PC Riverview, LLC v. Xiao-Yan Cao
2017 UT 52
| Utah | 2017Background
- Cao personally guaranteed performance of a commercial lease originally assigned to L + C (2003) and again assigned to Lin with an extension to Sept. 30, 2013 (2006); both guaranty and lease incorporated prior lease terms (including late fees/interest).
- Lin fell behind on rent from 2008; PC Riverview (the landlord) and Lin entered a 2010 repayment agreement (five extra payments, waiver of most late charges if timely) without Cao’s involvement or consent.
- PC Riverview later dismissed an earlier suit for failure to prosecute after Lin complied with the 2010 plan and paid arrears; in 2013 Lin vacated owing $5,003.50 for the last month(s).
- PC Riverview sued Lin and Cao for the $5,003.50; district court found the 2010 repayment agreement materially modified the lease and discharged Cao’s guaranty.
- Utah Court of Appeals reversed, holding a mere extension of time to pay did not materially modify the guaranteed obligation; the Supreme Court granted certiorari and affirmed the court of appeals.
Issues
| Issue | Plaintiff's Argument (PC Riverview) | Defendant's Argument (Cao) | Held |
|---|---|---|---|
| Whether the 2010 repayment agreement materially modified the guaranteed lease, discharging Cao | The repayment plan was only an extension of time for overdue payments and did not change Cao’s risk under the guaranty | The side agreement materially altered the lease (by allowing continued occupancy, waiving notice, and changing payment terms) and discharged the guaranty | No. Extension of time was not a material modification under Restatement (Third) §41; Cao remains liable |
| Whether PC Riverview properly authenticated the 2006 assignment to allow enforcement by PC Riverview | Assignment was authenticated by PC Riverview’s witness who observed signatures; admissible under Rule 901 | The assignment was improperly admitted (signatories absent) so no privity/standing | Assignment authentication was properly admitted; district court did not abuse discretion |
| Whether Cao’s guaranty covered only the original lease term and not later extensions | Guaranty language covered performance of covenants and obligations—extensions were adopted | Guaranty expired with original lease; she was not liable for extended term | Issue unpreserved; appellate failure to address harmless; court did not remand |
| Entitlement to attorney’s fees under lease | Lease and guaranty permit recovery of enforcement costs and reasonable attorney fees | (Did not contest right to fees if PC Riverview prevailed) | PC Riverview entitled to reasonable costs and attorney fees; remand to determine amount |
Key Cases Cited
- DiMeo v. Nupetco Assocs., LLC, 309 P.3d 251 (Utah Ct. App. 2013) (minor timing alterations do not discharge guarantor)
- M.H. Walker Realty Co. v. Am. Sur. Co. of N.Y., 211 P. 998 (Utah 1922) (gratuitous guarantors are strictly construed and favored by the law)
- Bailey v. Bayles, 52 P.3d 1158 (Utah 2002) (appellate court may affirm on any ground apparent in the record)
- Donjuan v. McDermott, 266 P.3d 839 (Utah 2011) (preservation rules for appellate review)
- State v. Levin, 144 P.3d 1096 (Utah 2006) (standard of review on certiorari)
- Carrier Brokers, Inc. v. Spanish Trail, 751 P.2d 258 (Utah Ct. App. 1988) (material modifications in debtor-creditor dealings can discharge guarantor)