Daily Development for Thursday, January 21, 2010
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri
Another great contribution from Ira Meislik:
LANDLORD; TENANT: GUARANTEES: If a lease is intended to make the person signing on behalf of the tenant personally liable for the tenant's obligations, the lease must say so directly. Courts will not impose such liability just because the lease names the signatory as a guarantor without more.
Fairway Mortgage Solutions, Inc. v. Locust Gardens, 988 So.2d 678 (Fl. App. 4th Dist. 2008); July 30, 2008.
A tenant entered into a five year lease. Its president signed the lease, hand printing his name, and indicating that he was the tenant's president directly below the signature line. "Also below the signature line, closer to the bottom of the page," was a hand printed provision saying that the tenant's signature "above also indicates acceptance of personally guaranteeing [sic] this lease and is being freely given as per section 'G' of this lease." The president initialed each page of the lease including the page on which a schedule of lease terms listed the name of the tenant's president in the following context: "G. GUARANTOR FERNANDO RECALDE." Later in the lease, it defined the guarantor as "any 'Person' as hereinafter defined, who has executed or has agreed to execute any guarantee of tenant's obligations hereunder."
When the tenant stopped paying the rent, the landlord sued for possession, damages, and breach of guarantee. The tenant and its president responded with the defense that the president had signed the lease "solely as the president of the corporate tenant ... and not individually as guarantor." The president "attested that the hand written notation below his signature acknowledging him as guarantor was added after he signed the lease and without his knowledge or consent." The trial court found the president personally liable, and in doing so, it "expressly held that the hand written language found below [the president's] signature did not create a genuine issue of material fact."
The Appellate Court disagreed. It pointed out that the president had, in fact, raised "genuine issues of material fact concerning the personal guarantee." Under Florida case law, a "signature preceded by the word 'by' and accompanied by descriptio personae, that is, language identifying the person signing the document as a corporate officer or something similar, does not create personal liability for the person signing a contract to which he or she is not a specified party," unless "the contract contains language indicating personal liability or the assumption of personal obligations."
The Court focused on the language of the agreement itself. It pointed out that the printed provision near the beginning of the lease defined the guarantor as one "who has executed or has agreed to execute any guarantee of Tenant's obligations hereunder." It found no place in the lease or in any collateral document that the terms and conditions of the guarantee were defined or that had been executed by the president. Consequently, the landlord did not, in fact, have a valid claim against the tenant's president. Personal liability against the tenant's president would have to have been based on the disputed hand written language beneath the president's signature and not on the "standard" lease provision whose caption included the president's name. That provision contemplated the execution of a separate guaranty, but none had ever been executed.
Reporter's Comment 1: This is hardly a surprising result given the general notion that guarantees have to be in writing and are strictly construed against the obligee. What is surprising is that a lower court saw this otherwise to the point of ignoring, in a motion for summary judgment by the landlord, the president's testimony that the only language explicating the guaranty had been added to the document after its execution.
Reporter's Comment 2: Attorneys solely engaged in sophisticated practices may not realize that these types of lease provisions are common in "local" and landlord-prepared, small lease documents. Landlords using this style of hidden guaranty provision fear that if one clearly says what they mean, the tenant will not sign the lease.
Reporter's Comments 3: Not being there during whatever lease negotiations took place allows one to speculate that the tenant's president actually expected to be the guarantor given that his name appeared on the first page of the lease, in upper case letters, after the word "GUARANTOR." Even if the tenant didn't read the rest of the lease, this would have been in the same list where the rental amount and the length of the term was to be found. That makes it hard to miss.
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