Kan. City Live Block 125 Retail, LLC v. Bhakta

• Decision Date: 08 December 2015
• Docket Number: WD 78184
• Citation: 476 S.W.3d 326
• Parties: Kansas City Live Block 125 Retail, LLC, Respondent, v. Hamendra Bhakta and Daniel Bhakta, Appellants.
• Court: Missouri Court of Appeals

476 S.W.3d 326

Kansas City Live Block 125 Retail, LLC, Respondent,

v.Hamendra Bhakta and Daniel Bhakta, Appellants.

WD 78184

Missouri Court of Appeals, Western District.

Opinion filed: December 8, 2015

William J. Foland, for Respondent

Michael L. Baumberger, for Appellants

Before Division One: Anthony R. Gabbert, Presiding Judge, Victor C. Howard, Judge and Cynthia L. Martin, Judge

VICTOR C. HOWARD, JUDGE

Hamendra Bhakta and Daniel Bhakta appeal the judgment of the trial court in favor of Kansas City Live Block 125 Retail, LLC (KC Live), in its action against the Bhaktas for breach of a guaranty agreement. The Bhaktas contend that the trial court erred in entering judgment in favor of KC Live because KC Live failed to present sufficient evidence that (1) consideration supported the guaranty and (2) the conditions precedent to enforceability of the guaranty were satisfied. The judgment of the trial court is affirmed.

Factual and Procedural History

On September 29, 2008, KC Live, as landlord, and Albert Group, LLC, as tenant, entered into a commercial lease agreement. The lease granted Albert Group the authority to operate a Genghis Grill restaurant in a space in the Kansas City downtown Power & Light District. The lease provided for rent of $8,019 monthly (or $96,228 annually) and other charges. The lease also defined the parameters of an assignment or transfer of ownership, in pertinent part:

2301. Without prior written consent of Landlord ... Tenant shall not assign ... or permit the Premises or any part thereof to be used by others, or otherwise transfer ... this Lease or the Premises or any interest herein or therein. Neither the Premises, nor any part thereof, will be used, occupied or managed, or permitted to be used, occupied or managed, by anyone other than Tenant.... A sale, transfer, assignment, conveyance, endorsement or other disposition of ... a managing member's interest, if Tenant is a limited liability company or ... fifty percent (50%) or more (in the aggregate on accumulative basis) ... of the interest in capital, profits, or losses of Tenant (if Tenant is a ... limited liability company ...) shall be deemed to be an assignment of this Lease within the meanings of Section 2301.... Any other transaction that results in a change of operational control of Tenant ... shall also be deemed to be an assignment of this Lease within the meaning of this Section 2301....

The lease further provided that if KC Live consented to transfer of ownership, all parties must execute an agreement:

2307. Should Landlord consent to a Transfer, Tenant, its proposed Transferee and Landlord shall execute an agreement, prepared by or acceptable to Landlord in its sole reasonable discretion, under which the proposed Transferee shall be bound by the terms and conditions of this Lease ...

At the time the lease was executed, the president of Albert Group, Dan Albert, along with his wife, Katrina Albert, and JoAnne Sanchez signed a personal guaranty agreeing to guarantee and be responsible for all payments due from Albert Group under the lease.

Thereafter, as Albert Group got into the construction process and closer to opening the restaurant, it began having issues with financing and its contractors. KC Live became concerned about Albert Group's financial stability and wanted Albert Group to obtain $120,000 in additional funding to ensure sufficient funds to pay contractors and avoid the potential of liens being filed against the property. In late December 2008 or early January 2009, Albert Group began discussions with Hamendra Bhakta and Daniel Bhakta, who are brothers, regarding a Ghenghis Grill investment opportunity. Albert Group and the Bhaktas discussed the Bhaktas investment of $120,000 for a 30% interest in Albert Group. After learning that the Bhaktas would be providing funding and getting an ownership interest in Albert Group, KC Live requested the Bhaktas to guarantee the lease. The Bhaktas made an initial $60,000 payment to Albert Group in January 2009 and a second $60,000 payment at the time they signed the guaranty on March 11, 2009. The Guaranty provided, in pertinent part:

In order to induce Kansas City Live Block 125 Retail, LLC ("Landlord") to consent to a transfer to the undersigned of an interest in Tenant under that certain Lease (the "Lease") dated September 29, 2008, between Landlord and Albert Group, LLC ("Tenant") for the Premises ... and in consideration thereof and other good and valuable consideration, the receipt of adequacy of which is hereby acknowledged, the undersigned ("Guarantor") hereby unconditionally, absolutely and irrevocably guarantees to Landlord ... the prompt and full payment (and not merely the collectability) and performance and observance by Tenant of each and every item, covenant, condition, provision and obligation to be paid, kept, observed or performed by Tenant under the Lease, together with any and all costs and expenses, including reasonable attorneys' fees, which may be incurred by Landlord in connection with any default by Tenant under the Lease or enforcing the Lease and/or this Guaranty (collectively the "Obligations").

