Stewart v. Lanier Park Medical Office Building, Ltd., 578 S.E.2d 572 (Ga.App., 2003).
(:keywords charging order, foreclosure, foreclosing, forclosure, sale, sell, judicial sale, Georgia)
Opinion 2003 Georgia Foreclosure 2003GeorgiaStewartForeclosureSale
Related Article: None.
AI Synopsis
♦ Involved a protracted legal dispute between a medical office limited partnership and one of its limited partners, Richard Stewart, who also served as a tenant leasing professional office space from the entity. Stewart failed to comply with his obligations to pay agreed-upon rent and his share of operating expenses, eventually accumulating a significant arrearage exceeding eighty-seven thousand dollars. This led him to execute a promissory note in 1995 to evidence the debt. Following Stewart's default on the note and continued use of the office space, Lanier Park initiated litigation in 1997 to recover the balance due along with subsequent rent and costs. Stewart filed counterclaims seeking partnership dissolution, a full accounting, and damages for issues including breach of fiduciary duty. A jury ultimately awarded Lanier Park a total of $172,794 for the debt and attorney fees, plus an additional $20,150 for litigation costs due to Stewart's bad faith and stubborn litigiousness. While the trial court entered judgment on this verdict, it reserved the matters of final accounting and asset distribution for a later date. When Stewart failed to satisfy the judgment, the court granted Lanier Park's application for a charging order against Stewart's thirty percent partnership interest under O.C.G.A. section 14-9A-52 and subsequently ordered the foreclosure and judicial sale of that interest. On appeal, Stewart argued that Lanier Park was not yet a judgment creditor because the initial judgment was not final. The Court of Appeals of Georgia affirmed the trial court's decision, ruling that the judgment was final regarding Stewart's liability and that the partnership qualified as a judgment creditor. The court further held that the broad statutory language authorized judicial sale as a reasonable enforcement means when distributions alone would be ineffective, concluding that the trial court did not abuse its discretion. ♦
Stewart v. Lanier Park Medical Office Building, Ltd., 578 S.E.2d 572 (Ga.App., 2003).
A02A2188.
COURT OF APPEALS OF GEORGIA, THIRD DIVISION
259 Ga. App. 898;578 S.E.2d 572;
February 26, 2003, Decided
PRIOR HISTORY: [PAGE_1] Promissory note. Hall Superior Court. Before Judge Girardeau.
DISPOSITION: Judgment affirmed.
PAGE_ PAGE_ PAGE_
JUDGES: JOHNSON, Presiding Judge. Blackburn, P. J., and Miller, J., concur.
OPINIONBY: JOHNSON
OPINION: JOHNSON, Presiding Judge.
Lanier Park Medical Office Building, Ltd. is a limited partnership which was formed in 1982 by a group of physicians to own and manage medical office space. Richard Stewart is one of the limited partners, holding an interest of about 30 percent of the partnership. Under the terms of the partnership agreement, several of the limited partners, including Stewart, were to rent office suites in the buildings, and pay rent and a share of the operating expenses to the general partner, which is a hospital. The partnership was to last 15 years, until 1997, and then dissolve after the revenue bond which financed the construction of the buildings was repaid.
Stewart failed to pay the rent and expenses as agreed and, by February 1995, accumulated an arrearage of $ 87,687. That year, Stewart signed a promissory note evidencing his obligation to Lanier Park in the past due amount. In the note, Stewart agreed to make 11 payments of $ 5,000 and a balloon payment of $ 39,028. The note provided for ten percent [PAGE_2] interest per year on the principal balance. Stewart defaulted on the note, but continued to use the office space.
In 1997, Lanier Park filed suit against Stewart, seeking the balance due on the note, as well as rent and expenses which accrued after the note was signed. Stewart answered and counterclaimed, seeking dissolution of the partnership, an accounting, distribution of partnership assets, and damages for misrepresentation, breach of contract, and breach of fiduciary duty. The jury found in favor of Lanier Park, awarding it a total of $ 172,794 for money due on the note, additional rent and operating expenses, and attorney fees. The jury awarded Lanier Park an additional $ 20,150 for attorney fees and costs of litigation for bad faith and stubborn litigiousness. It found in favor of Lanier Park on Stewart's breach of contract and breach of fiduciary duty claims.
