Appeal from the Circuit Court of Cook County. No. 90 CH 2383. Honorable Edward C. Hofert, Judge Presiding.
The Honorable Justice Cerda delivered the opinion of the court: Rizzi, P.j., And Tully, J., Concur.
The opinion of the court was delivered by: Cerda
The Honorable Justice CERDA delivered the opinion of the court:
Plaintiffs, Louis Pacini, Lois Pacini, and LaSalle National Bank as Trustee under Trust No. 111927, filed a complaint against defendants, Angelo Regopoulos, Efstathios Regopoulos, and Joseph Navilio, alleging breach of an occupancy guaranty included in an agreement to purchase a shopping center. Defendants filed a counterclaim seeking specific performance of a junior mortgage agreement, foreclosure of an equitable mortgage lien, and damages. At the close of plaintiffs' case-in-chief, the trial court entered a directed finding in favor of defendants on plaintiffs' complaint and judgment in favor of defendants on their counterclaim. Without taking any further evidence, the trial court then entered an equitable mortgage lien against the property and personal judgments against each plaintiff in the amount of the lien.
On appeal, plaintiffs assert that the trial court erred when it (1) directed a finding in favor of defendants; (2) entered judgment for defendants on their counterclaim; and (3) entered personal judgments against plaintiffs.
The principle issue in this case is whether the doctrine of de minimis non curat lex applied where a rental occupancy guaranty agreement required 95% occupancy and the evidence only proved 94.9953% rental occupancy.
On May 12, 1988, plaintiffs entered into a purchase agreement with defendants to buy a shopping center. Included in the agreement was a guaranty of occupancy, which provided that defendants would guarantee an income stream from 95% of the rentable square footage. The sale closed on July 28, 1988, at which time plaintiffs and defendants entered into an assignment and assumption of leases, which included a provision whereby defendants would indemnify plaintiffs for claims arising from any lease and occurring prior to the closing.
As part of the sales transaction, plaintiffs assumed a first mortgage that was held by Crown Life Insurance Company for $4.5 million. Pursuant to the assumption of the first mortgage, $900,000 of the seller's loan proceeds were held in escrow under a rent holdback agreement. The parties also executed a junior mortgage agreement whereby they would enter into a second mortgage, also known as a junior mortgage, if Crown applied any portion of the holdback funds to the unpaid principal.
In May 1989, Crown applied $600,000 of the holdback funds to reduce the unpaid balance of the first mortgage owed by plaintiffs. At that time, defendants drafted and tendered a junior mortgage and promissory note to plaintiffs' attorney, but the junior mortgage documents were never executed. Instead, plaintiffs filed a complaint alleging that defendants had breached the occupancy guaranty. They claimed a substantial set-off on the junior mortgage's amount on the grounds that the 95% occupancy rate had never been attained.
Defendants filed a counterclaim alleging that plaintiffs had breached the junior mortgage agreement. They sought specific performance of the junior mortgage agreement or, in the alternative, an equitable mortgage lien on the property and personal judgments against plaintiffs.
At trial, plaintiff Louis Pacini testified that the 95% occupancy rate was never reached in the shopping center and that the post-occupancy vacancy rate had been as low as 67%. At the time of the closing, when he purchased the property, he estimated that the occupancy rate was around 92% with six vacancies and by October 1, 1988, with four vacancies, it was 94.38%.
Michael O'Connor, a licensed professional land surveyor, testified on plaintiffs' behalf. He evaluated the retail square footage of the shopping center in March 1993 and prepared a survey. He determined that the occupancy rate at the time of closing, without the six vacant units, was 93.384%. On October 31, 1988, without four vacant units, the occupancy rate was 94.9953%.
At the conclusion of plaintiffs' evidence, the trial court found that the 95% threshold had been met and granted a directed finding in favor of defendants. The trial court applied the doctrine of de minimis non curat lex, where the court gives no remedy for slight harm. 4 Corbin, A., Corbin on Contracts, § 946, at 813 (1951). On defendants' counterclaim, the trial court stated that it would not direct plaintiffs to execute the junior mortgage and note, but found that there was an equitable mortgage lien. The trial court also entered personal judgments against each plaintiff in the amount of the equitable mortgage lien.
The first issue is whether the trial court erred in directing a finding in favor of defendants on plaintiffs' claim. Plaintiffs assert that the evidence they presented during their case-in-chief established a prima facie case since their evidence showed that less than 95% of the shopping center was leased on the day of the closing.
Pursuant to section 2-1110 of the Illinois Code of Civil Procedure (735 ILCS 5/2-1110 (West 1994)), the defendant may move for a directed finding at the end of the plaintiff's case in any matter tried without a jury. Kokinis v. Kotrich, 81 Ill. 2d 151, 154, 407 N.E.2d 43, 40 Ill. Dec. 812 (1980); Illinois Health Care Ass'n v. Wright, 268 Ill. App. 3d 988, 994, 645 N.E.2d 1370, 206 Ill. Dec. 848 (1994). When ruling on the motion, the trial court must employ a two-step analysis. First, the trial court must determine whether the plaintiff has established each element of a prima facie case. Kokinis, 81 Ill. 2d at 155, 407 N.E.2d 43. To establish a prima facie case, the plaintiffs must present evidence to support each element of the cause of action. Illinois Health Care Ass'n, 268 Ill. App. 3d at 995, 645 N.E.2d 1370.
If the trial court finds that the plaintiff has not established a prima facie case, it should direct a finding in favor of the defendant. Kokinis, 81 Ill. 2d at 155, 407 N.E.2d 43; Illinois Health Care Ass'n, 268 Ill. App. 3d at 994, 645 N.E.2d 1370. If, however, the trial court finds that plaintiff has established a prima facie case, it proceeds to the second step of the analysis, which is to weigh all the evidence, including any evidence favorable to the defendant, assess the credibility of the witnesses, and generally consider the weight and quality of all the evidence. Kokinis, 81 Ill. 2d at 154, 407 N.E.2d 43; Illinois Health Care Ass'n, 268 Ill. App. 3d at 994, 645 N.E.2d 1370 (1994). In deciding a motion for a directed finding, the trial court is not to view the evidence in the light most favorable to the plaintiff. Kokinis, 81 Ill. 2d at 154, 407 N.E.2d 43.
If the weighing process results in the negation of some of the evidence necessary to the plaintiff's prima facie case, the court should grant the defendant's motion and enter judgment in his favor. Kokinis, 81 Ill. 2d at 154-55, 407 N.E.2d 43; Klemp v. Hergott Group, 267 Ill. App. 3d 574, 578, 641 N.E.2d 957, 204 Ill. Dec. 527 (1994). In contrast, if sufficient evidence establishing the plaintiff's prima facie case remains after the weighing process, the court should deny the defendant's motion and proceed ...