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Arrington v. Walter E. Heller International Corp.

JULY 8, 1975.




APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR L. DUNNE, Judge, presiding.


This appeal seeks reversal of those portions of a judgment order entered by the Circuit Court of Cook County granting plaintiffs' request for a declaration that defendant violated the terms of its lease with plaintiffs in that it acted unreasonably in withholding its consent to plaintiffs' leasing of space to Continental Illinois National Bank & Trust Company of Chicago (Continental) in the building owned by plaintiffs which is located at 30 North La Salle Street and to be known as the Heller International Building. Additionally, plaintiffs cross-appeal from the denial of count II of their complaint seeking damages, attorneys' fees and expenses. *fn1

The pertinent provisions of the lease in issue read as follows:

"4.1 Name of Building. During the term of the Lease, the Building shall be known as the HELLER INTERNATIONAL BUILDING, or by such other similar name as shall be designated by Tenant and approved by Landlord, which approval shall not be unreasonably withheld. Landlord shall, at Tenant's expense, install suitable signs, both on the interior and exterior of the Building, containing the name of the Building designated as above provided. The design and location of such signs are to be subject to the approval of Landlord, Tenant and Tenant's designer for the project, which approval shall not be unreasonably withheld; in no case will any sign be located on the roof of the Building."

"4.4 Public Image of the Building. Landlord recognizes that the Building name will be designated by Tenant in accordance with the provisions of Section 4.1 of this Article IV, which name is intended to reflect the business reputation and good-will of Tenant. In order to assure Tenant that the image of the Building to the general public will be such as to not adversely affect the business reputation and good-will of Tenant, Landlord covenants and agrees that it will not enter into any lease or other arrangement respecting the use of space on the ground floor, mezzanine and lower concourse of the Building, without the written consent of Tenant, which consent shall not be unreasonably withheld."

At trial the court held that the language of the lease — especially of paragraph 4.4 — was ambiguous and therefore testimony was received as to the negotiations preliminary to the execution of the Heller lease. The standard by which the trial judge allowed this parol evidence was whether or not the person offering the testimony was a "principal." The practical effect of his application of this standard was to admit evidence as to the subject matter of the negotiations offered by the plaintiffs' witnesses Alan Golboro, first vice president of Tishman Construction Company (Tishman), and William Friedman, one of the plaintiffs, and defendant's witness Franklin Cole, chairman of the board and chief executive officer of defendant, and to exclude the testimony of defendant's witnesses James Rood, former general counsel for defendant and Maynard Wishner, executive vice president of defendant. Rood and Wishner had attended the meeting wherein paragraph 4.4 had been discussed and negotiated, whereas Cole had not been in attendance at that meeting and indeed testified that he had never specifically discussed paragraph 4.4.

The pleadings and evidence developed the following facts. Plaintiffs were *fn2 composed of a general partnership consisting of nine local businessmen and attorneys and Tishman, who, in a joint venture, constructed, owned and were leasing a new 42-story office building in Chicago's financial and professional district. Defendant is principally engaged in the business of providing commercial counseling and financial services to businesses and banking entities through both its own facilities and those of a number of subsidiaries in the United States and in 20 other countries.

On September 7, 1973, following several months of negotiations initiated by plaintiffs, the parties entered into a 20-year lease under which plaintiffs leased to defendant 126,000 square feet on the top seven floors of the building with options to lease additional space on 15 other floors. The annual base rental was to be $1,184,832 with no rent payment to be made for the first two years. Defendant contended that this rental was $200,000 above the cost of obtaining comparable space at another Chicago location, and that this additional "premium" was to be paid for certain features of the lease, namely the right to name the building and the right to prevent rental to ground-floor and street-level tenants — by withholding its consent — to assure that such leasing would not impair upon the image of the building as it was to be named by the defendant. Defendant and plaintiffs, apparently from the start of negotiations, mutually referred to the building as the "Heller International Building."

The lease also contained provisions prohibiting the plaintiffs from leasing to tenants whose business would be inconsistent with a first-class office building, it granted to the defendant the right to have and approve signs containing its name, and to change the name of the building — both subject to the plaintiffs' approval — and the right to approve the building directory.

Cole testified that Golboro and Friedman had initiated the meetings leading to negotiations on the lease in September of 1972. Cole further testified that, at a meeting on December 15, 1972, he informed Golboro and Friedman that defendant would be willing to pay 1 cent a share — or $200,000 — a year to acquire a Heller International Building on La Salle Street. Friedman testified that he recalled Cole's assertion to have been that defendant would be willing to pay 2 cents a share for a prime location on La Salle Street without regard to the name of the building. Additionally, Friedman testified, defendant's image, prestige and good will were not discussed, and its prominence taken for granted which contrasts with Cole's assertions that all of these had been discussed in the context of how they would be reflected by the building.

Golboro participated in the negotiations as to the Heller lease and was handling the leasing operations for plaintiffs, a task at which he had extensive experience. In testimony during the presentation of plaintiffs' case in chief, he asserted that the "lead tenant is the first tenant in the building, and the principal tenant is the dominant tenant in the building, what you name your building after, or what your building is known as," and stated his opinion that "the Heller International Building is [so] named because Heller leased the amount of space they did."

In April, 1974, representatives of Continental met with Golboro at plaintiffs' instigation to discuss their possible tenancy on the ground floor of the building. Golboro suggested that they contact Cole which they apparently did on April 22. There is a dispute as to when Cole subsequently spoke to Golboro and as to the forcefulness and finality of the refusal given at that time, but there is no question that plaintiffs were informed, at the very least, of defendant's objection to the Continental lease prior to June 28, 1974, when it was signed by Continental. On July 9, the day after defendant received notice that the lease had been entered into, an officer of defendant sent a letter to Golboro charging this action to be a "flagrant violation" of the Heller lease, as a result of which defendant would pursue its legal remedies. Cole sent a formal written refusal to consent to the lease later that month alleging, in pertinent part that, in the opinion of the defendant:

"[I]t is unquestioned that our public image, business reputation and good will would be adversely affected by having a similar major corporate financial services institution occupying ground floor, mezzanine and concourse space in the same building where our principal business offices and international headquarters are located and which bears our corporate name."

In a subsequent series of meetings between plaintiffs and defendant, suggestions were made by both parties as to possible alternative tenants including quality restaurants, retail establishments, foreign banks, American National Bank & Trust (a wholly owned subsidiary of defendant), other major banks in the city as well as the possibility of defendant purchasing the building from plaintiffs. Some alternatives were objected to by ...

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