Regency Commercial Associates v. Lopax

• Court: Appellate Court of Illinois
• Decided: May 4, 2007
• Docket: 4-06-0332 Rel
• Status: Published

Opinion

NO. 4-06-0332 Filed 5/4/07

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT

REGENCY COMMERCIAL ASSOCIATES, LLC, an ) Appeal from Indiana Limited Liability Company, ) Circuit Court of Plaintiff-Appellee, ) Champaign County v. ) No. 05CH93 LOPAX, INC., a Delaware Corporation, ) Defendant-Appellant. ) Honorable ) Heidi Ladd, ) Judge Presiding. _________________________________________________________________

JUSTICE KNECHT delivered the opinion of the court:

Due to its desire to lease land to Pictor Enterprises,

III, Inc. (Pictor), a company planning to open a Buffalo Wild

Wings restaurant, plaintiff, Regency Commercial Associates, Ltd.

(Regency), filed a complaint for declaratory judgment concerning

a restrictive covenant in a land sales contract in favor of

defendant, Lopax, Inc. (Lopax), on land previously sold to Lopax

by Regency's predecessor for use as a Kentucky Fried Chicken

(KFC) restaurant. Pursuant to Regency's motion for summary

judgment, the trial court determined the restriction covered

"fast[-]food" restaurants primarily serving chicken and also

found an evidentiary hearing would be necessary to determine if

Buffalo Wild Wings was a fast-food restaurant. Prior to the

evidentiary hearing, Lopax filed a motion for summary judgment

contending Regency entered into a lease with Pictor prior to

filing its complaint for declaratory judgment and was barred from obtaining declaratory relief by the doctrine of "non[]liability

for past conduct." The court ruled Regency was not barred by the

doctrine and denied Lopax's motion for summary judgment. After

an evidentiary hearing, the court found Buffalo Wild Wings was

not a fast-food restaurant and, hence, was not covered by the

restrictive covenant. Lopax appeals the court's decisions (1)

the restrictive covenant covered only fast-food restaurants

serving primarily chicken, (2) the declaratory-judgment action

was not barred by the doctrine of nonliability for past conduct,

and (3) Regency need not be compelled to produce the entire lease

agreement between itself and Pictor. We affirm.

I. BACKGROUND

On June 20, 2001, Lopax entered into a contract with

Arbours Development Limited Partnership (Arbours) to purchase a

parcel of land in Savoy in order to lease it to Bartlett Manage-

ment Services, Inc., for the operation of a KFC restaurant. The

contract included a restrictive covenant negotiated between the

parties prohibiting Arbours from permitting certain types of

competitive restaurant operations within its commercial develop-

ment area. The restriction was memorialized in paragraph 4.1(h)

of the contract and reads in pertinent part as follows:

"Seller will not after the date of this

agreement sell, lease[,] or permit to be

occupied any real estate which [s]eller owns,

manages[,] or otherwise controls within one

mile of the [l]and for the purpose of con-

- 2 - structing, or having conducted thereon, any

fast[-]food [(quick service restaurant)]

restaurant or restaurant facility whose prin-

cipal food product is chicken on the bone,

boneless chicken[,] or chicken sandwiches.

The prohibited businesses would include but

be not limited to Boston Market, Popeye's

Chicken, Church's Fried Chicken[,] and

Pirtles Chicken. Other than the aforemen-

tioned restaurants which shall absolutely be

prohibited, a restaurant shall be deemed to

'feature boneless chicken or chicken sand-

wiches' only if the primary business of such

restaurant is the sale of such items. This

provision shall survive the [c]losing and

shall not be merged into the [d]eed. Seller

may sell, lease[,] or permit the occupancy of

any such real estate by (1) dinner houses or

seafood restaurants, (2) Oriental, French,

Mexican, Italian[,] or other ethnic restau-

rants, (3) any so-called 'casual dining'

restaurant such as Chili's or Black-Eyed Pea,

or (4) any food speciality shops such as ice

cream, yogurt, pizza[,] or similar single[-]

item shops."

Regency later purchased Arbours' rights under the contract.

- 3 - Sometime in February 2005, Regency's attorney contacted

Lopax's attorney in an attempt to obtain permission to lease a

portion of its restricted land for the operation of a Buffalo

Wild Wings restaurant. On February 23, 2005, Lopax's attorney

sent a written objection based on the restrictions in paragraph

4.1(h) of the contract and Lopax's position that Buffalo Wild

Wings is a restaurant facility whose principal food product is

chicken. On March 7, 2005 Regency's attorney again contacted

Lopax's attorney in an effort to convince Lopax to withdraw its

written objection to the leasing of the property for a Buffalo

Wild Wings restaurant because it is a full service "casual

dining" restaurant expressly permitted under paragraph 4.1(h) and

not a fast-food restaurant. On March 8, 2005, Lopax's attorney

responded Lopax was not withdrawing its objection due to its

interpretation of the restrictive covenant as generally prohibit-

ing restaurant facilities whose primary food product is chicken

and not just fast-food restaurants. On March 16, 2005, Daniel

Pictor, the Buffalo Wild Wings franchisee, contacted Lopax and

offered $5,000 for permission to locate in the restricted area.

On March 29, 2005, Regency filed a verified complaint

for declaratory judgment asking the trial court to find (1) the

restriction found in paragraph 4.1(h) prohibits fast-food restau-

rant operations serving primarily chicken but does not prohibit

other types of restaurant operations whose primary food product

is chicken and (2) Buffalo Wild Wings is not a fast-food restau-

rant but a full-service restaurant featuring "casual dining."

- 4 - On May 2, 2005, Lopax filed a motion to dismiss under

section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619

(West 2002)) and attached exhibits in support of its contention

that Buffalo Wild Wings is a restaurant whose principal food

product is chicken and paragraph 4.1(h) was unambiguous in its

prohibition of both (1) fast-food restaurants whose principal

food product is chicken or (2) restaurant facilities whose

principal food product is chicken.

