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REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 1104 September Term, 2003

MIDDLEBROOK TECH, LLC v. ROGER H. MOORE

Eyler, Deborah S., Adkins, Bloom, Theodore G. (Ret'd, Specially Assigned), JJ. Opinion by Eyler, Deborah S., J.

Filed: May 7, 2004

The

Circuit

Court

for

Montgomery

County

granted

summary

judgment in favor of Roger H. Moore, the appellee, in a breach of guaranty action brought against him by Middlebrook Tech, LLC ("Middlebrook"), the appellant. On appeal, Middlebrook presents

three questions for review, which can be distilled into the single question of whether the circuit court's decision to grant summary judgment was legally incorrect.1 For the following reasons, we

shall reverse the circuit court's decision and remand the case to that court for further proceedings.

FACTS AND PROCEEDINGS

1

The questions presented by Middlebrook in its brief are:

1. Whether the Circuit Court erred in granting Summary Judgment in favor of [Moore] when it applied the doctrine of judicial estoppel to bar [Middlebrook's] claim for relief against [Moore] under an absolute and unconditional guaranty of a Lease, notwithstanding the fact that the Bankruptcy Court, in an earlier proceeding, did not adjudicate the issue that formed the basis of the claim of judicial estoppel[.] 2. Whether the Circuit Court erred by granting Summary Judgment in favor of [Moore] and dismissing [Middlebrook's] claim for relief under an absolute and unconditional guaranty of a Lease, based on the filing of an involuntary bankruptcy by tenant's former employees. 3. Whether the Circuit Court erred by granting Summary Judgment in favor of [Moore] when it addressed the implications of the Bankruptcy Provision in the Lease and held that despite the tenant's default under the Lease for failing to pay rent, the Bankruptcy Provision in the Lease precluded the relief sought by [Middlebrook] against [Moore] under an absolute and unconditional guaranty, as a result of a foreign insolvency proceeding involving the tenant's parent company and/or the involuntary bankruptcy filed under the U.S. Bankruptcy Code by tenant's former employees.

In

1980,

Moore

founded

Optim

Electronics

Corporation

("Optim"), a Maryland corporation with its principal place of business in Germantown, Montgomery County. Optim was in the

business of manufacturing electronic measuring systems for use in industry. At Optim's inception, Moore was its president and sole At a time not specified in the record, but prior to

stockholder.

1992, Moore sold all of his stock in Optim to Bowthorpe, LLC, a British company. He remained as president of Optim, under an

employment contract. On April 30, 1992, Optim entered into a Lease Agreement ("Lease") with Brooke Venture Limited Partnership ("Brooke"), the predecessor-in-interest to Middlebrook. Pursuant to the Lease, Optim rented from Brooke commercial office space on the second floor of a building located at 12401 Middlebrook Road, in

Germantown ("the Leased Premises"). term, ending on April 30, 1997. payable in monthly installments.

The Lease was for a five-year

It established an annual rent,

As pertinent to this case, section 15 of the Lease, entitled "Default Provisions," stated, inter alia, that the tenant would be in default for failure to pay rent ten days after the time it was due. The Lease also contained, as section 26, a "Holding Over"

clause, stating that, if the tenant should hold possession of the Leased Premises after the end of the term, the tenant would be deemed to be occupying the Leased Premises as a Tenant from month to month, at double the Rent, adjusted to a -2-

