IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

WEC98C-4 LLC,

 Plaintiff,

v.

SAKS INCORPORATED,

 Defendant.

 

TOCU II LLC,

 Plaintiff-Intervenor,

v.

SAKS INCORPORATED,

 Defendant.

Case No. 20 C 4363

Judge Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

For the following reasons, the Court denies Defendant Saks 

Incorporated’s motion to dismiss the complaint (Dkt. No. 19) and 

motion to dismiss the complaint in intervention (Dkt. No. 25.)

I. BACKGROUND

In 1985, the Plaintiff landlord’s predecessor in interest and 

the predecessor in interest to a Bon-Ton Stores, Inc.’s subsidiary, 

CPS Department Stores, Inc. (“Tenant”), entered into a Lease.

(Compl. ¶ 10, Dkt. No. 1; see also Lease, Compl., Ex. 1, Dkt. No. 

1-1.) The Lease related to a piece of property located in the North 

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Riverside Park Mall in North Riverside, Illinois for the operation 

of a Carson Pirie Scott department store. (Compl. ¶ 9.) 

On August 5, 1998, Red Mountain Funding, LLC (“Original 

Lender”), made a loan to Plaintiff landlord in the amount of 

$14,012,500.00 memorialized by a promissory note, a mortgage 

agreement, and an assignment of lease and rents (“ALR”).

(Intervenor Compl. ¶ 11, Dkt. No. 23.) On the same date, Proffitt’s 

Inc., the predecessor in interest to Defendant Saks Inc., executed 

a written Lease Guaranty in favor of Plaintiff landlord as it 

related to the Tenant’s obligations under the Lease, including 

prompt payment of its rent. (Compl. ¶ 13, see also Lease Guaranty, 

Compl., Ex. 4, Dkt. No. 1-4.) 

In 2004, Original Lender and Plaintiff landlord split the 

promissory note into two loans: Note A in the amount $8,372,716.00

and Note B in the amount of $4,924,759.00. (Intervenor Compl. 

¶ 14.) At some time later, the Original Lender endorsed Note A and 

assigned the mortgage and ALR to Plaintiff-Intervenor, TOCU II, 

LLC. (Id. ¶ 15.) 

On February 4, 2018, Tenant’s parent company, the Bon-Ton 

Stores, Inc., sought bankruptcy protection in the United States

Bankruptcy Court in the District of Delaware. (Id. ¶ 16.) After 

the filing, Tenant failed to make a full rental payment for the 

month of February 2018 as required by the Lease. (Compl. ¶ 17.) At 

about the same time, Plaintiff landlord failed to make required 

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mortgage payments. (Intervenor Compl. ¶¶ 17–18.) These failures 

resulted in default. (Compl. ¶ 22.) And, on September 14, 2018, 

TOCU II brought a foreclosure action in Illinois state court. 

(Intervenor Compl. ¶ 23.) The state court appointed a receiver to 

oversee the premises. (Id. ¶ 24.) The receiver immediately 

attempted to re-let the premises. (Id. ¶ 25.) 

On November 12, 2019, the state court entered a judgment of 

foreclosure in favor of TOCU II. (Id. ¶ 26.) This permitted the

premises to be sold at a judicial sale and a judgment in the amount 

of $10,548,701.86 was entered against the Plaintiff landlord. 

(Id.; see also Judgment, Intervenor Compl., Ex. D, Dkt. No. 23.) 

On January 10, 2020, the judicial sale was held, and the property 

was sold to TOCU II for $2,250,000, which was its bid. (Intervenor 

Compl. ¶ 27.) Under the terms of the ALR, the Plaintiff landlord, 

as borrower, irrevocably assigned to TOCU II all of its interest 

in the Lease Guaranty. (Id. ¶ 29.) 

