Union Tank Car Co. v. NuDevco Partners Holdings, LLC

2019 IL App (1st) 172858
SECOND DIVISION
January 15, 2019
No. 1-17-2858
UNION TANK CAR COMPANY, ) Appeal from the
) Circuit Court of
Plaintiff-Appellee and Cross-Appellant, ) Cook County, Illinois.
)
v. ) No. 16 L 2559
)
NUDEVCO PARTNERS HOLDINGS, LLC, ) Honorable
) Diane M. Shelley,
Defendant-Appellant and Cross-Appellee. ) Judge Presiding.
PRESIDING JUSTICE MASON delivered the judgment of the court, with opinion.
Justices Lavin and Pucinski concurred in the judgment and opinion.
OPINION
¶1 Following a 2017 bench trial, plaintiff-appellee, Union Tank Car Company (Union
Tank), was awarded $1.27 million in damages as a result of the breach of a lease guaranty by
defendant-appellant, NuDevco Partners Holdings, LLC (NuDevco). On appeal, NuDevco
challenges the verdict, claiming the trial court erred by (i) concluding that Union Tank’s cause of
action was not governed by the Uniform Commercial Code (UCC) (810 ILCS 5/1-101 et seq.
(West 2016)), (ii) awarding Union Tank damages when Union Tank failed to satisfy the UCC’s
condition precedent to the recovery of damages, (iii) awarding damages to Union Tank for
anticipated blasting and future storage costs, and (iv) admitting certain evidence, which, in turn,
influenced the amount of damages.
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¶2 Union Tank cross-appeals from the trial court’s refusal to award the present value of lost
future rent under the lease and the trial court’s deduction of $10,000 from Union Tank’s petition
for attorney fees.
¶3 For the reasons that follow, we affirm in part and vacate in part.
¶4 BACKGROUND
¶5 In January 2003, Ponderosa Petroleum Company (Ponderosa) entered into a lease with
General Electric Railcar Services Corporation (GE Railcar) for 47 railcars to carry crude
petroleum. In the ensuing years, the parties executed numerous riders providing for lease terms
ending between May 2017 and February 2020. On April 1, 2015, Associated Energy Services,
LLC (Associated Energy) assumed the obligation to make payments under the lease, although
Ponderosa remained a party to the lease.
¶6 Associated Energy is a wholly owned subsidiary of NuDevco. On March 3, 2015,
NuDevco executed a guaranty in favor of GE Railcar to pay Associated Energy’s obligations
under the lease. The terms of the guaranty provided that NuDevco would
“absolutely, irrevocably and unconditionally guarantee the full and prompt payment
when due of all the obligations *** due under the Leases, including, but not limited to,
rent, service charges, freight, railroad charges, *** [and] cleaning charges *** together
with all other sums which may or shall become due and payable pursuant to the
provisions of the Leases, including, without limitation, any damages resulting from the
Lessee’s failure to perform its obligations thereunder.”
The guaranty further provided that NuDevco would reimburse Union Tank for all costs it
incurred in enforcing the guaranty, including reasonable attorney fees.
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¶7 In September 2015, Union Tank acquired the lease, riders, and railcars from General
Electric Capital Corporation, which owned or controlled (directly or indirectly) all of the interest
in GE Railcar.
¶8 On September 1, 2015, Associated Energy sent a notice of termination of the lease to GE
Railcar citing as justification that the cars were approaching the end of their permitted use to haul
crude oil. No provision of the lease authorized termination for this reason. At the same time,
Associated Energy also began returning the railcars to Union Tank. Associated Energy
discontinued rental payments as of September 30, 2015, and returned all the leased cars to Union
Tank by December 2015. Union Tank then invoked the guaranty, but NuDevco refused to honor
it.
¶9 On March 10, 2016, Union Tank filed a complaint against NuDevco alleging breach of
the guaranty. The complaint alleged that the reason given for Associated Energy’s termination of
the lease was not valid per the lease terms and NuDevco’s refusal to comply with Union Tank’s
demand for payment was a material breach of the guaranty.
