Source: https://law.justia.com/cases/georgia/supreme-court/1983/39554-1.html
Timestamp: 2020-04-07 07:52:08
Document Index: 163557815

Matched Legal Cases: ['§ 14', '§ 75', '§ 23', '§ 37', '§ 14', '§ 75', '§ 14', '§ 75']

Westminster Properties v. Atlanta Assoc. :: 1983 :: Supreme Court of Georgia Decisions :: Georgia Case Law :: Georgia Law :: US Law :: Justia
Justia › US Law › Case Law › Georgia Case Law › Supreme Court of Georgia Decisions › 1983 › Westminster Properties v. Atlanta Assoc.
Westminster Properties v. Atlanta Assoc.
250 Ga. 841 (1983)
301 S.E.2d 636
39554, 39555.
Macey & Sikes, John M. Sikes, Jr., Steven M. Forte, for appellants.
Westminster then began advertising its intent to foreclose on its security deed on the apartment complex. The partnership (Atlanta Associates), its managing general partner (Inter-American), and its limited partner (Harrison) brought this action against Westminster to enjoin foreclosure and for other relief.[1] The trial court refused to *842 enjoin the foreclosure but did order Westminster not to sell the property to a third party pending a final determination in this case.
The general rule is that partners owe the strictest good faith to each other. OCGA § 14-8-40 (Code Ann. § 75-201); see also OCGA §§ 23-2-58, 23-2-59 (Code Ann. §§ 37-707, 37-708). However, as between partners the intent of the parties is the true test, and a partnership may be created by a contract giving rights or imposing obligations differing from those which the law ordinarily infers. See Huggins v. Huggins, 117 Ga. 151 (1) (43 SE 759) (1902). "Partners generally, be they general or limited, may make any agreement between themselves that they deem desirable so long as said agreement is not in violation of prohibitory statutory provisions, the common law, or relevant considerations of public policy." Kochis v. Mills, 233 Ga. 652, 653 (212 SE2d 823) (1975).
The partnership agreement here referred to the security deed held by Westminster and specified that certain capital contributions were to be used to retire that obligation to Westminster. Thus the security deed became a part of the partnership agreement and established the rights of the partners, including Westminster. Foreclosure on the security deed upon default is one of those rights. Plaintiffs argue that a partner who makes a secured loan to the partnership cannot, by virtue of its duties as a partner, enforce its *843 rights as a secured creditor. We find that a partnership which gives security to a partner for a loan cannot enforce the partnership duties owed it by the secured partner which duties impair the rights of the secured partner. (This prohibition is applicable to the partners as well as to the partnership.) If the rule were otherwise, a partnership could not obtain secured financing from its partners because its partners would not provide such financing.
The law and the partnership agreement required each general partner not to commit any act which would make it impossible for the partnership to carry on its ordinary business. OCGA § 14-9-70 (2) (Code Ann. § 75-410). Plaintiffs cite these provisions in arguing that the foreclosure was a breach of Westminster's duties to the partnership. The law, OCGA § 14-9-70 (2) (Code Ann. § 75-410), permits a general partner to make it impossible to carry on the ordinary business of the partnership with written consent, and we find that the partners here have given such consent. We find further that the specific terms of the security deed, also a part of the partnership agreement, prevail over its general provisions to the extent the two are in conflict. See Kochis v. Mills, supra; see also McCann v. Glynn Lumber Co., 199 Ga. 669, 677 (34 SE2d 839) (1945). In the cases relied upon by plaintiffs, there was no security deed granted to a partner.
2. In its amended answer Westminster enumerated several counterclaims against Atlanta Associates (the partnership) and Harrison individually. Two counterclaims allege Atlanta Associates had not repaid two operating expense loans. The security deed to Westminster states that it includes the original obligation as well as "any and all other indebtedness now owing or which may become owing." This language may cover the operating expense loans for which Westminster is counterclaiming.
*844 Westminster's two remaining counterclaims allege Harrison had not made certain payments to Westminster. These obligations are specified in the partnership agreement as amended. The appropriate party to enforce these obligations is Atlanta Associates, the partnership. While the partnership agreement specified the contributions were to be used to reduce the obligations owed Westminster under its security deed, the obligations run to the partnership and not to Westminster. Whether these obligations remain outstanding and whether Westminster can recover as third party beneficiary of the partnership agreement we leave to the trial court upon remand.
Judgment affirmed in part and reversed in part. Marshall, P. J., Clarke, Smith, Gregory and Weltner, JJ., and Judge Andrew J. Whalen, Jr., concur. Bell, J., disqualified.
[1] This other relief included prayers for an order compelling Westminster to consent to the bankruptcy petition, or at least not to interfere with it, or to resign its position as partner, and an order finding that Westminster had forfeited its partner status and rights and its consent is not required for the petition. The complaint was later amended to seek to set aside the subsequent foreclosure sale and for monetary relief.