Buchanan Energy (N), LLC v. Lake Bluff Holdings, LLC
Filing
85
MEMORANDUM Opinion and Order Signed by the Honorable Young B. Kim on 10/31/2017. (ma,)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
BUCHANAN ENERGY (N), LLC, a
Delaware limited liability company,
Plaintiff,
v.
LAKE BLUFF HOLDINGS, LLC, an
Illinois limited liability company,
Defendant.
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No. 15 CV 3851
Magistrate Judge Young B. Kim
October 31, 2017
MEMORANDUM OPINION and ORDER
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 countersued 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:
Background1
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”).
Unless otherwise indicated, the following undisputed facts are taken from the
parties’ Joint Rule 56.1 Statements of Material Facts Not in Dispute (“JSOF”),
(R. 72), and will be viewed in the light most favorable to each respective non-moving
party, see O’Leary v. Accretive Health, Inc., 657 F.3d 625, 630 (7th Cir. 2011). Lake
Bluff also submitted its own additional facts attaching exhibits in support of those
facts. (R. 75, Def.’s Stmt. of Uncontested Mat. Facts.) The court includes only those
portions of the parties’ statements of facts that are appropriately presented,
supported, and relevant to the resolution of the pending motions for summary
judgment.
1
2
(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 . . . .
3
(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 landonly 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
4
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.)
Analysis
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 nonmoving 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
According to Buchanan, Kleszynski’s appraisal values were based upon an
incorrect square footage, which when corrected, results in an appraised value of
$493,355 for the property as vacant. (R. 78, Pl.’s Mem. at 5 n.2.)
2
5
nonmoving party.” Id. at 248. Summary judgment should be entered “against a
party who fails to make a showing sufficient to establish the existence of an element
essential to that party’s case, and on which that party will bear the burden of proof
at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
A.
Judicial Estoppel
Before reaching the primary dispute in this case, the court first addresses
Lake Bluff’s contention that Buchanan is judicially estopped from arguing that the
Lease is unambiguous. (See R. 79, Def.’s Resp. at 5-6.) Judicial estoppel typically
prevents a litigant from succeeding in maintaining a certain position, and then later
taking a contrary position, especially if doing so prejudices the other party. See
New Hampshire v. Maine, 532 U.S. 742, 750 (2001) (internal citation omitted).
Although the circumstances under which judicial estoppel may apply are not
reducible to any general formulation of principle, relevant considerations typically
include whether a party’s later position is “clearly inconsistent” with its earlier
position and whether judicial acceptance of the subsequent position would create
“the perception that either the first or the second court was misled.” Id. (citations
and quotation marks omitted). Ultimately the application of judicial estoppel is left
to the court’s equitable judgment and discretion. See In re Knight-Celotex, 695 F.3d
714, 721 (7th Cir. 2012).
Here, Lake Bluff points to the fact that Buchanan argued at the motion to
dismiss stage that “premises” in the Lease refers “only to the property, including
any ‘improvements’, that was actually leased by the landlord to the tenant through
6
the 1989 Lease.” (See R. 79, Def.’s Resp. at 6 (quoting R. 29, Pl.’s Resp. at 7).) Lake
Bluff also cites Buchanan’s complaint, which alleges that the gas station and
convenience store were built by Buchanan’s predecessor after the Lease commenced.
(See id. at 7 (citing R. 1, Compl. ¶ 6).) In denying Lake Bluff’s motion to dismiss,
this court acknowledged that if Buchanan’s predecessor did in fact expend money to
add the improvements, the tenant under the Lease would now face “a second charge
for the same improvements if Lake Bluff’s interpretation of ‘premises’ is adopted.”
Buchanan Energy (N), LLC v. Lake Bluff Holdings, LLC, No. 15 CV 3851, 2015 WL
5173645, at *4 (N.D. Ill. Sept. 2, 2015). This court found that Buchanan had made
a colorable claim, in the context of defeating a motion to dismiss, that the value of
the “premises” under the Lease could be based only on “property that was leased to
the tenant, including the land and any improvements thereon at the time the Lease
was made.” Id. (emphases in original).
