2460-68 Clark, LLC v. Chopo Chicken, LLC

2022 IL App (1st) 210119

198 N.E.3d 655

459 Ill.Dec. 628

2460-68 CLARK, LLC, an Illinois Limited Liability Company, Plaintiff-Appellee,

v.CHOPO CHICKEN, LLC, an Illinois Limited Liability Company, and Gabriel Poblete, Defendants-Appellants.

No. 1-21-0119

Appellate Court of Illinois, First District, SECOND DIVISION.

Filed January 18, 2022

David R. Buetow and Scott Nehls, of Fuchs & Roselli, Ltd., of Chicago, and Jennifer K. Schwendener, of Petrarca, Gleason, Boyle & Izzo, LLC, of, Downers Grove, for appellants.

Elizabeth D. Sharp, of Law Offices of Elizabeth D. Sharp, P.C., of Chicago, for appellee.

PRESIDING JUSTICE FITZGERALD SMITH delivered the judgment of the court, with opinion.

¶ 1 On August 15, 2016, a commercial lease for a premises at 2460 North Clark Street in Chicago was entered into by the plaintiff, 2460-68 Clark, LLC (landlord), and defendant Chopo Chicken, LLC (tenant).

Defendant Gabriel Poblete executed a guarantee of that lease. (Unless otherwise noted, we will refer to Chopo Chicken, LLC, and Poblete collectively as tenants.) The lease and guarantee were thereafter amended twice, on September 1, 2019, and May 25, 2020. As amended, the term of the lease expired on August 31, 2021, and the monthly rent was $5650. The lease provided that the tenants’ failure to pay rent within five days of the landlord sending written notice demanding it constituted a breach of the lease and allowed the landlord to exercise the remedies provided under the lease. Other provisions of the lease relevant to this appeal are discussed below.

¶ 2 On August 14, 2020, Dan Gauen, an employee of the landlord's property manager, served upon the tenants a five-day notice demanding payment of $3991.36 in overdue rent, which stated that unless payment of this sum was made within five days of service, the tenants’ right to possession of the premises would terminate. Gauen served the five-day notice by hand delivery upon an employee of the tenants working at the premises.

¶ 3 On August 26, 2020, the landlord filed a complaint for forcible entry and detainer, breach of contract, and breach of guarantee against the tenants. The complaint alleged that the tenants had failed to pay the overdue rent within five days of service of the written notice demanding it and for this reason were in default of the lease and guarantee. It sought a judgment granting the landlord possession of the premises as well as other remedies available under the lease, including "a sum equal to the amount of unpaid rent and other charges and adjustments called for under the Lease for the remaining balance of the term of the Lease, from September 1, 2020 through August 31, 2021, *** as damages due to Landlord by reason of Tenant's defaults."

¶ 4 On October 1, 2020, an appearance was filed on behalf of the tenants. The case was set for bench trial on October 27, 2020, which was conducted remotely by video conference. The parties have submitted a bystander's report of the bench trial proceedings of October 27, 2020, which was certified by the trial court. According to that bystander's report, the parties’ attorneys and witnesses were visible by video during the court of the trial, but the trial judge's video remained off throughout the trial.

¶ 5 Gauen testified behalf of the landlord. He is employed by Jerome H. Meyer & Company and acts as the property manager of the premises at issue. His job responsibilities include the collection of rent, issuing tenant ledgers, and communicating with tenants. He testified as to various provisions of the lease and its two amendments, which were admitted into evidence. This included article 7 of the lease, which addressed certain fixtures and equipment being left in place at the end of the lease term. It also included article 20(A), which detailed that the landlord's remedies upon the tenants’ default included receipt of a sum equal to the amount of unpaid rent for the balance of the lease term as damages, as well as attorney fees and costs.

¶ 6 Gauen testified that. in 2020, the landlord had agreed to provide the tenants with relief with respect to COVID-19, whereby rent was conditionally abated to one-half of the normal rate for the months of June and July 2020. Under the second amendment to the lease agreement, the tenants were required to resume paying the full rental rate of $5650 on August 1, 2020. Gauen testified that the tenants paid only $2000 on August 5, 2020, and identified a tenant ledger confirming this payment, which was admitted into evidence. He testified that on August 13, 2020, he prepared a five-day notice demanding the amount of unpaid rent due and owing from the tenants as of that date, which was then $3991.36. He testified that he served the five-day notice by hand delivering it to an employee of the tenants who was then in charge of the premises. Gauen testified that the tenants did not pay the amount demanded in the five-day notice.

