Leydig, Voit & Mayer Ltd. v. SL PRU, LLC ( 2021 )

2021 IL App (1st) 191637-UFOURTH DIVISION
March 25, 2021
No. 1-19-1637
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
limited circumstances allowed under Rule 23(e)(1).
______________________________________________________________________________
IN THE APPELLATE COURT
OF ILLINOIS
FIRST JUDICIAL DISTRICT
______________________________________________________________________________
LEYDIG, VOIT & MAYER, LTD., an Illinois corporation,) Appeal from the
) Circuit Court of
Plaintiff and Counterdefendant - ) Cook County
Appellee and Cross-Appellant, )
)
v. )
)
SL PRU, LLC, a Delaware limited liability company, ) No. 16 CH 02697
successor-in-interest to BF PRU I, LLC, a Delaware )
limited liability company, successor-in-interest to )
THE PRUDENTIAL INSURANCE COMPANY OF )
AMERICA, a New Jersey corporation, ) Honorable
) Sophia Hall,
Defendant and Counterplaintiff - ) Judge Presiding.
Appellant and Cross-Appellee. )
______________________________________________________________________________
JUSTICE REYES delivered the judgment of the court.
Presiding Justice Gordon and Justice Lampkin concurred in the judgment.
ORDER
¶1 Held: Affirming the judgment of the circuit court of Cook County in favor of a tenant
on both its declaratory judgment complaint and the landlord’s counterclaim for
reformation of the parties’ lease and ordering the release of escrowed funds upon
issuance of the mandate.
¶2 Leydig, Voit & Mayer, Ltd. (Leydig), a law firm specializing in intellectual property law,
leased office space in a Chicago building from successor landlord SL PRU LLC (SL PRU). The
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seventh amendment to the parties’ lease, executed in 2007, included a contraction option
provision, under which Leydig could discontinue its use of a portion of its leased space if certain
conditions were satisfied. The conditions included payment of a contraction fee, comprised of
(a) five months’ gross rent plus (b) an “unamortized amount, as of May 31, 2017[.]” By the time
Leydig exercised the contraction option in 2016, a dispute had emerged between the parties
regarding the proper calculation of the unamortized amount. SL PRU contends that the inclusion
of the May 31, 2017 date in the contraction option provision was a mistake, as it would always
result in an unamortized amount of $0. According to SL PRU, the end date of the amortization
period should be the expiration date of the lease – September 30, 2025. Leydig filed a complaint
in the circuit court of Cook County seeking a judgment declaring that the contraction option
provision should be interpreted as written, i.e., Leydig would owe nothing on account of the
unamortized-expense portion of the contraction fee. SL PRU filed a counterclaim against
Leydig, seeking reformation of the seventh amendment, i.e., substituting September 30, 2025 in
place of May 31, 2017 as the end date of the amortization period. Following a bench trial, the
circuit court ruled for Leydig on both its complaint for declaratory judgment and SL PRU’s
counterclaim for reformation. SL PRU appeals from this ruling, and Leydig cross-appeals from
a circuit court order denying its motion for release of escrowed funds. As discussed below, we
affirm the judgment except as otherwise provided herein.
¶3 BACKGROUND
¶4 The Lease and the Seventh Amendment
¶5 Pursuant to a lease initially executed with The Prudential Insurance Company of America
(Prudential) in 1986, Leydig leased office space at 180 North Stetson Avenue, known as Two
Prudential Plaza. The lease provides, in part, that in the event of litigation between the parties,
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the prevailing party will recover its litigation costs, including attorney fees, from the other party.
¶6 In 2007, Leydig and BF PRU I, LLC (BF PRU) – as successor to Prudential – executed a
seventh amendment to the lease, which provided for an expansion of the leased premises;
BF PRU incurred various expenses in connection with the expansion. The seventh amendment
also included an option for Leydig to return a significant portion of the expansion space after 10
years (in 2017), approximately 8 years before the end of the lease in 2025. To exercise the
contraction option, Leydig would be required to pay five months’ rent plus “the unamortized
amount, as of May 31, 2017 ***.” 1
¶7 Leydig’s Complaint and SL PRU’s Counterclaim
¶8 On February 25, 2016, Leydig filed a complaint for declaratory judgment against BF
PRU’s successor, SL PRU. The complaint alleged that Leydig had timely exercised the
contraction option under the seventh amendment by (a) providing written notice to SL PRU that
it intended to discontinue its use of a portion of the building and (b) tendering to SL PRU the
amount of $306,310.24, which is equal to five months of gross rent due for such space.
The complaint further alleged that since the “unamortized amount, as of May 31, 2017” was $0,
Leydig had satisfied the express terms of the contraction option provision.
