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Wendy and William Spatz Charitable Foundation v. 2263 North Lincoln Corp.

Court of Appeal of Illinois, First District, Fifth Division

October 11, 2013

2263 NORTH LINCOLN CORPORATION, Bobby Burleson and Kevin Killerman, Defendants-Appellants and Cross-Appellees.

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Michael Pomerantz, Andrew Jacobson, Josh Goldberg, and Stephanie Grelewicz, Brown, Udell, Pomerantz & Delrahim, Ltd., Chicago, for appellants.

Alissa Levin, Law Office of Alissa Levin, Chicago, for appellee.


TAYLOR, Justice.

[376 Ill.Dec. 202] ¶ 1 Defendants 2263 North Lincoln Corporation (Lincoln), Bobby Burleson and Kevin Killerman appeal from a judgment of the circuit court of Cook County in a forcible entry and detainer action, granting possession of real property with the common address of 2257-2263 North Lincoln Avenue, Chicago, Illinois (the property), in favor of plaintiff the Wendy and William Spatz Charitable Foundation (Spatz), which had acquired that property before defendants' lease expired. Defendants contend that the court erred in awarding possession to Spatz because before Spatz acquired the property, Lincoln had exercised its option to purchase the property from its prior owner, Victory Gardens Theater (VGT), and therefore, could not be evicted. On cross-appeal from the order, plaintiff contends that while the trial court properly awarded attorney fees to Spatz pursuant to the lease with defendants, it improperly reduced the amount of fees. Plaintiff further contends that the trial court erred in denying its holdover claim against defendant, in which plaintiff sought double rent for the time defendants occupied the property after the lease expired.


¶ 3 The dispute in this case arose from an action of forcible entry and detainer filed by Spatz, the current owner of the [376 Ill.Dec. 203]

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property, against Lincoln, a tenant pursuant to a lease that expired by its own terms on May 31, 2009. On July 6, 2009, plaintiff filed its action against Lincoln and its principals, Burleson and Killerman, who were also guarantors under the lease. In that complaint, Spatz sought possession of the property as well as rent and damages for defendants' allegedly unlawful withholding of the premises since June 20, 2009.

¶ 4 Spatz subsequently filed its first amended complaint, in which it explained that the property is a mixed-use restaurant and theater building, and that defendants occupied a 3,300-square-foot portion of that property utilized as a bar or restaurant. Plaintiff further stated that defendants occupied the property pursuant to a lease entered into in 1994 with plaintiff's predecessors in interest, VGT and Community Arts Foundation (CAF), which later transferred its interest to VGT. Spatz acknowledged that the lease provided that VGT would offer to sell the property to Lincoln first before " generally" offering it for sale. Plaintiff alleged, however, that although the property was never offered for sale " generally," VGT nevertheless made a written offer to sell it to Lincoln before selling it to Spatz. According to plaintiff, while Lincoln responded that it intended to purchase the property, it did not take any further steps to consummate the purchase and did not tender a contract to VGT and, consequently, no closing ever took place. Since no sale was closed between VGT and Lincoln within 90 days after the offer was extended to Lincoln, VGT was then permitted to sell the property to another party under the terms of the lease, and at that time, VGT sold the property to Spatz, which took over ownership of the property in August 2008. Plaintiff further alleged that since Lincoln never renewed its lease, it sent Lincoln a 30-day notice on May 19, 2009, notifying Lincoln that its lease was to expire on May 31, 2009. Despite the notice, Lincoln failed to vacate the property upon the expiration of the lease or within 30 days of receipt of the notice. Based on those allegations, plaintiff sought, in count I of the complaint, possession of the property, as well as rent and damages from defendants for Lincoln's unlawful withholding of possession of said property. In count II, plaintiff sought holdover tenancy, pursuant to section 9-202 of the Illinois Code of Civil Procedure (Code) ( 735 ILCS 5/9-202 (West 2008)), which allows a landlord to recover double the yearly rent from a tenant who willfully holds over the property after the expiration of the lease and after the landlord sends written notice to such tenant.

