Genesco v. 33 North LaSalle Partners

THIRD DIVISION
MAY 28, 2008
Nos. 1-07-2782, 1-07-3076 consolidated
GENESCO, INC., ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Cook County.
)
v. ) No. 07 CH 12660
)
33 NORTH LASALLE PARTNERS, L.P., ) The Honorable
) Nancy J. Arnold,
Defendant-Appellee. ) Judge Presiding.
JUSTICE GREIMAN delivered the opinion of the court:
Plaintiff Genesco, Inc., appeals from the order of the circuit court granting summary
judgment in favor of defendant 33 North LaSalle Partners, L.P. In so doing, the circuit court
determined that plaintiff failed to comply with the terms of the parties’ lease termination option
and further concluded that plaintiff was not entitled to equitable relief. On appeal, plaintiff
contends that, despite its failure to strictly comply with the lease termination requirements, the
circuit court erred in failing to grant equitable relief where plaintiff gave timely, oral notice;
plaintiff’s noncompliance was trivial and not intentional; plaintiff will suffer undue hardship as a
result of the court’s order; and defendant has not suffered harm as a result of plaintiff’s
noncompliance.
The underlying facts are not in dispute. In June 2004, plaintiff entered into a sublease,
which expired on February 28, 2008, with Credit Suisse First Boston, USA, Inc. (Credit Suisse),
for retail space located at 33 North LaSalle Street, Chicago, Illinois. At that time, the retail and
office building housing the space at issue was owned by Thirty-Three Associates, LLC
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(Associates). Accordingly, the sublease defined Credit Suisse as plaintiff’s "Landlord” and
Associates as plaintiff’s "Overlandlord.”
Simultaneous therewith, plaintiff entered a prospective six-year lease with Associates
commencing upon the expiration of the sublease. According to its terms, plaintiff was required
to operate a Johnston & Murphy men’s shoe store and was prohibited from assigning or
subletting the space without prior written consent from the landlord. The "Landlord,” however,
could not unreasonably withhold, delay or condition its consent to assign or sublet, so long as the
intended use of the space remained a "high-end, full price” retail establishment, excluding food
and clothing stores and travel agencies. The base rent for the life of the lease totaled
approximately $800,000.
The lease further provided plaintiff with an option to terminate, the subject of which
forms the basis of this appeal. In order to exercise the termination option, plaintiff was required
to provide written notice to the "Landlord” no later than February 28, 2007 and simultaneously
pay $7,500 of the $30,000 termination fee, "time being of the essence.” In a separate provision,
the lease detailed the notice requirements, such that notice would be "deemed given and
delivered, whether or not received, on the date when personally delivered by overnight courier
service *** or two days following the date when deposited in the United States Mail *** and
properly addressed”as instructed, "To Landord: c/o Golub & Company, Suite 2000, 625 North
Michigan Avenue, Chicago, Illinois 60611, Attention: Vice President/Commercial Properties, or
such other address as Landlord shall designate by written notice.”
Plaintiff additionally entered an agreement with Credit Suisse and Associates regarding
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the sublease. This related agreement expressly provided Associates’ consent for the sublease and
referenced plaintiff and Associates’ prospective lease. In addition, the related agreement noted
that plaintiff could exercise a termination option provided it gave written notice to the
"Landlord,” where "Landlord” was not defined.
According to defendant, on July 30, 2004, it purchased 33 North LaSalle building and
succeeded Associates as landlord under the lease. Defendant, however, did not notify plaintiff of
its succession in interest before February 27, 2008, the closing date of plaintiff’s termination
option. As a result, defendant agreed, by way of stipulation, that it would not argue that notice
sent to Associates was defective.
