A “good guy guaranty” is generally understood to be a limited personal guaranty for a lease obligation – an obligation that applies only to the time the entity tenant remains in occupancy prior to the return of the leased premises to the owner/landlord, at which point the personal obligation/liability ends.
“Good guy” and other guaranties are often the subject of contentious litigation. Six recent in Supreme Court, New York County, examples follow:
ET 46 Main St. LLC v. Lord & Guy, LLC, 2016 NY Slip Op 31473(U) (Sup. Ct. N.Y. Co., Kern, J.) [decided on July 27, 2016]
ET 46 Main Street LLC sued Lord & Guy, LLC and Gavin Abadi to recover unpaid rent claimed to be due pursuant to a commercial lease agreement (with Lord & Guy) and a personal guaranty (by Abadi).
The Court summarized the lease and the guaranty:
The relevant facts are as follows. On or about January 24, 2014, plaintiff, as landlord, entered into a commercial lease agreement (the “Lease”) with Lord & Guy, as tenant, for premises in a building located at 46 Main Street, East Hampton, New York (the “premises”). Pursuant to Article 3 of the Lease, “Tenant agrees to accept the Demised Premises in its ‘as in’ condition and acknowledges and agrees that Landlord shall not be responsible to perform any work, make any improvements, alterations or other modifications to the Demised Premises to prepare the same for Tenant’s occupancy.” Concurrently with the execution of the Lease, Abadi, a principal of Lord & Guy, entered into a personal guaranty of the Lease (the “Guaranty”). Pursuant to the Guaranty, “[t]he Guarantor [Abadi] hereby irrevocably and unconditionally guarantees, to Landlord and its successors and assigns, the full, faithful and timely payment, performance, and observance by Tenant [Lord & Guy] of all of the payments, covenants and other obligations of Tenant under or pursuant to the Lease in accordance with the terms herein.”
The subsequent developments:
In or around December 2014, Lord & Guy stopped making rent payments. Plaintiff mailed invoices addressed to Lord & Guy at the attention of Abadi on December 1, 2014, January 1, 2015, February 1, 2015, March 1, 2015 and April 1, 2015. Plaintiff has submitted the affidavit of Elie Tahari (‘Tahari”), the managing director of plaintiffs owner, stating that Lord & Guy failed to pay or object to any of the invoices. In response, defendants have submitted the affidavit of Abadi stating that he spoke with Ran Daniel (“Daniel”), plaintiffs in-house attorney and accountant, on many occasions beginning in December 2014 to object to “paying the rent” due to alleged misrepresentations made during the lease negotiations. Abadi’s affidavit further states that a Tiffany & Co. store was located across the street from the premises at the time of the negotiations, which was a critical factor in Lord & Guy’s decision to rent the premises, but that the Tiffany & Co. store vacated its space shortly after Lord & Guy’s took possession of the premises. Also, Abadi’s affidavit states that the condition of the premises “was not what was represented,” and that Lord & Guy spent $80,000.00 in repairs to make the premises usable.
In the present case, plaintiff has made a prima facie showing of its entitlement to summary judgment on its cause of action for breach of a personal guaranty against Abadi as it has submitted the Guaranty, which is absolute and unconditional, and the affidavit testimony of Tahari that Lord & Guy failed to pay rent from December 2014 to the present due and owing pursuant to the Lease and that Abadi also failed to pay said rent as required by the Guaranty.
In opposition, defendants have failed to raise a triable issue of fact. Defendants’ argument that Abadi should be excused from his obligation to pay rent under the Guaranty due to plaintiff’s alleged misrepresentation of the condition of the premises is without merit as it is completely belied by the terms of the Lease. The Lease explicitly states that the tenant accepts the premises “as is” and that landlord “acknowledges and agrees that Landlord shall not be responsible to perform any work, make any improvements, alterations or other modifications to the Demised Premises to prepare the same for Tenant’s occupancy.”
Defendants’ argument that Abadi should be excused from his obligation to pay rent under the Guaranty due to plaintiff’s alleged “misrepresentation” regarding the proximity of the Tiffany & Co. store is also without merit as Abadi’s affidavit does not allege that plaintiff made any representation whatsoever to defendants that the Tiffany & Co. store would be located near the premises during Lord & Guy’s tenancy or that plaintiff knew of the store, its location or any plans to vacate its location.
