UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
17 Outlets, LLC
v. Civil No. 15-cv-101-JD Opinion No. 2016 DNH 167 Healthy Food Corporation, d/b/a Frozurt, and Tai H. Pham
v.
ThurKen III, LLC and Richard E. Landry, Jr.
O R D E R
17 Outlets, LLC brought suit against Healthy Food
Corporation, d/b/a Frozurt, (“HFC”) and Tai H. Pham after HFC
failed to pay rent due under a lease for commercial space in
Merrimack, New Hampshire. In its claim against Pham, 17 Outlets
sought to enforce a guaranty signed by Pham.1 Pham moves for
summary judgment, and 17 Outlets objects.
Standard of Review
Summary judgment is appropriate when the moving party
“shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). “A genuine dispute is one that a
reasonable fact-finder could resolve in favor of either party
1 HFC also brought a third-party complaint against ThurKen III, LLC and ThurKen’s manager, Richard E. Landry, Jr. and a material fact is one that could affect the outcome of the
case.” Flood v. Bank of Am. Corp., 780 F.3d 1, 7 (1st Cir.
2015). Although the facts and reasonable inferences are taken
in the light most favorable to the nonmoving party, unsupported
speculation and evidence that “is less than significantly
probative” are not sufficient to avoid summary judgment.
Planadeball v. Wyndham Vacation Resorts, Inc., 793 F.3d 169, 174
(1st Cir. 2015) (internal quotation marks omitted). “On issues
where the movant does not have the burden of proof at trial, the
movant can succeed on summary judgment by showing ‘that there is
an absence of evidence to support the nonmoving party’s case.’”
OneBeacon Am. Ins. Co. v. Commercial Union Assurance Co. of
Canada, 684 F.3d 237, 241 (1st Cir. 2012) (quoting Celotex Corp.
v. Catrett, 477 U.S. 317, 325 (1986)).
Background
The claims in this case arose from events that began when
ThurKen III, LLC (or another related entity) made arrangements
during the spring of 2012 to buy land to build a strip mall in
Merrimack, New Hampshire.2 The strip mall was to contain four
units leased to retail enterprises. On May 23, 2012, Orange
2 ThurKen III and Thurloe Kensington Corporation appear to be related entities. It is not clear which entity began the strip mall undertaking.
2 Leaf, a frozen yogurt shop and one of the four lessees, decided
not to lease a unit in the mall.
Through agents, Thurloe Kensington Corporation contacted
Tram Dang about leasing the vacant unit for her frozen yogurt
business and sent Dang a letter of intent. A personal guaranty
was required for the lease. Pham signed a guaranty agreement on
May 31, 2012, before the lease was signed.
The “Unlimited Guaranty,” which Pham signed, states that
the guaranty was “[t]o induce Landlord [Thurken III LLC] to
enter into a certain lease agreement of even or near date with
Tram Dang dba Frozurt, (‘the Lessee’), for real property located
in Merrimack, New Hampshire (the ‘Lease’).” Pham “absolutely
and unconditionally guarantee[d] the full and punctual payment
to Landlord of all sums which may be presently due and owing and
of all sums which shall now and in the future become due and
owing to Landlord from the Lessee, under the Lease.”
Pham signed the guaranty at his home on Long Island. He
did not see the lease or attend the closing on the lease the
next day when Tuan Dang signed the lease on behalf of HFC. Pham
signed the guaranty because of his family relationship to Tram
Dang’s mother, who is his cousin, as a matter of Vietnamese
tradition and duty. He had no information about the operation
of Tram Dang’s business and did not know the business was
incorporated.
3 The lease, which was signed the day after Pham signed the
guaranty agreement, identified HFC as the tenant and ThurKen III
as the landlord. Tuan Dang, the president of HFC, signed the
lease on behalf of HFC, and Richard E. Landry signed the lease
on behalf of ThurKen III. Tram Dang was not a lessee named in
the lease and did not sign the lease.
