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Tennessee Supreme Court Once Again Addresses Personal Responsibility/Guaranty for Commercial Leases

Posted on Sep 8 2016 3:45PM by Attorney, Jason A. Lee

The Tennessee Supreme Court has one again addressed a key issue that comes up often in commercial leases.  The question in this case, decided September 2, 2016, was whether an individual who signed the lease (in a peculiar way) was personally responsible for the terms of the commercial lease.  This case is MLG Enterprises, LLC v. Richard L. Johnson, 2016 WL 4582174 (Tenn. 2016).  In this case, the individual Defendant, Richard Johnson, signed a lease on behalf of the tenant as well as individually.  The key issue in this case was where Mr. Johnson signed the lease individually in such a way that made him personally obligated as a guarantor for the lease terms.  The Tennessee Supreme Court identified the key signature line as follows:

 

The third signature space, located on the right side of the Lease and below the second signature space, provides a signature line beneath which appears the typed text “Richard L. Johnson.” On this line is the handwritten signature “Richard L. Johnson” followed by the handwritten words “for Mobile Master Mfg. LLC.” To the left of this signature appears the typed text “EXECUTED BY Richard L. Johnson, THIS ___ DAY OF OCTOBER, 2007.”

  

As you can see, Mr. Johnson signed the lease individually but then added the words “for Mobile Master Mfg. LLC”.  The implication was that he was not signing on his own behalf but instead he was signing for the entity.  The Tennessee Supreme Court found that this modification of the signature was ineffective because it was contrary to the clear language in the lease.

 

The Court found that Mr. Johnson was liable under the lease because of the clear intent of the lease to hold him personally liable.  That is due to the fact that the preceding paragraph prior to the signatures contained the following personal guaranty language:

 

37. PERSONAL LIABILITY:

In consideration of Landlord entering into this Lease with Tenant, Richard L. Johnson hereby agrees that he shall be personally liable for all of Tenant's obligations under this Lease and executes this Lease for this purpose.

 

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TAGS: Corporation/LLC Law, Contracts Comments [0]
  
 
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Jason A. Lee is a Member of Burrow Lee, PLLC. He practices in all areas of defense litigation inside and outside of Tennessee.

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Tennessee Defense Litigation Blog
Jason A. Lee, Member of Burrow Lee, PLLC
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Nashville, TN 37203
Phone: 615-540-1004
E-mail: jlee@burrowlee.com

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