Further, defendants’ argument that plaintiffs damages should be reduced by the amount of the security deposit, which was retained by plaintiff, is without merit as the Guaranty explicitly states that “[t]he Guaranteed Obligations shall in no way be reduced or otherwise affected by any security deposit held by Landlord under the Lease, it being expressly agreed that the Guaranteed Obligations are in addition to the amount of any such security deposit.” Thus, defendants have failed to raise a triable issue of fact and the portion of plaintiff’s motion for summary judgment on its cause of action for breach of a personal guaranty is granted.
James Leonard 6, Inc. v. Six & Cornelia Assoc., 2016 NY Slip Op 31472(U) (Sup. Ct. N.Y. Co., Rakower, J.) [decided on August 1, 2016]
Six & Cornelia Associates leased space for an optician’s office to James Leonard, Inc. with performance of the lease guaranteed by Leon Folgen and James Zisman, former vice presidents of James Leonard. James Leonard defaulted under the lease and Six and Cornelia applied a $24,000 security deposit against a rent claim of $115,000 (app.).’’
The Court found that Six & Cornelia was entitled to a judgment against James Leonard in the full amount claimed (a sum in excess of the $24,000 security deposit).
The “good guy” guaranty provided that:
Under all circumstances, including Tenant’s default, and in addition to the security deposit posted under this Lease, Guarantor guarantees to Landlord the payment and performance of Tenant’s obligations under and in accordance with the Lease, including without limitation, (i) the payment of Fixed and Additional Rent which accrue under the Lease up to and including the date Tenant and any party claiming under Tenant vacate the entire Demised Premises, the delivery of the keys therefor and, at Landlord’s option, the execution by Tenant and delivery of an instrument of surrender and release … (emphasis added).
Folgen and Zisman claimed “that they are not liable for damages that occurred after the [James Leonard] vacated the premises in accordance with the Guaranty Agreement and not liable for the monetary damages and attorney’s fees.”
Six & Cornelia relied upon the words “without limitation” in the guaranty in a claim for expenses of reletting of space, including rent concessions and brokerage fees.
Folgen and Zisman argued that “they are only responsible for the Tenant’s obligations up to and including the date the Tenant and any party claiming under Tenant vacate the entire Demised Premises.”
And the Court concluded that:
The reletting expenses, including rent concessions, and broker’s fees occurred after the Plaintiff vacated the Premises and returned the key on May 15, 2015. Defendant does not dispute that Plaintiff returned the keys and vacated the entire premises. Therefore, when James Leonard vacated the property on May 15, 2015, Folgen and Zisman’s liability for future rent ceased.
115 W. 27th St. Assoc. LLC v. Perez, 2016 NY Slip Op 31588(U) (Sup. Ct. N.Y. Co., Kornreich, J.) [decided on August 19, 2016]
Plaintiff/landlord owned a building at 115-117 West 27th Street in Manhattan. Space on the fifth floor of the building was leased for a five-year term to non-party Roc The Mic LLC. Juan Perez signed a “good guy guaranty” with respect to the obligations of Roc The Mic.
The guaranty provided that Perez personally guaranteed the tenant’s obligation under the lease until the “surrender date”, defined to mean:
[T]he date that Tenant shall have performed all of the following: (a) vacated and surrendered the demised premises to Landlord (or its managing agent) free of all subleases or licensees and in broom clean condition, reasonable wear and tear, casualty and condemnation excepted, and Tenant has so notified Landlord or such agent in writing and (b) delivered the keys to the doors to the demised premises to Landlord (or its managing agent). (boldface in opinion)
The guaranty also provided that: “[o]n the Surrender Date, [Perez] shall be released and discharged from all liability with respect to any obligations of Tenant arising or accruing after the Surrender Date.”
Tenant purportedly vacated and surrendered the premises on March 5, 2015. Landlord rejected the purported surrender letter stating that:
Please be advised that Tenant’s Notice contains numerous inaccuracies, and to the extent that it purports to constitute a legal surrender of the Premises thereby alleviating Tenant of the obligation to pay past due rent and rent (or liquidated damages) not yet due, it is hereby rejected.
As an initial matter, Tenant did not abandon the Premises in March 5, 2015 as set forth in the Notice. Instead, Tenant abandoned the Premises handed over the keys to the Landlord on March 6, 2015. What’s more, contrary to the method of service described in the Notice, it was never served by “Hand Delivery.” [sic]
Landlord took the position that tenant was in breach of the lease and Perez was still liable under the guaranty.