HFC moved into the strip mall unit and operated the Frozurt
business there. By spring of 2014, HFC was unable to continue
to make the payments required under the lease. 17 Outlets
served an eviction notice on HFC, which vacated the strip mall
unit sometime after October 3, 2014. When HFC did not pay the
rent due under the lease, 17 Outlets demanded the amount due
from Pham pursuant to the guaranty agreement. Pham denied that
he had any obligations under the guaranty agreement to pay what
HFC owed under the lease.
17 Outlets brings a claim that Pham breached his personal
guaranty promised in the guaranty agreement. It previously
moved for summary judgment in its favor on its breach of
guaranty claim. The court concluded, however, that material
factual disputes existed as to whether the guaranty agreement
was voidable because of a mutual mistake as to the identity of
the lessee and whether the parties entered an agreement at all
because of a lack of meeting of the minds. As a result, the
court denied 17 Outlets’s motion for summary judgment.
4 Discussion
Pham moves for summary judgment on the breach of guaranty
claim against him, arguing that 17 Outlets cannot prove the
claim because the guaranty is void and unenforceable as to HFC’s
lease obligations. In support, Pham refers to his arguments
made in objecting to 17 Outlets’s motion for summary judgment
and focuses on his argument that the guaranty agreement was void
because there was no meeting of the minds. 17 Outlets objects,
arguing that Pham and ThurKen III agreed that Pham would
guaranty Tram Dang’s obligations under the lease which formed an
enforceable agreement, that then the guaranty could be modified
without Pham’s consent, that Pham waived all suretyship
defenses, that the change in the identity of the lessee was not
material, and that the issue of intent cannot be resolved on
summary judgment.
I. Meeting of the Minds
“For a contract to be valid, there must be a meeting of the
minds on all essential terms of the contract, meaning that the
parties must have assented to the same contract terms.” Chase
Home for Children v. N.H. Div. for Children, Youth & Famlies,
162 N.H. 720, 727 (2011). “The formation of a guaranty
contract, like any other contract, is governed by the principles
5 of mutual assent, adequate consideration, definiteness, and
meeting of the minds.” Middileton Bldg. Supply, Inc. v. Gidge,
2000 WL 33915975, at *2 (N.H. Super. Ct. June 5, 2000) (internal
quotation marks omitted). The identity of the person or entity
whose obligations are being guaranteed, which is the subject
matter of the agreement, is a material term of the guaranty
agreement. See, e.g., In re Blonder, 2015 WL 5773230, at *7
(Bankr. N.D. Ga. Sept. 28, 2015); Elderberry of Weber City, LLC
v. Living Ctrs.-Southeast, Inc., 958 F. Supp. 2d 623, 628 (W.D.
Va. 2013); Lerman v. Rock City Bar & Grille, Inc., 2010 WL
2044865, at *4-*5 (N.D. Ohio May 21, 2010); Provident Bank v.
Taylor Creek Enters., LLC, 2010 WL 298300, at *3 (N.D. Fla. Jan.
19, 2010).
In the agreement, Pham agreed to guaranty the obligations
of Tram Dang as the lessee of the strip mall unit under a lease
with ThurKen III. The guaranty agreement identifies Tram Dang
as the lessee and ThurKen III as the landlord but does not
mention HFC. Tram Dang, however, was not the lessee when the
guaranty was signed and never became the lessee. Therefore,
Tram Dang did not have and never incurred any lease obligations
to ThurKen III for Pham to guarantee. Instead, the lease,
signed the next day by Tuan Dang, identified HFC as the tenant,
and HFC incurred the obligations under the lease.
6 On its face, the guaranty agreement does not cover the
lease obligations incurred by HFC. 17 Outlets provides no
evidence that despite the plain terms of the guaranty agreement
Pham and ThurKen III understood that HFC would be the lessee or
that Tram Dang and HFC were one and the same thing. Instead, it
appears to be undisputed that Pham did not agree to guaranty the
obligations of HFC when he signed the guaranty agreement.
Therefore, there was no meeting of the minds at the inception of
the guaranty agreement that Pham would guaranty the obligations
of HFC under the lease. Without more, Pham is not obligated
under the guaranty agreement to cover HFC’s obligations.