¶ 10 At the bench trial, Union Tank presented evidence that Associated Energy sent all of the
leased railcars to a Union Tank facility in Evanston, Wyoming, without first informing Union
Tank. Because that facility was unable to process that number of cars, Union Tank transferred 39
of the 47 railcars to a facility in Kansas, 2 of the cars to a facility in Texas, and kept only 6 in
Wyoming. The cars were cleaned at those locations, at a cost of $137,690.09, of which
Associated Energy paid only $60,710. Union Tank also incurred costs (known as “freight”) in
moving the railcars from Wyoming to Kansas and Texas and “switching” charges in connection
with transporting the cars. A switching charge is incurred when a car is transported from a main
line railroad and “switched” to storage by way of a short-line railroad or privately held yard.
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¶ 11 Union Tank had to pay to store the cars after their return, as it had excess inventory of
those specific railcars and could not market them to new customers. (Union Tank had
insufficient yard space to store the cars on its own and generally shipped excess inventory to
third-party railyards.) Union Tank again incurred freight and switching charges in shipping the
cars from where they were cleaned to where they were ultimately stored. Through the date of
trial, Union Tank incurred $192,975.80 in freight costs, $9605 in switching costs, and
$41,315.30 in storage charges.
¶ 12 As evidence to support these incurred costs, Union Tank introduced invoices that it
received from third parties. While none of the third parties generating the invoices were called to
testify, Frederick Koenig, a 40-year Union Tank employee currently serving as Union Tank’s
director of fleet repair, testified that Union Tank receives freight invoices through an Internet
portal or via e-mail in the ordinary course of its business. A Union Tank employee then signs the
invoice, whereupon it is routed to the accounts payable department, which generates payment by
check or electronically. William Constantino, the general manager of Union Tank’s leasing
business unit, testified that he receives similar invoices for storage, switching, and cleaning
charges, which are checked for accuracy and then sent to him for countersignature if above a
certain amount. According to Constantino, he receives these invoices during the normal and
typical course of his business activity anytime Union Tank has idle equipment in storage.
Finally, Union Tank’s controller and vice president for the leasing business unit, James
Murauskis, testified that, after the invoices (for cleaning, freight, storage, or switching) are
routed to accounts payable, the invoices are paid.
¶ 13 Murauskis’s testimony regarding payment was based on a spreadsheet Union Tank
generated in the course of its business. That spreadsheet listed the bills associated with the 47
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railcars Associated Energy returned and linked each invoice to the authorization for payment by
wire transfer through Bank of America. NuDevco objected to Murauskis’s testimony on this
issue given that the payment confirmation pages from Bank of America were not introduced at
trial.
¶ 14 In addition to the costs incurred as of the date of trial, Union Tank also sought
$97,215.90 in storage costs for the remainder of the lease terms. In support of these costs,
Constantino testified that in the beginning of 2016, shortly after Associated Energy returned the
leased cars, Union Tank had 3000 DOT-111 cars (the type leased by Associated Energy) in
storage and not leased to customers. But by the end of 2016 and at the time of trial, Union Tank
had leased only 550 DOT-111 cars to new lessees while the number of cars in storage had
increased to 6000. (The remainder of Union Tank’s DOT-111 inventory—approximately 16,000
cars—was leased.) Constantino testified that the pace of leasing these cars was not increasing.
While Constantino nevertheless expected to eventually re-lease the 47 cars Associated Energy
returned, he admitted that he could not make a final determination as to the fate of the cars until
they are brought to the repair shop and Union Tank undertakes an economic evaluation of their
condition.
¶ 15 Finally, the evidence at trial revealed that before it could lease the 47 railcars to other
customers, Union Tank would need to “blast” the interior of the cars to remove the residue from
the prior service, namely, crude oil. Union Tank introduced evidence that the railcars would
necessarily be used to transport something other than crude oil, as they no longer complied with
governmental regulations for the transport of crude petroleum. Based on the size of the cars,
blasting would cost Union Tank $109,930; however, blasting had not occurred as of the date of
trial, given that the cars had not yet been reassigned to transport a different commodity.
