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Wolfram Partnership, Ltd. v. LaSalle National Bank

December 19, 2001

THE WOLFRAM PARTNERSHIP, LTD., AN ILLINOIS LIMITED PARTNERSHIP, PLAINTIFF AND COUNTERDEFENDANT-APPELLANT
v.
LASALLE NATIONAL BANK, AS TRUSTEE OF TRUST AGREEMENT DATED JULY 25, 1966 AND KNOWN AS TRUST NO. 19672, UNKNOWN BENEFICIARIES OF LASALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST AGREEMENT DATED JULY 25, 1966 AND KNOWN AS TRUST NO. 19672, AND FRED SCHIMEL AND JOAN SCHIMEL, AS HEIRS TO THE ESTATE AND EXECUTRIX OF RUTH E. GUINAND, DECEASED, DEFENDANTS AND COUNTERPLAINTIFFS AND THIRD-PARTY PLAINTIFFS-APPELLEES, (DUNCAN HENDERSON AND DEIRDRE HENDERSON, THIRD-PARTY DEFENDANTS-APPELLANTS; PERILLO BMW, INC., AND JOSEPH PERILLO, THIRD-PARY DEFENDANTS)



The opinion of the court was delivered by: Justice Cerda

UNPUBLISHED

Appeal from the Circuit Court of Cook County. Honorable John K. Madden, Judge Presiding.

This case involves a dispute between plaintiff/counter-defendant, The Wolfram Partnership, Ltd., an Illinois limited partnership; its general partners, third-party defendants Duncan Henderson and Deirdre Henderson (collectively Wolfram); defendant/counterplaintiff/third-party plaintiff LaSalle National Bank (LaSalle), as trustee of trust agreement dated July 25, 1966, and known as Trust No. 19672 (the Trust), and the Trust's beneficiaries, Joan Schimel, Barbara Guinand, Garnet Guinand, Joan Guinand, and Richard Guinand (the Beneficiaries) (collectively defendants), concerning the parties' rights under a lease agreement covering the Trust res commonly known as 2834 North Halsted Street in Chicago (the Premises). Upon Wolfram's appeal of the entry of summary judgment in favor of defendants, we affirm in part, reverse in part, and remand for further proceedings.

BACKGROUND

Wolfram and Its Lease for the Premises

On April 24, 1984, Wolfram, which is engaged in the business of managing and leasing commercial real estate, executed a lease agreement (the Lease) with Ruth Guinard, the then sole beneficiary of the Trust, for use of the Premises for a five-year period commencing on May 1, 1984, and ending April 30, 1989. In relevant part, the Lease, paragraph 8, allowed Wolfram to sublease the Premises to a third party, without Ruth's consent, provided Wolfram "(a) [gave the Trust] immediate written notice of such *** subletting; and (b) [furnished the Trust] with an executed copy of such *** sublease at the time such instrument [was] executed."

Paragraph 18 of the Lease required Wolfram to maintain certain insurance coverage on the Premises which adequately protected the Trust's interest in the property. Under that paragraph, Wolfram agreed "that throughout the term of [the] lease it *** [would], at [its own] cost, keep all buildings and improvements situated on the *** premises insured against fire and extended coverage perils to the extent of the full insurable value of said buildings and improvements, provided Landlord shall remain as an additional insured under all insurance policies."

In the event Wolfram was in default of "any term, provision, or covenant" of the Lease, subject to certain exceptions not relevant here, paragraph 21 afforded Wolfram the opportunity to cure its default. In particular, Wolfram was required to cure its breach (1) within 30 days of receiving written notice thereof or (2) alternatively, if its default could not be reasonably cured within the 30-day period, to undertake curative efforts within that time frame and thereafter act with reasonable diligence and in good faith to remedy its noncompliance. If Wolfram failed to cure as directed, the Trust held the right to declare Wolfram in default and could pursue a number of options, including termination of the Lease.

A rider agreement (the Rider) accompanying the Lease afforded Wolfram the option of renewing the lease agreement for an additional five years following the expiration of the original period. The Rider further granted Wolfram the option to purchase the Premises for $200,000 during the original lease term and, if applicable, for $250,000 during the renewal term.

Wolfram's Subleases and the Lease Amendments

Almost immediately after its execution of the Lease, in June 1984, Wolfram subleased the Premises to 2834 North Halsted Street Corporation, d/b/a Wolf's Head Motors Limited (Wolf's Head), for a period commencing July 1, 1984, and ending April 30, 1989 (the Wolf's Head Sublease). As mandated by the Lease, Wolfram provided timely notice of the Wolf's Head Sublease to Ruth.

