DB Real Estate Assets I, LLC v. Dinatale
| Decision Date | 02 September 2014 |
| Docket Number | No. 1-13-1386,1-13-1386 |
| Citation | 2014 IL App (1st) 131386 -U |
| Parties | DB REAL ESTATE ASSETS I, LLC, Plaintiff-Appellant, v. DONATO DINATALE and ANGELA DINATALE, Defendants-Appellees. |
| Court | United States Appellate Court of Illinois |
NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).
Appeal from the Circuit Court of Cook County.
Honorable Mary L. Mikva, Judge Presiding.
¶ 1 Held: The trial court did not err in denying lessee's claim for specific performance to enforce a purchase option against lessor in the parties' lease agreement; the trial court did not err in denying lessee's petition for damages against lessor.
¶ 2 This appeal arises from the August 13, 2012 opinion, January 7, 2013 order, and March 29, 2013 order entered by the circuit court of Cook County, which denied a claim for specific performance against plaintiff DB Real Estate Assets I LLC (DB), granted in part a declaratory judgment claim in favor of DB, but denied DB's petition for legal damages against defendants Donato DiNatale (Donato) and Angela DiNatale (Angela) (collectively, the DiNatales) in adispute over real property. On appeal, DB argues that: (1) the trial court erred in denying specific performance in favor of the DiNatales; and (2) the trial court erred in denying DB's petition for legal damages against the DiNatales. For the following reasons, we affirm the judgment of the circuit court of Cook County.
¶ 4 In 1975, the DiNatales purchased real estate property located at 7201 West Grand Avenue in Elmwood Park, Illinois (the property), for $185,000. Also in 1975, the DiNatales quitclaimed the property to Chicago Title & Trust Company (Chicago Title) pursuant to a land trust agreement. Under the land trust agreement, the DiNatales remained as beneficiaries of the land trust until 2007, at which time they conveyed the property from the land trust back into their own names. In 1983, the property was partially destroyed by fire.
¶ 5 In the summer of 1984, Seventh Dunkin' Donuts Realty, Inc.,1 offered to purchase the property for $170,000. The DiNatales, who were interested in selling the property for $325,000 according to real estate broker Peter Longi (Longi), rejected the offer. The parties then began discussing a possible lease of the property.
¶ 6 On December 18, 1984, Dunkin' Donuts of Illinois, Inc. (Dunkin' Donuts), as predecessor-in-interest to DB, entered into a lease agreement with Chicago Title, as land trustee for the DiNatales, for the purpose of operating a Dunkin' Donuts shop on the property.2 Under the lease agreement, the property was leased to Dunkin' Donuts for an initial term of 20 years,with the option of extending the lease for two additional successive 10-year terms.3 The lease agreement stated that the lessee's obligation to pay rent and real estate taxes would begin once the Dunkin' Donuts shop is constructed on the premises and is open to serve the general public. Paragraph 14 of the lease agreement contained a purchase option clause, which granted the lessee a right to purchase the premises "at any time after the fifth anniversary for the sum of [$235,000]." According to Donato's testimony at trial, the DiNatales' attorney, I.H. Feldstein (Attorney Feldstein),4 was present when the purchase option was first discussed in an August or September 1984 meeting involving Donato, Longi, and the manager of real estate and franchise development at Dunkin' Donuts of America, Inc., Patrick O'Brien (O'Brien). Although it is unclear in the record whether the DiNatales received a copy of the lease agreement containing the purchase option clause prior to its execution, the lease agreement was sent to the DiNatales' attorney, Attorney Feldstein, before it was signed by Chicago Title as land trustee for the DiNatales.
¶ 7 In January 1985, Dunkin' Donuts and Chicago Title, as land trustee for the DiNatales, executed a "notice of lease" which contained the purchase option provision as stated in the lease agreement. On March 6, 1985, the "notice of lease" was recorded with the recorder of deeds in Cook County.
¶ 8 Sometime after July 1985, Dunkin' Donuts demolished the existing structure on the property and constructed a donut store in its place. Dunkin' Donuts allegedly spent $330,000 onthe demolition and construction process. On January 20, 1986, when the donut shop opened, Dunkin' Donuts began making rent payments under the lease agreement.
¶ 9 On May 26, 2006, Dunkin' Donuts assigned its interests and rights in the lease agreement to DB. In 2007, the DiNatales conveyed the property from the land trust held by Chicago Title back into their own names.
