Vict. Entm't Props. v. Phx. Steps, LLC

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2024 IL App (1st) 231916-U

VICTORIA ENTERTAINMENT PROPERTIES, LLC and VICTORIA OPERATING CO., LLC, Plaintiffs-Appellees, v. PHOENIX STEPS, LLC and BANK OF AMERICA, N.A., Defendants

Phoenix Steps, LLC, Defendant-Appellant

Nos. 1-23-1916, 1-23-2159

Court of Appeals of Illinois, First District, Third Division

November 27, 2024

This order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1).

Appeal from the Circuit Court of Cook County. No. 16 CH 10298 Honorable Anna H. Demacopoulos, Judge, presiding.

PRESIDING JUSTICE LAMPKIN delivered the judgment of the court. Justices Martin and D.B. Walker concurred in the judgment.

ORDER

LAMPKIN PRESIDING JUSTICE

¶ 1 Held: Where plaintiffs sued defendant seeking declaratory relief, injunctive relief, and damages for encroaching on plaintiffs' property, the trial court's award in favor of plaintiffs was not against the manifest weight of the evidence.

¶ 2 Following a bench trial, the trial court granted plaintiffs Victoria Entertainment Properties, LLC (VEP) and Victoria Operating Company, LLC (VOC) declaratory relief, injunctive relief damages, attorney fees, and costs, finding that defendant Phoenix Steps LLC (Phoenix) encroached on plaintiffs' property by building and maintaining structures that extended into plaintiffs' property and by repaving plaintiffs' property without consent.

¶ 3 On appeal, defendant argues that the trial court erred by (1) holding that plaintiffs own the airspace over an easement, which is occupied by structures defendant built and/or maintained, (2) finding an intentional trespass, (3) finding an actionable trespass, (4) denying defendant's laches defense, and (5) awarding plaintiffs damages and attorney fees.

¶ 4 For the reasons that follow, we affirm the judgment of the circuit court. ^[1]

¶ 5 I. BACKGROUND

¶ 6 This appeal involves the parties' dispute regarding their rights to use a passageway located between their respective properties.

¶ 7 In 2000, plaintiff VEP purchased property located on North Sheffield Avenue in Chicago (the Victoria Property). VEP owns plaintiff VOC, which leases the Victoria Property and operates The Vic Theatre.

¶ 8 In 2012, defendant Phoenix acquired property located on West Belmont Avenue in Chicago, which includes a two-story building (the Phoenix Property). The Phoenix Property is immediately north of the Victoria Property. Numerous structures (the appurtenant items), including a brick shed, HVAC runs, ducts, drains, conduits, gutters, air conditioners, and vents, are located on the south wall of the Phoenix Property and extend over the south line of the Phoenix Property and into the Victoria Property.

¶ 9 A 10-foot passageway, which is on the northernmost 10 feet of the Victoria Property and owned by VEP, runs between the Victoria Property and the Phoenix Property. This passageway is subject to an easement dated October 5, 1911, which provides, in relevant part, that the 10-foot passageway shall be kept open and unobstructed as a passageway for the common use of the owners and grantees (i.e., plaintiffs and defendant) and their tenants and occupants. Furthermore, the owners of either side of the passageway shall have the right to construct fire escapes over the passageway in conformity with the ordinances of the City of Chicago, so long as the fire escapes are constructed to leave ample head room for free passage through the passageway.

¶ 10 According to the parties' stipulations, before defendant acquired the Phoenix Property, defendant ordered and received surveys dated February 14, 2012, and March 2, 2012. After defendant acquired the Phoenix Property, defendant ordered and received a survey dated June 29, 2012. When defendant acquired the Phoenix Property, it had attachments on its south wall that extended beyond the southern property line. Furthermore, defendant's tenants are not permitted to alter the structures of the building on the Phoenix Property, including by attaching any structures to the exterior of the building, without defendant's permission. Defendant has the ability to remove any structures attached to the south wall of its building and direct its tenants to remove any structures they attached to the south wall of its building.

¶ 11 When defendant acquired the Phoenix Property in 2012, defendant assumed a lease with Bank of America^[2] for a portion of the Phoenix Property, which lease began in June 2005. Bank of America attached five metal HVAC vents to the south wall of the Phoenix Property, which extend out of the first floor of the Phoenix Property, above the passageway, and vertically to the roof of the Phoenix Property. In July 2019, Bank of America cancelled its lease and surrendered the leased premises to defendant.

