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Benzakry v. Patel

Court of Appeals of Illinois, Third District

April 5, 2017

EMIL BENZAKRY and EMIL AND SON, LLC, Plaintiffs-Appellees and Cross-Appellants,
v.
PARESH PATEL and KALPITA PATEL, Defendants-Appellants and Cross-Appellees.

          Appeal from the Circuit Court of the 14th Judicial Circuit, Whiteside County, Illinois.

         Appeal No. 3-16-0162 Circuit No. 07LM128, The Honorable John L. Hauptman, Judge, presiding.

          JUSTICE McDADE delivered the judgment of the court, with opinion, Presiding Justice Holdridge and Justice Schmidt concurred in the judgment and opinion.

          OPINION

          McDADE, JUSTICE

         ¶ 1 Plaintiff Emil Benzakry, through his company Emil & Son, LLC, entered into a purchase agreement with defendants Paresh and Kalpita Patel, through their company KAP Family Investments, LLC, to purchase a gas station in Rock Falls, Illinois. The gas station closed, and Benzakry sued for damages. A judgment was entered in favor of Benzakry. Defendants appealed, arguing (1) a claim for veil piercing cannot be tried before a jury, (2) the trial court abused its discretion by allowing the introduction of bank statements without proper foundation, (3)plaintiffs cannot prove fraud because Paresh did not proximately cause Benzakry's damages, (4)plaintiffs cannot prove fraud because Benzakry did not justifiably rely on Paresh's alleged misrepresentations, and (5) the corporate veil judgment against Kalpita was against the manifest weight of the evidence. Benzakry cross-appealed, arguing (1) the trial court's grant of defendant's motion for a directed verdict was error because plaintiffs are allowed to sue under the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act or Act) (815 ILCS 505/1 et seq. (West 2006)) and (2) the trial court's denial of plaintiffs' motion to amend a complaint to conform the pleadings to the proofs was error because there was evidence of a principal-agent relationship. We affirm in part and reverse in part, and the cause is remanded for further proceedings.

         ¶ 2 FACTS

         ¶ 3 The following facts are undisputed. Plaintiff Benzakry owned multiple businesses in California throughout his career. In 2005, Benzakry sold his last business and started looking on LoopNet[1] for investments to assist him with his living expenses during his retirement. Benzakry came across an advertisement on the LoopNet site that stated the following:

"*********TRIPLE NNN LEASE[2]**********GAS STATION LOCATED IN ROCK FALLS, IL*******Please call for actual location************ Located on a Major exit on the State Highway. Surrounded by Fast Food restaurants like McDonald's, Arby's[, ] Burger King, Subway. 1 Million Gallon plus annual sale!!!!!!!!!! $300, 000 inside C-store sales!!!!! EPA CLEAN PHASE I conducted!!!!!! 13% CAP RATE!!!!!"

         ¶ 4 "K. Patel" was listed in the advertisement as the contact person for inquires, and after several months, Benzakry called the phone number listed. In January 2007, David Levin, a realtor, e-mailed Paresh the following information:

"I just visited with Emil and he has just some basic questions which he is going to write up and send to me. I will forward to you for your response. The one that has him more worried about any is this:
Who is Singh & Singh LLC? We see no evidence of a personal guarantee so if the businesses goes bad, what leverage does the owner of the Fee have? They seem to have taken your word that everything is good. Some history on the Tenant will be relevant.
He would feel more comfortable with a Personal Guarantee and some history of who this gentleman or gentlemen are."

         Paresh responded with Benzakry copied on the e-mail, stating:

"Singh & Singh LLC is owned by the former manager of my gas station. He has over 10 years of experience in managing gas stations. He was operating the Rock Falls, IL[, ] gas station ever since I bought it in 2005. He also managed my other store in Le Claire, IA and in Chicago. I personally know him for the last 8 years. Since I knew him personally, I did not ask for a Personal Guarantee on the rental payments in the purchase agreement."

Benzakry received a copy of the lease agreement between Singh & Singh, LLC, and KAP [3] and of the Singhs' personal financial statements for his review. On January 12, 2007, Benzakry, through his company Emil & Son, entered into a purchase agreement and addendum for the Rock Falls gas station for $521, 500. Benzakry was to receive $6000 per month in rent.

         ¶ 5 On January 24, Benzakry e-mailed Paresh with questions regarding the purchase of the gas station, and Paresh responded, providing his answers below Benzakry's questions:

"1) who is SING & SING LLC. SINGH & SINGH, LLC is the Tenant of KAP Family Investments, LLC (my corporation). KAP Family Investments, LLC owns the Land, & Building at Rock Falls, IL and SINGH & SINGH, LLC signed a 15 years NNN lease to operate the Gas Station.
***
3) according to information David and I received is that SING & SING LLC. operates another two gas stations, we have no evidence of that. SINGH & SINGH, LLC does not operate two gas stations. Mr. Singh was a manager of three gas stations that were owned by me.
***
5) In what capacity was Mr. sing working for you? Mr. Singh was working as a Manager for the three gas stations that I own.
***
7) In all leases I have ever seen, there always is a clause mentioning, "the leasee paid first last and security deposit", this lease has no mention of that. As I mentioned earlier in the email that I know Mr. Signh personally for the last 8 years and have worked for me for the last 5 years I did not ask any security deposit from him.
* * *
11)I object to have a tenant with an LLC. Unless he also sign a personal guaranty. I can get a personal guarantee signed from the tenant. Attached is the personal guarantee agreement.
12) Because of the above questions, and uncertainties, which were not clear when we signed our agreement, and because of the leasee no proof of owning other gas stations as presumed earlier, I suggest this course of action, a) a personal guaranty to be added, not a problem.
b) a security deposit and last moth [sic] rent to be paid, (1 month rent as security deposit and last month rent for a total of $12, 000 is reasonable)."

