Utah Court of Appeals
Can a settlement agreement release a personal guarantor without express language? Myler v. Blackstone Financial Group Explained
Summary
Myler personally guaranteed construction loans for a real estate development project. When the project failed, the lender entered a settlement agreement with the primary borrower that included a deed in lieu of foreclosure but contained a caveat reserving rights to pursue other security. Myler claimed the settlement released him from his personal guarantee as a member and manager of the borrowing entity.
Analysis
Background and Facts
Larry Myler served as a member and manager of Midtown Joint Venture, LC, which developed the Midtown Village Project in Orem. To secure construction financing, Myler executed a personal guarantee on loans from Blackstone Financial Group’s predecessors. When the project failed during the 2008 economic downturn, Blackstone sued various parties in a defalcation action and later reached a settlement agreement with some defendants, including the primary borrower Midtown.
Key Legal Issues
The central issue was whether the settlement agreement’s release provisions discharged Myler’s liability under his personal guarantee. Myler argued that as a member and manager of Midtown, he qualified as a third-party beneficiary entitled to release under language stating that Midtown’s affiliates would be released “as if Midtown had been specifically identified” in the general release provision.
Court’s Analysis and Holding
The Court of Appeals affirmed summary judgment for Blackstone, focusing on the settlement agreement’s reservation of rights clause. Section 2 of the agreement explicitly stated that “[n]othing contained in this Agreement or in the Deed in Lieu” would “preclude Blackstone from enforcing any and all rights and remedies against or with respect to the Midtown Village and other security.” The court found this language unambiguously preserved Blackstone’s rights under the personal guarantee. Additionally, the fact that another guarantor was expressly released by name suggested the parties knew how to release guarantors when they intended to do so.
Practice Implications
This decision emphasizes the importance of precise drafting in settlement agreements involving guaranteed debt. Courts will enforce broad reservation of rights clauses that preserve creditor remedies against guarantors. When parties intend to release guarantors, they must do so with specific, unambiguous language rather than relying on general release provisions that might encompass affiliated parties.
Case Details
Case Name
Myler v. Blackstone Financial Group
Citation
2014 UT App 187
Court
Utah Court of Appeals
Case Number
No. 20130246-CA
Date Decided
August 7, 2014
Outcome
Affirmed
Holding
A settlement agreement’s broad reservation of rights clause preserved a creditor’s ability to pursue claims against a personal guarantor despite language releasing the primary debtor and its affiliates.
Standard of Review
Correctness for legal conclusions and the ultimate grant or denial of summary judgment
Practice Tip
When drafting settlement agreements involving guaranteed debt, use specific language to either expressly release guarantors or clearly reserve rights against them to avoid ambiguity about continuing liability.
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