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The Village of Palatine, A Municipal Corporation v. Palatine Associates

March 16, 2012

THE VILLAGE OF PALATINE, A MUNICIPAL CORPORATION, PLAINTIFF-APPELLEE,
v.
PALATINE ASSOCIATES, LLC, AN ILLINOIS LIMITED LIABILITY
CORPORATION, SEARS ROEBUCK AND COMPANY, A NEW YORK COOK CORPORATION, AND ALL AMERICAN TITLE AGENCY, LLC, AN ILLINOIS LIMITED LIABILITY COMPANY,
DEFENDANTS
(ALL AMERICAN TITLE AGENCY, LLC, AN ILLINOIS LIMITED LIABILITY COMPANY, DEFENDANT-APPELLANT; PALATINE ASSOCIATES, LLC, AN ILLINOIS LIMITED LIABILITY CORPORATION, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of County No. 06 L 51257 Honorable Alexander P. White, Judge Presiding.

The opinion of the court was delivered by: Justice Robert E. Gordon

PRESIDING JUSTICE ROBERT E. GORDON delivered the judgment of the court, with opinion. Justices Lampkin and Palmer concurred in the judgment and opinion.

OPINION

¶ 1 This appeal arises from a condemnation proceeding brought by the Village of Palatine*fn1 (Village), seeking to acquire real property in Palatine, Illinois, that was being used for a shopping center. The Village intends to acquire the property to be used as a police facility, with other municipal uses. The Village paid over $6 million to the owner, defendant Palatine Associates, LLC (Palatine Associates), in just compensation, and any claims of tenants was to be apportioned from the money received. Palatine Associates filed a motion requesting the trial court to find that appellant All American Title Agency, LLC (All American), had no interest in the final award of just compensation because its leases had terminated prior to the entry of the award. The court agreed and All American appeals, arguing that its leases were not terminated prior to the entry of the final award of just compensation. We affirm.

¶ 2 BACKGROUND

¶ 3 I. Leases

¶ 4 Palatine Associates was the owner of the property at issue in this case (subject property), which consisted of a shopping center with a number of tenants, including Sears and All American. All American was a tenant for two spaces and had entered into two written leases in 2005. The first lease, dated April 28, 2005, was for "approximately 7500 square feet" at 601 North Hicks Road (the 601 lease), for a lease term beginning June 1, 2005, and ending on May 31, 2015, with the option for All American to extend the lease for two additional option periods of five years each. The second lease, dated October 28, 2005, was for "approximately 2500 square feet" at 565 North Hicks Road (the 565 lease), for a lease term from November 1, 2005, through May 31, 2015, with the option for All American to extend the lease for two additional option periods of five years each. Both leases contained similar terms.

¶ 5 Article 2 of each lease provided:

"Tenant acknowledges that the premises are being accepted 'as is' and subject to the Landlord's obligations set forth in Exhibit B attached hereto. Landlord has not agreed to make any changes, additions or alterations in or to the Leased Premises or to perform any work therein, all of which shall be the sole obligation of Tenant and at Tenant's sole cost and expense, except as provided in Exhibit B."

¶ 6 The leases required All American to pay a fixed base rent, as well as "additional rent," defined as "Real Estate Taxes and CAM Charges*fn2 based upon Tenant's pro-rata share[] (capped at $3.00 per square foot through [the] initial lease term)." Article 4 of the leases stated that "Tenant shall pay to Landlord, *** as 'Fixed Base Rent' for the Premises during the term of this Lease without any deduction or setoff, except as expressly provided in this lease, the amount set forth in Section 1.1, in equal monthly installments, in advance, on the first day of each calendar month."

¶ 7 Article 5 of the 565 lease explained how to calculate taxes:

"Commencing on the Commencement Date TENANT shall pay, as additional rent, TENANT'S proportionate share of all real estate taxes and assessments*** for each calendar year during the term hereof[.] *** For purposes of this Lease, TENANT'S proportionate share shall be deemed 1.50%. (2500 out of 167,142 sq. ft.)

During the term of this Lease, TENANT shall pay to LANDLORD, monthly in advance, an amount equal to one-twelfth (1/12th) of TENANT'S proportionate share of real estate taxes and assessments for the current year, as reasonably estimated by LANDLORD. Such amount is currently estimated to be $2.00 per square foot. If TENANT'S proportionate share of taxes with respect of any tax year is less than the total amount theretofore paid by TENANT for such period, the excess shall be credited against the rent next becoming due or promptly refunded if no rent remains due. If TENANT'S proportionate share of taxes for any year promptly exceeds the total amount theretofore paid by TENANT for such period, TENANT shall, within 30 days after receipt of invoices from LANDLORD and a copy of real estate tax bill, pay the difference between the actual amount paid by TENANT and TENANT'S proportionate share of real estate taxes and assessments."

