O'Brien Brothers' P'Ship, Llp v. Plociennik

• Decision Date: 28 September 2007
• Docket Number: No. 06-125.,06-125.
• Citation: 2007 VT 105,940 A.2d 692
• Parties: O'BRIEN BROTHERS' PARTNERSHIP, LLP v. Wioletta PLOCIENNIK d/b/a Gourmet Art of Vermont.
• Court: Vermont Supreme Court

940 A.2d 692

2007 VT 105

O'BRIEN BROTHERS' PARTNERSHIP, LLP v. Wioletta PLOCIENNIK d/b/a Gourmet Art of Vermont.

No. 06-125.

Supreme Court of Vermont.

September 28, 2007.

Heather Rider Hammond of Gravel and Shea, Burlington, for Plaintiff-Appellee.

Gary W. Lange of Swanson & Lange, LLP, Burlington, for Defendant-Appellant.

Present: REIBER, C.J., DOOLEY, JOHNSON and SKOGLUND, JJ., and CASHMAN, D.J., Specially Assigned.

¶ 1. DOOLEY, J.

Defendant, Wioletta Plociennik, appeals a declaratory judgment that she is liable under a personal guaranty to plaintiff, O'Brien Brothers' Partnership, LLP, for the lease obligation of Leroy Arts and Products, Inc. ("Leroy").^* Defendant contends that the personal guaranty accompanying the original lease agreement did not apply to the subsequent lease agreements. We agree and reverse.

¶ 2. On April 7, 1999, defendant, in her capacity as president of Leroy, signed a two-year lease with plaintiff for a building of 15,400 square feet. By its terms, the lease commenced on May 1, 1999 and ended on April 30, 2001. It contained no provision for the extension or renewal of the lease term, and section 24 of the lease specified that "[t]his lease contains the entire agreement between the parties and cannot be changed or terminated except by a written instrument subsequently executed by the parties hereto." It was signed by defendant as the authorized agent of Leroy.

¶ 3. In addition to the lease, defendant signed a personal guaranty to pay plaintiff "the monthly terms as agreed to in an executed lease dated 4-7-99 between [Leroy] (Lessee) and O'Brien Brothers Partnership (Lessor), the terms and conditions as set forth in said lease." The personal guaranty was not incorporated into the original lease, but was a separate document entitled "Addendum Number 1, Personal Guarantee."

¶ 4. On March 24, 2001, the parties signed another two-year lease agreement entitled "Amendment # 2 Lease Renewal Agreement." The 2001 agreement amended some of the terms of the lease to extend the lease from May 2001 through April 2003, increase the space being rented and set new rent and common area maintenance amounts. Defendant signed the agreement as duly authorized agent for Leroy. The guaranty was not amended, nor was a new guaranty signed.

¶ 5. On May 6, 2003, the parties executed "Amendment # 3 Lease Renewal Agreement," for the same space until April 2005. This agreement further increased the rent. Again, defendant signed as duly authorized agent of Leroy. Again, there was no modification of the original guaranty, and no new guaranty was signed.

¶ 6. Starting in January 2004, Leroy began to miss a significant number of rent payments. On August 12, 2004, during a meeting with plaintiff's representatives to address its concerns over Leroy's failure to pay rent, defendant stated that she was able to pay and presented her bank account balance and an appraisal of her residence. On August 30, 2004, defendant stated through her accountant that she was no longer bound by the terms of the personal guaranty, and plaintiff filed suit on September 27, 2004.

¶ 7. The sole issue before the superior court was whether the personal guaranty covered the duration of the third lease agreement, specifically May 2003 to April 2005. The parties disagreed about whether the second and third lease agreements were new leases or simply extensions of the original lease and whether the personal guaranty applied to those subsequent agreements. Plaintiff claimed that the personal guaranty signed in 1999 applied to the original lease as well as the two subsequent lease extensions and, therefore, defendant was personally liable for Leroy's failure to pay rent in accordance with the third lease. Defendant claimed that the personal guaranty was limited by its terms to the original two-year period from April 1999 to April 2001 and did not apply to the second or third leases.

¶ 8. The superior court concluded that defendant was liable under the terms of the personal guaranty for two reasons. First, the court found the language of the guaranty ambiguous because it could be read to apply exclusively to the lease executed on April 7, 1999, or, alternatively, it could be read to apply to both the original lease and the subsequent lease agreements. Turning to parol evidence, the court determined that the parties intended that the personal guaranty would bind defendant to the original lease as well as the subsequent agreements. In reaching this conclusion, the court focused on plaintiff's practice of obtaining leases from tenants who were not national companies, Leroy's frequent late payments during the first and second lease terms, defendant's failure to renounce the personal guaranty when she signed the second and third agreements, and defendant's statements at the meeting on August 12, 2004. Second, relying on authority from other jurisdictions the court concluded that defendant consented to an extension of the personal guaranty because she obtained the lease extensions, on behalf of Leroy. On appeal, defendant claims: (1) the superior court erred in allowing parol evidence because the language of the guaranty was unambiguous in that it applied only to the original lease, and (2) defendant's participation in negotiating and executing the new leases was insufficient, as a matter of law, to justify a finding that she personally consented to an extension of her obligations under the personal guaranty.