monthly basis, and subject to all the other conditions, provisions, and obligations of this Lease insofar as the same are applicable, or as the same shall be adjusted, to a month-to-month tenancy. Finally, also as relevant to this case, the Lease contained the following "Bankruptcy Termination Provision," at section 16: This Lease shall automatically terminate and expire, without the performance of any act or the giving of any notice by Landlord, upon the occurrence of any of the following events: (1) Tenant's admitting in writing its inability to pay its debts generally as they become due, or (2) the commencement by Tenant of a voluntary case under the federal bankruptcy laws . . . or any other applicable federal or state bankruptcy, insolvency or other similar law, or (3) the entry of a decree or order for relief by a court having jurisdiction in the premises in respect of Tenant in an involuntary case under the federal bankruptcy laws . . . or any other applicable federal or state bankruptcy, insolvency or other similar law, and the continuance of any such decree or order unstayed and in effect for a period of 30 consecutive days, or (4) Tenant's making an assignment of all or a substantial part of its property for the benefit of its creditors, or (5) Tenant's seeking or consenting to or acquiescing in the appointment of, or taking possession by, a receiver, trustee, or custodian for all or a substantial part of its property, or (6) the entry of a court order without Tenant's consent, which order shall not be vacated, set aside or stayed within 30 days from the date of entry, appointing a receiver, trustee or custodian for all or a substantial part of its property. The provisions of this Section 16 shall be construed with due recognition for the provisions of the federal bankruptcy laws, where applicable, but shall be interpreted in a manner which results in a termination of this Lease in each and every instance, and to the fullest extent and at the earliest moment that such termination is permitted under the federal bankruptcy laws, it being of prime importance to the Landlord to deal only with Tenants who have, and continue to have, a strong degree of financial strength and financial stability.

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In 1993, Brooke conveyed its interest in the Leased Premises to a life insurance company, which in 1996 reconveyed that interest to First Amsterdam Realty, LLC ("First Amsterdam"). On February 25, 1997, Optim and First Amsterdam entered into an Amendment to the Lease ("Amendment") that, among other things, extended the Lease term for five years, from May 1, 1997, to April 30, 2002 ("the Extended Term"). In addition, the Amendment gave Optim an option to renew the Lease term for an additional five years, from May 1, 2002, to April 30, 2007 ("the Renewal Term"). Section 2(b) of the Amendment stated: Provided that Tenant is not then in default of any of the terms and conditions of this Lease, Tenant shall have the right to renew this Lease for one (1) additional term of five (5) years commencing on May 1, 2002 and terminating on April 30, 2007 . . . provided that for Tenant to validly exercise the option for the Renewal Term, Tenant shall give Landlord written notice at least one (1) year prior to the expiration of the Extended Term, and provided that there shall be no further right of renewal. Sometime Amsterdam thereafter, its but before in December the 7, 1999, First to

conveyed

interest

Leased

Premises

Middlebrook. On December 7, 1999, Moore executed an "Unconditional Guaranty of Lease Agreement" ("Guaranty"). The Guaranty was given in

connection with Bowthorpe's sale of all of Optim's stock to Trident Analytical, Inc., a wholly owned subsidiary of Trident Overseas Limited (collectively "Trident"), also a British Company. The Guaranty states:

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In consideration of and as a material inducement of [Middlebrook] . . . to consent to the transfer of all or part of the capital stock of [Optim] from [Bowthorpe to Trident], which consent is required pursuant to [the Lease and Amendment] . . . [Moore] hereby unconditionally and absolutely guarantees unto [Middlebrook] . . . , the full, prompt and complete payment of any amounts of rent, minimum rent, additional rent, or any additional payment, as these terms may be provided for and used in the [Lease] to be paid by [Optim], and the complete and prompt observance and performance by [Optim] of all the terms, covenants and conditions of the Lease on [Optim's] part to be performed or observed. Two days later, on December 9, 1999, Trident entered into a loan agreement with the Bank of Scotland ("BOS"). time, Trident, Optim, and the BOS entered into At the same a Security

Agreement, by which Trident pledged what amounted to all of Optim's assets as security for the BOS loan. A Financing Statement was

recorded, granting BOS a first priority security interest in all of Optim's personal property. About a year and a half later, on April 20, 2001, Moore, in his capacity as President of Optim, sent Middlebrook a letter stating that it was Optim's intent to renew the Lease for the five year Renewal Term (May 1, 2002 to April 30, 2007) ("the Renewal Letter"). Ultimately, Trident defaulted on the BOS loan. On August 30, 2001, Trident was forced by the BOS into an "administrative

receivership" in the United Kingdom, under a debenture held by the BOS. Two accountants with the firm of Arthur Andersen in Great

Britain were appointed "Joint Administrative Receivers" of Trident.