¶ 10 On May 9, 2008, the DiNatales entered into a purchase agreement with Argent Group LLC (Argent Group) to sell the property for $1.7 million. In the purchase agreement, the DiNatales represented to Argent Group that no third party had any existing "options to purchase" the property. On July 7, 2008, Argent Group terminated the purchase agreement with the DiNatales, after learning about the $235,000 purchase option in the lease agreement between the DiNatales and Dunkin' Donuts, as predecessor-in-interest to DB.
¶ 11 On November 4, 2008, DB, through its counsel, notified the DiNatales in writing of its intent to exercise the purchase option pursuant to the terms of the lease agreement. It is stipulated by the parties that, as of November 4, 2008, DB had made approximately $608,932 in rent payments pursuant to the lease agreement. On November 24, 2008, the DiNatales notified DB that they refused to sell the property to DB for $235,000. The parties stipulated that from November 24, 2008 to June 12, 2012, DB had paid approximately $137,367.97 in rent to the DiNatales. It is also stipulated by the parties that, under the lease agreement, rent payments from November 4, 2008 until the end of the first optional 10-year extension period (January 19, 2016), would total $283,953.
¶ 12 On December 4, 2008, DB filed a two-count complaint against the DiNatales, requesting the trial court to enter a declaratory judgment (count I) that the lease agreement and purchase option were valid and enforceable; and alleging a claim for specific performance (count II) byrequesting the trial court to direct the DiNatales to sell the property to DB for $235,000 pursuant to the purchase option under the lease terms.5 On February 9, 2009, DB's action was transferred from the law division to the chancery division of the circuit court of Cook County.
¶ 13 In July 2012, a two-day bench trial was held. At trial, the testimony of the DiNatales; the video deposition of O'Brien; Longi's discovery deposition; the testimony of Chicago Title's trust counsel David Lanciotti (Lanciotti); and the testimony of DB's director of retail development, Michael LaVigne (LaVigne), were presented. Documentary evidence presented at trial included the final version of the lease agreement; a September 1984 letter from O'Brien to Attorney Feldstein; the January 1985 "notice of lease"; an internal memorandum from O'Brien to Dunkin' Donuts' finance committee; a February 1985 "general direction" signed by Donato directing Chicago Title to sign the "notice of lease"; and a September 1983 letter from Longi to O'Brien.
¶ 14 In an August 13, 2012 opinion, the trial court denied DB's claim for specific performance (count II) in the complaint. Although the trial court found that the DiNatales failed to show either that the lease agreement between the parties was induced by fraud or that it was unconscionable, the trial court refused to award specific performance to enforce the purchase option on the basis that it would be inequitable under the circumstances of the case. Specifically, the trial court found that O'Brien "took advantage of his greater sophistication and experience to let [Donato] believe that they had entered into an agreement to 'meet his price' at the five-year mark for the lease." The trial court further found O'Brien to be hostile and uncooperative, whileit found Donato to be "quite credible" in his testimony that he did not leave his negotiations with O'Brien with any understanding that he had agreed to the fixed price purchase option as stated in the lease agreement. The trial court further found it clear that Donato was not shown a copy of the lease containing the purchase option clause during his negotiations with O'Brien, that the parties' "long-time expectations" were that they had entered into a lease rather than a purchase agreement, and that enforcing the purchase option under the lease terms would be inequitable where DB waited almost a quarter of a century to exercise the option. Further, the trial court found that Attorney Feldstein's role in the negotiations was limited and, thus, under the circumstances, his presence during the discussion of the purchase option did not render it equitable to enforce the purchase option. In its August 13, 2012 ruling, the trial court expressly stated it was "not a final judgment" and made no mention of DB's declaratory judgment claim (count I) in the complaint.
¶ 15 On August 22, 2012, DB filed a motion for clarification of the trial court's August 13, 2012 opinion (motion to clarify), seeking the court to declare that the purchase option under the lease agreement was valid and legally binding (count I), and to allow DB to file a petition for further legal and equitable relief under the Declaratory Judgment Act (735 ILCS 5/2-701(c) (West 2012)). On January 7, 2013, the trial court granted declaratory judgment in part by ruling that, given the court's factual findings, the purchase option was legally valid but not enforceable. In its January 7, 2013 order, the trial court also allowed DB to file a petition to seek...
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