UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
17 Outlets, LLC
v.
Healthy Food Corporation, d/b/a Forzurt, and Tai H. Pham Civil No. 15-cv-101-JD Opinion No. 2016 DNH 063 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, that is subject to a guaranty signed
by Pham. HFC brought a third-party complaint against ThurKen
III, LLC and ThurKen’s manager, Richard E. Landry, Jr., arising
from the original lease agreement with ThurKen. 17 Outlets
moves for summary judgment on its claims against HFC and Pham.
HFC and Pham do not dispute that HFC failed to pay rent but
object to the motion for summary judgment on the claim against
Pham based on the guaranty, which they claim is unenforceable. 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
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). Reasonable inferences are taken in the light most
favorable to the nonmoving party, but 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).
Background
ThurKen purchased a four unit strip mall on June 1, 2012.
Prior to the purchase, ThurKen arranged to lease all four units.
HFC and Pham believe that ThurKen was under pressure to have the
four units in the business center leased by May 31, 2012, in
order to close on the purchase of the property. On May 23,
2012, Orange Leaf, a frozen yogurt business, decided not to
lease the space in the mall, as originally planned.
2 Richard Landry, as manager for ThurKen, then contacted Tram
Dang about HFC leasing the space because she had expressed
interest in leasing space for a Frozurt store. On May 31, 2012,
Tuan Dang signed a lease for commercial space in the mall, on
behalf of HFC d/b/a Frozurt, as president and treasurer of HFC.1
ThurKen was the lessor, and Landry signed the lease as manager
of ThurKen. Under the terms of the lease, HFC was required to
pay monthly rent and other amounts for a lease period of fifteen
years.
On the same day, Pham signed an agreement titled “Unlimited
Guaranty.”2 The guaranty stated that it was provided “[t]o
induce Landlord 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.” 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 also agreed to other provisions in the guaranty.
1 Tuan and Tram Dang are brother and sister.
2 Pham signed the guaranty at his home on Long Island, not as part of the closing on the lease. Pham states that he never saw the lease and signed the guaranty because of Vietnamese family duty.
3 In support of its motion for summary judgment, 17 Outlets
submitted a copy of the “Business Entity Summary” for HFC filed
with the Corporations Division of the Secretary of State’s
Office for the Commonwealth of Massachusetts. The Summary lists
Tram Dang as president, treasurer, secretary, and director of
HFC. Although the Summary is undated, counsel for 17 Outlets
represents that the document appeared on the Secretary of
State’s website on November 16, 2015. In response, HFC and Pham
submitted a copy of a “Statement of Change of Supplemental
Information” for HFC from the Secretary of State’s Office, that
is dated May 3, 2012, that lists Tuan Dang as HFC’s president,
treasurer, secretary, and director.
17 Outlets purchased the property from ThurKen on April 17,
2014, pursuant to a document titled “Assignment and Assumption
of Lease Agreements.” After the purchase, HFC failed to pay
rent beginning in May of 2014. 17 Outlets served a demand for
rent and an eviction notice on HFC on October 3, 2014. HFC has
vacated the leased space.
Part II, Section 17(c)(i) states that in the event of
default, the stated fixed and additional rents become due and
are required to be paid. Section 17(c)(iii) imposes as
liquidated damages the deficiency between the amount of rent
owed and the amount the landlord received by re-letting the
4 space. The lease also provides for costs and attorneys’ fees to
the prevailing party in proceedings under the lease. Part II,
Section 38(f).
Discussion
17 Outlets brings a claim of breach of contract against HFC
and a claim of breach of guaranty against Pham. HFC does not
contest the breach of contract claim against it. Pham contends
that he did not breach the guaranty because it is unenforceable.
A. Breach of Contract
HFC does not object to summary judgment on the breach of
contract claim against it and does not contest that it is liable
to 17 Outlets under the terms of the lease. Therefore, 17
Outlets is entitled to summary judgment on the breach of
contract claim against HFC.
B. Breach of Guaranty
17 Outlets moves for summary judgment on the breach of
guaranty claim against Pham. 17 Outlets contends that HFC has
defaulted under the lease, making Pham liable for the amounts
due pursuant to the guaranty. Pham argues that he is not liable
because the guaranty is voidable due to a mutual mistake, that
no guaranty agreement was reached, and that under a strict
5 construction of the guaranty he did not guarantee HFC’s
obligations. 3
A guaranty agreement is governed by contract law. See Fleet
Bank-NH v. Christy’s Table, Inc., 141 N.H. 285, 289 (1996).
Therefore, “[a] guarantor’s exposure to liability depends upon
the terms of the contract.” BankEast v. Michalenoick, 138 N.H.
367, 369 (1994).
“The interpretation of a contract is a question of law to
be determined by focusing on the language of the written
contract, as it reflects the intent of the parties, . . . [and]
[t]his intent is determined from the agreement taken as a
whole.” Id. The obligation of a guarantor depends on what “the
fair import of the language used imposed on [the guarantor].”
