World of Sleep, Inc. v. Seidenfeld

Zel Seidenfeld (defendant) created Colorado Sleepmasters, Inc. (CSI) to sell mattresses and other products under a license from World of Sleep, Inc. (World) (plaintiff). To start out, CSI bought $40,000 worth of inventory from World with a promissory note. CSI also subleased World’s premises from World. While the parties were discussing the promissory note and sublease, Seidenfeld agreed to personally guarantee the note and the sublease agreement. When the contract documents were prepared, however, they included a place for Seidenfeld to sign guaranteeing the sublease, but not the promissory note. Seidenfeld noticed the error, but he did not mention it to World. A few years later, CSI was doing poorly and stopped making payments on the promissory note. CSI also missed several rental payments and eventually stopped running the store at all. World sued Seidenfeld personally to recover what CSI owed under the promissory note and the sublease. Seidenfeld argued that personal guarantees fall within the statute of frauds, and, therefore, that Seidenfeld could not be liable for CSI’s debt unless the guarantee was in writing. The trial court reformed the terms of the promissory note by writing in a personal guarantee from Seidenfeld. The trial court then entered judgment against Seidenfeld, finding that he was personally liable to pay for both the sublease and the promissory note. Seidenfeld appealed.