Daily Development for Thursday, June 28, 2001

Daily Development for Thursday, June 14. 2001

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

LANDLORD/TENANT; GUARANTORS; TERMINATION OF GUARANTY: When an owner of leased commercial property enters into a memorandum of settlement with the tenant's guarantor for past due rental amounts, unless reservation is made for the continuation of the guaranty, guarantor's obligation for future rental defaults is extinguished.

Mid Rivers Mall v. McManmon, 37 S.W.3d 253 (Mo. App. E.D. 2000).

The appellate court upheld the trial court's granting of a motion to dismiss in favor of the guarantors of a commercial lease.

Guarantors had guaranteed personally Tenant's performance under a lease with Landlord.. When Tenant defaulted on rental payments owed to the owner in 1998, the owner brought suit against both Tenant and the guarantors. The parties subsequently entered into a memorandum of settlement in that case, which stated "In satisfaction and full settlement of Count II, Guarantors . . . have made payment . . . on behalf of [Tenant], the receipt of which [Landlord] hereby acknowledges, said payment made pursuant to and in full satisfaction of the Guarantee . . ."

The next year, the tenant again defaulted, at which time Landlord brought the present suit against Tenant and the guarantors. The guarantors successfully filed a motion to dismiss, claiming that the settlement of the first case extinguished their guaranty obligations and barred the instant claims against them. The Court applied basic contract interpretation principles to the memorandum of settlement and agreed with the trial court that the plain language of the memorandum of settlement, as found in the document itself, indeed barred the present claims. "Full satisfaction" was held to mean just that the guaranty was therefore extinguished at the time of settlement and the guarantors were "completely discharged" of further lease obligations.

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