507 S.W.3d 183
Tenn.2016Background
- Landlord (MLG) and Tenant (Mobile Master Manufacturing LLC) executed a commercial lease dated October 1, 2007; the Lease included paragraph 37: a clear personal-liability clause stating Richard L. Johnson “hereby agrees that he shall be personally liable for all of Tenant’s obligations.”
- The signature block on the same page contained three signature lines: landlord (Michael L. Griffith), tenant (Richard L. Johnson, signed “By: … (C.E.O.)”), and a separate line signed “Richard L. Johnson” followed by the handwriting “for Mobile Master Mfg. LLC.”
- Landlord sued the Tenant and Johnson after the tenant vacated the premises; Landlord obtained default judgment against the tenant and proceeded against Johnson for breach of the guaranty provision.
- The trial court granted an involuntary dismissal as to Johnson, finding his second signature (followed by the word “for” and the company name) was representative only; the Court of Appeals affirmed (majority), with a dissent.
- The Tennessee Supreme Court granted review to decide whether Johnson’s second signature, in context, bound him personally despite the handwritten “for Mobile Master Mfg. LLC,” and reversed: the Court held the second signature bound Johnson personally under paragraph 37.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Johnson’s second signature bound him personally as guarantor | Paragraph 37 unambiguously made Johnson personally liable; his second signature immediately after that provision effectuated the guaranty despite any handwritten notation | The second signature followed by “for Mobile Master Mfg. LLC” presumed a representative signature and the presumption was unrebutted | The Court held the second signature bound Johnson personally; the handwritten “for …” did not override the explicit guaranty clause |
Key Cases Cited
- 84 Lumber Co. v. Smith, 356 S.W.3d 380 (Tenn. 2011) (an individual who signs may be personally bound where contract language unambiguously creates a personal guaranty despite representative-form signature)
- Cone Oil Co. v. Green, 669 S.W.2d 662 (Tenn. Ct. App. 1983) (recognizes a presumption that corporate officers who sign with indicia like "by" or "per" sign in representative capacity)
- Lazarov v. Klyce, 255 S.W.2d 11 (Tenn. 1953) (party’s capacity—individual or representative—must be determined from the contract itself)
- Standard Meat Co. v. Taco Kid of Springfield, Inc., 554 S.W.2d 592 (Mo. Ct. App. 1977) (construing a guaranty as the corporation’s own guaranty would be redundant and absurd)
