Appeal from the County Court at Law No. 1 Galveston County,
Texas Trial Court Case No. CV-0061302
consists of Chief Justice Radack and Justices Keyes and
Radack, Chief Justice
Jeff O'Banion, challenges the trial court's judgment,
entered after a bench trial, in favor of appellees, Inland
Western Clear Lake Gulf Shores GP, LLC ("Inland")
and Shannon Methvin, in Inland's suit against
O'Banion for breach of a guaranty agreement pertaining to
a commercial lease and in O'Banion's third-party
claim against Methvin for indemnity under a divorce decree.
In three issues, O'Banion contends that the trial court
erred in concluding that he personally guaranteed the lease
and concluding that he is not entitled to indemnity.
affirm in part and reverse and remand in part.
2005, O'Banion and Methvin, who were husband and wife,
opened a skateboard business, known as Flipt, Inc.
("Flipt"). On July 7, 2005, O'Banion, on behalf
of Flipt, leased from Inland a retail space located at 243 FM
2094, Suite L, in Kemah, Texas. The term of the lease (the
"Lease") was for five years, commencing on
September 1, 2005, and terminating on August 31, 2010. The
initial rental set out in the Lease was $2, 200.83 per month.
O'Banion executed the Lease as follows:
Executed by Tenant [date]
By: Jeff O'Banion, President [hand-written]
President - Flipt, Inc.
also executed, as "Exhibit G" of the Lease, a
guaranty agreement (the "Guaranty"), guaranteeing
Flipt's payment of the Lease to Inland:
Unconditional Guaranty of Lease Dated 7-7-05
By and Between
[Inland] "As Landlord" [a]nd Flipt, Inc. "As
The undersigned (herein called "Guarantor, "
whether one or more), to induce the Landlord named therein to
execute such lease and as a material consideration and
inducement therefor (recognizing that without execution of
this guaranty such Landlord would not be willing to enter
into or make such lease with said Tenant), hereby jointly and
severally unconditionally guarantees performance and
observance by such Tenant of all the obligations, duties,
covenants, agreements and conditions provided in such lease,
as same may be amended from time to time, to be performed or
observed by such Tenant (including specifically and without
limiting the generality of the foregoing, payment by such
Tenant of all rental and other amounts and damages of
whatsoever kind or nature which may be or become due from
such Tenant under the terms of or in connection with such
lease). This guaranty is unconditional and the liability of
Guarantor shall be absolute, in the same manner as if
Guarantor was named and had signed such lease as the
"Tenant" thereunder. . . . It shall not be
necessary or required in order to maintain and enforce
Guarantor's liability hereunder that demand be made upon
such Tenant or that action by commenced or prosecuted against
such Tenant of that any effort be made to enforce the
liability or responsibility of such Tenant for performance of
his obligations or duties under or in connection with such
lease, and it shall not be required that such Tenant or any
other party liable on such lease be joined in any action
brought against guarantor for enforcement of Guarantor's
liability and responsibility under this guaranty or that
judgement have therefore been obtained against such Tenant or
any other party liable therefor on or in connection with any
such claim. . . .
. . . .
Jeff O'Banion - President Flipt, Inc.
Jeff O'Banion 2016 Pebble Beach League City, Texas 77573
Social Security Number of Guarantor
in the acknowledgement portion of the Guaranty, O'Banion
included his driver's license number.
2006, O'Banion and Methvin divorced. In the "Agreed
Final Decree of Divorce, " the trial court awarded Flipt
to Methvin, as her sole and separate property, as follows:
IT IS ORDERED AND DECREED that the wife, [Methvin], is
awarded the following as her sole and separate property, and
the husband [O'Banion] is divested of all right, title,
interest, and claim in and to that property:
W-1. The business known as Flipt, Inc., located at 243 Suite
L, F.M. 2094, Kemah, Texas 77565 including all inventory,
stock, accounts receivable, present and future income . . . .
decree also provides that O'Banion is to indemnify
Methvin for certain debts and obligations:
IT IS ORDERED AND DECREED that the husband [O'Banion]
shall pay, as a part of the division of the estate of the
parties, and shall indemnify and hold wife and her property
harmless from any failure to so discharge, these items:
. . . .
