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Blackhawk Hotel Associates v. Kaufman

OPINION FILED DECEMBER 26, 1979.

BLACKHAWK HOTEL ASSOCIATES, PLAINTIFF-APPELLANT,

v.

GERALD S. KAUFMAN, DEFENDANT-APPELLEE.



APPEAL from the Circuit Court of Cook County; the Hon. ALLEN HARTMAN, Judge, presiding.

MR. JUSTICE DOWNING DELIVERED THE OPINION OF THE COURT:

Rehearing denied February 8, 1980.

Plaintiff, Blackhawk Hotel Associates, Ltd. (Blackhawk), brought this contract action to enforce a written guaranty which provided that upon a lessee's failure to make rent payments as they became due under a lease, defendant, Gerald S. Kaufman (Kaufman), would pay the rental. Kaufman raised the affirmative defense of release pursuant to the terms of the guaranty and the trial court granted his cross motion for summary judgment.

On appeal Blackhawk asks this court to consider whether the words "any sale," as used in a guaranty release provision, are ambiguous and therefore raise a material question of fact precluding the grant of a summary judgment.

Prior to 1976, Blackhawk owned and operated a hotel commonly known as the Blackhawk Hotel, located in Davenport, Iowa. Blackhawk's ownership interest in the hotel was subject to a mortgage held by the Davenport Bank and Trust Company. On December 29, 1975, Blackhawk agreed to lease its interest in the hotel to Knightsbridge Hotels of Iowa, Ltd. (Knightsbridge). The 30-year lease provided, inter alia, the following rental terms:

"Article IV, Section 1. Basic Rental. From and after the commencement of this Lease, Lessee shall pay to Lessor an aggregate annual basic rental * * * of the sum of

(a) [$30,000] payable in equal monthly installments commencing on February 1, 1976 and on the first day of each and every month thereafter, * * * and

(b) the annual payments of or provision for principal and interest due under:

(1) promissory notes of Lessor * * * in the amount of $825,000, and * * * $175,000, both secured by Deed of Trust to Davenport Bank and Trust Company * * *."

Kaufman agreed to the following provisions in a guaranty dated December 29, 1975:

"In consideration of the making of the foregoing Lease by and between [Blackhawk] (`Lessor') and [Knightsbridge] (`Lessee'), the undersigned Gerald S. Kaufman, an individual resident in the State of Illinois, at the request of the Lessor, and in reliance of the Lessor on this Guaranty, hereby unconditionally guarantees payment of the Basic Rental described in Section 1 of Article IV of said Lease to the Lessor. Any assignment or assignments and successive assignments of the Lease, or any sale of the premises which are the subject of the Lease, * * * shall release the undersigned from liability as guarantor." (Emphasis added.)

During early 1976, Knightsbridge failed to continue making its rent payments as required by the lease. Blackhawk, in turn, defaulted on mortgage payments due its mortgagee, and that bank initiated mortgage foreclosure proceedings on or about June 22, 1976. In a letter dated June 26, 1976, Blackhawk's general partner allegedly made demand upon Kaufman to perform his obligations under the guaranty. Kaufman made no payments. On August 27, 1976, the District Court of Scott County, Iowa, entered judgment for the bank and against Blackhawk in the amount of $993,093.05 plus interest and costs. That court ordered, by special execution, the Scott County sheriff to sell the hotel and all personally associated with it in satisfaction of the judgment. On October 5, 1976, at a public judicial sale, the bank made the highest bid and, accordingly, the sheriff executed to the bank a certificate of purchase for the property. Blackhawk suffered no deficiency liability as a result of the mortgage foreclosure proceedings.

I.

A ...


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