Chicago Business Litigation Lawyer Blog

DiTommaso-Lubin represents clients all over the Chicago-land area, and because Chicago is a growing metropolis, land comes at a premium. This means that there is constant property development going on all over our fair city, and with that development comes unique legal problems. Water Tower Realty Company v. Fordham is a case that was decided in the Appellate Court of Illinois, First District, Third Division that addresses some of the problems that arise when companies perform construction in close proximity to neighboring businesses.

In Water Tower Realty Company v. Fordham, Defendant Fordham constructed a building on a parcel of land in Chicago, and prior to its construction, Defendant agreed to indemnify Plaintiff Water Tower for losses suffered due to the erection of the edifice. Five years after the building was finished, Plaintiff filed suit alleging that during construction Defendant had “so used its property as to make it impossible to lease” an adjacent property. Plaintiff claimed that it had lost over $75,000 in rental business as a result and that Defendant had refused to indemnify Plaintiff for this loss. Plaintiff filed for a dismissal of the action, and the trial court dismissed the claims because they were barred by the applicable statute of limitations as set forth in 735 ILCS 2-619(a)(5). Defendant then appealed the trial court's dismissal.

The Appellate Court analyzed whether the trial court was correct in applying the four year statutory period or whether a ten year period was appropriate. The Court found that the nature of the injury was determinative in making such a decision, with the four year term applying if the injury was due to a construction-related activity, and the ten year term applying if the harm was caused by a breach of contract. In reversing the lower court's dismissal, the Appellate Court concluded that the appropriate statute of limitations was the ten year term because the Plaintiff's injury was caused by Defendant's failure to honor the indemnity agreement. The Court went on to hold that the agreement's indemnity provisions applied to both first party and third party claims, and that it contained no language that could hold Defendant's agents personally liable for Plaintiff's damages.

Continue reading "Appellate Court Applies 10 Year Statute of Limitations in Construction Indemnity Case" »

A trial court was correct to find a breach of fiduciary duty in a real estate partnership, the First District Court of Appeal ruled March 27. In 1515 North Wells LP v. 1513 North Wells LLC, No. 1-07-1881 (Ill. 1st. Dist. March 27, 2009), the appeals court also upheld the lower court’s rulings that one partner had breached his contract and that denied him a chance to amend his complaint to pierce the corporate veil.

The case grows out of a real estate development deal struck in 1997. Thomas Bracken, Mark Sutherland, Alex Pearsall and an uninvolved fourth partner formed 1515 North Wells LP, a limited partnership, to develop a condominium with retail space. Sutherland and Pearsall then created SP Development Corporation to serve as the general partner of 1515 North Wells LP. Bracken separately created 1513 North Wells LLC to own space in the building that was to be a health club. Bracken borrowed $250,000 to pay for his part of the property, and signed a note saying he agreed to pay it back no later than 15 days after receiving a financial statement from 1515 North Wells. He further agreed to pay it even if there was a dispute, then wait for a refund later.

To begin development, SP, the general partner, solicited bids for a general contractor. It hired yet another Sutherland and Pearsall company, Sutherland and Pearsall Development, even though its bid was the only one received that failed to state a maximum price for the project. The same general contractor, not 1515 North Wells, later received the profits from condominium upgrades.

In 2001, Bracken received his financial statement but did not pay back the loan, claiming the accounting was inadequate. The next year, 1515 North Wells sued him for breach of contract. Bracken countersued SP, and Sutherland and Pearsall as individuals, for breach of fiduciary duty, citing the choice of their own company as general contractor. SP was granted summary judgment on Bracken’s breach of contract issue, and the individuals were granted summary judgment on breach of fiduciary duty as to them personally. Bracken was unsuccessful in his own request for summary judgment, finding that there were genuine issues of material fact to address at trial.

