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FIRST NATL. BANK OF CHICAGO v. PLITT THEATERS

January 30, 1990

FIRST NATIONAL BANK OF CHICAGO and FLORENCE KAUFMANN, not individually, but as trustees of the Alfred Kaufmann Trust, Plaintiffs
v.
PLITT THEATERS, INC., Defendant



The opinion of the court was delivered by: BUA

 NICHOLAS J. BUA, UNITED STATES DISTRICT JUDGE

 This order concerns plaintiffs' motion for summary judgment. For the reasons stated herein, plaintiffs' motion is granted.

 FACTS *fn1"

 Plaintiffs First National Bank of Chicago and Florence Kaufmann are trustees of the Alfred Kaufmann Trust ("the Trust"). The Trust owns real property located at 5405-09 Hohman Avenue in Hammond, Indiana. Some time ago, a theatre building named the "Paramount" was built on the Hohman Avenue property. The theatre was erected pursuant to a 99-year ground lease which runs from 1929 to 2028 ("the lease"). At all times relevant hereto, the Trust has been the lessor under the lease. Defendant Plitt Theatres, Inc., ("Plitt") became the lessee under the lease on December 31, 1974. Beginning in 1975, Plitt ran motion pictures at the Paramount.

 In the late 1970s, Plitt stopped showing movies at the Paramount, turned off the water and electricity, and boarded-up the building. For nearly ten years thereafter, the Paramount remained idle. Plitt did no repair, maintenance, or other work to the theatre, which caused the condition of the theatre to deteriorate greatly. In October of 1985, a fire caused serious damage to the Paramount. Shortly thereafter, James Walsco, the Chief Inspector of the Hammond Fire Department, declared that the huge holes in the roof and the leaning walls made the interior of the Paramount "a hazard to life and limb." In July 1987, Jack Turner, the Hammond Building Commissioner, sent a letter to Plitt demanding that the Paramount be repaired to prevent injury from the concrete blocks which were falling from the structure. A month later, Plitt's Northern Division Vice President, Irwin A. Cohen, sent a letter to the president of Plitt's Theatre Division in which he stated that "the [Paramount] is in deplorable condition and is a hazard because of falling objects." During the time that the theatre remained idle, Plitt faithfully paid the rent owed to the Trust, which was $ 16,000 per year. Pursuant to the lease, Plitt also maintained insurance on the property and paid the real estate taxes which accrued during that time.

 Premier was an Indiana corporation which was incorporated on August 25, 1987, for the sole purpose of acquiring and refurbishing the Paramount. Premier had no assets. The President of the corporation, Stephen Stofko, was 18 years old. At the time he entered into the agreements with Plitt on behalf of Premier, Stofko was living with his mother, attending his first year of college, and working part-time for $ 6.20 per hour. He had no business experience, and he had just $ 2,000 in the bank. His business partner, Don Bertolo, was in a similar situation. Before Premier entered into the contract with Plitt, Stofko and Bertolo inspected the Paramount and noticed a large hole in the roof, plaster torn away from the interior ceiling and walls, four feet of water in the basement, and numerous other defects. Nevertheless, Stofko entered into the agreement with Plitt on behalf of Premier with the hope that Premier could obtain a grant to refurbish the theatre. *fn2"

 Plitt's attorneys first notified the Trust of the assignment of the lease to Premier by a letter dated April 18, 1988. Upon receiving the letter, the Trust changed its rent ledger to identify Premier as the tenant. The Trust then sent rent notices to Premier in an effort to collect the rent due on the lease for June 1988. When Premier did not respond to the rent notices, the Trust sent a notice to Plitt requesting payment for the June rent. Plitt did not pay the June rent, and has refused to pay any rent to the Trust since May 1988. Premier, meanwhile, never formally applied for any grants to refurbish the property and eventually abandoned its interest in the Paramount, having never made any payments to the Trust. Stofko and Bertolo allowed Premier to be dissolved, and the corporation is no longer in existence.

 DISCUSSION

 Plaintiffs filed this action on behalf of the Trust seeking declaratory and monetary relief against Plitt. Plaintiffs claim that under the terms of the lease, Plitt's purported assignment of the lease to Premier was null and void. Therefore, plaintiffs argue, Plitt retains all of its obligations under the lease and is liable for all the damages proximately caused to the Trust by the attempted assignment.

 The express language of the lease supports plaintiffs' position. Article Fifteenth of the lease provides that the lessee can assign his rights under the lease only where: (1) the lessee is not in default on any of the covenants and agreements contained in the lease; and (2) the assignment is in writing and a copy of that writing is delivered to the lessor within thirty days after the date the writing is delivered to the lessee. Plitt's purported assignment clearly did not satisfy either of these criteria. *fn3"

 Plitt admits that it failed to comply with the maintenance covenants in the lease and that it failed to notify the Trust of the assignment within thirty days as required under the lease. Nevertheless, Plitt maintains that it is no longer liable under the lease because the Trust waived its right to contest the assignment. Plitt argues that since the Trust had been fully aware of the dilapidated condition of the Paramount for several years, the Trust waived its right to object to the assignment based on Plitt's breach of the maintenance covenants in the lease. Plitt further argues that the Trust, by changing its ledger to list Premier as tenant of the Paramount, by referring to Premier as the "new lessee" in internal memoranda, and by requesting ...


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