Hello, dreemer. You're really asking several questions here -- what
is your obligation to the LESSOR; what is your obligation to the LLC;
and what are the LLC partners' obligations TO EACH OTHER. For
clarity's sake I'm going to discuss them separately.
Also, at the outset, I will assume that the personal guarantee on the
lease is expressly described as irrevocable. Otherwise, the general
rule in California is that a continuing guarantee may be revoked at
any time. (Civil Code Section 2815; see also _Central Bldg. LLC. v.
Cooper_ (2005) 127 Cal.App.4th 1053.) Usually a guarantee clause in a
commercial lease does indeed state that it is irrevocable, so I would
be VERY surprised if this one did not so state.
Okay. The first part is going to be bad news: you're on the hook TO
THE LESSOR whether your former partner continues the business or not.
In other words, if the rent doesn't get paid for WHATEVER reason, the
landlord has every right to look right at you for payment. You can
protest that you're no longer involved in the business, and it won't
matter. You are liable because of that personal guarantee. See
_Central Bldg. LLC. v. Cooper_ (2005) 127 Cal.App.4th 1053.
However, that does not mean you have to stand there alone. Let's
assume the worst, and assume that your former partner flat refuses to
pay the entire rent. That means that either you have to pony up the
difference in order to keep the landlord from suing you on the
guarantee, or you just wait until he does sue you. Either way, THE
LLC ITSELF is liable TO YOU for what you paid.
Once you're out of the business, your obligation on the personal
guarantee is just like a co-signer on a note. You're agreeing to
answer for the debt if it doesn't get paid, but really, the debt
"belongs" to the primary debtor. In the unhappy event that you are
forced to pay that debt for the other "person," then you have the
right to look to that "person" for payment. See _Quality Wash Group
V, Ltd. v. Hallak_ (1996) 50 Cal.App.4th 1687; _Flojo Internat., Inc.
v. Lassleben_ (1992) 4 Cal.App.4th 713.
Here, the primary debtor is the LLC itself -- NOT your former partner.
Your former partner is in essentially the same position you are in
with respect to the lease. He is a guarantor, but not the lessee.
The fact that he is the "owner" of the business is irrelevant: under
an LLC, you can't get to the assets of the owners unless you can prove
that the LLC is the "alter ego" of the owner, and that there is no
real separation between the interest and finances of the owner and the
interests and finances of the LLC. (For a discussion of this aspect
of an LLC, you might want to look at
http://answers.google.com/answers/threadview?id=539033.)
So your answer to your former partner is, "Wait a minute. I don't
have to pay the rent -- and YOU don't have to pay the rent. THE LLC
HAS TO PAY THE RENT, since it's the lessee. We only have to pay if
the LLC defaults. And if that happens, I'll be looking to the LLC's
assets for reimbursement, since this is a debt of the company, not my
debt."
Hope this helps. If I can be of any further assistance, please don't
hesitate to ask. Thanks for the question. |
