L.D.S., LLC v. Southern Cross Food, Ltd.
2017 IL App (1st) 163058
| Ill. App. Ct. | 2017Background
- L.D.S., LLC (landlord) leased commercial premises to Southern Cross Food, Ltd. (tenant) in a March 31, 2006 lease; Brendan Skehan signed the lease as Southern Cross’s president.
- Southern Cross took possession July 21, 2006; tendered a security deposit July 24, 2006; a personal guaranty signed by Skehan was dated July 26, 2006.
- Plaintiff alleges the guaranty was part of the same, contemporaneous transaction as the lease; Skehan contends the guaranty was a later, separate agreement requiring new consideration and also alleged forgery.
- At bench trial plaintiff’s only witness was its principal, Subhash Saluja, who testified he signed the lease July 20, delivered keys July 21, then first demanded a personal guaranty and obtained Skehan’s signature July 26.
- Trial court granted defendant’s motion for a directed finding, concluding the guaranty was a separate post-lease negotiation requiring new consideration and that plaintiff failed to establish a prima facie case.
- Appellate court affirmed, finding the trial court’s weighing of the evidence and conclusion were not against the manifest weight of the evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the personal guaranty was contemporaneous with the lease such that no new consideration was required | The guaranty was part of a single, contemporaneous transaction with the lease (despite a few days’ gap) | The guaranty was negotiated and executed after the lease was completed and therefore required new consideration | Guaranty was a separate transaction executed after the lease; new consideration was required and plaintiff failed to prove it |
| Whether plaintiff met its prima facie burden at close of its case | Testimony showed the guaranty, security deposit, and lease comprised one transaction | Testimony showed separate negotiations and execution dates; plaintiff lacked evidence of new consideration | Trial court correctly found plaintiff did not establish a prima facie case; directed finding proper |
| Whether plaintiff’s refusal to accept/cash the security deposit delayed execution of the lease | The lease was not fully executed until plaintiff accepted the deposit after guaranty was signed | The lease was executed when signed and possession/security deposit were tendered; landlord’s refusal to cash the check doesn’t negate execution | Trial court reasonably found lease was executed prior to guaranty and landlord’s conduct did not create new consideration |
| Whether appellate sanctions were warranted for a frivolous appeal | N/A (plaintiff appealed merits) | Skehan requested sanctions under Ill. S. Ct. R. 375(b) | Court declined to impose sanctions |
Key Cases Cited
- Tower Investors, LLC v. 111 East Chestnut Consultants, Inc., 371 Ill. App. 3d 1019 (Ill. App. 2007) (if guaranty is executed after the underlying obligation, new consideration is generally required)
- Vaughn v. Commissary Realty, Inc., 30 Ill. App. 2d 296 (Ill. App. 1961) (short delay between lease and guaranty does not preclude finding a single, contemporaneous transaction absent evidence of separate negotiations)
- People ex rel. Sherman v. Cryns, 203 Ill. 2d 264 (Ill. 2003) (directed-finding standard in bench trials: two-step analysis and weighing of evidence)
- Eychaner v. Gross, 202 Ill. 2d 228 (Ill. 2002) (definition of manifest weight of the evidence standard)