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On December 31, 2001, Moore's employment contract with Optim expired and was not renewed. Optim continued operating for the first two weeks of January 2002, but its employees were not paid. On February 8, 2002, Optim's employees and Moore filed a petition, in the United States Bankruptcy Court for the District of Maryland ("Bankruptcy Court"), seeking to place Optim in involuntary On

bankruptcy under Chapter 7 of the federal bankruptcy code.

March 13, 2002, the Bankruptcy Court issued an order granting that relief. Thereafter, in April 2002, the Bankruptcy Court appointed Michael Wolff, Esquire, as Trustee for Optim. Beginning in March 2002, Optim ceased making any rent payments under the Lease. On May 13, 2002, in the bankruptcy case, Middlebrook filed a motion for relief from the automatic stay imposed by section 362(a) of the bankruptcy code. It argued that the Lease term ended on

April 30, 2002, and that, from May 1, 2002 on, Optim was occupying the Leased Premises as a holdover tenant, under section 26 of the Lease. Its argument that the Lease was not renewed was twofold: that, as of the date of the Renewal Term (May 1, 2002), Optim was in default, for non-payment of rent, and therefore could not exercise the renewal option; and that the Renewal Letter was ineffective because it was not sent by registered or certified mail, as required under a notice provision of the Lease.

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Middlebrook further argued that, in any event, even if the lease were renewed, it was deemed rejected by the Trustee, as of May 12, 2002, under Section 365(d)(4) of the bankruptcy code, and therefore Middlebrook was entitled to immediate possession of the Leased Premises. On June 7, 2002, the Bankruptcy Court entered an order

granting Middlebrook's motion for relief from the automatic stay. The court ordered that the Lease was deemed rejected on May 13, 2002, pursuant to section 365(d)(4). It further ordered

that the automatic stay . . . be and hereby is terminated as to [Middlebrook], and that [Middlebrook] may exercise all of its contractual and/or State law rights and remedies under its Lease . . . , and Trustee shall consent to such State Court relief; however, [Middlebrook] shall forbear from execution on its judgment until the earlier of July 26, 2002 or 11 days after final order approving sale of collateral in the Leased Premises; and it is further ORDERED, that [Middlebrook] shall have access to the Leased Premises with prior notice to Trustee; and Trustee shall provide keys and alarm code for this purpose to show Leased Premises to prospective tenants; and Trustee shall maintain insurance on Leased Premises as required by Lease; and it is further ORDERED[,] that [Middlebrook] shall have an administrative claim for rent until the Leased Premises are vacated. On February 4, 2003, in the Circuit Court for Montgomery County, Middlebrook filed a complaint for breach of guaranty against Moore. Middlebrook alleged that Optim had renewed the

Lease for the Renewal Term (May 1, 2002 to April 30, 2007), but had breached the Lease by failing to pay rent from March 2002 forward. -7-

It sought recovery from Moore, on his Guaranty, of approximately $210,000 in unpaid rent and late fees allegedly owed by Optim, through January 2003, plus 18% interest. Middlebrook attached

copies of the Lease, Amendment, Guaranty, and April 20, 2001 renewal letter to its complaint. Middlebrook's complaint was filed with an accompanying motion for summary judgment and request for hearing. The motion was

supported by an affidavit by an officer of Middlebrook attesting that the allegations in the complaint were true and the documents attached to the complaint were authentic. Middlebrook did not file a memorandum of law in support of its motion for summary judgment. Moore filed an answer to the complaint, an opposition to Middlebrook's motion for summary judgment, and a cross-motion for summary judgment. Moore advanced numerous, alternative arguments in opposition to Middlebrook's motion for summary judgment. First, he argued 1) a written

that the Lease was not renewed, for four reasons:

renewal amendment was not signed and the Renewal Letter was not in and of itself effective to extend the Lease for the Renewal Term; 2) the Renewal Letter could not satisfy the statute of frauds; 3) Optim could not renew the Lease because at the inception of the Renewal Term it was in default for failure to pay rent; and 4) at the inception of the Renewal Term, Optim lacked the capacity to renew the Lease because it was in involuntary bankruptcy and only

