Amnon Shreibman v. First Class Corporation ( 2018 )

12/21/2018
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
October 2, 2018 Session
AMNON SHREIBMAN ET AL. v. FIRST CLASS CORPORATION ET AL.
Appeal from the Chancery Court for Davidson County
No. 16-415-III Ellen Hobbs Lyle, Chancellor
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No. M2017-02289-COA-R3-CV
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A commercial landlord filed suit against its tenant and the guarantor of the lease. After
obtaining a default judgment against the tenant, the landlord moved for partial summary
judgment on the question of the guarantor’s liability. The chancery court concluded that
the guarantor was liable under the guaranty. And following a trial on damages, the court
entered judgment against the tenant and the guarantor. The guarantor appeals solely on
the issue of his personal liability, arguing that his guaranty was conditional. Because the
guaranty was an absolute undertaking, we affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
W. NEAL MCBRAYER, J., delivered the opinion of the court, in which FRANK G.
CLEMENT, JR., P.J., M.S., and ANDY D. BENNETT, J., joined.
Kathy A. Leslie, Nashville, Tennessee, for the appellant, Emmett Harvell.
David P. Cañas, Nashville, Tennessee, for the appellees, Amnon Shreibman and Ruth
Shreibman.
OPINION
I.
A.
In June 2014, First Class Corporation entered into a retail lease agreement with IX
CW Bell Road, L.P. for space in a shopping center located in Antioch, Tennessee.
Among other things, the lease required a guaranty of the tenant’s obligations.
Specifically, paragraph 1.19 of the lease provided as follows: “Guarantor{s}:
Contemporaneously with the execution and delivery of this Lease, Emmett Harvell and/or
Sonya Shirley, the sole owners of Tenant, shall execute and deliver to landlord a
Guaranty Agreement in the form attached hereto as Schedule 1:19.”
On June 18, 2014, Emmett Harvell executed the guaranty agreement. Under the
guaranty, Mr. Harvell agreed to “unconditionally guarant[ee] to Landlord the prompt
payment when due of the rent, additional rent and other charges payable under the Lease
and full and faithful performance and observance of any and all Covenants (including,
without limitation, the indemnities contained in the Lease).”
In December 2015, IX CW Bell Road, L.P. transferred the shopping center to
Amnon and Ruth Shreibman. IX CW Bell Road, L.P. also assigned to the Shreibmans
the First Class lease and Mr. Harvell’s guaranty.
The next month, the Shreibmans’ property manager sent First Class a notice of
lease default for failure to pay rent. Although additional payments were made after the
notice of default, the payments were insufficient to cure the default or to satisfy the
continuing rent obligation of First Class.
B.
The Shreibmans filed a complaint for possession and money damages against First
Class and Mr. Harvell in the Chancery Court for Davidson County, Tennessee. First
Class failed to answer, and on the Shreibmans’ motion for default, the chancery court
entered a default judgment against First Class for possession of the leased premises and
on liability under the lease. The court reserved the issue of the damages to be awarded
the Shreibmans.
Mr. Harvell did answer. To the Shreibmans’ allegation that Mr. Harvell had
executed a guaranty by which he unconditionally guaranteed the obligations of the lease,
Mr. Harvell admitted that was “what the guaranty states, but that such guaranty was not
unconditional and demand[ed] strict proof of same.” Mr. Harvell also asserted what he
characterized as “cross-claims” against Cedaneo Lee and Sonya Shirley, although neither
were named as defendants. Among other things, Mr. Harvell alleged that he had been
induced into executing the guaranty by Mr. Lee, an officer and shareholder of First Class,
who falsely claimed that he also guaranteed the lease.
The Shreibmans moved for partial summary judgment against Mr. Harvell. They
argued that Mr. Harvell was liable as a matter of law for all amounts due under the lease
based on his guaranty. In support of their motion, they submitted the affidavits of
Mr. Shreibman and an employee of the property manager for the shopping center and the
default judgment against First Class. Mr. Shreibman’s affidavit authenticated the deed
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for the shopping center property and the assignment of the lease and guaranty. The
affidavit of the property manager authenticated the lease and guaranty and detailed the
payment defaults by First Class.
Mr. Harvell opposed the motion for partial summary judgment primarily on two
grounds. First, he argued that his guaranty was conditional. According to Mr. Harvell,
paragraph 1.19 of the lease required guaranties by Mr. Harvell and Ms. Shirley or only by
Ms. Shirley. In other words, if Mr. Harvell guaranteed the lease, Ms. Shirley was
required to guarantee the lease also. Because Ms. Shirley had not signed a guaranty, a
condition to his guaranty obligation was unsatisfied. Second, he denied that First Class
had defaulted under the lease.
