When A Good Guy Guarantor Does Everything Right and A Landlord Does Everything Wrong
March 31, 2023
My firm represented a guarantor of a commercial lease. The guaranty was a “Good Guy Guaranty”, whereby the guarantor could be released from liability for the defaulting tenant, if tenant gave landlord the proper notice and if tenant was current through the date of vacatur. Tenant was a single purpose entity, the business of which was destroyed by the Pandemic, and which had only debt and no assets. Tenant gave the proper notice to landlord and paid all the rent through the date of vacatur, including additional rent for real estate taxes billed in advance, that arguably were not even due at the time of vacatur.
Landlord, unhappy with the deal it had made, took the whole thing personally, and set a pointlessly aggressive lawyer after the guarantor. I represented the guarantor.
Landlord thought he would wear the guarantor down by tossing everything (including the kitchen sink) at him in the lawsuit. Landlord sued the guarantor for a bunch of completely inapplicable causes of action, not limited to but including:
- breach of lease (but the guarantor was not a party to the lease agreement);
- successor firm liability (but there was no successor firm, tenant entity merely folded);
- tortious interference with contract (really? you think the guarantor is a third party inducing the defaulting tenant away from a lease?);
- unjust enrichment (but you cannot have unjust enrichment when there is a contract between the parties, and a guaranty is a contract);
- accounting (but you can only get an accounting when there is a confidential relationship between the parties, which again, is never present in landlord and tenant context).
I brought a motion to dismiss the case against the guarantor and all nine of landlord’s causes of against the guarantor were dismissed.
What is the lesson? There are a couple. First, a deal is a deal. If a landlord is not going to be happy if a tenant pulls the trigger on his Good Guy Guaranty release, then do not make that deal. Second, the problem with vomiting nine inapplicable causes of action into a complaint and hoping the defendant will be scared into paying money it does not owe, is that tenant might hire someone like me, who knows abusive b.s. when she sees it. By the way, before I got his case dismissed, I offered opposing counsel to settle for the amount that the guarantor was about to pay me for the motion practice that got his case tossed out. He said…”no”. So, I got paid and his client did not (hey…I tried) and the guarantor who did everything right was protected from massive liability and (hopefully) will live happily ever after.