Wolf's Head occupied the Premises from July 1984 until early 1987, when the business was sold to Steven Flaxman, who thereafter ran the business as Wolfram Motors. Wolfram and Wolfram Motors executed an agreement on April 30, 1987 for Wolfram Motors' sublease of the Premises for a period commencing June 1, 1987 and ending April 30, 1994 (the Wolfram Motors Sublease).

On April 29, 1987, the day prior to the execution of the Wolfram Motors Sublease, Wolfram and Ruth executed a document entitled "Owner's Consent" in which the parties agreed to extend the original lease term to April 30, 1994. While the Owner's Consent references the Wolfram Motors Sublease, the record does not reveal whether the sublease instrument accompanied the Owner's Consent or whether Ruth was otherwise presented a copy of that instrument for her perusal. In a separate instrument executed a short time thereafter, the parties amended the Lease to increase the monthly rent paid by Wolfram.

Wolfram Motors occupied the Premises until early 1990, when the business was sold to Perillo BMW, Inc. (Perillo BMW). On June 25, 1990, Wolfram and Perillo BMW entered into an agreement whereby Perillo BMW subleased the Premises for a period commencing on July 1, 1990, and ending April 30, 1994 (the 1990 Perillo Sublease). There is no indication in the record materials that Ruth ever received a copy of the 1990 Perillo Sublease or was otherwise notified of that agreement.

Also in June 1991, and following Wolfram's execution of the Perillo BMW sublease, Wolfram and Ruth again amended the Lease (the 1991 Amendment). In a formal amendment executed June 15, 1991, the parties agreed to extend the original lease term to April 30, 2004. The parties further agreed to an increase in the option price. The price was set at "$225,000 from May 1, 1991 through April 30, 1994, *** $250,000 from May 1, 1999 through April 30, 1999, and *** $275,000 from May 1, 1999 through April 30, 2004." In the event Wolfram exercised its option, the amendment required Wolfram to "deposit with Chicago Title and Trust the sum specified in *** Escrow Instructions," a document which was executed by the parties contemporaneously with the amendatory instrument. Per the escrow instructions, Wolfram was to deposit the full amount of the applicable purchase price in escrow with Chicago Title in the event its option was exercised.

Ruth's Death and Wolfram's Additional Subleases with Perillo BMW

Ruth died on March 5, 1993. The record indicates Ruth's daughter, Joan Schimel, who acted as executrix of Ruth's estate, undertook the primary responsibility of administering Wolfram's lease of the Premises. By letter dated April 20, 1993, and written by Joan's son, Fred Schimel, Wolfram was notified of Ruth's death and instructed to remit all future rental payments for the Premises to Joan.

Notably, at some point shortly after Ruth's death, Fred discussed with legal counsel the feasibility of breaking the Lease. According to Joan, Fred believed the rent paid by Wolfram, as well as the option prices, were unfairly low. While Fred asked counsel to look into the matter, the Beneficiaries never took any steps to cancel or otherwise defeat the lease agreement. Rather, the Beneficiaries continued to accept Wolfram's monthly rental payments.

The 1990 Perillo Sublease expired on April 30, 1994. The record indicates that Perillo BMW continued to occupy the Premises as a month-to-month subtenant through March 1995. On March 11, 1995, Wolfram and Perillo BMW entered into a second sublease for a term commencing on March 31, 1995, and ending March 31, 1997 (the 1995 Perillo Sublease). The two-year term set forth in the 1995 Perillo Sublease was extended by the parties on March 19, 1997, for another year, until March 31, 1998 (the 1997 Perillo Sublease Extension). The record materials fails to show that Wolfram notified Joan or any other Trust representative of either of the foregoing Perillo sublease documents.

The 1997 Perillo Sublease Extension expired, as provided, on March 31, 1998. From that time until the present, Perillo BMW has apparently occupied the Premises as a month-to-month subtenant.

Wolfram's Intention to Purchase the Premises and the Beneficiaries' Assertions of Default

In early 1999, Wolfram notified the Beneficiaries of its intention to purchase the Premises for $250,000, the option price in effect at the time under the 1991 Amendment.

Shortly thereafter, on February 3, 1999, Fred wrote Wolfram to advise it that the requisite escrow deposit of the full purchase price had not been made. Wolfram responded by depositing $50,000 of the $250,000 purchase price on February 5, 1999. Wolfram further, on or about the same date, reached an agreement with Perillo BMW for the sale of the Premises.

Between March 2 and 8, 1999, Wolfram and Fred exchanged numerous correspondences in which the parties addressed the amount of Wolfram's deposit and the possibility of allowing that deposit to stand, despite it being less than the amount required, with the understanding that the deposit would be nonrefundable. In part, Fred informed Wolfram that the $50,000 deposit proposed was "quite substantial and would likely be acceptable to the Trust and its beneficiaries subject to the non-refundable terms of the deposit." While Fred expressed his concerns that no formal agreement ...


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