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Bevelheimer v. Gierach

OCTOBER 2, 1975.

DONALD L. BEVELHEIMER ET AL., PLAINTIFFS-APPELLEES,

v.

WILL E. GIERACH, DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Cook County; the Hon. RUSSELL R. DeBOW, Judge, presiding.

MR. PRESIDING JUSTICE MCGLOON DELIVERED THE OPINION OF THE COURT:

Plaintiffs, Oak Lawn Freezer Meats, Inc. (hereinafter sometimes referred to as OLFM), a corporation, and Donald Bevelheimer, president and sole shareholder of said corporation, sued defendant, Will Gierach, an attorney, for damages caused them by defendant's alleged failure to renew a lease. A jury rendered verdicts of $20,000 in favor of Donald Bevelheimer and $10,000 in favor of OLFM and the trial court entered judgment on these verdicts. Defendant then filed a post-trial motion asking for judgment notwithstanding the verdict or in the alternative for a new trial. The trial court ordered that said motion be denied, and finding the jury verdict of $20,000 in favor of Donald Bevelheimer excessive, further ordered a remittitur of $7,500, thus reducing that verdict to $12,500. Defendant now appeals.

Defendant makes the following contentions on appeal: (1) that Bevelheimer was not a proper party plaintiff; (2) that the trial court erred in not ordering a directed verdict in favor of defendant because plaintiffs in another action had terminated the lease by agreement; (3) that the trial court erred in refusing to permit evidence by defendant as to how the renewal of lease options were handled in his practice; and (4) that the trial court erred in refusing to give the jury an instruction concerning breach of contract.

We reverse and remand.

On August 5, 1964, Donald Bevelheimer entered into a written lease with the lessor, Alfred Chiappetti, leasing certain premises located at 4828 West 95th Street in Oak Lawn, Illinois, for a period of three years. This lease contained a provision giving Bevelheimer the right to assign the lease to a corporation to be organized by him and another provision giving Bevelheimer an option to renew the lease for an additional period of three years on three months' notice. Subsequently, Bevelheimer organized Oak Lawn Freezer Meats, Inc., an Illinois corporation, and assigned the lease to said corporation which proceeded to occupy the leased premises. Bevelheimer was president and sole shareholder of OLFM except for the qualifying shares.

Bevelheimer first became acquainted with defendant Will Gierach in August of 1964 after contacting Gierach to seek advice on the above lease entered into with Chiappetti. After Oak Lawn Freezer Meats, Inc., was organized, Gierach was retained as attorney for both Bevelheimer and Oak Lawn Freezer Meats, Inc., for certain matters. Gierach was also the registered agent of the corporation, Oak Lawn Freezer Meats, Inc.

At trial, Bevelheimer testified that he had a conference with Gierach on May 10, 1967, to discuss setting up another corporation to engage in the box lunch business. At this conference Bevelheimer also mentioned to Gierach that it was time to renew the lease of the premises at 4828 West 95th Street. According to Bevelheimer's testimony, Bevelheimer asked Gierach to renew the lease and Gierach replied that he would have his secretary handle the matter. Thomas Riley, an employee of OLFM, substantiated Bevelheimer's testimony in this regard. Riley testified that he was present at the above conference, that the subject of the renewal of the lease arose, and that Gierach said he would have his secretary handle the matter.

Gierach testified that to his knowledge he had no conversation with Bevelheimer in early May concerning the renewal of the lease and that the first concrete knowledge he had that Bevelheimer wanted to renew the lease was on June 8, 1967, when Bevelheimer came into his office with a letter from Chiappetti's attorneys telling Bevelheimer to vacate the leased premises.

