Park 100 Investors, Inc. v. Kartes
FACTS: Kartes were owners of a Video communications company which was growing rapidly and needed larger facilities. A representative of an industrial park contacted them about a lease in Park 100. The complex provided a lease agreement form to the Karteses, but it did not include any provisions for a personal guaranty of the lease and a personal guaranty was never mentioned. KVC’s attorney looked over the lease and it was signed and delivered to the representative, Scannel. The night before the Kartes were supposed to move into the building, Scannel arrived at their business as they were headed to their daughters wedding rehearsal and told the they needed to sign the Lease Agreement so they could move into the park the next day. Kartes phoned Kaplan, his senior VP who had been handling the lease and asked if the Lease agreement had been approved by the lawyer. After the phone call, Scannel opened the contract to the signature page and Kartes signed the papers. Kartes was never told that what he was actually signing was a personal guaranty. Eventually the Kartes sold their interest in KVC to associates who failed to make rent payments. Park 100 brought a suit to collect the payments from the Karteses under the personal guaranty.
ISSUE: whether the trial court erred in finding that Park 100 used fraudulent means to procure the signatures of the Karteses on the guaranty of the lease.
HOLDING: Generally parties are obligated to know the terms of the agreement they are signing and cannot avoid their obligations under the agreement due to a failure to read it. However, where one employs misrepresentation to induce a party'’ obligation under a contract, one cannot bind that party to the terms of the agreement.
REASONING: under Indiana law the elements of fraud are:
(1) a material misrepresentation of past or existing fact by the party to be charged, which
(2) was false,
(3) was made with knowledge or in reckless ignorance of the falsity,
(4) was relied upon by the complaining party and
(5) proximately caused the complaining party injury
* Scannel’s actions fit the requirements. A guaranty of the lease was never discussed and the document presented to the Kartses was entitled “Lease Agreement” Only upon confirming that KVC’s attorney had examined and approved the lease did the Karteses affix their signatures to the document entitled “Lease Agreement”
RESULT: the evidence supports the trial court’s conclusion that Park 100 obtained the signatures of the Karteses on the personal guaranty of the lease through fraudulent means.