¶9 The complaint described communications in late 2015 and early 2016 regarding the
1
Section 15(b) of the seventh amendment provides, in part, that the contraction fee would be
comprised of “(i) five months’ Base Rent and Additional Rent at the rates that would otherwise be
payable under the Lease but for the Tenant’s exercise of the Contraction Option for the five months
immediately following the Contraction Date plus (ii) the unamortized amount, as of May 31, 2017, of the
total of (A) the disbursed Initial Alterations Allowance, plus any other allowances disbursed by Landlord
in connection with Tenant’s lease of any Expansion Space pursuant to Paragraph 11 of this Amendment
and/or any First Offer Space (if applicable) or other space added to the Lease after the date of this
Amendment plus (B) any leasing commissions, plus (C) any free rent provided to Tenant pursuant to or
after the date of this Amendment. The total of the amounts to be amortized under clauses (A), (B) and
(C) of this paragraph is referred to hereinafter as the “Amortization Amount.” For purposes of
calculating the unamortized portion of the Amortization Amount, the amortization period shall be the
period commencing on June 1, 2007, and ending on May 31, 2017, and the amortization shall be on a
straight line basis at an annual interest rate of ten percent (10%).” (Emphases in original.)
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parties’ respective positions concerning the contraction option calculation. SL PRU’s agent
asserted that the “relevant amortization period would run from May 31, 2017 to September 30,
2025,” i.e., the end date of the lease. SL PRU thus claimed an additional $1,160,607.21 was due
from Leydig, resulting in a total fee of $1,466,917.45. Leydig disputed these contentions, noting
that the contraction option provision stated in three places that the amortization period ends on
May 31, 2017. In its complaint, Leydig sought a declaratory judgment declaring that the
provision should be interpreted according to its “clear and unambiguous terms.”
¶ 10 To preserve its rights under the contraction option, Leydig filed an emergency motion to
deposit the disputed funds with the clerk of the circuit court of Cook County. The circuit court
entered an agreed order on February 26, 2016, directing the clerk to accept Leydig’s tender of
$1,160,607.21 and to deposit the funds into escrow “pending the disposition of this case.”
¶ 11 In its answer, SL PRU admitted that it was seeking an additional $1,160,607.21 from
Leydig and stated that the contraction option “contains a scrivener’s error and mutual mistake.”
SL PRU filed a counterclaim seeking reformation, alleging that prior to drafting and executing
the seventh amendment, the parties had executed a letter of intent (LOI) which outlined the terms
of the lease and described the fee to be paid by Leydig if it were to elect to reduce the size of its
leased space. The LOI provided that the contraction fee would consist of two components:
(a) five months of gross rent plus (b) “the value of unamortized costs amortized at 10%,
including leasing commissions, tenant improvements, free rent and any other concessions or
allowances.” According to SL PRU, if Leydig did not elect to contract (or reduce) the size of its
leased premises, then all such costs would be fully amortized and recovered by SL PRU through
Leydig’s full payment of the rent for the expanded leased premises. If Leydig chose to reduce
the size of the leased premises, however, the fee would include those costs which had not yet
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been amortized since SL PRU would be paid less rent after the reduction.
¶ 12 SL PRU alleged that the seventh amendment misstated the period of unamortized costs,
i.e., it used the “start” date as the “end” date for the amortization period. Since the same date
was used for the start date and end date of the amortization period, the “unamortized” amount –
by definition – had to be zero. SL PRU alleged such a result was contrary to the parties’ intent
as expressed in the LOI. Accordingly, SL PRU sought reformation of the seventh amendment,
i.e., substituting September 30, 2025 in place of May 31, 2017, as the end date of the
amortization period.
¶ 13 Leydig’s Motion to Dismiss Counterclaim and For Judgment on the Pleadings
¶ 14 Leydig filed a motion to dismiss the counterclaim and for judgment on the pleadings
under sections 615(a) and 615(e) of the Code of Civil Procedure (735 ILCS 5/2-615(a), (e) (West
2016)). Leydig argued, in part, that SL PRU asserted mutual mistake based on the LOI, but the
LOI did not include an end date for the amortization period and expressly stated that it was not
binding on the parties. Leydig further observed that BF PRU had circulated an initial draft of the
seventh amendment with an amortization period end date of March 31, 2017, and subsequently
revised the proposed end date to February 28, 2017, and then April 20, 2017, before settling on
May 31, 2017. According to Leydig, SL PRU is not entitled to reformation for the unilateral
mistake of its predecessor, which was a sophisticated commercial party represented by counsel.
¶ 15 SL PRU responded, in part, that if the parties intended for the unamortized-expense
amount to be $0, then there was no need for the seventh amendment to devote so many words to
explaining its calculation. SL PRU asserted that the seventh amendment should be reformed to
reflect the parties’ “obvious intent” that some amount was to be paid on account of unamortized
expenses. In its reply, Leydig argued that SL PRU had not pled any mistake by Leydig or that
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any meeting of the minds occurred regarding a different amortization period end date. Leydig
acknowledged that the contraction provision did “perhaps include[] more verbiage than
necessary,” but asserted that this does not mean that the language lacked meaning or that Leydig
was mistaken regarding its effect. The circuit court denied the section 2-615 motion.