The Lease Guaranty states in relevant part:

NOW, THEREFORE, in consideration of and as an 

inducement for the Landlord's purchase of the Demised 

Premises and the granting, execution and delivery of 

the Second Amendment (the Original Lease, as amended 

by the First Amendment and the Second Amendment, is 

hereinafter called the “Lease”), and other good and 

valuable consideration, the receipt and adequacy of 

which are hereby acknowledged by the undersigned,

Guarantor, intending to be legally bound, hereby 

guarantees to Landlord the full and prompt payment 

when due of all Basic Rent, additional rent and any 

and all other sums and charges payable by Tenant under 

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the Lease, and the full, faithful and prompt 

performance and observance of all the covenants, 

terms, conditions, and agreements therein provided to 

be performed and observed by Tenant (collectively, 

the “Obligations”); and Guarantor does hereby become 

surety to Landlord for and with respect to all of the 

Obligations.

Guarantor hereby covenants and agrees to and with 

Landlord that if default shall at any time be made by 

Tenant in the payment of any such rent or other sums 

or charges payable by Tenant under the Lease or in 

the performance of any of the covenants, terms, 

conditions or agreements contained in the Lease, 

Guarantor will forthwith pay such rent or other sums 

or charges to Landlord, and any arrears thereof, and 

will forthwith faithfully perform and fulfill all of 

such covenants, terms, conditions and agreements, and 

will forthwith pay to Landlord all damages and all 

costs and expenses that may arise in consequence of 

any default by Guarantor hereunder (including, 

without limitation, all reasonable attorneys' fees 

incurred by Landlord or caused by any such default 

and/or by the enforcement of this Guaranty).

This Guaranty is an absolute and unconditional guaranty

of payment (and not of collection) and of performance

and is a surety agreement. Guarantor's liability

hereunder is direct and may be enforced without

Landlord being required to resort to any other right,

remedy or security and this Guaranty shall be

enforceable against Guarantor, without the necessity

for any suit or proceedings on Landlord's part of any

kind or nature whatsoever against Tenant, and without

the necessity of any notice of non-payment, nonperformance or non-observance or the continuance of

any such default or of any notice of acceptance of this

Guaranty or of Landlord's intention to act in reliance

hereon or of any other notice or demand to which

Guarantor might otherwise be entitled, all of which 

Guarantor hereby expressly waives; and Guarantor hereby

expressly agrees that the validity of this Guaranty

and the obligations of Guarantor hereunder shall in

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nowise be terminated, affected or impaired by reason of

the assertion or the failure to assert by Landlord

against Tenant, of any of the rights or remedies

reserved to Landlord pursuant to the provisions of the

Lease.

This Guaranty shall be a continuing Guaranty, and 

(whether or not Guarantor shall have notice or 

knowledge of any of the following) the liability and 

obligation of Guarantor hereunder shall be absolute 

and unconditional and shall remain in full force and 

effect without regard to, and shall not be released, 

discharged or in any way impaired by, and shall not 

be subject to any reduction, imitation, termination, 

defense, offset, counterclaim or recoupment as a 

result of (a) any amendment or modification of, or

supplement to, or extension or renewal of, the Lease 

or any assignment or transfer thereof; (b) any 

exercise or non-exercise of any right, power, remedy 

or privilege under or in respect of the Lease or this 

Guaranty or any waiver, consent or approval by

Landlord with respect to any of the covenants, terms, 

conditions or agreements contained in the Lease or 

this Guaranty or any indulgences, forbearances or 

extensions of time for performance or observance 

allowed to Tenant or Guarantor from time to time and 

for any length of time; (c) any increase in, addition 

to, exchange or release of, or non-perfection of any 

lien on or security interest in, any collateral or any 

release or amendment or waiver of or consent to any 

departure from or failure to enforce any other 

guarantee, for all or any of the Obligations; (d) any 

bankruptcy, insolvency, reorganization, arrangement,

readjustment, composition, liquidation, dissolution or 

similar proceeding relating to Tenant, or its

properties, or Guarantor including, without limitation, 

rejection of the Lease or guaranteed Obligations in

such bankruptcy; . . .

(Lease Guaranty at 1–2.) 

Plaintiff sued Defendant based on alleged breach of the Lease 

Guaranty. Prior to Defendant’s response, TOCU II requested and was 

granted leave to intervene. TOCU II, the current holder of Note A, 

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the mortgage, and the ALR that includes the Lease Guaranty, filed 

a complaint in intervention. TOCU II essentially makes the same 

claim as Plaintiff. Defendant now moves to dismiss both the 

complaint and the complaint in intervention pursuant to Fed. R. 

