J.M.L., Inc. v. Shoppes of Mount Pleasant, LLC

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
J.M.L. INC. & LAWRENCE GILLEN,
Appellants,
v. C.A. No. N 15A-06-006 FWW
)
)
)
)
)
§
SHOPPES OF MOUNT PLEASANT, )
LLC, )
)
Appellee. )
Submitted: July 19, 2016
Decided: October 14, 2016
MEMORANDUM OPINION AND ORDER
On Appeal from the Court of Common PleaS:
AFFIRMED in part, REVERSED in part.
Leo John Ramurmo, Esquire, 5149 W. Woodmill Drive, Suite 20, Wilmington,
Delaware 19808; Attorney for Appellants.
Josiah R. Wolcott, Esquire, Connolly Gallagher, LLP, 267 East Main Street,
Newark, Delaware 19711; Attorney for Appellee.
WHARTON, J.
I. INTRODUCTION
J.M.L, Inc. (“J.M.L.”) and Lawrence Gillen (“Gillen”) (collectively referred
to as “Appellants”) filed a Notice of Appeal on July 19, 2016, requesting a review
of the Court of Common Pleas’ decision that Gillen was a guarantor of a
commercial lease. Appellants also request a review of the trial court’s calculation
of damages and its decision to grant attorney’s fees to Appellee.
In considering this appeal, the Court must determine whether the trial court’s
findings are supported by substantial evidence and free from legal error. Upon
consideration of the pleadings before the Court and the record below, the Court
finds that there is substantial evidence to support the trial court’s decision that
Gillen was a guarantor of the commercial lease, and the trial court did not make a
legal error in reaching its decision. Regarding the trial court’s decision to grant
attorney’s fees, the Court also finds that no error occurred. However, the trial
court erred in its calculation of damages. Accordingly, the Court of Common
Pleas’ decision is AFFIRMED in part and REVERSED in part.
II. FACTUAL AND PROCEDURAL CONTEXT
Shoppes of Mount Pleasant, LLC (“Shoppes”) owns commercial real estate
at the intersection of Delaware Route 896 and Boyd’s Corner Road in Middletown,
Delaware.l The real estate consists of a gas station, a Dunl2015 WL 3824118, at * 4-7 (Del. Com. Pl.
May 11, 2015).
55 1a at *7.
attorney’s fees in the amount of $20,132.00 and costs in the amount of $1,933.74.39
Appellants appeal the trial court’s decisions.
III. THE PARTIES’ CONTENTIONS
Appellants make the following four arguments: First, Appellants argue that
Gillen did not sign the Lease as a guarantor.40 Second, Appellants argue that, even
if Gillen signed the Lease as a guarantor, Gillen did not continue to be a guarantor
after the initial term of the Lease expired.41 Third, Appellants argue that the trial
court’s calculation of damages in the amount of $24,984.80 was clearly
erroneous.42 Fourth, Appellants argue that the trial judge clearly erred when it
awarded Shoppes attorney’s fees and costs.43
In response, Shoppes first argues that Appellants failed to cite to any
evidence in the record that supports their claim that Gillen did not sign the Lease as
a guarantor.44 Second, Shoppes argues that the trial court “correctly found that
Gillen was a continuing guarantor based on the mutual agreement of the parties in
the Memorandum.”45 Third, Shoppes contends that the trial court’s calculation of
damages should be affirmed because it “is sufficiently supported by the record and
59 Shoppes ofMoun¢ Pleasanr, LLC v. J.ML., Inc., No. CPU4-14-001415, at 9 (Dei. Com. Pl.
Aug. 4, 2015).
40 Appellants’ Opening Br., D.l. 13, at 4.
411d. at 6.
42 Id. at 11.
45 1a at 13.
