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Crooks Terminal Warehouses v. Amer. Nat'l Bk.





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


In May 1978, Crooks Terminal Warehouses, Inc. (plaintiff), as lessee, and American National Bank and Trust Company of Chicago, as trustee under trust #39338 (defendant), as lessor, entered into a 10-year 8-month net industrial building lease of a large industrial building in Melrose Park, Illinois. In November, plaintiff filed a complaint for declaratory judgment seeking a determination that the lease was terminated by plaintiff in accordance with its terms. Defendant denied the essential allegations of the complaint, asserted several affirmative defenses and filed a counterclaim for tax deposits claimed to be due under the lease. Later that month, defendant filed a motion for summary judgment (a) on the complaint on the sole ground that plaintiff was in default under the lease for failure to make those tax deposits and, therefore, was not entitled to terminate the lease, and (b) on its counterclaim for the tax deposits. Plaintiff resisted the motion on the ground that factual issues were involved. Plaintiff did not file any motion for summary judgment. In February 1979, the trial court entered summary judgment for defendant on its counterclaim for the tax deposits, but awarded plaintiff a setoff of the deposit of the one month's rent which defendant was holding. The court failed to grant defendant summary judgment on the complaint, holding that plaintiff's failure to make tax deposits did not bar plaintiff from terminating the lease. The court then, despite the fact that plaintiff had not filed a motion for summary judgment and despite the fact that defendant was not given an opportunity to be heard as to those affirmative defenses which it had reserved, entered a "cross motion for summary judgment" on the complaint in plaintiff's favor, holding that the lease was terminated as of December 31, 1978.

Defendant appeals from (a) the "cross motion for summary judgment" granted plaintiff, (b) that portion of the order awarding plaintiff a setoff and declaring that the lease is null and void as of December 31, 1978, and (c) the court's refusal to enter summary judgment in defendant's favor on the complaint. Plaintiff cross-appeals from the summary judgment entered for defendant on the counterclaim.

The record discloses:

The lease was entered into as of May 1, 1978. Defendant retained Chicago Properties Corporation (Chicago Properties) to manage the property. Under the lease, plaintiff was to pay a total of $2,582,160 in fixed rentals at the rate of $20,621.42 per month during the period from January 1, 1979, to December 31, 1983, and $22,414.58 per month thereafter. Plaintiff took possession of the premises and began using them in its warehousing operations during May 1978. Plaintiff vacated the premises on December 29, 1978.

The lease required plaintiff to deposit the rent for the month of January 1979 at the beginning of the lease. This deposit of $20,621.42 was made. Plaintiff was permitted to occupy the premises from May 1978 until December 31, 1978, without paying any fixed monthly rent for that period.

Defendant, as lessor, was to do the work necessary to obtain a certificate of occupancy from the village of Melrose Park. Plaintiff was given the right to terminate the lease after November 1, 1978, if the village of Melrose Park was not prepared to issue a certificate of occupancy on or before that date. Section 2.2 of the lease provided:

"* * * Notwithstanding anything to the contrary herein contained, if the Village of Melrose Park is not prepared to issue a final Certificate of Occupancy with respect to the Premises by November 1, 1978 (or, if any one or more Force Majuere Events shall have occurred, by such later date (`Second Extended Date') which is subsequent to November 1, 1978, by the number of days Lessee [sic] is delayed in performing the Work by the occurrence of any Force Majuere Events), and if Lessee has not theretofore defaulted under this Lease and any guarantor hereof has not theretofore defaulted under its guaranty, Lessee shall have the right (as its sole remedy) to terminate this Lease by written notice to Lessor given within the 30 day period subsequent to November 1, 1978, or the Second Extended Date, whichever is later, but in any event given not later than the date said Village is prepared to issue said Certificate, * * *."

Plaintiff took possession in May 1978 with the expectation that defendant would perform the work necessary to obtain a final certificate of occupancy as soon as possible.

The lease was a "net lease" and plaintiff was required to pay as additional rent all expenses of the premises, including real estate taxes for the period from May 1, 1978, to December 31, 1978. To secure the payment of real estate taxes and its other obligations under the lease, plaintiff was required to make tax deposits on the first day of each month, starting in May 1978, in an amount equal to 1/12 of the amount of the 1978 taxes as reasonably estimated by defendant. Section 1.4(b) of the lease provided:

"To secure Lessee's obligations under the Lease, including, without limitation, its obligation to pay Taxes, Lessee shall deposit with Lessor on the same date as each installment of fixed rent is payable (plus the first days of each calendar month during the period from May 1, 1978 to December 31, 1978), an amount equal to 1/12 of the amount of the Taxes, as reasonably estimated by Lessor, for the fiscal period of the applicable governmental authority (presently the calendar year) in which said date occurs, said deposits to be made so that Lessor shall have on deposit by the end of each fiscal period the estimated amount of the Taxes payable by Lessee on account of said fiscal period. * * *"

An estimate of the amount of 1978 taxes was necessary because the actual amount would not be known until the middle of 1979. To assure that plaintiff would ultimately pay only the actual amount of taxes assessed, the lease provided for adjustments once the actual amount of the taxes became known.

A supplemental lease provision required plaintiff to retain counsel to obtain the proper legal assessment for the property. No tax estimate was made by defendant before August 15, 1978. The monthly deposit was estimated to be $4482.50. Although requested, plaintiff made no tax deposits.

In September 1978, the assessor's office notified Chicago Properties that the assessment on the property had been increased from $452,414 to $1,110,860. Defendant then wrote plaintiff informing it of the increase and once again requesting that the tax deposits be made, now in the increased amount of $10,000 per month. Plaintiff made no deposits. In November 1978 the assessor changed the assessment again and lowered it to the original figure of $452,414. Defendant again notified plaintiff that the ...

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