363, plus interest and a Commercial Loan Agreement dated October 1,2009, each signed by Haygood, individually. The September 30, 2009 promissory note states that it is a refinancing of an earlier note dated September 21, 2008 in the amount of $3 million.

       Haygood, Dover, and A. S. Dover signed commercial guaranties with GCB guaranteeing repayment of the First and Second HFI Notes (collectively, the “HFI Guaranties”).

       The jury, however, found in favor of the Bank and against Crystal Creek, Legacy, A. S. Dover, Dover Development, and Dover on the Other Notes, but that determination is not a part of this appeal.

       OCGA § 16-8-102 (2) provides:
      A person commits the offense of residential mortgage fraud when, with the intent to defraud, such person . . . [kjnowingly uses or facilitates the use of any deliberate misstatement, misrepresentation, or omission, knowing the same to contain a misstatement, misrepresentation, or omission, during the mortgage lending process with the intention that it be relied on by a mortgage lender, borrower, or any other party to the mortgage lending process.

       There, because the appellant did not assert the affirmative defense of illegality, this Court’s analysis on the issue could be considered dicta. Nevertheless, we find the reasoning persuasive and adopt it.

       Although Haygood presented expert testimony at trial attacking the methodology and validity of these appraisals, we note that in a financial statement dated April 2008, Haygood himself represented the value of the Rackley Road Property to he $3,600,000.