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National Bank v. S.n.h.

SEPTEMBER 4, 1975.

NATIONAL BANK OF ALBANY PARK IN CHICAGO, PLAINTIFF-APPELLEE,

v.

S.N.H., INC., DEFENDANT-APPELLANT. — (STEVE CHRONIS ET AL., THIRD-PARTY PLAINTIFFS,

v.

MARY ANN BAKING COMPANY ET AL., THIRD-PARTY DEFENDANTS-APPELLANTS; — LILLIAN CONTOS, INTERVENING PETITIONER-APPELLANT,

v.

MARY ANN BAKING COMPANY ET AL., RESPONDENTS.)



APPEAL from the Circuit Court of Cook County; the Hon. JOHN FITZGERALD, Judge, presiding.

MR. JUSTICE MEJDA DELIVERED THE OPINION OF THE COURT:

Rehearing denied October 2, 1975.

This is an appeal from a summary judgment granted upon plaintiff's motion and from an order denying a motion by third-party defendants for rehearing and vacation of the judgment. The judgment declared the subject lease terminated and the occupancy of the premises by defendant to be on a month-to-month tenancy. The issues on appeal are whether summary judgment was properly granted and whether there was a failure to join an indispensable party. We reverse and remand.

The following pertinent facts are not in dispute. On January 1, 1961, La Salle National Bank, as trustee and lessor (Trustee), entered into a written lease with Chef Christopher, Inc., a corporation (Chef), as lessee, for a term of 10 years with an option of 10 additional years for the premises commonly known as 3400-02 West Lawrence Avenue, Chicago, Illinois, for use as a restaurant. Paragraph 8 of the lease provided, among other things:

"Lessee shall not allow or permit any transfer of this Lease or any interest under it or any lien upon Lessee's interest by operation of law, or assign or convey this Lease or any interest under it, or sublet the premises or any part thereof, or permit the use or occupancy of the premises or any part thereof by any one other than Lessee."

Paragraph 15(b) provided in part:

"* * * or if the leasehold interest of Lessee be levied upon under execution or by attached by process of law, * * * or if Lessee abandons the premises, then and in any such event Lessor may * * * terminate this Lease and * * * or * * * Lessee's right to possession of the premises."

Christ Contos and Lillian Contos, his wife, were the sole stockholders of Chef. Christ Contos died in March 1969, and Chef occupied the premises and paid the rental through the month of August 1969. On May 1, 1970, the Trustee sold the building containing the leased premises to plaintiff National Bank of Albany Park in Chicago, a national banking association (Bank), which is successor-lessor to the Trustee.

Plaintiff Bank commenced proceedings by filing a verified complaint for declaratory judgment against defendant S.N.H. Inc., an Illinois corporation (S.N.H.), alleging that Chef "vacated" the premises; that S.N.H. moved into the store in October or November of 1969 as a month-to-month tenant; that on January 13, 1970, counsel for Trustee sent to counsel for S.N.H. a certain letter advising that the Trustee "must take the position that S.N.H. Inc. is occupying the premises on a month-to-month tenancy"; that on February 20, 1970, Mary Ann Baking Company, an Illinois corporation (Mary Ann), purported to assign the interest of Chef in and to the lease to S.N.H.; that on May 1, 1970, Trustee sold the building to the Bank and the Bank repeatedly notified S.N.H. that the tenancy was on a month-to-month basis only and recognized no interest of S.N.H. in the lease; that on September 10, 1970, new counsel for S.N.H. informed the Bank by letter that S.N.H. claimed to be an "assignee of an assignment of Mary Ann Bakery [sic] Company's interest under the lease of Chef Christopher, Inc."

In an unverified answer to the Bank's complaint defendant S.N.H. alleges in part that Chef did not vacate the premises, and in the alternative, admits that Chef vacated and S.N.H. entered the premises; S.N.H. denies moving in as a month-to-month tenant, and in the alternative, admits moving into the store, alleging that the Bank is estopped to deny that S.N.H. is lessee on the same terms and conditions as the lease. S.N.H. admits that on September 10, 1970, the Bank was informed by letter that S.N.H. claimed to be an assignee of Mary Ann's interest under the lease of Chef. The answer concluded with a prayer for declaratory judgment that S.N.H. has a valid and existing interest under the lease and that the lease to Chef is valid and in full force.