44 Appellee’s Answering Br., D.I. 14, at 10-11.
45 ld. at 11.
is the product of an orderly, logical and deductive process.”46 Finally, Shoppes
contends that the trial court “engaged in a reasoned and detailed review of the fee
request,” and therefore, the trial court did not abuse its discretion.47
IV. STANDARD OF REVIEW
The standard of review by the Superior Court for an appeal from the Court
of Common Pleas is the same standard applied by the Supreme Court to appeals
from the Superior Court.48 In addressing appeals from the trial court, this Court is
limited to correcting errors of law and to determining whether substantial evidence
exists to support factual findings.49 Substantial evidence is “relevant evidence that
a reasonable mind might accept as adequate to support a conclusion.”50 If factual
findings are “sufficiently supported by the record and are the product of an orderly
and logical[ly] deductive process,” then they will not be challenged.51 Questions
- 52
of law are reviewed de novo.
45 Id. 3113.
41 la s115.
48 Robert.[ Smith Co., Inc. v. Thomas, 2001 WL 1729143, at *2 (Del. Super. Dec. 10, 2001).
49 Henry v. Nissan Motors Acceptance Corp., 1998 WL 961759, at *1 (Del. Super. Oct. 21,
1998) (citing Shahan v. Lana'ing, 643 A.2d 1357, 1359 (Del. Super. 1994)).
50 Thomas, 2001 WL 1729143, at *2 (citing Oceanport Ina'us., Inc. v. Wilmington Stevedores,
Inc., 636 A.2d 892, 899 (Del. 1994)).
51 Levm v. Bouvier, 287 A.2d 671, 673 (Dei. 1972).
52 Henry, 1998 wL 961759, a1*1
V. DISCUSSION
A. The Trial Court Did Not Err When It Found that Gillen Was a Guarantor
of the Lease.
A guaranty contract is an “‘agreement to pay the debt of another’ in the
event that the primary debtor defaults.”53 Under Delaware’s statute of frauds, such
an agreement shall be unenforceable unless it is reduced to writing and is signed by
the party to be charged.54 As courts in this jurisdiction have noted, “a contract to
pay the debt of another must not only be in writing but the writing must contain on
its face enough to show that the person signing it was assuming that liability.”55
Appellants argue that the guaranty within the Lease does not satisfy the
statute of frauds for two reasons: First, Appellants argue that Gillen’s signature
was forged, and therefore, the signature requirement of the statute of frauds is
unfulfilled.56 Second, Appellants argue that because the Lease has only two
53 Chestnut Hill Plaza Holdings Corp. v. Parkway Cleaners, Inc., 2011 WL 1885256, at *5 (Del.
Super. May, 17, 2011) (quoting Falco v. Alpha Ajj'z``liates, Inc., 1997 WL 782011, at *5 (D. Del.
Dec. 10, 1997)).
54 6 Del. C. § 2714(a) (“No action shall be brought to charge any person . . . to answer for the
debt, default, or miscarriage, of another, in any sum of the value of $25 and upwards, unless the
contract is reduced to writing, or some memorandum, or notes thereof, are signed by the party to
be charged therewith, or some other person thereunto by the party lawfully authorized in writing
55 Woodcock v. Udell, 97 A.2d 878, 881 (Dei. super. 1953). See CBA Colleczion services L¢d. v.
Potter, Crosse & Leonard, P.A., 1996 WL 527214, at ’1‘3 (Del. Super. Aug. 14, 1996) (citing
Woodcock, 97 A.2d at 881).
56 Appellants’ Opening Br., D.I. 13, at 5.
10
references to a guarantor, the Lease did not provide enough detail for Gillen to
know that he was assuming J.M.L.’s liability.57
The Court does not find these arguments to be persuasive. First, Appellants
have not provided any evidence to support the contention that Gillen’s signature
was forged. The trial court found that both Wittig and his wife saw Gillen sign the
Lease as a guarantor in their home on February 25, 2005. While Gillen testified
that he did not sign the Lease at any time, the trial court did not find Gillen’s
testimony to be credible. Without any evidence in the record suggesting that the
trial court’s findings were clearly wrong, the Court must accept them.