The court also denied Bracken leave to amend his complaint to pierce the corporate veil and find Sutherland and Pearsall personally liable for the alleged breach of fiduciary duty. Bracken’s request came in 2005, seven weeks before trial and after the issue had been raised in previous filings. However, the judge in the case retired, delaying trial. At a bench trial in December of 2005, the court found for Bracken on the breach of fiduciary duty claim. Bracken then petitioned for reconsideration of the summary judgment against him and of the denial of leave to amend his petition, in light of the court’s finding. The new judge did not change the first judge’s rulings, and in fact, amended the judgment against Bracken to include more interest and attorney fees.

Everybody appealed to the First District. On appeal, Bracken argued that the trial court erred in finding him liable for breach of contract in repayment of the loan, and in not allowing him to amend his complaint to include a request to pierce the corporate veil. SP argued that the trial court should not have found a breach of fiduciary duty because of language in the partnership agreement for 1515 North Wells.

The First District started its analysis by quickly affirming the trial court’s rulings against Bracken. It was undisputed that Bracken was contractually obligated to pay the money back, the court said, and it was undisputed that he did not repay it. Thus, summary judgment on the breach of contract issue was entirely appropriate.

It next looked at Bracken’s claim for amending his case to include a count for piercing the corporate veil. Bracken argued that he had repeatedly made that request but had not been allowed, starting at least 16 months before trial. However, the court found no evidence in the record that Bracken had done so. It further concluded that the motion he did make, seven weeks before trial, was not timely. Bracken did not make his request until nearly three years after the case was filed, the court reasoned, and had no way of knowing that the late-September trial would be postponed further. In fact, allowing an amended complaint at that late date would have been prejudicial, the First District wrote.

Finally, the appeals court dismissed SP’s argument that the trial court erred in finding it breached its fiduciary duty. SP relied on language in the partnership agreement providing that partners may engage in whichever activities they choose without financial obligation to the partnership. However, the appeals court said, the Illinois Uniform Partnership Act specifies that a partnership agreement may never eliminate or reduce a partner’s fiduciary duties. Furthermore, there was ample evidence at trial that SP breached its fiduciary duty, including the “cost plus” contract with the contractor and the fact that it did not route condo sales profits back to the partnership. Thus, the First District upheld the trial court’s decisions on all counts.

Based in Chicago and near Naperville, Ill., DiTommaso-Lubin handles partnership and shareholder, and family business disputes including such disputes involving real-esate partnerships, and other business ventures for businesses, partnerships and corporations of all sizes, from closely held family businesses to larger enterprises. Our Chicago and Oak Brook commercial litigation attorneys represent businesses in state and federal courts, and alternative dispute resolution, throughout Illinois, Indiana and Wisconsin. DiTommaso-Lubin's goal is to minimize our clients’ financial risk and avoid disruptions to their business as much as possible while still protecting their legal rights. If your business, corporation or partnership is involved in an Illinois business lawsuit and you would like to learn more about how we can help, contact DiTommaso-Lubin today for a free consultation.

In a decision with wide-reaching implications for Chicago land owners and developers, the First District Court of Appeal found March 6 that at least part of the Chicago Landmarks Ordinance was unconstitutionally vague. Hanna v. City of Chicago, No. 1-07-3548 (Ill. 1st Dist. March 6, 2009) is an Illinois real estate lawsuit alleging that the ordinance was overly vague, improperly delegated the city’s legislative authority and violated the due process and equal protection clauses of the Illinois Constitution.

Plaintiff Albert Hanna owned property in Chicago’s Arlington Deming neighborhood, and plaintiff Carol Mrowka owned property in the East Village neighborhood. Both had been approved as Landmark Districts, which means that property owners in those areas must get approval from the Commission of Chicago Landmarks for any alteration, construction, demolition or other work on their property. Land owners may contest the designation at a hearing. The plaintiffs sued the City of Chicago, the Commission and several city officials to overturn the ordinance, which authorizes the designations.

