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Losurdo Bros. v. Arkin Distributing Co.

OPINION FILED JUNE 20, 1984.

LOSURDO BROTHERS, PLAINTIFF-APPELLEE,

v.

ARKIN DISTRIBUTING COMPANY, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Du Page County; the Hon. Richard A. Lucas, Judge, presiding.

JUSTICE REINHARD DELIVERED THE OPINION OF THE COURT:

Defendant, Arkin Distributing Company (Arkin), lessee, appeals from judgments for possession of commercial premises and attorney fees in favor of plaintiff, Losurdo Brothers (Losurdo), lessor, upon Losurdo's complaint in forcible entry and detainer. The issue Arkin presents for review is whether Losurdo, by its failure to respond to Arkin's request that Losurdo consent to Arkin's subletting of the premises, unreasonably withheld consent and thus waived the lease provision requiring such consent prior to subleasing of the premises. Losurdo cross-appeals from the judgment for attorney fees, contending the award is inadequate.

Losurdo's complaint for forcible entry and detainer, as amended, alleged that the parties entered into a written industrial building lease whereby Arkin leased units A, B, and C for use as a toy distributor; that Arkin breached the terms of the lease in various respects including the subletting of the premises without the written consent of Losurdo; and that Losurdo was entitled to possession of the premises upon breach, and attorney fees and costs pursuant to the terms of the lease. Arkin's answer and its answer to an amendment to the complaint generally denied the other allegations of breach and, while admitting it subleased the premises, affirmatively asserted it made its best efforts to obtain written consent to sublease from Losurdo in writing, but Losurdo unreasonably withheld such consent.

In a bench trial, the testimony and exhibits established that the parties entered into a written lease for five years beginning on April 15, 1978, under which Arkin leased three building units for the stated purpose as a toy distributor. A term of the lease provides that the lessee will not sublet any portion of the premises without first obtaining the written consent of the lessor, which consent shall not be unreasonably withheld by the lessor. A further term of the lease provides that the lessee will pay all reasonable costs, attorney fees and expenses incurred by the lessor in enforcing the covenants of the lease.

On December 15, 1981, Arkin executed a lease with Jeffrey and Mary Kraft, doing business as Ramlyn Metal Products (Ramlyn), for unit C of the premises, for use in Ramlyn's business of precision sheet metal work. The Ramlyn lease, which was to run from January 1, 1982, through December 31, 1984, was made subject to the consent of Losurdo. In a letter dated December 24, 1981, Arkin's attorney requested consent from Losurdo for this sublease. The letter indicated that consent would be assumed if Arkin did not hear from Losurdo by December 30, 1981, and that if Losurdo did not consent, it should specify the reasons for the refusal. The letter also indicated consent to sublease was requested "sometime ago," but was not responded to, and in December 1980, Losurdo had unreasonably withheld consent to sublease to another proposed subtenant. However, no testimony was adduced at trial to support the two prior requests to sublet in the letter. The original of this letter, as well as copies of the Ramlyn lease and the lease application, were either delivered personally to or mailed to Losurdo on December 31, 1981, by Arkin's regional manager, Michael Mack. Losurdo never consented to this sublease, and notified Arkin in a notice to quit to deliver up the premises because of a default by the use of flammable materials in the nature of welding equipment in the premises. Losurdo then filed a forcible entry and detainer complaint on March 30, 1982. This proceeding was continued several times and not heard until May 17, 1983.

In the meantime, during pendency of this suit, in a letter dated July 27, 1982, Mack requested that Losurdo consent to a sublease of unit C to Hanna Car Wash Systems (Hanna). Mack's letter indicated that Arkin had entered into a sublease agreement with Hanna and that the premises would be used for sales offices and warehousing of component parts for car wash equipment and a service truck. This lease, which was executed on July 22, 1982, was for a two-year term beginning August 9, 1982; however, Hanna was given the right to possession on July 28, 1982, for the purpose of making preparations for the use of the building. Losurdo never gave consent to this sublease. Although the record is not absolutely clear, it appears that Ramlyn took possession of unit C for a short period of time and then Hanna took possession of unit C and was in possession at the time of trial.

On February 19, 1983, Mack wrote to Losurdo, indicating that Arkin had entered into another sublease agreement, this time for unit A with Ron Pilch, owner of Vehicle Maintenance Systems, Inc. No further evidence was introduced on this proposed sublease.

The exhibits and brief testimony recited above were all the evidence offered by the parties relating to the breach of the term of the lease relating to subleasing of the premises. The bulk of the testimony at trial concerned other alleged breaches of the lease and are not pertinent to this appeal, as the trial court found either that they had not been proved by Losurdo, or were not significant enough to terminate the lease. The trial court, however, found that Arkin had repeatedly subleased the premises without the consent of Losurdo contrary to the lease provision and that consent was not unreasonably withheld. The court granted Losurdo possession of the premises and, after a subsequent hearing, awarded Losurdo $1,173.75 for attorney fees although Losurdo had requested attorney fees and costs totaling $3,903.