In late January 2007, plaintiff’s agent and defendant’s agent attempted to renegotiate the
base rent rate. At that time, plaintiff’s agent orally informed defendant’s agent that plaintiff
would exercise its termination option if the negotiations proved unsuccessful. Then, on February
27, 2007, plaintiff’s agent orally notified defendant’s agent that plaintiff wished to exercise the
termination option and that written notice indicating such along with the termination fee was
forthcoming. On February 27, 2007, plaintiff erroneously sent notice and a check for $7,500 to
Credit Suisse and copied the notice to Associates, care of Golub & Company, at 625 N. Michigan
Avenue, Suite 200 instead of Suite 2000. On March 7, 2007, Credit Suisse returned the check
and, in response, plaintiff contacted Golub & Company to determine where to direct the
termination fee and to obtain a W-9 tax form. Plaintiff subsequently received a W-9 tax form via
facsimile from Mainland Properties and therefore issued a second check payable to both
Associates and Mainland Properties at the corresponding address on the facsimile. Associates
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later returned the check. As a result, plaintiff filed a claim for declaratory judgment and both
parties filed cross-motions for summary judgment. This timely appeal follows the circuit court’s
order granting summary judgment in favor of defendant.
Summary judgment should be granted only if the pleadings, depositions, admissions and
affidavits, construed liberally and in favor of the nonmoving party, demonstrate that no genuine
issue of material fact exists and that the moving party is entitled to judgment as a matter of law.
735 ILCS 5/2-1005(c) (West 2006); Thomson Learning, Inc. v. Olympia Properties, LLC, 365 Ill.
App. 3d 621, 626 (2006). We review the trial court’s legal decisions de novo. Thomson
Learning, Inc., 365 Ill. App. 3d at 627. However, to the extent that the trial court exercised its
discretion in determining that equitable relief was not proper, we believe that the trial court’s
decision is entitled to deference and will consider it for an abuse of discretion. See Seymour v.
Harris Trust & Savings Bank of Chicago, 264 Ill. App. 3d 583, 595, 604 (1994) (although the
court reviewed de novo the trial court’s order granting summary judgment, the issue of whether
the trial court properly exercised its equitable powers in deciding whether to grant injunctive
relief was reviewed for an abuse of discretion); see also Krusinksi Construction Co. v.
Northbrook Property & Casualty Insurance Co., 326 Ill. App. 3d 210, 218 (2001) (whether to
grant apportionment was an equity matter to be reviewed for an abuse of discretion).
In a seminal decision, the supreme court announced the general rule that a lessee must
strictly comply with the terms of an option to extend a lease. Dikeman v. Sunday Creek Coal
Co., 184 Ill. 546, 550-51 (1900). Over 100 years ago, the Dikeman court stated:
"In a court of law the time for the performance of an act is as essential as any other part of
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the contract. The time passed, and, not having been waived, the option was lost, so that
there could be no defense made in the action at law. Equity maintains a somewhat
different rule, - that time is not necessarily of the essence of a contract; and if it is not of
the essence of an agreement, and a party has acted in good faith in a meritorious cause,
equity may grant relief. Parties have a right, however, to make their own contracts, and,
if they intend that time shall be of the essence of the contract, either by the express form
of their agreement or because the subject matter makes it so, a court of equity will treat it
as of the essence and hold the parties to their agreement. A court of equity is bound by a
contract as the parties have made it, and has no authority to substitute for it another and
different agreement, and particular language is not necessary to make the time of
performance essential, if right and justice in the individual case demand it. An agreement
must be complied with as made unless some stipulation is waived or there is a just excuse
for non-compliance.” Dikeman, 184 Ill. at 550-51.
Courts have since additionally applied that general rule to require strict compliance with
an option to terminate a lease. See Thomson Learning, Inc., 365 Ill. App. 3d at 627; see also
Gold Standard Enterprises, Inc. v. United Investors Management Co., 182 Ill. App. 3d 840, 844
(1989). The rationale behind the rule is that a lessee should be strictly held to the agreed-upon
terms of the parties’ contract where the parties to commercial leases are generally sophisticated
and the lessor typically receives no consideration for agreeing to the option. Thomson Learning,
Inc., 365 Ill. App. 3d at 629-30; Linn Corp. v. LaSalle National Bank, 98 Ill. App. 3d 480, 484
(1981).