Buchanan now argues after the benefit of taking discovery that whichever
tenant actually built the improvements, and the existence of the improvements
themselves, are factors that are irrelevant to the price of the property under the
purchase option. (See R. 78, Pl.’s Mem. at 5-9.) Lake Bluff attributes the shift in
Buchanan’s position to the fact that discovery produced no evidence showing that
either Buchanan or its predecessor tenant constructed any of the improvements on
the property. (R. 79, Def.’s Mem. at 7.) Lake Bluff argues that because Buchanan
prevailed at the motion to dismiss stage by taking a position different from its
current stance, it is judicially estopped from now claiming that the Lease is
7
unambiguous and arguing that whoever built the improvements is irrelevant. (Id.
at 6.)
The court declines, however, to apply judicial estoppel in this instance for a
few reasons. First, the court denied Lake Bluff’s motion to dismiss after taking all
well-pleaded facts in Buchanan’s complaint as true and viewing reasonable
inferences in the light most favorable to Buchanan. See Buchanan Energy (N), 2015
WL 5173645, at *2 (citations omitted). Concluding that Buchanan has stated a
cognizable claim at the motion to dismiss stage is very different from finding that
the claim has any merit. See Alper v. Altheimer & Gray, No. 97 CV 1200, 2002 WL
31133287, at *34 (N.D. Ill. Sept. 26, 2002).
At the motion to dismiss stage,
Buchanan only prevailed in persuading the court that its complaint gave Lake Bluff
“fair notice of what the . . . claim is and the grounds upon which it rests,” and that it
“includes allegations that are enough to raise a right to relief above the speculative
level.” See Buchanan Energy (N), 2015 WL 5173645, at *2 (citations omitted and
internal quotations omitted). Because the court’s acceptance of Buchanan’s position
at the motion to dismiss stage would not be inconsistent with its acceptance of
Buchanan’s current stance in the summary judgment context, the court’s motion to
dismiss decision does not weigh in favor of applying judicial estoppel. See Shuffle
Tech Int'l LLC v. Sci. Games Corp., No. 15 CV 3702, 2017 WL 3838096, at *8 (N.D.
Ill. Sept. 1, 2017) (judicial estoppel “requires that the court accepted the earlier
position such that its acceptance of the new position would lead to inconsistent
determinations”) (citing New Hampshire, 532 U.S. at 749).
8
Other courts have
adopted similar reasoning in declining to apply judicial estoppel where the party’s
prior position was taken at the motion to dismiss stage. See, e.g., Burns v. First Am.
Bank, No. 04 CV 7682, 2006 WL 3754820, at *5 (N.D. Ill. Dec. 19, 2006) (“It would
be inconsistent with the federal pleading standards and the preliminary nature of a
motion to dismiss to say that Plaintiffs ‘prevailed’ on a particular ground.”); Alper,
2002 WL 31133287, at *34 n.56 (“Neither Defendants nor the court have located a
case in which surviving a motion to dismiss in one proceeding constituted a victory
sufficient to trigger judicial estoppel in a second.”).
Second, Buchanan’s arguments are not as contradictory as Lake Bluff alleges,
although Buchanan’s briefs muddy the waters on this point.
In opposing Lake
Bluff’s motion to dismiss, Buchanan argued that a vacant-land appraisal was
appropriate because the term “premises” in the Lease referred to the state of the
land at the time the Lease was signed. (R. 29, Pl.’s Resp. at 7.) In making that
argument, Buchanan assumed that the land was vacant and that its predecessor
tenant constructed the property’s improvements after signing the Lease. (See R. 1,
Compl. ¶ 6.) But after conducting discovery and finding no evidence showing who
built the improvements, (see R. 79, Def.’s Resp. at 7-8), Buchanan is now arguing
that regardless of who built them, the Lease unambiguously gives Buchanan
ownership rights over the improvements and that forcing it to pay for improvements
it already owns would be “unreasonable and unfair,” (see R. 78, Pl.’s Mem. at 5-9).
Buchanan fumbles its refutation of Lake Bluff’s judicial estoppel argument by
contending that “claim[ing] that the improvements were built by Buchanan’s
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predecessor” and “say[ing] it is unclear who built the improvements” is “not
necessarily inconsistent.” (See R. 81, Pl.’s Resp. at 7; R. 82, Pl.’s Reply at 2.) The
court disagrees. In its complaint, Buchanan did not assert in general terms that
one of its predecessors built the improvements, or that its predecessor tenant may
have built the improvements, but rather that the predecessor tenant who signed the
Lease did build the improvements. (See R. 1, Compl. ¶ 6.) By asserting that a
particular entity constructed the improvements, Buchanan necessarily implied that
it knew who constructed the improvements.