More significantly, the Premises was not left by Tenant in “broom clean condition.” Instead, Tenant left numerous items of its property and garbage behind in the Premises, and the Premises was left in a state of disarray and disrepair. Among other things, the Tenant:
1) removed electrical wiring from the Premises (in violation of paragraph 117 of the Lease);
2) left the ceiling in a of [sic] state of disrepair (including, but not limited to, leaving holes in the ceiling from which wires were left dangling and were otherwise exposed; numerous holes in the ceiling);
3) left behind a pool table;
4) left behind a table, a long couch and a black sofa;
5) left behind metal shelves, wire racks, and a cabinet;
6) left electrical outlets dangling from the walls;
7) left behind a receptionist desk;
8) left behind garbage
While not exhaustive, the foregoing is sufficient to demonstrate that numerous items of Tenant’s property were abandoned in the Premises, and that the Premises itself and the electrical wiring were left in a condition that can only be described as being in an extreme state of disrepair. To state that the Premises was not left in a “broom clean in condition” would be an understatement.
In turn, tenant stated that:
Please be advised that your letters are hereby rejected as factually inaccurate and legally defective and incorrect. The surrender notices are fully effective. Tenant and Mr. Perez regard your letters as a continuation of the Landlord’s pattern of harassment and merely a cover to distract from the Landlord’s own breaches of the Lease. Among other things, the demised premises have been returned in better condition than at the inception of the Lease, the Landlord has expressly (through you) accepted the furniture that remained on site, and no wires that connect the building’s electrical system, to Tenant’s equipment were ever removed. We have documented all these matters and will have no difficulty so demonstrating if need be.
Landlord’ counsel subsequently left the following voicemail message with Perez’s attorney:
In response to your question. They [i.e. Tenant and Perez] can leave behind whatever sort of furniture they want, um and he’s [i.e. Landlord] okay with that, um but he also noted that he’s gonna be…We would like to review the Security Agreement, I’m sorry the Surrender Agreement uh preferably tomorrow or Wednesday at the latest because I think Joel won’t be in the office on Thursday so he wants to have that sort of hammered out beforehand. (boldface in opinion)
Any questions call me at [phone number omitted]. Thank you, Bye.
Landlord sued Perez based upon the guaranty. Landlord also asserted a claim to hold Perez personally liable for the tenant’s obligation under the lease regardless of Perez’s scope of liability under the guaranty.
The Court granted Perez’s motion to dismiss the complaint with respect to his personal liability under the lease beyond that which may have existed under the guaranty.
However, with respect to the guaranty, the Court concluded that:
Perez’s motion to dismiss the furniture related claims is denied. Leaving aside the question of whether the voicemail is admissible or constitutes documentary evidence, there are disputed facts regarding the state in which Tenant was obligated to surrender the premises. The single cited voicemail does not suffice to utterly refute Landlord’s claim that an agreement permitting Tenant to leave the furniture was never finalized. The full context of the parties’ negotiations should be produced in discovery before determining the parties’ agreement with respect to the furniture. Without such a factual record, it is premature to evaluate the merits of Perez’s waiver argument, which, it should be noted, is not necessarily precluded by the Lease’s requirement that amendments be in writing[.]
259 E. 10th St. Realty Assoc., L.P. v. Cowgirl’s Baking Inc., 2016 NY Slip Op 31643(u) (Sup. Ct. N.Y. Co., Rakower, J.) [decided on August 29, 2016]
259 East 10th St. Realty sued to recover rent and additional rent owed under a commercial lease from Cowgirl’s Baking Inc. Suit was also brought upon a “limited guarantee” against Lidia J. Byhower.
