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Peoples Bank Bldg., Inc. v. Pixley & Ehlers

DECEMBER 15, 1972.




APPEAL from the Circuit Court of Cook County; the Hon. LESTER JANKOWSKI, Judge, presiding. MR. JUSTICE ENGLISH DELIVERED THE OPINION OF THE COURT:

This suit was brought by plaintiff-lessor against two lessees and their guarantor to recover damages caused by the lessees' alleged breach of an extension of the lease for the rental of certain restaurant premises. After plaintiff had presented its case, the trial judge, hearing the case without a jury, granted defendants' motion to dismiss and entered a judgment in favor of defendants, from which plaintiff now appeals.

Three contentions are presented on appeal:

(1) The lessees validly exercised their option to extend the lease for a five-year period.

(2) The lessor properly notified the lessees of their breach of the terms of the lease prior to bringing this suit.

(3) The trial court erred in dismissing the cause and entering judgment in favor of defendants.

As of June 8, 1953, the entire building located at 1540 West Madison Street, Chicago, was owned by P & E Service Corporation, and the portion of the premises in question was occupied under lease by defendant Pixley & Ehlers, Inc., for use as a restaurant.

On June 8, 1953, Pixley & Ehlers, Inc., and P & E Service Corporation entered into a new ten-year lease for the period beginning July 1, 1953, and ending June 30, 1963. This will be referred to as the original lease, under which the lessor's interest was assigned to plaintiff on May 31, 1963.

On July 26, 1962, the original lease was amended by an agreement which extended its term for five years from July 1, 1963, through June 30, 1968, and which gave lessee an additional five-year extension option from July 1, 1968, to June 30, 1973. This option was to be exercised by lessee by giving lessor written notice 180 days before June 30, 1968, the last day of the original lease as extended. All the terms and covenants of the original lease were to continue in full force, and the rental was to continue at $1000 per month.

On or about May 31, 1963, Pixley & Ehlers, Inc., subleased the restaurant premises to defendant West Restaurant Corp. for the period June 1, 1963, through June 28, 1969. The sublease recited the existence of the option to extend the term of the lease for the additional five-year period ending June 30, 1973. West Restaurant Corp. agreed to comply with all of the covenants of the original lease as amended by the extension agreement, and plaintiff consented to the sublease, but without releasing Pixley & Ehlers, Inc. The obligations of the sublessee were guaranteed by defendant Victor West.

The first conversation which took place in connection with defendants' exercising their option to extend the lease beyond June 30, 1968, was in July or August, 1967, when defendants' attorney called Samuel F. Hillman, president of plaintiff corporation. When the attorney suggested a reduction in rent, it was refused by Hillman and the discussion ended. About a month later, defendants' attorney again contacted Hillman by telephone and told him that defendants would exercise their option to renew the lease.

In the fall of 1967, Victor West visited Hillman to discuss a possible plan for expanding the leased premises. During this discussion, the two parties resolved all of the various things that were going to be done in relation to the option to renew the lease. West requested, and Hillman agreed, that without charging any more rent, plaintiff would provide additional space in the building adjacent to the restaurant for the creation of a private dining room, but that lessees would remodel the added space at their own expense. It was also agreed that the lessor would pay for the installation of separate heating and hot water facilities for the entire leased premises, but that the lessees would pay for the fuel, maintenance, and repairs of said facilities.

Mrs. Ellsworth, Hillman's secretary, secretary of plaintiff corporation and manager of the instant premises, was also a party to this conversation. When West was ready to leave, Hillman directed Mrs. Ellsworth to proceed with getting estimates for the work which had been agreed upon. She contacted Frank Ueker, a general contractor who had been doing the repair and maintenance work on the premises for about 20 years. Ueker was directed by Hillman to discuss the remodeling with West and to proceed with the job at West's convenience. As West was concerned about the cost of the heating facilities, Ueker was also directed by Hillman to ask the gas company to make a survey of the leased premises and determine the heating cost. This survey was done to West's satisfaction.

In November, 1967, Ueker met with West at the restaurant to discuss the remodeling which was to be done at West's expense. West was informed by Ueker that the contractor would have to make his own sketches, find out the building requirements, and get an estimate of the cost before starting. They also discussed what was to be done about the heating facilities, and Ueker informed West that installation of the new heating and plumbing would be done as soon as the weather moderated.

On December 28, 1967, three days before the expiration of the lessees' 180-day option to renew the lease, defendants Pixley & Ehlers, Inc., and West Restaurant Corp. ...

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