However, Buchanan’s current
argument does not turn on who constructed the improvements. Rather, Buchanan’s
position at this stage in the proceeding is that it is irrelevant who improved the land
because the Lease gives Buchanan “complete control and ownership” of the
improvements “regardless of who erected or installed them.” (R. 81, Pl.’s Resp. at
6.) And even though the way Buchanan supports its argument has shifted, the
essence of Buchanan’s argument—that it owns the improvements and should not
have to pay for what it already owns—has not changed. (Compare R. 29, Pl.’s Resp.
at 8-10, with R. 78, Pl.’s Mem. at 6-9.)
This weighs against applying judicial
estoppel.
Third, there is no indication that Buchanan proceeded in an unfair manner or
somehow abused the court system. See New Hampshire, 532 U.S. at 749-51. This is
not a case where a party concealed or manipulated information to make
contradictory arguments to the detriment of the other party. See Zedner v. United
States, 547 U.S. 489, 504-06 (2006); see also Ogden Martin Sys., Inc. v. Whiting
10
Corp., 179 F.3d 523, 527 (7th Cir. 1999). Nor has Lake Bluff adequately explained
how it is prejudiced by Buchanan’s shift in strategy. See New Hampshire, 532 U.S.
at 749. Rather than playing “fast and loose with the courts,” see InterGen N.V. v.
Grina, 344 F.3d 134, 144 (1st Cir. 2003), it appears that Buchanan took a position
prior to having the full benefit of discovery, and after finding certain evidence
lacking, adjusted its arguments accordingly, (see R. 74, Def.’s Mem. at 2; R. 79,
Def.’s Resp. at 5, 7-8; R. 83, Def.’s Reply at 1-2). This is not an uncommon sequence
of events in litigation, and the court finds little reason to conclude that Buchanan
was gaming the system in altering its strategy.
Accordingly, Buchanan is not
judicially estopped from arguing that who built the improvements is irrelevant and
that the Lease unambiguously grants Buchanan ownership of the improvements.
B.
Definition of “Premises”
The court now turns to the heart of the dispute, which centers upon the
meaning of the word “premises” in the Lease. Both parties seek summary judgment
on Buchanan’s claim that it is entitled to purchase the property at a price based on
vacant-land appraisals.
The parties agree that the substantive law of Illinois
applies in this diversity case. See Berrey v. Travelers Indem. Co. of Am., 770 F.3d
591, 594 (7th Cir. 2014). Under Illinois law, rules of contract interpretation apply
when construing provisions in a lease. See Urban Sites of Chi., LLC v. Crown
Castle USA, 2012 IL App. (1st) 111880, ¶ 24. “In construing a contract, the court
must determine and give effect to the parties’ intentions at the time they entered
into the agreement.” Id. Where there is no ambiguity in the contractual language,
11
“the intention of the parties must be ascertained by the language used, not by
constructions urged by the parties.” Napleton v. Ray Buick, Inc., 704 N.E.2d 864,
871 (Ill. App. Ct. 1998).
Furthermore, in Illinois an unambiguous contract is
interpreted by the court as a matter of law without use of parol evidence. State
Bank of Toulon v. Covey (In re Duckworth), 776 F.3d 453, 456 (7th Cir. 2014) (citing
Air Safety, Inc. v. Teachers Realty Corp., 706 N.E.2d 882, 884 (Ill. 1999)). The
contractual language must be considered “as a whole, viewing each part in light of
the others.” Szafranski v. Dunston, 2015 IL App. (1st) 122975-B, ¶ 95. “The intent
of the parties is not to be gathered from detached portions of a contract or from any
clause or provision standing by itself.”
Id.
And, importantly, courts should
“construe a contract reasonably to avoid absurd results.”
Suburban Auto
Rebuilders, Inc. v. Associated Tile Dealers Warehouse, Inc., 902 N.E.2d 1178, 1190
(Ill. App. Ct. 2009).
Although the parties take opposing positions as to the meaning of the term
“premises,” both parties assert that the Lease’s terms are unambiguous. Lake Bluff
argues that the Lease defines “premises” to include improvements, and that any
valuation conducted pursuant to the purchase option must therefore include the
improvements. (R. 74, Def.’s Mem. at 1-2.) Buchanan contends that any appraisal
including the property’s improvements would result in an “unreasonable,
inequitable and absurd outcome” because the Lease grants Buchanan ownership of
the improvements and it should not have to “pay for that which it already owns[.]”