When the Guaranty was signed, the Bhaktas understood that the funds they were providing to Albert Group were needed to pay a down payment to a contractor to allow construction to begin. Moreover, KC Live did not have any information regarding what percentage of ownership interest Albert Group planned to transfer to the Bhaktas. No transfer of ownership had been initiated at the time the Bhaktas made payments to Albert Group, but the Bhaktas intended to get their ownership interest at some time in the future.

The Bhaktas never acquired an ownership interest in Albert Group. In April 2009, they learned of restrictions regarding a change of ownership in Albert Group's Small Business Administration (SBA) loan. The Genghis Grill opened in late June 2009. It went out of business in October 2011.

KC Live filed the underlying action for breach of guaranty against the Bhaktas in June 2010. It contended that the Bhaktas executed a personal guaranty for the lease between it and Albert Group, that Albert Group defaulted on the lease, and that the Bhaktas were liable for unpaid rent and other charges, which totaled over $1 million at the time of trial in August 2014.

Following a bench trial, the trial court entered judgment in favor of KC Live and against the Bhaktas in the amount of $1,166,367.30 plus attorney's fees and costs finding that as guarantors, the Bhaktas were liable for the amount due under the lease. This appeal by the Bhaktas followed.

Standard of Review

In their two points on appeal, the Bhaktas contend that the trial court erred in entering judgment in favor of KC Live because KC Live failed to present sufficient evidence that (1) consideration supported the guaranty and (2) the conditions precedent to enforceability of the guaranty were satisfied. In reviewing a court-tried case, the appellate court will affirm the trial court's judgment unless it is not supported by substantial evidence, it is against the weight of the evidence, or it erroneously declares or applies the law. Ivie v. Smith, 439 S.W.3d 189, 198–99 (Mo. banc 2014) (citing Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976) ). To be successful on their claim of insufficient evidence, the Bhaktas are required to demonstrate that the judgment was not supported by substantial evidence. J.A.R. v. D.G.R., 426 S.W.3d 624, 629 (Mo. banc 2014). Substantial evidence is evidence that, if believed, has some probative force on each fact necessary to sustain the trial court's judgment. Ivie, 439 S.W.3d at 199. "Evidence has probative force if it has any tendency to make a material fact more or less likely." Id.

In reviewing whether the trial court's judgment is supported by substantial evidence, the appellate court views the evidence in the light most favorable to the judgment and defers to the trial court's credibility determinations. Id. at 200. It accepts as true the evidence and inferences favorable to the judgment and disregards all contrary evidence. Id. The trial court is free to believe any, all, or none of the evidence presented at trial. Id. "All fact issues upon which no specific findings are made shall be considered as having been found in accordance with the result reached." Rule 73.01(c).

Discussion

A guaranty is a contract that must be supported by consideration. Boatmen's First Nat'l Bank of Kansas City v. Roofco Sys., Inc., 852 S.W.2d 402, 403 (Mo.App.W.D.1993) ; Henty Constr. Co. v. Hall, 783 S.W.2d 412, 418 (Mo.App.E.D.1989). A guaranty executed contemporaneously with the original contract may be considered part of the original contract and supported by the same consideration. Henty Constr., 783 S.W.2d at 419. If, however, a guaranty is executed subsequently to the principal contract, it requires a new and independent consideration. Kurtz v. Fischer, 600 S.W.2d 642, 646 (Mo.App.W.D.1980).

"Consideration consists either of a promise (to do or refrain from doing something) or the transfer or giving up of something of value to the other party." Baker v. Bristol Care, Inc., 450 S.W.3d 770, 774 (Mo. banc 2014) (internal quotes and citation omitted). Consideration for a guaranty need not move only between the creditor and guarantor. Boatmen's First Nat'l Bank, 852 S.W.2d at 403. Benefit to the debtor or detriment to the creditor constitutes sufficient consideration to support a guaranty. Id. at 403–4 ; Henty Constr., 783 S.W.2d at 418.

The guarantor need not receive any benefit from either the principal contract or the guaranty. Boatmen's First...