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Buchanan Energy (N), LLC v. Lake Bluff Holdings, LLC

United States District Court, N.D. Illinois, Eastern Division

October 31, 2017

BUCHANAN ENERGY (N), LLC, a Delaware limited liability company, Plaintiff,
LAKE BLUFF HOLDINGS, LLC, an Illinois limited liability company, Defendant.



         Plaintiff Buchanan Energy (N), LLC (“Buchanan”) brought this suit against Defendant Lake Bluff Holdings, LLC (“Lake Bluff”), alleging that Buchanan is entitled to purchase real property from Lake Bluff pursuant to a purchase option in a lease agreement for a lower price than Lake Bluff's valuation. Lake Bluff counter-sued alleging that Buchanan breached the lease and should be evicted, or in the alternative, that Buchanan's appraisal was conducted in bad faith and should be disregarded. Before the court are the parties' cross-motions for summary judgment. For the following reasons, the parties' motions are granted in part and denied in part:

         Background [1]

         Buchanan and Lake Bluff are successor parties in interest to a lease agreement dated September 22, 1989, involving property commonly known as 2 North Waukegan Road, Lake Bluff, Illinois (“Lease”). (R. 72, JSOF ¶¶ 2, 10; R. 72-1, Ex. A.) The property is a half-acre parcel improved with a gas station and a convenience store. (R. 72, JSOF ¶ 7.) Buchanan, a gas retailer, occupies the property and is the successor tenant to the Lease pursuant to a December 9, 2010 assignment from ExxonMobil Corporation. (Id. ¶¶ 2, 6, 12.) Lake Bluff is the owner and successor landlord of the property. (Id. ¶¶ 4, 11.) The previous landlords, Muriel Slack and Milton Smith (“predecessor landlords”), signed the Lease with the previous tenant, Mobil Oil Corporation (“predecessor tenant”) (together with predecessor landlords, “predecessor parties”). (R. 72-1, Ex. A ¶ 1.) The Lease describes the leased property as:

that certain parcel of land situated at NWC of Waukegan Rd. and Rockland Rd. Street, in the County of Lake, State of Illinois . . . together with any improvements thereon and the appurtenances and all right, title and interest of Landlord in and to land lying in all streets, highways and rights of way abutting on or appurtenant to the premises (all of said leased property [being] referred to in this lease as the “premises”).

(Id.) The Lease also provides that the predecessor parties “shall execute . . . a short form of lease for purposes of recording[, ]” but that the “short form shall not, under any circumstances, be deemed to modify or amend any of the provisions of [the Lease] which shall, in all circumstances, prevail.” (Id. ¶ 24.) In accordance with the Lease, the predecessor parties recorded a Memorandum of Lease in August 1990. (R. 72, JSOF ¶ 16; R. 72-2, Ex. B.) The Memorandum of Lease describes the “premises covered by said lease” as “all that certain parcel of land situated at NWC of Waukegan Road and Rockland Road in the County of Lake and State of Illinois[.]” (R. 72-2, Ex. B ¶ 1.)

         The Lease anticipates that the tenant will use the leased property as a “retail drive-in facility . . . or for continued use for the storage and sale of petroleum and other products and services to be sold at the premises.” (R. 72-1, Ex. A ¶ 9.) The Lease further provides that, in addition to the land itself, “buildings, improvements and equipment” may exist on the property and/or be added. (Id. ¶¶ 8-9.) Additionally, the Lease contemplates that the tenant will add improvements to the land to operate a gas station. (Id. ¶¶ 3, 8-10.) Under the Lease, any buildings, improvements, and equipment erected or installed by the tenant on the property “remain the property of Tenant.” (Id. ¶ 8.) The Memorandum of Lease restates this provision as follows:

Said lease grants Tenant the right to erect and install on the said premises such buildings, improvements and equipment as it may require . . . . No buildings, improvements and equipment erected, installed or owned by Tenant shall become a part of the real estate, but shall be and remain the property of Tenant . . . .

(R. 72-2, Ex. B ¶ 4.) Furthermore, the Lease specifies that the tenant “shall have the right to remove, change, demolish, replace or abandon any or all of [such buildings, improvements and equipment] or to enter to remove any or all of same at any time while this lease is in effect and for thirty (30) days thereafter.” (R. 72-1, Ex. A ¶ 8.)

         The Lease also gives the tenant “the option to purchase the premises free and clear of all liens and encumbrances for the sum” set forth in the Lease Rider after the end of the 17th year of the Lease and its renewal periods. (Id. ¶¶ 12, 13.) The Lease Rider, which is “attached to and made part of” the Lease, in turn states that the tenant “shall have the option to purchase the premises at any time at a purchase price determined by taking the average of three (3) appraisals.” (Id. at 12; see R. 72, JSOF ¶ 18.) The Lease Rider provides that the landlord would choose an appraiser, the tenant would choose an appraiser, and the third appraiser would be “mutually agreed upon.” (R. 72-1, Ex. A at 12.) On September 8, 2014, Buchanan provided written notice to Lake Bluff regarding its intent to exercise the purchase option. (R. 72, JSOF ¶ 17; R. 72-3, Ex. C.)

         Buchanan retained real estate appraiser Daniel Currier to perform a land-only appraisal excluding improvements, which resulted in an appraised value of $295, 000. (R. 72, JSOF ¶ 22; R. 72-5, Ex. E at 3.) Lake Bluff retained real estate appraiser Michael MaRous, who appraised the property at $675, 000 as vacant and $1.2 million as improved. (See R. 72, JSOF ¶ 24; R. 72-6, Ex. F. at 4, 25.) The parties jointly retained real estate appraiser Dale Kleszynski, who appraised the property at $535, 000 as vacant and $1, 070, 000 as improved.[2] (See R. 72, JSOF ¶ 25; R. 72-7, Ex. G at 5.)

         In January 2015 the parties agreed to extend the Lease on a month-to-month basis on the same terms and conditions as provided in the Lease. (R. 72, JSOF ¶ 13.) On March 30, 2015, and April 10, 2015, Buchanan sent letters to Lake Bluff requesting that closing occur at the purchase price of $487, 775 (the average of the three appraisals of the land as vacant). (R. 72, JSOF ¶¶ 31-32; R. 72-8, Ex. H; R. 72-9, Ex. I.) Lake Bluff responded with a letter on April 16, 2015, asserting that Buchanan had breached the terms of the purchase option and notifying Buchanan that its tenancy would be terminated at the end of May 2015. (R. 72, JSOF ¶ 33; R. 72-10, Ex. J.) No sale was completed and this suit followed. (See R. 72, JSOF ¶ 33; R. 1, Compl.)


         Summary judgment is appropriate when the moving party shows “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). In considering a motion for summary judgment, this court must view the evidence in the light most favorable to the non-moving party, drawing all reasonable inferences in its favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). A genuine issue of material fact exists where “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. at 248. Summary judgment should be entered ÔÇťagainst a party who fails to make a showing sufficient to ...

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