LaSalle Nat. Bank v. General Mills Restaurant Group, Inc., 104048
| Decision Date | 23 August 1988 |
| Docket Number | No. 104048,No. 87-2915,P,104048,87-2915 |
| Citation | 854 F.2d 1050 |
| Parties | LaSALLE NATIONAL BANK as Trustee under Trustlaintiff-Appellant, v. GENERAL MILLS RESTAURANT GROUP, INC., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Anthony J. Pauletto, Skokie, Ill., for plaintiff-appellant.
Jeffrey L. Dorman, Sonnenschein Carlin Nath Rosenthal, Chicago, Ill., for defendant-appellee.
Before CUMMINGS and POSNER, Circuit Judges, and ESCHBACH, Senior Circuit Judge.
LaSalle National Bank, trustee for a land trust that owns a building on Michigan Avenue in Chicago, appeals from the dismissal, on the defendant's motion for summary judgment, of LaSalle's diversity breach of contract suit.
The defendant, which owns the "Red Lobster" restaurant chain and which we shall call Red Lobster in an effort to enliven our opinion, wanted to open a restaurant on Michigan Avenue in Chicago; and on June 28, 1984, it signed an agreement with LaSalle to lease space in the land trust's building. The lease was to be in effect for ten years from the day that certain conditions precedent were satisfied; until that day, the lease would not be operative and no rent would accrue. Two provisions of the lease agreement are at the heart of this case:
In the event the lease term has not commenced within one hundred eighty (180) days from the last signing or initialing of this Agreement, either party shall have the right to cancel this Agreement by written notice to the other party.
In the event an application is pending before any governmental or municipal agency at the end of the above one hundred eighty (180) days, either party's right to cancel shall then be exercisable only at the end of an additional thirty (30) day period. Notwithstanding the foregoing, to the extent that either LANDLORD or Tenant is unable to complete in a timely fashion its obligations under this Agreement, the time period herein (the 180 or 30 days) shall be extended accordingly. For example, if LANDLORD or Tenant cannot complete its work within an applicable time period, needing an additional ten (10) days, then the one hundred eighty (180) day period shall be extended an additional ten (10) days.
Paragraph was important because Red Lobster needed to obtain various government permits in order to convert the premises into a restaurant.
The initial 180-day period during which neither party could cancel the lease was due to expire on December 25, 1984. On December 7 Red Lobster wrote LaSalle (its actual dealings were with the beneficial owner of the premises and a real estate broker, but for the sake of simplicity we shall pretend that LaSalle was the landlord and the broker) that it was exercising its 30-day privilege of extension because the City of Chicago would not issue the necessary permits by December 25. On January 17, 1985, nine days before the 30-day extension period was due to expire, Red Lobster wrote LaSalle again. The permits hadn't come through yet (the parties have stipulated that the delays in obtaining the permits were not due to any lack of diligence by Red Lobster), and Red Lobster did not anticipate receiving all of them until April 30. The letter requested that the lease be modified to extend the noncancellation period to April 30 and stated that "although our General Counsel believes that under Paragraph of our Lease Agreement Red Lobster would be entitled to whatever additional time was necessary to complete its work at no cost, in an effort to show good faith on our part, we are willing to pay $10,000.00 for the extension."
As LaSalle's lawyer admitted at his deposition, LaSalle believed that the agreement did extend the noncancellation period for as long as Red Lobster needed, but, as he said with charming candor, "We figured we had a sucker and we'd play him." LaSalle therefore replied to Red Lobster's offer of $10,000 for modification of the lease by demanding $20,000 by April 1 and $10,000 for each month thereafter until the permits were obtained. LaSalle mailed Red Lobster this counterproposal on January 25. Five days later, Red Lobster wrote LaSalle a letter notifying LaSalle that Red Lobster deemed the noncancellation period to have expired on January 26 (the expiration of the 30-day extension period) and was cancelling the lease. LaSalle countered with this lawsuit, in which it claims that the noncancellation period extended for as long as Red Lobster needed to obtain the permits and satisfy the other conditions precedent, and therefore Red Lobster broke the contract by cancelling it during that period. The district judge granted summary judgment for Red Lobster on the ground that the contract was ambiguous and the conduct of the parties showed that they had intended either of them to be allowed to cancel the lease after the expiration of the 30-day extension period.
If a judge can make sense of a written contract without hearing testimony, his duty is to construe the contract without letting the parties introduce any evidence other than the contract itself. See, e.g., LaSalle National Bank v. Service Merchandise Co., 827 F.2d 74, 78 (7th Cir.1987) ( Illinois law); City of Clinton v. Moffitt, 812 F.2d 341, 342 (7th Cir.1987) (same). But if he can't, then "extrinsic" evidence is admissible and the question of the meaning of the contract is treated as an ordinary factual question for decision at trial. See, e.g., Ridenhour v. Mollman Publishing Co., 66 Ill.App.3d 1049, 1051, 23 Ill.Dec. 36, 37-38, 383 N.E.2d 803, 804-05 (1978); Nerone v. Boehler, 34 Ill.App.3d 888, 891, 340 N.E.2d 534, 536-37 (1976). The district judge in this case used a hybrid method--deeming the contract ambiguous yet resolving the interpretive question on summary judgment, i.e., without a trial. This was a permissible course of action if no material facts were contested, but not otherwise. See, e.g., City of Clinton v. Moffitt, supra, 812 F.2d at 344; Ridenhour v. Mollman Publishing Co., supra, 66 Ill.App.3d at 1051, 23 Ill.Dec. at 38, 383 N.E.2d at 805.
LaSalle argues that material facts were in dispute and therefore there should have been a trial....
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