On June 29, 2005, Regency filed both a response to

Lopax's motion to dismiss and a motion for summary judgment with

attached exhibits in support of its contention that paragraph

4.1(h) unambiguously prohibits only restaurants and restaurant

facilities that are both fast food and whose primary food product

is chicken.

On July 27, 2005, the trial court heard arguments on

both parties' motions. After taking the matter under advisement,

on September 7, 2005, the court determined, first, the language

of paragraph 4.1(h) was ambiguous, and second, after reviewing

the exhibits pertaining to correspondence between the parties

during negotiations of the final contract and the circumstances

under which agreement on the final terms were reached, the

contract language prohibits fast-food restaurants whose principal

food product is chicken and fast-food restaurant facilities whose

principal food product is chicken. Further, the court determined

a genuine factual dispute remained as to whether Buffalo Wild

Wings fit the description of either a fast-food restaurant or

- 5 - fast-food restaurant facility whose principal product is chicken.

Thus, the court denied Lopax's motion to dismiss and granted part

of Regency's motion for summary judgment.

On September 29, 2005, Lopax filed a motion to recon-

sider, which was denied on October 27, 2005. On November 10,

2005, Daniel Pictor, the Buffalo Wild Wings franchisee, contacted

Mike Bartlett, a minority shareholder of Lopax and manager of the

KFC at issue, and offered to negotiate with Lopax to settle this

dispute just to speed things up as he was confident Regency would

prevail in court. However, he also stated he already signed a

lease with Regency. After Lopax learned an actual lease between

Regency and Pictor existed, it determined the lease existed prior

to Regency filing its complaint for declaratory judgment.

On January 20, 2006, Lopax filed a motion to compel

discovery of the entire lease between Regency and Pictor and a

motion for summary judgment based on the theory of nonliability

for past conduct. In response to the motion to compel, Regency

produced 8 paragraphs of the lease agreement and, later, the

table of contents of the lease indicating it contained 67 pages,

including exhibits and riders. The paragraphs produced by

Regency pertained to basic lease information such as date signed,

location of property, term, permitted uses, commencement date

(which was defined as the date on which this lawsuit is re-

solved), and a "[c]ontingency [c]lause" relating commencement of

the lease term to successful resolution of this lawsuit.

On March 3, 2006, a hearing was held on Lopax's motion

- 6 - for summary judgment and motion to compel discovery. Lopax's

theory was a lease existed between Regency and Pictor for the

operation of a Buffalo Wild Wings restaurant prior to Regency

filing its complaint for declaratory judgment and, because it had

already taken action that either was or might be in violation of

the provision of the contract between Lopax and Regency that was

the subject of the declaratory-judgment action, it was barred

from seeking such relief because it was seeking a finding of non-

liability for action already taken and a declaration of its

rights if it took some future action. The trial court denied

Lopax's motion for summary judgment because Regency's lease

agreement with Pictor was contingent on the outcome of this

declaratory-judgment action. The court then stated the only

issue not resolved was whether Buffalo Wild Wings was a fast-food

restaurant. Regency produced the entire lease agreement for the

court's in camera inspection.

On March 13, 2006, the trial court determined, after an

in camera inspection, the remaining portions of the lease agree-

ment contained nothing that would be relevant to a determination

of the remaining issue of whether Buffalo Wild Wings was a fast-

food restaurant and denied Lopax's motion to compel its discov-

ery.

On March 23 and 24, 2006, a bench trial was held on the

remaining issue of fact, and the trial court found Buffalo Wild

Wings was not a fast-food restaurant. Judgment was entered in

favor of Regency. This appeal followed.

- 7 - II. ANALYSIS

A. Interpretation of Restrictive Covenant

At issue is the prohibition against "any fast[-]food

(QSR) restaurant or restaurant facility whose principal food

product is chicken on the bone, boneless chicken[,] or chicken

sandwiches." (The term "QSR" in the contract is explained in the

record as the restaurant industry's new description of fast-food

restaurants and means "quick serve restaurant." It has no

bearing on the interpretation of the contract.) Regency asserts

the quoted language was intended to prohibit (1) fast-food

restaurants whose principal product is chicken and (2) fast-food

restaurant facilities whose principal product is chicken. Lopax

asserts this language was intended to prohibit (1) fast-food

restaurants serving primarily chicken and (2) restaurant facili-

ties serving primarily chicken.

When construing the language of a contract, a court's

principal objective is to give effect to the intent the parties

possessed at the time they entered into the agreement. First

Bank & Trust Co. v. Village of Orland Hills, 338 Ill. App. 3d 35,

40, 787 N.E.2d 300, 304 (2003). The agreement is to be inter-

preted as a whole, giving meaning and effect to every provision

when possible, and a court will not interpret the agreement in a

way that would nullify provisions or render them meaningless.

Coles-Moultrie Electric Cooperative v. City of Sullivan, 304 Ill.

App. 3d 153, 159, 709 N.E.2d 249, 253 (1999). When parties agree

to and insert language into a contract, the presumption is it was

- 8 - done purposefully and the language employed is to be given

effect. Coles-Moultrie Electric, 304 Ill. App. 3d at 159, 709

N.E.2d at 253.

If the terms of a contract are unambiguous, the par-

ties' intent is ascertained solely from the words of the contract

itself. Bradley Real Estate Trust v. Dolan Associates Ltd., 266

Ill. App. 3d 709, 712, 640 N.E.2d 9, 11 (1994). The question

whether the language of a contract is ambiguous and requires

additional evidence for interpretation is a question of law.

River's Edge Homeowners' Ass'n v. City of Naperville, 353 Ill.

App. 3d 874, 878, 819 N.E.2d 806, 809-10 (2004).

Where an ambiguity exists, parol or extrinsic evidence

may be considered to interpret the contract. Abingdon Bank &

Trust Co. V. Bulkeley, 390 Ill. 582, 592, 62 N.E.2d 447, 451

(1945). As part of the parol evidence, a court may consider

preliminary negotiations between the parties in order to deter-

mine the meaning of contract provisions and the intent of the

parties. Rybicki v. Anesthesia & Analgesia Associates, Ltd., 246

Ill. App. 3d 290, 299, 615 N.E.2d 1236, 1242-43 (1993).