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could act through its Trustee (who did not renew the Lease and indeed was deemed by the Bankruptcy Court to have rejected it). Moore further argued that, because the Lease was not renewed, Optim was a month-to-month tenant until it vacated the premises in July 2002, and any liability of Optim on the Lease ended at that time. Because Middlebrook received administrative rent in the bankruptcy case covering that period, nothing was owed by Optim and therefore nothing was owed by Moore on the Guaranty. Second, Moore argued that, under section 16 of the Lease, the Lease automatically terminated before the Renewal Term, by either one of two triggering events. Under section 16(4), the Lease

terminated on December 9, 1999, when the Security Agreement was signed, because, by pledging its assets as collateral for the BOS loan to Trident, Optim "mad[e] an assignment of all or a

substantial part of its property for the benefit of its creditors." Alternatively, under section 16(6), the Lease automatically

terminated on August 30, 2001, when the Joint Administrative Receivers were appointed.2 Moore took the position that automatic

Moore also argued that the Lease, if not already terminated, was terminated when Woolf was appointed Trustee of Optim's assets in the bankruptcy case. He later withdrew that argument, in recognition that section 365(e)(1) of the Bankruptcy Code prohibits what are known as "ipso facto clauses," that is, clauses that declare an executory contract or unexpired lease of the debtor terminated in the event of the debtor's bankruptcy, or that there has been a material breach. Section 365(3)(1) invalidates clauses conditioned, at any time after commencement of the bankruptcy case, on (continued...) -9-

2

termination of the Lease meant that Moore ceased to have any liability under the Guaranty because the obligations he was

guaranteeing no longer existed, and to extend his Guaranty to cover a holdover tenancy not covered by the Lease for an insolvent business would be to impose on him a new and entirely different obligation from that which he had agreed to. Third, Moore argued that Optim's involuntary bankruptcy was a "supervening performance impracticality" under the Lease. that discharged he Optim's that duty of

Fourth,

argued

Optim's

insolvency "completely frustrated the purpose" of the Lease, so its original purpose could not be achieved, thus permitting it to be terminated by Optim. Fifth, Moore argued that Middlebrook failed

to mitigate its damages by limiting its claim against Optim to the administrative rent, of approximately $78,000, that it received in the bankruptcy case, when there were adequate funds in the

bankruptcy estate to pay Middlebrook's full claim.

Finally, Moore

argued that Optim had no liability under the Lease after July 2002 because Middlebrook insisted that Optim vacate the premises as of that time and Optim did so. Moore maintained that, under all of

2

(...continued) (A) the insolvency or financial condition of the debtor at any time before the closing of the [bankruptcy] case; (B) the commencement of [the bankruptcy case]; or (C) the appointment of or taking possession by a trustee in a case under [the Bankruptcy Code) or a custodian before such commencement. -10-

these scenarios, Optim had no obligations to Middlebrook under the Lease and therefore he had no liability under the Guaranty. In support of his cross-motion for summary judgment, Moore reasserted that he was obligated under the Guaranty only if the Lease was in effect and Optim was bound by it. When the Lease

automatically terminated, by one of two triggering events under section 16, as Moore argued was the case, Optim's obligation under the Lease terminated and his Guaranty terminated as well. If Optim was released from its duty of performance under the Lease, either due to the "supervening impracticality" of its involuntary

bankruptcy or due to frustration of purpose of the Lease, Moore's obligation under the Guaranty likewise ceased. If that was not the case but the Lease was not renewed, his obligation only was for the holdover period, for which Middlebrook already was compensated. If the Lease was renewed, his Guaranty did not apply, because he only had agreed to guarantee the obligations of Optim as a financially sound going concern, not as an insolvent company. Moore also

argued that the Guaranty was not enforceable because it was not supported by consideration. Middlebrook filed an opposition to Moore's cross-motion for summary judgment, addressing the points raised. It argued that the Renewal Letter was all that was required to effectively extend the Lease and that the statute of frauds was satisfied by the Lease itself. It further argued that Optim was not in default or in

