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Dixie Sq. Thom Mcan v. Dixie Sq. Management

OPINION FILED DECEMBER 14, 1977.

DIXIE SQUARE THOM MCAN, INC., ET AL., PLAINTIFFS-APPELLANTS AND CROSS-APPELLEES,

v.

DIXIE SQUARE MANAGEMENT COMPANY, INC., ET AL., DEFENDANTS-APPELLEES AND CROSS-APPELLANTS.



APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR DUNNE, Judge, presiding.

MR. JUSTICE MCNAMARA DELIVERED THE OPINION OF THE COURT:

On July 30, 1975, plaintiffs Dixie Square Thom McAn, Inc. (hereinafter Thom McAn) and Dixie Square Chess King, Inc. (hereinafter Chess King) brought this action seeking a declaration that the commercial lease each had entered into for premises in Dixie Square Shopping Center in Harvey, Illinois, had been cancelled. On August 25, 1976, the trial court granted defendants-lessors' motion for summary judgment. On appeal plaintiffs contend that there exist genuine issues of material fact as to whether defendants breached express and implied obligations pertaining to certain key tenants remaining in the shopping center for the duration of plaintiffs' leases, and as to whether defendants violated certain provisions in the leases concerning security protection which would justify cancellation of the leases. Defendants have filed a cross-appeal from the trial court's denial of their motion to tax costs against plaintiffs.

Plaintiffs Thom McAn and Chess King are each part of national retail chains and are subsidiaries of Melville Shoe Corporation. On August 6, 1970, plaintiffs entered into separate leases for space in the shopping center. Lessor was Dixie Square Shopping Center, Inc. After a series of assignments of the leases, defendant Dixie Square Mall, a limited partnership of which defendant First Wilkow Venture is the general partner, became lessor at the time summary judgment was entered.

From pleadings, affidavits, depositions, and answers to interrogatories, the following facts were before the trial court. In December 1969, Joseph F. Bigos, vice-president of Melville and Joseph B. Clementz, its midwest representative, met with Terry C. MacDonald of the Robert Meyer Corporation which represented Dixie Square Shopping Center. The men met at a real estate industry convention in St. Louis and discussed the possibility of opening stores at Dixie Square. MacDonald offered Bigos and Clementz space in a wing of the shopping center where the principal tenant was Turn-Style, a general retailer and a subsidiary of Jewel Companies, Inc. Bigos reported that conversation to his supervisor, Ray Fogus, who refused to commit plaintiffs to leases without more information. Fogus wished to wait until a traffic pattern developed at the shopping center in order to determine whether there would be sufficient "foot traffic" to support the anticipated business in Melville's stores. In December 1969, Fogus himself inspected the shopping center. Frank Koslosky, regional sales supervisor of Thom McAn, also visited the shopping center in late 1969. Koslosky told Clementz that he estimated Thom McAn could expect $350,000 worth of business per year in the shopping center.

On or about June 6, 1970, MacDonald submitted drafts of the proposed leases to plaintiffs. On July 16, 1970, Melville sent MacDonald a three-page list of changes which it required to appear in the final drafts. Included in the list was the following:

"Add warranty that leases executed with Turn-Style, J.C. Penney, Montgomery Ward for terms of at least 20 years and with F.W. Woolworth for a term of at least 15 years."

Plaintiffs' leasing representatives mailed revised copies of the leases to MacDonald on August 6, 1970. The revised leases contained the following provision:

"Landlord represents, warrants and agrees that non-cancellable leases, except for default, fire or condemnation, have been previously entered into with Turn-Style, J.C. Penney Company and Montgomery Ward (herein called `Key Tenants') for spaces in the Shopping Center as shown by Exhibit `A' hereof, and that the initial terms of said leases are for twenty (20) years each, and has also entered into a lease with F.W. Woolworth for space in the Shopping Center as shown on Exhibit `A' hereof for an initial term of fifteen (15) years."

The Turn-Style store was open from 1969 until January, 1974, when it ceased retail operations at the shopping center. At all times since 1969, Turn-Style has paid rent in accordance with its obligations under its lease. At the time Turn-Style closed its store, there were nine satellite tenants, including plaintiffs, open and operating in the Turn-Style wing. By November 1975, only three of the nine stores, plaintiffs and one other, were still open and operating in that location. In December 1975, plaintiffs ceased operations in the shopping center. In the nine-month period following the Turn-Style closing, Chess King's volume of sales dropped approximately 50 to 60 percent. From 1973 to 1974, Thom McAn's sales volume dropped $94,000. The other tenants in the wing reported similar results. Attempts to secure new tenants for the wing proved unsuccessful.

In their answers to defendants' interrogatories, plaintiffs stated that MacDonald represented that certain key tenants, particularly Turn-Style, would remain in operation in the shopping center for the duration of plaintiffs' leases. In affidavits Bigos and Clementz stated that defendants had warranted that Turn-Style had entered into a noncancellable lease and that the most influential factor affecting plaintiffs' decision to execute the leases was the presence of Turn-Style which would be in operation and which had a reputation as a drawer of foot traffic. In his deposition, Bigos testified that he understood that the key tenant clause required continued operations. However, he further testified that he did not know if such was a legal requirement and that there was no clear understanding one way or another. Clementz died before defendants had an opportunity to take his deposition. In his deposition, MacDonald denied making any representations that Turn-Style or any other key tenant would continue throughout the period of plaintiffs' tenancy.

Koslosky testified in his deposition that he had not been involved in communications relating to whether Turn-Style would remain in operation although he assumed that if Thom McAn would open a store Turn-Style would be operated. Koslosky also stated that Dixie Square induced plaintiffs to lease premises in the Turn-Style wing of the mall because of the proximity to Turn-Style and the high volume of foot traffic which would result.

Michael O'Shea, a former employee of defendants who was responsible for the management of the shopping center, testified at deposition that he was not involved in the present lease negotiations. It was his opinion that the noncancellable paragraph in the leases would be confined to rental payment. However, he also stated that if he included such a clause in a lease in behalf of a tenant he would have to admit that the clause meant continued operations.

After Turn-Style announced its decision to cease operations in the shopping center, defendants unsuccessfully sought to enjoin Turn-Style from ceasing active operation. In their complaint for an injunction, defendants recited that many of their tenants occupied space in the center in reliance on Turn-Style's presence, and that the wrong was not the loss of rent, but that Turn-Style's departure would inhibit successful operation of the shopping center as a whole.

On August 25, 1976, the trial court granted defendants' motion for summary judgment and ordered plaintiffs to pay an aggregate rental of $2,790.93 per month into an escrow account pending appeal. Defendants also moved the trial court to tax plaintiffs for costs incurred by defendants prior to the allowance of ...


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