Count I of the complaint alleges that the ordinance is so vague that citizens have no way to tell how they should behave to comply with it. Counts II and III allege that the ordinance violates provisions of the Illinois Constitution reserving legislative power to the city council and state legislature. Counts V through XX allege that the ordinance violates the constitution’s equal protection clause and substantive due process clause. In trial court, the city moved to dismiss the multiple counts of their complaint for failure to state a claim. The trial court granted the motion as to counts I through III and V through XX. The plaintiffs now appeal that decision.

The First District Court of Appeal started with the vagueness allegation. The plaintiffs alleged that numerous parts of the ordinance are so vague that ordinary people must guess at their meaning. The court agreed, saying words like “value,” “important,” “significant” and “unique” were so broad that an ordinary person could not predict which areas might be designated as landmarks or even which people might sit on the Commission. By itself, this is enough to state a cause of action, so the court reversed the dismissal of Count I.

The court next turned to Counts II and III, which alleged that the authority granted to the Commission is impermissible under the state constitution. Again, the First District agreed. The city argued that the Commission is an advisory body only because the City Council has a final vote on whether to adopt the Commission’s recommendations. However, the court said, if the city takes no action, those recommendations become law after one year. For that reason, the Commission is really a declaratory body with authority that is improper under the Illinois Constitution, the court found. And even if that were not true, the court wrote, its standards might still be impermissibly vague. Again, this is sufficient to state a cause of action, the court wrote.

On the remaining counts, V through XX, the First District declined to make a ruling until the trial court can make a finding on whether the ordinance is unconstitutionally vague. If it so finds, the appeals court wrote, the issues of whether the ordinance violates the equal protection and due process clauses of the state constitution are moot. Thus, it reversed the lower court’s decision and remanded it for a trial.

The Chicago and Oakbrook Terrace, Ill,, real-estate litigation law firm of DiTommaso-Lubin represents clients throughout the Chicago area including in Naperville, Aurora, Wheaton, Oak Brook and Highland Park in disputes over both residential and commercial real estate. Our Chicago real estate trial attorneys have handled lease disputes and breach of contract claims, zoning problems, construction disputes and many other real estate matters. In addition to Illinois state law matters, our Midwest real estate trial lawyers represent people in federal court and in state courts in Indiana and Wisconsin. If you’re involved in a real estate lawsuit and you’re looking for experienced representation, DiTommaso-Lubin can help. To set up a free consultation, please contact us online or call 1-877-990-4990 today.

As Naperville, Oak Brook, Wheaton, and Chicago business trial lawyers with substantial experience in shopping center claims, we were interested to see a recent decision by the First District Court of Appeal on the obligations of people who guarantee a lease. A change in the lease and a directed verdict at trial do not relieve a couple of their liability as guarantors of a commercial lease, the court has ruled. In Chicago Exhibitors Corporation v. Jeepers! Of Illinois and Swento, 1-06-3313 (Aug. 30, 2007), the court ruled that a guaranty agreement written to survive changes to the lease is enforceable even if the lease is assigned to a new tenant who changes it without the guarantor's approval.

Harvey and Cherry Swento owned a business that leased space from a predecessor landlord to Chicago Exhibitors Corporation (CEC). To sweeten that lease, the Swentos in 1991 personally guaranteed their lease payments and all of their other obligations as tenants, with a clause specifying that the guaranty would survive changes to or assignment of the lease. In 1997, they sold their business to Jeepers! of Illinois, Inc. and executed an agreement in which Jeepers! indemnified them from losses stemming from their personal guaranty. Jeepers! then failed to pay its rent, causing CEC to demand an amendment to the lease that reaffirmed the Swentos' personal guaranty. CEC declined to recognize the transfer of lease obligations from the Swentos' company to Jeepers! until rent was paid in full and Jeepers! executed its own guaranty.

