Ashline v. Marinas USA, L.P.

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.
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The motion of appellee for sanctions is hereby denied.
2
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[.]
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(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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