Commercial leases are often complicated, as the stakes are high for each party. A tenant needs the right space to operate its business and a landlord needs reliable tenants to cover its expenses and earn a profit. When tenants cease paying rent and vacate or are evicted, actions by landlords to collect unpaid rent ensue. Sometimes, those actions include claims against a tenant’s principal to enforce a personal guarantee in the lease. That was at issue in TSG Grat #7, LLC v Cortlandt Manor Flooring, LLC/John Posimato, Index No. 57204/16.
In this case before Westchester Commercial Division Justice Linda Jamieson, the tenant-defendant, Cortlandt Manor Flooring, LLC, leased commercial space from the plaintiff-landlord. After the tenant stopped paying rent, it was evicted. The landlord sued the tenant and its principal, John Posimato, to collect rent allegedly due through the end of the lease. The landlord claimed that Posimato personally guaranteed the lease. But Posimato signed the guarantee: “John Posimato, Member, Cortlandt Manor Flooring, LLC.”
In opposition to the landlord’s summary judgment motion, Posimato argued that he only signed in his corporate capacity. In reply, the landlord submitted an unsigned proposal it had sent to Posimato before the lease and guarantee were executed that sought a six-month “good guy guarantee.”
Justice Jamieson ruled that the landlord’s unsigned proposal proved nothing. Further, the lease required the landlord to reduce any damage claim by the amount it received after reletting the premises. But the landlord failed to address this in its motion papers. For these reasons, there were issues of fact concerning the amount of rent owed and whether Posimato signed the guarantee personally or in his corporate capacity. Thus, Justice Jamieson denied the landlord’s motion for summary judgment against Posimato.
In addition, the corporate tenant did not appear in the action. Justice Jamieson denied the landlord’s motion for a default judgment and dismissed the action against the tenant because the landlord only served by regular mail. Under Limited Liability Company Law § 303 and CPLR § 311-a, that “is not an authorized method of serving a limited liability company.”
Takeaway for Landlords: When seeking a personal guarantee under a commercial lease, make sure the language clearly and unambiguously provides that the representative is signing personally rather than in his/her corporate capacity.
Additional Takeaway: Make sure you hire an experienced process server who knows the proper methods of service.
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