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In the case at bar, there is no question that plaintiff failed to strictly comply with the
termination option. In order to exercise that option, plaintiff was required to mail its written
notice to the designated landlord along with a portion of the termination fee at least two days
prior to February 28, 2007. Plaintiff concedes that written notice was not mailed until February
27, 2007 and the termination fee was improperly executed. The parties’ termination option
expressly provided that time was of the essence and courts are bound to interpret the contract as
written. See Dikeman, 184 Ill. at 550-51. Accordingly, plaintiff failed to exercise the
termination option.
Plaintiff, however, contends that its failure should be excused where it provided timely,
oral notice of its intent to exercise the termination option. According to plaintiff, because its
agent verbally notified defendant’s agent of its intent one day prior to the date written notice was
due, it substantively complied with the notice requirement. We decline plaintiff’s invitation to
adopt a per se actual notice rule and find no reason to treat cancellation options different than
extension options; instead, we agree with the trial court and the Thomson Learning, Inc. court
that actual, verbal notice "is just another way of highlighting Tenant’s failure to strictly comply
with the Cancellation Option.” Thomson Learning, Inc., 365 Ill. App. 3d at 633; cf. Vole, Inc. v.
Georgacopoulos, 181 Ill. App. 3d 1012, 1019 (1989) (where court held that, in the context of a
lease violation, timely written notice was sufficient despite a technical error that it was not sent
via registered mail).
Nevertheless, plaintiff contends that this court should exercise its equitable powers to
excuse plaintiff’s noncompliance based on the fact that plaintiff provided actual, oral notice; its
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mistake was trivial; its noncompliance was not intentional, but rather negligent; it will suffer
serious harm if not excused from the lease; and defendant was not harmed by plaintiff’s
noncompliance.
As previously stated, the supreme court in Dikeman explained that "[a]n agreement must
be complied with as made unless some stipulation is waived or there is just excuse for non-
compliance.” Dikeman, 184 Ill. at 551. A number of courts have since interpreted Dikeman to
mean that a court may exercise its equitable powers to excuse strict performance of an extension
or termination option. We are troubled by the fact that these cases extending and applying the
narrow, express language offered in Dikeman offer no basis in law upon which courts are
purportedly empowered with a blanket ability to provide equitable relief. See Gold Standard
Enterprises, Inc., 182 Ill. App. 3d at 845 (relying on Dikeman and a concoction of secondary
sources, namely, 30 C.J.S. Equity 546 (1965); 3 J. Pomeroy, Equity Jurisprudence §§823, 824
(5th ed. 1941); and 7 Ill. L. & Prac. Chancery §55 (1954), to support the proposition that equity
may relieve strict performance where failure to comply is an "accident”); Ceres Terminals Inc. v.
Chicago City Bank & Trust Co., 117 Ill. App. 3d 399, 405 (1983) (comparing the facts of that
case to those in Dikeman and Linn Corp. to presumptively determine that the plaintiff had "not
established the degree of special circumstances necessary to warrant equitable relief”);
Providence Insurance Co. v. La Salle National Bank, 118 Ill. App. 3d 720, 723-24 (1983) (solely
relying on Linn Corp. and Dikeman to presumptively conclude that, where the facts were "even
stronger” than Linn Corp., the court could excuse strict performance); Linn Corp., 98 Ill. App. 3d
at 483-84 (distinguishing Dikeman and finding support in cases outside the jurisdiction to
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presumptively conclude that a court could exercise "its equitable powers” to excuse strict
compliance). These cases provide an unsupported theory of equitable power and, relying
thereupon, plaintiff conclusively states that we have the inherent authority to grant relief when it
is "fair and just.” None of these cases, however, recognize that Dikeman, sitting at a time when
courts of equity existed, stated that equitable relief may only be granted where time is not of the
essence in the agreement and "a party has acted in good faith in a meritorious cause.” Dikeman,
184 Ill. at 550. Therefore, even assuming, arguendo, we had the power to grant equitable relief
in any and all cases, according to Dikeman, the instant case would not be afforded such relief
where the parties’ termination option clearly stated that time was of the essence. Moreover, the
instant case suffers from the same malady as that dismissed by the court in Dikeman, in that:
"[t]here was no fraud, accident, or mistake on account of which complainant neglected to
avail itself of the option, and it assigns no explanation or excuse for the delay except the
negligence of its own agent. It 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.
