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In re Generes

November 3, 1995








Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 93 C 5884--George M. Marovich, Judge.

Before CUMMINGS, COFFEY and EASTERBROOK, Circuit Judges.

COFFEY, Circuit Judge.



The dispute in this case arises from an adversary proceeding in the bankruptcy court concerning a two-month extension of a lease for a family home owned by the debtor, Tasker Generes, and rented to Edward and Patricia Morrell (the Morrells). The bankruptcy court determined that an oral agreement had been made between Generes and the Morrells to extend the lease. Generes appealed to the district court and lost; he now appeals to this court. The Morrells appeal the district court's decision not to impose sanctions in the form of attorneys' fees against Generes for filing a frivolous appeal in the district court. We affirm in part and reverse in part, and impose sanctions against Generes for pursuing a frivolous appeal in this court.

I. Background

The Morrells occupied and owned a family home in Northfield, Illinois, that was partially destroyed by fire in December 1990. No one was injured and the house was temporarily uninhabitable, but the Morrells and their four children were forced to find temporary housing while the repair work was being completed. Authorized by their insurance company and aided by an attorney, the Morrells signed a six-month lease with Tasker Generes to rent a home owned by Generes in Northbrook, Illinois. Generes, a practicing attorney for almost twenty years, resided next door.

The lease was for a term of six months and provided for a monthly rent of $2200, to be paid by the 18th of the preceding month, and a security deposit of $4400. Under the six-month term of the agreement, the Morrells were to vacate the premises by June 17, 1991. However, the lease contained a holdover provision in the event that the Morrells remained in possession of the house beyond the lease's original term. *fn1 The Morrells paid the security deposit and first month's rent and moved in on December 18, 1990.

There is no dispute that for the six month term of the original written lease, the Morrells paid each month's rent on time, usually by dropping off the rent-check at the Generes residence next door. However, the Morrells did not vacate the house by June 17, 1991, as originally agreed, but remained in possession for another two months pursuant to an oral agreement with Generes, the existence of which Generes denies. The Morrells paid rent of $2200 for the two additional months, although the July rent, due June 17, was not paid until July 6.

The Morrells vacated the premises on August 18, 1991 and contacted Generes about the return of their $4400 security deposit. Generes did not return the security deposit.

In late August 1991, Generes filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code and the Morrells filed a timely claim for the return of the $4400 security deposit. Generes disputed the claim and filed an adversary proceeding against the Morrells in bankruptcy court, seeking eight months of unpaid rent and $8000 of alleged property damage. *fn2 In his complaint, Generes alleged that there had been no oral agreement to extend the lease, but instead a holdover tenancy had been created by the Morrells remaining on the property, which obligated the Morrells to pay twelve months of rent according to the holdover provision in the written lease. *fn3 Further, Generes asserted that on July 1, 1991, he delivered a letter to the Morrells in which he exercised his right under the terms of the written lease to create the holdover tenancy.

On June 30, 1993, the bankruptcy court held a hearing on the matter, receiving testimony from Generes, the Morrells, and the Morrells's contractor. According to the Morrells, in the spring of 1991, the contractor who was repairing their home informed them that the work would not be completed until mid-August. The Morrells testified that they then contacted Generes and requested and received a two-month extension of their lease at the same rate.

Generes testified that no such oral agreement was made. Further, he stated that the first action taken was on July 1, 1991, when he prepared a letter to the Morrells, in which he exercised his right to create a holdover tenancy for a term of one year due to the Morrells' continued occupancy of the property. However, Generes conceded that he did not mail the letter or hand-deliver it to anyone at the rental property, but instead dropped it inside the Morrells' unlocked front door.

Recognizing that the decision boiled down to a credibility determination, the bankruptcy court ...

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