¶ 5 Attached to plaintiff's first amended complaint was a copy of the lease agreement, which provided, in paragraph 28:

" Prior to offering the Property for sale generally, [VGT] will offer to sell the Property to [Lincoln] by written notice to [Lincoln] (the Offer Notice). The Offer Notice shall specify an all cash purchase price [VGT] is prepared to accept for the Property (the Offered Price), in ‘ as is' condition. [Lincoln] shall have ninety (90) days following receipt of the Offer Notice to elect, by written notice to [VGT], either (i) to purchase the Property at the Offered Price, or (ii) to permit [VGT] to sell the Property and thereafter have the option to terminate this [l]lease * * *. If [Lincoln] fails to timely notify [VGT] of its election [to purchase], [Lincoln] shall be conclusively deemed to have elected to permit [VGT] to sell the Property * * *.
If [Lincoln] elects to purchase the Property at the Offered Price * * *, then (i) [Lincoln] shall purchase the Property in ‘ as is' condition, [and] (ii) a closing of the purchase and sale shall [376 Ill.Dec. 204]

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occur ninety (90) days after [Lincoln] elects to purchase."

¶ 6 We note that while the parties throughout the proceedings refer to the provisions under paragraph 28 as a " purchase option," " right of first refusal," and " right of first offer," they do not appear to dispute that once that right was triggered, the landlord was obligated to inform the tenant of its intention to sell the property at a certain price and the tenant would then have the opportunity to purchase it at that price.

¶ 7 Also attached to the complaint was plaintiff's 30-day notice to Lincoln, which stated that its tenancy at the property would be terminated on May 31, 2009, or after 30 days of service of the notice, at which time Lincoln was to vacate the premises. As alleged in the complaint, the notice was issued on May 19, 2009.

¶ 8 Defendants filed an answer, which also contained affirmative defenses, counterclaims and a third-party complaint against VGT, and Wendy and William Spatz. In their answer, defendants admit that VGT sent them a letter offering to sell Lincoln the property pursuant to paragraph 28 of the lease, but, contrary to plaintiff's allegation, defendants contend that they did, in fact, accept VGT's offer to purchase the property in " as is" condition. According to defendants, they had no obligation to tender a contract for purchase to plaintiff or VGT, and no closing took place only because VGT refused to consummate the sale of the property after Lincoln accepted its offer. Furthermore, defendants admitted that they did not vacate the property after receiving Spatz's notice to vacate, nor did they renew their lease, but explained that since they had exercised the option to purchase the property, such renewal was not necessary.

¶ 9 Defendants further alleged that VGT, acting in concert with plaintiff, refused to honor Lincoln's acceptance of VGT's offer, even though, according to defendants, the lease required VGT to offer the property to Lincoln for purchase before offering it for sale to any third party. They explained that plaintiff is an entity established and controlled by Wendy and William Spatz, who are VGT's board members, and in an attempt to evade Lincoln's right of first refusal, VGT and Spatz agreed on several restrictions of use of the property that benefit VGT as part of the purchase contract, and included those same restrictions in the offer that VGT made to Lincoln. According to defendants, while no such restrictions previously existed, VGT's offer to sell the property to Lincoln included the conditions that: (1) the portion of the property operated as a theater under the name Victory Gardens Greenhouse be permitted to continue to operate in such manner for a period of time; (2) VGT be granted use of office space on the property at no charge for a period of six months; and (3) Lincoln grant VGT a right of first refusal for any subsequent sale of the theater space. Defendants asserted that since the lease gave Lincoln an option to purchase the property for an all cash price in " as is" condition, VGT was required to offer to sell the property to Lincoln with no such restrictions. Thus, defendants claim that when Lincoln accepted VGT's offer to purchase the property for $2,250,000 but refused the restrictions imposed, VGT had the obligation to close on the sale and convey the property to Lincoln, which it did not do. Plaintiff and VGT subsequently recorded a " memorandum of declaration," which restricts the use of the property in accordance to the restrictions to which plaintiff agreed when it contracted to purchase the property. According to defendants, encumbering the property in that manner was an effort by VGT and plaintiff to [376 Ill.Dec. 205]

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frustrate Lincoln's purchase option ...

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