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United States District Court, Northern District of Illinois, E.D

June 21, 1983


The opinion of the court was delivered by: Shadur, District Judge.


Three lessees of gasoline stations owned by Texaco, Inc. ("Texaco") sued Texaco, challenging (under the Petroleum Marketing Practices Act, 15 U.S.C. § 2802, and perhaps under Illinois law as well) its termination of (and refusal to renew) their leases and franchises. In turn Texaco filed a four-count amended counterclaim. Counterclaim Count I ("Count I") asserts plaintiffs' liability under Illinois law for rent incurred during the post-termination period in which they have continued to occupy and operate their service stations. Texaco now moves under Fed.R.Civ.P. ("Rule") 56 for summary judgment on Count I. For the reasons stated in this memorandum opinion and order Texaco's motion is granted.


Some time during 1979 or 1980 each plaintiff signed the same standard lease form (the "Lease") and Agreement of Sale (both drafted by Texaco), entitling him to lease a service station, to market Texaco products under the Texaco brand name and to use the Texaco trademarks to promote such sales. Under Lease ¶ 2(a), Texaco was permitted to "terminate or fail to renew this Lease only for good cause and not in bad faith."

Each plaintiff began selling non-Texaco brand name products at some point during the term of his Lease. In late September or early October 1981 each plaintiff attempted to notify his customers of that practice by posting in the window of his service station the following sign:


Illinois Gasoline
Dealers Ass'n.                    The Management

Nonetheless each plaintiff continued to use Texaco's trademarks, including the large Texaco hexagonal sign and Texaco-trademarked gasoline pumps. Texaco objected to plaintiffs' practices as an abuse of each plaintiff's right to use Texaco trademarks and brand names and as a violation of his franchise obligations. Consequently Texaco gave advance notice to each plaintiff of its intention to terminate (and not renew) his Lease and franchise effective February 1, 1982.

Each plaintiff refused to vacate his service station on the designated termination date. Subsequently Texaco instituted eviction proceedings against at least one of the three plaintiffs under Illinois' forcible detainer laws. To date plaintiffs remain in possession of their stations.

Summary Judgment

Count I seeks damages and injunctive relief to remedy the injuries suffered by Texaco as a result of plaintiffs' possession of the gasoline stations since February 1, 1982. As for its damages element, Count I is apparently based on two alternative theories:

      1. If plaintiffs' continued possession of those
    facilities is wrongful, plaintiffs are liable for
    any resulting damages.

      2. If plaintiffs establish the Leases were still
    in force (by showing Texaco improperly terminated
    the Leases), plaintiffs are liable for the rent
    incurred since February 1, 1982.

Regardless of which theory is applicable, there is no factual dispute that defeats Texaco's entitlement as a matter of law to the same accrued amount, equal to the rent under the respective Leases.

Because the second theory is conceptually more straightforward, it will be dealt with first. By definition each plaintiff is liable for past rent under that theory (assuming the validity of its predicate).

Plaintiffs counter unpersuasively that Texaco's asserted failure to perform certain covenants under the Lease and the Agreement of Sale extinguishes their obligation to pay rent. But that argument flies in the face of Illinois law, which follows the entrenched common law rule as to the independence of the covenant to pay rent:

  We are unaware of any authority in this state for
  permitting a commercial tenant [like each plaintiff]
  to both remain in possession and refuse to pay rent
  when a landlord breaches a covenant of the lease,
  unless the terms of the lease so provide.

McArdle v. Courson, 82 Ill. App.3d 123, 126, 37 Ill.Dec. 402, 405,
402 N.E.2d 292, 295 (4th Dist. 1980). Accordingly each plaintiff must pay back rent, for (1) each has elected to retain possession and (2) his Lease does not condition rental obligations on Texaco's performance of any of its covenants.

As for the first theory, it too warrants summary judgment in Texaco's favor. Under Illinois common law an individual "who, after rightfully being in possession of rented premises, continues in possession after his right to such possession has terminated" is a tenant at sufferance (24 I.L.P. Landlord and Tenant § 68, at 197 (1980)). To the extent plaintiffs have that status (as the first theory presumes), Texaco had the sole option to evict them as trespassers or to treat them as holdover tenants bound by the terms of the expired Leases (id. § 128, at 233). But once Texaco has exercised that option it may not alter its election (id. § 129, at 234).

Texaco's actions establish unequivocally it has opted to regard plaintiffs as trespassers:

      1. It has already begun eviction proceedings
    against at least one of the plaintiffs.

      2. It has taken the position in this case that
    plaintiffs are trespassers.

Accordingly Texaco cannot seek past rent (qua rent) from plaintiffs as holdover tenants.*fn2 Nonetheless on this assumed alternative Texaco is entitled to any damages resulting from plaintiffs' wrongful possession. Such damages include recovery for any rental income Texaco could have obtained during the post-termination period — an amount based on the then-prevailing market rental rate.

It is of course not always true that current fair market rental is equal to the rental rate prescribed by a now-terminated lease. However the Lease figures are at least prima facie evidence of market rentals, particularly where as here the Leases were executed within the past few years. And given plaintiffs' total failure to proffer any other evidence on the issue,*fn3 the evidence of the Leases is dispositive in Rule 56 terms.*fn4


Both roads lead to the same destination. Texaco's motion for summary judgment on Count I is granted, with judgment to be entered for an amount equal to the full back rent specified in each Lease.*fn5

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