         ¶ 6 On January 26, a second addendum to the purchase agreement was executed and included the enforcement of a personal guarantee agreement and security deposit of $12, 000. The addendum also contained a clause that stated:

"Entire Agreement. This Addenda and Agreement contain the entire agreement between Seller and Buyer, and there are no other terms, conditions, promises, undertakings, statements or representations, either written or oral or expressed or implied, concerning the sale contemplated by this agreement." (Emphasis added.)

         ¶ 7 In February 2007, Benzakry and KAP closed on the gas station. At the time, a guaranty of lease agreement between KAP and Singh & Singh was signed. The agreement stated the following:

"1. GUARANTOR jointly, severally and unconditionally guarantees to LESSOR, its successors and assigns, the prompt payment by TENANT of the rents reserved in said LEASE and the performance by TENANT of all provisions and covenants contained in said LEASE for and during the original term of said LEASE and any renewal or renewals, extensions, modifications or amendments thereof; and if any default shall be made by TENANT, GUARANTOR shall pay to LESSOR, its successors or assigns, such sum or sums of money as will be sufficient to make up any such deficiency, and shall satisfy the provisions and covenants by TENANT to be performed."

         ¶ 8 Benzakry received rent for the months of February to April but did not receive rent for the month of May. Benzakry called the station to address this issue, but no one answered. He called David Levin, who went to the gas station and discovered that it was closed. Levin sent pictures of the closed store to Benzakry that depicted an "Out of Gas" sign on the gas tanks and a "Sorry … Closed" sign on the gas station door.

         ¶ 9 Singh & Singh entered into an agreement with Emil & Son to relinquish possession of the gas station for failure to pay rent. After relinquishment, Benzakry came to Rock Falls, Illinois, where he continued to operate the establishment as a gas station for about a year and a half, after which time Benzakry turned the establishment into a retail store.[4] Ultimately, Whiteside County seized the store due to illegal actions of the store's manager.[5]

         ¶ 10 On August 28, 2007, Emil & Son filed a complaint against Singh & Singh, Christopher Singh, Anita Singh, and Jane Singh, claiming rent and damages. On April 6, 2009, Christopher and Anita Singh and Benzakry and Emil & Son entered into a consent judgment of nondischargability in the amount of $25, 000.

         ¶ 11 In June 2009, Emil & Son filed an amended complaint adding KAP and Paresh as defendants, claiming breach of contract, deceptive practices, and common-law fraud. Discovery commenced, and the matter was set for trial on March 15, 2011.

         ¶ 12 Emil & Son filed a motion for default judgment against KAP in March 2011, which the trial court granted and ordered KAP to pay $577, 307.45.

         ¶ 13 In February 2013, Emil & Son filed a third amended complaint adding Kalpita as a defendant, claiming breach of contract, deceptive practices, and common-law fraud. Another amended complaint was filed in July 2013, adding Benzakry as plaintiff.

         ¶ 14 At trial, Benzakry testified that the financial strength of the tenant was important in his determination to enter into the purchase agreement. Furthermore, he testified that after he received the Singh & Singh lease and was assured about the tenant's ability to pay rent by Paresh, Benzakry entered into the purchase agreement with KAP.

         ¶ 15 Paresh acknowledged that Benzakry was interested in a triple net lease and the financial strength of the tenant when Benzakry inquired about the gas station. He admitted that Christopher Singh had not operated the Rock Falls gas station since 2005, Paresh never owned a gas station in Chicago, and Paresh had not known Christopher Singh for eight years but rather eight months. Also, Paresh admitted that the annual sale of a million gallons of gas and $300, 000 of convenience store sales were not the actual but projected figures of the gas station. Paresh further admitted that the figures were not identified as projected in the advertisement.

         ¶ 16 Christopher Singh testified that Singh & Singh signed a lease to the Rock Falls gas station with KAP in 2007. At the time, he had never managed a gas station, he had not known Paresh for eight years, and he had not worked for Paresh for five years. When he started managing the gas station, he was told that the rent would come out of the profits from the gas station. After two to three months, Singh realized he was not making enough money from the gas station to pay rent and told Paresh about the financial issues. Moreover, Singh testified that Paresh provided him the figures listed in the financial statement given to Benzakry.

         ¶ 17 Kalpita testified that she and her friend Anjali Agarwel formed KAP. Kalpita could not recall how much money she invested in KAP at the time of formation. Eventually, Kalpita bought Agarwel's share in KAP and became sole owner. She was not involved in the day-to-day transactions of KAP: "Honestly, this is all day-to-day transactions and my manager, that would be my husband, he used to look after all of this. I can request you ask him and he can answer you better. I mean I have no clue because I was not involved in day-to-day transactions, no." Kalpita admitted that she transferred funds in the amount of $8500, $31, 000, and $40, 000 to her other business, Mississippi Marketplace, transferred personal funds into an Amcore Bank account, and transferred money to Guy Culvert, a horse trainer. When asked why payments from the Amcore Bank account were made to the Patels' horse trainer, Kalpita responded, "Okay. So-I don't know how to answer this but, if you are having multiple businesses, as a ...


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