The opinion of the court was delivered by: BUCKLO
General Electric Capital Corporation ("GECC")
brought a breach of contract action against the defendants, Kenneth L. Tucker and Richard H. Tucker. The defendants asserted several defenses and moved for summary judgment with respect to two of them. The plaintiff moved for summary judgment with respect to all defenses. For the following reasons, the defendants' motion is denied and the plaintiff's motion is granted.
The Tuckers are in the business of acquiring, developing, leasing, and managing shopping centers. They conduct their business transactions through a variety of entities, including The Tucker Companies, Tucker Evansville Limited Partnership ("Tucker Evansville"), and Tucker Master General Partnership ("Tucker Master"). The Tuckers and GECC have a long-standing relationship. Beginning in the late 1980's, GECC provided financing for several Tucker ventures, including approximately $ 70 million for a redevelopment project in Chicago and over $ 20 million for a shopping center acquisition in Naperville.
In February 1992, upon the default by the original borrower, GECC offered the Tuckers the ownership and management of two properties located in Evansville, Indiana--Washington Square Mall Shopping Center ("WS Mall") and Lawndale Shopping Center ("Lawndale"). Tucker Evansville, formed for this purpose, of which the Tuckers were limited partners, acquired the properties and assumed the attendant note and mortgage obligations ("Evansville Loan") on or about February 28, 1992.
In late 1992, the Tuckers began exploring the possibility of taking The Tucker Companies public through a real estate investment trust ("REIT"). GECC's cooperation was necessary to secure the release of mortgages and participation interests,
which GECC held on a number of properties to be included in the REIT. Additionally, the Tuckers required financing to acquire more properties for the REIT and to fund the REIT itself. Negotiations between the Tuckers and GECC began in January 1993. Tucker Master was created as a vehicle for effectuating the REIT.
The Master Loan Agreement was executed on June 25, 1993. Among other things, the Agreement severed the Lawndale loan from the Evansville Loan, because the WS Mall would not be included in the REIT, while the Lawndale property would be. The mortgages on the properties to be included in the REIT were to be repaid and therefore released, while the mortgage on the WS Mall was to remain. Tucker Master assumed the modified Evansville Loan from Tucker Evansville.
In the event that the WS Mall Loan shall not have been paid in full on or prior to December 31, 1994, then:
(a) KLT[, Kenneth Tucker,] and RHT[, Richard Tucker,] hereby covenant and agree to jointly and severally execute and deliver (or to jointly and severally guarantee) a master lease of the WS Mall (herein called the "WS Mall Master Lease") which will provide during the term of the WS Mall Master Lease a minimum Net Operating Income from the WS Mall of not less than $ 2,500,000 per annum;
(f) In the event that KLT and RHT shall fail to execute and deliver the WS Mall Master Lease, they shall be and become jointly and severally personally obligated and liable for all rents which would become due under such a WS Mall Master Lease as provided in Subsection (a) above less amounts received by GECC from occupancy tenants, notwithstanding any other exculpation herein or in any of the Borrower's Loan Documents.
GECC agreed to provide $ 50 million to enable the Tuckers to acquire additional properties for the REIT, to establish a $ 45 million credit line facility for the REIT, and to release mortgages and its participating interests on the properties comprising the REIT. The REIT transaction closed on or about October 3, 1993. GECC provided the financing set forth above and released the mortgages and the participating interests. GECC received the balance of the outstanding debts on the properties included in the REIT and $ 7.7 million of the offering proceeds.
Various tenant possibilities were explored by the Tuckers and GECC for the purposes of fulfilling the Master Lease provision. However, no WS Mall Master Lease was ever executed. On February 8, 1995, GECC notified Tucker Evansville
that it was declaring a "default" as of December 1994 on the WS Mall loan. The loan is as yet unpaid.
On July 31, 1995, GECC filed suit to enforce § 5.15(f) of the Master Loan Agreement, seeking declaratory judgment and damages. The Tuckers seek summary judgment with respect to their defenses of vagueness and release. GECC moved for summary judgment with respect to all defenses.