Notwithstanding, the only case cited which provides recognizable support for the ability
to grant equitable relief and a test for when equitable relief is proper is Thomson Learning, Inc.
In Thomson Learning, Inc., the Second District provided:
"To be entitled to equitable relief, a lessee that fails to strictly comply with an option to
cancel or extend a commercial lease must at a minimum establish: (1) the delay in
strictly complying was slight; (2) the lessee would suffer undue hardship if strict
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compliance were not excused; and (3) the lessor would not suffer prejudice if strict
compliance were excused.” Thomson Learning, Inc., 365 Ill. App. 3d at 633, citing 1 J.
Perillo, Corbin on Contracts §2.15, at 203 (rev. ed. 1993).
Consequently, despite our concerns, we analyze whether the trial court may have provided
"equitable relief” for plaintiff’s failure to strictly comply with the terms of the termination
provision pursuant to the Thomson Learning, Inc. test.
Primarily, we conclude that plaintiff’s errors do not rise to the level of "just excuse” as
initially stated in Dikeman and applied in various forms in its progeny. Unlike the lessees in
Providence Insurance Co. and Gold Standard, the instant plaintiff cannot demonstrate that its
noncompliance resulted from its minor carelessness or negligence in combination with that of
another. In Providence Insurance Co., the lessee mailed the requisite written notice two days
prior to the final option date, which fell on a Saturday, yet the lessor did not actually pick up the
notice from the post office until the following Monday. 1 Providence Insurance Co., 118 Ill. App.
3d at 722. There, the trial court excused the lessee’s strict noncompliance on the basis that there
was no way to know the precise day on which the notice was deposited in the lessor’s post office
box and the one-day delay did not harm the lessor in any manner. Providence Insurance Co., 118
Ill. App. 3d at 723-24.
Morever, in Gold Standard, the lessee mailed the requisite notice several days prior to the
due date and it was delivered the next day; however, the postage affixed by the lessee was
1
The lease provided that service was considered complete five days after mailing or upon
receipt, whichever was earlier. Providence Insurance Co., 118 Ill. App. 3d at 722.
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insufficient and thus the lessor never formally received the notice. Gold Standard, 182 Ill. App.
3d at 845-46. The Gold Standard court excused the lessee’s noncompliance as an accident on the
basis that the lessee had sent previous letters with the same postage and they were received
without incident. Gold Standard, 182 Ill. App. 3d at 846 (in making its determination, the court
additionally considered the fact that the lessor was not harmed by the delay).
Contrarily, in the case at bar, plaintiff solely made a series of errors resulting in the initial
delay, which were then exacerbated in its attempted cure. More specifically, plaintiff’s agent
failed to contact its legal advisors in executing the termination option and compounded that error
by failing to read the parties’ lease. Instead, resting on unrelated experience, plaintiff’s agent
mailed the notice one day prior to its due date, instead of two days prior as required by the agreed
terms of the lease. Moreover, plaintiff’s agent mailed the notice and executed the lease
termination fee to the landlord under the sublease as opposed to the landlord named in the
parties’ lease. Plaintiff attempts to justify this error by averring that a copy of the notice was sent
to defendant’s predecessor in interest, Associates, and that its agent was confused regarding the
appropriate landlord because of the language in the parties’ related agreement referencing the
termination option in the lease. We are not persuaded. The fact remains that plaintiff was
exercising an option under the lease; therefore, any confusion regarding the appropriate steps
necessary to exercise that option should have been resolved by consulting the actual lease, which
plaintiff’s agent admittedly did not do despite the fact that she directly quoted the language of the
lease’s termination option in the prepared notice.
