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Smith v. Roberts

OPINION FILED NOVEMBER 30, 1977.

SAMUEL B. SMITH ET AL., PLAINTIFFS AND COUNTERDEFENDANTS-APPELLANTS,

v.

RICHARD A. ROBERTS, EX'R OF THE ESTATE OF JOSEPH C. ROBERTS, DECEASED, ET AL., DEFENDANTS AND COUNTERPLAINTIFFS-APPELLEES.



APPEAL from the Circuit Court of Sangamon County; the Hon. SIMON L. FRIEDMAN, Judge, presiding.

MR. JUSTICE MILLS DELIVERED THE OPINION OF THE COURT:

We have here a lease.

And with it we have the doctrine of commercial frustration.

The trial judge held that the doctrine applied and that the lease was terminated thereby.

He was right. We affirm.

The Smiths and Roberts Brothers entered into a lease agreement for the rental of the first floor and basement of property located in Springfield at 111-113 North Sixth Street. Roberts Brothers was already operating a men's clothing store next to the leased premises and intended to make an opening through their east wall and Smith's west wall in order to establish a department which would be called the Gas Light Room. Thereafter, the main store building of Roberts Brothers was completely destroyed by fire. Questions concerning the rights and liabilities of the parties under the lease were raised as a result of that conflagration and those questions then ripened into litigation.

After Roberts Brothers failed to reoccupy the leased premises — which suffered only smoke damage — the Smiths filed suit for breach of the lease. Roberts Brothers then counterclaimed for damages against the Smiths alleging that the Smiths had caused delay in the reconstruction of Roberts Brothers' premises and asked for a determination that the lease was terminated. The trial court found that the lease had been terminated because the destruction of Roberts Brothers' main store excused performance on its part. The court also held that the tenant (Roberts Brothers) was not damaged by the landlords (Smiths) during the construction of the tenant's new building since Roberts Brothers had not complied with statutory notice requirements and, furthermore, that Roberts Brothers had not adequately proved the costs incurred in shoring up and reinforcing the Smith wall.

We concur with the trial judge and affirm.

In their complaint, the Smiths alleged that the clothing store had violated its obligations under the lease and that the leased premises had been restored and repaired according to provisions of the lease. Roberts Brothers' defense to the complaint was two-fold: (1) the lease had been terminated because of the "doctrine of commercial frustration"; and (2) the lease had been terminated because of the "doctrine of constructive eviction." We need only consider the first defense since it is dispositive of the question.

• 1 At issue is the doctrine of commercial frustration:

"The doctrine of frustration is an extension of this exception to cases where the cessation or nonexistence of some particular condition or state of things has rendered performance impossible and the object of the contract frustrated. It rests on the view that where from the nature of the contract and the surrounding circumstances the parties when entering into the contract must have known that it could not be performed unless some particular condition or state of things would continue to exist, the parties must be deemed, when entering into the contract, to have made their bargain on the footing that such particular condition or state of things would continue to exist, and the contract therefore must be construed as subject to an implied condition that the parties shall be excused in case performance becomes impossible from such condition or state of things ceasing to exist." Leonard v. Autocar Sales & Service Co. (1945), 392 Ill. 182, 187-88, 64 N.E.2d 477, 479-80, cert. denied (1946), 327 U.S. 804, 90 L.Ed. 1029, 66 S.Ct. 968.

The doctrine of commercial frustration is not to be applied liberally. (Greenlee Foundries, Inc. v. Kussel (1973), 13 Ill. App.3d 611, 301 N.E.2d 106.) However, the defense of commercial frustration is a viable doctrine in Illinois and will be applied when the defendant has satisfied two rigorous tests: (1) the frustrating event was not reasonably foreseeable; and (2) the value of counterperformance by the lessee had been totally or near totally destroyed by the frustrating cause. Greenlee, citing Lloyd v. Murphy (1944), 25 Cal.2d 48, 153 P.2d 47.

• 2 The factual circumstances here satisfy these stringent tests. First, although it might be foreseeable that the main Roberts Brothers' store would be destroyed and the leased premises would remain intact, it is a remote contingency to provide for in a lease. The parties were, in fact, diligent enough to put a catastrophe clause in the lease concerning destruction of the leased premises. We find that their failure to include such a clause as to Roberts Brothers' main store was not due to a lack of diligence since such a contingency was not reasonably foreseeable.

• 3 The second horn of the two-prong test is also satisfied — the value of the Smith counterperformance was totally — or nearly totally — destroyed. Although it would be physically possible to operate the leased premises as a separate entity, testimony revealed that operations would have to be changed drastically in order to make the premises self-sufficient. Furthermore, the record clearly demonstrates that the leased premises were never intended to be autonomous. Therefore, the trial court's finding that the existence of the main store was an implied condition of the contract between the parties and that its ...


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