Michigan Wacker Associates, LLC v. Casdan, Inc.

2018 IL App (1st) 171222
THIRD DIVISION
February 28, 2018
No. 1-17-1222
____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
______________________________________________________________________________
)
MICHIGAN WACKER ASSOCIATES, LLC, ) Appeal from the
) Circuit Court of
Plaintiff and Counterdefendant-Appellant, ) Cook County.
)
v. ) No. 2016 CH 12105
)
CASDAN, INC., ) The Honorable
) Anna H. Demacopoulos
Defendant and Counterplaintiff-Appellee. ) Judge Presiding.
)
JUSTICE LAVIN delivered the judgment of the court, with opinion.
Presiding Justice Cobbs and Justice Fitzgerald Smith concurred in the judgment and
opinion.
OPINION
¶1 This dispute arises from a lease entered into between landlord Michigan Wacker
Associates, LLC (landlord), and tenant Casdan, Inc. (tenant). Landlord maintains that tenant
failed to exercise its option to extend the lease term while tenant asserts the opposite. Before the
trial court, both parties sought declarations supporting their respective positions and filed cross-
motions for summary judgment. The trial court entered judgment in favor of tenant, and landlord
No. 1-17-1222
now appeals. For the following reasons, we reverse the trial court’s judgment and remand for the
court to enter judgment in favor of landlord.
¶2 I. Background
¶3 A. The Lease
¶4 In 2001, the parties entered into a lease for landlord’s property located at 75 East Wacker
Drive in Chicago. 1 Tenant was to operate a restaurant under the name Bella! Bacino’s. The lease
was to expire on December 31, 2011, but provided two options to extend the lease:
“Tenant shall have the option to extend the term of this Lease for two additional five (5)
year periods (the first five (5) year extension option shall hereinafter be referred to as the
‘First Extension Option’ and the second five (5) year extension option shall hereinafter be
referred to as the ‘Second Extension Option’). *** The option to renew shall be exercised
with respect to the entire Demised Premises only and shall be exercisable by Tenant
delivering the Extension Notice to Landlord, in the case of the First Extension Option, on
or prior to January 1, 2011 and in the case of the Second Extension Option, on or prior to
January 1, 2016, in all cases, time being of the essence.”
Additionally, the parties would determine the rent amount for any extension by considering the
fair market rent for comparable restaurants at that time. If the parties could not agree on such
amount within 10 days of tenant’s exercise of an option, either party could demand arbitration.
¶5 Article 27 of the lease governed notice:
“Except as otherwise expressly provided in this Lease, any *** notices *** or
other communications given or required to be given under this Lease *** shall be deemed
1
Tenant’s fact section is argumentative and at times inaccurate, in violation of Illinois Supreme
Court Rule 341(h)(6) (eff. Nov. 1, 2017). While we decline to take any action here, we remind tenant that
reviewing courts may strike an improper statement of facts or dismiss an appeal where warranted.
Szczesniak v. CJC Auto Parts, Inc., 2014 IL App (2d) 130636, ¶ 8.
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No. 1-17-1222
sufficiently given or rendered only if in writing, *** sent by registered or certified mail
(return receipt requested) addressed to Landlord at Landlord’s address set forth in this
Lease, with a copy to Masterworks Development Corporation, 56 West 45th Street, 4th
Floor, New York, New York 10036, Attention: Jon D. Horowitz, Esq.; or *** to such
other address as *** Landlord *** may designate as its new address for such purpose by
notice given to the other in accordance with the provisions of this Article 27.”
Landlord’s address was Michigan Wacker Associates, LLC, “c/o Masterworks Development
Corporation at 555 Fifth Avenue, Suite 1400, New York, New York, 10017.” We note that
Masterworks Development Corporation (Masterworks) controlled landlord’s operations.
¶6 The lease also contained two sections limiting landlord’s ability to waive lease terms
(collectively referred to as the no-waiver clause). In short, the lease provided that landlord could
waive strict performance of a lease term only by executing a written instrument to that effect
and, even then, waiver of one breach would not result in the waiver of subsequent breaches.