Further compounding its errors, when Credit Suisse returned plaintiff’s check for the
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termination fee, plaintiff’s agent contacted defendant’s property manager at a different location to
ascertain the appropriate name and address of the landlord. The property manager subsequently
sent plaintiff a requested tax document via facsimile and plaintiff assumed that the corresponding
address was the appropriate landlord. Again we cannot excuse plaintiff’s failure to consult the
actual lease to resolve any confusion. Accordingly, although defendant was given oral notice
within the prescribed time period, plaintiff has not demonstrated that its subsequent carelessness
or negligence in attempting to comply with the terms of the lease should be justly excused.
Plaintiff further argues that this court should equitably excuse its noncompliance because
it will suffer undue hardship if the lease remains in effect. Primarily, plaintiff attempts to
convince this court that it will suffer losses of over $1 million if the lease is not forfeited. Simply
stated, plaintiff is incorrect because, to endure such a loss, plaintiff would be required to lease the
premises at issue for the life of the lease and presumes that plaintiff would continue to operate
the store with the expected earnings’ loss. Plaintiff, however, fails to acknowledge the fact that it
could breach the lease and abandon the store, thereby forcing defendant to mitigate its damages.
See 735 ILCS 5/9-213.1 (West 2006). In that situation, plaintiff’s potential loss could not exceed
the balance of the agreed rent for the lease, namely, approximately $800,000.
Still more appealing, plaintiff could attempt to sublease or assign the lease to another
party so long as it complied with the relevant terms of the lease, namely, finding a high-end,
nonfood, nonclothing or nontravel agent retail tenant. Plaintiff’s attempt to argue that a
subtenant or assignee would be required to operate a Johnston & Murphy shoe store is plainly
inaccurate where the terms of the lease require plaintiff to operate that business, yet provides
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parameters for potential subtenants or assignees.
We are further not convinced by plaintiff’s argument that no action would eliminate its
undue hardship because the rent for the leased space was well above market. Plaintiff is a
sophisticated commercial retail lessee that negotiated and agreed with the terms of the lease. The
fact that it gambled on the market and entered the lease four years prior to its commencement is
not a basis upon which we will grant equitable relief simply because plaintiff lost its gamble.
Plaintiff’s purported hardship is distinguishable from the “special circumstances”
resulting in equitable relief in Linn. In granting relief despite the lessee’s failure to strictly
comply with the terms of a renewal option, the Linn court heavily relied on the fact that the lease
required the lessee to make substantial improvements to the subject property in exchange for the
option. Linn, 98 Ill. App. 3d at 483-84. The Linn court distinguished its facts from those in
Dikeman on the basis that they did “not present the kind of case in which the option to renew
[was] merely a privilege with no corresponding right or privilege of the lessor.” Linn, 98 Ill.
App. 3d at 484. Rather, the lessors in Linn “allegedly received an extremely valuable
consideration for granting the options - the right to have the improvements made and the right to
keep all such improvements at the conclusion of the lease term or any extension thereof.” Linn,
98 Ill. App. 3d at 484.
In the case at bar, plaintiff cannot demonstrate that it will suffer undue hardship as a
result of “valuable consideration” given to defendant in exchange for providing the termination
option. We are not persuaded by plaintiff’s attempt to compare the $30,000 termination fee
required under the parties’ lease to the $200,000 in property improvements made by the lessee in
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Linn. In addition to the fact that the termination fee does not equate to “valuable consideration”
in our opinion, the situations are vastly different in that the instant plaintiff was charged that fee
presumably for the convenience of opting out of a six-year lease and requiring defendant to take
all the necessary steps to find a tenant to fulfill that vacancy, whereas the lessee in Linn was
required to make substantial improvements to the leased space while only benefitting from those
improvements for approximately two years. Linn, 98 Ill. App. 3d at 484. Instead, the instant
case more closely resembles the facts of Ceres Terminals, Inc., where the court concluded that
any losses suffered by the lessee represented “nothing more than normal business costs which
could be alleged as losses by any lessee who has failed to exercise properly a lease option.”
