Opinion ID: 70764
Heading Depth: 2
Heading Rank: 3

Heading: Construction of the Put Option

Text: 54 Ameritrust argues that the district court erred in concluding that White had only a contingent obligation to pay the installments on the note. Ameritrust points out that, under the put option agreement, Cardinal granted to White the option to put his obligations under the note to Cardinal. Ameritrust argues that the put option agreement did not release White from his obligations to Amberwood to make payments on the note; rather, the put option agreement only gave White a contractual right against Cardinal to require Cardinal to assume White's obligations under the note. Thus, Ameritrust argues, White is still obligated under the note to make payments to Amberwood or its assignee, although White may have a contractual right to collect these payments from Cardinal under the put option agreement. 55 In support of its position, Ameritrust relies on the same Signet Bank v. Weaver case discussed in Part A above. 19 Signet Bank involved a put option clause identical to that at issue in this case. The district court in Signet Bank concluded that this put option did not release the defendant from liability on the note; the court reasoned: 56 Defendant contends that by exercising its rights under this provision he is released from his obligation to pay Palmside [the limited partnership] the specified payment for the year in question. Defendant's support for this position, however, is tenuous. Defendant argues nothing more than that the plain language of the provision abrogates Defendant's liability on the note upon exercise of the put option, and that there would be no logical reason for the provision were it held to not have this effect. 57 As this Court reads the provision, however, all Defendant gains by exercise of his right to put payment obligations to Cardinal Industries Inc. is Cardinal Industries Inc.'s promise to purchase the attendant Limited Partnership interest. The provision does not abrogate any continuing liability to Palmside. Palmside is not mentioned in the provision. Under this provision Defendant's exercise of its right to put does not release it from liability but simply perfects for Defendant a breach of contract remedy for Cardinal Industries Inc.'s failure to perform its contractual obligation. This Court is unable to read into a contract things which simply are not there. 20 58 We agree with this reasoning. Under the terms of the promissory note at issue in this case, White is obligated to pay Amberwood or its assignee $446,530. The put option clause does not mention Amberwood, and Amberwood is not a signatory on the put option agreement; the agreement is signed only by Cardinal and Cardinal Industries Development Corporation. While the put option clause gives White the option to put to Cardinal certain obligations under the notes, it does not abrogate White's liability to Amberwood, or its assignee, under the notes. Accordingly, we hold that the district court erred in concluding that the put option agreement relieved White of liability on the promissory note. 59 Our construction of the option to put is consistent with the Amberwood Certificates on file with the Clerks of the Superior Courts of Bartow and Fulton Counties. In the counties' files are the Certificate of Limited Partnership, filed in August 1985, and the Certificate of Amendment of Limited Partnership Agreement, filed in July 1986. This latter document indicates that White is the sole limited partner and that his total contribution to the partnership will be $896,980; it does not mention the option to put. Under O.C.G.A. Sec. 14-9A-25(b), a certificate of limited partnership must be amended whenever [t]here is a change in ... the amount or character of the contribution of any limited partner. If, as White contends, his exercise of option to put relieved him of his obligation to contribute $446,530 to Amberwood under the terms of the second promissory note, this would certainly constitute a change in ... the amount or character of his contribution within the meaning of O.C.G.A. Sec. 14-9A-25(b). Yet, such a change is not reflected in the documents in the counties' files. What is reflected in these documents--that White is obligated to contribute $896,980 to Amberwood--is consistent with our conclusion that White's exercise of the option to put did not relieve him of liability under the promissory note. 60 Although the put option agreement does not relieve White of his obligation to make payments on the promissory note, it does, by its terms, give White a contractual right to collect these payments from Cardinal. White cannot rely on this contractual right against Cardinal to set off his obligations under the note because Cardinal was not a party to the note transaction; that is, Cardinal is neither the original obligor nor an assignee. White made the note payable to Amberwood, Amberwood endorsed the note to the CISC, and CISC endorsed the note to Ameritrust. Cardinal was not in this chain of assignment. Thus, White's contractual right against Cardinal is no defense to Ameritrust's cause of action against White. 61 Moreover, even if Cardinal were a party to the note transaction through some inter-corporate relationship with CISC, White's contractual right against Cardinal under the put option agreement is unenforceable due to application of the Georgia Uniform Limited Partnership Act. O.C.G.A. Sec. 14-9A-47 provides: 62 14-9A-47. Withdrawal or reduction of contribution. 63 (a) A limited partner shall not receive from a general partner or out of partnership property any part of his contribution until: 64 (1) All liabilities of the partnership, except liabilities to general partners and to limited partners on account of their contributions, have been paid or there remains property of the partnership sufficient to pay them; [and] 65 . . . . . 66 (3) The certificate required under Code Section 14-9A-20 is canceled or so amended as to set forth the withdrawal or reduction. 67 The Georgia courts have construed this statute only once, in the case of Mills v. Kochis. 21 Kochis, like this case, involved a limited partnership that owned an apartment complex. The articles of partnership contained a repurchase commitment by the general partners to the limited partners in the event of foreclosure on the property. After the property was foreclosed, the limited partners brought suit against the general partners to recover on the repurchase commitment. The Georgia Supreme Court upheld a ruling in favor of the general partners, finding that the repurchase provision found in the partnership agreement [is] in violation of [O.C.G.A. Sec. 14-9A-47] and [is] not enforceable absent a showing that obligations to third party creditors have been satisfied. 22 68 We find that White's contractual right against Cardinal under the put option agreement, like the repurchase commitment at issue in Kochis, is unenforceable under O.C.G.A. Sec. 14-9A-47 absent a showing that all obligations to Amberwood's third party creditors have been satisfied. Under the two promissory notes, White was obligated to contribute $896,980 to Amberwood. White's contractual right against Cardinal under the put option agreement amounts to a right to receive from Cardinal, the general partner, a part of this contribution. Thus, O.C.G.A. Sec. 14-9A-47 is applicable to render White's contractual right unenforceable absent satisfaction of Amberwood's debts. 69 Accordingly, we conclude that the district court erred in holding that White's exercise of this option to put relieved him of his liability under the note. For the reasons explained above, we hold that White may not rely on the put option agreement as a defense against Ameritrust's cause of action on the note.