Procedural Posture

Procedural Posture

Defendant guarantors appealed from a judgment of the Alameda County Superior Court (California) in an action for breach of contract involving the guarantors’ personal guaranties of payment to plaintiff lessor on a commercial lease.

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Overview

The lessee was frequently late in making the rent payments. A new lease and a lease termination agreement specifically referenced the personal guaranties as additional consideration for the lease. After expiration of an extended term and a holdover term, the parties extended the term another year. The court held that the guaranty agreements applied to the lease as amended. The guaranty agreement applied to present and future obligations under the lease and created a continuing guaranty, as specifically stated in the contract. Although in general a continuing guaranty could be revoked at any time, the guaranty was expressly made irrevocable and had no expiration date. The language in the lease and the guaranty agreements plainly made the guaranty applicable to modifications in the lease such as extensions of the lease term. Moreover, the guarantors expressly waived their statutory right under Cal. Civ. Code § 2819 to exoneration when the original obligation was altered. Although the guaranty did not define what constituted “prompt” payment of the rent, the rent was not paid when due under the lease agreement. Thus, the guarantors were not entitled to a reduction in the guaranty cap.

Outcome

The court affirmed the judgment.

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