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C. & W. Ill., Inc. v. North. 500 Ltd Part.

OPINION FILED FEBRUARY 17, 1983.

CUSHMAN & WAKEFIELD OF ILLINOIS, INC., PLAINTIFF-COUNTERDEFENDANT-APPELLEE AND CROSS-APPELLANT,

v.

NORTHBROOK 500 LIMITED PARTNERSHIP ET AL., DEFENDANTS-COUNTERPLAINTIFFS-APPELLANTS AND CROSS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. Warren D. Wolfson, Judge, presiding.

JUSTICE JOHNSON DELIVERED THE OPINION OF THE COURT:

Plaintiff, Cushman & Wakefield of Illinois, Inc., brought an action against defendants, Northbrook 500 Limited Partnership, Richard Stein and James Otis, to recover leasing commissions claimed to be due under a renting agency agreement. Defendants counterclaimed for damages from plaintiff for overspending on tenant improvements on the various leases negotiated by plaintiff's assignor. A jury awarded plaintiff $130,807.12 in leasing commissions. The trial court directed a verdict against defendants' counterclaim and denied plaintiff's claim for prejudgment interest on the commissions. Defendants appeal the jury's finding for plaintiff and the court's directed verdict dismissing their counterclaim. Plaintiff appeals the court's denial of prejudgment interest on the commissions.

The issues raised on appeal are (1) whether plaintiff was required to plead and prove that its individual brokers, officers and management personnel, as well as those of its assignor, were all licensed real estate brokers during the time of the rental agency agreement; (2) whether plaintiff proved that it was entitled to the rental commissions awarded by the jury, including the commission for the lease held by Combined Insurance Company of America; (3) whether the trial court properly directed a verdict against defendants on their counterclaim for damages; and (4) whether plaintiff is entitled to prejudgment interest on the commissions owed by defendants.

The case involves several parties. For the sake of clarity, each party and his relevant relationship to this litigation are outlined as follows:

(1) Cushman & Wakefield, Inc., a New York corporation (C&W), made the original renting agency agreement (Agreement) with defendants. C&W later assigned its interest under the Agreement to plaintiff.

(2) Cushman & Wakefield of Illinois, Inc., an Illinois corporation, is the plaintiff and the assignee of C&W, the New York corporation.

(3) Northbrook 500 Limited Partnership is a defendant and developer of the Northbrook 500 building.

(4) Richard A. Stein and James Otis are also defendants and each owns a partnership interest in the Northbrook 500 Limited Partnership.

(5) John Buck and Wesley Irvine were vice-presidents of C&W at the time of formation of the original Agreement between C&W and Northbrook 500 Limited Partnership. Buck and Irvine each owned a one-sixth interest in the Northbrook 500 project, and they also served as renting managers on behalf of C&W during the term of the Agreement. They testified on behalf of plaintiff, Cushman & Wakefield of Illinois, Inc., but were not, themselves, parties to the litigation.

In 1975, Richard Stein and James Otis undertook the development of an office building known as the Northbrook 500, in Northbrook, Illinois. John Buck and Wesley Irvine, vice-presidents of C&W, a large real estate brokerage company headquartered in New York, were contacted. An agreement was reached whereby Stein, Otis, Buck and Irvine would become partners in the project. Stein and Otis each owned a one-third interest and Buck and Irvine each owned a one-sixth interest in the project. The parties agreed that C&W would be the exclusive leasing agent for the building. Buck and Irvine, vice-presidents of C&W as well as partners in the project, were to be rental managers under the renting Agreement. C&W was to receive certain stated commissions. The Agreement was reconfirmed in August 1976, retroactive to January 1, 1976, when two additional individuals joined and the partnership was changed to a limited partnership.

The Agreement provided in pertinent part as follows:

"THIS RENTING AGENCY AGREEMENT made this 23rd day of August, 1976, between NORTHBROOK 500 LIMITED PARTNERSHIP, an Illinois limited partnership, having an office c/o Richard A. Stein, 208 South LaSalle Street, Chicago, Illinois, 60604, (hereinafter referred to as `Owner'), and CUSHMAN & WAKEFIELD, INC., a New York corporation, with local offices at 233 South Wacker Drive, Room 5220, Chicago, Illinois 60606, (hereinafter referred to as `Agent').

