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Higgins v. Brunswick Corp.

OPINION FILED SEPTEMBER 12, 1979.

THOMAS J. HIGGINS ET AL., PLAINTIFFS-APPELLEES,

v.

BRUNSWICK CORPORATION, DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Cook County; the Hon. DONALD J. O'BRIEN, Judge, presiding.

MR. JUSTICE MCNAMARA DELIVERED THE OPINION OF THE COURT:

Plaintiffs, Thomas J. and Lorraine Higgins, brought this action in chancery to cancel a lease entered into between them as lessors, and defendant, Brunswick Corp., as lessee. After a trial without a jury, the trial court entered judgment canceling the lease and ordering Brunswick to vacate the premises and to leave its personal property behind. The court ruled that plaintiffs entered the lease because of duress and undue influence exercised by Brunswick. On appeal Brunswick contends that plaintiffs' action was barred by the doctrine of laches; that the action was barred by res judicata and collateral estoppel; that plaintiffs lacked standing to bring the action; and that the court erred in finding that plaintiffs signed the lease because of duress or undue influence exercised by Brunswick.

In February 1962, Thomas Higgins, a real estate broker and builder, erected a bowling alley, containing a cocktail lounge, at 3660 West 111th Street in Chicago. To do so, he borrowed $150,000 from a savings and loan association. He purchased 16 bowling alleys, automatic pinsetters and other bowling equipment from Brunswick at a cost of $269,479.84. Plaintiffs paid $17,692 in cash for this equipment and executed conditional sales notes in favor of Brunswick in the amount of $251,787.84. Title to the equipment remained in Brunswick until the entire purchase price was paid, and Brunswick was authorized to repossess the equipment in case of plaintiffs' default. Sixteen months later, plaintiffs were $4320 in arrears to Brunswick.

In February 1964, after discussions with Brunswick representatives, plaintiffs ordered additional bowling equipment designed to modernize existing equipment and to increase sales revenue. Plaintiffs paid $2,348.80 in cash to Brunswick and executed conditional sales notes in the amount of $24,517.76. Plaintiffs renegotiated their obligation with Brunswick, which extended the length of their payment period without increasing monthly payments. Plaintiffs were also required to personally guarantee the purchase of the new equipment. Plaintiffs thereafter failed to make any payments to Brunswick and from March 1964 to March 1965, attempted unsuccessfully to again renegotiate the obligations.

On April 1, 1965, plaintiffs and Brunswick tentatively agreed to a lease arrangement of the premises whereby Brunswick would release plaintiffs from their personal guarantees and pay rent to plaintiffs. In return, plaintiffs would lease the entire operation to Brunswick. The premises would also be used as a test center for new Brunswick bowling equipment. Under the lease terms, plaintiffs would have an additional 60 days to pay their outstanding debts for the equipment or surrender possession of the premises and lease it to Brunswick. On May 28, 1965, three days before Brunswick was to take possession of the bowling alley, plaintiffs filed for bankruptcy in Federal court. In that action, they sought to restrain Brunswick from repossessing its equipment or taking possession of the premises.

On July 2, 1965, Brunswick filed an action against plaintiffs in the circuit court of Cook County for $215,700, the balance outstanding on plaintiffs' bowling equipment purchases. Brunswick additionally sought repossession of the equipment. Brunswick also petitioned the bankruptcy court for an order requiring plaintiffs to surrender the premises as per their agreement. The bankruptcy court appointed a receiver and arranged a meeting in which the receiver, plaintiff Thomas Higgins, plaintiffs' attorney, and Brunswick representatives were present. In the negotiations that followed, Brunswick agreed to dismiss its lawsuit against plaintiffs and to pay off plaintiffs' unsecured creditors in exchange for the lease of the building. The receiver authorized the arrangement and, on motion of plaintiffs, the bankruptcy court dismissed the bankruptcy petition. The lease agreement was not presented in the Federal court.

The lease provided that plaintiffs were to receive $22,000 a year as rent from Brunswick. That amount covered the mortgage, taxes and insurance on the establishment. Brunswick received a lease for 24 months with renewal options totaling 19 years. Plaintiffs were responsible for maintenance and repair costs in excess of $50.

After the lease was executed, Brunswick dismissed all proceedings against plaintiffs and paid their unsecured creditors. In 1966, Brunswick received correspondence from an attorney for plaintiffs who demanded that Brunswick perform in strict conformity with the lease. In 1972 and again in 1975, Brunswick refused plaintiffs' offer to purchase the operation. In August 1973, plaintiffs proposed to sell the premises to Brunswick for $200,000 but this also was refused. Plaintiffs refused Brunswick's counteroffer after their 1975 attempt to purchase.

In March 1976, LaSalle National Bank, as trustee of the land trust which held title to the premises in question, transferred title to Marquette National Bank, trustee of another trust in which the sole beneficiary was Thomas Higgins. Thereafter, plaintiffs and LaSalle assigned their interest in the lease to Marquette, as trustee, and directed Brunswick to pay the rent to Marquette.

On July 20, 1976, plaintiffs filed the present action for rescission and cancellation of the lease. They alleged that the lease was signed under duress and that its terms were unconscionable.

In support of their suit plaintiffs introduced evidence of rental income and expenses for the bowling establishment for the years 1975, 1976, and 1977, which showed a total net profit of only $778.41. They also introduced requests from Brunswick for repairs to the premises in the amount of $30,000. Plaintiffs introduced Brunswick's financial projections for the business which indicated a gross profit of $250,000 per year.

Brunswick presented actual figures indicating that the combined net profits of the business for the years 1966, 1967, and 1968 were only $10,286. Brunswick also introduced evidence that over the years different attorneys for plaintiffs had reviewed the lease without recommending action. At the time the present complaint was filed, Brunswick had been in possession for 11 years and had paid $244,000 in rent to plaintiffs. Evidence was also introduced that plaintiffs had a serious under-capitalization problem and poor cash flow at the time of setting up the business.

William Francis, a Brunswick sales engineer, testified that he evaluated the business enterprise on behalf of Brunswick. He believed the bowling establishment was a financially attractive investment for Brunswick as a test center for new equipment and that a lease arrangement with plaintiffs was advisable. Francis' financial projections indicated that Brunswick could expect a new profit of $26,580 for 1967 and a net profit of $306,367 from 1969 to 1978. Francis testified that he had discussed the terms of the lease with Thomas Higgins in the presence of the Higgins' attorney and an attorney for Brunswick. At that conversation, Francis explained the lease renewal options. Francis testified that on October 29, 1965, he went to the premises with two other men from Brunswick to take possession of the business pursuant to the authorization of the receiver. He presented the lease to Thomas Higgins for execution. Higgins appeared upset and refused to execute the lease. Higgins then left the premises carrying the unsigned lease agreement. Francis denied urging Higgins to sign by making threats that he would lose the bowling alley, his home, and his other assets.

Thomas Higgins testified that Brunswick representatives informed him that pending lawsuits would be dismissed if he signed a lease for the premises. Francis, along with two other men from Brunswick, came to the bowling alley to secure his signature. They threatened to take his home, bowling alley and other assets if he refused to sign the lease. There was no negotiation concerning the terms of the lease. Higgins further testified that he was unaware of options to renew the lease; that he did ...


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