The “limited guarantee” provided in relevant part that:
- As an inducement to 259 East 10th St. Realty Assoc. (“Owner”) to enter into an Assignment of lease, dated August 13th, 2010 (the “Lease”) with Cowgirls Baking, Inc. (the “Tenant”), for East Store (Street Level) in the premises located at 259 East 10th Street, New York, New York (the “Demised Premises”), the undersigned, hereby absolutely, unconditionally and irrevocably guaranty to Owner until the last day of the month (the “Surrender Date”) in which the Tenant executes and delivers to Owner an instrument in recordable form whereby the Tenant surrenders of all Tenant’s rights under the Lease and delivers to Owner the Demised Premises vacant and in broom clean condition in accordance with the terms of the Lease, free of any subleases, licenses or occupants, and simultaneously therewith delivers the keys to the Demised Premises to the Owner. This guarantee shall relate to the payment of all annual rent, real estate tax increases, insurance premiums, water and electric charges, and for the cost of removing any mechanic’s liens through such Surrender Date. In addition, if Tenant shall not have paid all rent required to have been paid by Tenant pursuant to the Lease during the period through and including Surrender Date, the guarantor(s) agrees to pay to Owner a sum equal to the amount of concession granted to Tenant under the Lease. [emphasis added) by the Court].
- Any security deposit held by the Owner under the Lease shall not be credited against amounts payable by Tenant, or by Guarantor(s) under the terms of this Guarantee. The acceptance by Owner of payment by Tenant or Guarantor(s) or the acceptance of a such surrender of the Demised Premises shall not be deemed a release or waiver by Owner of any obligations of the Tenant under the Lease, and Tenant’s obligation of the Tenant under the Lease…shall survive such acceptance and surrender.
- This Guarantee is an absolute and unconditional and is a guarantee of payment and not of collection.
- Guarantor(s) agree that this Guarantee shall remain in force and effect as to any assignment, transfer, renewal, modification or extension of the Lease, whether or not Guarantor( s) shall have received any notice of or consented to such renewal, modifications, extension, assignment or transfer.
- The granting of any extension of time or the forbearance or failure of Owner to insist upon strict performance or observance or any of any of the terms of the Lease, or otherwise to exercise any right therein contained, shall not be construed as a waiver as against Tenant or Guarantor(s) under the Guarantee.
The Court granted Realty Associates’ motion for summary judgment against Byhower:
Plaintiff has made a prima facie showing of entitlement to summary judgment on its cause of action for breach of contract, pursuant to Guarantee. Hollander’s Affidavit, and the documentary evidence submitted, establishes that, for the period from August 2011 through January 2012, Byhower owes Plaintiff for unpaid base rent and additional rent (water/sewage and tax assessments) under the Lease [and] under the Guarantee in the total sum of $19,952.08, and for the two month rent concession provided at the Lease onset for September and October 2010 in the amount of $6,200. Pursuant to paragraph B of the Guarantee, the security deposit shall not be credited to this amount.
In opposition, Byhower attests in her affidavit, “Upon exiting the premises, I called my representative (Erik- Martin Hollander’s son) and he had specifically said that the deposit would go towards the delinquent rent and we were all ‘good.”‘ Byhower provides no written document that memorializes such an agreement or a modification of Byhower’ s obligations under the Guarantee. Byhower does not dispute that she executed the Lease and Guarantee and that she “evacuated the premises” and stopped paying rent in 2011. Byhower does not demonstrate that Tenant “execute[d] and deliver[ed] to Owner an instrument in recordable form whereby the Tenant surrenders [all of] Tenant’s rights under the Lease and delivers to Owner the Demised Premises vacant and in broom clean condition in accordance with the terms of the Lease, free of any subleases, licenses or occupants, and simultaneously therewith deliver[ed] the keys to the Demised Premises to the Owner” in accordance with the terms of the Guarantee. Furthermore, Byhower’ s arguments belies the very language of the Guarantee which states “[a]ny security deposit held by the Owner under the Lease shall not be credited against amounts payable by Tenant, or by Guarantor(s) under the terms of this Guarantee.”
And denied the landlord’s request for attorneys’ fees:
While Plaintiff also seeks attorneys’ fees from Byhower that Plaintiff has incurred in the non-payment proceeding and possession of the Premises ($2,223.20), and attorneys’ fees it has paid for the present collection action ($2,066), Plaintiff has failed to provide the basis for the relief requested. The Guarantee “shall relate to the payment of all annual rent, real estate tax increases, insurance premiums, water and electric charges, and for the cost of removing any mechanic’s liens through such Surrender Date.” Attorneys’ fees incurred in enforcing the Lease or the Guarantee are not listed in the Guarantee as part of Byhower’ s obligations or defined as “annual rent” under the Lease.
