Bennett v. Leatherby

Opinion

GILBERT, J.

The guarantors of a lease agree to guarantee the performance of a lessee and any successors, assignees or sublessees. Here we hold that a sublessee who assumes all obligations under the prime lease, with the consent of the lessor, is a principal debtor. Therefore, if the lessor impairs its rights or remedies against the sublessee, without the consent of the guarantors, the guarantors are released from their guaranty.

Plaintiff H. Michael Bennett, trustee of a testamentary trust, appeals a summary judgment in favor of defendants Albert Leatherby and David Leatherby, Jr.

[451]

We affirm. The Leatherbys are exonerated from their guaranties by California Civil Code section 2819.

1

Facts

On February 15, 1984, the testamentary trust of H. T. Bennett leased real property at 26 West Anapamu Street in Santa Barbara to Leatherby Marketing, Inc. (LMI or lessee). The lease was for 10 years and 3 months and contemplated that the lessee would sublet the property to a franchisee who would operate a restaurant.

Defendants Albert Leatherby and David Leatherby, Jr., agreed to guarantee, for five years, the performance of LMI, “its successors or assigns” under the lease. The guaranty stated: “This Guaranty will continue to be in full force and effect even though Lessee assigns its obligations hereunder or subleases the premises, and this Guaranty applies to any successor, assignee or sublessee or Lessee.”

Approximately one year later, LMI subleased the real property to “Auburn, Santa Barbara & Stockton Leatherby’s Partners” (Partnership or sub-lessee). This sublessee expressly agreed to assume all obligations of LMI’s lease with the trust. The trust consented to the sublease, in part, because sublessor LMI agreed to remain “fully obligated” under the lease. Thus, both the sublessor and sublessee agreed to perform all obligations of the prime lease between the trust and LMI.

On June 3,1987, during the fourth year of the 10-year lease, the sublessee defaulted in payment of rent. Thereafter, the trust settled with two general partners of the sublessee for $50,000. The trust then released the two general partners “from all claims, demands, causes of action, obligations, damages or liabilities relating in any way to the Lease and/or the Sublease . . . .”