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O'Banion v. Inland Western Clear Lake Gulf Shores GP, LLC

Court of Appeals of Texas, First District

November 16, 2017

JEFF O'BANION, Appellant
v.
INLAND WESTERN CLEAR LAKE GULF SHORES GP, LLC AND SHANNON METHVIN, Appellees

         On Appeal from the County Court at Law No. 1 Galveston County, Texas Trial Court Case No. CV-0061302

          Panel consists of Chief Justice Radack and Justices Keyes and Caughey.

          MEMORANDUM OPINION

          Sherry Radack, Chief Justice

         Appellant, 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, [1]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.

         We affirm in part and reverse and remand in part.

         Background

         In 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]
TENANT
Flipt, Inc.
By: Jeff O'Banion, President [hand-written]
Jeff O'Banion
President - Flipt, Inc.

         O'Banion also executed, as "Exhibit G" of the Lease, a guaranty agreement (the "Guaranty"), guaranteeing Flipt's payment of the Lease to Inland:

         GUARANTY

Unconditional Guaranty of Lease Dated 7-7-05
By and Between
[Inland] "As Landlord" [a]nd Flipt, Inc. "As Tenant"
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. . . .
. . . .
"GUARANTOR(S)"
Jeff O'Banion - President Flipt, Inc. [hand-written]
Jeff O'Banion 2016 Pebble Beach League City, Texas 77573
[###-##-####] [hand-written]
Social Security Number of Guarantor

         Further, in the acknowledgement portion of the Guaranty, O'Banion included his driver's license number.

         In 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 . . . .

         The 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 contrary.

         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 contrary.

         In 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.

         After 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.

         O'Banion 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 representative capacity.

         O'Banion 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.

         Methvin 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 Guaranty.

         The 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."

         At 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 bank accounts.

         O'Banion 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 ...


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