¶ 16 SL PRU’s Amended Counterclaim
¶ 17 After certain discovery was completed, SL PRU filed a motion for leave to supplement or
amend its counterclaim. SL PRU asserted that newly discovered evidence indicated that Leydig
knowingly concealed the presence of the mistaken date in the drafts of the seventh amendment
from BF PRU since it would be favorable to Leydig, even though Leydig knew that the mistaken
date did not reflect the parties’ true agreement. Leydig responded that SL PRU had not alleged
that Leydig was under any duty to disclose and had failed to plead that BF PRU could not have
discovered the “mistake” through reasonable inquiry or inspection. Leydig further argued that:
(a) there was no agreement regarding the specific dates of the amortization period prior to the
execution of the seventh amendment; (b) Leydig did not “know” that BF PRU’s counsel made a
mistake; and (c) Leydig did not conceal BF PRU’s purported mistake.
¶ 18 The circuit court granted the motion, and SL PRU filed an amended two-count
counterclaim seeking reformation of the seventh amendment. Count I was based on mutual
mistake; count II was based on unilateral mistake and fraud.
¶ 19 Cross-Motions for Summary Judgment
¶ 20 SL PRU filed a motion for partial summary judgment as to Leydig’s complaint and on
count II of its counterclaim. Among other things, SL PRU argued that, prior to its execution,
when the seventh amendment was being drafted, Leydig’s real estate attorney John Stephens
(Stephens) was aware of the consequence of using the contraction date for the end date of the
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amortization period which would result in the unamortized-cost component becoming zero.
When asked during his deposition if there was any reason, he had not suggested striking out the
terms for how to calculate the unamortized amount, he responded, “I just didn’t see the need to
do that [since] [t]he way it was calculated was favorable to my client. And so, we chose not to
comment on it.” According to SL PRU, Stephens admitted that during the negotiations of the
seventh amendment he never notified anyone associated with the landlord that the consequence
of the unamortized costs would be zero. SL PRU also asserted that Steven Petersen (Petersen),
an attorney at Leydig – who was also involved in the negotiations of the seventh amendment –
admitted he knew that the contraction option provision meant the unamortized costs would be
zero. He also did not recall anyone on Leydig’s side informing anyone on the landlord’s side of
this outcome.
¶ 21 SL PRU further noted that in 2015 – prior to Leydig’s request to exercise the contraction
option in the seventh amendment – Leydig’s real estate broker Beth McGee Grogan (Grogan)
prepared materials which contained an analysis of the contraction fee for Leydig’s use in
considering its subleasing options. In calculating the unamortized-costs component of the
contraction option, she used the end of the lease date as the amortization date which resulted in a
fee of approximately $1.2 million. During her deposition, Grogan testified that the reason to use
unamortized costs in this context is to pay back the landlord if the tenant does not complete its
lease, i.e., to repay the funds the landlord put into the deal, such as the tenant improvement
allowance, commissions, and rent abatement. According to SL PRU, Grogan’s use of the end
date of the lease for the end date of her amortization table confirmed that the seventh amendment
contained a scrivener’s error, as her amortization table matched the parties’ true agreement.
¶ 22 In a cross-motion for summary judgment, Leydig argued that there was no meeting of the
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minds between the parties that the end date of the amortization period would be September 30,
2025. Leydig further contends that there was no evidence of any (a) mistake on the part of the
parties in agreeing to May 31, 2017 as the end date of the contraction option in the seventh
amendment or (b) fraud on Leydig’s part when it was the landlord’s counsel that proposed – and
repeatedly changed – the end date for the amortization period. According to Leydig, the conduct
of the landlord’s representatives gave Leydig and its representatives the impression that the end
date they proposed in writing was the end date they intended.
¶ 23 The circuit court denied the parties’ cross-motions for summary judgment, and the case
proceeded to trial.
¶ 24 Pretrial Motions
¶ 25 The parties filed various motions in limine, including Leydig’s motion to exclude SL
PRU’s experts seeking to testify regarding the real estate industry’s custom and practice. SL
PRU had disclosed several fact witnesses as “independent expert witnesses” to testify as to
industry custom and practice, including Andrea Saewitz (Saewitz), a real estate broker for BF
PRU, and Bryan Oyster (Oyster), the general manager at the property in question. SL PRU had
also disclosed a “controlled expert witness,” Patrick J. Caruso (Caruso). Caruso had opined in a
two-page letter that in his decades of representing landlords and tenants in lease negotiations, he
never discussed a lease provision wherein the unamortized costs are zero when an option is
exercised before the end of the lease term. Caruso further opined that it is understood “in every
case and by all parties” that the intent is for the landlord’s costs to be amortized over the entire
lease term. Leydig argued that testimony on industry custom and practice was not admissible
since it was not relevant to the reformation analysis, i.e., “[e]vidence of custom and practice in
an industry is distinct from what any given party’s intention and understanding may be.”