II. Guaranty Agreement as to Tram Dang
Taking a different route to save its claim against Pham, 17
Outlets argues that a guaranty agreement was formed when Pham
agreed to guaranty the lease obligations of Tram Dang to ThurKen
III. In support, it contends that Pham and ThurKen agreed that
Tram Dang would be the lessee and, therefore, a meeting of the
minds existed based on those terms. Then, 17 Outlets asserts,
under a provision in the guaranty agreement, Tram Dang and
Thurken III were allowed to modify their relationship by
changing the lessee to HFC without notice to Pham. 17 Outlets
also asserts that a waiver provision precludes all defenses to
the guaranty. Pham responds that no meeting of the minds
7 occurred so that the cited provisions of the guaranty agreement
are void.
The interpretation of a written contract is ultimately a
legal question for the court. Birch Broad., Inc. v. Capitol
Broad. Corp., 161 N.H. 192, 196 (2010). The court gives “the
language used by the parties its reasonable meaning, considering
the circumstances and context in which the agreement was
negotiated, when reading the document as a whole.” Signal
Aviation Servs., Inc. v. City of Lebanon, --- A.3d ---, 2016 WL
3532500, at *2 (N.H. June 28, 2016) (internal quotation marks
omitted).
The guaranty agreement identifies Tram Dang as the lessee
and identifies ThurKen III as the landlord. Pham agreed to
guaranty Tram Dang’s obligations under a lease with ThurKen III.
Therefore, an agreement was created that Pham would guarantee
Tram Dang’s obligations under a lease with ThurKen III.
A. Modification Provision in the Guaranty
Based on Pham’s agreement to guaranty Tram Dang’s
obligations, 17 Outlets contends that Pham now is required to
cover the obligations of HFC because a modification provision in
the guaranty agreement allowed Tram Dang and ThurKen III to
change the lessee to HFC without notifying Pham. 17 Outlets
relies on the following provision in the guaranty:
8 Guarantor also agrees: (1) that this Guaranty shall not be impaired by any modification, supplement, extension, renewal or amendment of any contract or agreement to which the parties thereto may hereafter agree, nor by any modification, increase, release or other alteration of any of the obligations hereby guaranteed or of any security therefore, nor by any agreement or arrangements whatsoever with the Lessee or anyone else, all of which may be done without notice to or consent by the Guarantor.3
17 Outlets contends that Tram Dang and ThurKen III modified
their landlord tenant relationship, referred to in the guaranty
agreement, with the lease that named HFC as the tenant. The
result, according to 17 Outlets, is that Pham is required to
guaranty HFC’s lease obligations.
The guaranty agreement, however, did not establish a
landlord tenant relationship between Tram Dang and ThurKen III.
No such relationship existed when the guaranty agreement was
signed, and Tram Dang never became the lessee, so that no
relationship between Tram Dang and ThurKen III was ever formed.
As a result, there was no relationship for Tram Dang and ThurKen
III to modify with the lease.
3 17 Outlets cites “DN 29-11 at 5” as the part of the guaranty agreement with the quoted provision. DN 29 is HFC’s objection to 17 Outlets’s motion for summary judgment and “29-11” is the affidavit of Tai H. Pham that was submitted in support of the defendants’ objection to 17 Outlets’s motion for summary judgment. The guaranty agreement was submitted as an exhibit to 17 Outlets’s motion for summary judgment, document number 16, exhibit 4, and was also submitted as Exhibit B to the complaint, document number 1, exhibit 2. The court has referred to those copies of the agreement.
9 In addition, Tram Dang was not a party to the lease. The
lease was signed by Tuan Dang, on behalf of HFC, and Richard
Landry, on behalf of ThurKen III. Therefore, Tram Dang did not
agree to the lease and, therefore, did not agree to change the
lessee named in the guaranty agreement by the terms of the
lease.4
The cases cited by 17 Outlets do not support their theory
of the application of the modification provision here. In WRS
Inc. v. Plaza Entm’t, Inc., 285 F. App’x 872 (3d Cir. 2008), the
surety guaranteed Plaza’s debts to WRS and the agreement
included a provision that WRS would have “the unrestricted right
to renew, extend, modify, and/or compromise any indebtedness and
to accept, substitute, surrender or otherwise deal with any
collateral security or other guaranties, without notice to the
undersigned and without affecting the obligation of the
undersigned hereunder.” Id. at 873. After the surety contract
was signed and in effect, WRS and Plaza entered into a services
agreement through which WRS performed debt collection and
accounting services for Plaza and Plaza’s obligations were
guaranteed by two other guarantors.
