SMITH v. PERSICHETTI et al., 245 Ga. App. 357

Blackburn, Presiding Judge. In this contract dispute regarding the lease of certain real property with an option to purchase, Monroe E. Smith appeals the trial court’s grant of partial

summary judgment to John Persichetti and Michael O’Brien, contending that he should not be required to return a $125,000 down payment on the property to Persichetti and O’Brien after they elected not to exercise their option to purchase. For the reasons set forth below, we affirm the trial court’s finding that the down payment must be returned.

Summary judgment is proper when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. OCGA § 9-11-56 (c). A de novo standard of review applies to an appeal from a grant [or denial] of

summary judgment, and we view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant. Matjoulis v. Integon Gen. Ins. Corp. Viewed in this light, the record shows that the parties entered into a “Lease With Option To Purchase” on May 19, 1997.

This Lease provided as follows: The lease hereunder commencing May 19, 1997 and continues thence for a period of One (1) year, ending on the 1st day of July 1998. $2560.00 to be paid the St [sic] day of June 1997 and $4000.00 commencing on the 1st day of July 1997 and running for 12 months @ 4000.00 per month with $36,000.00 applied to the [principal] balance owed of $364,000.00. A downpayment of $125,000 ... is received on May 19, 1997.

Lessor herein grants to Lessee an exclusive option to purchase the property ... for a total purchase price of $525,000 . . ., $125,000 down payment, for a period of one (1) year from July 1, 1997. At the termination of their lease, Persichetti and O’Brien elected not to exercise their option on the property, basing their decision not to purchase on a lawsuit brought by another party against Smith raising title and marketability problems with the subject property. Persichetti and O’Brien then asked Smith to return the $125,000 down payment made by them, which Smith refused to do.

Subsequently, Persichetti and O’Brien sued Smith for the return of these funds and filed a motion for

summary judgment, which the trial court granted with regard to the $125,000 down payment. On appeal, Smith argues that this ruling was erroneous, contending that the contract was ambiguous with regard to the nature of the down payment. Smith further argues that the down payment was actually nonrefundable consideration paid by Persichetti and O’Brien to purchase the option.

Although Smith now argues that the payment was for an option priced in excess of 24 percent of the purchase price of the property, the record shows that he understood the payment to be “a down payment like you pay ... on a car” at the time the contract was executed, and his current claim is spurious. Even if we assume that the contract is ambiguous, as Smith contends, the rules of construction contained in OCGA § 13-2-2 support the trial court’s finding that the $125,000 down payment should be returned. OCGA § 13-2-2 (1) provides: “Parol evidence is inadmissible to add to, take from, or vary a written contract.

All the attendant and surrounding circumstances may be proved and, if there is an ambiguity, latent or patent, it may be explained.” In addition, “any ambiguity in the language [of the contract] must be construed against [Smith] as the drafter.” Asian Square Partners v. Ly. The contract in question was drafted by Smith. Beginning with OCGA § 13-2-2 (1) and applying these rules of construction to the matter at hand, parol evidence exists which indicates that Smith did not, as he now contends, consider the down payment of $125,000 as consideration for an option at the time the contract was signed.

In a deposition taken on September 25,1998, Smith was asked about his understanding of the nature of the $125,000 down payment. Smith responded: “That’s a down payment like you pay $10,000 on a car or something. That’s a down payment [toward the purchase price].” Smith was asked this question more than once, and each time his answer was the same, making no mention of consideration for an option. In contrast, when he was asked to characterize monthly payments of $4,000, Smith indicated that the full amount of each such payment was nonrefundable rent.

Smith points to an affidavit given by him seven months after his deposition to buttress his position. In this affidavit, which was attached to Smith’s response in opposition to the plaintiffs’ motion for

summary judgment, Smith reversed his characterization of the $125,000 down payment, describing it for the first time as “consideration for the exclusive option to purchase the property.” According to Prophecy Corp. v. Charles Rossignol, Inc., testimony given by a nonmoving party which contradicts other testimony given by that party will be construed against him on a motion for

summary judgment. With regard to the down payment in this case, Smith’s affidavit contradicts his deposition testimony, as the $125,000 payment cannot be both “a down payment like you pay $10,000 on a car” and “consideration for the exclusive option to purchase the property.” No explanation exists in the record which explains this contradiction. The conflict between Smith’s affidavit testimony and his deposition testimony must be construed against him. The dissent contends both that Prophecy does not apply in this case and that its application is irrelevant.

However, both Smith’s case and the dissent’s opinion depend on his affidavit. The dissent correctly finds that the term “down payment” is unambiguously defined as “a part of the full purchase price paid at the time of purchase or delivery with the balance to be paid later.” The dissent, however, then incorrectly construes the term “down payment” in favor of the drafter of the contract.

The dissent contends that the term “down payment,” notwithstanding its unambiguous definition, might encompass both “ ‘a part of the full purchase price paid at the time of purchase or delivery with the balance to be paid later,’ ” and a payment in consideration of an option. The only evidence that the $125,000 was a payment for the option is contained in Smith’s affidavit generated seven months after his depositions with which it conflicts, in response to appellees’ motion for

summary judgment. Because the affidavit is the only evidence of Smith’s contention, it is relevant, and, because it conflicts with his deposition and he is the nonmoving party, Prophecy requires that this conflict in evidence be construed against him. The purchase of an option to buy real estate creates a separate and distinct property right that is not a part of the real estate subject to that option. At the moment that the option agreement is entered into, the transaction is complete, and the full property right has passed.

On the other hand, when one makes a down payment on real property, one is making a partial payment for the subject property, and full ownership interest in the property does not pass to the buyer until the purchase price has been paid in full. Here, the purchase of the option to buy the subject parcel of real property was a different transaction from the purchase of the real property itself.

Applying the unambiguous definition described above, the $125,000 was to be applied as a down payment on the real property itself, upon the purchasers’ exercise of their option to buy such property, rather than the nonrefundable purchase price of the option. Employing the undisputed definition of “down payment,” they cannot be considered the same. As such, Prophecy applies. Moreover, the application of Prophecy is not irrelevant in this case. To describe his understanding of the nature of the down payment, Smith has proffered two conflicting

interpretations: (1) it was “a down payment like you pay $10,000 on a car” or (2) it was “consideration for the exclusive option to purchase the property.” Prophecy precludes us from considering the latter

interpretation. Therefore, we must limit our construction of the meaning of “down payment” to the content of Smith’s deposition. Therein, he stated that the down payment was like one made on a car. With regard to this

interpretation, Smith never deposed that this payment was nonrefundable, although, in the same deposition, he repeatedly characterized the payments of $4,000 a month as nonrefundable rent. In fact, Smith never described the down payment as a nonrefundable obligation until he was faced with a

summary judgment motion based on his deposition testimony. Prophecy will not allow Smith to alter his testimony regarding the nature of the down payment in order to defeat

summary judgment. Therefore, the trial court appropriately rejected Smith’s argument that he was entitled to keep the plaintiffs’ payment of $125,000 as consideration for an option to purchase the property and required that said sum be returned to Persichetti and O’Brien. The rules of construction require this result. Judgment affirmed. Johnson, C. J, Pope, P. J., and Phipps, J., concur. Eldridge, Barnes and Mikell, JJ, dissent. Matjoulis v. Integon Gen. Ins. Corp., 226 Ga. App. 459 (1) (486 SE2d 684) (1997). Asian Square Partners v. Ly, 238 Ga. App. 165, 167 (1) (518 SE2d 166) (1999). Prophecy Corp. v. Charles Rossignol, Inc., 256 Ga. 27, 30 (343 SE2d 680) (1986).