Lease Guarantors’ Evidence Must Be More Than “Speculative”

Facts: A shopping center tenant breached its lease with the owner. The owner sued the two guarantors of the lease. The guarantors both argued to the trial court that they had been fraudulently induced to enter into the lease by the center’s previous owner. They also sought damages “suffered as a result of the fraudulent inducement to enter into the lease.” The owner and the guarantors each asked the trial court for a judgment in its favor without a trial. The court ruled in favor of the owner, determining that the guarantors were liable for breach of the lease, and dismissed the guarantors’ claim for damages. The guarantors appealed.

Decision: A New York appeals court upheld the trial court’s decision.

Reasoning: The appeals court decided that the owner had established its entitlement to a judgment in its favor without a trial based on the breach of the lease, noting that the guarantors failed to provide any evidence of the alleged fraudulent inducement. To establish fraudulent inducement, the guarantors were required to establish the existence of “a material representation, known to be false, made with the intention of inducing reliance, upon which the victim actually relies, consequently sustaining a detriment.”

Here, the guarantors’ allegations of fraudulent inducement were based upon the alleged representation of the center’s previous owner that the retail space adjacent to the location rented by the guarantors’ tenant had been “leased to others” when, in fact, the adjacent space was vacant. The guarantors further alleged that, if the adjacent space had been occupied, there would have been increased pedestrian and vehicular traffic in that section of the center, which would have resulted in “an acceptable economic environment” for [the tenant].

However, the guarantors couldn’t provide any evidence that a tenant occupying adjacent space would have produced an increase in customers or sales at the tenant’s store. The documents provided by the guarantors to support their allegations contained “nothing more than speculation and conclusory assertions that [the former owner’s] representation, even if untrue, resulted in a detriment to defendants,” the appeals court stressed. Such conclusory and speculative assertions were insufficient to prove their case, the appeals court concluded.

• Trahwen, LLC v. Ming 99 Cent City #7, Inc., May 2013