In the

United States Court of Appeals

For the Seventh Circuit

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No. 03-2953

ROBERTA CASTELLANO and MARION CASTELLANO,

Plaintiffs-Appellants,

v.

WAL-MART STORES, INCORPORATED,

a Delaware corporation,

Defendant-Appellee.

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Appeal from the United States District Court

for the Southern District of Illinois.

No. 98 C 4149—Philip M. Frazier, Magistrate Judge.

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ARGUED FEBRUARY 20, 2004—DECIDED JUNE 24, 2004

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Before FLAUM, Chief Judge, and BAUER and MANION,

Circuit Judges.

BAUER, Circuit Judge. Plaintiffs brought this action in

the district court, charging breach of contract, invalidity of

a lease amendment, breach of implied covenant of good

faith and fair dealing, and two counts of fraud. The district

court resolved all issues against the Plaintiffs through

summary judgment and judgment as a matter of law. We

review both summary judgment and judgment as a matter
2 No. 03-2953

1 Plaintiff-Appellant’s brief states that Wal-Mart sold the building to Lancaster. This appears to be a mistake. The record and

earlier federal opinions agree with the facts as recited above.

of law de novo. Juarez v. Menard, Inc., 366 F.3d 479, 481

(7th Cir. 2004); Fillmore v. Page, 358 F.3d 496, 505 (7th Cir.

2002).

I. BACKGROUND

In 1977 RJLC-1 Land Trust (RJLC) entered into a

contract with Wal-Mart for the construction and lease of a

commercial property in Marion, Illinois. RJLC then gave a

mortgage to Republic Mortgage (Republic) and assigned the

lease with Wal-Mart to Republic. Wal-Mart moved into the

newly constructed retail space in 1979. Shortly thereafter,

RJLC sold the property to Lancaster Trust and took back a

second mortgage and assignment of rents.1

 Sometime later,

RJLC ceased to exist and the mortgage and assignment it

held ultimately went to Roberta Castellano, Marion

Castellano’s wife. A tornado struck the building in 1982 and

caused substantial damage, particularly to the roof. WalMart undertook the necessary repairs under the emergency

provisions of the lease. 

By 1985 Lancaster had sold the property to Alan Sagner,

who, in turn, sold the property to Marion Partners (no

relation to Plaintiff Marion Castellano). In 1985, Wal-Mart

added to the building by constructing an addition on

neighboring property and removing one wall of the leased

premises to join the addition to the original building. Then,

in 1987 Wal-Mart negotiated a third amended lease with

Marion Partners. 

By 1990 the roof had begun to leak and continued to do so

for a number of years. On May 5, 1997, Wal-Mart sent a

letter to Marion Partners which purported to terminate the
No. 03-2953 3

lease for Marion Partners’ failure, or, more to the point,

financial inability to fix the leaks. The lease was not

terminated at that time. Marion Partners, however, had

had enough and transferred the property to VistaCorp.

Roberta Castellano then declared the mortgage she held in

breach for wrongful transfer. VistaCorp ended up transferring the property to VP Land Trust—the legal beneficiary

of which was J.D. Castellano, son of Roberta and Marion

Castellano. Title was later transferred from VP Land Trust

to Marion Castellano. Wal-Mart ultimately terminated the

lease, moved out, and ceased paying rent.

When Wal-Mart moved out, the building was left in postaddition condition, i.e. it was missing one wall where it was

attached to the adjoining property. Castellano sued for

breach of contract, alleging that Wal-Mart had breached its

duty to restore the common wall between the buildings. 

In October 1998, a pair of letters were exchanged between

the attorneys for Wal-Mart and Castellano. Castellano

argued below that these letters constituted a partial

settlement agreement wherein Wal-Mart would deed the

building to Castellano in exchange for a release from the

duty to restore the common wall. Castellano, after receiving

the letter from Wal-Mart, began negotiations to sell the

property to Rural King. Wal-Mart did not deliver the deed

until April 6, 1999. This was after Castellano’s attorney

sent another letter to Wal-Mart’s attorney, dated March 8,

1999, which memorialized an oral settlement agreement.