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bankruptcy when the Lease term was extended by the Renewal Letter, and therefore Optim satisfied the preconditions and had the

capacity to renew the Lease and extend the Lease term; it only went into default after the Lease term was extended. Therefore, the

Lease was in effect for the remainder of the Renewal Term, that is, through April 2007. Middlebrook asserted that Optim's insolvency did not discharge Moore from his obligation under the Guaranty. In response to the arguments advanced by Moore under section 16 of the Lease, Middlebrook asserted that the entire section was invalid as an "ipso facto clause," prohibited by section 365(3)(1) of the federal bankruptcy code. Middlebrook further argued that

even if section 16 were effective and operated to terminate the Lease, or if Optim's bankruptcy terminated its obligations under the Lease, as guarantor, Moore would step into Optim's shoes, and become liable under the Lease in any event. Middlebrook further

asserted that the doctrines of "supervening impracticability" and "frustration of purpose" were inapplicable, and would not eliminate Moore's liability under the Guaranty in any event, and that

Middlebrook did not limit the sum it could recover against Moore under the Guaranty by accepting approximately $78,000 in

administrative rent in the bankruptcy case. Although the date is not discernible from the record, it appears that sometime not long before the scheduled hearing on the summary judgment motions, which had been postponed, counsel for the

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parties obtained copies of the motion for relief from automatic stay filed by Middlebrook in the bankruptcy case and the Bankruptcy Court's June 7, 2002 order granting that relief. The case came on for a hearing before the circuit court on May 21, 2003.3 Middlebrook argued that, notwithstanding Optim's

bankruptcy, Moore remained fully liable on his Guaranty of the obligations in the Lease; indeed, the purpose of the Guaranty was to protect Middlebrook in the event of insolvency of Optim.

Middlebrook's counsel acknowledged having argued in the bankruptcy case that Optim had not renewed the Lease for the Renewal Term. He

maintained, however, that the Bankruptcy Court did not decide the

The following documents were before the circuit court on the day of the hearing, having been attached to the complaint, answer, motion, and cross-motion for summary judgment filed by the parties: Lease Agreement between Brooke Venture Ltd. Partnership and Optim Electronics Corporation; Addendum to the Lease Agreement; Amendment to the Lease Agreement; Guaranty of the Lease Agreement by Roger Moore; April 20, 2001 letter by Roger Moore to Middlebrook Tech, LLC exercising Optim's right to extend the Lease; an affidavit by Middlebrook Tech, LLC; Notice by Administrative Receiver Suspending Moore's Power as a Director of Optim; Tenant's Ledger showing charges to and payments by Optim to Middlebrook; Trustee's Motion for Approval of Settlement in the Maryland bankruptcy case with Security Agreement and UCC-1 attached; Report of the Joint Administrative Receivers; Affidavit by Jeffery Orenstein; the Bank of Scotland's Response to Order Requiring Bank of Scotland to File Augmented Schedules and Financial Schedules and Financial Affairs; March 18, 2002 Order by Bankruptcy Court Entering Relief Under Chapter 7 on Involuntary Petition and Directing Compliance with Filing Requirements; Motion by Roger Moore to Amend Order Directing Designated Creditors to File Chapter 7 Schedules A-J, Statement of Financial Affairs, and Mailing Matrix. Also, at the hearing, Middlebrook's motion for relief from automatic stay, and the Bankruptcy Court's June 7, 2002 order granting that relief, were moved into the record. -13-

3

renewal issue and, in any event, the bankruptcy case did not involve Moore. He asserted that the undisputed facts established that the Lease had been renewed, that rent had not been paid from March 2002 forward, and that Moore was liable, on his Guaranty, for the sums owed in rent under the Lease that were not paid and had not been reimbursed by administrative rent in the bankruptcy case. Counsel for Moore focused her argument on section 16 of the Lease, asserting that the Lease had terminated automatically either on December or 9, in 1999, when Optim entered the into the Security

Agreement,

August

2001,

when

Joint

Administrative

Receivers were appointed.