¶ 9. We begin with defendant's argument that the superior court erred in concluding that the language of the personal guaranty was ambiguous and in admitting and relying upon parol evidence to determine the intent of the parties. A contract term is ambiguous if "reasonable people could differ as to its interpretation." Trs. of Net Realty Holding Trust v. AVCO Fin. Servs. of Barre, Inc., 144 Vt. 243, 248, 476 A.2d 530, 533 (1984). The question of whether the language of a contract is ambiguous is a matter of law, which we review de novo. Downtown Barre Dev. v. C & S Wholesale. Grocers, Inc., 2004 VT 47, 118, 177 Vt. 70, 857 A.2d 263. The interpretation of an unambiguous contract is also a question of law, which we review de novo. Morrisseau v. Fayette, 164 Vt. 358, 366, 670 A.2d 820, 826 (1995). Although some evidence regarding the circumstances surrounding the making of a contract may be considered by the court to determine whether the provisions are ambiguous, Isbrandtsen v. N. Branch Corp., 150 Vt. 575, 578-79, 556 A.2d 81, 84 (1988), "those circumstances `may not be used to vary the terms of an unambiguous writing.'" Downtown Barre Dev., 2004 VT 47, 118, 177 Vt. 70, 857 A.2d 263 (quoting Kipp v. Chips Estate, 169 Vt. 102, 107, 732 A.2d 127, 131 (1999)). If the terms of the contract are plain and unambiguous, "they will be given effect and enforced in accordance with their language." KPC Corp. v. Book Press, Inc., 161 Vt. 145, 150, 636 A.2d 325, 328 (1993).

¶ 10. We conclude that, the language of the personal guaranty is unambiguous. The terms of the personal guaranty read as follows:

Wioleta E. Plociennik, grantor, absolutely and unconditionally guarantees and promises to pay to O'Brien Brothers Partnership (Lessor) or [its] order the monthly terms as agreed to in an executed lease dated 4-7-99 between [Leroy] (Lessee) and O'Brien Brothers Partnership (Lessor), the terms and conditions as set forth in said lease.

The language of the personal guaranty clearly states that it applies to the "executed lease dated 4-7-99" and that the promise is in accordance with the "terms and conditions" in that lease. Nothing in either the lease or the personal guaranty speaks of possible modifications, renewals or extensions of the lease obligations. Thus, the plain language of the guaranty unambiguously binds defendant personally to the required rental payments between April 1999 and April 2001, but does not continue the obligation beyond those required payments.

¶ 11. Without pointing to any other language, the trial court found ambiguity because the lease could be read "to include the lease as subsequently amended and extended by the parties." Such a reading expands the guarantor's obligation beyond what the language supports. This expansion of the obligation is particularly inappropriate because the obligation of the guarantor must be strictly interpreted in favor of the guarantor. See Stern v. Sawyer, 78 Vt. 5, 11, 61 A. 36, 38 (1905) ("Nothing can be clearer, both upon principle and authority, than the doctrine that the liability of a surety is not to be extended by implication beyond the terms of his contract." (citation and quotation omitted)); Dunn Indus. Group, Inc. v. City of Sugar Creek, 112 S.W.3d 421, 434 (Mo. 2003) ("[T]he liability of a guarantor is to be strictly construed according to the terms of the guaranty agreement and may not be extended by implication beyond the strict letter of the obligation."); White Rose Food v. Saleh, 99 N.Y.2d 589, 758 N.Y.S.2d 253, 788 N.E.2d 602, 603 (2003) ("A guaranty is to be interpreted in the strictest manner.").

¶ 12. We recognize that some decisions from courts in other jurisdictions have held that the guarantor remains liable for lease payments under lease extensions in similar circumstances. See, e.g., Handy Boat Service, Inc. v. Prof'l Servs., Inc., 1998 ME 134, ¶ 9, 711 A.2d 1306 see generally C.D. Sumner, Annot., Liability of Lessee's Guarantor or Surety Beyond the Original Period Fixed by Lease, 10 A.L.R.3d 582, § 3[a] (1966). In general, however, these decisions depend on language in the lease or the guaranty that is missing here. See Handy Boat Service, Inc., 1998 ME 134, ¶ 8, 711 A.2d 1306 (relying on lease language providing the option to extend the lease period). We conclude, consistent with numerous jurisdictions, that the better reasoned view is that a guaranty for a specific term does not apply to extensions or renewals of the lease unless the continuing obligation of the...