A court's determination of the construction of a

contract is a question of law. People ex rel. Department of

Public Health v. Wiley, 218 Ill. 2d 207, 223, 843 N.E.2d 259, 268

(2006). Construction of contractual language is subject to

de novo review. American States Insurance Co. v. Koloms, 177

Ill. 2d 473, 479-80, 687 N.E.2d 72, 75 (1997).

The trial court considered the language of the contract

- 9 - to be ambiguous. Consequently, the court then looked at the

written exchanges between the parties while negotiating the

contract and the memorandum of contract to purchase recorded

April 17, 2002, and the amended memorandum recorded August 8,

2002, and signed by both parties, as well as the language of the

contract, in determining that the contract language prohibited

fast-food restaurants whose principal product is chicken and

fast-food restaurant facilities whose principal product is

chicken.

Both parties first contend the provision at issue is

not ambiguous. Lopax contends the use of "or" to connect phrases

"fast[-]food (QSR) restaurant" and "restaurant facility" repre-

sents two alternatives intended to be different or unlike each

other: either fast-food (QSR) restaurants serving chicken or

restaurant facilities serving chicken. Regency presented an

affidavit in opposition to Lopax's section 2-619 motion to

dismiss the complaint for declaratory judgment in which the

affiant, James R. McKinney, the president of Regency, suggests

the term "restaurant" means a stand-alone facility while "restau-

rant facility" means an operation found in a multioutlet food

court, embedded in a store or otherwise not a stand-alone facil-

ity. The trial court found this distinction persuasive when

finding Lopax's interpretation of the contract language would

make the word "facility" surplusage while Regency's definition

would not. Lopax contends the "or" must have been inserted to

differentiate between fast-food and not-fast-food restaurant

- 10 - operations and differentiate between restaurants and restaurant

facilities because those terms are used interchangeably in the

contract in reference to its own KFC operation.

Lopax notes every provision in a contract must be given

effect (see Martindell v. Lake Shore National Bank, 15 Ill. 2d

272, 283, 154 N.E.2d 683, 689 (1958)) and contends its interpre-

tation focusing on whether a restaurant serves primarily chicken

and not the type of service given by the restaurant (fast food or

full service) was the intent of the parties' prohibition. Lopax

specifically notes the language in paragraph 4.1(h): "Other than

the aforementioned restaurants which shall absolutely be prohib-

ited, a restaurant shall be deemed to 'feature boneless chicken

or chicken sandwiches' only if the primary business of such

restaurant is the sale of such items." Lopax contends this

language creates a strict prohibition on restaurants serving

primarily chicken, regardless of level of service. Lopax con-

tends this phrase is placed before the second half of the re-

strictive clause and indicates the parties will determine if a

restaurant which would otherwise have been permitted will be

restricted, because in a category listed in the second half of

the clause, based on its service of primarily chicken.

Regency contends the distinction between "restaurant"

and "restaurant facility" is important under contract-interpreta-

tion principles that require every word to be given meaning and

not be considered surplusage. Regency contends the inclusion of

specific prohibited and permissible restaurants is inconsistent

- 11 - with Lopax's "or" interpretation of the sentence. All examples

given of prohibited restaurants are fast-food restaurants that

serve primarily chicken. Thus, the intent of the contract is to

prohibit operations that are both "fast food" and "serve primar-

ily chicken." Permitted restaurants listed are casual dining,

dinner houses, ethnic restaurants, fine dining, et cetera. These

examples listed are not fast-food but are full-service restau-

rants indicating an intent for the distinguishing characteristic

to be the level of service and the serving of chicken. Thus, the

intent was to prohibit only fast-food restaurants and fast-food

restaurant facilities serving primarily chicken.

Lopax contends service level is not the primary focus

of the restrictive clause because it intended to limit chicken

restaurants regardless of service level. Further, Lopax argues,

if the chicken restriction is interpreted as Regency suggests,

there is no need for the "test" language and the court must

ignore two of the four sentences in 4.1(h) that limit use. By

interpreting the contract as "fast food" modifying both "restau-

rant" and "restaurant facility," the restriction only applies to

fast-food chicken operations. Therefore, the parties would not

need to explain the ban on fast-food chicken operations as it is

obvious. However, if the language creates a test for determining

if a restaurant facility primarily serves chicken, then all

language in the clause becomes relevant.

We note Lopax argues it intended to prohibit all

restaurants serving primarily chicken as that would certainly be

- 12 - more beneficial to it but it is not clear from the language of

the clause at issue the restriction was that comprehensive. We

find, as the trial court did, the language at issue is ambiguous,

and we also look to parol and extrinsic evidence.

Evidence from negotiations showed Lopax's concern

regarding competition from restaurant operations serving chicken

as it attempted to insert specific language referring to competi-

tion with KFC. It also suggested the restrictive language

contain a quantitative measure of 5% of gross sales revenue from

chicken putting a restaurant into the restricted category.

Regency attempted to limit the restrictive language to "fast[-]

food" restaurants only, but none of these provisions appear in

the final contract. Lopax repeatedly tried to control the type

of food served and not the level of service as it rejected

Regency's attempt to insert the words "fast[-]food" in the clause

"Other than the aforementioned restaurants which shall absolutely

be prohibited, a fast[-]food restaurant shall be deemed to

'feature boneless chicken or chicken sandwiches' only if the

primary business of such restaurant is the sale of such items."

(Emphasis in original.) Indeed, Lopax's concern consistently was

not over the level of service but the serving of chicken.

Further negotiation evidence indicates Regency's

rejection of Lopax's attempts to prohibit all fast-food restau-

rants, not just those serving primarily chicken. Regency re-

jected Lopax's inclusions of Burger King, McDonald's, Steak 'N

Shake, Backyard Burger, Hardee's, Wendy's, and Arby's in examples

- 13 - of specifically prohibited restaurants. Regency also crossed out

language prohibiting "any fast[-]food restaurant or restaurant

facility featuring chicken on the bone, boneless chicken[,] or

chicken sandwiches." Instead, Regency added the language "whose

principal food product is chicken on the bone, boneless

chicken[,] or chicken sandwiches" following the description of

prohibited operations as any "fast[-]food restaurant or restau-

rant facility."

