Veterans Commercial Properties, LLC v. Barry's Flooring, Inc.
67 So. 3d 627, 2011 WL 2020784, 2011 La. App. LEXIS 656 (2011)
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Rule of Law:
When a contract contains a clear and unambiguous guaranty clause, an individual who signs that clause is personally bound as a surety for the principal debtor, even if the signature is accompanied by the name of the principal company, because to hold otherwise would render the guaranty clause meaningless.
Facts:
- On October 23, 2007, 3848 Veterans BLVD, LLC, as lessor, entered into a three-year commercial lease with Barry's Flooring, Inc., as tenant.
- The lease agreement contained a separate guaranty provision stating that the 'undersigned make themselves party to this lease and bind themselves in solido with Tenant...guaranteeing to Lessor...the payment of the rent.'
- Mr. Barry M. Wilbert signed the lease agreement twice: once for the tenant, and again below the specific guaranty provision, handwriting both 'Barry's Flooring' and his own name, 'Barry M. Wilbert'.
- Sometime after the lease was executed, Veteran's Commercial Properties, LLC purchased the property and assumed the lease.
- Barry's Flooring contended that increased tenant occupancy under the new ownership created unsustainable parking conditions for its customers.
- After failing to negotiate an amicable termination, Barry's Flooring vacated the leased property on May 1, 2009, eighteen months before the lease was set to expire.
Procedural Posture:
- Veteran’s Commercial Properties, LLC filed a petition for breach of lease and damages against Barry's Flooring, Inc. in a trial court.
- Veteran's subsequently amended its petition to add Mr. Barry M. Wilbert as a defendant, alleging he personally guaranteed the lease.
- Veteran's moved for summary judgment against both defendants.
- The trial court granted the motion in part, finding Barry's Flooring liable for breaching the lease but finding that Mr. Wilbert was not personally liable as a surety.
- Veteran's (appellant) appealed the portion of the trial court's judgment that absolved Mr. Wilbert of personal liability to the Court of Appeal of Louisiana, Fifth Circuit.
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Issue:
Does an individual's signature on a commercial lease's personal guaranty clause create personal liability as a surety for the company's debt, even when the individual also writes the company's name by their signature?
Opinions:
Majority - Fredericka Homberg Wicker
Yes. An individual who signs a clear guaranty clause within a lease is personally liable as a surety. The court reasoned that contract interpretation requires giving legal effect to all provisions of a written agreement according to the intent determined from the 'four corners of the instrument.' The guaranty clause in the lease was clear and unambiguous. To interpret Mr. Wilbert's signature on that clause as being only in his representative capacity for Barry's Flooring—which was already bound by the lease—would render the entire guaranty provision meaningless and worthless. Following the precedent of American Bank & Trust, the court concluded that the notation of the company's name next to the signature was merely for identification and did not negate the personal obligation created by the explicit language of the suretyship agreement.
Analysis:
This decision reinforces the legal principle that courts will interpret contracts in a way that gives meaning to all of their clauses, avoiding interpretations that render a provision superfluous. It establishes a strong precedent in Louisiana for holding individuals personally liable on guaranty agreements, even when they sign with a corporate identifier, unless there is clear language to the contrary. The ruling provides significant protection for creditors and lessors, making it more difficult for corporate officers to evade personal liability after signing a suretyship provision intended to secure a corporate debt. It serves as a caution to individuals signing on behalf of corporations to be acutely aware of the personal obligations they may be undertaking in separate guaranty clauses.
