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Citizens Nat'l Bk. v. Morman

OPINION FILED NOVEMBER 19, 1979.

CITIZENS NATIONAL BANK OF DOWNERS GROVE, TRUSTEE, PLAINTIFF AND COUNTERDEFENDANT-APPELLANT,

v.

BERNARD F. MORMAN ET AL., D/B/A STOP N' CHAT RESTAURANT, DEFENDANTS AND COUNTERPLAINTIFFS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. EDWARD F. HEALY, Judge, presiding.

MR. JUSTICE O'CONNOR DELIVERED THE OPINION OF THE COURT:

Plaintiff, Citizens National Bank of Downers Grove, as Trustee under Trust No. 993, brought this action against the defendants, Bernard F. Morman and Patrick J. O'Connor, d/b/a Stop n' Chat Restaurant, lessees of certain property from plaintiff, to declare the rights of the parties concerning a disputed lease renewal option. Defendants answered and filed a counterclaim against plaintiff. After a bench trial, the court entered judgment for defendants on plaintiff's complaint and on their counterclaim. Plaintiff appeals.

Defendants, Bernard F. Morman and Patrick J. O'Connor, are the owners of the Stop n' Chat Restaurant in Westmont, Illinois. Defendants purchased the restaurant in 1967 from Walter and Helen Timmerberg, who were leasing the property on which the restaurant is located from the property's then owner, K & H Westmont Building ("K & H Westmont"), a partnership. The defendants had conditioned their purchase of the restaurant from the Timmerbergs on defendants obtaining a new lease from K & H Westmont. The Timmerbergs' sale of the restaurant to defendants closed when defendants signed a ground lease with K & H Westmont, dated June 1, 1967, for a 10-year term ending May 31, 1977, at a monthly rent of $150. The lease was signed for K & H Westmont by Sidney Herzog, one of its partners.

K & H Westmont sold the property where the restaurant is located to Philip C. Behoff on August 1, 1973, and assigned its lease with defendants to him. Behoff eventually sold the property and assigned the lease to plaintiff on November, 16, 1976. Plaintiff presently holds title to the property as trustee for the benefit of George K. Durand.

The lease signed by defendants and by Sidney Herzog for K & H Westmont contains typewritten language stating that defendants have an option to renew the lease for five years, and an option to renew for a second five-year term, at a monthly rent of $150, and also a right of first refusal if the land should be sold. A line has been drawn through the typewritten words stating that defendants may renew at a monthly rent of $150 and have first refusal rights. The following handwritten words appear on the lease just below the lined-out language: "Option of first 5 year and 2nd 5 year at a yearly rental to be agreed upon by mutual consent prior to expiration of each option period." The initials "S.H." and "J.P.R." are handprinted next to these words.

George K. Durand, plaintiff's beneficiary, sent a letter dated November 23, 1976, to defendants informing them that he had purchased the property on which their restaurant is located and that unless they renewed their lease for the first five-year period at a rent mutually agreed upon, they would be required to vacate on May 31, 1977. This letter was based on Durand's and plaintiff's belief that, prior to the time the lease was signed by defendants, the typewritten words on defendants' lease had been lined out and the handwritten words added and that, therefore, only the handwritten words were effective.

Defendants refused to enter into negotiations with plaintiff or Durand for renewal of the lease at a mutually agreed upon rent. Defendants' refusal was based on their belief that the typewritten words had been lined out and the handwritten words added without their consent after they had signed the lease, and that only the typewritten words were effective. Also, defendants' attorney had sent a letter, dated February 27, 1976, to Philip Behoff stating that defendants elected to renew their lease for the first five-year option period. Defendants felt, therefore, that they had already renewed their lease for five years at a monthly rent of $150.

On May 4, 1977, plaintiff filed a complaint for a declaratory judgment pursuant to section 57.1 of the Civil Practice Act (Ill. Rev. Stat. 1977, ch. 110, par. 57.1). Plaintiff asked that the trial court declare the rights of the parties under the lease and order that defendants vacate the property by May 31, 1977, unless defendants renewed the lease at a rent mutually agreed upon with plaintiff.

Defendants in their answer stated that their lease had been materially altered without their consent after they had signed it and asked the court to recognize that they had exercised their first option to renew and were entitled to remain in possession for five more years at a monthly rent of $150. Defendants also filed a counterclaim, based on the fact that their lease states in typewriting that they have "the unrestricted right to use the parking area on Lots 19, 20 and 21 immediately adjacent to [the restaurant]." Defendants alleged that plaintiff had erected a fence in this parking area and asked the court to find that the fence interfered with defendants' parking rights.

At trial, Sidney Herzog, plaintiff's witness, testified that on or about June 1, 1967, John P. Russell came to his home and presented for his signature the lease between K & H Westmont and defendants. Defendants were not present and had not yet signed the lease. Herzog stated that, at his request, Russell at this time lined out the typewritten words and added the handwritten words. Herzog testified that he and Russell then initialed the changes, after which Herzog signed the lease. Russell then took the lease to have defendants sign it, and about one week later Herzog received the lease back with defendants' signatures on it.

Herzog also testified that in an earlier deposition he had said he did not know exactly who had made the changes in the lease, or whether the changes were made at the same time he signed the lease, or sometime afterwards. He did know that the changes conformed to what he wanted. Herzog further testified that he normally would have had defendants initial the changes, but Russell had told him that he had a "power of attorney to accept anything." Herzog also stated that he never asked Russell to show him such a power of attorney and never asked Russell whom he represented, because "[i]t didn't make any difference to me."

Philip C. Behoff testified that when K & H Westmont sold the property on which defendants' restaurant is located and assigned its lease with defendants to him in 1973, the lease included the handwritten changes. Behoff further testified that he would not have purchased the property from K & H Westmont for $170,000 if he had believed the lease granted defendants two five-year options to renew at $150 a month rent. Behoff also stated that while he knew defendants' lease gave them the right to unrestricted use of parking lots 19, 20 and 21, he put a commuter parking lot designed for 72 cars in that area and allocated five spaces for parking by restaurant patrons. Defendants did not object to the commuter parking lot when it was proposed. Most of the restaurant customers came during the evening after the commuters' cars were gone. In the summer of 1974, Catherine Morman, defendant Bernard Morman's wife, told Behoff that defendants needed more parking spaces and Behoff then allocated five more spaces for restaurant customers. After this, Behoff testified, defendants did not complain to him about the parking area.

George K. Durand testified that defendants' lease with K & H Westmont contained the handwritten changes when Behoff assigned it to plaintiff on November 16, 1976. Durand also testified that he had erected a fence in parking lots 19, 20 and 21, and that defendant Patrick O'Connor had complained to him when he was putting the fence up that it would interfere with defendants' right to use the parking lots, but he had told O'Connor the fence was going up.

Defendant O'Connor testified that John P. Russell was the Timmerbergs' broker for the sale of the restaurant to defendants. O'Connor testified that Russell acted on behalf of the Timmerbergs as an "intermediary" between Herzog and defendants when defendants obtained their lease from K & H Westmont, because defendants' purchase of the Timmerbergs' restaurant was conditioned upon defendants acquiring the lease. O'Connor and defendant Bernard Morman both testified that Russell never represented them and they never gave Russell ...


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