Jeepers! never did take on the guaranty, but it failed to pay its rent again several times. In an effort to avoid eviction, it agreed to several changes to the lease in January of 2001. The Swentos did not sign this amendment, even though it called for the ratification of all guarantors. When CEC eventually sued Jeepers! for unpaid rent and repairs, it included the Swentos as guarantors. In the trial, the Swentos asserted that the January 2001 amendment was a material change that discharged them from their obligations as guarantors; CEC successfully moved in limine for a ruling that it was not. The parties then agreed to move straight to the damages phase of the trial, so the judge granted a directed verdict on liability. The Swentos were eventually found liable for unpaid rent and damages as well as attorney fees. They appealed the in limine motion, the directed verdict and the award of attorney fees.

In its decision, the appeals court found that the January amendment to the lease was not material enough to release the Swentos from their obligations. In Illinois, changes to a contract must make the guarantor's obligations materially different from what they originally signed, including a substantial increase in risk. None of the changes in the amendment changed the Swentos' financial obligations, the court said, so it was not a material enough change to release them from their guaranty. Nor was the Swentos' lack of control over Jeepers! enough to constitute an increase in risk, especially since their original guaranty was written to endure despite changes in the lease.

The Swentos also argued that a directed verdict denying them a chance to defend themselves was inappropriate because they never signed the January 2001 amendment, which they argued superseded the lease and thus waived CEC's rights against them. The court found those arguments unconvincing, but more importantly, pointed out that they are waived on appeal because the Swentos failed to raise them at trial. Finally, the appeals court rejected the Swentos' argument that they shouldn't be held responsible for an agreement they didn't sign, again saying that the January 2001 changes to the lease were not material enough to release them from their obligations. Thus, the trial court's decision was unanimously affirmed.

With offices in Chicago and Oak Brook, Ill., DiTommaso-Lubin handles commercial real estate litigation of all kinds, including a variety of contractual disputes and shopping center tenant matters. If you have a legal problem regarding a shopping center or another real estate matter, we would like to help. To set up a confidential consultation with our Chicago business and real-estate trial attorneys, please contact our Oak Brook business and real-estate trial attorneys today.

As Chicago class action attorneys, our firm has been able to help many Illinois tenants protect their rights under a special state law that not every renter knows about. The Illinois Security Deposit Interest Act requires many Illinois landlords to pay their renters the interest on security deposits. The law applies to landlords of buildings with 25 or more rental units, and to deposits held six months or more. Under those circumstances, the law requires landlords to pay interest on security deposits once a year, after the end of the yearly rental agreement, except when the renter owed unpaid rent. Landlords who willfully fail to do this can be sued for the amount of the withheld interest, as well as attorney fees and court costs.

That was the case in Wang v. Williams and Royal Rentals, 343 Ill.App.3d 495, 797 N.E.2d 179, 277 Ill.Dec. 832 (Sept. 10, 2003). Zhiyuan Wang of Carbondale sued his landlord, Royal Rentals, for failing to return his security deposit, failing to pay interest during the two years he rented from Royal, consumer fraud and breach of contract. The trial court dismissed his interest claim and his breach of contract claim, both of which were based on the Security Deposit Interest Act, because Wang's lease included a provision stating "TENANTS agree to waive right to interest on security deposit." Wang appealed to the Fifth District Court of Appeal.

On appeal, Royal Rentals argued that legal rights, including Wang's rights under the Security Deposit Interest Act, can be waived when the right in question is conferred only for the benefit of individuals rather than the public. The court found this unconvincing. It pointed out that the Security Deposit Interest Act protects the rights of renters, a class of people. In support, it cited several cases, including Gittleman v. Create, Inc., 189 Ill. App. 3d 199, 545 N.E.2d 237, 240 (1989), a similar case in which tenants sued their landlord for a security deposit refund and interest. That lease had a provision reading "It is understood that the security deposit is net of security deposit interest, if any." That court found for the tenants, saying the provision was intentionally vague about how interest should be paid and suggesting that the landlord used that vagueness to try to circumvent the Security Deposit Interest Act.