(R. 78, Pl.’s Mem. at 2.)
12
Reading the Lease as a whole, the court finds that the term “premises”
unambiguously includes the property’s improvements. First, the Lease expressly
defines “premises” as the land “together with any improvements thereon.” (R. 72-1,
Ex. A ¶ 1.) This definition comports with the ordinary meaning of the word as
defined by Illinois courts, Black’s Law Dictionary, Merriam Webster’s, and some
circuit courts. See, e.g., Tobin v. Gluck, 684 Fed. Appx. 61, 63 (2d Cir. 2017) (“The
word [‘premises’] is commonly understood to mean a ‘house or building, along with
its grounds; esp., the buildings and land that a shop, restaurant, company, etc.
uses.’” (quoting Black’s Law Dictionary (10th ed. 2014))); Cain Rest. Co. v. Carrols
Corp., 273 Fed. Appx. 430, 434 (6th Cir. 2008) (citing Merriam Webster’s Collegiate
Dictionary 920 (10th ed. 1997) (defining “premises” as “a tract of land with the
buildings thereon”)); United States v. Griffin, 827 F.2d 1108, 1114 (7th Cir. 1987)
(“According to Black’s Law Dictionary . . . premises means ‘lands and tenements; an
estate including land and buildings thereon.’” (citations omitted)); Nelson v. Aurora
Equip. Co., 909 N.E.2d 931, 935 (Ill. App. Ct. 2009) (citing Black’s Law Dictionary
definition of “premises” (citation omitted)); People v. Davit, 851 N.E.2d 924, 929 (Ill.
App. Ct. 2006) (noting Black’s Law Dictionary definition of “premises,” but
ultimately finding that the term was ambiguous as used in the trial court’s order
(citations omitted)).
Buchanan characterizes the Lease’s definition as “a single
boilerplate provision” in an attempt to downplay its importance. (R. 78, Pl.’s Mem.
at 7-8.) However, Buchanan does not dispute that this definition, boilerplate or not,
is unambiguous on its face and expressly includes improvements in the “leased
13
property.” (R. 72-1, Ex. A ¶ 1.) If the language in a contract is unambiguous, the
intention of the parties must be ascertained by the language used, not by
constructions urged by the parties. Napleton v. Ray Buick, Inc., 302 Ill. App. 3d
191, 201 (1998).
Furthermore, a defined term will be accorded that meaning
wherever it appears. See In re Shara Manning Props., Inc., 475 B.R. 898, 907
(Bankr. C.D. Ill. 2010) (citing Alexian Bros. Health Providers Ass’n, Inc. v. Humana
Health Plan, Inc., 330 F. Supp. 2d 970, 975 (N.D. Ill. 2004)). The Lease gives the
tenant “the option[] to purchase the premises” and requires the landlord to deliver
“title to said premises free and clear of all liens and encumbrances[.]” (See R. 72-1,
Ex. A ¶ 12 (emphases added).) According to the Lease’s own terms and definition,
the purchase option contemplates the purchase of both the land and its
improvements.
Nevertheless, Buchanan relies on language in the Lease giving Buchanan the
right to “remove, change, demolish, or abandon” all of the land’s improvements at
any time to argue that it owns the improvements. (See R. 78, Pl.’s Mem. at 6 (citing
R. 72-1, Ex. A ¶ 8).) Buchanan insists that it would be absurd to “force Buchanan to
pay for improvements it already owns.” (Id. at 8-9.) But Buchanan exaggerates the
absurdity of adhering to the Lease’s express definition of “premises.”
First, as
Buchanan points out, the Lease contemplates that the tenant would add
improvements to the land related to the storage and sale of petroleum. (See R. 72-1,
Ex. A ¶ 3.) Indeed, the paragraph addressing the tenant’s use and control of the
improvements begins by guaranteeing that the tenant “shall have the right to use
14
the premises in any lawful manner and shall have the right to erect and install such
buildings, improvements and equipment that it may require[.] (Id. ¶ 8.) To that
end, the Lease gives the tenant the right to tear down “any improvements of
Landlord on the leased land . . . without obligation to restore or replace same and
without accountability to the Landlord.” (Id.) When read in the proper context and
in light of the Lease as a whole, that provision facilitates the tenant’s use of the
property for the purposes stated in the Lease. In other words, the court agrees with
Lake Bluff that this portion of the Lease reflects the fact that “[a]s is typical of this
type of lease transaction, the tenant receive[s] the benefit of indicia of ownership of
the improvements[] without having to expend funds to actually purchase the
Property.”