Ceres Terminals, Inc., 117 Ill. App. 3d at 405. Accordingly, we conclude that plaintiff failed to
establish that it should be equitably excused from failing to strictly comply with the terms of the
termination option because it will endure undue hardship.
Finally, we are not persuaded by plaintiff’s argument that equitable relief is proper where
defendant did not suffer harm as a result of the delayed notice. Based on the fact that defendant
has not established just excuse or undue hardship, we need not consider whether defendant
would suffer prejudice if we provided equitable relief. Thomson Learning, Inc., 365 Ill. App. 3d
at 633 (a lessee must minimally establish all three requirements to be entitled to equitable relief).
Rather, “it is plaintiff’s burden to establish the degree of special circumstances necessary to
invoke the equitable powers of the court before any balancing of equities occurs.” Ceres
Terminals, Inc., 117 Ill. App. 3d at 406.
Accordingly, we affirm the judgment of the circuit court of Cook County.
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Affirmed.
QUINN, P.J. concurs.
THEIS, J. specially concurs.
JUSTICE THEIS, specially concurring:
In this case, the majority finds that equity should not excuse plaintiff from strict
compliance with the terms of the termination option of its lease. I agree with the majority=s
reasoning and holding, but write separately to explain the equitable relief that plaintiff requests. I
will also explain why these equitable principles do not aid plaintiff in this case.
It is well settled that a court may exercise its equitable powers to relieve a party of strict
compliance with the requirements of exercising an option in a lease agreement where there has
been an unavoidable accident, fraud, surprise, or mistake. 2 J. Pomeroy, Equity Jurisprudence
'451, at 283; '453b, at 296-97 (5th ed. 1941); F.B. Fountain Co. v. Stein, 97 Conn. 619, 624,
118 A. 47, 49 (1922); see also Dikeman v. Sunday Creek Coal Co., 184 Ill. 546, 551, 56
N.E.864, 865 (1900). For example, a court would exercise its equitable powers to relieve strict
compliance where a party has made an honest effort to comply with the requirements of a
contract and there was a miscarriage of the mail. See 2 J. Pomeroy, Equity Jurisprudence '453,
at 292 (5th ed. 1941) (discussing mistake and accident in the context of forfeitures arising from
the failure to pay rent); see also Gold Standard Enterprises, Inc. v. United Investors Management
Co., 182 Ill. App. 3d 840, 845-46, 538 N.E.2d 636, 639-40 (1989) (post office failed to deliver
letter because, unbeknownst to party mailing letter to exercise option, it lacked sufficient
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postage); Providence Insurance Co. v. La Salle National Bank, 118 Ill. App. 3d 720, 723, 455
N.E.2d 238, 240-41 (1983) (although letter may have been in lessor=s post office box on the
Saturday due date, the lessor did not pick up the letter from the post office box until Monday,
which was first business day following the due date).
It is also well-settled that a court will not exercise its equitable powers to relieve a party
of gross or willful negligence in failing to timely and properly exercise an option to renew or
terminate a lease. 2 J. Pomeroy, Equity Jurisprudence '453b, at 296-97 (5th ed. 1941); F.B.
Fountain, 97 Conn. at 624, 118 A. at 49. However, jurisdictions across the country are split over
whether a court may exercise its equitable powers to relieve a party=s mere carelessness,
forgetfulness, or ordinary negligence in failing to properly exercise an option. Thomson
Learning, Inc. v. Olympia Properties, LLC, 365 Ill. App. 3d 621, 633 n.4, 850 N.E.2d 314, 325
n.4 (2006) (and cases cited therein); Andrews v. Blake, 205 Ariz. 236, 244-45, 69 P.3d 7, 15-16
nn 4-5 (2003) (and cases cited therein).