On the Wang case's breach of contract matter, the plaintiff pointed out that Illinois contracts incorporate relevant parts of Illinois law unless otherwise specified. Royal Rentals argued that Wang's lease didn't implicitly incorporate the Security Deposit Interest Act because it included explicit provisions to the contrary. However, the appeals court said, language in a lease may not supersede state law. Indeed, the Royal Rentals provision, which the court called "an apparent attempt to circumvent the Act," showed that interest on a security deposit is an essential element of a lease, it wrote. Thus, it reversed the trial court on both counts and remanded the case for trial.

This case is important because it establishes that renters cannot waive their rights under the Security Deposit Interest Act, and that renters are a protected class of people, rather than protected individuals. As Illinois tenants' rights lawyers, we believe those are important legal tools for renters seeking to protect their legal rights. At DiTommaso-Lubin, we handle tenants' rights cases as both individual cases and as class actions involving renters with complaints against the same landlord. If you think you may have a case under the Security Deposit Interest Act or another landlord-tenant law, you can contact our Chicago class action lawyers for a free consultation on your case and your rights.

As Chicago business trial attorneys with substantial experience in disputes involving shopping centers, our firm was interested to see a recent Fourth District Court of Appeal decision allowing a shopping center to go through with its lease despite a restrictive covenant in a land sale by its predecessor. In Regency Commercial Associates v. Lopax, 4-06-0332 (May 4, 2007), the appeals court upheld the trial court's ruling that the business at issue was not covered by the covenant, and that starting the lease while the case was still pending did not bar it from requesting a declaratory judgment.

Regency Commercial Associates, LLC and Lopax, Inc. are companies that own neighboring parcels of land in Savoy, Ill. The prior owner of Regency's land, Arbours Development Limited Partnership, sold Lopax its land, which Lopax then leased to a Kentucky Fried Chicken franchisee. The sales contract between Lopax and Arbours restricted Arbours from allowing another "fast-food restaurant ... or restaurant facility whose principal food product is chicken[.]" It also lists the types of businesses allowed, which include "casual dining." Regency later purchased Arbours' rights under the contract.

When Regency wanted to lease to a Buffalo Wild Wings restaurant, it negotiated with Lopax, arguing that the restaurant is "casual dining" and not fast food. Lopax disagreed, saying it believed the contract restricts any restaurant that primarily serves chicken. Regency filed for declaratory judgment, asking the court to find that Buffalo Wild Wings is not fast food and that the covenant restricts only fast-food restaurants that primarily sell chicken. Finding that there was a genuine issue of material fact to try, the court denied Lopax's motion to dismiss.

During this phase, Lopax discovered that Buffalo Wild Wings franchisee had already signed a lease with Regency, contingent on the lawsuit's success, before Regency's filing. Lopax then filed for summary judgment based on nonliability for past conduct -- the legal theory that a plaintiff may not seek declaratory judgment after already taking a contract-breaching action. Regency contended that because the lease didn't take effect until the case was over, there was no lease. Lopax also moved to compel discovery of the lease. The court denied both that and the summary judgment motion. Lopax appealed both denials, as well as the denial of its motion to dismiss.

In its analysis, the Fourth District noted that the language of the restrictive covenant was ambiguous as to whether all chicken restaurants are banned, or just fast food restaurants. Using documents that illuminated the parties' reasoning at the time the contract was written, it decided that the covenant restricted only fast-food restaurants primarily serving chicken. On the issue of nonliability for past conduct, the appeals court pointed out that the lease is not effective until this case is over and none of the actions adverse to Lopax -- opening the buffalo wings restaurant -- have taken place, so Regency is not seeking to avoid liability for past conduct. Finally, the court upheld the trial court's decision that the lease was irrelevant and therefore should not be discoverable. It is worth noting that Justice Cook dissented from this decision.