The chancery court held that Mr. Harvell was liable to the Shreibmans under the
guaranty for all amounts due under the lease. The court concluded that the phrase
“and/or” in paragraph 1.19 of the lease meant that either Mr. Harvell or Ms. Shirley
would guaranty the lease or both would. And Mr. Harvell’s mere denial of a lease default
was insufficient to create a genuine issue of material fact.
Following a hearing on damages, the court granted the Shreibmans a judgment
against First Class and Mr. Harvell for $74,569.50 in unpaid rent. The court later
awarded the Shreibmans attorney’s fees and expenses of $55,445.25 and certified the
judgment as final.1 See Tenn. R. Civ. P. 54.02(1). From this decision, Mr. Harvell
appealed.
II.
On appeal, Mr. Harvell challenges only the determination that he is liable under
the guaranty. As we perceive his arguments, Mr. Harvell claims that the Shreibmans’
motion for partial summary judgment was not properly supported so the burden of
production never shifted to him. He also claims, as he did in the court below, that the
“intent of the guaranty was that both [he and Ms. Shirley] would be guarantors and not
one.”
Summary judgment is appropriate when “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” Tenn. R. Civ. P. 56.04. A trial court decision on summary
judgment presents a question of law, which we review de novo, with no presumption of
correctness. Rye v. Women’s Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 250
(Tenn. 2015), cert. denied, 136 S. Ct. 2452 (2016). Thus, we must “make a fresh
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Mr. Harvell’s claims against Mr. Lee, Ms. Shirley, and First Class for indemnification remained
unresolved.
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determination of whether the requirements of Rule 56 of the Tennessee Rules of Civil
Procedure have been satisfied.” Id.
A.
The moving party has the burden of persuading the court that no genuine issues of
material fact exist and that it is entitled to a judgment as a matter of law. Byrd v. Hall,
847 S.W.2d 208, 215 (Tenn. 1993). If the moving party fails to satisfy that burden, the
motion for summary judgment should be denied. See id. But if the moving party
satisfies its burden, then the nonmoving party must demonstrate that there is a genuine,
material factual dispute to avoid entry of summary judgment. Id.
Mr. Harvell submits that the Shreibmans failed to satisfy their initial burden of
production because Mr. Shreibman’s affidavit included “the mere conclusory statement[,]
‘The lease was guaranteed by Emmett Harvell.’” And, according to Mr. Harvell, “[i]t is
important to note that the [Shreibmans] were not present when [Mr. Harvell] allegedly
signed as guarantor because the [Shreibmans] bought the building from the original
lessor.” Thus, the court had to “believe the affidavit of one person (Shriebman) [sic] who
was not a party to the original contract making a mere conclusory statement that Harvell
was a guarantor or it would believe the sworn affidavit by Harvell stating that [the] intent
of the guaranty was that both [Mr. Harvell and Ms. Shirley] would be guarantors and not
one.”
One problem with Mr. Harvell’s argument, among others, is that it ignores the
other affidavit filed in support of the Shreibmans’ motion for partial summary judgment.
The Shreibmans also submitted the affidavit of an employee of the property management
company that managed the shopping center at the time of the execution of the guaranty.
It is through this affidavit that Mr. Harvell’s guaranty was authenticated. See Shipley v.
Williams, 350 S.W.3d 527, 564-65 & n.12 (Tenn. 2011) (Koch, J., concurring in part and
dissenting in part) (noting that evidence, including the substance of affidavits, filed in
“support or to oppose a motion for summary judgment must be admissible”). So the
court did not err in considering Mr. Harvell’s guaranty. See id. at 565 (stating that an
abuse of discretion standard applies to decisions regarding the admissibility of evidence
filed in support of or in opposition to motions for summary judgment).
B.
Mr. Harvell’s second argument is that his guaranty was conditional, that his
guaranty is only valid if there is a coguarantor, namely Ms. Shirley. The argument is
based on the language of paragraph 1.19 of the lease: “Contemporaneously with the
execution and delivery of this Lease, Emmett Harvell and/or Sonya Shirley, the sole
owners of Tenant, shall execute and deliver to landlord a Guaranty Agreement . . . .”
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We agree with the chancery court’s interpretation of paragraph 1.19 of the lease.
“The literal sense of and/or is ‘both or either,’ . . . .” ANTONIN SCALIA & BRYAN A.
