MURPHY v. BCCTC ASSOCIATES, INC. Et Al.

FIRST DIVISION
DOYLE, C. J.,
PHIPPS, P. J., and BOGGS, J.

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

November 19, 2015

In the Court of Appeals of Georgia
A15A1048. MURPHY v. BCCTC ASSOCIATES, INC. et al. BO-052

BOGGS, Judge.

M. Vincent Murphy, III, appeals from a trial court order denying his motion for

summary judgment and granting the partial motion for summary judgment filed by

BCCTC Associates, Inc., C & M Management, Inc., and Boston Capital Partners, Inc.

(“the plaintiffs”) in this case involving Murphy’s obligations pursuant to a guaranty.

For the following reasons, we affirm in part and reverse in part.

“Summary judgment is appropriate when no genuine issues of material fact

remain and the movant is entitled to judgment as a matter of law. On appeal, we

review the grant or denial of summary judgment de novo, construing the evidence and

all inferences in a light most favorable to the nonmoving party.” (Citation and
punctuation omitted.) Seki v. Groupon, Inc., 333 Ga. App. 319 (775 SE2d 776) (2015).

So viewed, the evidence showed that Murphy and E. Donald Dressel were the

members of 2745 Hapeville Road Partners LLC, which, in turn, was the general

partner of Summerdale/AAFHI, L.P.,1 which was the general partner of Summerdale

L.P.2 Murphy and Dressel were also members of Summerdale Advisors, LLC, which

was the general partner of Summerdale/AAHFI, L.P. II,3 which, in turn, was the

general partner for Summerdale Partners, L.P. II.4

On July 3, 1997, Summerdale/AAFHI, L.P. (the “General Partner”) entered into

an “Amended and Restated Agreement of Limited Partnership,” with Boston Capital

Corporate Tax Credit Fund VI, L.P. (“BCC VI”), as the limited partner, and BCCC,

Inc., as the special limited partner, for the purpose of developing apartment properties

that would qualify for low income housing tax credits. On December 15, 1997,

Summerdale/AAFHI, L.P. II (the “General Partner”), entered into a “Third Amended

and Restated Agreement of Limited Partnership” for the same purpose with Boston

1
Atlanta Affordable Housing for the Future was the limited partner.
2
Boston Capital Tax Credit Fund VI, L.P. was the limited partner.
3
Atlanta Affordable Housing for the Future was the limited partner.
4
Boston Capital Tax Credit Fund X, L.P. was the limited partner.

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Capital Corporate Tax Credit Fund XI, L.P. (“BCC XI”) as the limited partner and

BCCC, Inc. as the special limited partner. Murphy and Dressel executed a “Limited

Guaranty” in conjunction with each of these agreements (hereinafter “the LPAs”) to

guaranty the obligations of the General Partners thereunder. The guarantees

specifically noted that Murphy was to guaranty the General Partners’ obligations

under the LPAs to make certain “‘Operating Deficit Loans’ to repurchase the

Investment Partnership’s Interest in certain circumstances and to guaranty payment

of the Asset Management Fee . . . as such term[ ] [is] defined in the [LPAs].” And the

LPAs likewise provided that the General Partner was obligated to pay Asset

Management Fees, and repurchase the Interest of the Investment Partnership upon the

occurrence of an event of default, or if the General Partner failed to make Operating

Deficit loans. The plaintiffs asserted that an event of default occurred requiring the

General Partners to repurchase the Interest of the Investment Partnership when

Summerdale Partners, L. P. and Summerdale Partners, L.P. II each defaulted on a

mortgage note.

In November 2009, the plaintiffs (general partners of the parties to the LPAs

or their successors in interest) filed suit against Murphy, Dressel, the General Partners

Summerdale/AAHFI, L.P. and Summerdale/AAHFI, L.P. II, asserting claims for

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breach of contract, enforcement of the guarantees, and specific performance. With

regard to the guarantees, the plaintiffs asserted that as guarantors of the obligations

of the General Partners, Murphy and Dressel were responsible for unpaid asset

management fees and were required to make Operating Deficit Loans following the

occurrence of default. Following some discovery, the plaintiffs moved for partial

summary judgment “on the issue of liability and damages under the partnership

agreements and guaranties.” They “reserv[ed] the issue of recovery for contractual

attorneys’ fees under the guaranties for a later determination.”