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(Emphasis in original.)
¶ 26 The circuit court granted Leydig’s motion. While Saewitz and Oyster were permitted to
testify at trial, they were not allowed to testify regarding the real estate industry’s custom and
practice. Prior to the commencement of the trial, SL PRU submitted offers of proof regarding
the opinion testimony of Caruso, as well as Saewitz and Oyster.
¶ 27 Trial Testimony
¶ 28 The trial testimony included the following. John Kilyk, Jr. (Kilyk), a Leydig attorney,
testified he was part of a three-member ad hoc committee established in 2006 to “work on the
lease extension.” The other members of the committee were Petersen and Leydig’s president
John Kozak (Kozak). According to Kilyk, the firm was considering either extending the lease or
moving to a new location; the committee was charged with exploring options and reporting back
to the firm’s board. The committee hired William A. Rogers, Jr. (Rogers) as their real estate
broker.
¶ 29 Kilyk testified that the committee’s overriding concern during this entire process was to
obtain the lowest cost to the firm. The committee also sought flexibility to expand or reduce the
amount of leased space to respond to the firm’s future needs. The decision eventually was made
to extend the firm’s existing lease. Kilyk signed the LOI, which the committee viewed as an
“agenda” and a “place to start negotiations.” He also testified that he did not recall having any
understanding of a proposed amortization period for the contraction option in the LOI. As to the
seventh amendment, Kilyk recalled that multiple drafts were circulated between the parties. He
further testified that it was his understanding that Leydig was not making any kind of mistake by
entering into the seventh amendment. Kilyk was also “not aware of anything that we withheld at
all, material or immaterial, during the entire lease negotiation process.”
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¶ 30 During cross-examination, Kilyk could not recall various changes to and communications
regarding the LOI, e.g., a change in the initial draft of the LOI which increased the interest rate
for the amortization calculation from 8% to 10%. As of the time of his trial testimony, Kilyk did
not understand what “unamortized costs” meant in the context of the LOI. Kilyk’s impression
was that the cost of the contraction option in the seventh amendment would be low, based in part
on the statements of BF PRU’s manager, C. Frederick Webha II (Webha), that “he’d make it
worth our while to stay there.” Kilyk also testified that he was not familiar with the custom and
practice in the real estate industry.
¶ 31 Kozak, one of the other committee members, testified that he wanted consistency in the
firm’s real estate costs, i.e., no “peaks or valleys.” Although he executed the seventh
amendment, he did not recall being involved in its negotiation or specifically reviewing any draft
thereof. Kozak testified he was “extremely surprised” when he later learned that SL PRU was
demanding a $1.4 million contraction fee. When questioned during cross-examination regarding
the use of the May 31, 2017 date in the seventh amendment, he testified that he had no
recollection of studying the seventh amendment to the point of recognizing what part the dates
would have on the calculation.
¶ 32 Petersen, another member of the Leydig committee, testified that when he was presented
with a draft of the seventh amendment during the negotiation process, he attempted to calculate
the approximate amount of the contraction fee. He concluded “it would be in the range of a few
hundred thousand dollars.” He determined that the second component of the calculation –
relating to the unamortized costs – would be zero “[b]ecause the end date of the amortization
period was the same as the contraction date.” Although he testified that the “language has a
purpose,” he acknowledged that it was “hard” for him to assess the purpose.
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¶ 33 Petersen further testified that in 2015, the firm engaged its real estate broker to present
cost estimates of the firm’s different options with respect to the lease. When Petersen received
an analysis that included a $1.5 million contraction fee, he was “shocked” by the calculation. He
subsequently learned that the broker made a mistake in the contraction fee calculation.
¶ 34 Petersen testified that the LOI did not change his understanding of the contraction fee
since the seventh amendment included a definition of the amortization period and the LOI did
not. He did not believe that Leydig made a mistake in agreeing to the contraction option
provision. Petersen also testified that he was not aware of any material facts related to the
seventh amendment that Leydig attempted to keep from the landlord during their negotiations.
On cross-examination, Petersen testified that he was not aware that anyone on the landlord’s side
of the transaction was aware that the unamortized portion of the contraction fee would be zero.
¶ 35 Rogers, Leydig’s real estate broker, testified that during the negotiations of the seventh
amendment he did not recall noticing that the end date for the amortization period was the same
as the contraction date. When Rogers later provided real estate services to Leydig in 2015, he
asked his colleague Grogan to prepare a calculation of the costs associated with the firm’s
exercise of the contraction option. Her calculation was approximately $1.5 million. Grogan
subsequently testified that her calculation of unamortized costs was “mistaken” since she
incorrectly used September 30, 2025 as the end date of the amortization period.