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¶ 16 Following the conclusion of Union Tank’s case in chief, NuDevco moved for a directed
verdict, which was denied after briefing. NuDevco did not present any evidence, and on May 18,
2017, the trial court found in favor of Union Tank, awarding it $192,975.80 in freight costs,
$207,510.18 in cleaning costs, $41,315.30 in past due storage costs, $97,214.90 in future storage
costs, $109,930 in “anticipated future blasting,” and $743,912.90 in past due rent, amounting to a
total of $1,332,149, plus prejudgment interest and attorney fees to be determined. The trial court
did not award damages for the present value of future rent because the lease did not contain a
rent acceleration clause.
¶ 17 Union Tank filed its attorney fee petition, and while that petition was pending, NuDevco
moved for reconsideration of the trial court’s judgment, which was denied.
¶ 18 On December 21, 2017, the court issued its order on the fee petition and other
miscellaneous relief, granting Union Tank attorney fees in the amount of $255,139.66, which
was $10,000 less than Union Tank requested, based on the court’s finding that the $10,000 was
for excessive, redundant, or otherwise unnecessary work. The December 2017 order also reduced
Union Tank’s damages to reflect a miscalculation in cleaning costs and additionally awarded
$9605 in switching costs, reducing the judgment to $1,271,935.80.
¶ 19 NuDevco timely appeals, and Union Tank cross-appeals.
¶ 20 ANALYSIS
¶ 21 NuDevco urges reversal of the trial court’s decision on four grounds. We consider each in
turn.
¶ 22 Initially, NuDevco argues that the trial court erred in finding the UCC inapplicable to
Union Tank’s cause of action alleging breach of the guaranty. This is a question of law which we
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review de novo. Hessler v. Crystal Lake Chrysler-Plymouth, Inc., 338 Ill. App. 3d 1010, 1017
(2003) (applying de novo review to trial court’s construction of contract).
¶ 23 At the outset, we acknowledge that the UCC is applicable to any transaction that creates a
lease. 810 ILCS 5/2A-102 (West 2016). Here, however, Union Tank did not sue Associated
Energy based on its breach of the lease but sued NuDevco for its failure to perform under the
guaranty. NuDevco maintains that this is a distinction without a difference given that its liability
under the guaranty is predicated on the amounts due under the lease. We disagree.
¶ 24 Notwithstanding the fact that the guaranty would not have been triggered but for
Associated Energy’s breach of the lease, the guaranty, as the trial court aptly noted, is a contract
in and of itself. See TH Davidson & Co. v. Eidola Concrete, LLC, 2012 IL App (3d) 110641,
¶ 10 (guaranty is contract subject to traditional principles of contractual interpretation). And the
guaranty, unlike the lease, was not a contract for the lease of goods or services but was a promise
to pay a debt. Contracts promising to pay a debt are not governed by the UCC, and none of the
cases NuDevco relies on support a conclusion to the contrary. Under these circumstances, we
conclude that the UCC is not applicable to the guaranty.
¶ 25 Because we conclude that the trial court correctly found the UCC inapplicable to Union
Tank’s cause of action for breach of the guaranty, we necessarily reject NuDevco’s argument
that the trial court erroneously allowed Union Tank to recover notwithstanding its alleged failure
to satisfy the UCC’s conditions precedent to recovery. 1
1
Under the UCC, in order to be entitled to recovery, Union Tank would have to show that it was
unable after a reasonable effort to dispose of the cars at a reasonable price or that circumstances indicated
that such an effort would have been unavailing. 810 ILCS 5/2A-529(1)(b) (West 2016). Union Tank’s
damages would also be reduced by the value of the available market rent for the leased goods. Id. § 2A­
528(1). We note that, even if the UCC applied, the proof Union Tank adduced at trial showed that its
inventory of unleased DOT-111 railcars doubled from the date of Associated Energy’s breach through
trial, thus supporting the reasonable inference that there was no market for the cars.