GARNER, READING LAW: THE INTERPRETATION OF LEGAL TEXTS 125 (2012). So in this
instance, the language required Mr. Harvell to execute a guaranty, Ms. Shirley to execute
a guaranty, or both Mr. Harvell and Ms. Shirley to execute guaranties. See id.
But we need not go beyond the terms of Mr. Harvell’s guaranty to dispose of his
second argument. In commercial transactions, a guarantor is “held to the full extent of
his engagements,” so in construing the guaranty, “the words of the guaranty are . . . taken
as strongly against the guarantor as the sense will admit.” Farmers-Peoples Bank v.
Clemmer, 519 S.W.2d 801, 804-05 (Tenn. 1975). Here, Mr. Harvell gave an
unconditional or absolute guaranty of First Class’s obligations under the lease.
An absolute guaranty is a guaranty whereby the guarantor agrees to
answer for the debt of the debtor, notwithstanding the occurrence or
nonoccurrence of any event either within or not within the contemplation of
the parties at the time the guaranty is executed. The creditor that takes an
absolute, unconditional guaranty will be able to require that the guarantor
perform, notwithstanding the existence of the primary obligor’s defense to
performance of the primary obligor’s contract with the creditor. A creditor
may take immediate action against the guarantor upon the fact that other
remedies are available. Any credits or setoffs the creditor receives that are
beyond the scope of the guaranty agreement are not effective to discharge a
guarantor’s obligation. Additionally, an unconditional guarantor is still
liable where the obligee impairs the collateral.
PETER A. ALCES, THE LAW OF SURETYSHIP AND GUARANTY § 1:4, Westlaw (database
updated June 2018) (footnotes omitted).
Because he gave an unconditional guaranty, Mr. Harvell cannot now complain that
the lease required a coguarantor. He agreed to answer for the debt of First Class
notwithstanding the nonoccurrence of any event.
III.
The Shreibmans request an award of attorney’s fees and expenses incurred on
appeal under Tennessee Code Annotated § 27-1-122 (2017), which authorizes an award
of damages for a frivolous appeal, and the fee shifting provisions of the lease and
guaranty. In determining whether such an award is appropriate, we look first to the
contractual authority for the request. See Eberbach v. Eberbach, 535 S.W.3d 467, 478
(Tenn. 2017) (observing that, in the context of a post-divorce proceeding, “our courts
should look to the parties’ contract first before moving on to any discretionary analysis
under statutes such as section 36-5-103(c) and section 27-1-122”).
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Although both the lease and guaranty include provisions permitting the recovery
of attorney’s fees and expenses, we conclude that the Shreibmans are entitled to an award
of attorney’s fees and expenses incurred in this appeal only under the guaranty. The
applicable lease provision obligates the “Tenant,” defined as First Class, “to pay
Landlord reasonable attorneys’ fees and costs.” But under the guaranty, Mr. Harvell
must “pay to Landlord on demand, all expenses (including, without limitation, reasonable
attorneys’ fees and disbursements and court costs) of, or incidental to, or relating to the
enforcement or protection of Landlord’s rights hereunder or under the Lease.” So we
grant the Shreibmans attorney’s fees and expenses incurred on appeal.
Even though we conclude an award of attorney’s fees and expenses incurred on
appeal is mandated under Mr. Harvell’s guaranty, we must also review the claim for fees
and expenses under Tennessee Code Annotated § 27-1-122. See id. at 479. The statute
authorizing an award of damages for frivolous appeals “must be interpreted and applied
strictly so as not to discourage legitimate appeals.” See Davis v. Gulf Ins. Grp., 546
S.W.2d 583, 586 (Tenn. 1977) (citing the predecessor to Tennessee Code Annotated
§ 27-1-122).
We find this appeal to be frivolous. A frivolous appeal is one “utterly devoid of
merit,” Combustion Eng’g, Inc. v. Kennedy, 562 S.W.2d 202, 205 (Tenn. 1978), or that
has “no reasonable chance of success,” Davis, 546 S.W.2d at 586. As our supreme court
has observed, “[An] appeal is recognizable on its face as devoid of merit [when i]t
presents no justiciable questions—neither debatable questions of law nor findings of fact
not clearly supported.” Davis, 546 S.W.2d at 586. Such is the case here.
IV.
Because his guaranty was unconditional, we affirm the chancery court’s judgment
against Mr. Harvell. We also grant the Shreibmans’ request for attorney’s fees and
expenses incurred on appeal. This case is remanded to the chancery court for a
determination of the appropriate amount of attorney’s fees and expenses incurred on
appeal and for such further proceedings as may be consistent with this opinion.
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W. NEAL MCBRAYER, JUDGE
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