Regency's crossing-out of the language "featuring

chicken" is instructive as it leaves meaningless the language

defining "featuring chicken" relied upon by Lopax in its argument

the parties meant this language as a "test." The definition

language was left in the contract while the term it is attempting

to define was removed. Thus, it is not a "test" at all and has

no bearing on the correct interpretation of the prohibited

restaurant operations.

Lopax argues actions of Regency after the contract

demonstrate Regency knew the chicken restriction applied to

Buffalo Wild Wings. The record indicates on February 23, 2005,

Regency's attorney contacted Lopax's attorney in an attempt to

obtain permission to lease a portion of the restricted area to

Pictor for the operation of a Buffalo Wild Wings restaurant.

Regency's attorney again contacted Lopax's attorney in an effort

to convince Lopax to remove its written objection to such a

lease. On March 16, 2005, Daniel Pictor, the Buffalo Wild Wings

franchisee, contacted Lopax and offered $5,000 for permission to

- 14 - locate in the restricted area. These actions are not indicative

of a contract interpretation by Regency but of attempts to avoid

litigation because the contract language was arguably ambiguous.

Further evidence of the parties' intent is found in the

memorandum and amended memorandum recorded by the Champaign

County recorder of deeds. The memoranda were recorded in Cham-

paign County after the sale of the KFC premises in order to give

notice of the chicken competition restriction. The memorandum

was originally recorded on April 7, 2002, and amended on August

6, 2002. After notice by recordation, interested parties have a

duty to investigate any noted restrictions or be deemed to have

actual notice of the facts. Smith v. Grubb, 402 Ill. 451, 464,

84 N.E.2d 421, 428 (1949). Recording of documents serves to

notify any interested parties in the future of the status of

owners of property and/or restrictions on specific parcels.

Housing Authority of Gallatin County v. Church of God, 401 Ill.

100, 108, 81 N.E.2d 500, 505 (1948).

The memorandum of contract to purchase recorded April

17, 2002, and the amended memorandum recorded August 6, 2002,

support the trial court's construction of the disputed language.

Both were signed by representatives for Regency and Lopax,

including Lopax's attorney, who negotiated the contract. The

memorandum recorded April 17 states:

"[N]o fast[-]food restaurant shall be allowed

on the [a]dditional [r]eal [e]state currently

owned by [s]eller whose principal food prod-

- 15 - uct is chicken on the bone, boneless chicken

or chicken sandwiches." (Emphases added.)

The language in the amended memorandum recorded August

6, 2002, states:

on the [a]dditional [r]eal [e]state or any

other real estate which [s]eller or Arbours

Development Limited Partnership owns, man-

ages[,] or otherwise controls within one (1)

mile of the [r]eal [e]state, whose principal

food product is chicken on the bone, boneless

chicken[,] or chicken sandwiches." (Emphases

added.)

The wording of the amended memorandum includes the same examples

of permissible restaurants as are included in the contract

itself: "(1) dinner houses or seafood restaurants, (2) Oriental,

French, Mexican, Italian[,] or other ethnic restaurants, (3) any

so-called 'casual dining' restaurant such as Chili's or Black-

Eyed Pea, or (4) any food specialty shops such as ice cream,

yogurt, pizza[,] or similar single[-]item shops." The wording of

both memoranda can only be read to apply to "fast[-]food" restau-

rants whose "principal food product is chicken." This is strong

evidence the intent of the contract was to prohibit only fast-

food restaurants whose primary food product is chicken and to

allow casual dining restaurants no matter their primary food

product. Both parties agreed to the language of the postcontract

- 16 - memoranda.

Obviously, Lopax, as the operator of the KFC restau-

rant, wanted to obtain a restriction against competition that was

as broad as possible. On the other hand, Regency's predecessor,

Arbours, as the owner of commercial property surrounding KFC's

operation, wanted to limit the restriction as much as possible.

Given the evidence of the contract negotiations, it is clear

neither party got everything it wanted in the final contract.

However, as the memorandum and amended memorandum of contract

indicate, the final contract included a prohibition against fast-

food restaurant operations serving primarily chicken, the logical

direct competitors to a KFC restaurant, which both parties agree

is a fast-food restaurant operation. The trial court was correct

in its interpretation of the contract language, its denial of

Lopax's section 2-619 motion to dismiss, and the partial grant of

Regency's motion for summary judgment.

B. Applicability of Doctrine of NonLiability for Past Conduct

The principle of "nonliability for past conduct" means

a party cannot seek declaratory relief to excuse itself from

liability incurred after acting in a way that would affect

contractual rights. Howlett v. Scott, 69 Ill. 2d 135, 143, 370

N.E.2d 1036, 1039 (1977); Delano Law Offices, P.C. v. Choi, 154

Ill. App. 3d 172, 173, 506 N.E.2d 723, 724 (1987).

Lopax asserts the contract between it and Regency

prohibits Regency from leasing to restaurants whose primary food

- 17 - product is chicken. However, by entering into a lease with

Pictor for the operation of a Buffalo Wild Wings restaurant prior

to the filing of this complaint, Regency has taken action prohib-

ited by contract. The "nonliability for past conduct" principle

prohibits Regency from seeking declaratory relief under the

declaratory-judgment statute because the court cannot declare

Regency not liable for action already taken.

During pretrial discovery, Lopax filed a motion for

summary judgment raising the defense of the "doctrine of

nonliability for past conduct." The doctrine was not raised as

an affirmative defense in any Lopax pleading. Regency contends

the denial of Lopax's motion for summary judgment is not

reviewable on appeal and Lopax has waived the issue of

nonliability for past conduct as it did not plead this defense

and did not attempt to introduce evidence on the issue at trial.

Denial of a motion for summary judgment is not immedi-

ately appealable because it is an interlocutory order. In re

Estate of Funk, 221 Ill. 2d 30, 85, 849 N.E.2d 366, 397 (2006).

