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Solomon v. Geller

APRIL 23, 1964.

LEONARD

v.

SOLOMON, PLAINTIFF-APPELLANT,

v.

NATHAN GELLER ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. CHARLES S. DOUGHERTY, Judge, presiding. Decree affirmed.

MR. PRESIDING JUSTICE SCHWARTZ DELIVERED THE OPINION OF THE COURT.

The plaintiff has appealed from a decree in a declaratory judgment proceeding finding that the defendants, who had leased property to the plaintiff in Chicago, Illinois, known as the Lincoln Motel, had not terminated the lease by taking possession of the premises, and that plaintiff-lessee was not entitled to the return of a deposit of $20,000 given by him as security for the performance of his obligations under the lease.

The trial court found that defendants took possession after nonpayment of the October 1962 rent and after both the plaintiff and plaintiff's assignee M & S Motels Co., Inc., (M & S) had refused to stay in possession and operate the motel, but instead voluntarily delivered possession to defendants when it appeared that if they did not do so, the motel would be closed and abandoned.

The principal issues involved concern the application of the doctrine of surrender and acceptance, whether the findings of the trial court are supported by the evidence, and whether in any event the defendants were entitled to retain the security deposit.

The lease was signed on February 10, 1960. It leased the motel to plaintiff for twenty years at a rental of $2,500 per month, or a total rental of $600,000 for the period. A supplemental agreement was also executed the same day, covering more fully the conditions under which an assignment could be made by the lessee.

Following the execution of the lease and supplemental agreement, plaintiff went into possession and operation of the motel. On October 17, 1961 he made a deal for the sale of the motel and executed an assignment of the lease to the purchaser, a corporation known as M & S Motels Co., Inc. While the lease and the supplemental agreement contained provisions for assigning or subletting without the lessors' consent, the assignment to M & S evidently was considered by the parties not to be within the scope of those provisions, and plaintiff secured defendants' consent in a separate instrument which provided that the lessee guaranteed the performance by the assignee of all the covenants, agreements and conditions contained in the lease, and that no rights of lessors to performance of the obligations of the lessee, or rights in and to the security deposit should be diminished or extinguished. A more complete resume of the applicable provisions of the separate instrument of assignment is appended below to show its breadth and scope. *fn1

Provisions with respect to the security fund were included in the lease and became a part of the assignment of the lease by plaintiff to M & S. A resume of the relevant provisions is contained in a subjoined note. *fn2

Although plaintiff put M & S into possession, the actual assignment papers were not delivered to it, but were put in escrow, subject to a deposit of $5,000 by M & S on January 2, 1962, and of other deposits to be made by it pursuant thereto, none of which, it seems, M & S made, although it continued in possession even after the escrow papers had been returned to plaintiff. This was the nature of the transaction under which M & S came into possession, and this was the status of the matter at the time it finally gave up possession. It is thus questionable what kind of interest M & S had acquired, and while this is not in direct issue in this litigation, defendants argue plausibly that it illustrates the precarious nature of the enterprise, explains the difficulties which subsequently arose, and supports the findings of the trial court that surrender of possession of the motel to defendants was voluntarily made by plaintiff.

Provisions of the lease pertinent to possession and termination are summarized in a subjoined note below. *fn3

Principal officers of M & S were Leonard A. Slavin, a practicing dentist, and Lawrence B. Mansfield. Each owned 50% of the stock. Mansfield was in active charge of the motel. He disappeared on Labor Day, September 3, 1962. Slavin and one William Durphy took over the operation. On September 19 or 20, 1962, Harold Fein, an attorney for the lessors, had a conversation with one Ferdinand, an attorney for Mansfield. Ferdinand indicated that M & S would be unable to pay the October 1st rent. The October rent was not paid when it came due. On October 5th Slavin, who had previously advanced $5,000 to M & S, told Nathan Geller that he could not pay the rent and that he was giving up possession. Geller said he would talk to his attorney, and asked Slavin to arrange with the manager of the motel to give him (Geller) the keys. Slavin did so, and after 4:00 p.m. that day, the motel was in Geller's possession. The plaintiff Solomon was apprised of the situation and met Geller at the motel that evening. Geller testified that he asked Solomon to accept possession and that Solomon replied he would not do so unless Geller gave him a reduction in rent of $500 a month. Geller said, "I can't do it. I will have talk to by brother about it." Solomon then left.

The next day, Donald Geller, Nathan's son, was placed on the motel payroll and began the management of the motel. Nathan opened a bank account to pay bills, discharged some of the maids, took an inventory, sent a list of missing items to Solomon, and raised the rates. Neither Solomon nor Slavin were consulted on any of these decisions. Later, however, both Solomon and Slavin, according to the testimony of Nathan Geller, were asked to take possession and operate the motel. They refused.

On October 11, 1962, defendants mailed a letter to plaintiff, reciting defaults in the payment of rent, gas bills, electric light bills, telephone bills, water bills and mechanics' lien claims for work done, including one for plumbing and heating, failure to make necessary maintenance repairs, to pay insurance premiums for public liability insurance, and necessary replacement of furniture, furnishings and equipment. Plaintiff received the letter but never replied thereto. The notice further stated that upon failure on the part of the plaintiff to cure these and other prior and subsequent defaults as may be ascertained, the lessors would expend such sums as may be required therefor and look to plaintiff to make payment thereof, together with the rent. It concluded with the following paragraph:

"The undersigned will, without hereby intending to terminate the said lease or your liability thereunder, operate the said business thereon so as to minimize all further loss and damage and will apply the income and proceeds of operation, as may be received from time to time, to the discharge of your liability under said lease for rent and otherwise. Personal property which may have been damaged beyond use will be replaced or repairs made thereto, as may be required, and the cost thereof of such replacement and repairs charged to your account."

The instant suit was commenced by plaintiff on October 22, 1962, some 17 days after defendants had taken possession. On November 13, 1962, a judgment for $5,232.50 representing rent, plus attorneys' fees, ...


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