Winnetka Bank v. Mandas

• Decision Date: 17 August 1990
• Docket Number: P,Nos. 1-88-1848,1-88-2032,R-576,s. 1-88-1848
• Citation: 147 Ill.Dec. 621,202 Ill.App.3d 373,559 N.E.2d 961
• Parties: , 147 Ill.Dec. 621 WINNETKA BANK, as Trustee Under Trust #laintiff-Appellant, v. Peter MANDAS and Bill Mandas, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 961

559 N.E.2d 961

202 Ill.App.3d 373, 147 Ill.Dec. 621

WINNETKA BANK, as Trustee Under Trust # R-576, Plaintiff-Appellant, v. Peter MANDAS and Bill Mandas, Defendants-Appellees.

Nos. 1-88-1848, 1-88-2032.

Appellate Court of Illinois First District, Fifth Division.

Aug. 17, 1990.

Phillip E. Couri, Court & Economos, Winnetka, for plaintiff-appellant.

Thomas M. Bastian, Storino, Ramello & Durkin, Des Plaines, for defendants-appellees.

Presiding Justice COCCIA delivered the opinion of the court:

Plaintiff, The Winnetka Bank, as trustee under Trust No. R-576 (the Bank), appeals from two orders of the circuit court favorable to defendants, Peter and Bill Mandas, in an action by the Bank to recover damages for breach of an unexecuted commercial lease agreement. Issues presented relate to (1) the enforceability of the unexecuted lease within the provisions of the Statute of Frauds, and (2) whether plaintiff, in its verified pleadings, made judicial admissions which preclude its recovery, in the alternative, for defendants' alleged breach of a prior, executed lease agreement.

On September 5, 1985, when the Bank filed its original complaint, it was legal title holder to the leased property, which it had acquired in January 1985 from the LaSalle National Bank, the previous trustee for the beneficial interest holders. The record reveals that defendants, who are brothers, operated a restaurant, the "Mandas Snack Shop," on the subject premises for approximately 26 years prior to this lawsuit, as tenants under a series of signed and unsigned term leases.

In its verified complaint, the Bank alleged that in January 1985, defendants were occupying the premises under the terms of a written lease agreement. The Bank further alleged that "on or about the first of March, 1984, Plaintiff, through its agent, and at Defendant's request, agreed to rewrite Defendant's lease agreement, thereby cancelling the balance of the existing lease agreement." The complaint further stated that defendants, "pursuant to the terms of the new lease agreement," leased the premises for a five-year term beginning April 1, 1984, and ending April 30, 1989, and occupied the premises until August 31, 1985, a period of 17 months, under the terms of the new lease (hereafter, "the 1984 lease"). It was further alleged that "on or about July 29, 1985, Defendants served written notice on Plaintiff that they intended to terminate their lease agreement on August 31, 1985," and that the termination notice was served "with the lease agreement attached to it." A copy of defendants' notice of termination, as well as a copy of a seven-page unexecuted written lease, stating a lease term of April 1, 1984, through April 30, 1989, and a gross rent of $183,000, payable in $3,000 monthly installments, were attached to the verified complaint. The complaint requested damages of $132,000 in rent for the remainder of the lease term, and a portion of the real estate taxes on the property, pursuant to a provision of the 1984 lease, for a total of $190,000, plus interest and costs of the lawsuit.

In their verified answer to the Bank's original complaint, defendants alleged as an affirmative defense that they entered into a store lease with the title holder of the premises on or about October 1, 1980, for a term ending September 30, 1985 (hereafter, "the 1980 lease"), and that they occupied the premises "under the terms of that lease" from October 1, 1980, to August 31, 1985. While denying nearly every allegation in plaintiff's complaint, including that "the document attached to Plaintiff's Complaint [the 1984 lease] * * * constitute[d] a lease agreement between the parties," defendants admitted that they "served written notice of termination of tenancy on Plaintiff on July 29, 1985." Defendants' answer includes neither an admission nor a denial of the allegation that defendants' termination notice was served on plaintiff with the 1984 lease attached.

It is undisputed that defendants vacated the subject premises by August 31, 1985, and immediately opened a new restaurant across the street. It is also undisputed that the City of Des Plaines (the City) initiated condemnation proceedings against the subject property soon thereafter, and obtained a condemnation judgment in March 1987. In oral argument before this court, the parties conceded that no damages relating to the period after March 1987 are being sought or contested in this action. Thus, the issues addressed in this opinion relate to the alleged liabilities of defendants arising from either the 1984 or the 1980 lease agreements with plaintiff and extending up to the date of condemnation.

