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Guaranty Bank & Trust Co. v. Reyna

AUGUST 21, 1964.






Appeal from the Superior Court of Cook County; the Hon. IRVING GOLDSTEIN, Judge, presiding. Judgment affirmed in part and reversed in part and cause remanded with directions.


This is an appeal from an order of the Superior Court of Cook County entered on March 27, 1962, assessing damages of $30,676.69 in favor of plaintiff, Guaranty Bank and Trust Co., as Trustee under Trust No. 8433, and against defendant, Tomasita Reyna; assessing damages of $29,026.60 in favor of counterplaintiff, Tomasita Reyna, and against cross-defendant, Guaranty Bank and Trust Co., individually; and finding not guilty the cross-defendant Leonard H. Lawrence on Tomasita Reyna's counterclaim.

The facts of the case are as follows. Tomasita Reyna answered a "Business Opportunities" advertisement in a Chicago paper about November 27, 1960. The ad had been placed by Leonard Lawrence, advertising space for rent in a building at 1038 North Dearborn, Chicago. Miss Reyna met with Lawrence, examined the premises and discussed the possibility of opening a restaurant there. She had been in the restaurant business for ten years and was presently operating the Mexico Lindo Restaurant on North Clark Street. She was looking for a larger area in which to open a Mexican restaurant in a better neighborhood. Lawrence believed that a continental restaurant would be more successful at this location and proposed that Curtis Clark, a Chef, be brought in to take care of the continental end of it.

During December, 1960, Miss Reyna had meetings with Lawrence, representatives of Vision Associates, architects, and her attorney in respect to the property. Vision Associates was retained to draw preliminary plans for the restaurant and was given $500 by Mr. Lawrence. Vision Associates was suggested by Lawrence as architects for the job. They were advised about the amount of capital available and proceeded to work on plans before the lease was entered into. Miss Reyna and Lawrence spoke of forming a corporation to run the restaurant with Miss Reyna, Lawrence and Curtis Clark as principals. Mr. Lawrence agreed to contribute 25% of the capital to the corporation. Miss Reyna was going to contribute 75%. Miss Reyna and Mr. Lawrence envisioned a total capitalization of around $25,000. The lease was to be entered into by Miss Reyna and later assigned to the corporation. The corporation was never formed.

The lease was drawn up by Leonard Lawrence and Miss Reyna's attorney on a printed form with rider attached. It was signed about January 14. On the face of the lease Southmoor Bank & Trust Company, as trustee under Trust No. 8433, appeared as lessor. Tomasita Reyna appeared as lessee. The lease was signed by Leonard H. Lawrence as agent of the Southmoor Bank & Trust Company.

The lease contained minimum rent provisions plus a percentage clause. No rent was to be paid under a deferred rental provision until May 1, 1961, the anticipated opening of the restaurant. A rider was attached to the form providing inter alia:

"(1) Lessor shall provide the same amount of heat for the comfort of the apartment residents of the Lansing Apartment Hotel, and until 10:30 o'clock p.m. during normal heating season.

"(12) Lessor agrees to permit Lessee to assign and transfer this lease to a corporation to be organized under the laws of Illinois by the Lessee. Lessor shall have the right to approve and consent to such assignment but will not unreasonably withhold consent. Lessee will not be liable to the provisions of this lease after assignment. Further if assignee corporation assumes and legally accepts liability for the Lessee for the term prior to the assignment to assignee corporation and from the inception of this lease, Lessor shall release Lessee from any liability to it during said aforesaid period. . . .