H-6. Any and all debts, charges, liabilities and other
obligations incurred solely by the husband or in his sole
name, unless express provision is made in this decree to the
decree further provides that Methvin is to indemnify
O'Banion for certain debts and obligations:
IT IS ORDERED AND DECREED that the wife, [Methvin], shall
pay, as a part of the division of the estate of the parties,
and shall indemnify and hold the husband and his property
harmless from any failure to so discharge, these items:
W-1. Any and all debts, obligations, accounts payable whether
past due or current in relation to the business known as
Flipt, Inc., 243 Suite L, F.M. 2094, Kemah, Texas 77565.
. . . .
W-3. Any and all debts, charges, liabilities, and other
obligations incurred solely by the wife from and after
September 15, 2006 unless express provision is made in this
decree to the contrary.
. . . .
W-5. Any and all debts, charges, liabilities and other
obligations incurred solely by the wife or in her sole name,
unless express provision is made in this decree to the
2009, Flipt defaulted on the Lease by failing to pay monthly
rent to Inland. Inland sued Flipt for breaching the Lease and
sued O'Banion on the Guaranty, asserting that
O'Banion had personally guaranteed Flipt's
obligations under the Lease.
Flipt did not file an answer, the trial court rendered a
default judgment against it, in favor of Inland, in the
amount of $38, 463.07, plus attorney's fees.
filed an answer, generally denying the allegations, and a
verified denial, denying that he had executed the Guaranty in
his personal capacity. He further asserted that the Guaranty
is ambiguous as to whether he signed it in his personal or
also filed a third-party claim against Methvin, alleging
that, pursuant to the divorce decree, she had assumed
responsibility for all debts, obligations, and accounts
payable relating to Flipt, which was awarded to her as her
sole and separate property, and she agreed to indemnify him
against any failure to make such payments, including rents to
Inland under the Lease.
filed an answer, generally denying the allegations, and
asserting that, although, in the decree, she was awarded the
business, Flipt, the liability for the payment of rent
remained with Flipt and O'Banion, under the Lease and
trial court granted Inland a partial summary judgment,
holding, in relevant part, that on July 7, 2005, O'Banion
executed a "Guaranty of Lease, " in which he
"guaranteed, in some capacity, the Tenant's
[Flipt's] obligations under the Lease." On April 28,
2009, Flipt defaulted on the Lease by failing to pay rents
due and vacating the premises. The unpaid rental and
additional charges due to Inland on the Lease from Flipt,
less the amounts to be recovered from the replacement tenant
for the remainder of Lease, and adding the expenses incurred
in obtaining the new tenant, resulted in total damages to
Inland in the amount of $46, 041.57. The trial court noted
that "the only remaining factual issue to be tried [was]
the capacity of the execution by the Guarantor."
trial, O'Banion testified that, while he was married to
Methvin, they formed a corporation, Flipt, for the purpose of
opening a skateboard shop in Kemah, and they leased a retail
space from Inland. In June 2005, O'Banion and Methvin,
after having their attorney and accountant review the Lease
and Guaranty, met with Inland's representative, Clay
Trozzo, to discuss the terms. O'Banion testified that he
signed both the Lease and Guaranty as "a corporate
officer, " i.e., as president of Flipt, told Trozzo he
had done so, and gave the documents to Trozzo, who did not
object. O'Banion testified that it was his understanding
that he was signing in his "corporate capacity, "
and he noted that he would not have signed the Guaranty if
Inland had told him that he was required to personally
guarantee the Lease. He noted that the address shown in the
signature block is both his home address and the
"corporate address" of Flipt. O'Banion
conceded, however, that, on the Guaranty, in the space asking
for the "Social Security Number of Guarantor, " he
provided his personal social security number, and not the tax
identification number of Flipt. Further, he or Methvin, in
conjunction with executing the Lease and Guaranty, had
provided Inland with copies of O'Banion's 2003 and
2004 personal tax returns and statements from his personal
bank accounts. He stipulated that the copies presented at
trial were true and accurate copies of his tax returns and
further testified that, in December 2006, during the term of
the Lease, he and Methvin divorced. In the divorce decree,
Methvin was awarded the business, Flipt, as her sole and
separate property, and he was divested of all interest. He
noted that, thereafter, he did not participate in the
business. O'Banion testified that he and Methvin had
agreed, as reflected in the decree, that she would indemnify
him, and hold him harmless, from any failure to discharge any
debt or obligation in relation to Flipt. He did not learn
that Flipt had defaulted on the Lease until he received ...