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11/22/96 UNIT ONE CORPORATION AND BOEHM v. BRADLEY

APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FOURTH DIVISION


November 22, 1996

UNIT ONE CORPORATION AND BOEHM, PEARLSTEIN & BRIGHT, LTD., PLAINTIFFS-APPELLANTS,
v.
BRADLEY MICKELSON AND MICKELSON ENTERPRISES, INC., DEFENDANTS-APPELLEES.

Appeal from the Circuit Court of Cook County. No. 90 L 17776. Honorable Irwin J. Solganick, Judge Presiding.

Rule 23 Order Redesignated Opinion and Ordered Published January 15, 1997. As Modified May 29, 1997.

Burke, J., with DiVITO, P.j., and Cerda, J.,* concurring.

MODIFIED ORDER

Plaintiff Unit One Corporation (Unit One) and Boehm, Pearlstein & Bright, Ltd., plaintiff's attorneys, appeal from two circuit court orders granting defendant Bradley Mickelson and Mickelson Enterprises, Inc.'s (Mickelson) motion for summary judgment pursuant to section 2--1005(b) of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/2--1005(b) (West 1992)) and motion for sanctions and attorney fees pursuant to Illinois Supreme Court Rule 137 (155 Ill. 2d R. 137). On appeal, Unit One and its attorneys argue that genuine issues of material fact existed, and issues of law were incorrectly ruled on regarding Mickelson's alleged breach of his lease contract with Unit One because Mickelson declined temporary air-conditioning services in order to perpetuate an interruption in services, an issue of fact existed as to whether air-conditioning services were only required during business hours, Mickelson's termination of the lease and refusal of temporary air-conditioning services was done in bad faith, the court erred in striking its cross-motion for summary judgment, sanctions were not warranted or supported by the record and, alternatively, the amount of attorney fees awarded was unreasonable. For the reasons set forth below, we affirm.

On July 14, 1988, Unit One and Mickelson entered into a store lease for rental of space for a hair salon in a building located at 3200 North Lake Shore Drive in Chicago, Illinois. The terms of the lease provided that it would terminate on July 31, 1993, and indicated a graduated rental increase each year. The lease and the attached rider also included the following provisions regarding Unit One's responsibilities for furnishing air-conditioning and heating:

[Lease provisions]

"7. Lessee after reasonable prior notice, will allow Lessor or any person authorized by Lessor free access to the Premises for the purpose of examining or exhibiting the same, or to make any repairs or alterations thereof which Lessor may see fit to make ***.

***

10. Where building is equipped for the purpose, Lessor at Lessor's expense, shall furnish to Lessee a reasonable amount of heat and air-conditioning necessary for comfortable use of the Premises, during customary Lessee's business hours, but not earlier than 8 a.m. nor later than 10 p.m. unless specifically stated herein. Lessor does not warrant that heating service will be free from interruptions caused by strike, accident or other cause beyond the reasonable control of Lessor, or by renewal or repair of the heating or air-conditioning apparatus in the building. Any such interruption shall not be deemed an eviction or disturbance of Lessee's use and possession of Premises, nor render Lessor liable to Lessee in damages. All claims against Lessor for injury or damage arising from failure to furnish heat or air-conditioning are hereby expressly waived by Lessee.

***

[Rider provisions]

23. Rider Supersedes. To the extent that the terms and conditions of this Rider may be inconsistent or in conflict with any of the terms and conditions of the foregoing printed and typed Lease, this Rider shall control and supersede the Lease. Unless the context requires otherwise, the 'Lease' shall refer to the foregoing printed and typed Lease and this Rider.

***

45. Interruption of Services.

(a) Notwithstanding anything contained in paragraphs 10 and 11 of the Lease to the contrary, if:

(i) the heating or air-conditioning services are interrupted or discontinued; or

(ii) the Premises, or any portion thereof, are rendered unusable for the operation of Lessee's business by reason of fire or other casualty; or

(iii) Lessee is prevented from gaining access to the Premises for a period in excess of ten (10) days, Lessee, at any time after seven (7) days after prior written notice to Lessor, shall have the right to terminate this lease.

***

47. Maintenance of Building. At all times during the Term, Lessor shall, at its sole cost and expense, keep and maintain the Building and all of its component parts, including, without limitation, the heating, ventilating and air-conditioning systems serving the Premises in good working order and consistent with the operation of a first-class residential and commercial property on Lake Shore Drive.

***

52. Hours of Operation. Lessee may operate its business from the Premises in accordance with the terms of this Lease from no earlier than 7:30 a.m. to no later than 10:00 p.m., seven (7) days a week including holidays, if Lessee so desires. Lessee shall not accept appointments that commence after 9:30 p.m."