Second, the Court finds that the Lease contains sufficient information to
inform Gillen of his personal liability. Article 22(A) contains the following
language regarding the guarantor’s liability: “If Tenant shall consist of more than
one person or if there shall be a guarantor of Tenant’s obligations, then the liability
of all such persons, including the guarantor, if any shall be joint and several . . . .”58
Additionally, on the last page of the Lease, there is a signature line specifically for
a guarantor. This information makes clear that if someone were to sign the Lease
as a personal guarantor, then he or she would be jointly and severally liable for any
of the primary debtor’s obligations By signing the Lease, then, Gillen knew, or
57 Id. at 4.
58 Appellants’ Ex. 1.
11
should have known, that he was assuming the liability of J.M.L. in the event that
J.M.L. did not pay its monthly rent.
Appellants rely heavily on Falco v. Alpha Affz``liates, Inc. to undermine this
analysis.59 Appellants contend that Falco stands for the proposition that the
absence of a guarantor’s social security number from a guaranty contract renders it
void.60 However, this interpretation of Falco is misplaced.61 Instead, Falco
suggests that a separate guaranty contract is unnecessary, so long as “some
guarantee language is written on the contract and signed by the person to be
charged.”62
Here, the fact that Gillen’s social security number is absent from the Lease
does not determine the validity of the guaranty contract. Gillen, who is the person
to be charged, signed the Lease in his individual capacity, and the Lease contained
sufficient guaranty language to inform Gillen of his contractual obligations.
Therefore, the trial court did not err when it found that the Lease satisfied the
statute of frauds.
59 1997 WL 782011 (D. Del. Dec. 10, 1997).
60 Appellants’ Opening Br., D.l. 13, at 4.
61 In Fafco, a landlord leased commercial real estate to a corporation. Falco, 1997 WL 782011,
at *1. The defendants signed in their corporate capacity,_and they also signed in their individual
capacities as “guarantors” with their social security numbers written below the signature lines.
Ia’. No other language in the lease discussed the terms of the guaranty. Id. at *5. The district
court found that the defendants’ signatures alone were enough hold them personally liable for the
corporation’s debts. Id.
62 Id. at *8.
12
B. The Trial Court Did Not Commit Legal Error When It Found that Gillen
Continued To Be a Guarantor of the Lease After Signing the
Memorandum.
Generally, a guarantor’s liability for the primary debtor’s contractual
63 -
When the lease terminates, so
obligations lasts for the entire term of the lease.
too does the guarantor’s liability.64 Thus, when a tenant remains on the premises
after the lease has expired, “a new tenancy ‘replaces’ the prior lease and the
”65 However, if the
guarantor has no obligation under the new agreement.
guarantor expressly consents to an extension or renewal of the lease, then the
guarantor is not discharged from his or her obligations to the landlord.66
Appellants argue that when the Lease expired on April 5, 2010, Gillen’s
obligations as a guarantor expired as well.67 Gillen did not provide Shoppes ninety
days written notice prior to the expiration of the existing term. Consequently,
when the Lease expired, Gillen’s obligations as a personal guarantor also expired.
While J.M.L. remained on the Premises thereafter, Appellants contend that a new
tenancy replaced the Lease and absolved Gillen from his secondary liability to
Shoppes.68
63 See Wilmington & Northern R. Co. v. Delaware Valley Ry. Co., Inc., 1999 WL 463705, at *5_
6 (Del. Super. Mar. 30, 1999).
64 See id.
:: Id. at *6 (citing Smith v. Cohen, 685 A.2d 268, 269 (R.I. 1996)).
Id.
67 Appellants’ Opening Br., D.I. 13, at 5-6.
515 181 316-7.