Civ. P. 12(b)(1) & 12(b)(6).

II. LEGAL STANDARD

A motion to dismiss under Rule 12(b)(1) tests the 

jurisdictional sufficiency of the complaint. See Fed. R. Civ.

P. 12(b)(1). Defendant asserts a factual challenge to Plaintiff’s

and TOCU II’s complaints. See Silha v. ACT, Inc., 807 F.3d 169, 

173 (7th Cir. 2015) (noting that in evaluating a challenge to 

subject matter jurisdiction, a court must first determine whether 

a defendant has raised a factual or facial challenge). “A factual 

challenge contends that there is in fact no subject matter 

jurisdiction, even if the pleadings are formally sufficient. Id.

(quotation and citation omitted). “In reviewing a factual 

challenge, the court may look beyond the pleadings and view any 

evidence submitted to determine if subject matter jurisdiction 

exists.” Id.; Apex Digit., Inc. v. Sears, Roebuck & Co., 572 F.3d 

440, 444 (7th Cir. 2009). The plaintiff bears the burden of 

establishing the elements necessary for jurisdiction. See Silha, 

807 F.3d at 173.

A Rule 12(b)(6) motion challenges the legal sufficiency of 

the complaint. To survive a Rule 12(b)(6) motion, the complaint’s 

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allegations must meet a standard of “plausibility.” Bell Atl. Corp. 

v. Twombly, 550 U.S. 544, 564 (2007). A claim is facially plausible 

“when the plaintiff pleads factual content that allows the court 

to draw the reasonable inference that the defendant is liable for 

the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 

(2009). “[T]he plausibility determination is a context-specific 

task that requires the reviewing court to draw on its judicial 

experience and common sense.” W. Bend Mut. Ins. Co. v. Schumacher, 

844 F.3d 670, 676 (7th Cir. 2016) (quotation and citation omitted). 

III. DISCUSSION

Defendant moves to dismiss both the complaint and the 

complaint in intervention. It raises four arguments in support of

dismissal: (1) Plaintiff and TOCU II lack standing; (2) Plaintiff 

and TOCU II waived their right to rent by failing to bring a claim 

against Tenant in bankruptcy court; (3) Tenant was excused from

performance of the Lease because of the mall’s transformation; and

(4) Plaintiff and TOCU II failed to plead mitigation. The Court 

addresses each of these arguments as follows.

A. Lack of Standing

Defendant’s lack of standing claim is based on its contention 

that it was a surety for the Tenant, its principal. And, according 

to surety law, a surety stands in the place of its principal and 

if principal owes nothing the surety as its stand-in also owes 

nothing. This argument, however, flies in the face of the Lease 

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Guaranty and Illinois law. The Lease Guaranty clearly states that 

it is “an absolute and unconditional guaranty of payment” and 

“Guarantor’s liability hereunder is direct.” (Lease Guaranty at 

2.) The Illinois Supreme Court states: “[a] surety is an insurer 

of the debt or obligation, while a guarantor is an insurer of the 

ability or the solvency of the principal.” JPMorgan Chase Bank, 

N.A. v. Earth Foods, Inc., 939 N.E.2d 487, 495 (Ill. 2010) (citing 

28 C.J. §§ 4, 5, at 890–91 (1922)). “A guaranty is a contract and 

should be interpreted according to the standards that govern the 

interpretation of contracts in general.” T.C.T. Bldg. P’ship v. 

Tandy Corp., 751 N.E.2d 135, 139 (Ill. App. Ct. 2001). Moreover, 

an Illinois Appellate Court has stated that: 

[A] guarantee is to be strictly construed in favor 

of the guarantor such that the guarantor is 

according the benefit of any doubt that arises from 

the contract language. The guarantor is entitled to

such benefit, however, only where some doubt arises 

as to the meaning of the guaranty language. Where 

the terms of a guaranty contract are clear and 

unambiguous, they must be given effect as written

and under such circumstances, the meaning of a 

guaranty is a question of law.