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¶ 26 Next, NuDevco contends that the trial court erred in awarding damages to Union Tank
for anticipated blasting and future storage costs. We review a trial court’s damages award under
the manifest weight of the evidence standard. Bell Leasing Brokerage, LLC v. Roger Auto
Service, Inc., 372 Ill. App. 3d 461, 473 (2007). A decision is against the manifest weight of the
evidence only when the opposite conclusion is apparent or the findings are unreasonable or
arbitrary. Jameson Real Estate, LLC v. Ahmed, 2018 IL App (1st) 171534, ¶ 59. Given that the
trial court is the finder of fact, its award of damages is entitled to substantial deference. See
Young v. Alden Gardens of Waterford, LLC, 2015 IL App (1st) 131887, ¶ 80.
¶ 27 NuDevco bases its argument on the well-settled principle that a plaintiff is not entitled to
recover damages that are remote, speculative, or uncertain. Doornbos Heating & Air
Conditioning, Inc. v. James D. Schlenker, M.D., S.C., 403 Ill. App. 3d 468, 485 (2010). Instead, a
plaintiff must establish an actual loss with measurable damages in order to recover. Pepper
Construction Co. v. Palmolive Tower Condominiums, LLC, 2016 IL App (1st) 142754, ¶ 85.
Importantly, however, “absolute certainty” with respect to the damage amount is not required.
Kirkpatrick v. Strosburg, 385 Ill. App. 3d 119, 130 (2008). Rather, so long as the existence of
damages is certain, a plaintiff need not necessarily establish the precise amount of damages. See
Westlake Financial Group, Inc. v. CDH-Delnor Health System, 2015 IL App (2d) 140589, ¶ 51.
A contrary rule would “immunize *** defendants from the consequences of their wrongful
conduct” by allowing them to escape liability merely because the amount of damages they have
caused cannot be proved with mathematical certainty. Id.
¶ 28 Turning first to future storage costs, while Union Tank had not incurred these costs as of
the date of trial, this does not necessarily render the costs too speculative to support an award of
damages. The need to recover future storage costs was supported by Constantino’s testimony that
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in 2016, Union Tank had leased only 550 DOT-111 cars to new customers, leaving 6000
unleased cars in its inventory. This excess inventory of the DOT-111 cars, coupled with
Constantino’s testimony that the demand for the cars was not increasing, is a reasonable basis for
concluding that UTC will incur storage costs for the 47 cars leased to Associated Energy through
the end of the cars’ last lease term in 2020.
¶ 29 To the extent that NuDevco argues that testimony regarding the need for future storage
costs was unreliable due to the fact that the testifying witness was not an expert, we disagree. A
lay witness is permitted to give opinion testimony where it is based on that witness’ personal
observation, is one the witness is competent to make, and assists in a clearer understanding of the
relevant issues. Klingelhoets v. Charlton-Perrin, 2013 IL App (1st) 112412, ¶ 44. Constantino,
who testified to the need for future storage and blasting costs, was the general manager of leasing
for Union Tank. As such, the market demand for the cars was certainly within his purview. We
cannot say the trial court’s decision to allow his testimony notwithstanding the fact that he was
not qualified as an expert in the rental market of railroad cars was an abuse of discretion. See id.
(reviewing trial court’s decision to allow lay witness testimony for abuse of discretion).
¶ 30 With regard to anticipated blasting, however, we agree with NuDevco that these damages
are too speculative to be recoverable. The extent of Union Tank’s surplus of DOT-111 railcars
and the anemic rate of new leases suggests that it is highly unlikely these 47 cars will ever be re-
let to transport a different commodity so as to require blasting. This is particularly true where
Constantino testified that the cars had not yet undergone an economic evaluation of their
condition in Union Tank’s repair shop, which was required before Union Tank could determine
whether they could be remarketed in the first place. Further, as NuDevco points out, it is
incongruous to award both future storage costs, which will only be incurred if the cars are not re­
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let by the end of the lease terms, and costs for blasting, which will be incurred if the cars are re-
let. This inconsistency compels us to conclude that the trial court’s decision on this element of
damages was against the manifest weight of the evidence. See Jameson Real Estate, LLC, 2018
IL App (1st) 171534, ¶ 59 (decision is against manifest weight of the evidence where opposite
conclusion is apparent). We therefore vacate this component of the damage award.
