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L.D.S., LLC v. Southern Cross Food, Ltd.

Court of Appeals of Illinois, First District, Fourth Division

December 21, 2017

L.D.S., LLC, an Illinois Limited Liability Company, Plaintiff-Appellant,
v.
SOUTHERN CROSS FOOD, LTD., and BRENDAN SKEHAN, Defendants Brendan Skehan, Defendant-Appellee.

         Appeal from the Circuit Court of Cook County. No. 08 L 8363 The Honorable Brigid Mary McGrath, Judge Presiding.

          JUSTICE GORDON delivered the judgment of the court, with opinion. Presiding Justice Burke and Justice McBride concurred in the judgment and opinion.

          OPINION

          GORDON, JUSTICE

         ¶ 1 The instant appeal concerns the validity of a personal guaranty purportedly executed by defendant Brendan Skehan in connection with the lease of commercial property between plaintiff L.D.S., LLC, and defendant Southern Cross Food, Ltd. (Southern Cross). This case came before us previously, after the trial court granted Skehan's motion to dismiss, and we reversed and remanded. L.D.S., LLC v. Southern Cross Food, Ltd., 2011 IL App (1st) 102379, ¶ 1. After remand, the matter proceeded to a bench trial, where plaintiff presented the testimony of one witness, plaintiff's principal. After plaintiff had rested its case in chief, Skehan moved for a directed finding, which the trial court granted. Plaintiff appeals and we affirm.

         ¶ 2 BACKGROUND

         ¶ 3 As noted, this case has previously been before this court, after the trial court granted Skehan's motion to dismiss plaintiff's verified second amended complaint. Consequently, our recitation of the facts up to that point is primarily taken from our prior opinion.

         ¶ 4 On July 30, 2008, plaintiff filed a verified complaint against defendants, alleging that defendants had breached their obligations under a lease agreement. The complaint alleged that on July 20, 2006, plaintiff, as landlord, and Southern Cross, as tenant, executed a lease dated March 31, 2006, for a property located at 117 South Clinton Street in Chicago, which was to be used as a Quizno's restaurant; Skehan signed the lease as president of Southern Cross. The lease agreement's provision concerning a security deposit provided, in relevant part:

"Concurrently with Tenant's execution of this Lease, Tenant shall deposit with Landlord the Security Deposit."

         ¶ 5 According to documents attached to the complaint, on July 21, 2006, Southern Cross took possession of the property and the keys, and on July 24, 2006, Southern Cross tendered plaintiff its security deposit. The receipt for the possession of the property provided:

"On July 21, 2006 the keys and the possession of the store #117 South Clinton, Chicago has been given to the tenant Mr. Brendon Skehan.
It is mutually agreed that the landlord shall also complete his work (installation of

         HVAC unit and dividing wall) that is required as per lease agreement during the period tenant will perform his work as required by Quizno."

         ¶ 6 According to the complaint, on July 26, 2006, Skehan executed a personal guaranty of the lease. The purported guaranty was attached to the complaint and was entitled, "Rider Attached to the Lease Dated 03-31-2006 By & Between L.D.S. LLC Limited Liability Company and Southern Cross Food, Ltd an Illinois Corporation ('Tenant')." The guaranty provided:

"It is hereby agreed as follows:
The tenant, Mr. Brendon [sic] Skehan has signed the lease agreement in [sic] behalf of Southern Cross Food, Ltd an Illinois Corporation, ('Tenant'). Upon signing below Brendon Skehan as principal of the corporation 'Southern Cross Food, Ltd corporation' hereby personally guarantees the payments of rent and all others [sic] performance or obligations of the tenant."

         ¶ 7 According to a document attached to the complaint, during the lease term, Southern Cross failed to pay rent, leaving an outstanding balance in 2007 and entirely ceasing to pay rent beginning in March 2008. On July 14, 2008, L.D.S. relet the premises to a Dunkin Donuts restaurant, which began paying rent in November 2008.

         ¶ 8 On December 22, 2008, Skehan[1] filed a motion to dismiss pursuant to section 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2006)). In the motion, Skehan claimed that the verified complaint did not allege any new consideration for Skehan's personal guaranty of the lease, which was required since the guaranty was executed after the lease became effective.

         ¶ 9 Plaintiff did not respond to Skehan's motion to dismiss but, instead, on February 9, 2009, filed a verified amended complaint. Count I of the verified amended complaint was substantially identical to the allegations in the verified complaint. An additional count II included several new allegations, which alleged that the consideration for the guaranty was plaintiff's permission to place interior signage on the premises.

         ¶ 10 On March 31, 2009, Skehan filed a motion to dismiss count II of plaintiff's verified amended complaint pursuant to section 2-615 of the Code. Once again, Skehan claimed that the verified amended complaint did not allege new consideration for the guaranty. He claimed that the purported consideration was plaintiff's granting of permission to install interior signage pursuant to an alleged agreement on July 24, 2006, but claimed that could not be new consideration for the guaranty since installation of the signage was already permitted under the original terms of the lease. On August 14, 2009, the trial court granted Skehan's motion to dismiss without prejudice and granted plaintiff leave to file a second amended complaint.

