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Crawford v. Belhaven Realty LLC

Court of Appeals of Illinois, First District, Second Division

June 12, 2018

DARLENE CRAWFORD, as Special Administrator of the Estate of Juanita Duke, Plaintiff-Appellant,
BELHAVEN REALTY LLC, an Illinois Limited Liability Company, GUADALUPE ECONOMIC SERVICES CORPORATION, a Texas Corporation, and U.S. BANK NATIONAL ASSOCIATION, as Trustee Seller, Defendants Belhaven Realty LLC, Defendant-Appellee.

          Appeal from the Circuit Court of Cook County, Illinois. No. 13 CH 1700 Honorable Kathleen G. Kennedy, Judge Presiding.

          PRESIDING JUSTICE MASON delivered the judgment of the court, with opinion. Justices Pucinski and Hyman concurred in the judgment and opinion.



         ¶ 1 Juanita Duke, a resident at Belhaven Nursing Home, died on July 2, 2006. The administrator of her estate, plaintiff Darlene Crawford, brought a personal injury suit against defendant Guadalupe Economic Services Corporation (Guadalupe), which owned the nursing home at the time of Duke's death. Guadalupe did not appear, and a default judgment was entered against Guadalupe for $1.5 million.

         ¶ 2 At the time Crawford filed her complaint on June 30, 2008, Guadalupe no longer owned the nursing home, having defaulted on its mortgage of that property. The mortgagee initiated foreclosure proceedings in January 2006 and, as part of the proceedings, sold the property to defendant Belhaven Realty LLC (Belhaven) on July 11, 2006. As part of the purchase agreement, Belhaven agreed to assume Guadalupe's liabilities. Despite this undertaking, Belhaven sought and obtained dismissal from Crawford's lawsuit after informing Crawford that it did not own the nursing home while Duke resided there.

         ¶ 3 On January 18, 2013, Crawford filed a second suit, seeking to enforce the $1.5 million default judgment against Belhaven based on Belhaven's assumption of Guadalupe's liabilities. The trial court granted summary judgment to Belhaven, finding that Crawford was precluded from recovery based on Guadalupe's failure in the underlying suit to either defend itself or tender its defense to Belhaven. Crawford appeals, arguing that material issues of fact exist as to whether Guadalupe acted reasonably to mitigate its damages in the underlying suit. We find that Belhaven's assumption of Guadalupe's debts was not contingent upon Guadalupe either defending itself or tendering its defense to Belhaven and, therefore, reverse the trial court's grant of summary judgment.

         ¶ 4 BACKGROUND

         ¶ 5 Belhaven's 2006 Purchase of the Nursing Home

         ¶ 6 Guadalupe purchased the nursing home in 1997 subject to a mortgage that was later assigned to U.S. Bank National Association (U.S. Bank). When Guadalupe defaulted on the mortgage, U.S. Bank filed a foreclosure action on January 13, 2006.

         ¶ 7 On March 29, 2006, Belhaven agreed to purchase the nursing home from U.S. Bank. Guadalupe was not a party to the purchase agreement. The original agreement between U.S. Bank and Belhaven provided that Belhaven would not assume any of the nursing home's debts or liabilities, including tort liabilities. On June 30, 2006, U.S. Bank sent a letter to Belhaven stating that, notwithstanding the provisions to the contrary in the March 29 agreement, Belhaven would

"assume any and all debts, obligations, claims, and other liabilities, whether known or unknown, relating to the operations of Belhaven Nursing Home, both prior to and after the Closing Date ***; EXCEPT [Belhaven] shall not be assuming the payment of any management fees owed the Long Hill Company, any accrued payroll or benefits, or the insurance deductibles involving the following residents: Johnny Williams and Louise Pool."

         Belhaven's manager, Michael Blisko, signed the June 30 addendum.

         ¶ 8 On July 11, 2006, the circuit court entered an order and judgment of consent foreclosure in favor of U.S. Bank and against Guadalupe. Pursuant to the judgment, Belhaven became the owner of the nursing home on July 11, 2006. The Illinois Secretary of State revoked Guadalupe's corporate status on May 11, 2007. There is no evidence in the record that Guadalupe, a Texas corporation, conducted any business in Illinois after the sale of the nursing home to Belhaven.

         ¶ 9 The Underlying Lawsuit

         ¶ 10 Duke moved to the nursing home on April 27, 2006. Between May 28 and June 4, 2006, Duke suffered a series of falls. She died on July 2, 2006, while Guadalupe still owned the nursing home. Duke's cause of death was identified as "acute pulmonary embolism, immobility with falls, and dementia with blindness."

         ¶ 11 On June 30, 2008, Crawford, as special administrator of Duke's estate, filed a personal injury suit alleging claims under the Nursing Home Care Act (210 ILCS 45/1-101 et seq. (West 2008)) and for medical negligence. Crawford's initial complaint named Belhaven (as Belhaven was the owner of record at that time) and various other parties as defendants but not Guadalupe. She amended her complaint to add Guadalupe on January 5, 2009.

