Personal Lease Guaranty Was Ambiguous

Facts: A coffee shop tenant signed a lease for space in a strip mall, and signed a personal guaranty, promising that he would be financially responsible if the lease were defaulted on. The tenant later sold the coffee shop. When the new coffee shop tenant stopped paying rent, the owner sought payment from the guarantor. A district court agreed with the owner that the guarantor was responsible for the rent. The guarantor appealed.

Decision: A Minnesota appeals court upheld the lower court’s decision.

Reasoning: The guarantor asserted that he wasn’t liable under the personal lease guaranty, because he was no longer the tenant and the coffee shop had been purchased by another party. He argued that when his business—whose performance he originally guaranteed—was released from the lease when the business was sold, his personal liability ended as well. But the appeals court disagreed. It said that because the lease guaranty was ambiguous and the lower court’s factual determination that the parties didn’t intend to release the guarantor from his guaranty obligations wasn’t clearly erroneous, it upheld the lower court’s decision.

• Southcross, LLC v. Meridius Co., LLC, March 2014