In September, 1990, the following events occurred. On September 9, 1990, a boiler servicing the building exploded causing Mickelson's hair salon to be without air-conditioning. On September 10, 1990, Unit One's representatives went to Mickelson's salon to begin working on installing a new water heater; however, Mickelson requested a postponement of this work until September 13, 1990. On September 13, 1990, Unit One's representatives wrote Mickelson a letter offering to provide him a free-standing air-conditioning unit until the building's system was running again. Mickelson, however, declined to "approve" the air-conditioning unit. *fn1 On September 20, 1990, Unit One installed a new hot water heater in the building. Also, on the same day, Mickelson's attorney informed Unit One that because no heating, air-conditioning or ventilation had been restored to the salon since September 9, 1990, Mickelson was providing Unit One with notice that it was exercising its right to terminate the lease pursuant to paragraphs 45 and 47 of the rider to the lease. On September 28, 1990, Mickelson vacated the premises.

On November 13, 1990, Unit One filed a complaint against Mickelson alleging a breach of the lease contract. Subsequently, Unit One filed an amended complaint which lowered the damages amount requested due to Unit One's mitigation of damages, and a second amended complaint, which added Mickelson Enterprises, Inc. as a named defendant.

Prior to filing his answer, Mickelson filed an appearance, a request to admit, interrogatories, a motion to strike and dismiss, and notices of deposition for Unit One representatives. In its response to Mickelson's request to admit filed on March 22, 1991, Unit One admitted the following: Unit One installed a new water heater subsequent to the boiler failure without seeking any approval from Mickelson as to the type of system to be installed; Mickelson never attempted to stop Unit One from installing the new water heater; Mickelson never attempted to stop or inhibit Unit One from repairing the boiler or installing a replacement air-conditioning unit in the salon or anywhere on the premises; the lease did not place a duty upon Mickelson to approve the type of water heating system or air-conditioning system installed on the premises; prior to September 28, 1990, Unit One did not install a functioning air-conditioning unit on the premises; air-conditioning services were interrupted and discontinued from September 9, 1990 to September 28, 1990; and on September 28, 1990, Mickelson notified Unit One in writing that he was terminating the lease. *fn2

On May 3, 1991, Mickelson filed his answer to Unit One's amended complaint. In his answer, Mickelson denied that, on September 10, 1990, he requested a postponement of Unit One's installation of a water heater. Mickelson also denied that Unit One's offer of a free-standing air-conditioning unit was an adequate or appropriate solution to the boiler explosion, and denied Unit One's allegation that he refused to approve Unit One's offer to correct the interruption of air-conditioning service. Mickelson further denied that a new hot water heater was installed on the premises on September 20, 1990, and Unit One's allegation that he breached the terms of the lease agreement.

Mickelson also alleged five affirmative defenses: (1) he was entitled to a judgment on the pleadings; (2) Unit One's complaint showed that it breached the terms of the lease; (3) Unit One made the offer to install the free-standing air-conditioner without having one readily available and without information regarding the sufficiency of the unit; (4) Unit One failed to reasonably mitigate its damages; and (5) Bradley Mickelson was only the guarantor of the lease and, therefore, Unit One was required to name Mickelson Enterprises as the proper party in interest. Mickelson also filed a counterclaim. The trial court subsequently dismissed Mickelson's counterclaim and affirmative defenses 1, 2, 3, and 5. On July 5, 1994, the trial court set the matter for trial on October 6, 1994.

On July 15, 1994, Mickelson filed a motion for summary judgment, arguing that Unit One failed to cite complete contract provisions, and that a reading of the relevant lease provisions indicated Mickelson's termination of the lease did not constitute a breach. Mickelson further argued that Unit One did not install functioning air-conditioning before September 28, 1990, Mickelson did not prevent Unit One from installing air-conditioning, a hot water heater was not installed until after September 19, 1990, and the lease provisions and Unit One's answer to Mickelson's request to admit showed that he was entitled to summary judgment as a matter of law.

On September 26, 1994, Mickelson filed a motion to bar Unit One from filing a response to his motion for summary judgment based on Unit One's failure to timely respond, which the trial court subsequently denied.