Manchester Bank v. Indus. Dev. Auth., 119 N.H. 14, 16 (1979)
(internal quotation marks omitted). A personal guaranty that is
“clear and explicit” and shows an intent by the guarantor to be
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
17 Outlets, LLC
v.
Healthy Food Corporation, d/b/a Forzurt, and Tai H. Pham Civil No. 15-cv-101-JD Opinion No. 2016 DNH 063 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, that is subject to a guaranty signed
by Pham. HFC brought a third-party complaint against ThurKen
III, LLC and ThurKen’s manager, Richard E. Landry, Jr., arising
from the original lease agreement with ThurKen. 17 Outlets
moves for summary judgment on its claims against HFC and Pham.
HFC and Pham do not dispute that HFC failed to pay rent but
object to the motion for summary judgment on the claim against
Pham based on the guaranty, which they claim is unenforceable. 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
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). Reasonable inferences are taken in the light most
favorable to the nonmoving party, but 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).
Background
ThurKen purchased a four unit strip mall on June 1, 2012.
Prior to the purchase, ThurKen arranged to lease all four units.
HFC and Pham believe that ThurKen was under pressure to have the
four units in the business center leased by May 31, 2012, in
order to close on the purchase of the property. On May 23,
2012, Orange Leaf, a frozen yogurt business, decided not to
lease the space in the mall, as originally planned.
2 Richard Landry, as manager for ThurKen, then contacted Tram
Dang about HFC leasing the space because she had expressed
interest in leasing space for a Frozurt store. On May 31, 2012,
Tuan Dang signed a lease for commercial space in the mall, on
behalf of HFC d/b/a Frozurt, as president and treasurer of HFC.1
ThurKen was the lessor, and Landry signed the lease as manager
of ThurKen. Under the terms of the lease, HFC was required to
pay monthly rent and other amounts for a lease period of fifteen
years.
On the same day, Pham signed an agreement titled “Unlimited
Guaranty.”2 The guaranty stated that it was provided “[t]o
induce Landlord 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.” 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 also agreed to other provisions in the guaranty.
1 Tuan and Tram Dang are brother and sister.
2 Pham signed the guaranty at his home on Long Island, not as part of the closing on the lease. Pham states that he never saw the lease and signed the guaranty because of Vietnamese family duty.
3 In support of its motion for summary judgment, 17 Outlets
submitted a copy of the “Business Entity Summary” for HFC filed
with the Corporations Division of the Secretary of State’s
Office for the Commonwealth of Massachusetts. The Summary lists
Tram Dang as president, treasurer, secretary, and director of
HFC. Although the Summary is undated, counsel for 17 Outlets
represents that the document appeared on the Secretary of
State’s website on November 16, 2015. In response, HFC and Pham
submitted a copy of a “Statement of Change of Supplemental
Information” for HFC from the Secretary of State’s Office, that
is dated May 3, 2012, that lists Tuan Dang as HFC’s president,
treasurer, secretary, and director.
17 Outlets purchased the property from ThurKen on April 17,
2014, pursuant to a document titled “Assignment and Assumption
of Lease Agreements.” After the purchase, HFC failed to pay
rent beginning in May of 2014. 17 Outlets served a demand for
rent and an eviction notice on HFC on October 3, 2014. HFC has
vacated the leased space.
Part II, Section 17(c)(i) states that in the event of
default, the stated fixed and additional rents become due and
are required to be paid. Section 17(c)(iii) imposes as
liquidated damages the deficiency between the amount of rent
owed and the amount the landlord received by re-letting the
4 space. The lease also provides for costs and attorneys’ fees to
the prevailing party in proceedings under the lease. Part II,
Section 38(f).
Discussion
17 Outlets brings a claim of breach of contract against HFC
and a claim of breach of guaranty against Pham. HFC does not
contest the breach of contract claim against it. Pham contends
that he did not breach the guaranty because it is unenforceable.
A. Breach of Contract
HFC does not object to summary judgment on the breach of
contract claim against it and does not contest that it is liable
to 17 Outlets under the terms of the lease. Therefore, 17
Outlets is entitled to summary judgment on the breach of
contract claim against HFC.
B. Breach of Guaranty
17 Outlets moves for summary judgment on the breach of
guaranty claim against Pham. 17 Outlets contends that HFC has
defaulted under the lease, making Pham liable for the amounts
due pursuant to the guaranty. Pham argues that he is not liable
because the guaranty is voidable due to a mutual mistake, that
no guaranty agreement was reached, and that under a strict
5 construction of the guaranty he did not guarantee HFC’s
obligations. 3
A guaranty agreement is governed by contract law. See Fleet
Bank-NH v. Christy’s Table, Inc., 141 N.H. 285, 289 (1996).
Therefore, “[a] guarantor’s exposure to liability depends upon
the terms of the contract.” BankEast v. Michalenoick, 138 N.H.
367, 369 (1994).
“The interpretation of a contract is a question of law to
be determined by focusing on the language of the written
contract, as it reflects the intent of the parties, . . . [and]
[t]his intent is determined from the agreement taken as a
whole.” Id. The obligation of a guarantor depends on what “the
fair import of the language used imposed on [the guarantor].”