13
Appellants also contend that the Memorandum cannot retroactively apply to
April 5, 2010 because the Lease had already terminated when Gillen failed to
fulfill the notice requirement69 Moreover, Appellants argue that Gillen never
expressly consented to renewing his personal liability under the Lease because he
never signed the Memorandum in his individual capacity.70
The Court finds that Gillen was a guarantor when he signed the
Memorandum because he expressly intended to renew the terms and conditions of
the Lease. Under Delaware law, “commercial leases are not governed by the
Residential Landlord-Tenant Code and parties to a commercial lease are free to
contract however they so desire.”71 Therefore, the Court will “give priority to the
parties’ intentions as reflected in the four corners of the agreement” and will
interpret clear and unambiguous terms according to their plain meaning.72
Furthermore, Delaware courts have long held that the terms of the contract will be
controlling so long as “they establish the parties’ common meaning so that a
69 Id_
70 las
71 See 25 Del. C. § 5101(b) (“Any rental agreement for a commercial rental unit . . . shall be
governed by general contract principles . . . .”); Independence Mall, Inc. v. Wahl, 2012 WL
6945505, at *4 (Del. Super. Dec. 31, 2012) (“Before its 1996 amendments, the Landlord-Tenant
Code applied to residential and commercial leases. After 1996, however, commercial rental
agreements were separated from Part III, Residential Landlord_Tenant Code.”).
12 GMG Capiml lnveszmems, LLC v. A¢heman Vemure Parmers 1, L.P_, 36 A.3d 776, 779 (Del.
2012) (citing Paul v. Deloitte & Touche, LLP, 974 A.2d 140, 145 (Del. 2009). See Motorola, Inc.
v. Amkor Tech., Inc., 958 A.2d 852, 859 (Del. 2008).
14
reasonable person in the position of either party would have no expectations
inconsistent with the contract language.”73
Under these well-established principles, Gillen renewed the Lease by
signing the Memorandum. As a result, all of the terms and conditions of the Lease
were also renewed. One of the Lease’s conditions, as noted by the Lease’s
signature line, is that Gillen had to sign as a guarantor. Therefore, when Gillen and
Shoppes mutually agreed to renew the Lease under the Memorandum, Gillen
renewed his obligation as a guarantor as well.
The trial court was correct to find that Gillen’s guaranty expired when the
Lease expired because Appellants did not provide the required ninety-day written
notice. The trial court was also correct to find that the parties expressly intended to
renew the Lease when they consummated the Memorandum. Accordingly, the
Court will not disturb their contractual freedom to do so.74 While the
Memorandum does not discuss whether Gillen signed in his individual capacity,
this is not a case where the individual who signed on behalf of a corporation is
different from the person who signed in his or her individual capacity. Gillen
signed the Lease and knew all of its terms. When Gillen renewed the Lease under
the Memorandum, he was not oblivious to his obligations as a guarantor. Hence,
73 Eagle Industries, Inc. v. De Vilbz``ss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) (citing
Rhone-Poulenc v. American Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992).
14 See NAF Holdings, LLC v. Li & Fung (deing) L¢d., 118 A.3d 175, 180 (Del. 2015).
15
the trial court did not commit legal error when it found that Gillen was a guarantor
when he signed the Memorandum because Gillen expressly intended to renew the
Lease and all of its provisions.
C. The Trial Court’s Calculation of Damages Was Clearly Erroneous.
In its complaint, Shoppes sought 826,286.75 in damages from Appellants.75
However, the trial court awarded $21,984.80 in damages.76 The trial court arrived
at this amount by making the following calculations: “The total charges
documented up to August 29, 2013 total $52,018.35. The total payments and
deductions total $30,033.55. Theref``ore, Defendants are jointly and severally liable
for the outstanding balance of 3321,984.80.”77 The trial court did not include debts
owed after August 29, 2013 because the new tenant began paying rent on
september 1, 2013.18
Appellants argue that the trial court failed to deduct their security deposit of
$3,500 and their common area maintenance (“CAM”) credit of $655.83.79
Appellants also argue that the balance forward in the ledger is unsupported by
evidence.80 Specifically, Shoppes presented a ledger at trial with a balance forward
of $15,933.55, but Appellants contend that there is no breakdown as to how
15 Shoppes efMeum Pleasam; LLC v. JML., lnc., 2015 wL 3824118, et *7 (Del. Com. Pi. May
11, 2015).
761d
77 Id'
78 las
79 Appellants’ Opening Br., D.I. 13, at 12.
511 1a 3111.