On October 5, 1995, Unit One filed a combined response to Mickelson's motion for summary judgment and a cross-motion for summary judgment. Unit one argued that Mickelson declined temporary air-conditioning services, and this precluded Mickelson from arguing that Unit One breached the terms of the lease by not supplying uninterrupted air-conditioning. Unit One also argued that the air-conditioning services were not interrupted for "in excess of ten days" because the boiler was replaced on September 20, 1990. In support of this statement, Unit One quoted Mickelson's deposition testimony indicating that on September 20, 1990, Unit One installed a hot water heater. *fn3 Additionally, Unit One argued that September 9, 1990, the day the boiler exploded, was a Sunday, and Mickelson did not operate his business on Sundays. Therefore, Unit One argued, the calculation of the 10-day period enumerated in the lease rider should not have begun until September 10, 1990, because Unit One was only obligated to provide air-conditioning during business hours. Finally, Unit One argued that Mickelson acted in bad faith when he terminated the lease because his tax returns and deposition testimony showed that he could not afford to pay the rent.

On October 7, 1994, the trial court heard arguments on Mickelson's motion for summary judgment, and granted the motion. The trial court stated that it would not consider the possible reasons Mickelson may have had for taking advantage of the lease provision allowing him to vacate the premises and avoid the contract. The court also held: the lease terms were clear and unambiguous and Mickelson had followed its terms regarding cancellation; Mickelson had no duty to accept or reject the offer of a free-standing air-conditioning unit, and Unit One could have simply entered the premises and installed the unit to avoid a continuous interruption of air-conditioning services; and Unit One's response to Mickelson's request to admit affirmed the court's conclusion that the motion for summary judgment should be granted. The trial court also denied Mickelson's motion to strike Unit One's response to his motion for summary judgment, and granted Mickelson's motion to strike Unit One's cross-motion for summary judgment.

On November 4, 1994, Mickelson filed a petition for sanctions against Unit One and its attorneys pursuant to Illinois Supreme Court Rule 137, arguing that sanctions were warranted because Unit One's claims against him were neither well grounded in fact nor warranted by existing law. He also argued that Unit One's combined response to his motion for summary judgment and its cross-motion for summary judgment contained false statements and misrepresentations of facts.

On November 30 1994, Unit One and its attorneys filed their response to Mickelson's petition for sanctions. They argued that the basis of the lawsuit was well grounded in fact and law because issues existed regarding whether Unit One's offer to provide temporary air-conditioning services precluded Mickelson from terminating his lease, an issue of fact existed regarding whether air-conditioning services were only required during customary business hours, Mickelson's pleadings perpetuated the litigation in increased fees, Unit One's responses to Mickelson's request to admit were not dispositive, and Unit One and its attorneys did not make misrepresentations to the court.

On December 20, 1994, the trial court granted Mickelson's petition for sanctions based on the following findings:

"1) That as of the date the request to admit was filed and the responses thereto given the plaintiff[']s complaint should [have] been abandoned because the complaint was not grounded in fact or warranted by law;

2) That a simple reading of the lease and the rider to the lease shows clearly that there was no basis in law or fact to file the complaint and proceeding on the complaint was done for no purpose other than to harass defendants, waste the court's time, to cause unnecessary delay or to needlessly increase litigation and the cost of litigation."

The trial court continued the matter for an evidentiary hearing on the issue of the amount of attorney fees to be awarded.

Prior to the evidentiary hearing, discovery was conducted regarding the amount of sanctions to be awarded. On June 19, 1995, the court heard extensive arguments on Mickelson's requested attorney fees. The trial court held that the attorney fees should be calculated from March 22, 1991, the date Unit One filed its response to Mickelson's request to admit. The court subsequently denied some of Mickelson's fee requests, and awarded Mickelson $3,318.75 for in-court fees and $2,620 for out-of-court fees for attorney John Pendergast, $825 for in-court fees and $1,218.75 for out-of-court fees for attorney Scott Stephenson, and $171.75 for costs.

On June 22, 1995, Unit One and its attorneys filed a notice of appeal, and on July 21, 1995, the trial court issued an agreed order approving an appeal bond in the amount of $12,229.87. This appeal followed and, subsequently, Mickelson filed a petition for sanctions pursuant to Illinois Supreme Court Rule 375(b) (172 Ill. 2d R. 375(b)), which we have taken with the case.

On appeal, Unit One first argues that summary judgment should not have been granted because a genuine issue of material fact existed as to whether it was required to supply air-conditioning and heat for Mickelson's leased premises on Sundays because paragraph 10 of the lease states that Unit One must furnish heat and air-conditioning during "customary business hours," and Mickelson did not operate his salon on Sundays. Unit One further argues that the air-conditioning services were not interrupted "in excess of 10 days" because the boiler exploded on a Sunday and that day should not have been counted in the 10-day calculation. Mickelson argues that summary judgment was properly granted because the terms of the lease and the rider were clear and unambiguous as to these "issues."

