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900 North Rush LLC v. Intermix Holdco, Inc.

Court of Appeals of Illinois, First District, First Division

August 26, 2019

900 NORTH RUSH LLC AND LP HOLDINGS HSR I, LLC, Plaintiffs-Appellants,
v.
INTERMIX HOLDCO, INC., Defendant-Appellee.

          Appeal from the Circuit Court of Cook County No. 17 M1 709969 Honorable Anthony C. Swanagan Judge Presiding

          JUSTICE GRIFFIN delivered the judgment of the court, with opinion. Justices Pierce and Walker concurred in the judgment and opinion.

          OPINION

          GRIFFIN, JUSTICE

         ¶ 1 This case concerns a commercial lease agreement between the parties. The lease agreement contains a renewal option that, if exercised, grants the tenant an additional five-year tenancy. The tenant attempted to exercise the option, but when it signed the exercise of option notice, it included the name of one of its sister companies in the signature block of the notice rather than the name of the tenant.

         ¶ 2 When the tenant refused to vacate the premises at the end of the original lease term, the landlord brought this case for eviction. The case required the trial court to determine whether the tenant had complied with the conditions for exercising the option. The trial court found that the option was properly exercised so that the tenant could remain in the premises and was not in default. The trial court also awarded the tenant its attorney fees and costs under a fee-shifting provision of the lease. The landlord appeals, arguing that the option was not properly exercised and that the trial court erred in its assessment of fees and costs. We affirm.

         ¶ 3 I. BACKGROUND

         ¶ 4 In July 2006, defendant Intermix Holdco, Inc.'s predecessor in interest entered into a lease agreement with plaintiff 900 North Rush LLC's predecessor in interest to rent retail space in a building located at 40 East Delaware Place in Chicago. The initial lease term extended to April 30, 2017, but the lease contained a renewal option that the tenant could exercise for an additional five-year term. Under the lease, Intermix could exercise the renewal option "by notifying Landlord, in writing, of its election to renew the Term for the Renewal Term on or before the date that is one hundred twenty (120) days prior to the expiration of the initial Term of the Lease."

         ¶ 5 During the original lease term, the original lessor, L.I. Portfolio Holdings, LLC, was succeeded by plaintiff 900 North Rush LLC as part of a refinance transaction. Similarly during the lease's original term, Gap, Inc. acquired Intermix LLC, and Intermix LLC was merged into defendant Intermix Holdco, Inc. Gap, Inc. is the parent company of Intermix, Old Navy, LLC, and a number of other retail clothing stores.

         ¶ 6 On November 29, 2016, Matthew Irwin, a member of Gap, Inc.'s real estate law department, sent a letter to 900 North Rush. The letter contains the heading: "Re: Exercise of Option Notice, Intermix #2357, E. Delaware (Rush-Chicago)(the "Premises"), Chicago, Illinois." The letter is on Gap, Inc.'s letterhead and states that "Pursuant to Article XXI of the lease, Tenant hereby exercises its right to extend the term of the Lease for an additional five (5) years commencing on May 1, 2017 and expiring on April 30, 2022." The letter is signed by Matthew Irwin, senior director-associate general counsel. Above Irwin's signature, the letter states "Very Truly Yours, Old Navy, LLC." (Emphasis added).

         ¶ 7 Fred Latsko, the manager of 900 North Rush, timely received the letter and knew that Intermix was attempting to exercise its renewal option. However, because the option was purportedly exercised in the name of Old Navy, LLC, not a party to the lease, he believed that the option was not properly exercised. Latsko sent a letter to Intermix stating that Irwin's letter was "deficient" as an attempt to exercise the option because "our lease required that the Tenant has the right to exercise this lease and [Irwin's] letter clearly does not fulfill the requirement under the lease." (Emphasis added). By the time Latsko received the letter and notified Intermix of its purported ineffectiveness, the deadline for exercising the option under the lease had passed.

         ¶ 8 When the original lease term ended, Intermix did not vacate the leased premises. About two weeks later, 900 North Rush served Intermix with a demand for possession in which it reiterated that it did not accept Irwin's letter as an effective exercise of the lease's renewal option. After Intermix failed to vacate the premises, 900 North Rush filed a complaint for eviction and for holdover rent.

         ¶ 9 In response to 900 North Rush's complaint, Intermix asserted an affirmative defense in which it contended that Irwin's letter was an effective exercise of the renewal option and, thus, that it was not liable. The parties conducted discovery and Intermix filed a motion for summary judgment. Intermix's motion for summary judgment, in relevant part, is based on its affirmative defense-that it is entitled to summary judgment because it exercised the lease's renewal option. The trial court held that Irwin's letter was an effective exercise of the renewal option so that Intermix was not in default under the lease.

         ¶ 10 The trial court issued a written order detailing its ruling. The trial court observed that the lease provision governing the renewal option specified that notice be given in writing and specified to whom the notice had to be given, but did not specify who could provide such notice. The trial court noted that Irwin's letter could only be ineffective if it could be construed to have not come from Intermix. Considering the content of the letter as a whole, the trial court found that Irwin acted as an agent for Intermix and that his signature was an effective exercise of Intermix's option to renew the lease term.

         ¶ 11 After obtaining a judgment of no liability in its favor, Intermix petitioned the court for attorney fees. 900 North Rush filed a written response to the fee petition and Intermix filed a reply. 900 North Rush requested that the court hold an evidentiary hearing on Intermix's fee petition. The trial court did not grant 900 North Rush an evidentiary hearing on the fee petition, but it permitted 900 North Rush to file a surreply. The court held a hearing, but not an evidentiary hearing, on the fee petition, and the trial court concluded by awarding Intermix $125, 832 in attorney fees. 900 North Rush appeals, raising issues regarding the adverse judgment and the award of attorney fees.

         ¶ 12 II. ANALYSIS

         ¶ 13 I. Exercise of the Renewal Option

         ¶ 14 The trial court granted summary judgment in favor of defendant Intermix finding that it was not liable because it had exercised the renewal option. 900 North Rush appeals the adverse judgment entered against it. The parties agree that our review is of an issue of law-whether Intermix satisfied the lease's requirements for effectively exercising the renewal option. ...


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