Nearly a year and a half later, Murphy and Dressel moved for summary

judgment on the plaintiffs’ complaint. After a hearing of the argument of counsel, the

trial court granted the plaintiffs’ motion and denied the motions filed by Murphy and

Dressel. Both Murphy and Dressel appealed to this court, but Dressel withdrew his

appeal after agreeing to settle with the plaintiffs.

On appeal, Murphy argues that the plaintiffs’ claims are barred by the statute

of frauds; Boston Capital and Boston Capital Partners, Inc. do not have standing; the

guarantees are too vague to enforce; fact questions remain regarding fiduciary duty,

waiver and estoppel; the damage claims are based upon inadmissible hearsay; the

plaintiffs have increased the risk to him in violation of OCGA § 10-7-22; fact

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questions remain regarding the plaintiffs’ alleged damages; and the plaintiffs failed

to comply with all preconditions for recovery under the guarantees.

Murphy executed two guarantees: one on July 3, 2007 in favor of Summerdale

Partners, L.P., and a second on December 15, 2007 in favor of Summerdale Partners,

L.P. II, each entity identified therein as “the Partnership.” The July 3, 2007 guaranty

provided in relevant part:

WHEREAS, concurrently with the execution of this Guaranty,
Summerdale/AAHFI, L.P., a Georgia limited partnership . . . (the
“General Partner”), and BCCC, Inc., a Massachusetts corporation (the
“Special Limited Partner”) and Boston Capital Corporate Tax Credit
Fund VI, [“BCC VI”] a Limited Partnership, a Massachusetts limited
partnership (the “Investment Partnership”), have entered into that certain
Amended and Restated Agreement of Limited Partnership of
Summerdale Partners, L. P. (the “Agreement”) pursuant to which the
General Partner has agreed, inter alia, to make certain Excess
Development Cost advances and certain Operating Deficit Loans to
repurchase the Investment Partnership’s Interest in certain circumstances
and to guaranty payment of the Asset Management Fee and the
Development Fee (as such terms are defined in the Agreement), and the
Investment Partnership has agreed to contribute capital to the
Partnership according to the terms and conditions set forth therein, a true

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 copy of which is attached hereto as Exhibit A, by this reference fully
incorporated herein . . .5

Each paragraph six of the guarantees provides:

The Partnership and Guarantors agree that so long as the Obligations
hereunder remain outstanding, the Investment Partnership shall be a
third party beneficiary under this Agreement and shall be entitled to
enforce the provisions hereof as if it were a party hereto. The Guarantors
each hereby irrevocably authorize and empower the Investment
Partnership, and irrevocably appoint the Limited Partner, the
Guarantors’ attorney-in-fact, to demand, sue for, collect and receive
every payment or advance due under the obligations and give security
therefor and to file and invoke claims and such other proceedings in
their names as the Investment Partnership may deem necessary or
advisable to enforce the obligations under this Guaranty, provided,
however, that the Investment Partnership shall only be entitled to
exercise such rights if the Partnership fails to take such action within
thirty (30) days after the Investment Partnership makes demand on the
Partnership to do so.

(Emphasis supplied.)

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The December 15, 2007 guarantee was in favor of Summerdale Partners, L.P.
II and named Boston Capital Corporate Tax Credit Fund X, L.P. (“BCC X”) as the
“Investment Partnership.”

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 Murphy argues that the plaintiffs failed to comply with this provision prior to

seeking to enforce the guarantees. Specifically, Murphy contends that under

paragraph six, the plaintiffs can only enforce the guarantees against him after

demanding that the “Partnerships” (either Summerdale Partners L.P. or Summerdale

Partners L.P. II) pursue a claim under the guarantees and the Partnerships fail to do

so. The plaintiffs, on the other hand, argue that the first sentence of paragraph six

“authorizes the Investment Partnership as third party beneficiaries to bring a direct

action to enforce the Guaranties against the Guarantors,” and that the second sentence

“does not apply to this lawsuit because the Plaintiffs are seeking to enforce the

Guaranties against the Guarantors, and are not suing the Partnership on behalf of the

Guarantors.” We disagree.

“Georgia courts strictly construe guaranty agreements in favor of the guarantor.

And the guarantor’s liability cannot be extended by implication or interpretation.”

