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Johnstowne Centre Partnership v. Chin

OPINION FILED NOVEMBER 30, 1982.

JOHNSTOWNE CENTRE PARTNERSHIP, PLAINTIFF AND COUNTERDEFENDANT-APPELLANT AND CROSS-APPELLEE,

v.

GEORGE CHIN, JR. ET AL., DEFENDANTS AND COUNTERPLAINTIFFS-APPELLEES AND CROSS-APPELLANTS.



Appeal from the Circuit Court of Champaign County; the Hon. George S. Miller, Judge, presiding.

JUSTICE LONDRIGAN DELIVERED THE OPINION OF THE COURT:

Rehearing denied December 28, 1982.

The plaintiff, Johnstowne Centre Partnership, developed a shopping block in Champaign and leased a site there to the defendants, George Chin, Jr. and Eddie Moy Chin, for operation of a restaurant. The Chins later repudiated their lease, and the Partnership sued: the trial court found the repudiation unjustified and awarded damages. On appeal the Partnership seeks additional damages; on cross-appeal the Chins argue that their own performance was excused by the Partnership's two breaches of the lease and that the trial should have been reopened for the testimony of another witness. We conclude that the Partnership is entitled to additional damages but affirm the trial court's decision in all other respects.

On February 25, 1976, the parties executed a 10-year lease beginning November 15, 1977, for a site in Johnstowne Centre, the new shopping area. The defendants formally repudiated the lease June 10, 1977. To mitigate damages the Partnership obtained a substitute tenant, the Parthenon Restaurant, who left about 20 months later; after an 8-month period of vacancy, the premises were rented to Giordano's Restaurant. The Partnership appeals the trial court's decision denying damages for the period between substitute tenants.

At trial the Chins asserted as counterclaims and affirmative defenses the Partnership's failure to provide a promised cathedral or extra-high ceiling in their site and the Partnership's decision to rent space elsewhere in the Centre to another restaurant, in violation of a restrictive covenant in their lease. To support the first counterclaim and affirmative defense, about the ceiling, the Chins moved to have the trial reopened to present the testimony of an architect who had helped design the premises; this witness was not located until after the end of the trial. The court found against the Chins on the counterclaims and affirmative defenses and denied their motion to reopen. The Chins raise these issues in their cross-appeal.

I

The Chins' obligations under the lease began November 15, 1977. The lease requires monthly payments of rent and of fees; the fees are for maintenance of the Centre's common areas and for membership in an association of the Centre's merchants. The 10-year lease of the first substitute tenant, the Parthenon, began March 15, 1978, and the Parthenon made payments through November 30, 1979; effective July 1, 1979, the Centre's merchants decided to increase the monthly fees for dues for membership in their association. The second substitute tenant, Giordano's, began payments under a 10-year lease August 1, 1980, and was still a tenant at the time of the trial a year later. The trial court awarded damages — rents, fees, and interest — for the four months preceding the start of the Parthenon's lease but denied recovery of rents and fees lost during the eight-month gap between the substitute tenants. The trial court gave two reasons for denying these damages. In an oral decision, the judge said that the Parthenon's failure should not be assessable to the Chins; in a later written order he relied on an agreement between the Partnership and the Parthenon settling or terminating the Parthenon's liability under its 10-year lease. The court awarded the Partnership other damages too and credited the Chins with their downpayment and deposit and interest on those amounts; these calculations produced a net award of $16,252.07 to the Partnership.

• 1 As support for the claim to damages for the eight-month period between substitute tenants, the Partnership relies on paragraph 14 of the Chins' lease, which says:

"If Lessee's right to the possession of the Premises shall be terminated in any way, the Premises, or any part thereof, may, but need not, be relet by Lessor * * * but Lessor shall not be required to accept or receive any tenant offered by Lessee, nor to do any act whatsoever or exercise any diligence whatsoever, in or about the procuring of another occupant or tenant to mitigate the damages of Lessee or otherwise, Lessee hereby waiving the use of any care or diligence by Lessor in the reletting thereof; and if a sufficient sum shall not be received from such reletting to satisfy the rent hereby reserved, after paying the expenses of reletting and collection, * * * Lessee agrees to pay and satisfy all deficiency; but the acceptance of a tenant by Lessor, in place of Lessee, shall not operate as a cancellation hereof, nor to release Lessee from the performance of any covenant, promise or agreement herein contained, and performance by any substituted tenant by the payment of rent, or otherwise, shall constitute only satisfaction pro tanto of the obligations of Lessee arising hereunder."

