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Cole v. Ignatius

OPINION FILED MARCH 30, 1983.

VIRGIL L. COLE, PLAINTIFF-APPELLANT,

v.

JOHN IGNATIUS ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. Reginald Holzer, Judge, presiding.

JUSTICE RIZZI DELIVERED THE OPINION OF THE COURT:

Rehearing denied May 6, 1983.

Plaintiff, Virgil L. Cole, brought an action for specific performance of the contract formed when he exercised an option to purchase property owned by defendants, John Ignatius and his wife, Mildred. Plaintiff alleged that defendants had leased the property involved to CSC Incorporated and that CSC had assigned the lease to him. Plaintiff further alleged that the lease contained an option to renew as well as an option to buy and that he had exercised both options. Plaintiff also alleged that he was ready, willing and able to perform all of the conditions under the contract formed when he exercised the option to buy. In their answer, defendants alleged as affirmative defenses that plaintiff was guilty of fraud and that plaintiff's exercise of the option to buy was untimely because it occurred after CSC had exercised the option to renew. Prior to trial, CSC and Brush Pottery, Incorporated, a division of CSC acquired by plaintiff, were made third-party defendants. Joseph Witry, who subleased the premises from plaintiff, was allowed to intervene as a plaintiff. A trial was held, and at the conclusion of the testimony, defendants sought to have a forfeiture of the lease declared because various provisions of the lease had been breached. The trial court found that plaintiff was in default of the lease and declared plaintiff to be a tenant at sufferance. We reverse and remand with directions.

Defendants leased a warehouse-type building located in Palatine, Illinois, to CSC for a five-year term commencing on May 1, 1975, and terminating on April 30, 1980. The lease contained both an option to renew and an option to buy. Plaintiff testified that he had been an employee of CSC from January 15, 1975, until November 30, 1979. On December 1, 1979, he acquired Brush Pottery from CSC, and that same day, CSC assigned him the lease involved here. Subsequently, defendants received a letter dated December 21, 1979, which informed them that the option to renew the lease was being exercised pursuant to the lease. The letter was signed by plaintiff and by an executive vice-president of CSC.

According to plaintiff, defendants learned of the lease assignment in January 1980. Plaintiff testified that he had a telephone conversation with defendant John Ignatius on January 7 in which Ignatius acknowledged that he had received plaintiff's rent check through Brush Pottery and stated that he would appreciate dealing with plaintiff because he had previously had problems with CSC. Plaintiff also testified that he spoke with Ignatius regarding a sublet of part of the building to Meadow Auto Body Shop in late February. A letter regarding this conversation was sent to Ignatius on February 25, and Ignatius testified that he was aware of this sublease. Plaintiff further testified that he spoke with Ignatius on or about May 2, 1980, regarding the option to purchase. According to plaintiff, he told Ignatius that he wanted to move his business to Ohio, and he therefore wanted to exercise the option so that he could sublease the building. Plaintiff stated that while Ignatius voiced his concern regarding the tax consequences of the sale and also questioned whether the option to purchase could be exercised since the option to renew had already been exercised, he told plaintiff to go ahead and mail a notice that the option to buy was being exercised in accordance with the lease. Plaintiff sent the notice on May 13 by certified mail, return receipt requested, as required by the lease, but because he did not receive a receipt, he sent a copy of the letter on May 28. Along with the notices, plaintiff sent a copy of CSC's assignment of the lease to him.

Meanwhile, plaintiff testified, he had spoken with Joseph Witry on or about April 5, 1980, about leasing or purchasing the building. As a result, plaintiff and Witry entered into a lease agreement for the entire building which included an option to buy for $360,000. Witry occupied the premises on May 16. Plaintiff testified that he did not give Witry permission to remodel the interior of the building. Finally, plaintiff testified that he had not received any notice from defendants regarding defects or defaults under the lease until after he had exercised the option to buy.

Defendant John Ignatius testified that he had no correspondence with plaintiff or CSC between January 1980 and May 1980, although he did testify that on January 19, 1980, he received the letter in which the option to renew was exercised. This defendant also testified that he received the notices of plaintiff's exercise of the option to buy. He denied that plaintiff told him he wanted to exercise the option, or that he encouraged plaintiff to do so.