¶ 36 Stephens, a real estate attorney who represented Leydig in connection with the seventh
amendment, testified that he had noticed during the parties’ negotiations that the contraction date
had been inserted for the end date of the amortization period. According to Stephens, “the
bottom line is that that component of the formula would result *** in no amount due because the
amortization – the amounts at issue, which are these costs, would be fully amortized as of that
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date.” He did not recall whether he ever considered proposing deleting this component of the
contraction fee calculation. He also did not recall notifying anyone on the landlord’s side
regarding the consequence that the unamortized amount of the contraction fee would always be
zero. Stephens assumed that, given that the landlord included such language, “there’s a reason
that they put that in the document,” although Stephens did not know what the reason was for its
inclusion.
¶ 37 Bryan Oyster testified that he was the general manager of the property in 2006 and 2007,
as well as in 2015 and 2016. After receiving an email request from Petersen in 2015, Oyster and
his accountant prepared a calculation of the contraction fee for Leydig, totaling approximately
$1.46 million. In preparing the amortization table, they used an end date of September 30, 2025,
i.e., the expiration date of the seventh amendment.
¶ 38 Andrea Saewitz testified that she was a real estate broker for BF PRU in connection with
the parties’ negotiations in 2006 and 2007. She testified that she and Rogers had discussions
regarding the contraction option provision in the LOI. Among other things, she and Rogers had
“agreed what the unamortized costs were,” which were then included in the LOI. On cross-
examination, Saewitz testified that she did not have authority to agree to lease terms or to
execute lease documents for BF PRU.
¶ 39 Mary Robinson (Robinson), an attorney retained as an expert on legal ethics, testified that
she was asked to review certain materials and offer an opinion on whether attorney Stephens
complied with his ethical obligations in his representation of Leydig in connection with the
seventh amendment. She concluded that he complied with his ethical obligations. According to
Robinson, Stephens did not have a duty to make a disclosure regarding the contraction option
calculation since he had no knowledge of any fraud by his client. She also testified that there
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was no material fact that Stephens knew – and which the landlord’s side did not know – which
he failed to disclose. Robinson opined that Stephens did not owe a duty to the landlord to make
edits to the provision because, among other things, he did not have any reason to believe Leydig
had not agreed to the provision as it is drafted.
¶ 40 Circuit Court Decision
¶ 41 In a decision entered on July 11, 2019, the circuit court (a) found for Leydig on SL
PRU’s counterclaim for reformation and for Leydig on its complaint for declaratory judgment
and (b) declared that Leydig has complied with the contraction option provision. Among other
things, the court determined that SL PRU failed to prove that BF PRU and Leydig mutually
agreed to an amortization period end date other than the end date expressed in the seventh
amendment. The court denied the admission of evidence depositions of Maria King (King) – the
real estate attorney who initially drafted the seventh amendment and incorporated the agreed-
upon modifications thereof – and Hans Mumper (Mumper) – a manager for Bentley Forbes
Midwest Property Management, the managing member of BF PRU – who was involved with
Saewitz in the negotiations.
¶ 42 The circuit court further found that there was no proof of a mistake by BF PRU or
Leydig, and that Leydig did not commit fraud. Finally, the circuit court rejected SL PRU’s
arguments that the contraction fee language is ambiguous on its face or that Leydig’s
interpretation results in certain language being rendered meaningless surplusage. SL PRU filed a
notice of appeal on August 9, 2019.
¶ 43 Pursuant to the attorney fee provision in the parties’ lease, Leydig filed a fee petition with
the circuit court, which remains pending at this time.
¶ 44 Motion to Release Escrow Funds
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¶ 45 On August 6, 2019, Leydig filed a motion for the release of the escrow funds in the
amount of $1,160,607.21 deposited with the Clerk of the Circuit Court of Cook County at the
commencement of the litigation. Leydig represented that it had taken out and drawn down a line
of credit to place the funds in escrow and was paying “significant amounts” of interest on the
line of credit. Leydig acknowledged that its fee petition was pending but asserted that the merits
of the complaint and counterclaim had been addressed and thus the escrowed funds (and any
interest thereon) should be immediately released to Leydig or its representative. SL PRU
responded that the motion should be denied since its appeal is a continuation of the case and the
fee petition has not been ruled upon. In an order entered on September 9, 2019, the circuit court
denied the motion.
¶ 46 On October 8, 2019, Leydig filed a motion for an express written finding under Illinois
Supreme Court Rule 304(a) (eff. Mar. 8, 2016), or alternatively, Illinois Supreme Court Rule 308
(eff. Oct. 1, 2019) certification as to the order denying the motion for release of escrow funds.
Over SL PRU’s objection, the circuit court entered an order on December 9, 2019 granting the
motion and making an express written finding pursuant to Rule 304(a) that there is no just reason
for delaying either enforcement or appeal of the court’s July 11, 2019 decision or its
September 9, 2019 order denying the motion for release of the escrow funds. Leydig filed a
cross-appeal challenging the denial of its motion to release the escrowed funds.
