In October 2006, Stump Hill Farm, Inc., purchased real property located in Canton, Ohio. PFC Lamont Hill

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In October 2006, Stump Hill Farm, Inc., purchased real property located in Canton, Ohio. PFC Lamont Hill Memorial Army Navy Garrison 2003, Inc. (PFC), entered into a five-year commercial lease agreement with Stump Hill for the property. The sum of the lease was $210,000 or $42,000 per year and PFC was required to pay $3,500 per month through October 2011 per the terms of the lease agreement. In October 2006, George Bell, Harry Kotigades, Timothy Rhodes, and Harold Young (“Guarantors”) executed and delivered to Stump Hill a Guaranty Agreement whereby the principal officers of PFC personally guaranteed the payment and performance of the lease agreement between Stump Hill and PFC. PFC stopped paying rent, utilities, and taxes to Stump Hill in December 2008. In April 2009, PFC agreed to increase the monthly rental payment to $5,500 per month, through the end of the lease agreement. PFC abandoned the property in September 2009. PFC filed for bankruptcy protection under Chapter 11 in August 2010. In December 2010, Stump Hill and PFC executed a Settlement Agreement and General Release with respect to the issues raised by Stump Hill in the Chapter 11 bankruptcy. In Section 11 of the Settlement Agreement, Stump Hill released and discharged the current board of trustees of PFC from personal liability. The Settlement Agreement and General Release was silent as to the corporate liability of PFC or the preexisting Guaranty Agreement. Stump Hill filed a suit for damages for breach of the lease agreement against the Guarantors, based on the Guaranty Agreement. The trial court held that the Guarantors unconditionally guaranteed payment of the rent, taxes, utilities, and attorney fees if PFC breached the terms of the lease agreement. Because PFC breached the terms of the lease agreement, the Guarantors were liable for all amounts owed under the lease agreement. The trial court entered judgment against the Guarantors in the amount of $179,119.32 under the lease agreement, $89,559.64 in attorney fees, and $350 in costs. Rhodes appealed and contended that the December 2010 Settlement Agreement and General Release discharged the liability of the Guarantors as to the debt. Did the release of the board of trustees serve to also release the guarantors from further liability? Why or why not?

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Dynamic Business Law

ISBN: 9781260247893

5th Edition

Authors: Nancy Kubasek, M. Neil Browne, Daniel Herron, Lucien Dhooge, Linda Barkacs

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