Article 5 of the 601 lease is identical except that the 601 lease deemed All American's proportionate share of taxes to be 4.49%. Article 6 of the leases provided that "the additional rent for real estate taxes and CAM shall not exceed $3.00 per square foot. Tenant shall not be responsible for payment of any real estate taxes or CAM, incurred or paid prior to December 1, 2006. CAM and Taxes shall be capped at $3.00 per foot during the original lease term." Article 6 further provided:

"During the 60-day period immediately following Landlord's delivery of any annual statement to taxes or CAM Charges, Tenant shall have the right to inspect Landlord's accounting records relating to Taxes or CAM Charges (as applicable to the statement delivered) at Landlord's or its agent's office, upon reasonable prior notice. Unless Tenant shall take written exception to any item in any such statement within said 60-day period, such statement shall be considered final and accepted by Tenant. Any payment due to Landlord or credit or payment due to Tenant as shown on any such statement shall be paid or applied in the manner and within the time period described herein, whether or not written exception is taken thereto, provided that such payment or application shall be without prejudice to any such written exception."

¶ 8 Article 12 of the leases provided the following concerning repairs by Palatine Associates:

"Landlord[] shall keep the foundations, roof, parking areas, Common Areas and structural portions of the walls of the Premises in good condition and repair, except for repairs required thereto by reason of the acts or omissions of Tenant, Tenant's employees, agents, invitees, licensees, or contractors. Tenant shall reimburse Landlord for such repairs, replacement and maintenance as described in Article 6 of this Lease provided in no event shall Tenant be responsible for any repair or replacement costs for the foundations, structural portions of the walls, load bearing items, plumbing, utility lines, pipes and conduits inside or outside the Premises and/or common areas unless the repair or replacement is caused by Tenant, its employees, customers or invitees. Tenant shall give Landlord written notice of the necessity for repairs coming to the attention of Tenant following which Landlord shall have a reasonable time to undertake and complete such repairs. The provisions of this Paragraph shall not apply in the case of damage or destruction by fire or other casualty or by eminent domain, in which event the obligations of Landlord shall be controlled by either Article 14 or Article 16 hereof. If [Landlord] fails to make the required repairs under the lease within a reasonable time, then Tenant may make said repairs and offset against rent."

¶ 9 Article 16 of the leases referred to eminent domain proceedings and provided that "Tenant shall share in any condemnation award for the difference between MV*fn3 of the space and rent being paid for remaining term of the lease." Article 17 applied to any default by the lessee:

"If Tenant defaults in the payment of Fixed Base Rent or other charges or in the performance of any other of Tenant's obligations hereunder, and fails to remedy such default within five (5) days after written notice from Landlord *** then and in any such instance, without further notice to Tenant, except to the extent required by law, Landlord may enter upon the Premises and terminate this Lease. In the event of such termination the obligations of Landlord hereunder shall cease without prejudice, however, to the right of Landlord to recover from Tenant any sums due Landlord for rent or otherwise to the date of such entry ***."

¶ 10 Article 24 of the leases concerns breach of the leases by Palatine Associates:

"If Landlord shall fail to perform any covenant, term or condition of this Lease upon Landlord's part to be performed and, as a consequence of such default, Tenant shall recover a money judgment against Landlord, such judgment shall be satisfied only out of the proceeds of sale received upon execution of such judgment and levy thereon against the right, title and interest of Landlord in the Shopping Center as the same may then be encumbered and neither Landlord nor if Landlord be a partnership, any of the partners comprising such partnership shall be liable for any deficiency. Tenant may also offset its judgment against rents."

¶ 11 Article 26 of the leases set forth various miscellaneous provisions:

"(a) Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the rental or other charges herein stipulated shall be deemed to be other than on account of the earliest stipulated rent nor shall any endorsement or statement on any check or any letter accompanying such check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or other charges or pursue any other remedy provided for in this Lease or available at law or in equity.

(b) Waiver. No waiver of any condition or legal right or remedy shall be implied by the failure of Landlord to declare a forfeiture, or for any other reason, and no waiver of any condition or covenant shall be valid unless it be in writing signed by the Landlord. ***

(f) Entire Agreement. This Lease and exhibits attached hereto set forth all of the covenants, promises, agreements, conditions and understandings between Landlord and Tenant concerning the Premises and there are no covenants, promises, agreements, conditions or understandings, either oral or written, between them other than are herein set forth. Except as otherwise provided no subsequent alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by them.