Id. at 139–40 (internal citations omitted). To argue that a 

tenant’s release somehow releases the guarantor from an obligation 

to pay rent due completely misstates the role of the guarantor

under the clear terms of the Lease Guaranty in this case. The main 

purpose of having a guarantor is to protect the holder of the 

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guaranty in the event that the principal cannot make required

payments.

As far as the Plaintiff’s standing is concerned (as opposed 

to the Plaintiff-Intervenor), even though Plaintiff assigned all 

of its interest in the Lease Guaranty to TOCU II, Plaintiff still 

has standing. Under the terms of the Lease Guaranty, in addition 

to rents, the Guarantor unconditionally guarantees “all damages 

and all costs and expenses that may arise in consequence of any 

default by Guarantor.” (Lease Guaranty at 2.) This means that 

Plaintiff may be entitled to consequential damages that it may 

have incurred as a result of the Lease default. It is too early 

for the Court to say that there are none. Therefore, this argument 

fails.

B. The Waiver Argument

Defendant next argues that bankruptcy law allows the Tenant 

to reject executory contracts, including leases, and the 

bankruptcy court allowed Tenant to do so with respect to the Lease

in this case. Therefore, according to Defendant, the landlord (here

Plaintiff and TOCU II) had “the right to submit a pre-petition 

claim for any damages resulting from the rejection of the Lease.”

(Compl. Dismissal Memo. at 10, Dkt. No. 20.) And, having failed to 

do so, they waive their rights to such damages.

This argument also flies in the face of the clear language of

the Lease Guaranty. The Lease Guaranty indicates, “the liability 

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and obligation of Guarantor hereunder shall be absolute and 

unconditional . . . and shall not be released, discharged or in 

any way impaired by . . . (d) any bankruptcy . . . relating to 

Tenant . . . including, without limitation, rejection of the Lease

. . . .” (Lease Guaranty at 2.) Under the clear terms of the Lease 

Guaranty, this argument fails.

C. Transformation of The Mall

Support for this claim is a local newspaper article, stating

that the Riverside Mall lost two major tenants in 1992 and 2001.

(See Newspaper Article, Compl. Dismissal Memo., Ex. A, Dkt. No. 

20-1.) Defendant contends that the loss of these two major tenants 

transformed the mall, thus excusing the Tenant from performance. 

This excuse, Defendant argues, also lets the Guarantor off the 

hook.

While a local news article is not the type of document that 

can be relied upon on to support a motion to dismiss, this argument

also fails to account for the fact that Defendant guarantor

executed a “Guarantor Estoppel Certificate” in 2017. (Compl. ¶ 15, 

see also Guarantor Estoppel Certificate, Compl., Ex. 5, Dkt. No.

1-5.) In this document, Defendant expressly certified to Plaintiff

that the Lease Guaranty remained in full force and effect as of 

that date. The Defendant executed the Guarantor Estoppel 

Certificate long after the exits of the two tenants described in 

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the news article relied upon here. Accordingly, this argument 

fails.

D. Failure to Mitigate

Finally, Defendant makes a dubious argument that Plaintiff 

and TOCU II had an obligation to mitigate damages. It gets there

by quoting from a provision in the Illinois Forcible Entry and 

Detainer Act that concerns a landlord’s duty to mitigate after it 

has taken possession of the leased premises. Whether this defense 

can be enforced against a holder of a guaranty is doubtful, and 

Defendant has cited no cases explicitly holding as such. Even if 

there is a duty to mitigate, however, TOCU II has pleaded an 

attempt to mitigate. TOCU II pleaded that a receiver was appointed 

to supervise the property, and the receiver listed the property

for sale with a major brokerage firm. Moreover, such an argument, 

if it has legs, is better left for summary judgment. This argument 

fails.

IV. CONCLUSION

For the foregoing reasons, the Court denies Defendant Saks 

Incorporated’s motion to dismiss the complaint (Dkt. No. 19) and 

motion to dismiss the complaint in intervention (Dkt. No. 25.)

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IT IS SO ORDERED.

Harry D. Leinenweber, Judge

United States District Court

Dated: 12/7/2020

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