Court Decides If Managing Member Of Tenant LLC Liable As Guarantor
Y.B. Associates Group, LLC, as landlord, entered into a written agreement with nonparty Mount Vernon Social Adult Day Care Center, LLC, as tenant. whereby Associates leased a certain building to the Day Care Center. The lease was 20 pages in length and included 70 separately numbered paragraphs. Paragraph 68, which was on the second to last page of the lease, was entitled “Good Guy Clause,” and provided that, in the event of the tenant’s default in its obligations under the lease, including default in the payment of rent, the “undersigned . . . covenants and agrees” to perform the tenant’s obligations up to and including the “Release Date,” with such date defined as the date upon which the tenant surrendered possession of the premises.
The last page of the lease had two signatures, with the first signature placed on the line designated for “TENANT: Mount Vernon Social Adult Day Care Center, LLC,” and the second signature placed on the line designated for “LANDLORD: Y.B. Associates, LLC.” The first signature was acknowledged to be that of Oleg Rubin. Next to Rubin’s signature are the handwritten words, “managing member.” Below Rubin’s signature are two lines of typewritten text, the first of which reads, “By: Mount Vernon Social Adult Day Care Center Mtg Co., LLC, Managing Member,” and the second of which reads, “By: It’s [sic] Managing Member, Oleg Rubin.”
Associates commenced a summary proceeding for nonpayment of rent against the Day Care Center, which was settled by a stipulation. Thereafter, Associates caused a judgment to be entered against the Day Care Center.
Associates then commenced an action against Rubin by motion for summary judgment in lieu of complaint pursuant to CPLR 3213, to recover from Rubin the amount of the judgment against the Day Care Center, plus pre-judgment and post-judgment interest. Rubin opposed the motion and cross-moved for summary judgment dismissing the action. Supreme Court denied Associate’s motion and granted Rubin’s cross-motion. Associates appealed..
A member of a limited liability company cannot be held liable for the company’s obligations by virtue of his or her status as a member thereof. An agent executing a contract on behalf of a disclosed principal is not liable for a breach of the contract unless it clearly appears that he or she intended to bind himself or herself personally. There must be clear and explicit evidence of the agent’s intention to substitute or superadd his or her personal liability for, or to, that of his or her principal.
The obligation of a guarantor is, admittedly, a heavy one, and the courts should refrain from foisting such an obligation upon a party, who simply signs as agent, absent the requisite clear and unequivocal evidence, to be gathered from the writing itself, that he or she intended to assume such a liability. There is great danger in allowing a single sentence in a long contract to bind individually a person who signs only as a corporate officer.
Here, paragraph 68 of the 70-paragraph lease refers to an obligation incurred by the “undersigned.” Nowhere in the lease is Rubin, individually, or anyone else, identified as the “undersigned”. Instead, Rubin’s name appears only on the signature page of the lease, where he has signed as a “managing member,” on a line clearly designated to bind the Day Care Center to the terms of the lease. There was no second signature by Rubin clearly pertaining to the purported personal guaranty clause, as distinguished from Rubin’s execution of the lease on behalf of the Day Care Center. The tenant is unambiguously defined, in both the body of the lease and on the signature page, as Mount Vernon Social Adult Day Care Center, LLC. Accordingly, this was not a case of an individual merely adding his or her corporate title while signing a document that contains language in the body of the agreement identifying such person as an individual guarantor.
Under these circumstances, Supreme Court properly denied Associate’s motion for summary judgment in lieu of complaint and granted Rubin’s cross-motion for summary judgment dismissing the action.