¶7 B. The Parties’ Correspondence
¶8 On November 9, 2010, tenant, through attorney Harold Rosen, sent landlord a letter
labeled, “Extension Notice for First Extension Term & Notice of Change of Additional
Addresses for purpose of Notice.” The letter stated, “Tenant hereby gives landlord this Extension
Notice that Tenant has elected to exercise the First Extension Option granted in the Lease and
does so with respect to the entire Demised Premises.” Notwithstanding that the notice was sent
via Federal Express rather than registered or certified mail, landlord did not dispute that tenant
effectively exercised the first option to extend the lease to December 31, 2016. As of 2012, well
after the first extension option was exercised, the parties were still negotiating the rent amount
for that period.
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No. 1-17-1222
¶9 On August 16, 2012, tenant, through Rosen, e-mailed Horowitz, who was landlord’s
representative and Masterworks’ general counsel. The e-mail addressed matters tenant “would
like to discuss,” “would like to resolve” or “would propose.” Rosen stated that he “would like to
discuss” reaching an agreement for the rent amount and “would also like to discuss with you the
improvements that the tenant would like to make with assistance from the Landlord.”
Additionally, “[t]enant would propose” that landlord match tenant’s contributions to
construction. A list of “[o]ther points tenant would like to resolve” included the following:
“We are now in the first of two (2) five (5) year options. Tenant would like to
exercise the second option now, so we don’t have to do this again as soon. It may be
better to simply convert both options to a ten (10) year extension term. The ten (10) year
period will better enable amortization of Landlord’s contribution to improvements. We
would also like to add a five (5) year option at the end of the lease.”
Rosen concluded, “Please contact me to discuss the tenant’s proposal.”
¶ 10 Rosen identified the proposal e-mail as tenant’s exercise of the second option. In his
deposition, he testified that the notice “wasn’t pretty” but it was “sufficient.” He also testified
that the parties had previously deviated from the lease’s notice provisions. According to Rosen, it
did not make sense to tender the same type of notice as he had with the first option because
landlord did not insist on formal notice and the parties were discussing other things. Rosen was
looking for a comprehensive solution to all outstanding issues and clarified that tenant had
wanted to exercise the second option immediately so that the parties would not have to negotiate
rent again, which would benefit both parties. Rosen further testified it was beneficial to tenant to
exercise the second extension option in 2012 and determine the rent for that period, in order to
amortize tenant’s contribution to improvements over a longer period.
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No. 1-17-1222
¶ 11 Tenant’s CEO, Linda Bacin, testified in her deposition that she exercised the second
extension option in 2012 as part of a larger plan. Tenant planned on investing in improvements
to the property, which would have warranted more than one five-year option. Bacin testified that
she asked Rosen to exercise the second option in 2012 and never doubted tenant’s right to
continue operating at that location until December 31, 2021.
¶ 12 In contrast, Horowitz testified that while tenant could exercise the option at any time
before January 1, 2016, it was not clear from the proposal e-mail that tenant was purporting to do
so because the e-mail repeatedly identified items that tenant or Rosen “would like.” Horowitz
also observed that Rosen referred to the letter as a proposal and required changes to the current
lease. Similarly, Masterworks employee Adam Bahna testified in his deposition that he viewed
the proposal e-mail only as an informal proposal. Adam testified, “This is a letter asking for a
bunch of stuff as part of a rent negotiation for the first extension.” He testified that the proposals
were “all part of a package.”
¶ 13 On October 16, 2012, Adam wrote an e-mail to Ralph Bahna, Masterworks’ CEO, and
sent a copy to Horowitz. The e-mail addressed the unresolved rent amount and stated that
landlord would deny tenant’s request for landlord to pay for half of the improvements to the
property. Adam stated, “They want to exercise their 2nd option now. The answer is no. They
want to add another 5 year option to the lease. The answer is no.” According to Adam, he did not
intend for his comments to indicate he believed that tenant had exercised the second option.
¶ 14 Six days later, on October 22, 2012, Horowitz wrote to Rosen on landlord’s behalf.