S.N.H. and Steven Chronis, its president, by new counsel, subsequently filed a verified third-party complaint against Mary Ann and Phil Georges, its employee and agent, which as amended alleged in part that Mary Ann was guarantor of a note from Chef to Oak Park National Bank which held a security interest in all the furniture, fixtures, equipment and supplies on the restaurant premises and that the indebtedness was also secured by an assignment of Chef's capital stock; that upon default, Mary Ann purchased the fixtures and capital stock of Chef at a public sale on August 21, 1969; that Mary Ann, by Phil Georges, entered into an agreement with S.N.H. and Chronis whereby Mary Ann agreed to transfer the capital stock, fixtures, lease and other assets of Chef for $70,000; that the lease was the most essential part of the transaction; and that the third-party defendant represented that they would obtain a valid lease which would enable them to operate a restaurant on the premises, which representations were known to be false.

In the second count of the third-party complaint S.N.H. and Chronis alleged, in the alternative, that in representing that a valid lease would be conveyed, there has been a mutual mistake of law and a material failure of consideration and that third-party defendants knew, or should have reasonably known, that retailers' occupational taxes were due the State of Illinois and that if third-party plaintiffs attempted to occupy the premises under the corporate auspices of Chef the State of Illinois would attempt to collect said taxes, and have in fact brought such action; and that third-party plaintiffs therefore sought a cancellation of the agreement and damages.

The original attorneys who had formerly represented S.N.H. thereafter filed a motion to strike the third-party complaint on behalf of the third-party defendants, Mary Ann and Georges. Lillian Contos, by leave of court, intervened and filed a verified amended intervening petition which named as respondents Mary Ann, Georges, Chronis, S.N.H., Bank, and also Paul G. Kuchuris, secretary of Mary Ann, and Chef Christopher, Inc., a corporation. Lillian Contos alleged in substance the following: She and her husband operated a restaurant on the leased premises; her husband became indebted to Mary Ann, upon whose suggestion that the business be expanded her husband caused Chef to be organized, and entered into an agreement with Mary Ann that the existing indebtedness would be merged into the cost of expansion, and that the entire indebtedness would be repayable to Mary Ann at a daily rate. Chef was in fact organized, 500 shares being issued to Christ Contos and 500 to Lillian Contos. The instant lease between Chef and the Trustee was negotiated and executed; a driver for Mary Ann was entrusted with a key to the premises to facilitate early deliveries of bakery goods. Christ Contos died intestate in March 1969, leaving Lillian Contos as his only heir-at-law; she operated the business and paid rent until late August of 1969 when Mary Ann conspired with its officers and agents to deprive her of her rights as sole shareholder of Chef, by changing the lock and preventing her from entering the store. Mary Ann caused S.N.H. to be organized to take over and operate the business; the monies advanced by Mary Ann, including the prior indebtedness, were fully satisfied and released after the death of Christ Contos, from insurance which Mary Ann carried, or should have carried on the life of Christ Contos to pay the indebtedness. At the time of the alleged foreclosure sale there was no existing indebtedness due and there was no valid sale of any rights of Chef under its lease. Lillian Contos further alleged that the sale of stock to Mary Ann and its sale to S.N.H. were null and void and were engineered by Mary Ann and its officers for the purpose of depriving her of her rights as a stockholder and the interest of Chef in the lease. The intervening petition concludes with a prayer for damages claimed by Lillian Contos as sole shareholder against Mary Ann, Georges, Kuchuris, Chronis and S.N.H., and further, for a declaration that the interest of the Bank is subject to the valid and subsisting lease of Chef, and that Chef is entitled to possession of the leased premises through its duly authorized officers.

Plaintiff Bank filed a motion for summary judgment against S.N.H., Chronis, Mary Ann, Georges and Contos, supported by the affidavit of counsel for the Bank. The affidavit alleged in pertinent part that Chef occupied the premises and paid the rent through August 1969, and at the end of that month vacated the premises; that no rent was paid for any of the term in the lease commencing September 1, 1969; that S.N.H. became a tenant in November of 1969 and thereafter submitted to the Trustee a new proposed lease which was rejected by letter of January 13, 1970, sent to counsel for S.N.H., stating that it was taking the position that S.N.H. was occupying the premises on a month-to-month tenancy; that Steve Chronis, president of S.N.H., at a discovery deposition on September 27, 1971, a portion of which was set forth in the affidavit, stated that Mary Ann "took over the corporation"; that Chronis was aware that the lease ran to Chef; that the attorneys for Mary Ann acted both for him and Mary Ann in negotiating for a new lease (the original attorneys who had filed an answer for S.N.H. and appeared for third-party defendants herein); that deponent had not previously seen the letter dated September 10, 1970, addressed to the original attorneys; that the intervening petition alleged no facts which would constitute a cause of action against plaintiff Bank. The affidavit concluded: "From the foregoing facts, it is apparent that" Chef did in fact abandon the premises; the lease by its ...


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