Battaglia v. 736 N. Clark Corp.

47 N.E.3d 314

Gino BATTAGLIA and Bernadette Battaglia, Plaintiffs–Appellees

v.736 N. CLARK CORP. d/b/a 25 Degrees, an Illinois Corporation, Defendant–Appellant (All Unknown Occupants, Defendants).

No. 1–14–2437.

Appellate Court of Illinois, First District, Second Division.

Dec. 22, 2015.

Fuksa Khorshid, LLC, Chicago (Thomas D. Carroll and Lema A. Khorshid, of counsel), for appellant.

Golan & Christie LLP, Chicago (Robert R. Benjamin, Beverly A. Berneman, and Anthony J. D'Agostino, of counsel), and Dordek, Rosenberg & Associates, P.C., Skokie (David S. Dordek, of counsel), for appellees.

OPINION

Presiding Justice PIERCE delivered the judgment of the court, with opinion.

¶ 1 Plaintiffs, landlords Gino and Bernadette Battaglia filed this forcible entry and detainer action claiming breach of commercial lease by their tenant, defendant 736 N. Clark Corp. d/b/a 25 Degrees. Following a bench trial, the court entered a “split decision” awarding plaintiffs $4,021 in damages for defendant's breach of the lease and denied an order of possession requested by plaintiffs. Defendant appeals this judgment. For the following reasons, we affirm.

¶ 2 BACKGROUND

¶ 3 On March 7, 2011, the parties entered into a five-year triple net lease (Lease) for a one-story commercial property located at 736 N. Clark Street, Chicago, IL 60654 (Property), to be used as a restaurant. In addition to the rent, the Lease requires the tenant, defendant 736 N. Clark Corp., to pay “[a]ll building expenses, costs and taxes, real estate and otherwise, fees, insurance and other monetary burdens levied against the property.”

¶ 4 In 2012, the property was reassessed, resulting in a tax increase. As the property's owners, plaintiffs hired an attorney to appeal the assessment and anticipated tax increase. The successful appeal resulted in property tax savings of $16,085. Plaintiffs were invoiced $4,021 for attorney fees incurred in the appeal. On May 16, 2013, plaintiffs sent defendant's owners an email requesting reimbursement for the attorney fees. Defendant neither responded to the email nor paid the attorney fees.

¶ 5 On June 18, 2013, plaintiffs served defendant with a 5–day notice, demanding defendant pay the attorney fees in full by June 23, 2013, or face eviction proceedings. Although the Lease identified a separate address for delivering notices, plaintiffs sent the 5–day notice to defendant at the property via regular U.S. Mail.

¶ 6 On June 20, 2013, defendant, through counsel, requested clarification of the payment demand from plaintiffs' attorney. Plaintiffs' attorney responded, confirming the attorney fees incurred resulted in property tax savings benefitting defendant and that plaintiffs' payment demand was ongoing. Although defendant has continued to pay its monthly rent and taxes, it has not paid the attorney fees incurred in the property tax appeal.

¶ 7 On July 31, 2013, plaintiffs filed this forcible entry and detainer action. Plaintiffs alleged the attorney fees incurred in the property tax appeal constituted “additional rent” under paragraph 4.3(a) of the Lease, and that defendant breached the Lease by not paying the fees. Plaintiffs sought monetary damages and possession of the Property.

¶ 8 Paragraph 4.3 of the Lease identifies the tenant's obligations to pay “additional rent.” It reads:

“4.3(a) ADDITIONAL RENT. All building expenses, costs and taxes, real estate and otherwise, fees, insurance costs, licenses and other monetary burdens levied against the property.

4.3(b) Monthly Installments: * * * In addition to monthly installments of Fixed Minimum Rent, Tenant's pro rata share of all such real estate taxes and assessments (said items being hereinafter referred to collectively in Section 4.3 Additional Rent) shall be paid in monthly installments on or before the first day of each calendar month during the Lease term, in advance, in an amount equal to 100% of the previous year's actual costs. Upon determination of the actual amount of the Section 4.3 Additional Rent for any lease year, Landlord shall furnish Tenant with a written statement calculating and allocating the amount thereof and the amount of Tenant's pro rata share.”

¶ 9 A four-day bench trial was held on plaintiffs' claims. At trial the parties disputed whether the “additional rent” provision required defendant to pay the demanded attorney fees; whether plaintiffs should have prorated the disputed fees, rather than demanded a lump sum payment; and whether the 5–day notice strictly complied with the Lease's notice provisions of the Lease.

