United States District Court, Northern District of Illinois, E.D
June 21, 1983
ROBERT MURPHY, WILLIAM LEO AND PAUL WASZAK, PLAINTIFFS,
TEXACO, INC., DEFENDANT.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
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:
ATTENTION THIS STATION DOES NOT NECESSARILY SELL TEXACO PRODUCTS, ASK
ATTENDANT FOR FURTHER INFORMATION
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
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
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
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