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Kerr Steam. Co. v. Chi. Title & Tr. Co.





Appeal from the Circuit Court of Cook County; the Hon. Arthur L. Dunne, Judge, presiding.


The instant appeal arises out of a complaint for declaratory judgment brought by plaintiffs, Kerr Steamship Company (Kerr) and Data General Corporation (Data General), tenant and subtenant, respectively, of certain office space leased by defendants, Chicago Title & Trust Company (CT&T) and Fleetwood Realty Corporation (Fleetwood). The complaint sought a construction of the lease language pertaining to plaintiffs' additional rental obligation and a refund of additional rental plaintiffs alleged they were overcharged. Defendants filed a motion to dismiss with an alternative motion to strike. The trial court entered an order granting the motion to dismiss, and it is from this order that plaintiffs now appeal. We reverse and remand.

The record reflects as follows. On September 26, 1973, Kerr entered into a lease with defendants whereby Kerr agreed to rent 3,587 square feet of space in an office building at 200 West Monroe Street in Chicago. CT&T, as land trustee, was named as lessor under the lease, but Fleetwood was, and continues to be, the managing agent for the beneficiaries of the trust. The lease is a standard form, with various names, dates, dollar amounts and other descriptions applying to the demised premises typed in. Paragraph 4 of the lease is headed "BASE RENTAL" and provides for an annual rental of $29,234.05, payable in the amount of $2,436.17 per month. Paragraph 5 of the lease is headed "ADDITIONAL RENTAL" and provides that in addition to the fixed annual rental the tenant agrees to pay its pro rata share of certain building costs; the additional rental is to be determined pursuant to a formula reflecting increases in operating costs and taxes during subsequent lease years, compared with such costs and taxes in the base year, which is the first lease year. Specifically, paragraph 5A of the lease provides in pertinent part:

"The Tenant hereby agrees to pay as additional rent `Tenant's Prorata Share' of the amount by which yearly `Building Operating Costs' incurred by the Landlord during each lease year during the term of this Lease, after the base year for determining such `Building Operating Costs' as hereinafter defined, exceed `Building Operating Costs' incurred by the Landlord during said base year."

Paragraph 5B states in pertinent part:

"Tenant hereby agrees to pay to Landlord as further additional rent `Tenant's Prorata Share' of any increase in real estate taxes payable during any Lease Year over and above the real estate taxes payable during the Base Year, being the First Lease Year."

Simultaneously with the execution of the lease, the parties executed a rider (the 1973 rider) which modified the lease in certain respects. The critical portion of the 1973 rider, for purposes of this litigation, is paragraph 2-B, which provides:

"The Additional Rental described in Paragraphs 5-A and 5-B of the Lease is limited to a maximum of four percent (4%) of the annual rental as described in Paragraph 4 of the Lease during any lease year period."

On January 23, 1975, the parties entered into an amendment to the original lease (the 1975 amendment) whereby additional space was rented and the annual rental was increased to its present level of $55,142.90. Paragraph 3 of the 1975 amendment reaffirms the limitations of the 1973 rider by providing that the provisions of the rider "relating to the limitation on Additional Rental to 4% of the Annual Rental shall refer to an annual rental of $55,142.90 per year." This annual rental multiplied by .04 yields $2,205.72.

Beginning in 1975, and continuing each year thereafter, Fleetwood invoiced Kerr for additional rental it claimed was due under the lease. For the years 1975 through 1980, Kerr paid invoices in the amounts of $351.53 for 1975, $2,495.35 for 1976, $4,905.99 for 1977, $6,822.62 for 1978, $9,391.61 for 1979 and $13,050.51 for 1980. Fleetwood also invoiced Kerr in the amount of $15,256.23 for the year 1981.

On December 19, 1978, Kerr entered into a sublease for the premises with Data General. The sublease was expressly consented to by CT&T in an agreement between it, Kerr and Data General dated February 26, 1979. The sublease specifically provided that the sublessee would be required to pay the additional rental required under paragraph 5 of the lease as amended by the 1973 rider.

Thereafter, for the years 1979 to 1981, upon being invoiced by Fleetwood for additional rental, Kerr, in turn, invoiced Data General. However, Data General refused to pay additional rental as invoiced on the ground that under the terms of the lease and sublease, additional rental could not exceed 4% of the annual rental, or $2,205.72 per year. Data General agreed to pay additional rental in the amount of $2,205.72 per year for the period of time it had been in possession of the premises. Following Data General's refusal to pay the higher amount of additional rental, Kerr officials reviewed the lease provisions and determined that they had been invoiced by Fleetwood for additional rental on a cumulative basis, resulting in alleged overpayments of $25,637.48 for the period 1975 to 1980.

On January 11, 1982, Fleetwood sent a notice to Kerr demanding payment of additional rental for the year 1981 in the amount of $15,256.23. This amount was arrived at by multiplying $2,205.72 times six years, 11 months, which was the length of Kerr's right to possession. Kerr tendered $2,205.72. Fleetwood refused payment and sent Kerr a notice of default and termination of possession.

Plaintiffs subsequently filed a complaint seeking a declaratory judgment that Kerr is not liable for additional rental in an amount exceeding $2,205.72 per year for the duration of the lease, that Data General's right to possession not be disturbed as a result of Kerr's refusal to pay additional rental exceeding $2,205.72 per year, and that Kerr be awarded a judgment against ...

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