(See R. 74, Def.’s Mem. at 10.)
Buchanan notes that it could have
avoided paying the improved value of the property by simply removing the
improvements and creating a vacant site prior to exercising the purchase option.
(See R. 81, Pl.’s Resp. at 4-5.) But then it also would have lost the benefit of owning
land that already has the improvements necessary for operating its gas retail
business.
As for Buchanan’s argument that it would be absurd for it to be forced to “pay
for improvements it already owns,” (see R. 78, Pl.’s Mem. at 8-9), there is a
difference between “owning” improvements in the sense that one has the right to
use, alter, or dispose of them, and “owning” them in the sense that one purchased or
erected the improvements themselves.
As Lake Bluff points out, this aspect of
Buchanan’s absurdity argument is less persuasive because there is no evidence
15
Buchanan would be purchasing the improvements twice under the Lease’s
definition of “premises.” (See R. 79, Def.’s Mem. at 8, 10.) In fact, there is no
evidence Buchanan purchased the improvements even once. (Id. at 10.)
Furthermore, Buchanan’s argument that the Lease’s definition of “premises”
would lead to unreasonable results rests on the assumption that Buchanan’s own
interpretation would not also lead to absurd consequences. But Buchanan’s reading
of the word “premises” would render significant portions of the Lease illogical. For
example, the Lease provides that the certificate of occupancy “shall be for occupancy
after [the tenant] completes a rebuild of the premises.”
(R. 72-1, Ex. A ¶ 2.)
Because “rebuild” implicates buildings, and because certificates of occupancy are
not issued for undeveloped land, this provision is nonsensical if “premises” does not
include buildings and improvements. See Cain Rest. Co., 273 Fed. Appx. at 435
(citing Black’s Law Dictionary (8th ed. 2004) (defining “certificate of occupancy” as a
document indicating that “a building complies with zoning and building
ordinances”)). The Lease also refers more than once to “products and services to be
sold at the premises.” (R. 72-1, Ex. A ¶¶ 3, 9.)
Under Buchanan’s reading of
“premises” these provisions would refer, strangely, to sales derived only from the
land itself and not from the gas station and convenience store on the land. See
Cain, Fed. Appx. at 434-35 (“Under [the defendant’s] reading of ‘Premises,’ ‘Gross
Sales’ includes only sales ‘at, in or from’ the land—and does not include sales ‘at, in
or from’ the buildings on the land[.]”). Similarly confounding would be references in
the Lease to “using the premises as a retail drive-in facility.” (R. 72-1, Ex. A ¶¶ 3,
16
9.)
This language shows that contrary to what Buchanan contends, the term
“premises” as used in the Lease comports with the word’s ordinary meaning, which
includes improvements.
Finally, Buchanan points to the Memorandum of Lease, which does not
explicitly include improvements in its description of the premises. (See R. 72-2,
Ex. B ¶ 1.) However, the Lease expressly states that the Memorandum of Lease
“shall not, under any circumstances, be deemed to modify or amend any of the
provisions of [the Lease] which shall, in all circumstances, prevail.” (R. 72-1, Ex. A
¶ 24.)
Although this court found at the motion to dismiss stage that the
Memorandum of Lease “supports Buchanan’s interpretation” and “reasonably may
be read as shedding light on . . . the predecessor parties’ intent,” Buchanan Energy
(N), LLC, 2015 WL 5173645, at *2, *4, the absence of improvements in the
Memorandum of Lease’s description does not amend the express definition in the
lease, (R. 72-1, Ex. A ¶ 1). A favorable finding at the more lenient motion to dismiss
stage does not guarantee a party will prevail at the more demanding summary
judgment stage. See McKinnie v. Dart, No. 14 CV 9588, 2015 WL 5675425, *4 (N.D.
Ill. Sept. 24, 2015). In light of the facts set forth by both parties and construing the
Lease as a whole, the court finds that the term “premises” as used in the Lease—
including
with
improvements.
regards
to
the
purchase
option—unambiguously
includes
Accordingly, the court grants Lake Bluff’s motion and denies
Buchanan’s motion as to Buchanan’s declaratory judgment and specific performance
claims.