Contained in the record on appeal are three written leases between plaintiff's predecessor in interest, "La Salle National Bank as Trustee, Philip G. Prassas, Agent," and the defendants. All of the leases are printed "Cole Legal Forms" store leases, with typewritten amendments and riders. They are nearly identical in format and contain, for the most part, nearly identical provisions. The leases vary primarily in the dates of the lease terms and the monthly rent provisions. The first lease states a lease term of October 1, 1979, through September 30, 1984, and a monthly rent of $2,300. The lessees are listed as Peter Mandas, Bill Mandas, and Stella Mandas. While the lease includes prepared signature lines for all three lessees and for Philip Prassas, as lessor's agent, the document is completely unexecuted. Neither plaintiff nor defendants claim that this lease was in effect at any time relevant to this lawsuit. It does, however, serve to illustrate the history of dealings between the parties.

The second lease (the 1980 lease) states a term of October 1, 1980, through September 30, 1985. The monthly rent is $2,500. Peter and Bill Mandas are listed as lessees, the name of Stella Mandas has been crossed out, and the deletion of Stella's name has been initialled by Prassas, Peter Mandas and Bill Mandas. The lease is fully executed by all three parties. In addition, the 1980 lease, like its predecessor, contains a Consumer Price Index (CPI) adjustment clause. This provision in part states:

"The basic monthly payments shall be subject to automatic adjustment after September 30, 1981, based on changes in the Consumer Price Index * * *. The Lessee hereto agrees to pay increased rental proportional to any increases in the CPI, * * * as follows: * * * [b]eginning October 1, 1980, the annual rental shall be increased if the percentage listed in the CPI increases for the preceding year. The adjustment in the CPI shall be computed using a (12) month period ending June 30 each year."

The 1980 lease also requires the lessee to carry insurance, in certain specified amounts, for death or personal injury on the premises, single accident coverage, and property damage with respect to the subject premises. It also requires the lessee to carry plate glass insurance. The lessee is further required to deposit with lessor, within 10 days from the beginning date of the lease term, a certificate showing that such insurance is in force. With regard to real estate taxes, the 1980 lease provides that the lessee shall reimburse the lessor "on a pro-rata basis according to his store's percentage of square foot area in relation to the total square foot area of the premises for any real estate taxes in excess of that charged against the property for the year 1978." Finally, the 1980 lease contains an "Option to Renew" clause (hereafter, "reverse option clause") which becomes significant in the context of the current dispute. The reverse option clause provides:

"Lessee shall have the right to renew this lease for a period of five (5) years under the same terms and conditions except that the annual rental shall be the current rental then in existence plus any CPI increase for said period. Said option shall be deemed exercised unless Lessee gives Lessor written notice of his intent not to exercise said option no later than 180 days prior to expiration of the lease contract." Emphasis added.

The third lease is the unexecuted 1984 lease upon which the Bank based its original complaint. This document is dated March 22, 1984, and states a five-year lease term, from April 1, 1984, through April 30, 1989. The gross monthly rental fee is $3,000. Peter and Bill Mandas are listed as sole lessees. The provisions for insurance coverage, including plate glass insurance, are identical with those of the 1980 lease, as are the real estate tax provisions. However, the CPI adjustment, under the 1984 lease, would be effective at the lessor's option, and only in the event that the lessee failed to undertake and complete "substantial remodeling" within 90 days from the beginning of the lease term, i.e., April 1, 1984. The provision further states that the lessee agrees to undertake this remodeling and upgrading of the premises "in consideration of Lessor giving Lessee a flat-rate gross rent and the elimination of a CPI rental adjustment. * * * " Other differences between the 1980 and 1984 leases are irrelevant to the issues before us.

In response to defendants' verified answer and affirmative defense, the Bank filed a motion for summary judgment as to liability. Plaintiff's motion was based on the reverse option clause of the 1980 lease, the effect of which was to automatically renew that lease for another five-year term in the event that the lessees failed to notify the lessor in writing, within 180 days of its expiration date, of their intention not to renew the lease. Plaintiff's motion was supported by the sworn affidavit of Philip Prassas, in which Prassas stated that he, as plaintiff's agent, never received the required written notice of defendants' intent not to renew the 1980 agreement.

In defendants' response to plaintiff's summary judgment motion, they again admitted that they entered into the 1980 lease, but denied nearly all of plaintiff's allegations...