         ¶ 12 In January 2009, Diana Lopez was Guadalupe's executive director at the company's headquarters in Texas. On January 13, 2009, when Lopez learned that Guadalupe was named as a defendant in the underlying suit, she made a phone call to Mary Glen Richardson, a Belhaven employee who was administrator of the nursing home. According to Lopez, Richardson assured her that the lawsuit "was not Guadalupe's problem and was the responsibility of Belhaven."

         ¶ 13 But Belhaven did not undertake Guadalupe's defense, nor did Guadalupe appear on its own behalf. The court found Guadalupe in default on April 27, 2009. Meanwhile, Belhaven sought dismissal from the case based on the fact that it did not own the nursing home at the time of Duke's injury and death. On October 20, 2009, before the trial court ruled on Belhaven's motion, Crawford voluntarily dismissed Belhaven from the action. There is nothing in the record to indicate that Belhaven disclosed to Crawford its assumption of liabilities relating to Guadalupe's operation of the nursing home.

         ¶ 14 Following a prove-up on June 28, 2010, the court awarded Crawford a judgment against Guadalupe in the amount of $1.5 million plus costs.

         ¶ 15 On October 20, 2010, Crawford refiled her personal injury complaint against Belhaven, asserting that Belhaven was a successor-in-interest to Guadalupe. Crawford subpoenaed a copy of the June 30 addendum to the 2006 purchase agreement, obtaining it on June 11, 2012. On November 9, 2012, the trial court stayed the case to allow Crawford the opportunity to determine Belhaven's obligations.

         ¶ 16 The Present Lawsuit

         ¶ 17 On January 18, 2013, Crawford filed this lawsuit against Belhaven, alleging that, because Belhaven assumed Guadalupe's liabilities in the 2006 purchase agreement, Belhaven was required to satisfy the judgment against Guadalupe in the underlying lawsuit. Crawford sought a declaration that Belhaven was liable for the judgment against Guadalupe and a judgment against Belhaven for $1.5 million plus postjudgment interest and costs. Crawford later amended her complaint to add Guadalupe as a defendant.[1] Guadalupe did not appear or litigate any defenses.

         ¶ 18 In its answer, Belhaven raised multiple affirmative defenses pertinent to this appeal. Underlying these defenses was Belhaven's assertion that, since its alleged liability arose out of the 2006 purchase agreement between U.S. Bank and Belhaven, the action should be treated as a breach of contract action. Relatedly, Belhaven argued that, if Crawford was a third-party beneficiary of the contract between U.S. Bank and Belhaven (an assertion which Belhaven disputed), Crawford "steps into the shoes of Guadalupe" and was subject to any defenses that Belhaven might raise against Guadalupe in a breach of contract action by Guadalupe.

         ¶ 19 Based on the foregoing rationale, Belhaven argued that Guadalupe failed to mitigate its damages by defending the underlying suit and therefore Crawford—litigating in Guadalupe's shoes—was precluded from recovery. Specifically, Belhaven alleged that Guadalupe failed to (1) tender its defense to its insurer or to Belhaven, (2) appear or answer the complaint, (3) raise any defenses, including the two-year statute of limitations applicable to personal injury claims, (4) vacate the default judgment or the damages award, and (5) appeal the judgment.

         ¶ 20 Belhaven additionally argued that Crawford was not an intended third-party beneficiary of the 2006 agreement and therefore lacked standing to sue on the contract. Belhaven further contended that, even if Crawford had standing to sue, her suit was time-barred. According to Belhaven, the statute of limitations began to run, at the latest, on the date of Duke's death on July 2, 2006. Although a suit for breach of a written contract typically has a 10-year statute of limitations, Belhaven contended that the applicable statute was the 5-year period for oral contracts because determining whether Crawford was an intended third-party beneficiary would require consideration of evidence outside the four corners of the contract (e.g., evidence of the judgment against Guadalupe in the underlying suit).

         ¶ 21 Crawford moved for summary judgment on Belhaven's affirmative defenses. The trial court granted Crawford's motion as to Belhaven's standing defense, as well as various defenses not at issue in this appeal, but denied Crawford's motion as to the statute of limitations and Guadalupe's failure to mitigate damages. With regard to the statute of limitations, the court found that "the 5 year statute of limitations applicable to oral contracts applies to the dispute between Plaintiff and Belhaven, " but it made no finding as to when Crawford's cause of action accrued, and it did not address Belhaven's contention that Crawford's suit was time-barred.

         ¶ 22 Meanwhile, on November 16, 2015, Belhaven served requests to admit on Guadalupe pursuant to Illinois Supreme Court Rule 216 (eff. July 1, 2014)[2], asking Guadalupe to admit that in the underlying suit, Guadalupe did not make a written tender of defense to Belhaven, did not authorize Belhaven to represent it in the suit, did not appear or answer the complaint, did not contest the order of default, and did not file a postjudgment motion, appeal, or section 2-1401 motion (735 ILCS 5/2-1401 (West 2014)). After Guadalupe failed to ...

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