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C.
Lake Bluff’s Counterclaims
Both parties have also moved for summary judgment on Lake Bluff’s
counterclaim seeking possession of the property under the Illinois Forcible Entry
and Detainer Act (“Act”), 735 ILCS 5/9-101, et seq. (See R. 34, Def.’s Answer and
Countercl. at 16.) The Act provides in relevant part that “the person entitled to the
possession of lands or tenements may be restored thereto . . . when any lessee of the
lands or tenements . . . holds possession without right after the termination of the
lease or tenancy by its own limitation, condition or terms, or by notice to quit or
otherwise.” 735 ILCS 5/9-102(a). Here, Lake Bluff contends that the Lease expired,
Buchanan received proper notice demanding possession of the property, and
Buchanan is holding possession without right.
(R. 74, Def.’s Mem. at 15.)
Specifically, Lake Bluff argues that because providing an appraisal that included
the improvements was a condition precedent to exercising the purchase option,
Buchanan failed to properly exercise its option. (Id. at 14-15.) The court disagrees.
The Lease provides that the purchase option “may be exercised by the giving
of written notice from Tenant to Landlord.” (R. 72-1, Ex. A ¶ 12.) The Lease also
requires that the option be exercised after the end of the 17th year of the Lease and
its renewal periods, but Lake Bluff is not disputing that Buchanan’s written notice
was timely. (See id. ¶ 13.) The Lease does not condition the exercise of the option
on a proper appraisal, and because Illinois law requires that options be exercised in
strict accordance with their terms, see Keene Corp. v. Chapple, 716 F.2d 475, 477
(7th Cir. 1983), courts have consistently found that timely notice may be all that is
18
required for effective exercise if the Lease so provides, see, e.g., Caisse Nationale de
Credit Agricole v. CBI Indus., 90 F.3d 1264, 1273 (7th Cir. 1996) (“Here the
condition for acceptance was nothing more than timely notice.”); In re Orla Enters.,
399 B.R. 25, 29 (Bankr. N.D. Ill. 2009) (“Brandy’s timely notice of its intention to
exercise the option was sufficient to properly exercise it.”); Wilson Sporting Goods
Co. v. Penn Partners, No. 03 CV 5236, 2004 WL 2445372, at *5 (N.D. Ill. Oct. 28,
2004) (citing cases in which “the only condition precedent for exercising the option
was notification by the optionee to the optionor”). Contrary to what Lake Bluff
contends, the Lease’s appraisal requirements relate to the execution of the purchase
after the option is exercised.
See, e.g., Wilson Sporting Goods Co., 2004 WL
2445372, at *5 (noting cases in which requirements for payment methods and the
execution of separate agreements in relation to the option “were related to the
subsequent performance of the contracts, not to the conditions precedent to exercise
of the option”); Gaskins v. Walz, 409 Ill. 40, 45 (1951) (finding that “[t]he demand
for an abstract showing merchantable title was made in reference to what should
happen as to performance during the period of the executory contract” after an
option was exercised). The court therefore finds that Buchanan properly exercised
its option to purchase the property because it gave timely written notice of its intent
to do so. Accordingly, the court grants Buchanan’s motion for summary judgment
as to Lake Bluff’s counterclaim seeking possession of the property and denies Lake
Bluff’s motion as to that claim.
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As for Lake Bluff’s other claim that Buchanan’s land-only appraisal
conducted by Currier was done in bad faith, because the court finds that
Buchanan’s appraisal must include improvements and should therefore either be
redone or revised for the purchase to go forward, the second count in Lake Bluff’s
counterclaim is moot.
Conclusion
For the foregoing reasons, the parties’ motions for summary judgment are
granted in part and denied in part. Lake Bluff’s motion is granted as to Buchanan’s
declaratory judgment and specific performance claims, but denied as to Lake Bluff’s
Illinois Forcible Entry and Detainer Act and declaratory judgment claims.
Buchanan’s motion is granted as to Lake Bluff’s counterclaims, but denied as to
Buchanan’s claims.
To determine the price of the property pursuant to the
purchase option, each of the three appraisals must include the improvements.
ENTER:
____________________________________
Young B. Kim
United States Magistrate Judge
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