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West Davisville Realty Co., LLC v. Alpha Nutrition, Inc.

Supreme Court of Rhode Island

April 19, 2018

West Davisville Realty Co., LLC
v.
Alpha Nutrition, Inc. et al.

          Providence County Superior Court, PC 15-5306, Associate Justice Michael A. Silverstein.

          For Defendant: Daniel P. McKiernan, Esq.

          For Plaintiff: Paul V. Sullivan, Esq. Glen R. Whitehead, Esq.

          Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.

          OPINION

          GILBERT V. INDEGLIA ASSOCIATE JUSTICE.

         The defendant, David Paolo (defendant or Paolo), appeals from a Providence County Superior Court judgment granting summary judgment in favor of the plaintiff, West Davisville Realty Co., LLC (plaintiff or West Davisville), holding Paolo liable on a personal guaranty of a termination of lease agreement between West Davisville and Alpha Nutrition, Inc. d/b/a Doggiefood.com (Alpha).[1] This case came before the Supreme Court on March 8, 2018, pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not be summarily decided. After hearing the parties' arguments and reviewing their memoranda, we are satisfied that cause has not been shown. Accordingly, we shall decide this appeal at this time without further briefing or argument. For the reasons set forth herein, we affirm the judgment of the Superior Court.

         I

         Facts and Travel

         In August 2012, Alpha entered into a lease agreement with West Davisville to rent commercial space in North Kingstown for a five-year term-from September 1, 2012 to August 31, 2017. In 2015, after suffering some financial setbacks, Alpha was past due on its rent payments to West Davisville. In response to this problem, Paolo, after developing a plan with Alpha's sole shareholder, said that he "communicated with West Davisville to determine whether [it] was willing to terminate its lease with Alpha prior to the full term of the written lease." Paolo explained that he was not a shareholder or officer of Alpha at that time, but he was under the impression that he might eventually hold such a position, and so he participated in the negotiations.[2]

         In exchange for ending the lease agreement early, on June 25, 2015, Alpha entered a Termination and Release Agreement (the termination agreement) with West Davisville, and issued a promissory note, personally guaranteed by Paolo, for the sum of $62, 362.50. The termination agreement provided, in pertinent part, that:

"WHEREAS, the Landlord has agreed to terminate the Lease at Tenant's request in exchange for the consideration set forth below and upon the other terms hereof.
2. Consideration. As consideration for Landlord's agreement to terminate the Lease at Tenant's request, Tenant shall pay Landlord the sum of Sixty Two Thousand Three Hundred Sixty-Two and 50/100 ($62, 362.50) Dollars. Tenant agrees to make payments to Landlord over an 18 month term with interest accruing at the fixed rate of 5% per annum. The deferred payments shall be set forth in a Promissory Note to be executed contemporaneously with this Agreement and shall be secured by the unlimited personal guaranty of the Tenant's principal shareholder David Paolo. The guaranty shall be executed and delivered by Mr. Paolo contemporaneously with this Agreement."

         Additionally, the promissory note stated that:

"FOR VALUE RECEIVED, the undersigned, David Paolo, individually and Alpha Nutrition, Inc., a Rhode Island corporation (jointly and severally, the "Borrower"), does hereby promise to pay to the order of West Davisville Realty Co., LLC, a Rhode Island limited liability company * * * the principal sum of Sixty Two Thousand Three Hundred Sixty-Two and 50/100 ($62, 362.50) Dollars, together with accrued interest on any and all principal amounts remaining unpaid hereunder from time to time from the date hereof until payment in full hereof."

         Paolo signed the promissory note twice-on behalf of Alpha and individually.

         He also executed a personal guaranty that stated, in relevant part, as follows:

"1. Guaranty. Guarantor hereby absolutely and unconditionally guarantees to the Landlord: (i) the punctual payment, at the Landlord's address, as and when due under the Note (whether by acceleration or otherwise) of any and all obligations owed to the Landlord which require payment; and (ii) performance by Tenant, as and when required by the Note or the ...

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