¶ 31 Finally, NuDevco argues that the trial court erred in admitting evidence of third-party
invoices and testimony that those invoices were paid. A trial court has broad discretion regarding
the admission of evidence, and we will not disturb the court’s ruling absent an abuse of
discretion. Wheeler Financial, Inc. v. Law Bulletin Publishing Co., 2018 IL App (1st) 171495,
¶ 104. An abuse of discretion is the most deferential standard of review, and a trial court abuses
its discretion only when its decision is unreasonable, arbitrary, or no reasonable person would
take the view it adopted. Gulino v. Zurawski, 2015 IL App (1st) 131587, ¶ 64.
¶ 32 At trial, Union Tank relied on the business records exception to the general rule
prohibiting hearsay to introduce the third-party invoices as evidence. Under this exception, the
proponent of evidence must show that the record was kept in the ordinary course of business and
it was the regular practice of the business to make that record at that time. City of Chicago v. Old
Colony Partners, L.P., 364 Ill. App. 3d 806, 819 (2006); see also Ill. S. Ct. R. 236(a) (eff. Aug.
1, 1992). Records made by a third party may be admissible as business records so long as the
person authenticating the record was either their custodian or other person familiar with the
business and its mode of operations. Bank of America, N.A. v. Land, 2013 IL App (5th) 120283,
¶ 13. Significantly, the circumstances surrounding the making of the record, including the lack of
personal knowledge, go to the weight of the evidence rather than its admissibility. PennyMac
Corp. v. Colley, 2015 IL App (3d) 140964, ¶ 17.
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¶ 33 The theory underlying the business records exception to the hearsay rule is that because
their purpose is to aid the business (and they are useless for that purpose unless accurate), there is
no motive to falsify the record and every reason to ensure its accuracy. Kimble v. Earle M.
Jorgenson Co., 358 Ill. App. 3d 400, 413-14 (2005).
¶ 34 NuDevco’s primary objection to the introduction of the invoices is that they were
prepared by third-party service providers who were not called as witnesses. But this alone does
not preclude their admission where the foundational requirements are satisfied. Id. at 413. Old
Colony Partners is instructive. There, the plaintiff challenged the admission of certain
documents an architecture firm provided to the defendant at the defendant’s request. Old Colony
Partners, 364 Ill. App. 3d at 820. The trial court admitted the documents as business records
based on the testimony of the defendant’s property manager, who testified that she maintained
the documents from the architecture firm on site in the ordinary course of business and
confirmed that the documents were received by the defendant. Id. On appeal, we affirmed the
trial court’s decision to admit the documents, notwithstanding the fact that the property manager
could not testify as to how they were generated. Id.
¶ 35 Likewise, in this case, Koenig and Constantino testified that they maintained the third-
party invoices and confirmed that they received the invoices on a regular basis by e-mail or
Internet portal during the ordinary course of Union Tank’s business. Koenig also identified the
relevant portions of the invoices, including the car number to which they corresponded and the
initials of the Union Tank employee approving them for payment. Under these circumstances,
the fact that there was no testimony regarding how the invoices were generated does not compel
a conclusion that no reasonable person would find the foundational requirements for the business
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records exception satisfied. This is particularly true since Union Tank relied on these invoices to
make payments to third parties.
¶ 36 Apa v. National Bank of Commerce, 374 Ill. App. 3d 1082 (2007), on which NuDevco
relies, is inapposite. There, we considered the admissibility of the plaintiff’s bank statements as
business records evidencing his lost income from the conversion of a bus he had purchased. Id. at
1084. We acknowledged that the business record need not be created by the party seeking to
introduce it in order to be admissible but held that the proponent of the record nevertheless
needed to satisfy Rule 236’s foundational requirements, namely that the record was made in the
regular course of business at or near the time of the occurrence. Id. at 1087-88. Finding that the
plaintiff failed to present evidence of “the circumstances of [the statements’] creation,” we held
that the trial court abused its discretion in admitting the bank statements. Id. at 1088.