As Chicago, Wheaton, Oak Brook and Naperville business trial lawyers with substantial experience with shopping center tenants disputes and shopping center tenants' rights issues, we welcome clarifications to real estate contract law, especially on restrictive covenants. If you are involved in a similar dispute over a shopping center or other commercial real estate and you would like to speak with us about your options, please contact DiTommaso-Lubin for a confidential consultation.

As Chicago class action attorneys with a focus on consumer rights and consumer protection law, we know that renters in Chicago are fortunate to be protected by a law requiring landlords to pay interest on the renters' own security deposits once a year, as long as the tenant stays for more than six months. Section 080 of the Chicago Residential Landlord and Tenant Ordinance (PDF) also specifies that landlords must return security deposits, minus unpaid rent or reasonable costs of repairs, within 45 days of the tenant's departure. Unlike with the corresponding state law, this is true regardless of the number of units the landlord owns. If a landlord fails to comply, the tenant has the right to sue for twice the amount of the deposit, plus interest and attorneys' fees.

The ordinance also applies even if the landlord did not willfully (that is, intentionally) withhold the payment. That provision was established by the decision of the First District Court of Appeal in Lawrence v. Regent Realty Group, 307 Ill.App.3d 155, 717 N.E.2d 443, 240 Ill.Dec. 350 (1999). In that case, Aurelia Lawrence sued her landlord for withholding interest on a pet deposit. At trial, the court decided that a pet deposit is a security deposit for the purposes of the law (rather than a fee or charge). But because the landlord didn't willfully refuse to pay interest on that pet deposit, it declined to impose the penalty of twice the deposit plus interest and attorney fees. Lawrence moved for a new trial, which was denied, and appealed to the First District.

In its analysis, the appeals court noted that it did not need to decide whether the landlord actually did willfully fail to pay; what mattered was whether the ordinance required willfulness in the first place. In order to require willfulness, the court wrote, a law must be penal (intended to punish) rather than remedial (intended to make the victim whole). Both sides agreed that the case turned on the issue of penal versus remedial. The court first decided that its decision should not be controlled by Szpila v. Burke, 279 Ill. App. 3d 964, 665 N.E.2d 357 (1996), in which the appeals court decided that a tenant was entitled to damages once rather than for each separate violation of the ordinance. In that case, the First District said, it found willfulness because to do otherwise would give a result that was out of proportion to the violation and unjust. A similar case, Namur v. Habitat Co., 294 Ill. App. 3d 1007, 691 N.E.2d 782 (1998), was dismissed because it did not address the question at issue here.

In this case, the court looked to legislative intent to guide it as to whether the Landlord and Tenant Ordinance is remedial or penal. The plain language of Chicago Municipal Code sec. 5-12-010 states that the ordinance "shall be liberally construed ... to promote its purposes and policies," it noted. The court then cited an entire paragraph from Friedman v. Krupp Corp., 282 Ill. App. 3d 436, 668 N.E.2d 142 (1996), in which it had previously written that the ordinance is remedial, because the law itself says its purpose is to establish rights and obligations in the landlord-tenant relationship and to promote the public welfare. Viewing it as penal would undermine the goals of the ordinance, wrote the court. Thus, the appeals court remanded the case to trial court, with instructions to enter judgment for "double damages" plus interest for Lawrence, and to hold a hearing on attorneys' fees.

This decision established that tenants do not need to prove that a landlord willfully withheld the security deposit interest they're owed -- only that the landlord did so. This is an important tool for us as Chicago tenants' rights lawyers, because it allows us to pursue valid cases that might otherwise have been actiionable. From offices in Chicago and Oak Brook, DiTommaso-Lubin handles tenants' rights cases like this, both for individuals like Lawrence and as class actions that bring together neighbors harmed by the same landlord's illegal practices. If you believe your landlord has illegally withheld your security deposit or its interest and you'd like to pursue a claim, please contact our Oak Brook and Chicago class action lawyers for a free consultation outlining your legal options.