4 The court does not construe or assess the enforceability of the modification provision in the guaranty agreement but instead assumes the viability of the interpretation 17 Outlets provides.
10 The business arrangements failed, and WRS brought suit.
The surety argued that the services agreement materially
modified the arrangement between WRS and Plaza, which increased
the surety’s risk and rendered the surety agreement inoperable.
Id. at 875. The court agreed with WRS that the surety had
consented to the modification of the relationship between WRS
and Plaza through the quoted provision in the surety agreement.
Id. at 876.
Importantly, in WRS, Plaza, whose obligations were the
subject of the surety agreement, agreed to the services
agreement with WRS. Therefore, WRS and Plaza had a relationship
that was the subject of the surety agreement and then mutually
agreed to modify their relationship. There was no third party
involved. The issue in that case was whether events subsequent
to the surety agreement so changed the surety’s obligation as to
render the agreement inoperable.5
5 Similarly, in Black v. O’Haver, 567 F.2d 361, 369-70 (10th Cir. 1977), the O’Havers guaranteed payment under a Building Loan Agreement that was subsequently modified to include fees. The court found that the modification of the guaranty was covered by the provision in the agreement consenting to such modifications and was not “so far-reaching as to transform its essence.” Id. at 370. There was no issue about switching the entity who was the subject matter of the guaranty.
In Chicago Exhibitors Corp. v. Jeepers! Of Ill., Inc., 876 N.E. 2d 129, 137 (Ill. App. Ct. 2007), individuals executed a personal guarantee for obligations under a lease owed by certain tenants. The guarantors argued that their liability was discharged when the tenant assigned the lease obligations to
11 Here, Pham agreed to guaranty the lease obligations of Tram
Dang, to be incurred under a lease with ThurKen III. Tram Dang,
however, did not enter the lease with ThurKen III and did not
have a lease relationship with ThurKen III. As a result, the
lease did not alter Tram Dang’s relationship with ThurKen III
because there was no relationship to alter and because Tram Dang
was not a party to the lease. Therefore, the identify of the
lessee, for purposes of the guaranty agreement, was not changed
by the lease.
B. Suretyship Defenses
17 Outlets also contends that Pham waived defenses against
the guaranty based on a change of lessee from Tram Dang to HFC
because he waived all defenses to the guaranty agreement,
including suretyship defenses. The cited provision states:
“Guarantor waives: notice of . . .; and any and all defenses,
including without limitations, any and all defenses which the
Lessee or any other party may have to the fullest extent
permitted by law, any defense to this Guaranty based on
impairment of collateral or on suretyship defenses of every
type; . . . .” Pham responds that he is not raising defenses
successor tenants over whom the guarantors had no control. The court found that the guarantors, however, had expressly agreed to guaranty the obligations of the assignee of the lease and to allow the landlord to modify the lease. Id. at 138. In this case, however, no such specific agreements were made.
12 but instead asserts that no agreement to guaranty HFC’s
obligations existed.
As is explained above, Pham agreed to guaranty Tram Dang’s
obligations under the lease not HFC’s obligations. Tram Dang
never has had any obligations under the lease. The guaranty
agreement does not require Pham to guaranty HFC’s obligations.
In the absence of any agreement that Pham guaranteed HFC’s
obligations, no defenses are needed to avoid 17 Outlets’s claim
against Pham. Therefore, the waiver provision has no effect
here.
C. Material Change
17 Outlets contends that the substitution of HFC for Tram
Dang as lessee did not materially change the relationship
between Pham and ThurKen III so that the substitution did not
release his obligations as guarantor. The cases 17 Outlets
cites in support make clear that while “mere formalistic
changes” would not affect the obligations of a surety, “changes
in form of the entity whose debts are guaranteed” that have an
adverse impact on the degree of risk are material. State of New
York v. Int’l Fidelity Ins. Co., 547 N.Y.S. 2d 466, 468-69 (N.Y.