“Your letter dated August 16, 2012 covers a number of points which I am responding to in
order.” Horowitz addressed, among other things, the unresolved rent amount and tenant’s request
for landlord to contribute toward improvements. Horowitz also stated:
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No. 1-17-1222
“Option Periods: The Landlord wants to follow the existing lease and not have
the Tenant exercise their 2nd option now. The Landlord is also unwilling to add an
additional 5 year option period to the lease.”
Horowitz testified that his statement was a response to only one of several requests made in the
proposal e-mail, not an acknowledgment that tenant was purporting to exercise the second
option. Tenant took the opposite position, however. Moreover, Bacin testified that Rosen told her
the lease did not allow landlord to reject her exercise of the option.
¶ 15 According to Rosen, he subsequently spoke to Horowitz on the telephone:
“I *** pointed out that the landlord didn’t have a choice in the matter, but that I
could understand. If he didn’t want to negotiate the rent with the second extension now,
that would be okay with me as long as I didn’t have to serve another notice. And my
recollection is, he said okay. Because if I had insisted that it be now and not yielded to his
desire to negotiate it later, then, according to the lease, he would have like ten days to
start something with respect to the rent that would ultimately put us in arbitration if—if
we couldn’t agree.”
Horowitz, however, submitted an affidavit denying that such conversation occurred or that he
told Rosen additional notice was unnecessary. On November 26, 2012, Horowitz e-mailed
Rosen, stating, “the rent and the term of the lease are, and must be, kept as two separate issues.”
¶ 16 Almost three years later, on October 7, 2015, Bacin e-mailed Horowitz, asking him to
advise her “of the process for notifying Masterworks of my intent to exercise the next option on
our lease at 75 East Wacker Drive.” Horowitz responded the same day: “A letter on company
stationery to me should suffice. I’ll need to see how we calculate rent.” Horowitz testified that it
would no longer make sense for Bacin to send a letter to the address in the lease, which was
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No. 1-17-1222
Ralph’s address. Ralph died in 2014. Despite Horowitz advising Bacin of an acceptable process,
tenant did not tender a letter to Horowitz on company stationery.
¶ 17 Meanwhile, Masterworks’ manager, Francis Longo, asked Adam if tenant had notified
landlord that it would extend the lease. Longo stated, “Per the Lease Precis, they have to notify
us by January 1st, 2016. The expiration Date of First Extension Term is 12/31/16.” Adam
responded that he had not been notified.
¶ 18 Bacin testified that in May 2016, which we note was after the deadline for exercising the
second option, landlord began showing the property to potential lessees. She had not thought
about the second option again until then. Bacin e-mailed Horowitz on May 10, 2016. After
discussing recent personal difficulties, she stated as follows:
“Please know that I do want to stay as a tenant it was my understanding that we
had exercised the options in our lease in the letter prior. If that is not the case please
know that I still do want to stay. *** I understand that it’s likely the rent may increase
and I fully understand the need for renovation as I had hoped we would’ve extended the
lease the last time and fully renovated at that time.”
Horowitz responded within the hour, telling her to call at her convenience.
¶ 19 Three days later, Horowitz told Bacin to have Rosen call him. She responded that Rosen
would meet with her the following week but asked Horowitz to “[p]lease let me know [sic] next
steps.” On June 1, 2016, Bacin apologized to Horowitz for not responding the week before. She
stated, “My position has not changed. I want to renew my lease, I am interested and wanting to
reinvest in the space and will work with you to assure that Bacinos is a long term asset to the
building.” Meanwhile, Bacin learned landlord was informing other individuals who worked in
the building that tenant had not renewed its lease, and she engaged Donald Manikas to represent
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No. 1-17-1222
tenant. On July 18, 2016, Manikas wrote to Horowitz, asserting that tenant had already exercised
the second option.
¶ 20 Horowitz responded the next day. He stated that landlord was surprised to learn that
tenant believed it had exercised the second extension option, thereby extending the lease to
December 31, 2021, because landlord had not received written notice complying with the lease.
“In accordance with Article 27 of the Lease, please provide us with evidence that such notice has
been delivered to Landlord as required under the clear and unambiguous terms of the Lease.”
Approximately one month later, Manikas responded that Rosen tendered written notice in 2012.
