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Public Building Commission of Chicago v. Sherwin Yellen

February 26, 2013

PUBLIC BUILDING COMMISSION OF CHICAGO, PLAINTIFF,
v.
SHERWIN YELLEN,
DEFENDANT-APPELLANT NANDORF, INC., D/B/A UNIQUE THRIFT STORE,
DEFENDANT-APPELLEE; MARTIN YELLEN AND UNKNOWN OWNERS, DEFENDANTS.



Appeal from the Circuit Court of Cook County No. 02 L 50176 Honorable Alexander White, Judge Presiding.

The opinion of the court was delivered by: Justice Simon

JUSTICE SIMON delivered the judgment of the court, with opinion. Justices Quinn and Connors concurred in the judgment and opinion.

OPINION

¶ 1 On February 7, 2002, plaintiff, Public Building Commission of Chicago (PBC), filed a complaint for condemnation pursuant to the Public Building Commission Act (50 ILCS 20/1 et seq. (West 2002)) seeking title to real property located at 2329-43 South Kedzie Avenue, Chicago, Illinois. The property was owned by defendants Sherwin Yellen (Yellen) and Martin Yellen. Defendant Nandorf, Inc., d/b/a Unique Thrift Store (Nandorf), was named as a party claiming a leasehold interest in the property. Following a jury trial, the jury entered a verdict setting the compensation for the property at $1,950,000, plus interest. On May 16, 2007, the trial court entered a final judgment order based on this verdict.

¶ 2 On August 27, 2007, Nandorf moved for apportionment of the final just compensation award. On August 12, 2010, following an evidentiary hearing on the apportionment motion, the trial court entered a memorandum decision and judgment in favor of Nandorf, awarding $380,000 for its leasehold interest, $99,045.81 of reimbursement for gross rent paid to Yellen, and $6,500 to be paid to the appraiser for unpaid fees related to her report and testimony in the jury trial. Yellen filed a motion to reconsider, amend the pleadings and admit new evidence in which Yellen sought to reverse the trial court's order based upon the trial court's misapplication of the law. Yellen also sought to amend his pleading to include affirmative defenses and the admission of evidence of the May 7, 2009, judgment entered in favor of Nandorf in its negligence action against the demolition company that damaged the building occupied by Nandorf.

¶ 3 The trial court denied Yellen's motion and this appeal followed. Yellen asserts that the trial court erred in apportioning the condemnation award because: Nandorf did not have a leasehold interest in the property at the time of the taking; Nandorf was compensated for its damages in the separate negligence action it brought against the demolition company, thereby making the apportioned condemnation award to Nandorf an impermissible double recovery; the voluntary payment doctrine barred Nandorf's claimed entitlement to recover rent payments it made to Yellen; and Nandorf's claim is barred by the doctrine of res judicata. Yellen also argues that the trial court improperly awarded payment of fees for Nandorf's appraiser out of the condemnation award. For the following reasons, we reverse the judgment of the trial court and remand the matter for entry of an order that the condemnation award funds and payment of the $6,500 in fees to Nandorf's expert witness be disgorged and remitted in full and without offset to Yellen.

¶ 4 I. BACKGROUND

¶ 5 On May 13, 1992, Yellen and Nandorf entered into a five-year lease of the subject property, 2321-29 South Kedzie Avenue, Chicago, Illinois. The lease terms included a rent provision of $5,000 per month plus a pro rata share of real estate taxes and insurance. Two five-year lease extension options were also included. Nandorf operated a thrift store at the property and, in May 1997, exercised the first five-year option with a monthly rent of $5,600 plus a pro rata share of real estate taxes and insurance. The second five-year option was exercised by Nandorf 's January 25, 2002, letter to Yellen extending the option term effective through May 2007 at a monthly rent of $6,200 plus a pro rata share of real estate taxes and insurance.

¶ 6 On February 7, 2002, the PBC filed the underlying eminent domain proceeding. Thereafter, Nandorf occupied the property and operated the thrift store. But, on January 14, 2004, the building occupied by Nandorf was damaged by a demolition contractor hired by the PBC to demolish an adjoining building. Nandorf continued to pay rent for a period of time, but was unable to occupy the building after it was damaged and ceased using the building for the operation of the thrift store. Following a jury trial, the trial court entered a final judgment order in the eminent domain proceeding, finding that just compensation for the property was $1,950,000, plus interest. On July 16, 2007, the PBC deposited the final award, plus interest, with the county treasurer.

