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Stride v. 120 West Madison Bldg. Corp.

OPINION FILED APRIL 10, 1985.

HERBERT F. STRIDE ET AL., PLAINTIFFS AND COUNTERDEFENDANTS AND DEFENDANTS-APPELLEES AND CROSS-APPELLANTS,

v.

120 WEST MADISON BUILDING CORPORATION, DEFENDANT AND COUNTERPLAINTIFF AND PLAINTIFF-APPELLANT AND CROSS-APPELLEE.



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

JUSTICE MCNAMARA DELIVERED THE OPINION OF THE COURT:

Plaintiffs, Herbert F. Stride and Herbert F. Stride, Ltd., brought this action against Joseph Stefan and 120 West Madison Building Associates (Associates), former owners and lessors of the building at 120 West Madison Street in Chicago. Stride sought an injunction to prevent Stefan and Associates from terminating his lease and for an accounting of excess rent paid. One month later, 120 West Madison Building Corporation (the Corporation), the current owners of the building and a co-defendant in Stride's action, filed a forcible entry and detainer action against Stride. The Corporation also sought double rent and attorney fees under the lease. The trial court consolidated all the actions. After a trial, the court found that Stefan and Associates properly terminated the lease, entered judgment for possession, denied double rent during the pendency of the lawsuit and denied attorney fees for the Corporation. The Corporation appeals from the denial of double rent and attorney fees. Stride has filed a cross-appeal from the findings in favor of the Corporation.

Stride, an attorney, has been a tenant in the building for approximately 20 years. In 1982, he negotiated a five-year lease commencing on August 1, 1982. Paragraph 18(e) of the lease provides:

"The Lessor shall have the right to terminate this lease on the thirtieth day of April in any year if the Lessor * * * decides to sell the building or the land under it * * *. Such termination shall become effective and conclusive by notice of the Lessor to the Lessee not less than ninety days prior to the thirtieth day of April fixed in the notice. * * * [T]he right hereby reserved to the Lessor shall inure to all purchasers, designees, lessees, transferees and ground lessees, as the case may be and is in addition to all other rights of the Lessor."

In December 1982, Stefan and Associates negotiated the sale of the building to the Corporation. An agreement was reached on December 23, 1982, which provided for the closing through an escrow. Pursuant to the contract, Associates prepared and executed an assignment of the building's leases and deposited it in the escrow on January 17, 1983. On January 24, Stride was served with a notice, signed by Stefan and delivered to one of Stride's employees, that his lease was terminated as of April 30, 1983. Stride received actual notice sometime in February 1983. The sale of the building was closed on February 1, 1983.

On April 18, 1983, Stride filed this action challenging the validity of the attempted termination of the lease. The Corporation filed its action for forcible entry and detainer, alleging that Stride was a "hold over" under the terms of the lease. It sought double rent from May 1, 1983, and attorney fees. The trial court found that the termination was valid and entered judgment for possession, but stayed execution until April 1, 1984. The court found that Stride had not acted in bad faith and consequently ordered double rent payment only in the event Stride held over after April 1, 1984. The Corporation's claim for attorney fees was denied.

We first address Stride's contention that the notice of termination of the lease was ineffective. Stride initially maintains that Stefan and Associates could not validly terminate the lease on January 24 because they assigned their interest eight days earlier and were no longer the "Lessor" under paragraph 18(e) of the lease.

Where a valid assignment is effective, the assignee acquires all of the interest of the assignor that is transferred and stands in the shoes of the assignor. (Stavros v. Karkomi (1976), 39 Ill. App.3d 113, 349 N.E.2d 599.) Generally, an assignment placed in escrow to be delivered upon the completion of some condition is not operative to convey an interest until the happening of the event. (Hirschberg v. Russell (1943), 317 Ill. App. 329, 45 N.E.2d 886.) However, the instrument will be treated as relating back to and taking effect at the time of its original deposit in escrow where a resort to this fiction is necessary to prevent injustice or to effectuate the intent of the parties. (Clodfelter v. Van Fossan (1946), 394 Ill. 29, 67 N.E.2d 182.) Since the delivery of the assignment to the escrow did not operate to convey the seller's interests to the Corporation, we must determine whether the equities and the intentions of the parties require a finding that the assignment relates back to January 17.

Although Stride testified that he was unaware of paragraph 18(e), he maintains the intention of the parties in inserting such a clause in the lease was to give the lessor the privilege of conveying possession to the purchaser. Stride presented evidence that Stefan told him in December 1982 that a termination notice might not be sent if Stride renegotiated the lease. Stefan stated that only one other tenant received a termination notice. Stride urges that the notice was sent to cancel an unprofitable lease and to coerce him into paying higher rent, rather than to convey possession to the Corporation.

• 1 The language of the lease does not clearly indicate the intent of the parties in inserting a termination clause. In fact, Stride's testimony that he was unaware of the termination clause belies any intention on his part. As one authority has noted, termination clauses benefit owners in that they can sell more easily and the purchasers may continue the lease, take possession for its own use, or make a better rental. (2 M. Friedman, Friedman on Leases sec. 21.302, at 1037-38 (2d ed. 1983); see Basiliko Inv. Corp. v. United Cigar-Whelan Stores Corp. (D.C. Cir. 1948), 168 F.2d 567.) The record indicates that Stride's rent was substantially lower than the other tenants in the building due to a computational error. There is no inequity in the Corporation's wanting Stefan to terminate the lease so it could find a more profitable tenant or to compel a renegotiation by Stride. Stride, an attorney, gave Stefan the power to terminate when he signed the lease. The trial court properly found that the termination was valid under the terms of the lease.

We likewise reject Stride's argument that Stefan was acting as an agent of the Corporation, attempting to exercise a power which the Corporation did not have. While the Corporation has no power to terminate until some future date when it sells the building, there is nothing which prevents it from discussing the leases with the sellers and requesting that certain leases be cancelled. Stride cites no authority to support his position that the sellers had to act independently of the buyer's wishes and we find none.

• 2 We next turn to the Corporation's argument that Stride was a "hold over" entitling the Corporation to double rent and attorney fees. Paragraph 7 of the lease provides in relevant part:

"Holding Over: If the Lessee retains possession of the premises or any part thereof after the termination of the term by lapse of time or otherwise, the Lessee shall pay the Lessor rent at double the rate of rental specified in Section 1 for the time the Lessee thus remains in possession, and in addition, shall pay the Lessor all damages sustained by reason of the Lessee's retention of possession." (Emphasis added.)

The trial court denied double rent from May 1, 1983, to April 1, 1984, based on its finding that Stride did not act in bad faith in failing to vacate the leased premises. The Corporation contends that the court erred in imposing a bad-faith ...


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