Certiorari to the Utah Court of Appeals Third District, Salt
Lake The Honorable Katie Bernards-Goodman No. 149902947
E. Kingston, Salt Lake City, for respondent.
Russell T. Monahan, Salt Lake City, for petitioner.
JUSTICE PEARCE authored the opinion of the Court, in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE, JUSTICE
DURHAM, and JUSTICE HIMONAS joined.
In 2003, L C Unlimited Corporation (L C) was assigned the
lease that permitted the Golden Isle Restaurant to operate in
a strip mall in Murray, Utah. Xiao-Yan Cao, L C's
president, personally guaranteed L C's performance. In
2006, the lease was again assigned, this time to Hong G. Lin.
As part of that assignment, the lease term was extended until
September 30, 2013, and both Cao and Lin inked personal
guaranties. In 2010, Lin fell behind making rent payments.
Lin and PC Riverview, the property's landlord, agreed to
a repayment schedule to permit Lin to catch up, which he did.
In 2013, Lin defaulted on rent payments shortly before
vacating the premises. PC Riverview sued both Lin and Cao for
$5, 003.50, a sum that represented the last month's rent
and a small balance from the penultimate month. Cao resisted paying that amount, arguing
that the 2010 repayment schedule materially modified the
contract and discharged her guaranty. The district court
agreed and ruled in Cao's favor.
The Utah Court of Appeals reversed the district court's
order. Relying on the Restatement (Third) of Suretyship and
Guaranty, the court of appeals reasoned that merely extending
the period within which a tenant could pay its rent did not
materially modify the contract. It concluded that Cao was
therefore still on the hook for Lin's past-due rent.
Cao seeks our review of the court of appeals' decision.
We conclude that the court of appeals correctly determined
that the 2010 repayment agreement did not materially modify
the contract and that Cao is not relieved of her
responsibilities as guarantor. We affirm the court of
In 1993, the restaurant at the heart of this matter operated
as Royal China Restaurant. Over the next decade, Royal China
changed its name, its landlord, and its owner-the latter a
number of times.
The first change took place in 1997, when the lease was
assigned to new tenants. The assignment included a provision
imposing late fees and interest if rent was not paid on time.
The restaurant's name also changed to Golden Isle
In 2003, the lease was again assigned to a new tenant, L C.
Appellant, L C's president, Xiao-Yan Cao, personally
guaranteed to then-landlord Riverview Properties the
"performance of all covenants, conditions and
obligations and duties required of Tenant under said
Lease." That assignment also provided that,
"[e]xcept as specifically modified, altered, or changed
by this Agreement, the Lease and any amendments and/or
extensions shall remain unchanged and in full force and
effect throughout the Extension Term of the Lease."
(Emphasis added.) Those amendments and extensions included
the 1997 provision detailing late fees and interest on
past-due amounts owed.
Then in 2006, Cao assigned the lease to another tenant, Hong
G. Lin. Lin took over the remaining two years of L C's
lease and extended the lease an additional five years-to
September 30, 2013. Both Cao and Lin signed the 2006 Lease
Extension as guarantors. The 2006 Lease Extension also
adopted all terms of the original lease and "any
amendments and/or extensions"-again including the 1997
provision detailing late fees and interest on past-due
amounts owed and Cao's 2003 personal guaranty.
A month later, in June 2006, Riverview Properties assigned
its "interest as landlord" in the strip mall that
housed Golden Isle to a new landlord, PC Riverview.
In 2008, Lin fell behind paying rent. This lapse continued
over the course of almost two years. In 2010, PC Riverview
filed suit against Lin and Cao. PC Riverview sought
collection of Lin's missed rent plus late fees-a total of
$23, 951.28 from Lin and the enforcement of the guaranty
against Cao. Cao responded by asking the district court to
stanch her potential losses by evicting Lin. PC Riverview
opposed Cao's efforts. As part of that opposition, PC
Riverview introduced evidence that, given the economic
conditions, it would be unable to find another tenant to
lease the space Lin's business occupied. Cao also filed a
motion for summary judgment. The district court stayed
Cao's motion and ordered the parties to mediate the
Unbeknownst to Cao, PC Riverview and Lin crafted a plan that
would allow Lin to operate the restaurant while paying PC
Riverview what it owed in missed payments, interest, and late
fees (the 2010 repayment agreement). Cao learned of that
agreement when she was faxed a copy of an executed agreement.
The 2010 repayment agreement provided that in addition to the
regular monthly payments that the lease required, Lin would
make five additional payments to repay past-due amounts. If
Lin made each payment when due, PC Riverview agreed to
forgive seven-eighths of the late charges that had accrued.
In light of the repayment plan, PC Riverview proposed to Cao
that she stipulate to the dismissal of the action without
prejudice. Cao refused. She wrote to PC Riverview explaining
that she believed this "side agreement" entered
into "without [her] input or knowledge" had
"terminated" "her responsibilities as surety
on this contract." Cao and PC Riverview never reached an
accord, and after a year of inaction on the case, the
district court dismissed the complaint for failure to
Meanwhile, Lin stuck to the terms of his new agreement with
PC Riverview and eventually paid back all past-due rent and
late fees. One might have thought that this would have
signaled a happy ending to this story-and, indeed, 2012 came
and passed without incident. But in 2013, as Lin's lease
was poised to expire, Lin vacated the premises without paying
the last month's rent and a small balance he owed for the
previous month. PC Riverview sued both Lin and Cao to recover
the $5, 003.50 that Lin owed (as well as interest and
attorney fees). The district court granted summary judgment
against Lin, but not Cao. The case against Cao proceeded to
At trial, PC Riverview called the president of its managing
member, Grace Mitchell, to testify about the assignment from
Riverview Properties to PC Riverview. She identified a
document that detailed an "assignment and assumption of
leases that [were] entered into when [PC Riverview] purchased
the property" in 2006. Cao objected to the document
being entered into evidence because the signatories on behalf
of the seller were not present to testify that they signed
the document. Mitchell then testified that ...