The settlement agreement disposed of all outstanding

issues except claims for roof repairs, past and future rents,

removal of carpeting, and repair of tile. Castellano’s third

amended complaint included claims for breach of contract

and fraud. The court disposed of the suit entering summary

judgment in favor of Defendant on some of the claims and

directing a verdict against the Plaintiffs on the remaining

claims. Plaintiffs appeal.
4 No. 03-2953

II. DISCUSSION

A. Partial Settlement

Castellano argues that the October 1998 letters constituted a binding settlement agreement that Wal-Mart

fraudulently refused to honor because it knew that

Castellano was in a dire financial situation. These financial

woes led Castellano to enter into the March 1999 settlement agreement—a situation he says constitutes economic

duress. Illinois law is clear that duress “does not exist

merely where consent to an agreement is secured because

of hard bargaining positions or the pressure of financial

circumstances.” Cont’l Illinois Nat’l Bank and Trust Co. v.

Stanley, 606 F. Supp. 558, 562 (N.D. Ill. 1985). Furthermore, it is clear that Castellano had options— accept the

March 1999 settlement offer or compel Wal-Mart to honor

the October 1998 “agreement” by legal action. Castellano

chose the former and accepted the benefits of the March

1999 settlement agreement. This is not duress. Moreover,

entering into an agreement and accepting the benefits of

that agreement ends the inquiry as to the validity of the

settlement agreement. Joyce v. Year Investments, Inc., 196

N.E.2d 24, 26-7 (Ill. App. 1964). 

Since the March 1999 settlement agreement was binding

and enforceable, then by its own terms, the only issues left

in the case deal with “roof decking issues, roof repair issues,

removal of carpeting from the tile floor, and rents due for

the past and future, less any mitigation.” This is true

despite Plaintiffs’ protestations to the contrary. 

The Castellanos argue that the settlement letter’s language stating, “the only remaining damage issues in this

case . . .” is ambiguous. It is not. The very same letter refers

to the case by docket number. By referring to the case’s

docket number, the agreement unambiguously refers to the

entire case.
No. 03-2953 5

B. Validity of Third Amended Lease

Plaintiffs argue that the third amended lease is invalid

and unenforceable due to the fact that the lessor and lessee

of the property did not get the written consent of the

mortgagees before amending the lease, as required under

the assignments of rents. We disagree.

1.) Validity of Third Amended Lease as it Relates to

Plaintiff—Lessor Marion Castellano

The facts show that Marion Partners, who originally

executed the third amended lease, was a predecessor in

interest to Marion Castellano. Being the successor in interest, Marion Castellano is bound by the terms of the third

amended lease. Sweeting v. Campbell, 119 N.E.2d 237, 240

(Ill. 1954). For the sake of fairness, we note that there is

nothing to indicate that Marion Castellano did not know of

the third amended lease when he acquired the property. In

fact, the lease was discussed in a case between J.D.

Castellano, Marion and Roberta Castellano’s son, and

Marion Partners which was decided in 1990. Castellano v.

Marion Partners, 1990 WL 357916, at *5-6 (S.D. Ill. 1990).

It should also be noted that the original complaint and the

first and second amended complaints named J.D.

Castellano, as sole beneficiary of the V.P. Land Trust, as a

Plaintiff. And, as Plaintiffs themselves note, “from an

equitable standpoint, it would have been unjust for someone

directly responsible for signing the document to now claim

that the signature was ineffective.” We agree. And since

Marion Castellano is a successor in interest, he is, legally

speaking, directly responsible for signing the third amended

lease. Sweeting, 119 N.E.2d at 496-97.
6 No. 03-2953

2 Black’s Law Dictionary defines “wrap around mortgage” as

follows: A second mortgage which wraps around or exists in

addition to a first or other mortgages. Form of secondary financing

typically used on older properties having first mortgages with low

interest rates in which a lender assumes the developer’s first

mortgage obligation and also loans additional money, taking back

from developer a junior mortgage in total amount at an intermediate interest rate.