149 Madison LLC v. PSF Shoes Ltd., 2016 NY Slip Op 31726(U) (Sup. Ct. N.Y. Co., Edmead, J.) [decided on September 15, 2016]
149 Madison Avenue sued PSF Shoes to recover unpaid rent and additional damages, including re-letting expenses and attorneys’ fees pursuant to a commercial lease. And 149 Madison sued Steven Fuchs, Vice President of PSF Shoes, based upon his personal guaranty.
The Court summarized the facts:
149 Madison, as landlord, and PSF, as tenant, entered into the Lease for Room 401 (the “Premises”) within 149 Madison Avenue, New York, New York (the “Building”) beginning on January 1, 2011 and expiring January 31, 2018. Pursuant to the lease, PSF agreed to monthly payments for base rent, electric bills, taxes as additional rent, and, upon late payment, late charges and interest…The Lease also contained provisions requiring the payment of liquidated damages upon PSF’s premature surrender of the Premises…absolving 149 Madison of any obligation to mitigate its damages by re-letting the Premises but obligation PSF to pay for any expenses should 149 Madison choose to re-let (id.0, setting forth terms of early surrender…, and allowing 149 Madison to apply PSF’s $14,428.13 security deposit to any amount owed by PSF[.].
In conjunction with the Lease, Fuchs executed the Guaranty, thus accepting personal liability for PSF’s payments and obligations under the Lease. The Guaranty contained a “good guy clause” which released Fuchs from personal liability upon the satisfaction of three conditions: vacatur and surrender of the demises Premises, notification to the Owner or managing Agent in writing, and delivery of the keys to the Owner or Managing Agent.
On November 3, 2014, Fuchs, in his capacity as PSF Vice President, sent a letter to Alan Abramson (“Abramson”) of 149 Madison setting forth PSF’s intention to surrender the Premises on November 30, 2014, several years before the Lease’s end and “deliver the keys to the Leased Space to Landlord”…On or about that date, PSF vacated the Premises after paying Sh76yquiri Ternava (“Ternava”), an employee of 149 Madison, to return the Premises to broom clean condition. Frank Fuchs, an employee of PSF, gave Ternava the keys on or about the same date. 149 Madison re-let the premises just under a year, on or about November 1, 2015.
149 Madison subsequently filed this action. The Complaint’s first and second causes of action allege that PSF is labile to 149 Madison for monies owned under the Lease – the first for rent and additional damages, and the second for liquidated damages. Similarly, the third and fourth causes of action allege that Fuchs, as Guarantor, is personally liable for the same amounts. The fifth through ninth causes of action allege various fraud claims against Fuchs, alleging in sum and substance that Fuchs abused the corporate form and is thus personally liable. The tenth and eleventh causes of action request attorneys’ fees under the Lease against PSF and Fuchs, respectively.
PSF issues, and Fuchs moved to dismiss, several of the causes of action alleged in the complaint; and 149 Madison cross-moved summary judgment with respect to several of those claims.
As to the guaranty, the Court stated:
The Guaranty’s requirements differ from the Lease, but the result is ultimately the same as Fuchs failed to satisfy all of the conditions required by the Guaranty’s “good guy clause”.
On a motion for summary judgment to enforce a written guaranty, all that the creditor need to prove is an absolute and unconditional guaranty, the underlying debt, and the guarantor’s failure to perform under the guaranty[.]
The Guaranty unambiguously provides that:
“for value received, and in consideration for, and as an inducement to [149 Madison[ making the within lease with [PSF], [Fuchs] guarantees to [149 Madison]…the full performance and observance of all the covenants, conditions and agreements, therein provided to be performed and observed by [PSF], including the “Rules and Regulations’ as therein provided,…and the obligations of the guarantor hereunder shall in no way be terminated, affected or impaired by reason of the assertion by [149 Madison] against [PSF] of any of the rights or remedies reserved to [149 Madison] pursuant to the provisions of the within lease” (emphases added).
Having satisfied its burden to demonstrate a debt and guaranty, the only remaining issue is the Guaranty’s “good guy clause”, which Fuchs claims to have satisfied, thereby absolving him of personal liability. That clause, reproduced here exactly as it was provided to the Court…
Anything herein and contained to the contrary notwithstanding upon Tenant’s (a) having vacated and surrendered the demised premises to Owner free of all subleases or licenses and in a broom clean condition and (b) having notified owner or Managing Agent in writing and (c) delivered the keys to the demised premises to the Owner or its Managing Agent, Guarantor shall not be liable under this guarantee to pay rent, additional rent or other charges or payments accruing under the lease after the date of said surrender.
