Cengage Advantage Books: Business Law Today, The Essentials 10th Edition by Roger LeRoy Miller

تمرين 8

Spotlight on Personal Guaranties
COMPANY PROFILE Tony Riviera founded Tony Maroni's, Inc., to sell Tony Maroni's Famous Gourmet Pizza in Seattle, Washington, in the late 1980s. Tony Maroni's began by offering pizzas, salads, calzones, and lasagna for delivery only. By 1995, the firm had begun franchising its brand (franchising will be discussed in Chapter 19). Two years later, with eleven locations in the Seattle area, including six franchise outlets, and ten more stores in development, the company announced plans to open five hundred locations nationwide before 2002. Despite these plans, by the end of 1997, the firm had yet to turn a profit and was nearly $1 million in debt.
FACTS Tony Maroni's, Inc., agreed to lease retail space owned by Wilson Court Limited Partnership. Tony Riviera, Tony Maroni's president, signed the lease for 1,676 square feet of space for a sixty-month term. When he signed the lease, Riviera also signed a guaranty agreement that was incorporated by reference in the lease.
On the signature line of the guaranty, Riviera wrote "President" after his name. The guaranty did not specifically identify who was bound, referring only to "the undersigned" or "Guarantor." Riviera also signed the lease in a representative capacity, but the lease clearly indicated that only Tony Maroni's was bound by its terms. When Tony Maroni's defaulted on the lease, Wilson filed a suit in a Washington state court against Tony Maroni's, Riviera, and others. Riviera asserted, in part, that he was not personally liable on the guaranty because he signed only in his capacity as a corporate officer. The court issued a summary judgment in favor of Wilson. Riviera appealed to the Washington Supreme Court.
ISSUE Was Riviera personally liable on the guaranty?
DECISION Yes. The Washington Supreme Court affirmed the judgment of the lower court.
REASON The state supreme court reasoned that if Riviera, the president, were not personally liable, the corporation would be the guarantor of its own lease. That conclusion would be commercially unreasonable because a party cannot be the guarantor of its own contract. The court pointed out that "any ambiguity in the Guaranty was created by Riviera" and "such ambiguity will be construed against Riviera as the party who drafted this language." The court noted that the "combination of circumstances" made the guaranty ambiguous. Nevertheless, by referring to three parties, including the "Guarantor," "the language of the Guaranty itself compels the view Riviera is personally liable." The court explained that "[i]f Riviera signed the Guaranty only in his representative capacity, Tony Maroni's would be both Tenant and Guarantor, rendering the Guaranty provisions absurd." Thus, "the very nature of a guaranty is such that Riviera created personal liability by his signature."
CRITICAL THINKING-Ethical Consideration Are there any circumstances in which a collateral document signed by a corporate officer to secure a corporate debt might not create personal liability? Explain.