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Bradley v. S. S. Kresge Co.

June 29, 1954

BRADLEY
v.
S. S. KRESGE CO.



Author: Swaim

Before MAJOR, Chief Judge, and SWAIM and SCHNACKENBERG, Circuit Judges.

SWAIM, Circuit Judge.

This is an action by Robert W. Bradley, the owner of a business property in Springfield, Illinois, occupied under lease by the S. S. Kresge Company, to recover from the Kresge Company certain amounts alleged to be due as additional rent for the years 1949, 1950 and 1951. The District Court entered judgment for the plaintiff in the amount of $6,097.12, and from this the defendant appeals.

The lease was entered into in 1926 between the then owner of the property, plaintiff's predecessor in interest, and the Kresge Company for the latter's use, occupancy and possession of the premises for a term commencing April 1, 1927, and ending September 1, 1958. The lessee contracted to pay a stated annual rental, and it was further provided that the lessee might demolish the building then standing on the premises and replace it with a new structure. It was, in fact, anticipated by the parties that a new building would thus be erected and that the value of both the real estate and improvements would thereby be increased. Accordingly, the lease provided that in addition to the stated annual rental agreed upon, the lessee would pay to the lessor each year, beginning the year after taking possession, an amount equal to any future increase in the taxes imposed on the demised premises arising from an increase in the assessed valuation of the improvements over their assessed value in 1927; and further, beginning in 1938, lessee would pay to the lessor each year an amount equal to any future increase in taxes arising from an increase in the assessed valuation of the land over its assessed value in 1937. This clause of the lease then contained the following significant provision:

"The term 'assessed valuation' wherever used in the foregoing paragraph, is used as meaning the assessed valuation upon which taxes are extended."

In 1927 the assessed value of the improvements then existing on the premises was $3,320.00, and the land was assessed in the year 1937 at a value of $22,960.00. Thus the combined 1927 and 1937 base valuation for improvements and land was $26,280.00, and the lessee was obligated, under the terms of the lease, to reimburse the lessor for any increase in taxes arising from an increase in this base valuation. Shortly after taking possession under the lease Kresge did proceed to raze the old structure and construct a new building, and subsequently the taxes on the property were increased as the parties had anticipated. The tax clause of the lease was thereafter applied without dispute over its meaning until sometime after 1946.

In 1946 the so-called Butler Law, Ill.Rev.St.1953, ch. 120, ยง 627 et seq., enacted by the State Legislature to correct irregularities in the assessment of property for taxes in Illinois, became effective. Prior to that time, property taxes were extended upon the valuations fixed by the local assessing officers of the several counties. And it was well recognized that while the law required all property to be assessed for tax purposes at full cash value, in practice the local assessing officers fixed assessments at varying amounts less than full value. There resulted, accordingly, a total lack of statewide uniformity in the assessment of property for tax purposes. To correct this situation the Butler Law provided for the application by the Department of Revenue of an equalizing factor, or multiplier, to the assessed values locally fixed in the several counties of the state. This factor is designed, in each instance of its application, to vary the local assessments to conform to actual property values. The actual values thus arrived at are the values upon which taxes are extended.

The equalizing factor applicable for each of the years in question in the county where the premises here involved are situated, when applied to the local assessment of these premises, produced a combined land and improvements valuation of $118,800.00 for each of the years 1949 and 1950 and a valuation of $113,380.00 for the year 1951. The District Court found that the amount of taxes which the defendant lessee had agreed, in effect, to pay was to be determined by subtracting from these values the 1927-1937 base valuation and extending against the remainder the applicable rate. The following chart illustrates the method by which the court computed the amount of additional rent due for the years in question:

Combined Base Amount of

Assessed Valuations Increase Increase in

Valuation for in Rate Taxes to be

Land and Land (1937) Assessed Per Paid by

Improvements Imp. (1927) Valuations $100.00 Lessee

1949 $118,800.00 $26,2 80.00 $92,520.00 ...


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