Generally, denial of summary judgment is not reviewable after

trial on the merits because the result of any error is merged

into the judgment entered at trial. Belleville Toyota, Inc. v.

Toyota Motor Sales, U.S.A., Inc., 199 Ill. 2d 325, 355, 770

N.E.2d 177, 196 (2002). However, where a summary-judgment motion

presented a legal issue rather than a factual one, review of the

denial of summary judgment is appropriate. Battles v. La Salle

National Bank, 240 Ill. App. 3d 550, 558, 608 N.E.2d 438, 444

- 18 - (1992) (First District) (summary-judgment denial not merged

because trial did not deal with legal issue raised in motion for

summary judgment).

In Funk, after denial of the motion for summary judg-

ment, the trial court proceeded to resolve the case and the issue

first raised by the motion for summary judgment, based on all

evidence that was presented at trial. Thus, any error in denial

of the motion for summary judgment merged into the final judg-

ment. Funk, 221 Ill. 2d at 85, 849 N.E.2d at 397. However, in

this case, the trial court did not resolve the same issue after

denial of summary judgment but held a completely separate hearing

with evidence on a completely separate issue before resolving the

case and entering final judgment.

Further, at hearing, Lopax attempted to question Daniel

Pictor regarding the existence of the lease between Regency and

Pictor. This line of questioning was met with four relevance

objections from Regency, all sustained. When Lopax started to

assert it wanted to make an offer of proof, the trial court told

Lopax it was unnecessary due to the established pretrial record.

In addition, when its motion for summary judgment was denied,

Lopax requested permission to seek an interlocutory appeal but

counsel for Regency objected, saying, "This issue

[(nonliability)] can be appealed with the entire case, if appro-

priate, in less than thirty days." Thus, Regency's actions both

before and during trial contradict its position here. Lopax was

prevented from offering any evidence at trial by Regency, and

- 19 - Regency objected to an interlocutory appeal. Regency cannot now

take a different position and assert Lopax has forfeited this

issue. It is disingenuous for Regency to argue no evidence was

presented at trial in light of its conduct at trial. The princi-

ples of forfeiture do not permit a party to complain of error

that produces forfeiture, where to do so is inconsistent with the

party's position in an earlier court proceeding. See Belleville

Toyota, 199 Ill. 2d at 333, 770 N.E.2d at 184.

Thus, we consider Lopax's argument Regency's complaint

for declaratory judgment is barred by the doctrine of

nonliability for past conduct. The standard of review for a

decision on a summary-judgment motion is de novo. Truserv Corp.

v. Bess Hardware & Sports, Inc., 346 Ill. App. 3d 194, 198, 804

N.E.2d 611, 614 (2004).

Lopax contends it is hampered in its arguments on this

issue because Regency has never produced the entire agreement

between it and Pictor, only excerpts. However, these facts are

clear: Regency entered into agreement with Pictor on March 24,

2005, and filed suit on March 29, 2005. Regency denies the

existence of a lease due to contingencies within the agreement.

For a lease to be valid in Illinois "there must be

agreement as to the extent and bounds of the property, the rental

price and time and manner of payment, and the term of the lease."

Ceres Illinois, Inc. v. Illinois Scrap Processing, Inc., 114 Ill.

2d 133, 145, 500 N.E.2d 1, 6 (1986). In this case, portions of

the agreement produced by Regency satisfy some of these require-

- 20 - ments. Paragraph 1.B specifies "extent and bounds of the prop-

erty." Paragraph 1.G specifies a term of 10 years with two

options to renew. Lopax further argues it must be presumed some

of the agreement's clauses must provide for "rental price and

manner of payment."

Regency points to a contingency in the agreement found

in section 33.34 of the lease rider. This contingency states:

"Parties acknowledge that at the time this

[l]ease was executed [l]andlord was a party

to a lawsuit with Lopax, Inc., regarding the

permissibility of [t]enant's [p]ermitted use.

This [l]ease shall be contingent upon said

lawsuit having been fully resolved. Upon

successful resolution of the lawsuit

[l]andlord shall send a [c]ommencement [d]ate

[a]greement which shall be executed by both

[l]andlord and [t]enant and thereafter par-

ties shall diligently pursue to complete its

obligations of the [l]ease."

Lopax contends this contingency is irrelevant to the

existence of a lease. Express conditions precedent in contracts

that affect a party's performance are subject to rules of strict

compliance. M X L Industries, Inc. v. Mulder, 252 Ill. App. 3d

18, 26, 623 N.E.2d 369, 375 (1993) (Second District). A condi-

tion precedent is defined as "one which must be performed either

before a contract becomes effective or which is to be performed

- 21 - by one party to an existing contract before the other party is

obligated to perform." M X L Industries, 252 Ill. App. 3d at 25,

623 N.E.2d at 374. Lopax argues as a condition precedent the

language of the "contingency" must be strictly construed. Since

the lease was signed on March 24, 2005, prior to this lawsuit on

March 29, the express condition precedent is invalid because no

lawsuit existed at the time the lease was signed.

Alternatively, Lopax asserts a performance contingency

does not prevent creation of a valid contract. See Catholic

Charities of the Archdiocese of Chicago v. Thorpe, 318 Ill. App.

3d 304, 307, 741 N.E.2d 651, 653 (2000). "Whether an act is

necessary to formation of the contract or the performance of an

obligation under the contract depends on the facts of the case."

McAnelly v. Graves, 126 Ill. App. 3d 528, 532, 467 N.E.2d 377,

379 (1984). If "a condition goes solely to the obligation of the

parties to perform, existence of such a condition does not

prevent the formation of a valid contract." McAnelly, 126 Ill.

App. 3d at 532, 467 N.E.2d at 379. The factual analysis hinges

on the mutual assent of the parties; if they agree to formation

of a binding contract, agreed-on conditions only affect the duty

to perform and the contract is valid. Catholic Charities, 318

Ill. App. 3d at 307-08, 741 N.E.2d at 653, quoting Edmund J.

