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LLC v. Bosch

Court of Appeals of Tennessee, Knoxville

April 12, 2018

500 BLOCK, LLC
v.
DONALD BOSCH

          Session August 9, 2017

          Appeal from the Chancery Court for Knox County No. 180363-2 Clarence E. Pridemore, Jr., Chancellor

         This case was brought by the landlord of a building that was leased to a limited liability company for purposes of operating a restaurant; the restaurant failed, and the company defaulted on its obligations under the lease and took bankruptcy. The landlord filed suit to recover damages from four persons who had signed agreements guaranteeing performance of the lease to the extent of the guarantors' interest in the lessee. The case proceeded to trial against one guarantor and, after a bench trial, the court dismissed the action, finding that the guaranty lacked consideration and that the guaranty was invalid and unenforceable because only the guarantor signed it. On appeal, the landlord contends that the trial court erred in both respects. Upon a de novo review of the record, we reverse the judgment of the trial court and remand the case for entry of a judgment against the guarantor in the amount of $60, 037.97 and for a determination of interest on the judgment.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed and Remanded

          W. Tyler Chastain and Margo J. Maxwell, Knoxville, Tennessee, for the appellant, 500 Block, LLC.

          Thomas S. Scott, Jr. and Christopher T. Cain, Knoxville, Tennessee, for the appellee, Donald A. Bosch.

          Richard H. Dinkins, J., delivered the opinion of the court, in which D. Michael Swiney, C.J., and John Wesley McClarty, J., joined.

          OPINION

          RICHARD H. DINKINS, JUDGE

         I. FACTUAL AND PROCEDURAL HISTORY

         On July 26, 2008, S&W, LLC, entered into a five-year agreement with 500 Block, LLC, to lease property located at 518 South Gay Street in Knoxville, to be used as a "restaurant facility, a deli selling food and food-related items, a take-out service, and a bar serving food items and alcoholic beverages." The lease was executed by Stephanie Balest on behalf of S&W. Page 21 of the Lease contained a "Lease Guaranty Agreement, " which read:

The undersigned, all being members of the Tenant, do hereby absolutely and unconditionally guaranty the prompt performance and payment of all sums due and owing by S&W, LLC under the foregoing lease, including, but not limited to all rents and other obligations for which the Tenant is responsible under the terms of the Lease. The guarantee will be pro-rated to the shareholding of each member of the Tenant and shall be in effect for the initial term of the lease (5 years front rent commencement). There will be no members guarantee for any subsequent team of the lease. The undersigned hereby acknowledge that they have read the foregoing lease on 20 pages and acknowledge the receipt of adequate consideration for the execution of this guaranty and HEREBY WAIVE ANY DEFENSE TO THE ENFORCEMENT HEREOF BASED UPON THE LACK OR INADEQUACY OF CONSIDERATION.
This the 26th day of July, 2008.
Don Bosch - 10%
Eric Funnel - 20%
Stephanie Balest - 70% jointly with Verbruggen
Marc Verbruggen - 70% jointly with Balest

         Ms. Balest and Mr. Verbruggen signed the Lease Guaranty Agreement where their names were listed; Mr. Bosch and Mr. Funnel did not.

         October 3, 2008, Mr. Bosch and Donald Funnell[1] signed Limited Lease Guaranty Agreements in which they guaranteed performance to the extent of their respective ten and twenty percent shares in S&W ("the October 3 ...


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