¶ 7 The trial court then asked the tenants’ attorney what their defense was to the landlord's case. The tenants’ attorney stated, "Judge, it's Covid." The tenants’ attorney further stated that the tenants were unable to perform due to COVID-19, had struggled financially, and had unsuccessfully sought to renegotiate and reduce the amount of rent with the landlord.

¶ 8 Poblete then testified on behalf of the tenants. He testified generally as to the tenants’ inability to perform under the lease due to COVID-19 and the related government-ordered closures of the restaurant operated out of the subject property. He testified that the tenants were required to and did comply with the governor's executive orders. However, sales plummeted due to the forced closure of the restaurant, and it struggled to stay afloat. Poblete testified that, despite the struggles that he and the business faced, he did everything that he could to help the restaurant survive, including putting his own funds into it. Poblete testified that he applied for the Paycheck Protection Program and a Small Business Administration loan, which he received. He testified it helped cover some expenses and employee payroll for a period of time, but it did not provide a substitute for the restaurant's typical sales.

¶ 9 Poblete testified that during the spring of 2020, he reached out to James Winkler, a representative of the landlord, numerous times for assistance. The landlord agreed to abate the rent by half for the months of June and July 2020. Beginning in July 2020, he again contacted Winkler for assistance with the upcoming August rent. He tried to negotiate rent or work out some other arrangement with Winkler so that the restaurant could continue to operate, but no agreement was reached. The tenants then sought to introduce a series of e-mails exchanged between Poblete and Winkler. The landlord's attorney objected to the admission of these e-mails on grounds of relevance and the integration clause of the parties’ lease. The tenants’ attorney responded that the e-mails were not being introduced to show any amendment or modification of the lease but rather to support the tenants’ defense of an inability to pay and to show the efforts made to contact the landlord regarding this. The landlord's attorney stated that she did not object to the e-mails being introduced, as long as they were not being used to argue for an amendment or modification of the lease. The trial court sustained the landlord's objection, finding that Poblete had already testified about the tenants’ inability to pay and ruling that the e-mails would not be admitted as evidence. The trial court further sustained an objection by the landlord's attorney to the tenants’ attorney questioning Poblete about the e-mails or having Poblete discuss them. On cross-examination, Poblete admitted that the tenants did not pay the amounts due in the five-day notice within five days of service of it. He also admitted that the landlord had not agreed to modify the lease.

¶ 10 The trial court found that the tenants had raised no defense to liability on the landlord's action for eviction and return of possession of the premises to the landlord under the forcible entry and detainer action or on the action for breach of contract. The court then turned to the damages sought by the landlord. The landlord's attorney relied upon several exhibits showing damages, which were admitted by the trial court, and stated that Winkler was prepared to testify further about damages if necessary. One of these exhibits was a letter from the landlord to the tenants dated February 11, 2019, referencing article 7 of the lease and including a list of 18 categories of items of equipment and fixtures that the landlord was requiring the tenants to leave in place at the end of the tenants’ tenancy. Another exhibit was an itemization of the damages requested, which included $56,500 for the balance owed as rent for the 10 months from November 1, 2020, to the end of the lease term on August 31, 2021, pursuant to articles 20(A)(i) and 20(A)(ii) of the lease.

¶ 11 Poblete testified in opposition to the landlord's damages request. He testified that he had purchased the equipment in the restaurant for approximately $200,000, and that, in its present condition, it was worth $150,000. No receipts or other evidence concerning the purported value of the used equipment was provided. The tenants’ attorney argued that the tenants should receive a credit of $150,000 for the value of the used equipment that would be left in place. The landlord's attorney argued that article 7 of the lease controlled, that it required that the equipment and fixtures be left in place at the end of the tenancy, and that it did not provide the tenants with any compensation for the equipment that was to be left in place.

¶ 12 At the end of the trial, the trial court asked the tenants’ attorney if the tenants had any additional objections to the landlord's summary of damages for the judgment award. The tenants’ attorney responded that the tenants...