The Law

Business Contract, Personal Liability by Ron Davis The owner of a business that leased space at an Ohio shopping center must take personal responsibility for payment of back rent that the business owes. That’s because when the business owner signed the tenant lease, she also signed a guarantee that she would pay the rent if her business could not. The shopping center is Westgate Village, located in the Toledo area, and the business the tenant operated leased space at the center to train persons for future employment in the computer field. When the business failed a couple of years after she signed the lease and guarantee, the principals of Westgate Village demanded that the owner pay back rent owed them. The owner refused, arguing that the guarantee she signed was merely as an employee of the tenant company. In fact, in signing the guarantee, she wrote, below her signature, “Executive Director.” So she contended that she was thereby exempt from being personally responsible for debts her company owes the shopping center. And, in the resulting lawsuit, an Ohio judge agreed with her and released her from any personal liability that her company incurred. The shopping center’s owners appealed. An Ohio appellate court differed with the lower court, ruling that the judge erred in releasing the business owner from individual liability for the amounts owed to the center’s owners under the guarantee. Explained the judges, “When the parties entered into the lease agreement, they created a separate guaranty agreement. Under that agreement, the ‘undersigned’ gave a guarantee to pay rent and other costs associated with the lease agreement. The owner signed her name and wrote only the words ‘Executive Director’ immediately beneath her signature. This was not sufficient to avoid personal liability.” (Westgate Village Shopping Center v. Parker, Slip Copy, 2008 WL 2221855 [Ohio App. 6 Dist.]) Decision: June 2008 Published: June 2008