Summary
The Texas Thirteenth Court of Appeals considered whether Kaplan Higher Education, LLC remained liable under a guaranty for lease obligations arising from a second lease amendment that Kaplan did not sign. The court strictly construed the guaranty and held that, because the lease required amendments to be signed by all parties and Kaplan was a party to the first amendment, the unsigned second amendment fell outside the guaranty’s scope; the court affirmed summary judgment for Kaplan.
Topics
Practice areas
Questions Presented
- Whether the guaranty covered the 2018 Second Amendment to the lease despite Kaplan's failure to sign that amendment.
- Whether Kaplan was included within the term "parties" in the lease provision requiring all amendments to be in writing and signed by all parties.
Holdings
- The guaranty did not apply to the Second Amendment because the guaranty required renewals, modifications, and extensions to remain subject to the terms, covenants, and conditions of the lease, and the lease required all amendments to be in writing and signed by all parties.
- Kaplan was included within the term "parties" in the lease provision requiring amendments to be in writing and signed by all parties.
Key quotations
“It is well settled in Texas that a guarantor may rely and insist upon the terms and conditions of the guaranty being strictly followed, and if the creditor and principal debtor vary in any material degree from the terms of their contract, then a new contract has been formed and the guarantor is not bound to it.” (12)
“Accordingly, as there is no dispute that Kaplan did not sign the Second Amendment, it never came within the scope of the Guaranty’s terms.” (16)
Factual background
Palmer leased commercial property in McAllen, Texas, to SACMD Acquisition Corporation under a 2003 lease, and Kaplan signed a guaranty attached to and forming part of that lease. Palmer, SACMD, and Kaplan later signed a First Amendment extending the lease term, while a 2018 Second Amendment extending the lease through 2028 was signed by Palmer and Virginia College, SACMD's purported successor, but not by Kaplan. After Virginia College allegedly stopped paying rent, Palmer sought to enforce Kaplan's guaranty, and the trial court granted Kaplan summary judgment.
Procedural history
Palmer sued Kaplan for breach of contract based on an alleged breach of a guaranty relating to a commercial lease. The trial court denied Palmer's summary-judgment motion and granted Kaplan's no-evidence and traditional summary-judgment motion, concluding that the guaranty did not apply to a Second Amendment to the lease because Kaplan had not signed it as required by the lease. The trial court later clarified that the judgment applied to Kaplan Higher Education, LLC, f/k/a Kaplan Higher Education Corporation, and severed Palmer's claims against Kaplan. Palmer appealed.