¶ 21 C. The Pleadings
¶ 22 Landlord then commenced this action, seeking a declaration that tenant did not exercise
the second extension option and that, consequently, the lease would expire on December 31,
2016. Landlord later added counts for breach of contract as well as forcible entry and detainer.
¶ 23 In response, tenant filed a counterclaim seeking a declaration that it effectively exercised
the second extension option, thereby extending the lease until December 31, 2021. Tenant also
filed an answer identifying Rosen’s proposal e-mail as tenant’s exercise of the second extension
option. Tenant added that landlord waived the right to assert that the option was not exercised
because (1) landlord knew of tenant’s intent to exercise it and (2) did not notify tenant until July
2016 that landlord believed the second option was not exercised. Furthermore, “tenant relied on
[landlord’s] words and actions that [landlord] knew and accepted that [tenant] exercised its rights
regarding the Second Extension Option to its detriment.” Tenant raised equitable estoppel based
on the same facts.
¶ 24 We note that, contrary to tenant’s suggestion, neither its counterclaim nor its answer
alleged landlord had established a practice of accepting notice that deviated from the method
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No. 1-17-1222
prescribed by the lease or that landlord had waived the right to strict compliance as a result. We
further note that tenant’s pleadings did not refer to the alleged telephone conversation between
Rosen and Horowitz.
¶ 25 In reply, landlord denied tenant’s affirmative defenses and denied that tenant provided
proper notice exercising the second option. Landlord also stated that it had no obligation to
notify tenant of its failure to exercise the option. Landlord’s pleadings did not, however, mention
the no-waiver clause.
¶ 26 The parties filed cross-motions for summary judgment with respect to the second
extension option. Landlord argued, among other things, that it was entitled to strict compliance
with the terms of the option but tenant failed to send the proposal e-mail to landlord’s address
and did not send notice via certified or registered mail. In any event, the proposal e-mail did not
constitute a definite, unequivocal, and unconditional exercise of the option to renew for a second
five-year period because that proposal was sent as part of negotiations over the rent amount for
the first extension period, which landlord construed as an argument toward establishing a better
deal. Landlord further argued that additional matters were raised in the proposal e-mail and
tenant stated only that it “would like” to exercise the option. Once again, landlord did not
mention the no-waiver clause.
¶ 27 In contrast, tenant maintained that the proposal e-mail was clear, unconditional, and
sufficient to exercise the second option. Additionally, Adam and Horowitz were aware of that e­
mail, and actual notice was sufficient. Tenant further argued that equitable considerations
warranted summary judgment. While tenant observed that landlord only recently asserted that
notice was ineffective due to technical deficiencies, we note that tenant’s summary judgment
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No. 1-17-1222
pleadings did not assert waiver on that basis. Moreover, tenant did not attempt to rely on the
disputed telephone conversation.
¶ 28 Following a hearing, the trial court entered summary judgment in favor of tenant on its
counterclaim and landlord’s declaratory judgment count, finding that the proposal e-mail was a
clear and unambiguous exercise of the second option. The court also found that Bacin’s
subsequent e-mail asking how to exercise the second option did not negate that. We note that
while tenant had argued at this hearing that landlord had a practice of forgoing strict compliance
and had “abandoned” it, tenant did not specifically raise “waiver” on that basis. Nonetheless, the
court determined that landlord waived strict compliance with the requisite method of notice
based on the same reasoning. Despite that determination, landlord did not bring the lease’s no-
waiver clause to the court’s attention. 2
¶ 29 II. ANALYSIS
¶ 30 On appeal, landlord challenges the trial court’s summary judgment ruling, asserting
among other things that tenant failed to strictly comply with the lease’s notice requirements and
that the proposal e-mail did not constitute an unequivocal exercise of the second option. Both
parties have also raised numerous instances of waiver. 3
¶ 31 We review the trial court’s summary judgment ruling de novo. Genesco, Inc. v. 33 North
LaSalle Partners, L.P., 383 Ill. App. 3d 115, 118 (2008). Accordingly, we review the court’s
judgment, not its reasoning. Morningside North Apartments I, LLC, v. 1000 N. La Salle, LLC,
2017 IL App (1st) 162274, ¶ 10. Summary judgment is appropriate where the pleadings,
2
The trial court entered a finding pursuant to Illinois Supreme Court Rule 304(a) (eff. Mar. 8,
2016).
