OAK CREEK PLAZA v. AMERICA'S BEST CONTACTS & EYEGLASSES

The opinion of the court was delivered by: MATHEW KENNELLY, District Judge

MEMORANDUM OPINION AND ORDER

Oak Creek Plaza, Ltd. and Oak Creek Plaza, LLC (collectively "Oak Creek"), the owner of a shopping center, have sued America's Best Contact & Eyeglasses, Inc. ("ABC"), for damages allegedly arising from ABC's claimed breach of a lease for a retail store at the shopping center. ABC has moved for summary judgment. For the reasons stated below, the Court denies ABC's motion.*fn1

Facts

  Oak Creek owns a shopping center in Mundelein, Illinois called Oak Creek Plaza. Starting in 1991, ABC leased space at the shopping center under a written lease. The lease expired on April 30, 2002. On October 8, 2001, Oak Creek sent a letter to ABC stating that another party had expressed interest in entering leasing the space occupied by ABC and asking whether ABC intended to continue operations after its lease expired. If so, Oak Creek stated in the letter, it would negotiate a renewal lease. ABC did not respond to the letter.

  The other party referenced in Oak Creek's letter was Leisure World, an existing tenant at the shopping center that wanted to expand into the space occupied by ABC. Having heard nothing from ABC, in February 2002, Oak Creek made an oral agreement with Leisure World to enter into a written lease for ABC's space once ABC's lease expired on April 30. Oak Creek agreed to demolish the wall between the space occupied by ABC and Leisure World's existing space so that Leisure World could use the space starting no later than June 1 to display goods for its summer selling season. Oak Creek says that Leisure World ordered additional inventory on the expectation that it would have the extra space available.

  Oak Creek contends it advised ABC in March and April 2002 that it had promised the space to Leisure World at the conclusion of ABC's lease term and also of the damage that would be sustained if ABC did not vacate the space when its term ended. ABC disputes this, denying it was told that Oak Creek had promised the space to Leisure World, and contending that it was told it could remain in the space for another 30 to 90 days. During the third week of April 2002, ABC's general counsel Paul Halpern visited the shopping center. After his visit, Halpern told Oak Creek's chief executive officer Ronald Boorstein that ABC would not be opening another store in the area and would vacate the space at the shopping center as soon as its operations permitted. Halpern agreed to provide a date certain for ABC's departure in return for an agreement by Oak Creek to hold ABC liable only for base rent. Boorstein did not commit to the proposal and said he was reserving all of Oak Creek's rights. On May 15, 2002, ABC sent Oak Creek a letter stating that ABC would surrender possession of the store at midnight on June 2. On May 21, Oak Creek sent ABC a letter stating that it would hold ABC liable under its lease for additional rent due while it was holding over and for other damages for which it was responsible. ABC vacated the space on June 2, but because its personnel left the keys with one of Leisure World's employees, Oak Creek did not obtain the keys until June 4.

  ABC paid $5,730.59 as rent for the month of May and the first two days of June. It is unclear when ABC paid this sum or how it determined the amount of this payment. On September 25, 2002, Oak Creek sent ABC a letter stating that the lease provided for a month-to-month tenancy for holding over, and that the total amount due for May and June rent was $13,844.40; it claimed ABC still owed $8,113.81 for rent. ABC now admits that this additional amount remains due.

  In the same September 25 letter, Oak Creek demanded that ABC reimburse Oak Creek for the losses it had suffered because it was unable to deliver the store to Leisure World at the conclusion of ABC's lease term. Oak Creek stated in the letter, and contends in this case, that because ABC did not vacate the store on April 30, Leisure World had no place to store or display the extra inventory it had ordered and had to rent extra off-site warehouse space and hire additional employees to move the goods there. Because Leisure World was unable to take possession of ABC's property at the end of ABC's lease term, Oak Creek asserts, Leisure World suffered a loss of over $230,000 because of its inability to sell the extra inventory at full price. As a result, Oak Creek claims, Leisure World threatened to leave the shopping center, and to keep this important tenant Oak Creek agreed to make concessions on Leisure World's rent. In addition, Leisure World has apparently demanded compensation of an additional amount as a condition of remaining at the shopping center.

  The parties agree that Illinois law governs this case. Under Illinois common law, a tenant that remains in possession after his right to possession has ended is a tenant at sufferance. The landlord may evict the tenant at sufferance as a trespasser or may treat it has a holdover tenant that continues to be bound by the terms of its expired lease on a month to month basis. Once the landlord has exercised its option, it may not alter the election. See Brach v. Amoco Oil Co., 570 F. Supp. 1437, 1441 (N.D. Ill. 1983) (applying Illinois law). A landlord that demands or sues to recover holdover rent thereby elects to treat the tenant as a holdover tenant. Wilkinson v. Johnson, 29 Ill.2d 392, 405, 194 N.E.2d 328, 336 (1963).

  ABC contends that by demanding holdover rent in its May and September 2002 letters, Oak Creek elected to treat it as a holdover tenant and is therefore limited to recovery of unpaid rent, not consequential damages. Assuming such an election were made, Oak Creek's recovery would indeed be so limited under Illinois common law. See Brach, 570 F. Supp. at 1441. But there are two problems with ABC's argument. First, Oak Creek argues that the parties' contract — the lease — alters the common law rule and permits it to recover both holdover rent and other damages.*fn2 Second, as Oak Creek points out, its letters to ABC demanded other damages in addition to rent; they can be called an "election" only if the demand for rent effectively trumps the remainder of the demand Because the letters relied on the contract, these arguments effectively collapse into one: that Article 32 of the lease permits Oak Creek to recover other damages even though it has demanded rent payments and thus treated ABC as a holdover tenant.

  ABC contends that Oak Creek may hold it liable for damages other than rent under Article 32 only if it "fail[ed] to surrender the premises on the termination of its lease." As a result of Oak Creek's election to treat ABC as a holdover tenant, ABC argues, the lease did not terminate, and thus the predicate for liability for other damages never existed. The Court disagrees, both as a matter of contract interpretation and as a matter of Illinois law.

  Article 32 refers to termination of the lease three times; it is reasonable to believe that each reference was intended to have the same meaning unless the context suggests otherwise or there is some other contrary indication — neither of which is the case here. At its outset, Article 32 refers to the Tenant remaining in possession "after the expiration or other termination of the term of this lease"; in describing one of Oak Creek's options if ABC holds over, Article 32 states that this particular option exists only if ABC has retained possession for ninety days "after the termination of this lease." It is rather obvious that both of these references denote the "termination" that occurs at the end of the stated term of the lease. The third reference is the one in question: it says that if ABC fails to surrender possession "upon the termination of the lease," it must hold Oak Creek harmless from other liabilities that result. In context it seems fairly clear that this phrase, like the other two, is meant to refer to the end of the stated term of the lease. In short, the hold harmless provision is triggered if ABC fails to surrender the premises after April 30, 2002.

  ABC argues that Oak Creek's purported election to treat it as a holdover tenant means that the lease remained in effect. That is not the law in Illinois. When a tenant holds over, although it remains subject to the terms of the lease, "`[t]he holding over does not renew or extend the lease but it creates a new tenancy. . . .'" Bransky v. Schmidt Motor Sales, Inc., 222 Ill. App.3d 1056, 1061, 584 N.E.2d 892, 8995 (1991) (quoting Bellows v. Ziv, 38 Ill. App.2d 342, 347-48, 187 N.E.2d 265, 267-68 (1962)). In other words, the lease terminated on April 30 but was replaced by a new, holdover tenancy on a month-to-month basis as provided by Article 32. But because ABC "fail[ed] to surrender the ...