Tuesday, April 19, 2011

Uduak J. Ubom v. SunTrust Bank (Ct. of Special Appeals)

Filed: April 4, 2011
Opinion by Judge Kathryn Grill Graeff

Held: The clear language of an Agreement for a Line of Credit, as a whole, shows that the signature of a managing partner as guarantor was in a personal capacity, resulting in personal liability when the LLC defaulted on its obligations.

Facts: A professional limited liability company that provides legal services obtained a line of credit from a bank. The Managing Partner, the managing attorney and sole owner of the LLC, signed his name twice on the Agreement, once on the signature line for “Applicant” and once on the signature line for “Guarantor.” After both signatures, The Managing Partner included his title of “Managing Partner.” The Managing Partner also completed the personal information listed under the section title “Guarantor Information.” The Bank approved the line of credit.

Almost three years later, the bank filed a Complaint against the LLC and The Managing Partner asserting that the LLC had failed to make scheduled monthly payments due on the account, and requesting that the court grant judgment in its favor against the LLC and The Managing Partner, jointly and severally. The Managing Partner acknowledged that the LLC had defaulted on the Agreement, but argued that he signed the Agreement in his official capacity as Managing Partner, not as a personal guarantor of the loan. The Managing Partner further asserted that the bank representative told him that although he was signing as guarantor on the LLC’s Line of Credit, he could avoid personal liability by not including his name on the page of the Agreement that asked for legal name of guarantor, and by writing his title of “Managing Partner” after his signature on the final page of the Agreement.

The Circuit court granted summary judgment in favor of the bank and against the LLC and The Managing Partner. The Managing Partner appealed.

Analysis: The legal question before the court was whether The Managing Partner signed his name in his capacity as an officer of the corporation or whether it was a personal guaranty. The Court noted that The Managing Partner in arguing that his signature did not create a personal guaranty cited no case law in support of this assertion. However, the Court exercised its discretion to consider The Managing Partner’s claim. The Managing Partner argued that the court should have allowed him to introduce evidence of the statements allegedly made to him by SunTrust’s representative.

Maryland courts adhere to a principle of objective interpretation of contracts, and only when the language of the contract is ambiguous will the court look to extraneous sources for the contract’s meaning. The Court compared the contract in this case to a similar case, L & H Enterprises, Inc. v. Allied Building Prod. Corp, 88 Md. App. 642, where there was a question of whether a guaranty of a corporation’s obligation, signed by a corporate officer, was signed in the officer’s representative or individual capacity. Although the Court in that instance found there was no personal liability because there was intent to only bind the corporation and only one place the corporation’s representatives signed, the Court distinguished that case from the case at hand. Here, there were two signature lines, one for “Applicant,” the law firm, and one for “Guarantor.” The Managing Partner signed his name on both signature lines, including his title after his signature. The court asserted that a corporate officer is not relieved of personal liability by the mere addition of his corporate title to a signature line.

The Managing Partner also completed the personal information under the “Guarantor Information” section of the form. If The Managing Partner had only signed the guaranty in a representative capacity, this would render the guaranty inconsequential; it would add nothing to SunTrust’s security to have the law firm, through its Managing Partner, guaranty an obligation to which the law firm was already bound. The language of the Agreement specifically indentifies the applicant, the LLC, as the entity primarily responsible for the line of credit, and the individual signing as guarantor, as jointly liable for the obligation of the LLC.

Since the language, which is clear and unambiguous, of the Agreement as a whole shows an intent to fix personal liability, parol evidence is inadmissible to contradict the clear terms of the Agreement.

The Court held that the circuit court properly granted bank’s motion for summary judgment against the LLC and the Managing Partner.

The full opinion is available in pdf.

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