Summary judgment is proper when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). A genuine issue of material fact exists when "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). All reasonable inferences must be drawn in favor of the non-moving party. Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir. 1991). However, a "scintilla of evidence" will not suffice. Brownell v. Figel, 950 F.2d 1285, 1289 (7th Cir. 1991).
Both parties move for summary judgment on the basis of their construction of § 5.15(f) of the Master Loan Agreement. "Under Illinois law, the primary objective in construing a contract is to give effect to the parties' intent."
Home Ins. Co. v. Chicago & NW Transp. Co., 56 F.3d 763, 767 (7th Cir. 1995). It is for the court to determine whether the contract terms are ambiguous. Meyer v. Marilyn Miglin, Inc., 273 Ill. App. 3d 882, 652 N.E.2d 1233, 1237-38, 210 Ill. Dec. 257 (1995). If the contract terms are unambiguous, the parties' intent must be ascertained exclusively from the express language of the contract. If the contract is ambiguous, the court may consider extrinsic evidence. Id. When a "party files a motion for summary judgment requiring interpretation of a contract, the district court must determine (1) if the contract is ambiguous or unambiguous and (2) if it is ambiguous, whether after consideration of the extrinsic evidence, there are any triable issues of fact." Hickey v. A.E. Staley Mfg., 995 F.2d 1385, 1389 (7th Cir. 1993). If, with the use of extrinsic evidence, the material terms cannot be rendered definite and certain, the contract is unenforceable. See Meyer, 652 N.E.2d at 1238.
The controversial phrase is the measure of the Tuckers' personal liability: "all rents which would become due under such a WS Mall Master Lease as provided in Subsection (a) above less amounts received by GECC from occupancy tenants." A contract is ambiguous "when the language used . . . is obscure in meaning through indefiniteness of expression." Wald v. Chicago Shippers Ass'n, 175 Ill. App. 3d 607, 529 N.E.2d 1138, 1145, 125 Ill. Dec. 62 (1988) (citation omitted). The terms "rents" and "amounts received by GECC from occupancy tenants" are not formally defined in the Master Loan Agreement. Cross-referencing § 5.15(a) does not entirely clarify the meaning of "rents," because § 5.15(a) does not mention rents, but speaks in terms of a Net Operating Income (NOI), of which rents are only a part. (See Master Loan Agreement § 1.1, at 8.) Therefore, I conclude that the phrase "all rents which would become due under such a WS Mall Master Lease as provided in Subsection (a) above less amounts received by GECC from occupancy tenants" is ambiguous. See Senkan v. Illinois Inst. of Tech, 1993 U.S. Dist. LEXIS 4202, No. 92 C 3238, 1993 WL 98225, at *3-*4 (N.D. Ill. Mar. 31, 1993), aff'd, 21 F.3d 430 (7th Cir. 1994) (lack of definition of terms renders contract ambiguous); see also United Thermal Indus., Inc. v. Asbestos Training & Employment, Inc., 920 F.2d 1345, 1349 (7th Cir. 1990) (terms are ambiguous if the parties' obligation under contract is unclear).
If the contract is ambiguous, "the parties' intentions can be determined from their declarations and conduct and from surrounding circumstances." Chandler v. Maxwell Manor Nursing Home, Inc., 281 Ill. App. 3d 309, 666 N.E.2d 740, 749, 217 Ill. Dec. 71 (1996). Richard Tucker testified as follows regarding what the parties contemplated to be the extent of the Tuckers' personal liability:
Q: What are [the] terms [of the Master Lease] as you understand them?
A: There was a Master Lease to be signed that called for an NOI of $ 2.5 million.
Q: Okay. In other words, that the Master Lease or rental from the Master Lease would essentially cover NOI to the level of $ 2.5 million, correct?
Q: So that if there was sufficient cash flow being thrown off from other tenants to cover the $ 2.5 million, your rental payments under the Master ...