The principal argument advanced in Arkin's brief in its appeal is that its requests by letter to sublet to Ramlyn and later to Hanna were reasonable, and Losurdo's failure to respond was "an unreasonable act which should bar their [Losurdo's] right to rely" on the prior consent provision and should be construed as "assent" to the proposed subleases. In essence, Arkin maintains Losurdo had an affirmative duty to respond to the requests to sublease, and the failure to do so bars enforcement of the term of the lease requiring written consent. Counsel for Arkin acknowledged at oral argument that the "unreasonable withholding of consent" provision in the lease pertains to the sublessee being suitable and meeting commercially reasonable standards which was not addressed by Arkin in its proofs or in its brief and is not an issue before us. Contrary to Losurdo's statement in its brief that Arkin's principal contention was not affirmatively raised in its answer, we believe this issue was fairly raised in Arkin's pleadings. In addition, proofs were presented on this contention without objection by Losurdo, thereby waiving by its conduct at trial any possible deficiency in Arkin's pleadings. See Schwarzbach v. City of Highland Park (1980), 82 Ill. App.3d 807, 810, 403 N.E.2d 102; see also Ill. Rev. Stat. 1981, ch. 110, par. 2-612(c).

• 1 Generally, a lease provision which prevents the lessee from subletting the premises or assigning the lease without the prior consent of the lessor is an enforceable provision, provided the lessor has not unreasonably rejected a suitable subtenant shown by the lessee to meet commercially reasonable standards. (See Jack Frost Sales, Inc. v. Harris Trust & Savings Bank (1982), 104 Ill. App.3d 933, 433 N.E.2d 941; Arrington v. Walter E. Heller International Corp. (1975), 30 Ill. App.3d 631, 333 N.E.2d 50; Reget v. Dempsey-Tegler & Co. (1966), 70 Ill. App.2d 32, 216 N.E.2d 500.) However, the issue before us is not whether Losurdo unreasonably withheld consent to sublet the premises, but whether Losurdo's failure to respond to Arkin's request to sublet operates to bar enforcement of the prior consent provision, or in essence to waive it. Nevertheless, the principle of law stated above regarding the obligation of the lessee to show that its proposed subtenant was suitable and meets commercially reasonable standards is relevant under the factual circumstances present here.

Losurdo was presented by Arkin with the request to consent to sublet to Ramlyn on December 31, 1981, for a subtenancy to begin the next day, January 1, 1982. While the record does not reveal whether possession by Ramlyn actually took place on January 1, the sublease so provided for possession on that day, the record indicates Ramlyn did occupy the premises and pay rent, and Arkin did not present any proofs to the contrary. Nor did Arkin introduce any testimony to prove that any request to consent to this subtenant was made at any time prior to the December 31 request, even though an unsubstantiated reference to a prior request is contained in an original letter dated December 24, 1981, from Arkin's attorney, which was attached to a request to sublet, delivered or mailed on December 31.

As Losurdo correctly contends, Arkin never gave it any opportunity to exercise any reasonable commercial judgment in which to determine whether the proposed subtenancy met commercially reasonable standards. Such standards may include the credit and financial responsibility of the proposed subtenant as well as the type of business to be conducted on the premises and whether the business competes with that of the lessor or any other lessee. (See Arrington v. Walter E. Heller International Corp. (1975), 30 Ill. App.3d 631, 333 N.E.2d 50; Reget v. Dempsey-Tegler & Co. (1966), 70 Ill. App.2d 32, 216 N.E.2d 500.) The lease between Losurdo and Arkin provided that the use of the premises was for the purpose of a toy distributor and included a provision that the premises could not be used for a purpose which would increase the fire hazard of the building. The proposed subtenancy lease between Arkin and Ramlyn, which was delivered or mailed to Losurdo on December 31, indicated Ramlyn was engaged in precision sheet metal work, certainly a use substantially different from that of a toy distributor conducted on the premises by Arkin. It is also apparent from the record that once Losurdo had made some investigation of the use of the premises, it mailed a "notice to quit" on February 3, 1982, to Arkin specifying a default by the use of flammable materials in the nature of welding equipment used on the premises in violation of a clause in the original lease. This suit for forcible entry and detainer was thereafter filed on March 30, 1982.

• 2 Under the facts present here, Arkin's delivery or mailing on December 31 to Losurdo of its request for consent to sublet the premises to begin on January 1 gave Losurdo no opportunity to investigate to determine if the proposed subtenant met commercially reasonable standards and no opportunity to respond before the subtenancy began. The occupancy of the premises by Ramlyn after January 1 was a breach of the express term of the original lease prohibiting a subletting of the premises without the prior written consent of the lessor. The failure of Losurdo to immediately respond, under the circumstances, is not a bar to enforcement of the covenant. Thus, even assuming a lessor's failure to respond would constitute a waiver of the right to enforce the prior-consent provision, the lessor must be provided a reasonable period of time to respond, unless a specific time is provided in the lease, and clearly here virtually no time was given for Losurdo to respond.

We also note that Arkin's second request to sublease the same unit C to another proposed tenant, Hanna, was likewise given without much advance notice. The letter request was dated July 27, 1982, for a sublease beginning August 9, 1982. This request was also made after this forcible entry and detainer suit was filed. In any event, the first subtenancy, as discussed above, was a ...


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