Manchester Bank v. Indus. Dev. Auth., 119 N.H. 14, 16 (1979)
(internal quotation marks omitted). A personal guaranty that is
“clear and explicit” and shows an intent by the guarantor to be
liable in the event of a default by the obligor is enforceable
as a guaranty. Middileton Bldg. Supply, Inc. v. Gidge, 2000 WL
33915975, at *3 (N.H. Superior Ct. June 5, 2000) (quoting 38
Am.Jur.2d, Guaranty, § 5).
3 Pham also asks that the terms of the guaranty be strictly construed. It is not necessary, for purposes of summary judgment, to decide whether that standard applies in this case.
6 1. Mutual Mistake
Pham contends that the guaranty agreement is voidable
because “Tram Dang d/b/a Frozurt” instead of HFC is named as the
lessee in the agreement. Pham further contends that ThurKen
mistakenly identified Tram Dang d/b/a Frozurt as the lessee
because of its haste to complete the lease, which resulted in
having the guaranty signed before the lease. Pham argues that
the name is not a mere typographical error and, instead, is a
mutual mistake that makes the guaranty voidable.
“‘Where a mistake of both parties at the time a contract
was made as to a basic assumption on which the contract was made
has a material effect on the agreed exchange of performances,
the contract is voidable by the adversely affected party.’”
Gray v. First NH Banks, 138 N.H. 279, 284 (1994) (quoting
Restatement (Second) of Contracts § 152(1) (1979)). “[T]here
must be a causal connection between the alleged mistake and some
detrimental action by the party seeking relief.” Petition of
Eskeland, 166 N.H. 554, 562-63 (2014). On the other hand, if
the party seeking to void the agreement was aware of the issue
before the contract was signed, no mistake occurred and the
agreement is not voidable. Gray, 138 N.H. at 284.
Here, there is no dispute that Tram Dang was mistakenly
identified as the lessee in the guaranty agreement. It appears
7 that at the time the lease and guaranty agreement were signed,
May 31, 2012, Tuan Dang was the president, treasurer, secretary,
and director of HFC and signed the lease on behalf of HFC. The
guaranty agreement, however, identifies Tram Dang, d/b/a
Frozurt, as the lessee whose obligations Pham agreed to
guarantee. The guaranty does not mention HFC.
Pham argues that because Tram Dang, rather than HFC, was
identified as the lessor in the guaranty agreement, he
understood that he was guaranteeing her obligations, personally,
not the obligations of HFC. Pham states in his affidavit that
Tram Dang’s mother, Huong Pham, is the daughter of his uncle,
making Huong Pham and Tai Pham cousins; that Huong asked Pham to
help Tram; and that he agreed because of the family connection.
Pham did not see the lease before signing the guaranty. He
did not know that the guaranty referred to HFC’s lease. Pham
states that he would not have signed the guaranty on behalf of a
corporation and intended only to guaranty the obligations of
Tram Dang, personally.
17 Outlets contends that because HFC is the lessee named in
the lease, Pham’s interpretation of who was the lessee is
unreasonable. 17 Outlets urges the court to consider the
guaranty in the context of the transaction as a whole. Based on
the lease’s definition of HFC as the lessee, 17 Outlets argues
8 that HFC, not Tram Dang, should be interpreted to be the lessee
for purposes of the guaranty. 17 Outlets asserts that Pham
guaranteed the obligations of HFC under the lease.
The circumstances taken as a whole show that the guaranty
could be interpreted as Pham contends. Pham did not see the
lease or know of its terms before he signed the guaranty. The
guaranty identifies Tram Dang, not HFC, as the lessee. HFC is
not mentioned in the guaranty agreement. As a result, based on
the summary judgment record, Pham reasonably could have
interpreted the guaranty agreement to require him to guaranty
the obligations of Tram Dang personally, as lessee, not the
obligations of HFC.
Therefore, based on the summary judgment record, Pham has
shown a material factual dispute about whether the guaranty
agreement is voidable due to mutual mistake. For that reason,
17 Outlets is not entitled to summary judgment on its claim in
Count II of breach of the guaranty.
2. Meeting of the Minds
Pham also contends that, based on a similar theory, no
agreement exists because the parties to the guaranty did not
reach a meeting of the minds as to whose obligations were
guaranteed. “For a contract to be valid, there must be a
meeting of the minds on all essential terms of the contract,
9 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). Based on the summary
judgment record, 17 Outlets has not shown that Pham intended to
be liable for the obligations of HFC.
Therefore, in addition to the question of mutual mistake,
an issue of whether there was a meeting of the minds in forming
the guaranty agreement precludes summary judgment.
Conclusion
For the foregoing reasons, the plaintiff’s motion for summary
judgment (document no. 16) is granted as to Count I, breach of
contract by HFC, and is denied as to Count II, breach of guaranty
by Tai Pham.
SO ORDERED.
__________________________ Joseph DiClerico, Jr. United States District Judge
March 23, 2016
cc: James F. Laboe, Esq. Christopher P. Mulligan, Esq. David K. Pinsonneault, Esq. Lisa Snow Wade, Esq.