3
The parties have failed to differentiate between the concepts of waiver and forfeiture.
Notwithstanding this inaccuracy, we follow suit and use the term “waiver” throughout. See Gallagher v.
Lenart, 226 Ill. 2d 208, 229 (2007) (stating that waiver is an intentional relinquishment of a known right
whereas forfeiture constitutes the failure to timely assert a right).
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No. 1-17-1222
admissions, depositions, and affidavits reveal no genuine issue of material fact so that the
movant is entitled to judgment as a matter of law. Id.
¶ 32 A. Strict Compliance v. Actual Notice
¶ 33 Our supreme court’s seminal decision in Dikeman v. Sunday Creek Coal Co., 184 Ill. 546
(1900), remains the leading authority on this options matter. The contractually mandated time for
performance is generally an essential term of a contract. Id. at 550. Unless that term is waived,
an option is lost due to untimeliness. Id. Discussing the nature of the option before it, Dikeman
stated, “[t]he agreement was purely a privilege given to the lessee without any corresponding
right or privilege of the lessor, and the only stipulation was that the right should be exercised at a
certain time.” Id. at 551.
¶ 34 Since Dikeman, courts have generally required strict compliance with options. See
Genesco, Inc., 383 Ill. App. 3d at 119; see also T.C.T. Building Partnership v. Tandy Corp., 323
Ill. App. 3d 114, 115, 119, 120 (2001) (treating the method for exercising an option as a
condition precedent requiring strict compliance). Strict compliance is dictated not only by
precedent, but by the needs of commercial transactions and fairness. Thompson Learning, Inc. v.
Olympia Properties, LLC, 365 Ill. App. 3d 621, 629 (2006). Options to cancel or extend
commercial leases are invaluable to a lessee, and a lessor generally does not receive
consideration for the lessor’s agreement to be bound by an exercise of the option. Id. Thus, a
lessor may insist on a writing to further certainty as the lessor forgoes other opportunities to lease
the space. Id. at 630. Courts have also recognized that a lessee should be strictly held to the
agreed terms because the parties to commercial leases are usually sophisticated. Genesco, Inc.,
383 Ill. App. 3d at 119.
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No. 1-17-1222
¶ 35 Consequently, actual or oral notice is insufficient to exercise an option where a party has
failed to provide timely written notice. Id.; Thompson Learning, Inc., 365 Ill. App. 3d at 627.
Instead, such notice “is just another way of highlighting Tenant’s failure to strictly comply.”
(Internal quotation marks omitted.) Genesco, Inc., 383 Ill. App. 3d at 119-20 (quoting Thompson
Learning, Inc., 365 Ill. App. 3d at 633). Furthermore, cases finding actual notice to be sufficient
outside the options context have no bearing on notice in options cases. Thompson Learning, Inc.,
365 Ill. App. 3d at 629; Epton v. CBC Corp., 48 Ill. App. 2d 274, 281 (1964) (observing that
“[a]n option agreement is a unilateral agreement governed by rules of law entirely distinct from
those applicable to bilateral contracts”); cf. Vole, Inc. v. Georgacopoulos, 181 Ill. App. 3d 1012,
1019 (1989) (where a tenant admittedly received his landlord’s notification that the landlord
objected to the tenant’s signage, the reviewing court stated that “[i]n general, the object of notice
is to inform the party notified, and if the information is obtained in any way other than formal
notice, the object of notice is attained”).
¶ 36 Here, no one suggests that landlord waived the deadline for exercising the second option.
In addition, tenant does not dispute that it failed to strictly comply with the method of notice
prescribed by the lease. Instead, tenant argues that actual notice is a sufficient substitute for the
lease requirements and landlord waived strict compliance with the requisite method of notice.
See T.C.T. Building Partnership, 323 Ill. App. 3d at 120 (stating that conditions in the form of a
notice required can be waived by the party whom the requirement was intended to benefit).
¶ 37 Dikeman and its progeny clearly defeat tenant’s assertion that actual notice is sufficient.