1. Owner hereby designates Agent and Agent agrees to serve, as the exclusive Renting Agent in connection with the leasing of the office and commercial space in the Premises for a term of three (3) years commencing September 1, 1976 and ending August 31, 1979, unless earlier terminated in accordance with the provisions hereof.

2. Agent shall use its best efforts in leasing and disposing of office and commercial space in the Premises and in keeping the Premises rented to desirable tenants and, to this end, Agent shall list space in the Premises with its brokers and salesmen and is hereby authorized on behalf of Owner to enlist the services of other real estate brokers. Agent shall, at all times, perform its leasing services hereunder diligently and in a first class manner designed to best protect and promote the leasing of the Premises.

5. (a) Owner Shall pay Agent on each lease executed and delivered during the term of this Agreement a commission equal to 7% of the `Base Lease Rent', as hereinafter defined, for the first year of such lease, and 2% of the Base Lease Rent, for all years thereafter. On any lease which is procured from an outside broker, a commission of 7% of the Base Lease Rent for the first year and 2% of the Base Lease Rent for the remainder of the term shall be paid to said outside broker, and, in addition, Owner shall pay to Agent a commission (`Override') of 2.8% of the Base Lease Rent for the first year of the lease and .8% of the Base Lease Rent for the remainder of the term of such lease. As used herein, `Base Lease Rent' for the first year of a lease shall mean the annual Base Rent as set forth in the Lease executed for space in the Premises. The Base Lease Rent for the remainder of the term of a lease shall mean the total Base Rent for each of the remaining years in the initial fixed lease term of a lease as set forth therein, excluding therefrom any period with respect to which a tenant has a right of lease cancellation. For leases which provide for step-ups, or step-downs of Base Rent during the initial fixed term, Base Lease Rent shall be the sum of the product of each stated annual Base Rent times the number of years such stated annual Base Rent is to be in effect. There shall be excluded from Base Lease Rent rental abatements or `take-over' payments with respect to space formerly occupied by the tenant.

(b) If any lease on which a commission is payable hereunder is re-negotiated prior to the expiration of the original initial fixed term thereof, the commission payable to Agent shall not be affected by such re-negotiation, provided, however, that if the Base Lease Rent under such re-negotiated lease is increased based upon additional space being leased to the tenant thereunder, then Agent shall be entitled to receive a commission equal to 2% of such increase for the remainder of the initial lease term. Said commission shall be payable as hereinafter provided;

(c) In the event a tenant shall exercise an option or right contained in a lease made during the term of this Agreement for a renewal or extension of the Lease, or to lease additional space, Owner shall pay to Agent a commission equal to 2% of the Base Lease Rent payable by tenant during such renewal or extension period; or on account of such additional space;

(d) If any lease with respect to which a commission hereunder is payable contains a cancellation right and if the tenant's right to cancel expires without being exercised, then Agent shall be entitled to such additional commission on such Lease as it would have earned if the Base Lease Rent for the portion of the lease term with respect to which tenant had a right of lease cancellation had been taken into account when its commission on such lease was originally calculated."

In June 1976, a revised budget for tenant improvement and a standard "work letter" were approved by the partnership. The work letter defined which tenant improvements would be provided by the partnership as part of the leasing agreement. The tenant improvement budget was $400,000, or approximately $4.12 per square foot of rental space. It appears that a date 18 months after the opening of the building was set as the goal for completing the leasing of the building. Under the Agreement, C&W was the exclusive renting agent for the building.

Sometime in 1977, Combined Insurance Company of America contacted either Otis or Stein regarding the negotiation of a lease. C&W, the leasing agent, was not involved in those negotiations. A lease was subsequently signed by Combined Insurance for rental of one-third of the available space in the building. The lease contained a paragraph naming C&W as the real estate broker responsible for that lease. However, at trial, both Otis and Stein ...


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