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Blackhawk Hotel Associates v. Kaufman

OPINION FILED MARCH 18, 1981.

BLACKHAWK HOTEL ASSOCIATES, APPELLANT,

v.

GERALD S. KAUFMAN, APPELLEE.



Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County, the Hon. Allen Hartman, Judge, presiding.

MR. JUSTICE CLARK DELIVERED THE OPINION OF THE COURT:

Rehearing denied June 4, 1981.

This is an action on a guaranty contract. Plaintiff, Blackhawk Hotel Associates, owned the Blackhawk Hotel, located in Davenport, Iowa. Defendant, Gerald S. Kaufman, guaranteed a portion of the hotel lessee's rental payments. The hotel was subject to a mortgage held by the Davenport Bank and Trust Company (bank). The lessee defaulted on its rental payments. The plaintiff thereafter defaulted on its mortgage payments.

The bank instituted foreclosure proceedings. The plaintiff then demanded performance from the defendant guarantor. Defendant did not pay the rent owed, the plaintiff did not pay the bank, and the foreclosure proceedings ended with a public judicial sale, at which the bank bought the hotel. No deficiency judgment was entered. Plaintiff brought suit in July 1977 on the guaranty contract. Defendant contended that the terms of the contract released him from liability. Cross-motions for summary judgment were made, and the circuit court of Cook County granted defendant's motion. The appellate court affirmed. (80 Ill. App.3d 462.) Plaintiff's petition for leave to appeal to this court was granted, and we now reverse the judgments of the appellate and circuit courts> and remand the cause for further proceedings.

The facts are contained in the complaint, the answer as amended, which included several affirmative defenses, plaintiff's reply, both parties' answers to interrogatories, and various affidavits and exhibits. The complaint, the answers, and the reply were all verified.

Plaintiff is a limited partnership organized pursuant to the laws of the State of Massachusetts. It owned and operated the Blackhawk Hotel (hotel) in Davenport, Iowa. In 1975 the hotel apparently experienced financial difficulties, and Knightsbridge Realty Partners, Ltd.-75 agreed to invest $300,000 in return for acquiring a 50.1% interest in the plaintiff partnership and becoming the general partner. The general partners of the plaintiff (before this agreement was made), in turn, became limited partners and relinquished their controlling interest in the partnership. Through a corporation they controlled, however, Knightsbridge Hotels of Iowa, Ltd., a Delaware corporation, they agreed to lease and operate the hotel. The negotiations were begun and concluded in late December 1975. Article IV of the lease between plaintiff and the corporation formed by its former general partners (lessee) stated in pertinent part:

"Section 1. Basic Rental.

From and after the commencement of this Lease, Lessee shall pay to Lessor an aggregate annual basic rental ("Basic rental") of the sum of (a) THIRTY THOUSAND AND 00/100 DOLLARS ($30,000.00) payable in equal monthly installments commencing on February 1, 1976 and on the first day of each and every month thereafter, provided, however, that if the term hereof shall commence prior to February 1, 1976, the first monthly payment of rent hereunder shall in addition include payment for the time between the date of commencement and February 1, 1976, and (b) the annual payments of or provision for principal and interest due under:

1.) promissory notes of Lessor dated 27 January 1975 in the amount of $825,000, and 8 July 1975 in the amount of $175,000, both secured by Deed of Trust to Davenport Bank and Trust Company dated 27 January 1975, and

2.) note of Lessor dated 27 January 1975 in the amount of $1,250,255.00, secured by Mortgage dated 27 January 1975 to Small Business Administration, as the schedules of payments thereunder now require."

Defendant guaranteed the payment of the "Basic Rental." The following contract, not one of standard form, was originally drafted by plaintiff's attorney, and was signed by defendant after he reviewed and revised it:

"GUARANTY

In consideration of the making of the foregoing Lease by and between Blackhawk Hotel Associates ("Lessor") and Knightsbridge Hotels of Iowa, Ltd. ("Lessee"), the undersigned Gerald S. Kaufman, an individual resident in the State of Illinois, at the request of Lessor, and in reliance of 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, or if the General ...


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