¶ 37 Here, too, there was no evidence of the invoices’ creation. But unlike Apa, where the
plaintiff used the bank statements solely to establish his damages and did not introduce evidence
indicating that he relied on the bank statements in the course of his business, in this case, the
evidence established that Union Tank did rely on the accuracy of the invoices in that it made
payments based on them. This diminishes the concern that they are inaccurate or falsified, which
forms the basis of the general rule prohibiting hearsay evidence. Kimble, 358 Ill. App. 3d at 414.
¶ 38 We likewise reject NuDevco’s argument that the testimony regarding the fact that the
invoices were paid was inadmissible because Union Tank did not produce the Bank of America
payment confirmation statements. For this argument, NuDevco cites the best evidence rule,
which prefers the production of the original documentary evidence when the contents of that
document are sought to be proved. See Village Discount Outlet v. Department of Employment
Security, 384 Ill. App. 3d 522, 526 (2008). It is sufficient to note that the best evidence rule
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applies only when the contents or terms of a writing are at issue and must be proved. People v.
Davis, 2014 IL App (4th) 121040, ¶ 20 (citing People v. Pelc, 177 Ill. App. 3d 737, 742 (1988)).
Here, however, the issue was not the content of the payment confirmation, but whether the
payment was made. And the fact that a payment was made existed independent of any writing
confirming that payment. Accordingly, the best evidence rule is inapplicable. Continental Illinois
National Bank & Trust Co. of Chicago v. Eastern Illinois Water Co., 31 Ill. App. 3d 148, 159
(1975) (“The best evidence rule does not apply where a party seeks to prove a fact which has an
existence independent of any writing, even though the fact might have been reduced to, or is
evidenced by, a writing.”).
¶ 39 Because we find that the evidence regarding the invoices and their payment was properly
admitted, we reject NuDevco’s argument that it was error for the trial court to award damages
based on this evidence.
¶ 40 Having disposed of NuDevco’s arguments, we turn next to Union Tank’s cross appeal.
Initially, Union Tank challenges the trial court’s deduction of $10,000 from the attorney fees it
requested pursuant to the terms of the guaranty. We review an award of attorney fees for an
abuse of discretion. Timan v. Ourada, 2012 IL App (2d) 100834, ¶ 29.
¶ 41 After considering Union Tank’s fee petition, the trial court reduced the amount of
attorney fees Union Tank requested by $10,000 after finding that “some of the work” performed
by Union Tank’s counsel was duplicative. Union Tank points out that the court’s order referred
only to entries in November 2015, which amounted to $5917.50 in fees, less than the $10,000 the
trial court deducted. However, the trial court’s decision in no way suggested that the work it
found redundant, excessive, or otherwise unnecessary was limited to services rendered in
November. Indeed, in its response in opposition to Union Tank’s petition for fees, NuDevco
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pointed to $13,688.50 in excessive or duplicative fees, in January, February, and March 2016.
For example, time entries on February 2 and 3, 2016, reflect that two attorneys charged for
reviewing e-mails from each other. Similarly, entries in March 2016 reveal that multiple
attorneys billed Union Tank for reviewing the same draft complaint. The trial court’s order
supports the conclusion that it considered these other entries in finding $10,000 in fees to be
redundant or unnecessary, and we cannot say that the trial court’s decision to reduce the fee
award under these circumstances was an abuse of discretion.
¶ 42 Finally, Union Tank argues that the trial court should have awarded it the present value of
future rent under the leases through their expiration dates. As discussed supra ¶ 25, we review a
trial court’s decision on damages under a manifest weight of the evidence standard.
¶ 43 Because this argument turns heavily on the construction of the guaranty, we transcribe it
in full here:
“The Guarantor hereby guarantees, as principal and not as surety, absolutely,
irrevocably and unconditionally, the full and prompt payment when due of all of
the obligations, whether primary, secondary, direct, contingent, sole, joint, several
or joint and several, due under the Leases, including, but not limited to, rent,
service charges, freight, railroad charges, lessee responsible repairs and
maintenance, casualties, return obligations, cleaning charges, taxes and
governmental impositions, assessments, customs and duties, mandated
modification charges, fines, penalties and other charges, costs associated with
removal of liens and encumbrances, high mileage utilization and indemnity
obligations thereunder, together with all other sums which may or shall become
due and payable pursuant to the provisions of the Leases, including, without
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limitation, any damages resulting from the Lessee’s failure to perform its
obligations thereunder.”
