Court Opinion

ID: 9819648
Source: CourtListenerOpinion
Date Created: 2023-09-01 06:29:25.980364+00
Date Added: 2024-06-11T07:38:31.529727
License: Public Domain

PRESIDING JUSTICE O’MALLEY, dissenting: A guarantor is a favorite of the law. Hensler v. Busey Bank, 231 Ill. App. 3d 920, 926 (1992). He is entitled to stand on the strict terms of his obligation (McHenry State Bank v. Y&A Trucking, Inc., 117 Ill. App. 3d 629, 633 (1983)) and is accorded the benefit of any doubt arising from the guaranty language (T.C.T. Building Partnership, 323 Ill. App. 3d at 119). The majority has no doubt that Teal is liable for holdover rent because “the guaranty unambiguously states that the guarantor will uphold ‘all covenants of this lease,’ and one of the lease covenants is the holdover provision.” 359 Ill. App. 3d at 1028. The terms of the guaranty are not quite so clear, in my view. The crux of the dispute here is the meaning of the term “covenant,” which is not provided in the lease or guaranty. The term “covenant,” in its wide sense, is used to indicate a contract, or an agreement “to act, or to refrain from acting, in a certain way.” 20 Am. Jur. 2d Covenants, Conditions and Restrictions § 9 (1995). I do not share the majority’s certainty that Dillavou was abiding by a covenant of the lease when she held over. As far as I can tell, nothing in the lease required Dillavou to hold over, and nothing in the lease required Roth to allow Dillavou to remain. Rather, Dillavou remained on the premises of her own accord and Roth allowed her to remain of his own accord. These choices appear to have been entirely unconstrained by the lease. It merely begs the question to note, as does the majority repeatedly, that a month-to-month tenancy was “contemplated” in the lease. 359 Ill. App. 3d at 1031. Obviously, the lease did so provide, but a guarantor’s liability is not necessarily coextensive with the obligations of the lease. It is all a question of what the guaranty requires. Here, Teal was obligated to uphold “all covenants” of the lease, but the genesis of the month-to-month tenancy did not appear to lie in the fulfillment of any covenant, but in the free choices of landlord and tenant. Indeed, if the holdover provision did not exist, a month-to-month tenancy would still have arisen, by operation of the common law. See A.O. Smith Corp., 231 Ill. App. 3d at 399. Teal should not be held liable for an arrangement that apparently did not arise by operation of the covenants she pledged to uphold. Where there is any doubt, the guaranty must be construed in favor of the guarantor. A rationale along these fines was articulated by the courts in Home Owners’ Loan, 69 S.D. 81, 6 N.W.2d 446, and Trolley Square Associates v. Nielson, 886 P.2d 61 (Utah App. 1994). In Home Owners’ Loan, the court said: “The written lease does not purport to grant to [the lessee] any right in the leased premises beyond the eighteen month period. Any occupancy of premises by [the lessee] after this period must, under the express terms of the lease, be with the consent of the lessor, and a consent other than the consent which the lessor gave when it signed the lease. We are, therefore, of the opinion that the occupation of the premises by [the lessee] during the period here in dispute was not under the written lease, but by reason of the consent of the lessor given entirely separate and apart from any stipulation contained in the lease.” Home Owners’ Loan, 69 S.D. at 83-84, 6 N.W.2d at 447. The same rationale was echoed in Trolley Square: “The lease agreement did not create the obligation to pay rent under the month-to-month tenancy. Instead, the lease created an obligation to pay rent through December 31, 1984. While the lease agreement provides that any holdover after the expiration of the term, or extended term, was to be a month-to-month tenancy at the rental rate of the last month of the lease term, this did not obligate [the lessee] to stay, nor did it obligate [the lessor] to keep [the lessee] as tenants [sic]. The guaranty of lease only covered the obligations under the lease, not obligations incurred after the lease expired.” Trolley Square, 886 P.2d at 69. This, I believe, is the proper way of analyzing this case. The potential scope of the guarantor’s liability is relevant to the interpretation of a guaranty. See Home Owners’ Loan, 69 S.D. at 83, 6 N.W.2d at 447. The lease here places no limit on the duration of a month-to-month tenancy. Thus, under the majority’s construction, the guaranty creates potentially indefinite liability for Teal. Confronted with a lease and guaranty relevantly similar to those now in question, the court in Home Owners’ Loan rejected as “absurd” such a construction as the majority adopts today. 69 S.D. at 83, 6 N.W.2d at 447.