She maintained that, from the date the

Lease had terminated forward, Optim was occupying the premises as a month-to-month holdover tenant, not under the Lease, because it no longer existed, but by law. Because the Lease had terminated,

Moore no longer had any liability on his Guaranty, because the obligations that he had guaranteed no longer existed. Moore's counsel further argued that, even if the Lease did not expire before the involuntary bankruptcy petition was filed, Optim did not effectively exercise the option to renew the Lease for the Renewal Term, because a condition precedent to renewal was that Optim not be in default at the time of the Renewal Term (that is, as of May 1, 2002), and that condition was not satisfied, because Optim had failed to pay rent for March and April 2002. Therefore,

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the Lease expired on April 30, 2002.4

In that regard, Moore's

counsel advanced an argument not made in his memorandum in support of cross-motion for summary judgment, and therefore not briefed for the court: that by advocating before the Bankruptcy Court, in

support of the motion to stay, that the Lease had not been renewed, Middlebrook was judicially estopped to argue in the breach of guaranty case against Moore that the Lease had been renewed. Counsel asserted that, on the basis of the non-renewal position it took in the bankruptcy case, Middlebrook was granted relief from the automatic stay, and was able to retake possession of the Lease Premises. At the conclusion of the hearing, the circuit court ruled: [Middlebrook] had previously taken the position in the bankruptcy matter . . . that Section 16 of the lease governed and resulted in termination of the lease. I am inclined to agree with the position that [Middlebrook] took in the bankruptcy court, with regard to Section 16 of the lease, for the reasons stated by Middlebrook and the additional reasons set forth today. It seems to me that by operation of the lease, that the lease itself was terminated; and I think that the position that [Middlebrook] take[s] in this matter is not only inconsistent with the position [it] has previously taken, but I think it is inconsistent with the facts which appear undisputed with regard to the triggering events; but also find that -- it seems to me that the doctrine of judicial estoppel was created to prevent the very thing that [Middlebrook] is doing here, and that is,

Counsel's arguments were somewhat inconsistent. She asserted that the Lease itself -- not the Lease term -- terminated under section 16, but then suggested that the Lease had to be renewed at the end of its term -- by April 30, 2002 -- to be continued; and that the renewal was not effective. If only the Lease term expired, however, the Lease still would remain effective, under section 26. -15-

4

asserting a contrary position in another case concerning essentially the same subject matter and asserting those inconsistent positions when it is depending upon whether it is to its benefit or detriment to assert the position taken. I am going to grant -- I do find there is no genuine dispute as to material fact. I am going to grant [Moore's] motion for summary judgment and deny [Middlebrook's] motion for summary judgment. . . . On May 28, 2003, the circuit court entered an order denying Middlebrook's motion for summary judgment and granting Moore's cross-motion for summary judgment. Within ten days, Middlebrook

filed a motion for reconsideration, which was denied in a brief order, without a hearing. of appeal. Middlebrook then filed a timely notice

DISCUSSION
Standard of Review of Grant of Motion for Summary Judgment Under Rule 2-501, a circuit court may grant summary judgment upon a finding that the material facts are not in genuine dispute and the moving party is entitled to judgment in its favor as a matter of law. Beyer v. Morgan State Univ., 369 Md. 335, 359-60

(2002); Schmerling v. Injured Workers' Ins. Fund, 368 Md. 434, 443 (2002); Lippert v. Jung, 366 Md. 221, 227 (2001). decision on both issues is a legal decision. The court's

Maryland Dept. of the

Environment v. Underwood, 368 Md. 160, 171 (2002); Philadelphia Indem. Ins. Co. v. Maryland Yacht Club, Inc., 129 Md. App. 455, 465 (1999). Accordingly, we review the grant of summary judgment de

