Defendant's Attorney:

Description: St. Louis, Missouri civil litigation lawyers represented the parties in a breach of guaranty action


Royal Gate owned and operated two automobile dealerships. Robert Kelly (Kelly) and Alizadeh were the shareholders and owners of Royal Gate through Royal Gate Holding Company. Kelly was the president and majority shareholder of Royal Gate and ran the day-today operations. Alizadeh was the minority shareholder of Royal Gate. Labantschnig was brought on as a manager in 2015. Royal Gate was experiencing financing issues on its vehicle inventory with its lender, NextGear. In 2018, Royal Gate requested that Labantschnig obtain a line of credit from a bank (Bank) in order to loan funds to Royal Gate to assist with the company's financing issues until it could sell its two dealerships. Labantschnig agreed to do so only if a guaranty was provided. Bank's chief lending officer (Bank Officer) discussed the loan details with Kelly, Alizadeh, and Labantschnig, and explained to them that a line of credit would be arranged. Following loan negotiations, Labantschnig and Royal Gate entered into the CPRI Agreement.

The CPRI Agreement provided that Labantschnig would obtain a $1.5 million line of credit with Bank for the benefit and use of Royal Gate for short-term credit needs, pending the sale of one of its two dealerships, and a standby ILOC against which NextGear could draw in the event that Royal Gate failed to meet its financial obligations. The CPRI Agreement indemnified Labantschnig against all losses, damages, interest, costs, and expenses. The CPRI Agreement set forth Royal Gate's repayment obligations for the principal balance and accrued interest, including monthly interest payments of $6,000. The repayment deadline was set on the date of the first dealership's closure or June 1, 2019, whichever occurred first. The CPRI Agreement was on the first three pages of a five-page document. The fourth page was the Personal Guaranty, and the fifth page was blank. Each of the five pages had the same footer identifying
the page number out of five as well as the same timestamp and version of the "LOC Agreement." Labantschnig and Kelly signed the CPRI Agreement in Kelly's office on March 23, 2019.

The same day, Alizadeh signed the Personal Guaranty in Kelly's office. The Personal Guaranty guarantees Royal Gate's liabilities under the CPRI Agreement. Under the Personal Guaranty, Kelly, Kelly's wife, and Alizadeh agreed to be jointly and severally liable to Labantschnig in their personal capacities and as for Kelly and Alizadeh liability also extended to them in their capacity as owners of Royal Gate. The Personal Guaranty states in relevant parts:

For and in consideration of the premises, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce [Labantschnig] to perform its obligations hereunder, the undersigned, jointly and severally, do hereby personally guaranty to [Labantschnig] the payment of all liabilities and obligations of Royal Gate to [Labantschnig] and Bank of any nature arising under and pursuant to the Agreement, whether now existing or hereafter incurred, whether created directly or acquired by [Labantschnig] by assignment or otherwise, whether matured or unmatured and whether absolute or contingent. The undersigned shall reimburse [Labantschnig], to the extent that such reimbursement is not made by Royal Gate, for all ILOC draws, expenses (including counsel fees), and other losses incurred by [Labantschnig] in connection with any liabilities or obligations of Royal Gate under the Agreement. ...

This is a continuing guaranty and shall remain in full force and effect irrespective of any interruptions in the business of any of the parties. All monies available to [Labantschnig] for application in payment or reduction of the liabilities or obligations of Royal Gate may be applied by [Labantschnig] in such manner and in such amounts and at such time or times as it may see fit to the payment or reduction of such liabilities or obligations as [Labantschnig] may elect, and the obligations pursuant to this guaranty shall not be affected by any surrender or release by Royal Gate of any other security held by it for any claim hereby guaranteed. The undersigned hereby waive (a) notice of acceptance of this guaranty, (b) presentment and demand for payment of any of the liabilities or obligations of Royal Gate, (c) protest and notice of dishonor or default to the undersigned or to any other party with respect to any of the liabilities or obligations of Royal Gate, (d) all other notices to which the undersigned might otherwise be entitled, and (e) any demand for payment under this guaranty.

Two days later, on March 25, 2019, Labantschnig procured a $1.5 million line of credit from Bank. The funds were deposited into Royal Gate's operating account, and Royal Gate used the funds to operate its business. Royal Gate made four monthly interest payments to Labantschnig.

Royal Gate completed the sale of the first dealership on September 6, 2019, triggering its full repayment obligations to Labantschnig under the CPRI Agreement. On September 25, 2019, Labantschnig, through counsel, made a demand for Royal Gate to complete its outstanding payments. Royal Gate did not repay Labantschnig at that time. Kelly and Alizadeh met with Labantschnig, and Kelly explained that Royal Gate would be able to pay him after closing the second dealership.

After the second dealership closed on October 3, 2019, Royal Gate repaid Labantschnig half of the principal balance on the line of credit. Royal Gate made no further payments towards either the principal or the interest. Labantschnig paid Bank the remaining $750,000 principal balance and $41,096.04 in accrued interest.

In March of 2020, Labantschnig filed a first amended petition, which included the subject claim for breach of guaranty against Alizadeh.[1] The case proceeded to a bench trial. The trial court issued judgment in favor of Labantschnig, finding he was entitled to recover on the Personal Guaranty against Alizadeh. Alizadeh filed this appeal. Labantschnig moved for appellate attorneys' fees, and we took the motion with the case.

Labantschnig v. Royal Gate, Inc., ED112169 (Mo. App. Nov 19, 2024)

Outcome: Affirmed

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Defendant's Experts:

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