The Partnership argues that it has done nothing that could be construed as releasing the Chins from their obligations.

We conclude that paragraph 14 of the lease entitled the Partnership to damages accruing in the period between substitute tenants: it expressly provides that reletting the premises does not cancel the Chins' lease and that their obligations under it will be satisfied only to the extent of a substitute tenant's payments. Paragraph 14 applies throughout the life of the Chins' lease, 10 years.

Spear v. Haggarty (1912), 168 Ill. App. 559, reached the same result under similar circumstances. In that case Spear rented to Haggarty a residence for one year, from May 1, 1908, to April 30, 1909; the lease provided that if the lessee abandoned, deserted, or vacated the premises and the premises were vacant for five consecutive days, the lessor could re-enter and relet, and apply all the proceeds toward the rent accruing under the indenture. Haggarty moved out in August 1908, surrendering the keys, but did not try to find a substitute tenant. Later that year Spear found one, who paid some rent and who left in February 1909. The premises were then vacant until the expiration of Haggarty's term. Spear sued for $145 in rent due under the lease, and the court affirmed a judgment in that amount in Spear's favor:

"The sum of $145 is the balance due for rent from Haggarty for the entire term, less the sums received by Spear from said third party." (168 Ill. App. 559, 560.)

Haggarty, the original tenant, therefore was liable for lost rents accruing after the departure as well as before the arrival of the substitute tenant.

The termination agreement between the Partnership and the Parthenon does not prevent recovery, for it concerned only the Parthenon's past and not future obligations. The agreement was not introduced into evidence; Harold Halpern, one of the partners, testified that the agreement essentially provided that the Parthenon would repay in part its notes that the Partnership held. Halpern explained that at some point during the tenancy the Parthenon ran short of money and gave the Partnership notes to offset reductions in its rent; the Parthenon was in or near bankruptcy at the end of its tenancy.

No evidence supports the Chins' argument that the settlement agreement pertained to rents and fees accruing after the Parthenon vacated the premises. Even if the agreement did include such payments, they would be credited against the Chins' liability and would not release them from their obligations under the lease.

• 2 The Chins argue that if the Partnership recovers for the eight-month period between substitute tenants, they should be credited with the difference between what Giordano's will pay in rent and what their own lease requires.

Recovery for breach of a lease is limited, however, to amounts due at the time of trial. (People ex rel. Nelson v. West Town State Bank (1940), 373 Ill. 106, 25 N.E.2d 509 (bank receiver disaffirms lease; unless lease provides otherwise, the bank's lessor may not recover rents accruing after the disaffirmance, for the receiver is liable only for claims on which a right of action exists at the time of his appointment, and the payment of future rents is not a current obligation); Dorris v. Center (1936), 284 Ill. App. 344, 1 N.E.2d 794 (lessor may sue for installments of rent as they come due, for several accrued installments, or for the entire amount at the end of the term).) In support of their argument the Chins cite Wanderer v. Plainfield Carton Corp. (1976), 40 Ill. App.3d 552, 351 N.E.2d 630. In that case Plainfield Carton signed a five-year lease for a building but moved out before the end of its term; a substitute tenant was finally obtained, and that tenant paid more rent than Plainfield Carton's lease required. In the lessor's suit for damages accrued before the arrival of the substitute tenant, the court held that Plainfield Carton was entitled to credit for the excess amount of rent received by the lessor. The Chins correctly point out that Plainfield Carton was seeking credit for excess amounts that the lessor stood to receive under the substitute tenant's lease.

"On appeal in this court, defendant Plainfield contends that the trial court should have credited defendant (as an offset to its liability for delinquent rent) with rental received and to be received by the landlord, Wanderer, from a new tenant during the balance of the original lease term, to the extent that those rentals exceeded the rent called for in the original lease." (Emphasis added.) (40 Ill. App.3d 552, 553-54, 351 N.E.2d 630, 632.)

The court allowed credits through the end of Plainfield Carton's term.

We decline to follow Wanderer on this question. We note that the original or underlying lease was for only five years and that it expired some six weeks before the appellate court filed its opinion. Also, the court did not discuss the timeliness of the ...


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