"(14) It is expressly understood and agreed that Lessee shall make substantial alterations and improvements in the leased premises. Whereas Lessee has engaged Vision Associates, architects, to prepare plans and specifications for such alterations and improvements and to direct and supervise the same, Lessor hereby agrees to accept all plans and specifications for such alterations and improvements of said premises finally submitted by Vision Associates and accepted by Lessee, provided they do not conflict with or violate any ordinances of the City of Chicago and have been duly approved by the Building Department of the City of Chicago. The cost of all said alterations and improvements shall be borne by and paid for by Lessee. However, the Lessor agrees to make the following alterations and improvements to the outside of the building premises, pursuant to plans and specifications prepared by Vision Associates, architects, at its own expense:

"(1) remove all north and south walls separating the respective store premises in leased premises and replaster where necessary including rerouting and removal of all electric wiring and equipment; and all plumbing and heating equipment, in the walls;

"(2) provide and install sections on the outside of the building at various entrances and on Dearborn St. front as designed by said architects."

The rider was again signed Southmoor Bank & Trust Company, as Trustee, by Leonard H. Lawrence, lessor.

Vision Associates began to prepare plans for the work. They also secured Samuel Kaye Construction Company to do the work through a bidding process. Kaye began work about February 17. It had no contract, but proceeded with the preliminary demolition work with the understanding that if it did not get the bid it would be reimbursed for time and material. Samuel Kaye's estimate of the preliminary work was $17,000. Although it is not clear in the record the $17,000 bid appears to apply to the initial construction and demolition work. Miss Reyna testified that Lawrence said he woud only be responsible for $8,000.

The major difficulties between the parties were the result of their inability to agree over the amount of money the total job would take. Vision Associates submitted plans calling for expenditures of $70,000, $65,000 and $54,000. The architect who testified for Vision Associates said that they based their figure on an initial $45,000 estimate. Miss Reyna throughout the proceedings maintained that the total capital to be invested should be $25,000. Because of inability to agree on the plans the Kaye workers were called on and off the job through February and March. The plans continued to be revised by Vision Associates.

About the middle of March, when little of the contemplated work had been completed and the bids were still too high, Miss Reyna began to talk to Mr. Lawrence about getting out of the lease. There was testimony that she wanted to buy out, that Lawrence refused and that he attempted to secure another lessee to take over the lease. Towards the end of March both Miss Reyna and Vision Associates came up with the idea of reducing the size of the restaurant and arriving at a total cost which would be within reach. Lawrence testified that Miss Reyna was enthusiastic about proceeding at this period. The architect from Vision Associates testified to the same effect. Miss Reyna also told Lawrence that she was getting new counsel.

Since it was obvious that the restaurant would not be completed by May 1 when rent was first to become due, Miss Reyna and her new attorney sought to secure certain changes in the lease. On April 7th, 8th or 9th a meeting was held between Lawrence and his partner, H.L. Marcus, Miss Reyna and her attorney. Miss Reyna said that she couldn't live with the lease as it stood and she asked: 1. that rent for January, February and March be waived; 2. that no security deposit should be required and an option to release at the end of five years should be included; 3. that an independent heating system should be installed by the lessor since the heat provided until 10:30 would not be adequate to heat the restaurant. Mr. Marcus said that the lease was binding as it stood and the terms would not be varied. On April 10, Miss Reyna's attorney, called Mr. Lucius, trust officer of the Southmoor Bank. In the course of conversation, Mr. Lucius stated that Mr. Lawrence is not the duly authorized agent of the bank, as trustee. Later on April 10, another meeting was held with H.L. Marcus, and he was told by Mr. Arons, Miss Reyna's attorney, that he had information to the effect that the lease was void and of no effect and that Tomasita Reyna was repudiating the lease; that the lease being void and of no effect and not legally binding, Tomasita Reyna did not consider herself bound thereby.

On April 11, Mr. Arons wrote a letter to the Southmoor Bank asking whether the statement of Mr. Lucius on April 10, that Mr. Lawrence had no authority, as true, and stating that a substantial damage suit against the lessor was contemplated. "In the event we do not hear from you within a reasonable time, we shall assume that despite the statement of Mr. Lucius, Mr. Lawrence was duly authorized by you to execute said lease in your name. . . ."

On April 14, 1961, the following letter was written by Jack O. Brown, attorney for the Southmoor ...

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