In any event, landlord disputes that it had actual notice. We also categorically reject any reliance
on Rosen’s testimony that Horowitz orally agreed to waive notice. As tenant recognizes, a party
waives any theories not raised before the court during summary judgment proceedings. US Bank,
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No. 1-17-1222
National Ass’n v. Avdic, 2014 IL App (1st) 121759, ¶ 34; see also Frederick v. Professional
Truck Driving School, Inc., 328 Ill. App. 3d 472, 479 (2002) (finding on appeal from summary
judgment for the defendant that the plaintiff waived an issue by failing to raise it in his complaint
or otherwise raise it before the trial court). In addition, none of tenant’s pertinent pleadings
addressed the alleged conversation. Rosen’s testimony was also contradicted by Horowitz,
creating a factual dispute that would preclude summary judgment on that basis.
¶ 38 Assuming, without deciding, that (1) tenant did not waive its assertion that landlord
waived strict compliance through a practice of forgoing lease requirements, (2) landlord did in
fact waive strict compliance with the method of notice prescribed by the lease, and (3) landlord
waived reliance on the no-waiver clause, we would nonetheless find the proposal e-mail did not
constitute an effective exercise of the second option. Any notice found in the proposal e-mail
was equivocal at best.
¶ 39 The acceptance of an offer contained in an option must be specific, certain, and
unconditional. See Wentcher v. Busby, 98 Ill. App. 3d 775, 783 (1981). In determining whether
an option was effectively exercised, we must construe the purported exercise in context. See
Morris v. Goldthorp, 390 Ill. 186, 196 (1945) (stating that “[i]n construing this sentence, those
words obviously must be considered, not only with the balance of the sentence in which they are
found, but with all the language which follows them”); Department of Public Works & Buildings
v. Halls, 35 Ill. 2d 283, 286-87 (1966) (considering a purported exercise of an option in its
entirety). When considered in context, no landlord would have reasonably understood the
proposal e-mail and tenant’s statement that it “would like to exercise the second option now” as
purporting to contemporaneously and unconditionally exercise the second option.
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No. 1-17-1222
¶ 40 As stated, the proposal e-mail referred to matters tenant “would like to discuss,” “would
like to resolve,” or “would propose.” Tenant stated that it “would like” to exercise the second
option now, not that it was purporting to do so. Compare Department of Public Works &
Buildings, 35 Ill. 2d at 284, 286 (finding a purported acceptance of an option was equivocal and
added a new condition even where the acceptance stated, “ ‘YOU ARE HEREBY NOTIFIED
that I have elected to exercise the option to purchase the real estate’ ”), with Gaskins v. Walz,
409 Ill. 40, 44 (1951) (finding acceptance of an option to be unequivocal where it stated, “ ‘You
are hereby notified that the option contained in said lease to purchase said property for the sum
of $17,500.00 is hereby exercised’ ”). Furthermore, the e-mail arose in the course of lengthy
negotiations over the rent amount for the first extension period and proposed that landlord
contribute toward improvements as well as grant a third option to extend the lease. The e-mail
concluded by collectively referring to the matters therein as one proposal. Rosen testified it was
accurate to say he was looking for a comprehensive solution to all of the parties’ outstanding
issues. That is precisely how one would understand the e-mail.
¶ 41 Rosen testified it was beneficial to tenant to exercise the second extension option in 2012
in order to amortize contribution improvements over a longer period. Bacin testified that tenant
planned on investing in improvements to property, which would have warranted more than one
five-year option. A landlord reading the proposal e-mail would not comprehend that tenant
intended to exercise the option even if tenant’s other proposals were rejected. While Bacin
denied that tenant wanted to exercise the second option only if the parties could set a rent amount
for that second period, a landlord examining the e-mail in question would have no means of
deducing that. Cf. Oliva v. Amtech Reliable Elevator Co., 366 Ill. App. 3d 148, 152-53 (2006)
(finding that where the parties’ agreement setting forth the option was silent as to notice, the law
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No. 1-17-1222
did not require any and the tenant exercised the option by remaining in possession of the
property). To be clear, we do not find the proposal e-mail was equivocal for the reason that it
deviated from the notice exercising the first extension option. Indeed, different language may
have permitted tenant to unequivocally exercise the second option. The language that tenant used
in the proposal e-mail, however, did not.