According to Fuchs, the striking of “and as otherwise provided by the lease” superseded the Lease’s more onerous requirement that 149 Madison consent in writing to the surrender. 149 Madison disputes Fuchs’ version of events, arguing that it never agreed to strike that portion of the Guaranty and pointing to the fact that the struck portion was not initialed as found elsewhere in the Lease[.]
Whatever the precise sequence of events, the significance of the stricken (or unstricken) language is a red herring. The parties do not dispute the relevant facts: that PSF vacated the Premises in broom clean condition, notified 149 Madison in writing of the surrender, and – most importantly for analysis here – provided the keys to Ternava, 149 Madison’s superintendent.
And the applicable law:
Generally speaking, giving keys to a janitor or superintendent in and of itself will not effect a surrender and acceptance…This rule is distinct from circumstances where, for example, an agent’s knowledge alone may be imputed by statute to the agent’s principal[.]
Nor did Ternava have apparent authority to bind 149 Madison through his actions. Apparent authority is created by the “words or conduct of the principal, communicated to a third party, that give rise to the appearance and belief that the agent possesses authority to enter into a transaction”…Significantly, “the agent cannot by his own acts imbue himself with apparent authority id. [emphasis added]). “Rather, the existence of ‘apparent authority’ depends upon a factual showing that the third party relied upon the misrepresentation of the agent because of some misleading conduct on the part of the principal – not the agent”[.].
The actions allegedly taken by 149 Madison to re-let the Premises and a statement by 149 Madison that Ternava would meet with Fuchs near the time of the surrender…, did not delegate, explicitly or otherwise, authority to Ternava to accept keys on 149 Madison’s behalf. Defendants cite only their own actions and assumptions: paying Ternava in cash to ensure that the Premises were left in broom clean condition and giving Ternava the keys. Most significantly, Fuchs’ own affidavit undermines his argument by admitting that “:No one from [149 Madison] every told me or distinguished to me that I had to deal with people at [149 Madison] other than Mr. Ternava (or [the previous superintendent]) with respect to the Leased Space, except with respect to being told to contact the office of [149 Madison] if I had questions with respect to rental obligations under the [L]ease”…(emphasis added). Giving terms their plain meaning, “rental obligations” unambiguously refers to the obligation to pay rent, including, logically, the conditions required to dissolve that obligation. Defendants’ additional submission, the letter to Abramson informing the latter of PSF’s surrender, similarly undermines Defendants’ argument by acknowledging that “Tennant [sic] shall deliver the keys to the Lease Space to Landlord”…Thus, there was no surrender by operation of law.
And even crediting Fuchs’ version of events, Fuchs did not introduce an issue of fact as to his satisfaction of the good guy clause’s requirement that the surrender of keys be made to the “Owner or Managing Agent” because Ternava, an employee of 149 Madison, qualifies as neither. Accordingly, Fuchs is personally liable for PSF’s financial obligations under the Guaranty.
345 E. 69th St. Owners Corp. v. Platinum First Cleaners, Inc., 2016 NY Slip Op 31736(U) (Sup. Ct. N.Y. Co., Ostrager, J.) [decided on September 19, 2016]
345 E. 69th Street (owner) and 69th St. (“sublessor”) of a cooperative building sued Platinum First Cleaners, sub-lessee of a first floor commercial space, and Kenneth Huang and Daisy Huang, as guarantors of the lease.
Supreme Court summarized the parties:
The co-plaintiffs are 345 East 69th Street Owners Corp., the owner of a cooperative building located at 345 East 69th Street, New York, New York, and 69th Street Realty Corp., the sub-lessor of first floor commercial space at the building…The defendant Platinum First Cleaners, Inc. d/b/a Splendid Cleaners (“Platinum”) is a dry cleaning business that operated at a portion of the of the first floor commercial space of the building…The defendants Kenneth Huang and Daisy Huang, principals and shareholders of Platinum…had signed a sublease agreement dated July 13, 2000 on behalf of Platinum, as well as a guaranty agreement dated July 13, 2000…The sublease agreement commenced on July 13, 2000 and was scheduled to expire on June 30, 2014 (“the Sublease Expiration”)[.]