2.) Validity of Third Amended Lease as it Relates to

Plaintiff—Mortgagee Roberta Castellano

Plaintiffs assert that because the mortgagees did not

consent to the third amended lease, it is unenforceable.

This argument fails. As discussed above, J.D. Castellano

knew of the third amended lease as far back as 1990.

At that time, he was the holder of the wrap around mortgage.2 Castellano, 1990 WL 357916, at *1, 3. J.D. Castellano

and his successor in interest, Roberta Castellano, continued

to accept the assigned rent payments with knowledge of the

third amended lease. By knowingly accepting the benefits

of the third amended lease for such a substantial period of

years, the mortgagee acquiesced to the terms of that lease.

See Maher & Assocs v. Quality Cabinets, 640 N.E.2d 1000,

1007 (Ill. App. 2d 1994) (“A contract is validly modified if

the party which did not propose the changes is shown to

acquiesce in the modification through a course of conduct

consistent with acceptance.”). Furthermore, it was stipulated in the Final Pretrial Order that Roberta Castellano

did not have standing to assert a claim for breach of

contract against Wal-Mart. 

C. Termination of the Lease—Rents and Roof Repair

Plaintiffs’ final colorable issues involve the question of

whether Wal-Mart’s termination of the lease constituted a

breach and, relatedly, whether Wal-Mart was obligated to
No. 03-2953 7

return the building with a repaired roof. Since the third

amended lease was valid and enforceable, we begin our

inquiry there.

The third amended lease put the responsibility for roof

maintenance on the lessor. The facts show that the roof had

been leaking from as early as 1990 and continuing through

1997. Notice of the leaks was provided to the lessor over

twenty-five times. In one instance, the fire department was

dispatched to the store because the leaks had caused

electrical short circuits. The leaks were not repaired and

Wal-Mart terminated the lease by letter on May 5, 1997.

The lease states, “[i]n the event of . . . the breach of any of

the other agreements contained in Lease, this Lease shall

terminate and be of no further effect at the discretion of the

Lessee.” The third amended lease put the duty of roof

maintenance on the lessor. Wal-Mart was well within its

contractual rights in terminating the lease for lessor’s

failure to maintain the roof.

As for the condition of the roof, there is no dispute that

the building was almost totally destroyed by a tornado in

1982. Castellano was aware of this fact. The then-current

lessor refused to repair the building and Wal-Mart completed the repairs under the emergency provision of the

lease. These repairs benefitted the lessor as the lessee had

no duty whatsoever to make those repairs. Both the original

and the third amended lease make clear that the condition

of the roof was solely the responsibility of the lessor.

Plaintiffs attempt to put the duty to repair the roof on to

Wal-Mart by pointing to a provision of the original lease

which says “[e]xcept for the obligations of Lessor under

paragraphs 8 and 9 of this lease, Lessee agrees, to maintain

the interior of the demised premises and shall repair any

damage caused by any act of, or by negligence of, the

Lessee, its contractors, Licensees, agents, or Employees.”

They argue that this provision makes Wal-Mart responsible
8 No. 03-2953

for the condition of the roof because Wal-Mart hired the

contractors to do the repairs after the 1982 tornado. 

Paragraph 9 of the original lease puts the duty to maintain the roof on the lessor. It was due to the lessor’s inaction that Wal-Mart made the roof repairs. As the repairs

were the duty of the lessor, any repairs made by Wal-Mart

under the emergency provision of the lease were done for

the benefit of the lessor. The language of the original lease

bears this out. It expressly excepts the obligations of the

lessor from those duties assigned to the lessee; “[e]xcept for

the obligations of Lessor under paragraphs 8 and 9 of this

lease . . . .”

Finally, Plaintiffs attempt to argue that Wal-Mart

committed fraud by installing a roofing system which did

not match the original construction and/or concealing facts

regarding the nature of the repairs. The district court dismissed these claims as being untimely. Plaintiffs did not

address the issue of timeliness in their brief to this court.

Without argument otherwise, we find no error in the

district court’s decision.

AFFIRMED

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—6-24-04