476 S.W.3d 326
Mo. Ct. App.2015Background
- KC Live (landlord) leased commercial space to Albert Group (tenant) for a Genghis Grill location; lease required landlord consent for certain ownership transfers or changes in operational control.
- Albert Group encountered construction/financing problems; KC Live requested $120,000 additional funding to assure payment to contractors and avoid liens.
- The Bhakta brothers agreed to provide $120,000 (two payments of $60,000) and signed an unconditional personal guaranty of the lease contemporaneously with the second payment.
- The guaranty recited that it was given to induce KC Live to consent to a transfer of an interest in Albert Group and acknowledged other good and valuable consideration.
- The Bhaktas never acquired the ownership interest (SBA loan restrictions discovered); Albert Group later defaulted and the restaurant closed; KC Live sued the Bhaktas for breach of guaranty and obtained judgment for over $1.16 million.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the guaranty was supported by consideration | KC Live: guaranty was supported by (a) KC Live’s promised consent to transfer and (b) the $120,000 funding the Bhaktas provided to Albert Group | Bhaktas: presumption of consideration was rebutted; KC Live produced no specific evidence of Albert Group’s financial distress or that the funds were not funds Albert Group already expected; no new consideration | Court held consideration was sufficient: (1) landlord’s promise to consent constituted bargained-for consideration, and (2) the $120,000 funding to Albert Group (benefit to debtor) constituted valid consideration; the guaranty’s recitation of consideration also raised a prima facie presumption that was not overcome |
| Whether conditions precedent (actual landlord consent or actual ownership transfer) were required before guaranty became effective | Bhaktas: guaranty was enforceable only after KC Live actually consented to a transfer and Bhaktas acquired an ownership interest | KC Live: guaranty was an unconditional, contemporaneous promise; consent promise and guaranty were mutual promises, not conditions precedent | Court held there was no express or necessarily implied condition precedent; language of guaranty was unconditional (“unconditionally, absolutely and irrevocably guarantees”); KC Live’s consent promise was part of the mutual bargain, not a condition to the guaranty’s effectiveness |
Key Cases Cited
- Ivie v. Smith, 439 S.W.3d 189 (Mo. banc 2014) (standard of review in court-tried cases)
- Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976) (bench-trial review standard)
- Boatmen’s First Nat’l Bank of Kansas City v. Roofco Sys., Inc., 852 S.W.2d 402 (Mo. App. W.D. 1993) (consideration may be benefit to debtor or detriment to creditor for guaranty)
- Henty Constr. Co. v. Hall, 783 S.W.2d 412 (Mo. App. E.D. 1989) (guaranty contemporaneous with original contract may share same consideration)
- Kurtz v. Fischer, 600 S.W.2d 642 (Mo. App. W.D. 1980) (guaranty executed after original contract requires independent consideration)
- Stewart Title Guar. Co. v. WKC Rests. Venture Co., 961 S.W.2d 874 (Mo. App. W.D. 1998) (recital "for value received" is prima facie evidence of consideration)
- Baker v. Bristol Care, Inc., 450 S.W.3d 770 (Mo. banc 2014) (definition of consideration)