805 F.2d 1292 (7th Cir. 1986), 85-1983, Combined Network, Inc. v. Equitable Life Assur. Soc. of the United States

Docket Nº:85-1983.
Citation:805 F.2d 1292
Party Name:COMBINED NETWORK, INC., an Illinois corporation, Plaintiff-Appellee, v. The EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, a New York corporation, Defendant-Appellant.
Case Date:November 12, 1986
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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805 F.2d 1292 (7th Cir. 1986)

COMBINED NETWORK, INC., an Illinois corporation, Plaintiff-Appellee,



New York corporation, Defendant-Appellant.

No. 85-1983.

United States Court of Appeals, Seventh Circuit

November 12, 1986

Argued Jan. 13, 1986.

Rehearing Denied Dec. 16, 1986.

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[Copyrighted Material Omitted]

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John D. Lien, Wilson & McIlvaine, Chicago, Ill., for defendant-appellant.

Mitchell S. Goldgehn, Greenberg, Keele, Lunn & Aronberg, Chicago, Ill., for plaintiff-appellee.

Before BAUER, Chief Judge, CUMMINGS and POSNER, Circuit Judges.

CUMMINGS, Circuit Judge.

Plaintiff Combined Network, Inc. (Combined) is an Illinois corporation. Defendant, The Equitable Life Assurance Society of the United States (Equitable), is a New York corporation. For the time period relevant here Equitable owned Gateway III, an office building at 222 South Riverside Plaza in Chicago, Illinois. Tishman Midwest Management Corporation (Tishman) was Equitable's leasing and managing agent pursuant to a written management agreement. Tishman handled all tenant negotiations for Equitable. In December 1981, Combined sought new office space through Berger Realty Group, Inc. (Berger Realty) for its business. The cast of major players involved in this lease attempt are: Michael Richer (President, Combined), Melvyn Goodman (Executive Vice President and General Counsel, Combined), David Miller (Tishman Marketing Representative for Gateway III), Cameron Estes (Tishman Vice President of Leasing), Richard Symonds (Building Manager of Gateway III), and Charles Vial (Tishman Vice President of Management).

Miller, Goodman, and Allison Peck (Berger Realty) initially met in mid-December 1981 to discuss the possibility of Combined's entering a 10-year lease at Gateway III. Combined hired the architectural firm of Bauhs & Dring to prepare renovation plans. The remodeling was estimated to cost $250,000. On January 6, 1982, Miller, Estes and Goodman met at Combined's offices to discuss lease terms. Shortly thereafter Goodman sent Miller information about Combined's financial position. January negotiations resulted in a proposed $250,000 loan from Equitable to Combined at 17% interest, to be repaid over the 10-year lease term. Estes then spoke with Equitable management and was authorized to proceed with negotiations.

On January 28, 1982, Miller sent Goodman a copy of a draft lease, which proposed a lease term of 5 years and 2 months (March 1, 1982--April 30, 1987) with a 5-year renewal option. Annual rental was to be $263,047 (with a 1981 base year). The draft lease was unacceptable to Combined because the second 5-year term was contingent on another tenant's waiving its currently held option to lease the same premises. On February 4, 1982, Goodman told Estes and Richer that Equitable would have to be responsible for all the moving costs if Combined was forced to move at the end of the first lease term. Estes and Miller agreed. At this same meeting the Tishman people informed Goodman that Equitable's policy was not to allow construction work until the lease was signed. But because the transaction had been approved and Combined wanted to occupy the offices by April, Tishman said if Combined would sign an indemnity agreement, work could begin immediately. Combined agreed to indemnify Tishman for $13,976 and the demolition work began.

On February 5, 1982, Goodman signed the lease and enclosed a check for the first month's rent. The lease contained two paragraphs that committed Equitable to lend Combined a total of $385,000: $250,000 for renovation and $135,000 for equipment, both at 17% interest. Miller reminded Goodman that formal approval (with signatures) was required from Equitable and said that he would call Goodman when the lease was approved.

Tishman sent the lease on to Equitable's lease manager, Frank Schmidt, along with Combined's financial information. Equitable reviewed the financial information around February 10, and concluded it was weak. Goodman testified that on February 10 or 11, 1982, Miller phoned him and informed him that Equitable had signed the lease. Miller denied this phone call, but did testify that during this time period he was aware that Equitable had not signed the lease. On February 15, 1982, Combined

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entered into a contract with Interior Alterations for remodeling work.

On February 18 or 19 Miller informed Goodman that Equitable wanted to change the lease so that Goodman and Richer would personally guarantee the loan. Goodman expressed dissatisfaction with Equitable's attempt to modify the contract and said that he would try to work something out but that the requested changes were unacceptable. Goodman suggested they meet later to discuss and attempt to resolve Equitable's concerns. On February 24, before that meeting, Vial directed Interior Alterations to stop construction work. When Goodman discovered what Vial had done, he called Miller and claimed that Equitable was breaching their signed agreement. The next day Miller told Goodman that the construction workers were back on the job as per the agreement. Interior Alterations continued to work until March 3, 1982.

Negotiations for what Goodman believed to be contract modifications continued into March. Equitable decided that it would not approve the loan to Combined. Miller informed Goodman that Equitable would only approve a 5-year "as-is" lease. An agreement could not be reached; Combined's rent check was returned. It was not until this point that Goodman discovered that the lease had never been signed.

Combined was billed $63,328.04 by Interior Alterations for its work at Gateway III. Demolition work totalled $11,443.09. Work performed by a subcontractor, Continental Electric, accounted for $23,065.29 of the invoice, and Continental sued Combined and Interior Alterations for that amount. The suit was later dismissed for want of prosecution.

In April 1982, Combined leased alternative space for its corporate headquarters at Hartford Plaza in Chicago. The rent at Hartford Plaza was $17.64 per square foot, which included the cost of preparing the premises for occupancy. The base rent at Gateway III had been set at $14.50, without improvements. Considering the base rent for Gateway III and factoring in the additional $250,000 loan for tenant improvements, Combined would have been able to rent space at Gateway III for $15.84 per square foot.

Combined sued Equitable for breach of the lease agreement. The jury found for Combined and awarded damages of $259,163.67: $8,332.50 for architect's fees; $64,684.17 for the aborted renovation work; and $186,147.00 for rental damages, the difference between rent at Gateway III and Hartford Plaza. The district court entered judgment for $259,163.67. Equitable has appealed. It raises five arguments. First, it claims that the Statute of Frauds should prevent enforcement of the lease. Second, it asserts that Combined may only recover restitution and not breach...

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