16
Shoppes arrived at this amount.81 Therefore, Appellants argue that the trial court
abused its discretion when it considered the balance forward in its calculation of
damages
First and foremost, the trial court had substantial evidence to consider the
balance forward in its calculation of damages This factual determination was
based upon the testimony of Kubiak and Larson. Specifically, when Kubiak was
asked about the balance forward, Kubiak testified that “there were some months [in
2012] that we did not receive any rent payments.”82 Kubiak also testified that the
balance forward included other costs, such as CAM charges and taxes, that
Appellants did not pay.83 Furthermore, Larson testified that, in late 2012, Gillen
was “having problems keeping up with rent.”84 Based upon this testimony, the
trial court had substantial evidence to find that the balance forward within the
ledger was accurate.
Nevertheless, the trial court erred in its calculation of damages Appellants’
obligations ended on August 29, 2013 because the new tenant began paying rent in
September 2013. As such, the amount owed as of the end of August, per the
ledger, is $25,657.55. The trial court failed to deduct Appellants’ CAM credit and
security deposit, which totals $4,155.85. Therefore, Appellants are jointly and
81 ld-
52 Tr. 45;10-18.
83 Id.
54 Tr. 76;1-5.
17
severally liable for the outstanding balance of $21,501.70, plus post-judgment
interest at a rate of 6 percent per year until the balance is paid in full.
D. The Trial Court Did Not Abuse Its Discretion When It Awarded
Attorney’s Fees to Shoppes.
Article 14(B) of the Lease provides that “Tenant shall reimburse Landlord
for all reasonable legal fees incurred by Landlord” in enforcing any of its
provisions85 Pursuant to Article 14(B), the trial court awarded $20,132.00 in
attorney’s fees and $1,933.74 in costs86 Appellants argue that the trial court
abused its discretion because the awarded damages were disproportionate to the
complexity of the case.87
The Court finds that the trial court did not abuse its discretion when it
awarded attorney’s fees to Shoppes Initially, Shoppes argued to the trial court that
it was entitled to $42,412.00 in attorney’s fees.88 In response, the trial court
determined that this was unreasonable, and instead awarded the aforementioned
amount.89 The trial court arrived at this conclusion by carefully weighing the
factors set forth in Rule 1.5 of The Delaware Lawyers’ Rules of Professional
Conduct and determining that 32.5 hours billed for post-trial memoranda was
85 Appellants’ Ex. 1.
553)16;»;)@.§- e;'Moum Pleasam, LLC v. JML., Inc., Ne. CPU4-14-001415, et 9 (Del. Cem. Pi.
Aug. 4, 2015).
87 Appellants’ Opening Br., D.I. 13, at 13.
:: Shoppes of Mount Pleasant, No. CPU4-14-001415, at 2.
Ia'.
18
unreasonable.90 Furthermore, the trial court reduced Shoppes’ attorney’s fees
because Appellants should not be charged for Shoppes’ own mistake.91 Two of
Shoppes’ witnesses were absent for the trial, and as a result, another trial had to be
held at a later date.92 The trial court determined that Shoppes’ attorney should not
be able to bill for this additional proceeding because it was an “accommodation” to
Shoppes93 Because the trial court’s reasoning was logical and supported by
substantial evidence, the Court will not disturb its finding.
VI. CONCLUSION
With respect to the Court of Common Pleas’ decision that rendered Gillen a
personal guarantor, the Court finds that the trial court did not err. The Court also
finds that the trial court did not err when it awarded $20,132.00 in attorney’s fees
and $1,933.74 in costs However, the trial court erred when it awarded damages to
Shoppes because it miscalculated the amount due. Appellants are jointly and
severally liable to Shoppes for $21,501.70, plus post-judgment interest at a rate of
6 percent per year until the balance is paid in full. Therefore, the decision of the
Court of Common Pleas is hereby AFFIRMED in part and REVERSED in part.
90161'. at4.
911d. at 5.
921d_
931d
19
IT IS SO ORDERED.
/7/1/'4
Ferzf s W. Wharton Jlege
20