Flynn Co. v. Schlosser, 265 A.2d 599, 601 (D.C. 1970).

Lopax contends Regency and Pictor mutually assented to

lease the land and memorialized the same, including all the terms

necessary to form a valid lease. The lease's contingency lan-

- 22 - guage makes Regency's duty to perform subject to the outcome of

this case. The condition concerns Regency's obligation to permit

Pictor to occupy the premises and does not concern any of the

factors required to determine the existence of a lease. Lopax

argues even if the contingency occurs and Regency's performance

is excused, a lease still exists under Illinois law before any

performance can be excused.

Lopax contends this case is analogous to McAnelly. The

McAnelly case dealt with a contract contingency of obtaining

necessary permits within 24 months which, if not obtained, would

make the lease of no effect. The court stated there was a valid

lease because neither party had the privilege of revocation prior

to the 24-month period ending and no further expression of assent

by the parties was necessary to proceed with the lease. See

McAnelly, 126 Ill. App. 3d at 533, 467 N.E.2d at 379. Further,

by Regency's reliance on the contingency, it is confirming the

validity of the lease. See McAnelly, 126 Ill. App. 3d at 534,

467 N.E.2d at 380 (court found the defendants affirmed the

validity of the lease by invoking the provision for termination

of the lease). Lopax argues Regency cannot simply abandon the

lease without Pictor's permission and, therefore, entered into a

binding contract that irrevocably changed its position and cannot

now seek to have this court declare it not liable for its past

conduct.

Lopax's argument is essentially a lease existed prior

to the filing of this cause of action, and thus, this action is

- 23 - barred by the existence of the lease. However, it is clear the

parties agree this suit is the one referred to in the lease

agreement and the fact it was filed a few days after the apparent

execution of the lease agreement is not dispositive of the issue

of whether Regency can pursue a declaratory-judgment action.

The purpose of the declaratory-judgment statute is for

a court to offer guidance to parties in relation to future

conduct in order to avoid or lessen potential liability. Adkins

Energy, LLC v. Delta-T Corp., 347 Ill. App. 3d 373, 378, 806

N.E.2d 1273, 1277-78 (2004). A declaratory judgment is designed

to settle and fix rights before an irrevocable change in position

of the parties, which will jeopardize their respective claims of

right. Beahringer v. Page, 204 Ill. 2d 363, 373, 789 N.E.2d

1216, 1223 (2003); Roland Machinery Co. v. Reed, 339 Ill. App. 3d

1093, 1097, 791 N.E.2d 716, 719 (2003). The statute is meant to

allow parties to learn the consequences of their actions before

they act. Eyman v. McDonough District Hospital, 245 Ill. App. 3d

394, 396, 613 N.E.2d 819, 821 (1993).

The agreement in question is an executory agreement

including a contingency clause that effectively cancels the

parties' obligations under the agreement if Regency does not

prevail in this action. The agreement does not bar a declaratory

action because, by its own terms, future conduct remains to be

guided by a declaration of rights. The agreement itself is not

canceled by a finding adverse to Regency, but Regency is not

obligated to perform although it could choose to do so knowing it

- 24 - would be liable to Lopax and could then try to purchase Lopax's

interests under their contract if that were to its benefit.

The cases cited by Lopax in support of the doctrine of

nonliability for past conduct do not actually focus on that point

but on the question of whether a declaratory-judgment action

could serve some practical purpose in guiding the parties' future

conduct. In Adkins, the court stated the doctrine of

nonliability for past conduct bars an action for declaratory

judgment only when the past conduct makes that party liable or

amenable to suit. Adkins, 347 Ill. App. 3d at 378, 806 N.E.2d at

1277. Here, there is no commencement date on the lease agreement

until this suit is resolved, so Pictor cannot access the proposed

premises and operate a Buffalo Wild Wings restaurant until then.

Lopax has not yet suffered any damages.

In Roland, Reed, one of the parties to a contract,

attempted to revoke its acceptance of a bulldozer it had bought

from Roland. Roland denied Reed was entitled to rescind its

acceptance. Roland, 339 Ill. App. 3d at 1095-96, 791 N.E.2d at

717-18. The object of the declaratory judgment was whether Reed

had a right to rescind its acceptance. Reed alleged Roland had

already taken action by refusing to accept its rescission of

acceptance and could not bring a declaratory-judgment action.

The court found the action was to determine the consequences of

future action: in the event Reed returned the dozer, would

Roland be obligated to accept it and return the purchase price?

Roland, 339 Ill. App. 3d at 1102, 791 N.E.2d at 723.

- 25 - According to these cases, the only circumstance that

would cause a court to dismiss a declaratory-judgment action

would be where no future conduct is left to be guided by the

court and the declaration would simply be a declaration of

liability on past conduct. Here, the court was guiding Regency

on whether to proceed with the agreement to commence the lease.

Future actions must take place by both Regency and Pictor before

Regency could become amenable to suit by Lopax. The fact these

future actions have not yet occurred is fatal to Lopax's asser-

tion that a declaratory judgment in this case is barred by the

doctrine of nonliability for past conduct.

Although there was an agreement to lease, the language

of the agreement precluded the parties from carrying out the

lease before this case is resolved. According to the agreement,

the lease term begins on the "[c]ommencement [d]ate," which is

defined as the "date upon which the lawsuit referenced in section

[33.34] has been resolved and the [l]ease will commence. Parties

agree to sign a letter to set this date." By its own terms, the

lease does not commence until "successful resolution of the

lawsuit". Pictor cannot take possession until the commencement

date, which is after this lawsuit is successfully resolved, i.e.,

in favor of Regency.

The lease term may not begin until the parties' rights

are declared in this action. Depending on its outcome, the lease

term may never commence. By the terms of the lease agreement,

Pictor cannot begin operating any business that may compete with

- 26 - Lopax's business until this suit is resolved.

The pivotal question is whether there is any future

conduct to be guided by the court's declaration of rights.

Roland Machinery, 339 Ill. App. 3d at 1102, 791 N.E.2d at 723.