Recited the terms of the guaranty:
The undersigned (“Guarantor”) hereby guarantees to Owner (as hereinafter defined), its successors and assigns, under that certain Sublease dated June 13, 2000 as same may be amended from time to time, (“Sublease”) by and between 69th STREET REALTY CORP., as owner (“Owner”), and PLATINUM FIRST CLEANERS, its successors and/or assigns, as tenant (“Tenant”), the timely payment of all Fixed Rent, Additional Charges and other obligations of Tenant of whatever nature under the Sublease, which guaranty shall be primary, absolute, and unconditional, and not subject to counterclaim, offset, deduction, credit or defense of any nature whatsoever, except to the extent of Owner’s default under the Non-Disturbance Agreement among Owner, Tenant and East 69th Street Dry Cleaners, Inc. dated June 13, 2000…that may arise during the period commencing on the date of the Sublease through and including the date Tenant vacates the premises and fulfills its obligations with respect thereto through the date of Tenant’s vacating in accordance with the provisions of the Sublease (including, without limitation the payment of all Fixed Rent and Additional Charges due with respect to such period) and leaves same in broom clean condition free and clear of all liens, encumbrances, tenancies, subtenancies and/or rights of occupancy, whether claiming by, through or under Tenant or Guarantor or otherwise and delivers the keys and unencumbered possession of the premises to Owner. (emphasis added).
Synthesized the issue before the Court:
It is undisputed that Platinum vacated the premises on or before June 30, 2012…prior to the Sublease Expiration…The issue here is whether the [Kenneth Huang] is personally liable under the guaranty for alleged unpaid rent, additional rent, and other fees and expenses in the amount of $609,517.51 allegedly owed to the Plaintiffs[.]
Summarized the positions of Platinum and Huang on cross-motions for summary judgment:
[H]uang argues that Platinum was current on its rent obligations to the Plaintiffs through the Surrender Date…Huang further argues that he signed a “good guy” guaranty, and since Platinum has complied with all payment and other obligations under the sublease, he is relieved of personal liability under the “good guy” guaranty…Huang has not furnished any cases to support his contention that the guaranty contains a “good guy” clause or any specific language to suggest it was a “good guy” guaranty…Instead, Huang asks this Court to read the guaranty agreement as a “good guy” guaranty because the Court must construe a contract in favor of the non-drafting party [Huang] if it contains ambiguities[.]
Summarized the argument in support of the Landlord’s cross-motion for summary judgment:
[P]laintiffs assert that the executed guaranty agreement was not a “good guy” guaranty but rather a full and unconditional guaranty, and Huang is therefore personally liable through the Sublease Expiration date. To support their contention, the Plaintiffs point to the plain language of the guaranty and several Appellate Division, First Department and Second Circuit cases…The Plaintiffs argue that Huang is personally liable for Platinum’s obligations under the sublease until its expiration on June 30, 2014.
Found that the guaranty of the lease was not a “good guy” guaranty:
The guaranty at issue is not a “good guy” guaranty but rather a full and unconditional guaranty. A “good guy” guaranty typically contain[s] a so-called “good guy” clause, limiting the guarantor’s liability to the date until the tenant of the premises actually vacates or surrenders the premises…The following is an example of a “good guy” clause: “Notwithstanding anything herein to the contrary, Guarantor’s obligations herein shall only be applicable with respect to period [sic] prior to such time as Owner obtains vacant, unencumbered possession of the Demised Premises, free and clear of all tenants, subtenants and occupants”[.]
And held that Huang’s guaranty was primary, absolute and unconditional:
The guaranty agreement that Huang had executed clearly and unambiguously states that the guaranty is primary, absolute, and unconditional. The guaranty does not contain a clause or language limiting the guarantor’s liability to the actual surrender date. What is more, the guaranty expressly states the guarantors’ liability shall remain until the tenant vacates and fulfills its obligations under the sublease. Thus, Platinum breached the sublease agreement by vacating prior to the Sublease Expiration date, and the defendant Kenneth Huang is personally liable under the guaranty.
Lessons learned: Our Courts often carefully review and narrowly construe the terms and conditions of personal guarantees of a tenant’s obligations under a commercial lease – so such guarantees should be drafted with precision and care. And even the enforcement of a meticulously-crafted guaranty may be stymied by questions of fact as to the circumstances at the time of the tenant’s departure.