Court Opinion

ID: 3190985
Source: CourtListenerOpinion
Date Created: 2016-04-04 07:04:04.331996+00
Date Added: 2024-06-11T14:35:51.649673
License: Public Domain

THIRD DIVISION
                             ELLINGTON, P. J.,
                        DILLARD and MCFADDEN, JJ.

                   NOTICE: Motions for reconsideration must be
                   physically received in our clerk’s office within ten
                   days of the date of decision to be deemed timely filed.
                               http://www.gaappeals.us/rules

                                                                    March 29, 2016

In the Court of Appeals of Georgia
 A15A2059. ASHLINE v. MARINAS USA, L.P. d/b/a AQUALAND
     MARINA.

      MCFADDEN, Judge.

      John Ashline initially brought this suit against Marinas USA, L.P. (Marinas)

for a tort allegedly arising out of its operation of Aqualand Marina. Marinas

defaulted. Ashline now appeals the trial court’s order denying his motion to add or

substitute Flagship Marinas Acquisition, LLC and Flagship Aqualand, LLC

(collectively, Flagship) as Marinas’s successors-in-interest. He argues that Flagship,

which purchased Aqualand Marina from Marinas, contractually agreed to assume

liability for all claims against Marinas and thereby assumed liability to him for his

default judgment. We find, however, that the language on which Ashline relies
merely released Marinas from certain liabilities. Flagship, therefore, did not assume

liability for Ashline’s default judgment. Accordingly, we affirm.1

      Ashline secured a default judgment against Marinas on May 4, 2012, for the

conversion of his houseboat, which had occurred seven years earlier, on or about July

15, 2005. A few weeks before that alleged conversion, on May 26, 2005, Marina had

entered into a contract with Flagship for the sale of a marina.

      After obtaining his default judgment against Marinas, Ashline filed a motion

in the trial court to add or substitute Flagship to the litigation, arguing that Flagship

had agreed in its contract with Marinas to “assume and pay the obligations that were

formerly attributable to Marinas.” The trial court denied that motion, finding that

“[Flagship] did not assume liability for [Marina’s] claims in the actions, all of which

arose or accrued prior to the date on which [Flagship] assumed ownership of their

assets and liabilities caused by the defendant to paid entities.” We review the trial

court’s construction of the contract as a question of law, subject to de novo review.

See Etowah Envtl. Group v. Advanced Disposal Servs., 297 Ga. App. 126, 127 (676

SE2d 456) (2009).

      1. Standing.

      1
          The motion of appellee for sanctions is hereby denied.

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      Although Ashline was not a party to the contract between Flagship and

Marinas, he still has standing to bring suit. “The claim here is for [conversion], not

for damages resulting from a breach of contract between two other parties, and the

action was not brought to enforce a contract.” Gwinnett Hosp. Sys. v. Massey, 220 Ga.

App. 334 (469 SE2d 729) (1996). Here, Ashline has argued only that under the

agreement, Flagship assumed Marina’s legal obligations, and he is therefore entitled

to bring suit against Marina. See MCG Health v. Nelson, 270 Ga. App. 409, 411 (1)

(606 SE2d 576) (2004) (“The plaintiff merely recognized that, under the clear terms

of the contract, [acquirer] was liable for pre-existing liabilities relating to the

operations it took over from the former operator. In other words, [acquirer] took

responsibility for its predecessor’s torts. And given this assumption of liabilities, the

plaintiff was entitled to bring suit directly against [acquirer].”)

      2. Terms of the contract.

      Ashline’s first enumeration of error is that the trial court misconstrued the

contract. He argues that under the contract for the sale of the marina between Flagship

and Marinas, Flagship assumed all of Marinas liabilities, including his default

judgment.

      As to contract construction generally:

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      Construction of a contract, at the outset, is a question of law for the
      court. And such construction involves three steps: first, the trial court
      must decide whether the language is clear and unambiguous. If it is, the
      court simply enforces the contract according to its clear terms; the
      contract alone is looked to for its meaning. Next, if the contract is
      ambiguous in some respect, the court must apply the rules of contract
      construction to resolve the ambiguity. Finally, if the ambiguity remains
      after applying the rules of construction, the issue of what the ambiguous
      language means and what the parties intended must be resolved by a
      jury.

Holcim (US) v. AMDG, 265 Ga. App. 818, 820 (596 SE2d 197) (2004) (citations and

punctuation omitted).

      As to the particular issue before us, the general rule is that “a purchasing

corporation does not assume the liabilities of the seller unless: (1) there is an

agreement to assume liabilities; (2) the transaction is, in fact, a merger; (3) the

transaction is a fraudulent attempt to avoid liabilities; or (4) the purchaser is a mere

continuation of the predecessor corporation.” First Support Servs. v. Trevino, 288 Ga.

App. 850, 852 (2) (655 SE2d 627) (2007) (citation omitted). Here, none of these

circumstances apply.

      In support of his argument that Flagship assumed all the liabilities of Marinas,

Ashline cites assignment provisions in three contract documents that assign certain

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specific liabilities to Flagship, as well as two release provisions in the main contract.