¶ 7 On August 27, 2007, Nandorf filed its motion to apportion the award and an amended motion to apportion on May 20, 2008, which is at issue in this appeal. Attached as copies to the amended motion were the lease and letters relating to Nandorf's exercise of the earlier option periods. Included was its letter of January 25, 2002, in which Nandorf general manager Otto A. Bonomo included a "request that two additional option periods of five years each at $6,800.00 and $7,400.00 per month respectively be added to the lease. Enclosed is that addendum. If this meets with your approval, please signature [sic] it and get it back to me." Yellen refused to accept that offer, as he did the other similar oral requests of Mr. Bonomo.

¶ 8 In its motion to apportion, Nandorf claimed that it was "entitled to the apportionment of the final just compensation award for its leasehold value for the unexpired term of its lease from January 14, 2004 until the expiration of the second option period on May 12, 2007." A briefing schedule was set for the motion. After briefs were submitted, an evidentiary hearing was held with testimony presented in November 2009 and January 2010.

¶ 9 At the apportionment hearing, Nandorf called Susan Enright, a commercial real estate appraiser, to testify as its expert on the valuation of the leasehold. Enright testified that she was originally contacted to appraise the leasehold value, but then was asked by counsel for Nandorf and counsel for Yellen to appraise the value of the whole property. In her testimony in the eminent domain proceeding, Enright stated that the market value of the entire property was $2,700,000. Enright also added that she was later contacted by Nandorf's counsel and asked to separately appraise the leasehold value.

¶ 10 Enright described her inspection of the property, interviews of real estate brokers and appraisers, analysis of the lease and the market data from comparable properties and detailing the property and area. From this Enright determined that the market rent for the property was $12 per square foot. She then opined that the contract rent was below market value because the subject property lease rent at a monthly rate of $3.74 per square foot generated positive leasehold income of $8.26 per foot for a total value of $13,044 per month.

¶ 11 Enright stated that she then calculated total leasehold potential income by multiplying the monthly leasehold income by 40, the remaining number of months in the lease option period that commenced May 12, 2002, to come to a total of $521,760. She then applied a discount factor of 10% and did a present value calculation to come to her total market value of the leasehold interest of $379,372, which she rounded up to $380,000. On cross-examination, Enright testified that she did not enter into an engagement letter for her work in the eminent domain proceeding or for her work related to the apportionment hearing.

¶ 12 Otto Bonomo testified that he was an employee of Nandorf from November 1974 to July 2004 and continued on with the company as a member of the board of directors after his retirement. Bonomo stated that he was eventually promoted to the position of general manager of the company and was responsible for maintaining Nandorf's six thrift stores in continuous, good operating condition. Bonomo also spoke to the selection of the property as a location for a thrift store and his discussions with Yellen in reaching terms for the lease agreement in 1992.

¶ 13 Bonomo further testified that Yellen submitted a form lease and, in negotiating the lease terms, Nandorf included some changes as well as a rider. The parties signed the lease as modified and Nandorf later exercised the two five-year options in 1997 and 2002. Bonomo stated that, when Nandorf exercised the 2002 option, he also sent a letter to Babette Yellen seeking to include two more five-year renewal options in the lease. Yellen did not agree to that request. Bonomo testified that, at that time, Yellen had indicated that the city was interested in taking the property, but that he was going to do everything he could to prevent that from happening.

¶ 14 Bonomo recalled that Nandorf continued to operate a thrift store on the property until January 14, 2004, when the building was damaged by the demolition contractor. He spoke to Yellen on the date of the accident and was told that the building would be repaired as soon as possible. Bonomo also talked with Yellen and his insurance company on several occasions regarding the repair of the building. Based on reassurances that the building would be repaired, Nandorf continued to pay its monthly rent and pro rata share of real estate taxes and insurance through December 2004.

ΒΆ 15 On cross-examination, Bonomo stated that he initially identified the subject property as a possible store location and conducted negotiations to rent the property. When he was given the form lease, it was forwarded to Nandorf's attorneys, who made alterations and drafted the rider. In particular, Bonomo testified that someone on behalf ...


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