More than 100 years ago, in Dikeman v. Sunday Creek Coal Co., 184 Ill. 546, 551, 56
N.E.864, 865 (1900), our supreme court held that a court must enforce an agreement as written
unless Asome stipulation [has been] waived or there is a just excuse for non-compliance.@ The
court then went on to explain that in that case, there was no Afraud, accident or mistake on
account of which complainant neglected to avail itself of the option, and it assign[ed] no
explanation or excuse for the delay except the negligence of its own agent.@ Dikeman, 184 Ill. at
551, 56 N.E.2d at 865. Absent a Ajust excuse@ such as Afraud, accident, or mistake,@ the court
thus declined to exercise its equitable powers to Arelieve against mere forgetfulness.@ Dikeman,
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184 Ill. at 551, 56 N.E.2d at 865; see also Moore v. Kriebel, 742 So. 2d 139, 145-46 (Miss. App.
1999) (interpreting and relying upon Dikeman to reach this same holding). Thus, Illinois sided
with those jurisdictions maintaining that equity will never relieve Amere negligence as by
forgetfulness@ in failing to timely and properly exercise an option in a lease agreement. See F.B.
Fountain, 97 Conn. at 625, 118 A. at 49; see also Thomson Learning, 365 Ill. App. 3d at 633 n.4,
850 N.E.2d at 325 n.4 (and cases cited therein).
However, numerous other jurisdictions have relied on the equitable maxim that Aequity
abhors forfeiture@ to reach a different result. 15 R. Lord, Williston on Contracts '46.11, at 437-
38 (4th ed. 2000); see also Andrews, 205 Ariz. at 244-45, 69 P.3d at 16 n.4 (citing cases from
jurisdictions allowing equitable interventions for negligent or inadvertent failures to strictly
comply with the terms of an option). The rationale behind this position is that equity abhors
forfeiture so much so that equity would allow a party time beyond the time established by a
contract to perform in order to save that party from an egregious forfeiture. 15 R. Lord, Williston
on Contracts '46.11, at 437-38 (4th ed. 2000). However, not all potential forfeitures warrant
equitable relief. 15 R. Lord, Williston on Contracts '46.11, at 439-41 (4th ed. 2000). To
determine what degree of forfeiture would prompt a court to equitably intervene, the court must
weigh the delay and culpability of the delaying party against the degree of the potential forfeiture.
15 R. Lord, Williston on Contracts '46.11, at 440-41 (4th ed. 2000). Where there has been no
forfeiture, equity may also act to prevent another unconscionable result. 1 J. Perillo, Corbin on
Contracts '2.15, at 202 (1993).
Courts across the country have applied a three-part test to determine when equity should
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relieve strict compliance in order to prevent a forfeiture or other unconscionable result. 15 R.
Lord, Williston on Contracts '46.12, at 461-62 (4th ed. 2000); 1 J. Perillo, Corbin on Contracts
'2.15, at 203 (1993). According to Corbin on Contracts, strict compliance with the terms of the
option may be excused where: (1) the delay in notice was slight; (2) the delay did not prejudice
the other party by a change in position; and (3) the failure to grant relief would result in such
hardship as to make literal enforcement of the renewal provision unconscionable. 1 J. Perillo,
Corbin on Contracts '2.15, at 203 (1993). The Corbin test was first articulated in F.B. Fountain,
97 Conn. At 627, 118 A. at 50. The court in F.B. Fountain explained that this test applied where
a party was neglectful, but not willfully or grossly negligent. F.B. Fountain, 97 Conn. at 627, 118
A. at 50. Further, the court in F.B. Fountain explained that the three-part test does not apply
where an independent ground for equity to relieve a party of strict compliance exists, such as
accident, fraud, surprise, or mistake Afree from culpable negligence.@ F.B. Fountain, 97 Conn. at
626, 118 A. at 49-50.
Other variations of this three-part test also exist. The Second District of this court in
Thomson Learing applied a variation of the Corbin test, which the majority applies here.
Thomson Learning, 365 Ill. App. 3d at 633, 850 N.E.2d at 324. Williston on Contracts
articulates yet another version of the test, under which the late exercise of an option may be
excused where: (1) the failure is caused by inadvertence or oversight; (2) the other party has not
substantially changed position in reliance on the failure to timely exercise the option; and (3) the
application of the general rule that time is of the essence would work an unconscionable result or
a forfeiture. 15 R. Lord, Williston on Contracts '46.12, at 461-62 (4th ed. 2000).