The standard of review for summary judgment is de novo. Urban v. Village of Lincolnshire, 272 Ill. App. 3d 1087, 1094, 651 N.E.2d 683, 209 Ill. Dec. 505 (1995). A reviewing court must determine whether the trial court correctly ruled that no genuine issue of material fact existed, and that judgment was properly entered for the moving party as a matter of law. Urban, 272 Ill. App. 3d at 1094. The reviewing court must view the evidence in a light most favorable to the nonmoving party. Turner v. Roesner, 193 Ill. App. 3d 482, 549 N.E.2d 1287, 140 Ill. Dec. 415 (1990), appeal denied, 132 Ill. 2d 555.

"When parties agree that the language of a contract is clear and unambiguous, then construing the contract is a matter of law appropriate for summary judgment." J.M. Beals Enterprises, Inc. v. Industrial Hard Chrome, Ltd., 194 Ill. App. 3d 744, 748, 551 N.E.2d 340, 141 Ill. Dec. 347 (1990). If the language of a contract is clear and unambiguous, the court must interpret the contract according to the language. Klemp v. Hergott Group, 267 Ill. App. 3d 574, 580, 641 N.E.2d 957, 204 Ill. Dec. 527 (1994). A contract will only be found ambiguous when its terms can reasonably be interpreted, or are fairly susceptible, to more than one interpretation. Omnitrus Merging Corp. v. Illinois Tool Works, 256 Ill. App. 3d 31, 34, 628 N.E.2d 1165, 195 Ill. Dec. 701 (1993). "The mere fact that parties disagree on some term, however, is not a sign that the term is ambiguous." J.M. Beals, 194 Ill. App. 3d at 748. A court may not add provisions to make an unambiguous contract more equitable. J.M. Beals, 194 Ill. App. 3d at 748.

We find that a straightforward reading of the lease contract and its rider provisions show that no ambiguity exists in their terms. The rider provides that "to the extent that the terms and conditions of [the] rider may be inconsistent or in conflict with any of the terms" of the lease, the rider controls and supersedes the lease. Paragraph 45 of the rider explicitly provides that if the air-conditioning services are interrupted for 10 days, lessee shall have the right to terminate the lease. Paragraph 52 of the rider provides that Mickelson may operate his business seven days a week, including holidays. The only explicit limitation in paragraph 52 relates to the time of day Mickelson may operate his business. As Mickelson points out in his brief on appeal, if the parties wanted "ten days" to mean 10 business days, they could have explicitly so provided, as had been done in other paragraphs of the lease. See Klemp, 267 Ill. App. 3d at 581 ("There is a strong presumption against provisions that easily could have been included in the contract but were not. *** A court will not add another term about which an agreement is silent"). Accordingly, the "customary business hours" provision in the lease was superseded by the rider to encompass seven days a week.

Unit One next argues that good faith is an implied term in contracts, and that Mickelson did not act in good faith when he refused to approve the free-standing air-conditioning unit. Additionally, Unit One argues that Mickelson's precarious financial status shows that his exercise of the termination clause was done with bad motive.

"Every contract implies good faith and fair dealing between the parties." First National Bank v. Sylvester, 196 Ill. App. 3d 902, 910, 554 N.E.2d 1063, 144 Ill. Dec. 24 (1990). Good faith requires that the party vested with discretion must exercise it reasonably and not arbitrarily, capriciously or inconsistent with the expectations of the parties to the contract. First National Bank, 196 Ill. App. 3d at 910-11.

Here, Unit One argues that Mickelson retained the discretion or power to accept or reject the replacement air-conditioning unit, and that this power constituted an implied condition precedent to the performance of the contract. Unit One, however, misstates the law when it cites Osten v. Shah, 104 Ill. App. 3d 784, 433 N.E.2d 294, 60 Ill. Dec. 497 (1982), for the proposition that a "party's good faith cooperation is an implied condition precedent to the performance of a contract. The Osten court stated that "[a] party cannot claim the failure of a condition defeats his own liability when he is the party who prevents actualization of the condition upon which contractual liability depends." Osten, 104 Ill. App. 3d at 786. Thus, Osten stands for the proposition that when a party is to perform a condition precedent, it must act in good faith, not that good faith is a condition precedent.