¶ 47 ANALYSIS
¶ 48 SL PRU advances two primary arguments on appeal. First, SL PRU contends that it
established by clear and convincing evidence that the seventh amendment should be reformed
based on mistake. Second, SL PRU asserts that the circuit court erred in barring Caruso, Oyster
and Saewitz from providing expert testimony as to the real estate industry’s custom and practice.
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In its cross-appeal, Leydig argues that the circuit court erred in denying its motion to release the
escrowed funds. We discuss each contention below.
¶ 49 There is a presumption that a written instrument conforms to the intention of the parties.
CitiMortgage, Inc. v. Parille, 2016 IL App (2d) 150286, ¶ 32; Wheeler-Dealer, Ltd. v. Christ,
379 Ill. App. 3d 864, 869 (2008). A court may reform a contract when the written agreement
does not reflect the intent of the parties. Parille, 2016 IL App (2d) 150286, ¶ 29. Such a claim
rests on the theory that the parties reached an agreement but then somehow erred (by mutual
mistake of fact, or by mistake on one side and fraud on the other) in reducing that agreement to
writing, with the result being that the writing fails to reflect the parties’ agreement. Id. See also
Magnus v. Lutheran General Health Care System, 235 Ill. App. 3d 173, 183-84 (1992). Thus,
the purpose of a reformation action is to change a written instrument by inserting some omitted
provision or deleting some existing provision so that the document conforms to the parties’
original agreement. Wheeler-Dealer, 379 Ill. App. 3d at 869.
¶ 50 To plead a claim for reformation, a plaintiff must allege: (1) the existence and substance
of an agreement between the parties and the identity of the parties to the agreement; (2) that the
parties agreed to reduce their agreement to writing; (3) the substance of the written agreement;
(4) that a variance exists between the parties’ original agreement and the writing; and (5) the
basis for reformation (e.g., mutual mistake). Parille, 2016 IL App (2d) 150286, ¶ 29; Schivarelli
v. Chicago Transit Authority, 355 Ill. App. 3d 93, 100 (2005). See also Goodwine State Bank v.
Mullins, 253 Ill. App. 3d 980, 991 (1993).
¶ 51 To succeed in a reformation action, a party must establish the elements of the claim by
strong, clear, and convincing evidence that there has been a meeting of the minds resulting in an
actual agreement between the parties but at the time the agreement was reduced to writing and
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executed some agreed upon provision was omitted. Parille, 2016 IL App (2d) 150286, ¶ 32.
Accord Brady v. Prairie Material Sales, Inc., 190 Ill. App. 3d 571, 578 (1989). See also
National Ben Franklin Insurance Co. v. Davidovitch, 123 Ill. App. 3d 88, 91 (1984) (noting that
mutual mistake must be proven clearly and convincingly as “equity cautions *** that
reformation if misapplied can lead to more damage than that caused by its denial”). In the
instant case, SL PRU has the burden of establishing by clear and convincing evidence that
Leydig and BF PRU reached a meeting of the minds which resulted in an actual agreement
between them, but that, at the time the agreement was reduced to writing and executed in the
seventh amendment, some agreed-upon provision was omitted, or one not agreed upon was
inserted through mutual mistake or through mistake by BF PRU and fraud by Leydig. See
Wheeler-Dealer, 379 Ill. App. 3d at 869.
¶ 52 The question of whether SL PRU has presented sufficient evidence to meet this higher
burden of proof (Goodwine State Bank, 253 Ill. App. 3d at 996) and overcome the presumption
that the seventh amendment as written expresses the parties’ true intention is primarily a question
of fact, and we will not disturb the circuit court’s decision unless it is against the manifest weight
of the evidence. Great America Federal Savings & Loan Ass’n v. Grivas, 137 Ill. App. 3d 267,
274 (1985). Accord Wheeler-Dealer, 379 Ill. App. 3d at 869; Schivarelli, 355 Ill. App. 3d at
100. See also Bazydlo v. Volant, 164 Ill. 2d 207, 215 (1995) (noting that where testimony is
conflicting in a bench trial, the trial court’s findings will not be disturbed unless they are against
the manifest weight of the evidence). A judgment is against the manifest weight of the evidence
only when an opposite conclusion is apparent or when findings appear to be arbitrary,
unreasonable, or not based on evidence. Id.- 16 -
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¶ 53 Mistake
¶ 54 As noted above, a party seeking reformation of a contract must show a mistake by both
parties or a mistake by one party which is known and concealed by the other party. In re
Marriage of Johnson, 237 Ill. App. 3d 381, 394 (1992). SL PRU is seeking reformation of the
seventh amendment under either theory.