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Although our supreme court has never overruled its holding in Dikeman, this court in
Linn Corp. v. LaSalle National Bank, 98 Ill. App. 3d 480, 424 N.E.2d 676 (1981), reversed the
grant of a motion to dismiss, finding that the circuit court could exercise its equitable powers to
relieve a party=s negligent failure to properly exercise an option based on the factors in the three-
part test. There, the court found that strict compliance with a one-year written notice to renew
requirement could be excused where strict enforcement would have resulted in the forfeiture of
some $200,000 worth of improvements to a premises and where the failure to exercise strict
compliance did not cause the lessor any undue hardship because the lessee had orally notified the
lessor of the intention to renew before the deadline. Linn, 98 Ill. App. 3d at 484, 424 N.E.2d at
679. In so holding, the Linn court erroneously cited Dikeman for the proposition that it could
simply excuse strict compliance with the terms of an option where Aright and justice@ so require.
Linn, 98 Ill. App. 3d at 483, 424 N.E.2d at 678. The Linn court failed to recognize that what
Dikeman considered to be Ajust excuse for noncompliance@ included only fraud, accident, or non-
negligent mistake, which are traditional grounds for equitable intervention. Dikeman, 184 Ill. at
551, 56 N.E. at 865; F.B. Fountain, 97 Conn. at 624, 118 A. at 49; see also 2 J. Pomeroy, Equity
Jurisprudence '453b, at 296 (5th ed. 1941).
Since Linn, the Illinois Appellate Court has continued to use the three-part test in
determining whether to excuse strict compliance with the terms of an option. See, e.g., Thomson
Learning, 365 Ill. App. 3d at 633, 850 N.E.2d at 324; Ceres Terminals, Inc. v. Chicago City Bank
& Trust Co., 117 Ill. App. 3d 399, 404-05, 453 N.E.2d 735, 738 (1983); see also Providence
Insurance, 118 Ill. App. 3d at 723, 455 N.E.2d at 240 (not applying the three-part test, but citing
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Linn for the proposition that strict compliance may be excused under Aproper circumstances@
even where the failure to provide the stipulated notice is due solely to the lessee=s negligence).
There has been no Illinois Supreme Court decision on this point since Dikeman. Thus, 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.
Here, plaintiff concedes that it negligently failed to properly exercise its option to
terminate the lease in question. Further, plaintiff has not asserted a traditional grounds for
equitable relief, such as fraud, mistake, duress, or accident. Therefore, because Dikeman is still
the law, the court should not excuse plaintiff=s negligent noncompliance.
However, even if the three-part test were adopted, I would reach the same conclusion.
Under either the Williston or Corbin version of the three-part test, it is clear that there must be a
risk of forfeiture or other unconscionable result before the court will relieve a party of strict
compliance. 15 R. Lord, Williston on Contracts '46.12, at 461-62 (4th ed. 2000); 1 J. Perillo,
Corbin on Contracts '2.15, at 203 (1993). Consistent with this requirement, this court in Ceres
Terminals, 117 Ill. App. 3d at 405, 453 N.E.2d at 738, did not excuse a party=s failure to timely
exercise an option where that party would have suffered nothing more than normal business costs
as a result of its failure.
Here, plaintiff has not claimed that it will suffer a forfeiture or other unconscionable
result if strict compliance were not excused. Rather, as in Ceres Terminals, plaintiff will only
suffer the normal business costs that would be suffered by any lessee that has failed to properly
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exercise a lease option. See Ceres Terminals, 117 Ill. App. 3d at 405, 453 N.E.2d at 739.
Therefore, under either the Williston or Corbin version of the three-part test, plaintiff should not
be relieved of strict compliance with the requirements of the option contract. Accordingly, I
agree with the majority=s conclusion affirming the judgment of the circuit court.
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