¶ 42 Contrary to tenant’s suggestion, Adam’s subsequent statement—that tenant and its
representatives wanted to “exercise their 2nd option now”—was entirely consistent with an
understanding that tenant was informally proposing to exercise the second option as part of a
larger plan. Adam stated only that tenant wanted to exercise the option, not that tenant had done
so. Furthermore, Horowitz’s statement to Rosen—that “The Landlord wants to follow the
existing lease and not have the Tenant exercise their 2nd option now”—did not constitute an
improper attempt to reject tenant’s exercise of the option. Tenant had to have exercised the
option before landlord could attempt to reject it. Moreover, tenant has cited no legal authority
supporting its suggestion that landlord had a duty to notify tenant that it had failed to exercise the
option. Surely, tenant, rather than landlord, was in the best position to proactively protect its
contractual rights.
¶ 43 B. Equitable Relief
¶ 44 Finally, the record does not show that equitable relief would be appropriate under these
circumstances. Equitable relief is available where time is not of the essence, but where time is of
the essence, courts will hold parties to their agreement. Dikeman, 184 Ill. at 550. In addition,
Dikeman observed that neither fraud, mistake, nor accident led the lessee in that case to fail to
timely avail itself of its option; instead, the lessee identified only the negligence of its agent. Id.
at 551; see also Genesco, Inc., 383 Ill. App. 3d at 128 (Theis, J., specially concurring) (stating
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No. 1-17-1222
that “the holding of Dikeman, that Illinois courts will never exercise their equitable powers to
relieve negligent or careless failures to timely and properly comply with the terms of an option,
is still the law”); but see Ceres Terminals, Inc. v. Chicago City Bank & Trust Co., 117 Ill. App.
3d 399, 402, 405 (1983) (stating that Dikeman held only that undue hardship must be shown
before equity will assist the negligent and that no undue hardship was established in Dikeman).
The supreme court concluded, “[the lessee] lost its legal right by failing to comply with the
condition precedent, and we do not see how equity can relieve against mere forgetfulness.”
Dikeman, 184 Ill. at 551.
¶ 45 After Dikeman, other panels of this court have applied a three-part test to determine if
equitable relief may cure the ineffective exercise of an option. See Thompson Learning, Inc., 365
Ill. App. 3d at 633; but see Genesco, Inc., 383 Ill. App. 3d at 126-28 (Theis, J., specially
concurring) (expressing doubt as to whether Illinois has adopted the aforementioned three-part
test for determining whether equity can relieve a party from failing to strictly comply). Yet, we
find Dikeman’s clear language precludes equitable relief where an option contract indicates that
time is of the essence or where a contracting party loses its legal right through the negligence of
its agent or mere forgetfulness. But see Linn Corp. v. LaSalle National Bank, 98 Ill. App. 3d 480,
481, 483-84 (1981) (finding equitable relief to be appropriate where renewal options were
granted in return for the tenant making substantial improvements and untimely notice of renewal
would not cause substantial hardship, despite that the untimeliness resulted from the tenant’s
carelessness).
¶ 46 Here, the lease stated that time was of the essence. This alone would foreclose equitable
relief. Although credibility judgments are inappropriate at the summary judgment stage, we
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No. 1-17-1222
further note that a trier of fact could find that tenant failed to timely exercise the second option
due to inattention on the part of Bacin and/or Rosen.
¶ 47 III. Conclusion
¶ 48 Tenant’s proposal e-mail did not constitute unequivocal, unconditional notice that tenant
was exercising the option. Additionally, equitable relief was unavailable where the lease
provided that time was of the essence. Because tenant failed to provide timely notice that it was
exercising the second option to extend the lease term, the lease expired. Accordingly, landlord,
rather than tenant, is entitled to summary judgment.
¶ 49 For the foregoing reasons, we reverse and remand for the trial court to enter summary
judgment in favor of landlord, and against tenant, and to address landlord’s remaining counts.
¶ 50 Reversed and remanded.
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