(Citations and punctuation omitted.) AAF-McQuay v. Willis, 308 Ga. App. 203, 216

(2) (707 SE2d 508) (2011). The question here is whether the language in paragraph

six of the guarantees constitutes a condition precedent. OCGA § 13-3-4 provides that

“[a] condition precedent must be performed before the contract becomes absolute and

obligatory upon the other party.” And

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 [w]hile conditions precedent are not favored in interpreting contracts,
words such as “on condition that,” “if,” and “provided,” are words of
condition, and in the absence of indication to the contrary, the
employment of such words in a contract creates conditions precedent.
Also, express statements to the effect that a condition is to be construed
as a condition precedent are often contained in contracts and are entitled
to be so construed in carrying out the intent of the parties.

(Citations, punctuation and footnotes omitted.) General Steel v. Delta Bldg. Systems,

297 Ga. App. 136, 139 (1) (676 SE2d 451) (2009).

The usual rules of contract construction are applicable when
determining the meaning and effect of a guaranty, the cardinal rule of
which is to ascertain the intention of the parties. The construction of
contracts involves three steps. At least initially, construction is a matter
of law for the court. First, the trial court must decide whether the
language is clear and unambiguous. If it is, no construction is required,
and the court simply enforces the contract according to its clear terms.
… 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. The existence or nonexistence of
an ambiguity is a question of law for the court. If the court determines
that an ambiguity exists, however, a jury question does not automatically
arise, but rather the court must first attempt to resolve the ambiguity by
applying the rules of construction in OCGA § 13-2-2.

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Id. at 138 (1).

The plain language of paragraph six of the guarantees provides that the

Investment Partnership is the third-party beneficiary to the guarantees and entitled to

enforce them “as if it were a party hereto.” This paragraph also empowers the

Investment Partnership to demand, sue for, collect and receive payment due under the

obligations and to file and invoke claims in its name to enforce the obligations under

the Guaranty, “provided, however, that the Investment Partnership shall only be

entitled to exercise such rights if the Partnership fails to take such action within thirty

(30) days after the Investment Partnership makes demand on the Partnership to do

so.” (Emphasis supplied.) Therefore, the Investment Partnership is only entitled to

bring an action to enforce the General Partners’ obligations under the guaranty, if it

makes a demand upon the Partnership to enforce those obligations and the Partnership

fails to do so within 30 days. This requirement is unambiguous, and contrary to the

plaintiffs’ argument here, this provision does not create an alternative means by

which to enforce the guaranty. See, e.g., Sovereign Healthcare, LLC v. Mariner

Health Care Mgmt. Co., 329 Ga. App. 782, 786 (1) (b) (766 SE2d 172) (2014) (plain

language of limited guaranty must be strictly construed and express terms cannot be

extended). Our conclusion is consistent with the provision in each guaranty that “This

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Guaranty . . . shall inure to the benefit of the Partnership and the Investment

Partnership.” (Emphasis supplied.)

“On a motion for summary judgment the plaintiff, as movant, has the burden

of establishing the absence or non-existence of any defense raised by the defendant.”

(Citations omitted.) Greenstein v. Bank of the Ozarks, 326 Ga. App. 648, 649 (1) (757

SE2d 254) (2014). Murphy raised the defense that the plaintiffs cannot enforce the

guarantees because a condition precedent was not satisfied, and plaintiffs have not

negated this defense. The guaranty cannot be enforced absent evidence of the

plaintiffs’ compliance with the condition precedent. See OCGA § 13-3-4; Hall v.

Ross, 273 Ga. App. 811, 813-814 (616 SE2d 145) (2005) (court erred in concluding

that party paid amounts due under contract where plain reading of contract contained

condition precedent before deducting payment). The trial court therefore erred in

granting the plaintiffs’ motion for partial summary judgment seeking liability and

damages under the guarantees. See Fayetteville v. Fayette County, 171 Ga. App. 13,

14 (2) (318 SE2d 757) (1984).

Murphy’s remaining arguments here are moot in light of our reversal, and we

affirm the denial of his motion for summary judgment. While Murphy has shown that

the grant of partial summary judgment was in error on the issue of the condition

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precedent of the guarantees, he has not shown that he is entitled to judgment as a

matter of law on this issue as the movant on his separate motion for summary

judgment.

Judgment affirmed in part, reversed in part. Doyle, C. J. and Phipps, P. J.,

concur.

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