¶ 10 Plaintiffs contended paragraph 4.3(a) was a broad provision which included the attorney fees as “additional rent,” and that their notice to defendant was timely and proper. At trial, plaintiff Gino Battaglia testified the Lease was a triple net lease negotiated by the parties' attorneys. At the time of the Lease execution, Gino understood plaintiffs were “only responsible for the outer walls and the roof” and defendant was “responsible for everything else” relating to the property. He understood paragraph 4.3(a) of the Lease established defendant would “pay for everything concerning the building, taxes, or anything related to the taxes,” especially “any reduction in taxes * * * [which] really benefits the tenants.” During lease negotiations, defendant's attorney sent an email to Gino's attorney, asking, “[w]hat does additional rent entail besides taxes?” Gino's attorney responded “[a]s I said, additional rent is everything and anything that is charged against the premise. * * * You wanted me to take away three paragraphs and replace [them] with a short statement. So the short statement is everything. As far as when you shift pay.”

¶ 11 Upon signing a lease, it was Gino's practice to verbally inform tenants that, as a benefit to them, he would appeal any real estate tax increase on the property. In 2012, the property was reassessed and the property taxes were raised. Gino hired an attorney who successfully secured a revised assessment, resulting in tax savings of $16,085. Gino received an invoice for $4,021 for attorney fees incurred in the appeal. Three days later, he emailed an invoice to Josef Boumaroun, one of defendant's owners, and asked for reimbursement of the attorney fees. On cross-examination, Gino explained that he brought the tax appeal to save the tenant money. He further admitted he should have charged defendant a prorated monthly amount for the $4,021 in additional rent instead of demanding a lump sum payment.

¶ 12 Defendant contended the tax appeal attorney fees did not constitute “additional rent” under the Lease. Additionally, the payment demand was improper because plaintiffs had not complied with the Lease's notice or pro rata apportionment requirements, instead demanding a lump sum payment. According to defendant, the final demand letter had arrived in the mail after the 5–day notice period ended, invalidating any tenancy termination. Therefore, plaintiffs' noncompliance with the Lease's notice provisions invalidated any claim of contract damages or Lease termination.

¶ 13 Defendant's owners, Josef Boumaroun and Matthew Boumaroun, testified for defendant. Josef testified that he was involved in the lease negotiations and that he understood “additional rent only meant property taxes.” He held this belief even after plaintiffs' attorney identified “additional rent” as “everything and anything” because when he asked plaintiffs' attorney for a “detailed description of the history of what has happened in the past, [the plaintiffs' attorney] kept sending us tax bills.” Josef did not know Gino hired an attorney to appeal the tax increase. Josef expected Gino to prorate additional rent amounts in monthly installments and was “shocked” when he received the invoice and request for a lump sum payment. He did not pay the invoice because there was no breakdown of the amount billed and he wanted to confirm he was responsible for its payment. He also testified it was not his “job to go and try to obtain property tax savings,” and he knew at some point plaintiffs would seek a reduction of the property's real estate taxes.

¶ 14 On cross-examination, Josef testified he was happy about the $16,000 tax savings obtained through the tax appeal and considered it a benefit to defendant. He did not recall Gino discussing his general policy of appealing property tax increases, but he thought the Lease may have mentioned it.

¶ 15 Matthew Boumaroun testified that plaintiffs' attorney explained the tenant is responsible for “everything and anything that is charged against the premises.” Matthew understood this to mean “a levy against the property,” not legal fees incurred by Gino. Matthew was personally served with the 5–day notice. He testified he did not know Gino hired an attorney to challenge the tax increase and he did not know defendant could be responsible for the tax attorney fees.

¶ 16 Following closing arguments, the trial court entered a “split decision” granting judgment in favor of plaintiffs on the breach of lease claim, but ordered that possession of the property remain with defendant because the breach did not warrant eviction. The court also ordered each party to bear its own costs and attorney fees incurred in litigating this dispute.

¶ 17 The trial court found paragraph 4.3(a) was a “catchall phrase * * * [which] so many of the contracts we see here in this court are like.” The court explained that if the contract had “laid out * * *25 different things that would be covered rather than a catchall [provision]” and there was no mention of attorney fees, then the court may have found attorney fees did not constitute “additional rent.” However, this Lease's “additional rent” definition was broad enough to include these attorney fees. As for the procedural defects in plaintiffs' 5–day notice and payment demands, the court stated “none of the * * * procedural defects that have been argued * * * [are] a major factor here. So * * * I do think that...