         ¶ 11 On September 11, 2009, plaintiff filed a verified second amended complaint. Count I concerned the breach of the lease agreement and was substantially identical to the earlier complaints. Count II concerned the breach of guaranty and included several new allegations:

"10. Contemporaneously with the signing of the Lease, on July 26, 2006, Skehan executed a personal guaranty ('Guaranty'). *** The Lease and Guaranty were part of a single lease transaction in which Southern Cross procured a Lease for the Premises and Skehan guarantied Southern Cross's obligation under the Lease.

         11. This single transaction took place over the course of several days. On or about July 21, 2006, Skehan signed a Receipt for the keys to the Premises. The Security Deposit was dated July 24, 2006, and was delivered to Plaintiff thereafter with a copy of the executed Lease. *** Plaintiff refused to accept the Security Deposit until Skehan executed the Guaranty on July 26, 2006. Plaintiff never intended to enter into the Lease without the Guaranty."

         ¶ 12 On October 13, 2009, Skehan filed a motion to dismiss count II of the verified second amended complaint pursuant to section 2-615 of the Code. Skehan claimed that the verified second amended complaint failed to cure the pleading defect in the verified amended complaint and that no cure was possible. On March 3, 2010, the trial court granted Skehan's motion to dismiss and dismissed the verified second amended complaint with prejudice. Plaintiff appealed, and we reversed the trial court's dismissal of the verified second amended complaint. L.D.S., LLC v. Southern Cross Food, Ltd., 2011 IL App (1st) 102379, ¶ 1.

         ¶ 13 After remand, on December 4, 2012, Skehan filed an answer and affirmative defense to the verified second amended complaint, in which he denied the allegations of the complaint and alleged that the signature on the guaranty purporting to be his was a forgery.

         ¶ 14 On May 13, 2015, plaintiff filed a motion for leave to file a third amended complaint, which was denied without prejudice "due to [the] age of [the] case." On March 31, 2016, Skehan filed a motion for summary judgment, which was denied on September 2, 2016.

         ¶ 15 On October 17, 2016, the case came before the trial court for trial. Plaintiff's sole witness was Subhash Saluja, plaintiff's principal, who testified that since 1990, he had owned, managed, or controlled approximately 25 leased units of commercial property. Saluja testified that plaintiff had purchased 113-117 South Clinton, which was being operated as a food court, at the end of 1989 and separated the property into five separate units. The unit at issue was one of those units. Saluja testified that he required personal guarantees from some, but not all, of his tenants; as an example of a tenant who did not require a guaranty, Saluja testified that "I had a tenant, Panda Express. They have 1500 restaurants. I leased them my premises, 113 South Clinton, and I never made a demand" for a personal guaranty.

         ¶ 16 Saluja testified that the unit at issue, 117 South Clinton, had been vacant while he was searching for a tenant. Saluja retained a real estate broker, who proposed tenants to him. Saluja rejected one proposed tenant-a doctor or dentist-because the proposed tenant refused to sign a personal guaranty. Saluja rejected another proposed tenant because "[t]hey had no assets." In February or March 2006, the broker proposed Southern Cross as a prospective tenant. Saluja testified:

"He called me that Quizno's wants to come there. And I know Quizno's is a good franchise. In those days, it was a better market. So I said okay. And initially, I did not know [whether] I am renting to Quizno's franchisor or I am renting to franchisee. Initially, when Todd told me Quizno's, I said okay. And if Quizno's was to be signing for franchisor, I would never say guarantee because Quizno's has maybe 100 or 500 restaurants. So it would be stupid of me to tell them [to] become personal guarantor."

         Saluja testified that he did not meet anyone prior to signing the lease on July 20, 2006.

         ¶ 17 Saluja testified that he spoke to his attorney, who drafted a lease agreement, and then the attorneys "[were] talking to each other." Saluja testified that "I was under this impression that my attorney is talking to the Quizno's attorney, although Quizno's was not my tenant, but franchisor's, but I was thinking that Quizno's attorney there was talking to my attorney for the franchisee." When asked what he meant by "Quizno's attorney, " Saluja testified that he believed that his attorney was talking to the attorney for the franchisor-Quizno's-who was negotiating the lease on behalf of the franchisee-Southern Cross. Saluja "ha[d] no idea" what led him to have that impression.

         ¶ 18 Saluja testified that he signed the lease on July 20, 2006, and identified the lease agreement as the same one attached to the complaint; the lease was admitted into evidence. Saluja read aloud a provision of the lease's definition section which provided "QF: Quizno's Franchising LLC or Quizno's Franchising II LLC" and read aloud another provision setting the tenant's mailing address as an address on June Lane in Lombard, "Attn: Brendan Skehan."

         ¶ 19 Saluja testified that after he signed the lease, it was faxed to his attorney, and his attorney received a copy signed by Skehan; it was close to one week before Saluja received a copy with Skehan's signature. Saluja received the copy and "when I [saw] the lease on the top written there, 'Quizno's, ' and then I [saw] over there written their name, tenant building address, then I said, 'Wait a minute. This is-what is going on? I am not renting to Brendan, and I ...


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