In this case, there is future conduct to be guided. Thus, the

trial court was correct in denying Lopax's motion for summary

judgment.

C. Production of the Entire Lease Agreement

Generally, rulings with regard to discovery are subject

to the abuse-of-discretion standard of review. Reda v. Advocate

Health Care, 199 Ill. 2d 47, 54, 765 N.E.2d 1002, 1007 (2002).

Lopax contends if facts are uncontroverted and the issue is an

application of law to facts, a reviewing court may determine the

correctness of a discovery ruling independently of the trial

court's judgment. Norskog v. Pfiel, 197 Ill. 2d 60, 70-71, 755

N.E.2d 1, 9 (2001).

In Norskog, the appeals court was deciding whether

disclosure of mental-health information is prohibited by statu-

tory discovery privilege and whether any exception to privilege

applies. Thus, it was strictly a matter of law and reviewed de

novo. Norskog, 197 Ill. 2d at 71, 755 N.E.2d at 9. Lopax notes

in this case, the trial court ruled on its motion to compel after

deciding the issue of the existence of the lease. Lopax contends

the existence of the lease was a legal issue similar to the

statutory-privilege issue in Norskog. If the lease existed,

clearly it was relevant to Lopax's position on the applicability

- 27 - of the declaratory-judgment statute. While production of the

lease itself was not a legal issue, its existence was, just like

the privilege in Norskog.

However, the existence of the privilege was not the

issue in Norskog but whether the privilege applied in the partic-

ular circumstances. This case does not deal with a statutory

discovery privilege. The lease agreement does not fall under a

statutory or other privilege. The issue was simply its relevancy

to one issue: whether Buffalo Wild Wings was a fast-food restau-

rant.

Relevant evidence includes not only what is admissible

at trial but what leads to admissible evidence. Manns v. Briell,

349 Ill. App. 3d 358, 361, 811 N.E.2d 349, 352 (2004). Lopax

contends a primary focus of its defense is the existence of the

lease prior to the filing of the declaratory-judgment action.

Therefore, it contends it is inconceivable to conclude the lease

is irrelevant to issues raised in its motion for summary judg-

ment, which was based solely on the existence of the lease prior

to filing suit. Because it only had parts of the lease, Lopax

argues it was not able to set forth a full and complete defense

and was prejudiced by being forced to interpret limited sections

of the lease produced based on Regency's opinion as to relevance.

Lopax contends it should not be compelled to rely on Regency's

assertions that only the clauses released are relevant or not

subject to an assertion of proprietary business information.

Certain portions of the Pictor agreement are or could

- 28 - be relevant to issues raised by Lopax in this matter, i.e.,

whether Buffalo Wild Wings is a fast-food restaurant and whether

future conduct remains to be guided by the court's declaration of

rights. Regency contended it produced those portions that (1)

identified the parties, (2) touched on the nature of the Buffalo

Wild Wings operation, or (3) made the entire relationship between

Regency and Pictor contingent on the outcome of this action.

The threshold relevance requirement in discovery is

whether items requested are actually relevant to issues in the

case. See Manns, 349 Ill. App. 3d at 361, 811 N.E.2d at 352

(court does not have discretion to order discovery of information

not meeting threshold requirement of relevance to matter actually

at issue in the case). The trial court conducted an in camera

review of the lease agreement and, thus, Lopax was not forced to

rely on Regency's assertions of relevancy or proprietary informa-

tion. In its ruling, the court noted it found nothing relevant

to the issues in dispute, stating "nothing in these agreements

refer to or can be interpreted to relate to a fast[-]food busi-

ness."

While Lopax argued to the trial court its objection to

the in camera review of the lease because it put the court in the

position of an advocate for Lopax, which position only its own

counsel could fill, it does not argue this point on appeal.

The issue of nonliability for past conduct, based on

the existence of the lease agreement, was determined, as we have

seen, based on the contingency clause, which clause was disclosed

- 29 - to Lopax. The relevancy of the remainder of the lease agreement

as to the remaining issue of whether Buffalo Wild Wings was a

fast-food restaurant was assessed by the trial court in its

in camera review. Thus, Lopax was not prejudiced by any inter-

pretation of relevancy placed on the agreement by Regency. We

have reviewed the lease agreement at issue and find no abuse of

discretion on the part of the trial court in denying Lopax's

motion to compel disclosure.

III. CONCLUSION

For the foregoing reasons, we affirm the trial court's

Affirmed.

TURNER, J., concurs.

COOK, J., dissents.

- 30 - JUSTICE COOK, dissenting:

I respectfully dissent. I would reverse, and hold that

Buffalo Wild Wings is a restaurant facility whose primary food

product is chicken and accordingly barred by the contract.

Parol evidence should not be considered in this case.

This contract contains an integration clause. Paragraph 8.2

provides:

"Entire Contract. This [c]ontract con-

stitutes the entire agreement between [s]eller

and [b]uyer, and there are no other covenants,

agreements, promises, terms and provisions,

conditions, undertakings or understandings

either oral or written, between them con-

cerning the [p]roperty other than those herein

set forth."

When a contract contains an integration clause, it is improper to

consider extrinsic evidence of prior negotiations to create an

extrinsic ambiguity. Air Safety, Inc. v. Teachers Realty Corp.,

185 Ill. 2d 457, 462-64, 706 N.E.2d 882, 884-85 (1999) ("four

corners" rule).

Paragraph 4.1(h) of the contract prohibits use of the

real estate for the purpose of conducting "any fast[-]food (QSR)

- 31 - restaurant or restaurant facility whose principal food product is

chicken." The language seems clear. A fast-food restaurant,

like KFC, whose principal food product is chicken, is specifi-

cally prohibited. More broadly, any restaurant facility whose

principal food product is chicken is also prohibited. The trial

court found Buffalo Wild Wings not to be a fast-food restaurant,

but there is no dispute that Buffalo Wild Wings's principal food

product is chicken.