¶ 12 In April 2014, Samuel Hergott, defendant's property manager, left a voicemail for VEP's principal, Jerry Mickelson, stating that defendant wanted to repave the passageway to more easily store dumpsters there and needed Mickelson's permission to do so. Although defendant never received permission, it repaved plaintiffs' property anyway. Defendant's unauthorized repaving caused water intrusion into The Vic Theatre.

¶ 13 Plaintiffs objected to defendant's unauthorized repaving and demanded that defendant pay for the repair work performed by plaintiffs. During those discussions, plaintiffs demanded, on June 10, 2015, that defendant remove the encroachments attached to the south wall of its building. On June 15, 2015, a representative of defendant offered to reimburse plaintiffs for the repair work if plaintiffs agreed to amend the passageway easement to accommodate defendant's encroachments. Plaintiffs rejected defendant's proposal, insisted on reimbursement for repair work, and offered defendant a one-year license for its encroachments for $30,000.

¶ 14 Defendant did not pay the proposed license fee and did not reimburse plaintiffs for the repair work. Plaintiffs removed defendant's new asphalt, repaired the property's pitch, repaired broken drain tile and concrete, and performed other tasks for a total of $13,515.

¶ 15 This litigation began in 2016 when VEP filed suit for trespass and nuisance. Thereafter, in the operative complaint, plaintiffs sued defendant for (1) intentional trespass, (2) negligent trespass, (3) private nuisance, (4) a declaratory judgment that defendant's right to use plaintiffs' property is limited to use of the passageway to enter and exit defendant's building, and (5) ejectment. Defendant's answer raised several affirmative defenses, including that VEP did not own the airspace between the buildings, the statute of limitations barred actions for trespass and nuisance, the balance of equities favored defendant, and laches and waiver.

¶ 16 The trial court conducted a bifurcated bench trial, which had a liability phase and a remedies/damages phase.

¶ 17 During the liability phase, Mickelson, the sole member and manager of VEP (the entity that owns VOC) testified that he owns The Vic Theatre and several other theatres in Chicago. He has been in the entertainment business nationally and in the Chicago area for more than 50 years. He testified about the potential value of the easement and the likelihood of future development. He explained his reasons for buying the Victoria Property, particularly the idea that the Victoria Property was "covered land play," i.e., a concept that involves a buyer purchasing real estate that can bring in money for the owner while the property appreciates in value and can later be redeveloped. Mickelson testified that he expected to develop the Victoria Property from lot line to lot line by building over the 10-foot passageway required by the easement while still preserving that passageway. Defendant did not offer any evidence to rebut Mickelson's testimony. Mickelson also testified that defendant's unauthorized repaving of the passageway negatively impacted the Victoria Property by changing the pitch of the gangway so that when it rained, water flowed into the theatre's exit doors and caused flooding and damage. The trial court found that Mickelson was very credible.

¶ 18 Timothy Glascott testified as plaintiffs' expert witness based on his experience of working in real estate brokerage, management, and development. The trial court found that he was credible, instructive on general principles in real estate development, and corroborative of Mickelson's testimony about the potential value of the airspace above the easement exceeding $2.5 million and the likelihood of its future development.

¶ 19 The parties stipulated to the expert testimony of George Halik, a retired architect who was licensed and had practiced in Illinois for 42 years. The parties stipulated that if called as a witness at trial, Halik would have provided his expert testimony that, based on his familiarity with the Victoria Property and his review of the passageway easement, it would be "feasible for the owner of [the Victoria Property] to utilize the northernmost ten feet of the property while accommodating the [passageway easement], including by building a structure that extends to Plaintiffs' northern property line while accommodating [defendant's] right of ingress and egress." Defendant did not offer any evidence to rebut Halik's testimony.

¶ 20 Hergott, the former property manager of the Phoenix Property, testified about the 2012 purchase of the property the review of documents and plat surveys prior to and after the purchase, and the content of the lease agreements between defendant and its tenants. Specifically, Hergott testified that defendant knew about the appurtenant items when it purchased the Phoenix Property. Hergott's testimony and pl...