This Lease supersedes and revokes all previous negotiations, arrangements, letters of intent, offers to lease, lease proposals, brochures, representations, and information conveyed, whether oral or in writing, between the parties hereto or their respective representatives or any other person purporting to represent the Landlord or the Tenant. The Tenant acknowledges that it has not been induced to enter into this Lease by any representations not set forth in this Lease,*fn4 shall be used in the interpretation or construction of this Lease, and the Landlord shall have no liability for any consequences arising as a result of any such representations."

¶ 12 Article 29 of the 601 lease, concerning "Landlord Representations," provided:

"Landlord represents to Tenant that the existing HVAC system and equipment servicing the Premises is, as of the date of this Lease, in good working order. Landlord further represents to the best of Landlord[']s knowledge to Tenant that the Shopping Center and the Premises are, as of the date of this Lease, in compliance with all applicable laws, rules, regulations and ordinances."

Article 29 of the 565 lease states that it was omitted intentionally.

¶ 13 Exhibit B, entitled "Landlord's Work," provides in entirety: "Landlord shall not perform any work whatsoever on the Premises. Tenant shall accept the Premises 'AS IS, WHERE IS AND WITH ALL FAULTS, IF ANY.' Landlord shall be responsible for the maintenance and replacement as needed of all Mechanical (HVAC), electrical systems, any fire sprinkler systems and other structural components." Exhibit C, entitled "Tenant's Work," provides in entirety: "The following items done over and above Landlord's scope of work shall be done by Tenant at the Tenant's expense: All work not detailed in Exhibit B."

¶ 14 II. Condemnation Proceeding

¶ 15 On December 22, 2006, the Village filed a complaint to condemn the subject property so that it could build a police station, with other municipal uses. In its complaint, the Village sought "to acquire fee simple title in and to the real property, together with all improvements and appurtenances attached to and part of said real estate" described in its legal description. In its prayer for relief, the Village asked "[t]hat plaintiff, by this proceeding, acquire the ownership of the said property in fee simple, free from all liens and claims whatsoever." All American was named as a party defendant to the complaint and was served with process, and there is no claim that it did not receive all required notices.

¶ 16 On June 9, 2009, All American made an oral motion for leave to file a traverse and motion to dismiss the complaint for condemnation, which was denied on the same day. Also on June 9, 2009, the condemnation court*fn5 entered an agreed final judgment order concerning the Village's condemnation action. The order provided just compensation for "the fee simple title to real property described in [the Village's] complaint to condemn ***, subject only to the lease of Sears and excluding any interest of Sears" for $6.15 million.

¶ 17 On July 6, 2009, the condemnation court entered an order vesting title to the subject property in the Village, subject to the lease of Sears. The order also authorized the Village to take immediate possession of the subject property other than that portion occupied by Sears.

¶ 18 On July 9, 2009, the condemnation court allowed Palatine Associates to withdraw the bulk of the award of $6.15 million, ordering $2 million to be retained by the Cook County treasurer pending tenants' interest in the award. On July 13, 2009, the condemnation court ordered the remaining $2 million to be paid to Palatine Associates' attorney as escrowee to be deposited in an interest-bearing account pending a determination of claims filed by several tenants, including All American.

¶ 19 On November 2, 2009, the Village filed a motion with the condemnation court for immediate possession of the subject property, excluding that portion occupied by Sears, because All American refused to relinquish possession. The motion stated that during the hearing in which the order vesting title was entered, All American represented that it had no objection to the entry of the order vesting title. However, as of the date of the Village's motion, All American remained on the subject property and refused to relinquish possession; All American also had not paid any rent to the Village since the date title vested in the Village, nor had it contacted the Village to request permission to remain on the premises. On November 6, 2009, the condemnation court ordered possession of the property to the Village after seven days from the entry of the order. On November 24, 2009, the circuit court entered an agreed order that All American could remain in possession until December 31, 2009, and would pay $500 for the use and occupancy.

¶ 20 On December 3, 2009, Palatine Associates filed a motion to release $300,000 being held in escrow and on December 4, 2009, the condemnation court ordered the escrowee to pay that amount to Palatine Associates.

¶ 21 III. Forcible Entry and Detainer and Bankruptcy Actions

¶ 22 On August 7, 2007, during the pendency of the condemnation action, Palatine Associates served All American with a "Notice of Termination of Tenancy" (the five-day notice). The notice stated:

"You are hereby notified that your tenancy or lease of the following described premises, to wit: 565 N Hicks Rd Palatine, Illinois, together with all other accommodations used by you in connection therewith, will be terminated as follows," and then listed three options: one concerning non-payment of rent, one concerning other breaches, and one terminating a week-to-week, month-to-month, or ...


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