Based on the facts before us, it is clear that Unit One is the party vested with the discretion regarding the installation of the replacement air-conditioning unit. We agree with Mickelson that he did not retain any power to accept or reject any services Unit One provided pursuant to the terms of the lease and rider. Indeed, according to paragraph 7 of the lease, Mickelson was required to allow Unit One free access to the salon for the purpose of making repairs. The discretion to install a new air-conditioning unit or to repair the old system remained solely with Unit One throughout the events of September 1990. Thus, Unit One is the party who failed to exercise its discretion in good faith and who breached the implied promise to act in good faith; Unit One offered a replacement air-conditioning unit to Mickelson but did not attempt to install it.

We also reject Unit One's argument that Mickelson's precarious financial condition at the time of the lease termination indicated his bad faith or bad motivation for vacating the premises. Unit One fails to cite authority in support of this argument and, therefore, has waived it on appeal. 155 Ill. 2d R. 341(e)(7); Saldana v. Wirtz Cartage Co., 74 Ill. 2d 379, 385 N.E.2d 664, 24 Ill. Dec. 523 (1978). Notwithstanding Unit One's waiver, we briefly note that because Mickelson's termination of the lease was in accordance with the terms of the lease and rider, it is irrelevant whether he had other motivations for wanting to vacate the premises.

We also find that Unit One has waived the issue of the trial court's striking of its cross-motion for summary judgment by failing to cite to authority. Saldana, 74 Ill. 2d at 379.

Lastly, Unit One argues that sanctions were not warranted because nothing in the record supports the trial court's findings and, alternatively, that the attorney fees awarded were unreasonable. Mickelson argues that the trial court did not abuse its discretion in imposing sanctions and that the attorney fees awarded were reasonable.

"The decision to impose sanctions is within the sound discretion of the trial judge and will not be reversed on appeal absent an abuse of discretion." Liddle v. Cepeda, 251 Ill. App. 3d 892, 894, 623 N.E.2d 849, 191 Ill. Dec. 259 (1993). "An appellate court reviewing imposition of sanctions considers whether (1) the circuit court's decision was an informed one; (2) the decision was based on valid reasons that fit the case; and (3) the decision followed logically from the application of the reasons stated to the particular circumstances of the case." Liddle, 251 Ill. App. 3d at 894. The purpose of Illinois Supreme Court Rule 137 is to "penalize parties who plead frivolous or false matters or bring suit without any basis in law." Fischer v. Brombolich, 246 Ill. App. 3d 660, 664, 616 N.E.2d 743, 186 Ill. Dec. 553 (1993). A trial court's decision constitutes an abuse of discretion only where "no reasonable person would take the view adopted by it." Fischer, 246 Ill. App. 3d at 664. An attorney must dismiss a lawsuit once it becomes obvious that the suit is baseless. Shea, Rogal & Associates v. Leslie Volkswagen, Inc., 250 Ill. App. 3d 149, 153, 621 N.E.2d 77, 190 Ill. Dec. 208 (1993).

In the case at bar, the sanctions imposed by the trial court did not constitute an abuse of discretion. When Unit One answered Mickelson's request to admit on March 22, 1991, it admitted that air-conditioning services had been interrupted from September 9, 1990 to September 28, 1990, and that Mickelson gave proper notice that he was terminating the lease. By admitting these facts on March 22, 1991, Unit One confirmed that Mickelson followed the terms of the lease when he vacated the premises and withheld any further payment of rent and, as the trial court properly held, Unit One was on notice that it did not have a basis for this lawsuit. Unit One thus caused unnecessary delay and expense to defendant and his attorneys. We further note that Unit One made no attempt to physically install a replacement air-conditioning unit or repair the boiler system and, instead, alleged that Mickelson precluded it from doing so. The duty was clearly upon Unit One to repair or replace the air-conditioning system, and the lease terms did not grant Mickelson the power to accept or reject any of these services. The trial court considered these facts when it made its decision to impose sanctions. We therefore find that the trial court did not abuse its discretion in imposing sanctions.

We also reject Unit One's argument that the trial court's calculation of attorney fees was unreasonable. The trial court heard extensive testimony on this issue in awarding Mickelson attorney fees based on billing documentation and, in fact, disallowed some of the requested fees because they were not properly documented or were incurred before Unit One should have withdrawn its suit. We therefore hold that the trial court did not abuse its discretion in its award of attorney fees.

Lastly, we have reviewed the parties' pleadings with respect to Mickelson's petition for sanctions in this court, and find that Unit One's appeal in this case does not rise to the level of frivolity under Illinois Supreme Court Rule 375(b) (172 Ill. 2d R. 375(b)), as argued by Mickelson. Accordingly, Mickelson's petition for sanctions is denied.

For the reasons stated, we affirm the orders of the circuit court.

Affirmed.

BURKE, J., with DiVITO, P.J., and Cerda, J.,* concurring.


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