Gierach then advised Bevelheimer to begin a declaratory judgment action against Chiappetti asking the court to declare that OLFM had a valid lease for a term commencing on September 1, 1967, and ending August 31, 1970. The declaratory judgment action was filed in the circuit court of Cook County with Gierach representing OLFM in said action. In the complaint for declaratory judgment Bevelheimer alleged that he had numerous conversations with Chiappetti in which Bevelheimer had informed Chiappetti of their election to exercise the option to renew the lease. At the advice of Gierach, the declaratory judgment action was dismissed by way of stipulation with OLFM being allowed to maintain possession of the premises until January 15, 1968. Subsequent to the dismissal of the declaratory judgment action, plaintiffs initiated the instant suit against Gierach.

In the instant case, both Bevelheimer and the corporation sued defendant for his alleged failure to keep his promise to renew the lease and each asked for distinct elements of damages. The corporation sued essentially for loss of profits and Bevelheimer sued for loss of wages of approximately $8,000 a year that the corporation was paying him. The jury was instructed to render two verdicts if it found defendant liable. Finding defendant liable, the jury rendered a verdict of $20,000 in favor of Bevelheimer (later reduced by the trial court to $12,500) and $10,000 in favor of the corporation.

• 1 Defendant first contends that Bevelheimer was not a proper party plaintiff in this case. Plaintiffs counter argue that Bevelheimer and OLFM should be treated as one person and further contend that Bevelheimer had not forfeited any of his rights nor was he released from any of his liabilities under the lease at the time defendant broke his promise to renew the lease. Plaintiffs then cite the following headnote in Illinois Law and Practice:

"While the privity of estate which exists between a lessor and lessee is terminated by an assignment of the lease by the lessee, ordinarily the lessee cannot relieve himself of his contractual liability merely by assigning the lease." (24 Ill. L. & Pr. Landlord and Tenant § 87 (1956).)

While we agree with the above statement of law, a necessary corollary thereto is that a lessee for a term for years who assigns his lease parts with all his rights thereunder. (Byrd v. Peterson (1947), 66 Ariz. 253, 186 P.2d 955; Flynn v. Mikelian (1962), 208 Cal.App.2d 305, 25 Cal.Rptr. 138; Gale Industries, Inc. v. Bristol Farmers Market & Auction Co. (1968), 431 Pa. 464, 246 A.2d 391.) As assignor, Bevelheimer lost his right to enforce the renewal, since such right passed to the assignee corporation, Oak Lawn Freezer Meats, Inc. (Prince v. Alford (1927), 173 Ark. 633, 293 S.W. 36; Drown Motor Car Co. v. Tobias (1930), 102 Vt. 457, 150 A. 136.) The option to renew the lease, however, runs with the land and is enforceable by the assignee, OLFM. Sutherland v. Goodnow (1884), 108 Ill. 528; Kaybill Corp., v. Cherne (1974), 24 Ill. App.3d 309, 320 N.E.2d 598; Loudave Estates, Inc. v. Cross Roads Improvement Co. (1961), 28 Misc.2d 54, 214 N.Y.S. 2d 72.

• 2, 3 Plaintiffs, however, argue that Bevelheimer and the corporation should be treated as one person. We disagree. A corporation is an entity separate from its shareholders and one who seeks to have the court apply an exception must seek that relief in his pleading and carry the burden of proving actual identity. (Divco-Wayne Sales Financial Corp. v. Martin Vehicle Sales, Inc. (1963), 45 Ill. App.2d 192, 195 N.E.2d 287.) In the instant case, plaintiff has not asked for such relief in his pleading nor has he attempted to prove facts sufficient to establish actual identity. Moreover, even if all the stock of a corporation is owned by one person, the corporation is an entity different from that of the stockholder. (Oppenheim & Strauss v. Mower (1915), 193 Ill. App. 48 (abstract opinion).) The general rule that a corporation and its stockholders are deemed separate entities is subject to the qualification that the separate identity may be disregarded in exceptional situations where it otherwise would present an obstacle to the due protection or enforcement of public or private rights. (Ohio Tank Car Co. v. Keith Ry. Equipment Co. (7th Cir. 1945), 148 F.2d 4, cert. denied (1945), 326 U.S. 730.) In ...


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