Florida Court Ruling Ordering Shareholder to Execute Loan Documents, Including Personal Guarantee, Set Aside

Florida Court Ruling Ordering Shareholder to Execute Loan Documents, Including Personal Guarantee, Set Aside

      In a decision rendered June 17, the District Court of Appeals in Florida set aside a trial court order that a 50% shareholder in a corporation execute, on the corporation’s behalf, certain loan documents, including a personal guarantee of the created indebtedness. Lugassy v. Lugassy, 2020 WL 3261409 (Fla. Dist. Ct. App. June 17, 2020).

      Shay and Yuval Lugassy were each 50% shareholders in Legaci, Inc. The two had had disagreements with respect to the corporation’s operations. In this particular instance, one of the brothers (neither is identified by name in the body of the opinion) had filed a complaint for the corporation’s dissolution on the basis of deadlock. That same brother wanted the corporation to undertake a loan. The other brother was opposed to the loan. The trial court had ordered the brother against the loan to sign the documents, one of which was a personal guarantee of the loan. It was that order that was appealed to this court. 

      Resoundingly, the order that the one brother execute the loan documents was reversed. Reciting language with respect to the nature of a contract being a voluntary undertaking, the court as well cited language as to the freedom to not enter into contracts. Further, the court found that the personal liability was not something that could be imposed as the circuit court ordering the documents to be executed and delivered did not have jurisdiction over the lender, so it would not be able to afford a remedy to the brother who resisted delivering the documents to begin with.