But none of those provisions require Flagship to assume liability for a judgment

against Marina arising out of events that occurred prior to the closing date.

      Ashline’s judgment is outside the scope of the assignment provisions. The first

assignment provision is in a document entitled “Assignment of Lease.” That is the

document under which Flagship assumed the master property lease for the marina. Its

language relating to assumption of liabilities reads, “Assignee assumes the payment

and performance of, and agrees to pay, perform and discharge, all the debts, duties

and obligations to be paid, performed, or discharged from and after (but not before)

the effective date hereof by the lessee.” The next assignment provision cited by

Ashline is in a document entitled “Assignment and Assumption of Leases.” In this

document, Flagship assumes “all of Assignor’s obligations under the Leases and with

respect to the Deposits arising or accruing from and after the Closing Date.” The final

assignment provision cited by Ashline is in a document entitled “Assignment and

Assumption of Contracts, Warranties and Guarantees and other Intangible Property.”

In that document, Flagship assumes Marinas’ obligations “under the Contracts arising

or accruing after the Closing Date”. All of the liabilities Flagship assumed by

executing these documents arose prior to the closing date.

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      The two release provisions found in the main contract likewise do not amount

to an assumption of all of Marina’s liabilities on the part of Flagship. Ashline

contends that under §§ 4.3 and 4.7 of the contract, Flagship assumed liability for all

of Marinas’ liabilities, including Ashline’s Judgment. But these two provisions are

narrow in scope, and merely serve to limit Marina’s liabilities to Flagship under

certain circumstances. They do not amount to an assumption of all of Marina’s

liabilities. The release in § 4.3 of the contract reads as follows:

      [N]o seller shall have (and each Seller is exculpated and released from
      any) liability whatsoever with respect to any [Claims] under. . .any of
      the representations and warranties contained in this agreement or in
      any closing document, except to the extent (and only to the extent) that
      the aggregate amount of all claims for breach of such Seller’s
      representations and warranties . . . exceeds one hundred thousand
      dollars. (emphasis supplied) The other release Ashline points to reads as
      follows:

      [Flagship]. . .waives its right to recover from, and forever releases and
      discharges, and covenants not to sue [Marina] with respect to any and
      all Claims, whether direct or indirect, known or unknown, foreseen or
      unforeseen, that may arise on account of or in any way be connected
      with any Property including the physical, environmental, or structural
      condition of the related Real Property or any law or regulation
      applicable thereto[.]

                                           6
(emphasis supplied)

     More fundamentally, Georgia law is clear that a release is not necessarily an
assumption of liabilities.

      Gwinnett Hosp. System, Inc. v. Massey, 220 Ga. App. 334 (469 SE2d
      729) (1996), which [Ashline] rel[ies] on, actually illustrates the
      difference between an indemnification clause and an assumption of
      liabilities. In that case, unlike the case at hand, there was “an express
      agreement between the Buyer and the Seller recited in broad,
      unambiguous language that the Buyer assumed all liabilities and
      obligations” of the Seller. Because of this language, we specifically
      rejected the Buyer’s arguments that it was merely an indemnitor of the
      Seller, subject to suit only if liability against the Seller is found first.
      Thus, in that case, we clearly distinguished between agreements that
      create an assumption of liabilities and provisions that require
      indemnification.

Heren v. Sucher, 325 Ga. App. 219, 225 (2) (750 SE2d 430) (2013). The term

“release” is not synonymous with either “assumption” or “indemnification.” We

therefore turn to dictionaries for the plain meaning of these terms. Akron Pest Control

v. Radar Exterminating Co., 216 Ga. App. 495, 497 (1) (455 SE2d 601) (1995)

(noting that courts may turn to a dictionary for the plain, ordinary, and popular sense

of a word in interpreting contracts). The applicable definition of “release” is

“[l]iberation from an obligation, duty, or demand; the act of giving up a right or claim

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to the person against whom it could have been enforced.” Black’s Law Dictionary

(10th ed. 2014). “Indemnify” is defined as, “[t]o reimburse (another) for a loss

suffered because of a third party’s or one’s own act or default.” Black’s Law

Dictionary (10th ed. 2014). The applicable definition of “assumption clause” is a

“provision by which the transferee of an instrument agrees to assume an obligation

of the transferor.” Black’s Law Dictionary (10th ed. 2014). The parties’ contract does

not adopt different definitions.

      In short, Flagship only released Marinas from specified liabilities and assumed

specified contractual obligations in its purchase of the marina. None of those

provisions override the general rule that liabilities are not assumed by operation of

law. First Support Servs., 288 Ga. App. at 852 (2).

      3. Failure to add defendant.

      Ashline’s second enumeration of error is that the trial court abused his

discretion by failing to add Flagship as a defendant in Fi. Fa. As the trial court did not

err in its construction of the contract, this enumeration is also without merit.

      Judgment affirmed. Ellington, P. J., and Dillard, J., concur.

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