¶ 55 For purposes of reformation of a written instrument, a mutual mistake exists when the
contract has been written in terms which violate the understanding of both parties. Parille, 2016
IL App (2d) 150286, ¶ 29; Biren v. Kluver, 35 Ill. App. 3d 692, 696 (1976). A mutual mistake is
one that is common to the parties such that each labors under the same misconception; the parties
actually agree but the written agreement does not express their real intent. Parille, 2016 IL App
(2d) 150286, ¶ 29. Accord Wheeler-Dealer, 379 Ill. App. 3d at 869. When it is alleged a
mistake was made parol evidence may be utilized to demonstrate the real agreement between the
parties and the purpose of the evidence is to make the contract conform to the parties’ original
intent. Danhauer v. Danhauer, 2013 IL App (1st) 123537, ¶ 29. See also Parille, 2016 IL App
(2d) 150286, ¶ 30 (noting that because the claim is that the instrument’s language does not
accurately reflect the intent of the parties, parol evidence may be introduced on the issue of the
parties’ intent, even when the instrument to be reformed is clear and unambiguous on its face).
¶ 56 An instrument may also be reformed upon proof of mistake by one party to the contract
when the other party knows of the mistake and fails to inform the other party or conceals the
truth from him. Biren, 35 Ill. App. 3d at 696. “In actions for reformation based on the existence
of a unilateral mistake coupled with fraud, we have looked to whether the parties have reached a
mutual agreement; but the defendant, knowing that the instrument finally prepared does not
accurately reflect that agreement, has concealed the defect from plaintiff at the time of
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execution.” Sheldon v. Colonial Carbon Co., 116 Ill. App. 3d 797, 802 (1983). Accord Klemp v.
Hergott Group, Inc., 267 Ill. App. 3d 574, 585 (1994). See also Magnus, 235 Ill. App. 3d at 183(providing that contract reformation is “proper where one party is mistaken about an
instrument’s terms and where the other party knows of the mistake but fails to inform him or
conceals the truth”).
¶ 57 In the instant case, SL PRU has failed to satisfy its burden in several key respects. First,
SL PRU did not establish that there was an express agreement between Leydig and BF PRU as to
the end date of the amortization period which is different from what is stated in the contraction
option. Despite SL PRU’s contentions to the contrary, there was no clear evidence of a meeting
of the minds between the parties as to an amortization period ending on September 30, 2025.
The LOI does not include any amortization period, and SL PRU has not demonstrated that BF
PRU communicated to Leydig any intention that the amortization period end with the lease term
or that Leydig so agreed. Klemp, 267 Ill App. 3d at 584 (noting that “[e]quity cannot make a
new agreement for the parties under the color of reforming the one made by them, nor can it be
used to add a provision to the contract that was never agreed upon”).
¶ 58 Mutual Mistake
¶ 59 SL PRU also failed to meet its burden of establishing the existence of a mutual mistake
by the parties at the time of the seventh amendment. Among other things, no evidence was
presented that at the time Webha executed the seventh amendment that BF PRU did not know
that the amortization period ended on May 31, 2017. SL PRU argues that the circuit court
should have considered the testimony from attorney King, who drafted the document, and
Mumper, who was involved in the negotiations. Unlike Webha, there is no indication that King
or Mumper had the authority to bind BF PRU. Even assuming arguendo that the circuit court
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erred in denying the admission of their testimony because they were not the contracting parties,
any error was harmless as neither King nor Mumper had any specific recollection relating to the
transaction or, specifically, the seventh amendment. See Inman v. Howe Freightways, Inc., 2019
IL App (1st) 172549, ¶ 157 (noting that harmless error occurs when, despite the presence of an
error, it appears no harm has been done). While King surmised that she had made an error in the
seventh amendment based on her reading of the amendment prior to her deposition, she had no
independent recollection of the drafting process which occurred in 2007. Similarly, when
Mumper was asked whether he had a “specific recollection” relating to this transaction (the
seventh amendment), he responded, “I really don’t.”
¶ 60 Furthermore, the evidence contradicts SL PRU’s contention that Leydig made a mistake.
The Leydig representatives testified that they had not agreed to a particular end date for the
amortization period prior to the seventh amendment. SL PRU speculates, however, that Leydig
must have made a mistake in agreeing to the contraction option in the seventh amendment.
Although the inclusion of a calculation which, by definition, equals zero may be curious, the
reformation of a document because of mistake will not be granted upon evidence that is loose or
equivocal. Holbrook v. Tomlinson, 304 Ill. 579, 585 (1922).
