PERSONAL GUARANTOR CANNOT ESCAPE A PERSONAL GUARANTEE BY…

imagesIn a prior article, I discussed the point that a personal guarantor cannot escape a contractual requirement of a personal guarantee merely by executing the guarantee as a corporate officer.   

 

The recent decision Frieri v. Capital Investment Services, Inc., 41 Fla. L. Weekly D1189a (Fla. 3d DCA 2016) illustrates this point.  In this case, a company hired an individual to help grow that company’s business.  The contract required the individual to invest $6 Million into a trust in consideration of the company’s president transferring substantial shares of the company into the trust.  The objective was that the trust would own the controlling shares of the company.  The money was transferred.  However, the shares were never placed in the trust and the trust never received controlling interest in the company.

 

The individual sued the company and the company’s president.  A judgment was entered against the company’s president and he appealed arguing there was no evidence to hold him personally liable.  The appellate court disagreed because the contract between the company and the individual imposed a personal obligation on the company’s president to actually place controlling shares into the trust and he failed to do so.  Although the company’s president signed the contract as a corporate officer of the company, his “official designation does not shield him from personal liability because the contract’s clear language shows that he assumed personal obligations [through the obligation to place the shares in the trust].” Fireri, supra

 

Remember, affixing a corporate title to a signature will not shield you as a personal guarantor if the contract clearly indicates language requiring a personal guarantee / personal liability.  And, as demonstrated in Frieri, personal liability can be assumed if the contract imposes an obligation on you to do something in a personal capacity, such as the obligation of the company’s president to specifically place shares in the trust.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

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