In March 2001, the trial court entered judgment on the jury's verdict, reserving for later determination Stewart's claim for a distribution of assets, and his request for a full and final accounting. Stewart filed an application for interlocutory review of that judgment, but this Court denied the application as untimely. [PAGE_3]
When Stewart failed to pay the judgment, Lanier Park moved for a forfeiture of Stewart's partnership interest, and a writ of fi. fa. was issued. Lanier Park then applied for an order charging Stewart's partnership interest in order to satisfy the unpaid judgment. n1 In defense, Stewart urged that the fi. fa. was entered improperly because the judgment at issue was not yet final.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n1 See O.C.G.A. § 14-9A-52.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
In February 2002, the court entered an order charging Stewart's interest in the partnership with the amount awarded in the March 2001 judgment and ordered that his partnership interest be foreclosed upon by judicial sale. Stewart appeals from the latest order.
1. Stewart contends that the trial court erred in granting Lanier Park a charging order against his partnership interest because Lanier Park was not a judgment creditor for purposes of O.C.G.A. § 14-9A-52. According to Stewart, the earlier judgment was not final inasmuch as two of his claims were [PAGE_4] still pending. We are not persuaded by Stewart's argument O.C.G.A. § 14-9A-52 provides, in relevant part, that on application by any judgment creditor of a limited partner, the court may charge the interest of an indebted limited partner with payment of the unsatisfied amount of the judgment debt.
It is true that the trial court's March 2001 judgment was not final as to all matters before the court. However, the judgment was final as to the issue of Stewart's liability to Lanier Park. Indeed, in its February 2002 order, the trial court reiterated that the judgment entered in March 2001 was final with regard to Stewart's obligation to pay Lanier Park $ 192,944, and that the only matters remaining were for a final accounting and possible distribution of assets. The court explained that Stewart's counterclaims had not been decided because of the practical impossibility of their resolution before Stewart paid the amount owed under the judgment. The trial court decided to enter a charging order in order to use Stewart's partnership interest toward payment of the debt, so that a proper distribution could then be made. It is clear that Lanier Park was a judgment [PAGE_5] creditor for purposes of O.C.G.A. § 14-9A-52. There was no error.
2. Stewart contends that the trial court erred in ordering a foreclosure and sale of his partnership interest because such would completely destroy his right to an accounting and distribution of partnership assets. We disagree.
Under O.C.G.A. § 14-9A-52, once a charging order has been entered, the trial court is authorized, in aid of the order, to appoint a receiver and make all other orders, directions, and inquiries which the circumstances of the case may require. n2 This broad language authorizes a trial court to order that a limited partner's charged interest be foreclosed by judicial sale. n3 Judicial sale may be appropriate where, for instance, it is apparent that distributions under the charging order will not pay the judgment debt within a reasonable amount of time. n4
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n2 Nigri v. Lotz, 216 Ga. App. 204, 205 (2) (453 S.E.2d 780) (1995).
n3 Id.
n4 Id.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [PAGE_6]
The trial court stated in the February 2002 judgment that the charging order entered in favor of Lanier Park would be ineffective without a judicial sale of Stewart's partnership interest, that, as a practical matter, issues regarding a final accounting and the distribution of partnership assets could not be decided until Stewart paid the debt he owed to the partnership, and that foreclosure was the only reasonable means of getting the debt paid.
The trial court has broad discretion in deciding whether to order a foreclosure and sale of charged interests. n5 The trial court indicated that Stewart's claim for an accounting and distribution of assets would be determined at a later date. Under the circumstances of this case, there was no abuse of discretion.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n5 Id.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
Judgment affirmed. Blackburn, P. J., and Miller, J., concur.