¶ 61 We are also unpersuaded by SL PRU’s contentions regarding alleged fraud by Stephens
or possibly Petersen. The trial court had a superior vantage point, which cannot be reproduced
from the cold record, to observe and judge the credibility and demeanor of the witnesses. Racky
v. Belfor USA Group, Inc., 2017 IL App (1st) 153446, ¶ 107. In any event, there is no allegation
that either attorney misrepresented any facts; fraud would have to be predicated on their
nondisclosure. Wilcox v. Natural Gas Storage Co. v. Illinois, 24 Ill. 2d 509, 513 (1962). Their
testimony did not reveal that their nondisclosure was deliberate or with an intention to deceive,
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nor was there any allegation that BF PRU or its counsel inquired as to the purpose or meaning of
the challenged portion of the contraction option provision. See id.¶ 62 SL PRU contends that the circuit court erred in barring the expert testimony of controlled
witness Caruso and independent expert witnesses Oyster and Saewitz as to the “custom and
practice” in the real estate industry of using unamortized costs through the lease term as a pricing
mechanism for contraction options. The decision whether to admit expert testimony is within the
sound discretion of the trial court and will not be reversed absent an abuse of that discretion.
Snelson v. Kamm, 204 Ill. 2d 1, 24 (2003). As an initial matter, the trial court determined that it
did not require the challenged expert testimony to adjudicate the deal reached by BF PRU and
Leydig or the intentions of the contracting parties. Cf. People v. Bennett, 376 Ill. App. 3d 554,
571 (2007) (noting that expert testimony is proper where such testimony will aid the fact finder
in reaching its conclusion). Furthermore, the opinions derived from the witnesses’ experiences
with other transactions is not relevant in determining the intention of the contracting parties in
the specific transaction at issue herein. Parille, 2016 IL App (2d) 150286, ¶ 29 (providing that a
court may reform a contract when the written agreement does not reflect “the parties’ intent”).
Based on the foregoing, the trial court did not abuse its discretion in barring the expert testimony.
¶ 63 For the reasons discussed above, we conclude that the trial court’s ruling in favor of
Leydig on its declaratory judgment complaint and on SL PRU’s counterclaim for reformation
was not against the manifest weight of the evidence. Wheeler-Dealer, 379 Ill. App. 3d at 869.
Simply put, SL PRU has not satisfied the exacting standard for contract reformation.
¶ 64 In its cross-appeal, Leydig contends that the trial court erred in denying its motion for
release of the escrowed funds in the amount of $1,160,607.21. The parties disagree regarding
the meaning of the language in their agreed order regarding the deposit of the funds into escrow
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“pending the disposition of this case.” Leydig seeks the immediate release of the funds, whereas
SL PRU contends that the instant appeal and the pending fee petition are indicative of no current
“disposition of this case.”
¶ 65 An agreed order adopted by the court is not an adjudication of the parties’ rights but,
rather, a record of their private contractual agreement and must be construed to give effect to the
intent of the parties, which is determined from the language of the order when there is no
ambiguity in its terms. In re Marriage of Watkins, 2017 IL App (3d) 160645, ¶ 28. An agreed
order is a written agreement between the parties and is to be interpreted as any other contract.
Village of Lakemoor v. First Bank of Oak Park, 136 Ill. App. 3d 35, 41 (1985). The construction
of a contract presents a question of law; our review is de novo. Gallagher v. Lenart, 226 Ill. 2d
208, 219 (2007).
¶ 66 Unlike an appeal bond (e.g., Ill. S. Ct. R. 305 (eff. July 1, 2017)), the purpose of the
escrowing was to preserve Leydig’s position with respect to the exercise of the contraction
option in the seventh amendment. Since we are affirming the decision of the circuit court as to
the primary underlying dispute, i.e., the reformation claim, we are inclined to order the release of
the funds. While we recognize that a fee petition is pending in the circuit court, the escrowed
funds have no direct relation to the attorney fee and related amounts apparently in dispute.
Therefore, upon the issuance of the mandate in the instant appeal, the clerk of the circuit court is
directed to release the escrowed funds to Leydig.
¶ 67 Finally, we note that Leydig filed a motion for leave to supplement the prayer for relief in
its appellate brief to request that this court award Leydig its fees and costs incurred “in
responding to this appeal” and remand the case to the trial court for entry of the award of
attorney fees and costs. SL PRU responded that the trial court’s Rule 304(a) finding (Ill. S. Ct.
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R. 304(a) (eff. Mar. 8, 2016)) “excluded Leydig’s fee claim because it remains pending below.”
On January 21, 2021, we entered an order taking the motion and response with the case. We
consider the issue of attorney fees for this appeal to be inseparable from the general
determination of attorney fees in this matter. As the issue of attorney fees was previously carved
out from this appeal by virtue of the Rule 304(a) finding – which was requested by Leydig – this
court lacks jurisdiction as to the overall issue of attorney fees. See Wofford v. Tracy, 2015 IL
App (2d) 141220, ¶ 23 (noting that the reviewing court lacks jurisdiction over counts to which
the trial court did not issue a Rule 304(a) finding). Leydig’s motion for leave to supplement the
prayer for relief is therefore denied.
¶ 68 CONCLUSION
¶ 69 The judgment of the circuit court is affirmed, except as to the release of the escrowed
amounts, as provided in this decision.
¶ 70 Affirmed as modified.
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