The parties agree that the words "whose principal food

product is chicken" modify both "restaurant" and "restaurant

facility." Regency argues the words "fast food (QSR)" modify

both "restaurant" and "restaurant facility." The problem with

Regency's argument is that there appears to be no difference

between a fast-food "restaurant" serving primarily chicken and a

fast-food "restaurant facility" serving primarily chicken. The

parties agree there are two categories here and there has to be a

difference between them, otherwise one of the categories is

surplusage. The obvious difference is that "fast food" modifies

only the word it precedes, not the words "restaurant facility"

which follow later, after the word "or."

Regency, however, attempts to create a distinction

between the two categories by a narrow and unusual definition of

"restaurant facility" as "a limited food[-]service operation

located in a multi-outlet food court, or embedded in a department

store, shopping center, or similar retail setting." That defini-

tion is found only in the self-serving affidavit of Regency's

- 32 - president, and is contradicted elsewhere in the agreement where

KFC itself (a stand-alone restaurant) is referred to as a "res-

taurant facility." A "facility" is something that is built to

serve a particular purpose, such as a medical facility, an

educational facility, or a recreational facility. See Merriam

Webster's Collegiate Dictionary 415 (10th ed. 2000) ("facility":

"4b: something (as a hospital) that is built, installed, or

established to serve a particular purpose"). There is no re-

quirement that a "facility" be embedded in some other operation.

The affidavit of Regency's president, which is relied on to show

ambiguity, is extrinsic evidence used to create an extrinsic

ambiguity in violation of the parol evidence rule. Air Safety,

185 Ill. 2d at 463-64, 706 N.E.2d at 885. There is no indication

in the contract that the parties were concerned with embedded

food operations. They were concerned with food operations like

KFC, that served primarily chicken.

Our construction of contracts seems to vary between

extremes. If we declare the contract not to be ambiguous, that

is the end of the matter and we make no attempt to construe,

interpret, or understand it. Dusthimer v. Board of Trustees, 368

Ill. App. 3d 159, 857 N.E.2d 343 (2006); Berryman Transfer &

Storage Co. v. New Prime, Inc., 345 Ill. App. 3d 859, 863, 802

N.E.2d 1285, 1288 (2004). If we declare the contract to be

ambiguous, we ignore the language of the contract and turn to any

and all extrinsic evidence, even preliminary negotiations between

the parties barred by the parol evidence rule. Slip op. at 8-9.

- 33 - There should be a middle ground, where we focus on the language

of the contract. See, e.g., the Uniform Commercial Code (810

ILCS 5/2-202 (West 2004)), which allows terms to be explained or

supplemented by usage of trade, or course of performance, but not

contradicted by evidence of any prior agreement. We should be

reluctant to discard the parol evidence rule. The parol evidence

rule bars the introduction of the most questionable form of

extrinsic evidence--self-serving testimony by one of the parties

as to what the parties "really" agreed to in the negotiations

leading up to the signing of the contract. R. Posner, The Law

and Economics of Contract Interpretation, 83 Tex. L. Rev. 1581,

1600 (2005). The testimony of independent experts, however, may

be considered. White City Shopping Center, LP v. PR Restaurants,

LLC, 21 Mass. L. Rptr. 565 n.4 (October 31, 2006) (a burrito is

not a sandwich).

Paragraph 4.1(h) identifies some (but not all) specifi-

cally prohibited businesses, all of which seem to be fast-food

chicken restaurants. The paragraph goes on to describe another

prohibited category:

"Other than the aforementioned restaurants

which shall absolutely be prohibited, a

restaurant shall be deemed to 'feature bone-

less chicken or chicken sandwiches' only if

the primary business of such restaurant is

the sale of such items."

That language is consistent with the construction that fast-food

- 34 - restaurants whose principal food product is chicken are specifi-

cally prohibited, and more broadly, any restaurant facility whose

principal food product is chicken is also prohibited. Paragraph

4.1(h) goes on to list some types of restaurants that are not

prohibited, like dinner houses, seafood restaurants, Italian

restaurants and "casual dining" restaurants. Those restaurants

apparently do not primarily feature chicken. It is interesting

that none of the examples given make any distinction between

stand-alone restaurants and embedded restaurants, which Regency

argues is the meaning of "restaurant facility."

Even if we were to consider the negotiations of the

parties, those negotiations support Lopax's argument that there

are two categories here, fast-food restaurants, and more broadly,

any restaurant facility. Lopax wanted to "prohibit all

fast-food restaurants, not just those serving primarily chicken."

Slip op. at 12. Lopax also wanted to prohibit all restaurant

operations serving chicken. "Indeed, Lopax's concern consis-

tently was not over the level of service but the serving of

chicken." Slip op. at 12. Regency/Arbours wanted to limit the

prohibitions. Regency/Arbours refused to go along with a prohi-

bition on all fast-food restaurants such as McDonald's. Re-

gency/Arbours insisted that only restaurants "whose principal

food product is chicken" (emphasis added) would be prohibited.

From the beginning, the parties were discussing two categories,

fast-food restaurants and restaurants in general. Regency/Ar-

bours added similar restrictions to both categories, but the

- 35 - parties never expressed the intent to limit the contract to fast-

food restaurants, as they could have done by eliminating the

second category.

The memoranda recorded April 17, 2002, and August 6,

2002, did not amend the contract. The purpose of recording a

memorandum of contract is to put the public on notice that a

contract exists. It is not necessary that the entire contract be

recorded. A prospective buyer has the duty to investigate and

determine the provisions of the contract. Smith, 402 Ill. at

465, 84 N.E.2d at 428 ("Under the circumstances present in this

case, a prudent person would have sought light from [the] plain-

tiff. This, [the] defendants failed to do. They were not

innocent purchasers for value"). The original memorandum here

summarized the provisions of paragraph 4.1(h) in a single sen-

tence. The amended memorandum discussed some of the paragraph's

limitations (within one mile of the real estate; shall expire if

use ceases for 90 days; dinner houses are allowed), perhaps

because Regency was concerned that prospective buyers would see

the recorded memorandum and not inquire further. The majority's

construction of the memoranda does not read "restaurant facility"

to mean embedded restaurant, as Regency argues, but instead

serves to strike the term from the contract.

- 36 -