App. Div. 1989); see also Fairview Block & Supply Corp. v.
Miscioine, Inc., 563 N.Y.S. 2d 375, 376 (N.Y. App. Div. 1990).
13 Here, Pham agreed to guaranty the lease obligations of Tram
Dang individually, not HFC. HFC was not substituted as lessee
for Tram Dang because Tram Dang never was the lessee. In
addition, the record shows that Pham guaranteed Tram Dang’s
obligations because of their family relationship and his sense
of family duty. Pham states in his affidavit that he did not
know that HFC existed and would not have guaranteed the
obligations of HFC. Indeed, Pham did not guarantee the
obligations of HFC.
17 Outlets has not shown a factual dispute that Pham should
be deemed to have guaranteed HFC’s obligations under the lease
in the circumstances of this case.
D. Intent
17 Outlets argues that summary judgment is not appropriate
because Pham’s intentions in signing the guaranty raise material
factual issues. The meaning of the guaranty agreement is not in
dispute: Pham agreed to guaranty the obligations of “Tram Dang
dba Frozurt” as lessee of the strip mall unit from ThurKen III.
Pham’s reasons for doing so and his intentions in entering that
agreement do not change the meaning of the agreement, although
those reasons bolster the materiality of Tram Dang as the entity
guaranteed.
14 17 Outlets has provided no evidence to raise a factual
issue to contest the plain meaning of the guaranty agreement.6
For example, 17 Outlets has not provided evidence that Pham knew
Tram Dang operated her yogurt business through HFC or that he
understood that HFC would be the tenant, despite the language of
the guaranty. Instead, 17 Outlets challenges Pham’s credibility
and asks the court to presume that Pham was aware of the
business operations of HFC or would have guaranteed HFC, despite
his affidavit to the contrary. The court will not engage in the
suggested speculation, which in any case would be insufficient
to defeat the properly supported motion for summary judgment.
III. Summary
Pham did not agree to guarantee HFC’s obligations under the
lease with ThurKen III, because no meeting of the minds occurred
that HFC would be the lessee for purposes of the guaranty
agreement. Therefore, no guaranty agreement exists to cover
HFC’s lease obligations.
6 The motion for summary judgment was filed on May 2, 2016, and 17 Outlets filed its objection on August 19, 2016, after being granted two extensions of time for the purpose of conducting additional discovery to respond to the motion. To the extent 17 Outlets now suggests that it lacked an opportunity to challenge the credibility of Pham’s statements in his affidavit due to a lack of discovery, the record does not support that complaint.
15 Although Pham did agree to guaranty Tram Dang’s obligations
under a lease with ThurKen III, no such lease was ever signed,
and Tram Dang never incurred lease obligations. Because Tram
Dang had no lease relationship with ThurKen III and did not sign
the lease, the lease between HFC and ThurKen III did not modify
a preexisting relationship between Tram Dang and ThurKen III.
As a result, the lease did not substitute HFC for Tram Dang as
the lessee for purposes of the guaranty agreement.
Therefore, based on the undisputed facts and the meaning of
the guaranty agreement as a matter of law, Pham is not obligated
to guaranty the obligations of HFC to ThurKen III under the
lease. For that reason, Pham has not breached the guaranty
agreement. Pham is entitled to summary judgment in his favor on
17 Outlets’s claim of breach of personal guaranty against him.
Conclusion
For the foregoing reasons, Tai H. Pham’s motion for summary
judgment (document no. 35) is granted. Count II of the
complaint (document no. 1) is dismissed.
Summary judgment has been granted in favor of 17 Outlets on
Count I of its complaint and in favor of Pham on Count II.
Counts I and III of HFC’s third-party complaint against ThurKen
III and Richard Landry have been voluntarily dismissed, leaving
only Count II, alleging fraudulent misrepresentation. 17
16 Outlets’s claim against ThurKen III and Richard Landry for
fraudulent misrepresentation also remains in the case.
SO ORDERED.
__________________________ Joseph DiClerico, Jr. United States District Judge
September 16, 2016
cc: James F. Laboe, Esq. Christopher P. Mulligan, Esq. David K. Pinsonneault, Esq. Lisa Snow Wade, Esq.