2017 IL App (1st) 163058
Ill. App. Ct.2018Background
- L.D.S., LLC (landlord) sued Southern Cross Food, Ltd. (tenant) and Brendan Skehan alleging lease breach and enforcement of a personal guaranty Skehan purportedly signed for the lease of 117 S. Clinton, Chicago.
- Lease was signed by landlord on July 20, 2006; Southern Cross took possession and keys on July 21, and tendered a security deposit on July 24; a guaranty bearing Skehan’s signature was dated July 26, 2006.
- Landlord’s principal (Saluja) testified at bench trial that he required a personal guaranty after learning he was leasing to Southern Cross rather than Quizno’s franchisor, that he told Skehan he would not proceed without a guaranty, and that Skehan signed the guaranty in Saluja’s presence on July 26.
- Skehan denied liability and pleaded forgery; Southern Cross defaulted and a default judgment was entered against it earlier in the case.
- After plaintiff rested, Skehan moved for a directed finding; the trial court weighed the evidence and found the guaranty resulted from separate negotiations after the lease had been executed and possession delivered, so new consideration was required and none existed. Judgment for Skehan followed; the appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the personal guaranty enforceable without new consideration because it was executed contemporaneously with the lease? | The guaranty was part of a single contemporaneous transaction with the lease (citing Vaughn), so lease consideration suffices. | The guaranty was executed after the lease was signed and possession/security deposit delivered, reflecting separate negotiations; new consideration was required and absent. | The court held the guaranty arose from separate negotiations after the lease was executed; new consideration was required but not shown, so plaintiff failed to make a prima facie case. |
Key Cases Cited
- Tower Investors, LLC v. 111 East Chestnut Consultants, Inc., 371 Ill. App. 3d 1019 (Ill. App. 2007) (guaranty executed after underlying obligation generally requires new consideration)
- Vaughn v. Commissary Realty, Inc., 30 Ill. App. 2d 296 (Ill. App. 1961) (guaranty held contemporaneous with lease where no evidence of separate negotiations)
- Sherman v. Cryns, 203 Ill. 2d 264 (Ill. 2003) (standard and two-part analysis for directed finding in bench trial)
- Kokinis v. Kotrich, 81 Ill. 2d 151 (Ill. 1980) (prima facie case requires some evidence on every essential element)
- Eychaner v. Gross, 202 Ill. 2d 228 (Ill. 2002) (manifest-weight-of-the-evidence standard on review)