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novo. Beyer, supra, 369 Md. at 359-360; Schmerling, supra, 368 Md. at 443; Fister v. Allstate Life Ins. Co., 366 Md. 201, 210 (2001). If the moving party offers more than one basis for its summary judgment argument, and the court rules on one basis, we review the court's decision on that issue. We do not review the issues that

did not form the basis for the court's ruling, unless the court would have had no discretion but to grant summary judgment on one of those bases. Maryland Rule 8-131(a); Sadler v. Dimensions

Healthcare Corp., 378 Md. 509, 537 (2003); Blades v. Woods, 338 Md. 475, 478 (1995)(quoting Gross v. Sussex Inc., 332 Md. 247, 254 n. 3 (1993)); Orkin v. Holy Cross Hosp. of Silver Spring, Inc., 318 Md. 429, 435 (1990). Analysis Before addressing Middlebrook's contentions, it will be

helpful to give an overview of some of the pertinent Maryland law respecting third party contractual obligors and the relevant

federal law respecting the effect of bankruptcy proceedings on executory contracts and leases of the debtor. In Maryland, there are two types of third-party contractual obligors: guarantors and sureties. Mercy Medical Center, Inc. v.

United Healthcare of the Mid-Atlantic, Inc., 149 Md. App. 336, 357 (2003). A suretyship contract

is a tripartite agreement among a principal obligor, his obligee, and a surety. This contract is a direct and original undertaking under which the surety is primarily -17-

liable with the principal obligor and therefore is responsible at once if the principal obligor fails to perform. General Motors Acceptance Corp. v. Daniels, 303 Md. 254, 259 (1985). See also Atl. Contracting & Material Co. v. Ulico, ___ Md. ___, No. 51, September Term, 2003 (filed March 12, 2004), 2004 WL 443885, at *5. "The liability of a surety is coextensive with that The surety is primarily or jointly liable with

of the principal.

the principal and, therefore, is immediately responsible if the principal fails to perform." Ulico, supra, 2004 WL 443885, at *6

(citing Gen. Builders Supply Co. v. MacArthur, 228 Md. 320, 326 (1962)). "Ultimate liability rests upon the principal obligor

rather than the surety, but the obligee has a remedy against both. The surety, however, becomes subrogated to the rights of the obligee when the surety pays the debt for the principal obligor." General Motors, supra, 303 Md. at 295. A guaranty is a form of commercial obligation in which the guarantor promises to perform if his principal does not. Mercy

Medical Center, supra, 149 Md. App. at 361 (quoting General Motors, supra, 303 Md. at 260, and Walton v. Washington County Hosp. Ass'n, 178 Md. 446, 450 (1940)). As distinguished from a contract of suretyship, a contract of guaranty is collateral to and independent of the principal contract that is guaranteed and, as a result, the guarantor is not a party to the principal obligation. A guarantor is therefore secondarily liable to the creditor on his contract and his promise to answer for the debt, default, or miscarriage of another becomes absolute upon -18-

default of the principal debtor and the satisfaction of the conditions precedent to liability. General Motors, supra, 303 Md. at 260. "Because `[t]he liability of a . . . guarantor is created entirely by his contract, it is strictly confined and limited to his contract.'" Mercy Medical

Center, supra, at 361-62 (quoting Plunkett v. Davis Sewing-Mach. Co., 84 Md. 529, 533 (1897)). For that reason, no change can be Plunkett,

made to the guaranty without the guarantor's consent. supra, 84 Md. at 533.

As Moore acknowledges in his brief and the papers he filed below, the contractual obligation he gave in the Guaranty was in the nature of a surety agreement, because it guaranteed performance of the obligations of Optim under the Lease, not performance by Optim of those obligations. The federal bankruptcy laws are codified in 11 U.S.C. sections 361, et seq. Section 365, entitled inter "Executory alia, that, contracts with and

unexpired

leases,"

provides,

certain

exceptions and subject to the Bankruptcy Court's approval, the trustee of a debtor may assume or reject an unexpired lease of the debtor.

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