The Tennessee Supreme Court has ruled that a business CEO who signed a lease on behalf of the company as well as in his personal capacity is liable for the obligations of the lease.
At issue in the case of MLG Enterprises v. Richard Johnson are the two signatures of Richard Johnson, CEO of Mobile Manufacturing, and whether his second signature was sufficient to make him individually responsible for obligations under the lease. In addition to signing the lease for Mobile Manufacturing to rent commercial space in a Williamson County building, Johnson signed the lease personally, but added “for Mobile Master Mfg. LLC” in handwriting after his second signature.
More than a year into the lease, the landlord, MLG Enterprises, filed a complaint stating that Mobile Manufacturing had abandoned the lease, and Johnson breached his personal guaranty agreement in the lease. Johnson maintained that the addition of the handwritten words absolved him of any personal obligation under the lease. The trial court agreed, dismissing the landlord’s complaint against Johnson. On appeal, a majority of the Court of Appeals agreed, and affirmed the trial court’s ruling in a 2-1 decision.
The Supreme Court agreed to hear the case to decide whether Johnson’s second signature was sufficient to bind him individually. In its opinion, the court noted the language preceding Johnson’s signature, which stated: “In consideration of Landlord entering into this Lease with Tenant, Richard L. Johnson hereby agrees that he shall be personally liable for all of Tenant’s obligations under this Lease and executes this Lease for this purpose.”
The Court held that any attempt by Johnson to avoid the plain meaning of the explicit provision for personal liability by following his second signature with the words “for Mobile Master Mfg. LLC” was not effective to overrule the clear intent of the lease.
To read the unanimous opinion in MLG Enterprises, LLC v. Richard Johnson, authored by Chief Justice Jeff Bivins, go to the opinions section of TNCourts.gov.
Source: Tennessee Supreme Court