Union Tank parses the guaranty into two subparts defining NuDevco’s responsibilities: first,
NuDevco guarantees prompt payment of all of the obligations due under the lease, and second, it
guarantees “all other sums which may or shall become due” pursuant to the lease terms,
including damages resulting from Associated Energy’s failure to perform its obligations under
the lease. According to Union Tank, it is this second clause (the “guaranty of damages”) that
entitles Union Tank to acceleration of rent based on the breach of the lease.
¶ 44 Damages for breach of contract are intended to place the nonbreaching party in the same
position as if the contract had been performed. Delatorre v. Safeway Insurance Co., 2013 IL App
(1st) 120852, ¶ 36. To that end, all damages foreseeably resulting from a breach are generally
recoverable. Midland Hotel Corp. v. Rueben H. Donnelley Corp., 118 Ill. 2d 306, 318 (1987).
However, as NuDevco correctly points out, Illinois common law does not recognize a present
obligation to pay future rent in the event of a breach of contract. Miner v. Fashion Enterprises,
Inc., 342 Ill. App. 3d 405, 416-17 (2013). For that reason, the failure to pay rent when it accrues
does not accelerate the unpaid rent absent a contractual provision to that effect. Id.
¶ 45 Neither the guaranty nor the lease says anything about rent acceleration in the event of
breach of the lease. Instead, the guaranty only provides that NuDevco guarantees “damages”
resulting from Associated Energy’s breach of the lease. Under the common law, damages for
breach of a lease do not include future rent (id.), thus precluding Union Tank from recovering
this amount.
¶ 46 In an attempt to avoid this conclusion, Union Tank relies on the UCC to support its
argument that it is entitled to the present value of future rent. But Union Tank previously argued
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that the UCC does not govern the guaranty, as it is a contract separate from its lease with
Associated Energy. It strains logic to conclude, as Union Tank urges, on the one hand, that the
UCC cannot limit Union Tank’s recovery, but on the other, its provisions can serve to increase
Union Tank’s damages award. Accordingly, having agreed with Union Tank that the UCC is
inapplicable to a cause of action alleging breach of the guaranty (supra ¶ 24), we conclude that
Union Tank cannot rely on the UCC to support its argument for rent acceleration, particularly
when the lease does not contain a rent acceleration clause.
¶ 47 We do not agree with Union Tank’s contention that this conclusion nullifies the guaranty
of damages clause. See Guterman Partners Energy, LLC v. Bridgeview Bank Group, 2018 IL
App (1st) 172196, ¶ 51 (courts should not interpret contract to nullify or render provisions
meaningless; all provisions in contract are presumed to have a purpose). The present value of
future rent is not the only “damage[ ] resulting from [Associated Energy’s] failure to perform its
obligations [under the lease].” The damages resulting from Associated Energy’s breach of the
lease also include the future storage costs. Contrary to Union Tank’s contention, these damages
are not encompassed under the guaranty of prompt payment clause, which allows Union Tank to
recover the accrued rent and the freight, railroad, and cleaning charges defined in the lease. Thus,
the two clauses of the guaranty—the guaranty of prompt payment and the guaranty of
damages—can be read in harmony without application of the UCC.
¶ 48 CONCLUSION
¶ 49 For the foregoing reasons, we affirm the trial court’s judgment in favor of Union Tank
and its award of damages for freight costs, cleaning costs, past due storage costs, future storage
costs, and past due rent but vacate the court’s award of damages for anticipated future blasting in
the amount of $109,930. With respect to Union Tank’s cross-appeal, we affirm the $10,000
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reduction in attorney fees and the judgment in favor of NuDevco on Union Tank’s request for an
award of the present value of future rent due under the leases.
¶ 50 Affirmed in part and vacated in part.
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