Ignatius further testified that Witry took possession of the premises without his knowledge. He learned of Witry's presence during an inspection he made of the building in June 1980. Following this inspection, he sent a letter to the president of CSC informing him that if the grounds and driveway were not brought into compliance with the lease, he would have the work done and then bill CSC for it. Ignatius sent plaintiff a copy of the letter because he did not know "who was actually in possession of the lease." A similar letter regarding other violations was sent to CSC and plaintiff on September 12. Ignatius stated that as of September 1980, none of the violations of which he had complained had been rectified.

Following the conclusion of the testimony at trial, defendants sought to have a forfeiture declared because various provisions of the lease relating to insurance had been breached, and because Witry had altered the premises without defendants' prior consent as required by the lease.

The trial court found that CSC's assignment of the lease to plaintiff was valid, and therefore, CSC had no right, title or interest upon which to exercise the option to renew. The court further found that plaintiff was in default of the covenants of the lease, and under the terms of the lease, a lessee could not exercise the option to renew or the option to buy if he was in default. Thus, the court found, plaintiff failed to effectively exercise either of these options. Finally, the court found that plaintiff was not a holdover tenant but was a tenant at sufferance. Witry, consequently, was a subtenant at sufferance. CSC and Brush Pottery were found to have no claim to the property. The court dismissed plaintiff's complaint, ordered defendants' title quieted as to claims by plaintiff, Witry, CSC and Brush Pottery, ordered Witry to restore the property to its original condition and ordered plaintiff to change the insurance policies he held on the premises to reflect ownership in defendants.

• 1 Since the parties agree that the lease in question was valid when executed by CSC and defendants, the first question we must address is the validity of CSC's assignment of the lease to plaintiff. Defendants admit that there is no provision in the lease prohibiting its assignment or requiring their prior approval of an assignment. In fact, language in the lease requiring prior written consent of lessors to an assignment has been lined out. In the absence of an express restriction in a lease prohibiting an assignment, the lease may be assigned. (Keogh v. Peck (1925), 316 Ill. 318, 328, 147 N.E. 266, 270.) Therefore, CSC had the right to assign its right, title and interest in the lease to plaintiff without first obtaining defendants' consent. We conclude that the December 1, 1979, assignment of the lease from CSC to plaintiff was valid.

• 2 In concluding that the assignment was valid, we reject defendants' argument that the assignment "was as a matter of law, at best, a nullity or, at worst, a fraud upon [defendants] and consequently not binding on [defendants]." In this regard, defendants argue that plaintiff failed to inform them of the assignment prior to May and failed to record the assignment. These arguments lack merit. The lease does not provide for notice of an assignment within a certain time or in any particular manner. We believe that the evidence shows that even though defendants did not receive written notice of the assignment until May, they were made aware of it prior to that time. In January 1980, defendants began receiving rent checks from plaintiff through Brush Pottery. In February, defendant John Ignatius learned that plaintiff was subleasing a portion of the premises. Ignatius also testified that he spoke to plaintiff regarding insurance rates for the building in February. In addition, plaintiff testified to conversations he had with defendant John Ignatius relating to the assignment at least as early as January. Although Ignatius denied that these conversations took place, the trial court presumably resolved the question of credibility in favor of plaintiff since it decided that the assignment was valid, and we see no reason to disturb this determination. Therefore, we must reject defendants' argument that the assignment was not valid because it was made in secrecy and defendants were not given notice of it.

As for plaintiff's failure to record the assignment, while the lease provides that an assignment may be recorded, it does not provide that an assignment must be recorded. In the absence of such a requirement, plaintiff's failure to record the assignment did not render it invalid.

• 3 In further support of their argument that the assignment was either a nullity or a fraud, defendants contend that CSC validly exercised the option to renew, and this had the effect of invalidating its prior assignment of the lease. Contrary to defendants' assertion, however, it was CSC's exercise of the renewal option which was invalid, not its assignment of the lease to plaintiff. Since CSC had validly assigned the lease on December 1, 1979, it no longer had any right, title or interest in the lease on December 21, 1979, when it purportedly exercised the option to renew, and therefore it could not have validly exercised that option. Defendants' ...


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