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
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.
Article 32 of ABC's lease provides as follows:
If Tenant remains in possession of the Leased
Premises after the expiration or other termination of
the term of this lease without a new lease reduced to
writing and duly executed and delivered by Landlord
and Tenant (even if Tenant shall have paid, and
Landlord shall have accepted, rent in respect to such
holding over), such event shall be deemed to
constitute, at Landlord's Option: (a) the creation of
a tenancy month to month, at a rental equal to one
and one half (1½) times the total rental due for the
last full calendar month of the term of this lease or
(b) the renewal of this lease for the additional term
of one (1) year at rental equal to two (2) times the
total rental due for year immediately preceding such
renewal; provided, however, that Landlord shall not
be entitled to elect option (b) unless and until
Tenant shall have so retained possession for at least
ninety (90) days after the termination of this lease.
Either such month to month tenancy or such additional
term of one (1) year shall be subject to all
covenants, conditions and agreements of this lease,
except as otherwise specifically provided herein.
Absent such election by Landlord, such holding over
shall be an unauthorized possession and default
hereunder. If Tenant fails to surrender the Leased
Premises upon the termination of this lease, then
Tenant shall, in addition to any other liabilities to
Landlord accruing therefrom, indemnify and hold
Landlord harmless from loss or liability resulting
from such failure, including, without limiting the
generality of the foregoing, attorneys' fees and any
claims made by any succeeding tenant resulting from
such failure.
Discussion
In deciding a motion for summary judgment, the Court views the
facts in the light most favorable to the non-moving party and
draws reasonable inferences in that party's favor. Anderson v.
Liberty Lobby, Inc.,
477 U.S. 242, 255 (1986). Summary judgment
may be granted only if there is no genuine issue of material fact
and the moving party is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(c).
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 ...