Wendy and William Spatz Charitable Foundation v. 2263 North Lincoln Corporation

ILLINOIS OFFICIAL REPORTS
Appellate Court
Wendy & William Spatz Charitable Foundation v. 2263 North Lincoln Corp.,
2013 IL App (1st) 122076
Appellate Court WENDY AND WILLIAM SPATZ CHARITABLE FOUNDATION,
Caption Plaintiff-Appellee and Cross-Appellant, v. 2263 NORTH LINCOLN
CORPORATION, BOBBY BURLESON and KEVIN KILLERMAN,
Defendants-Appellants and Cross-Appellees.
District & No. First District, Fifth Division
Docket No. 1-12-2076
Rule 23 Order filed September 6, 2013
Rule 23 Order
withdrawn October 7, 2013
Opinion filed October 11, 2013
Held In a forcible entry and detainer action, the trial court properly entered a
(Note: This syllabus judgment granting possession to plaintiff, an entity which purchased the
constitutes no part of property shortly before defendants’ lease expired, notwithstanding
the opinion of the court defendants’ contention that they had exercised their option to purchase
but has been prepared the property from the prior owner and could not be evicted, since the
by the Reporter of record did not support defendants’ claim, but the cause was remanded for
Decisions for the further proceedings on plaintiff’s petition for attorney fees.
convenience of the
reader.)
Decision Under Appeal from the Circuit Court of Cook County, No. 09-M1-715937; the
Review Hon. Sheldon Garber, Judge, presiding.
Judgment Affirmed in part and remanded in part.
Counsel on Michael Pomerantz, Andrew Jacobson, Josh Goldberg, and Stephanie
Appeal Grelewicz, all of Brown, Udell, Pomerantz & Delrahim, Ltd., of Chicago,
for appellants.
Alisa Levin, of Law Office of Alisa Levin, of Chicago, for appellee.
Panel JUSTICE TAYLOR delivered the judgment of the court, with opinion.
Justices McBride and Howse concurred in the judgment and opinion.
OPINION
¶1 Defendants 2263 North Lincoln Corporation (Lincoln), Bobby Burleson and Kevin
Killerman appeal from a judgment of the circuit court of Cook County in a forcible entry and
detainer action, granting possession of real property with the common address of 2257-2263
North Lincoln Avenue, Chicago, Illinois (the property), in favor of plaintiff the Wendy and
William Spatz Charitable Foundation (Spatz), which had acquired that property before
defendants’ lease expired. Defendants contend that the court erred in awarding possession
to Spatz because before Spatz acquired the property, Lincoln had exercised its option to
purchase the property from its prior owner, Victory Gardens Theater (VGT), and therefore,
could not be evicted. On cross-appeal from the order, plaintiff contends that while the trial
court properly awarded attorney fees to Spatz pursuant to the lease with defendants, it
improperly reduced the amount of fees. Plaintiff further contends that the trial court erred in
denying its holdover claim against defendant, in which plaintiff sought double rent for the
time defendants occupied the property after the lease expired.
¶2 BACKGROUND
¶3 The dispute in this case arose from an action of forcible entry and detainer filed by Spatz,
the current owner of the property, against Lincoln, a tenant pursuant to a lease that expired
by its own terms on May 31, 2009. On July 6, 2009, plaintiff filed its action against Lincoln
and its principals, Burleson and Killerman, who were also guarantors under the lease. In that
complaint, Spatz sought possession of the property as well as rent and damages for
defendants’ allegedly unlawful withholding of the premises since June 20, 2009.
¶4 Spatz subsequently filed its first amended complaint, in which it explained that the
property is a mixed-use restaurant and theater building, and that defendants occupied a
3,300-square-foot portion of that property utilized as a bar or restaurant. Plaintiff further
stated that defendants occupied the property pursuant to a lease entered into in 1994 with
-2-
plaintiff’s predecessors in interest, VGT and Community Arts Foundation (CAF), which later
transferred its interest to VGT. Spatz acknowledged that the lease provided that VGT would
offer to sell the property to Lincoln first before “generally” offering it for sale. Plaintiff
alleged, however, that although the property was never offered for sale “generally,” VGT
nevertheless made a written offer to sell it to Lincoln before selling it to Spatz. According
to plaintiff, while Lincoln responded that it intended to purchase the property, it did not take
any further steps to consummate the purchase and did not tender a contract to VGT and,
consequently, no closing ever took place. Since no sale was closed between VGT and
Lincoln within 90 days after the offer was extended to Lincoln, VGT was then permitted to
sell the property to another party under the terms of the lease, and at that time, VGT sold the
property to Spatz, which took over ownership of the property in August 2008. Plaintiff
further alleged that since Lincoln never renewed its lease, it sent Lincoln a 30-day notice on
May 19, 2009, notifying Lincoln that its lease was to expire on May 31, 2009. Despite the
notice, Lincoln failed to vacate the property upon the expiration of the lease or within 30
days of receipt of the notice. Based on those allegations, plaintiff sought, in count I of the
complaint, possession of the property, as well as rent and damages from defendants for
Lincoln’s unlawful withholding of possession of said property. In count II, plaintiff sought
holdover tenancy, pursuant to section 9-202 of the Illinois Code of Civil Procedure (Code)
(735 ILCS 5/9-202 (West 2008)), which allows a landlord to recover double the yearly rent
from a tenant who willfully holds over the property after the expiration of the lease and after
the landlord sends written notice to such tenant.
¶5 Attached to plaintiff’s first amended complaint was a copy of the lease agreement, which
provided, in paragraph 28:
“Prior to offering the Property for sale generally, [VGT] will offer to sell the Property
to [Lincoln] by written notice to [Lincoln] (the Offer Notice). The Offer Notice shall
specify an all cash purchase price [VGT] is prepared to accept for the Property (the
Offered Price), in ‘as is’ condition. [Lincoln] shall have ninety (90) days following
receipt of the Offer Notice to elect, by written notice to [VGT], either (i) to purchase the
Property at the Offered Price, or (ii) to permit [VGT] to sell the Property and thereafter
have the option to terminate this [l]lease ***. If [Lincoln] fails to timely notify [VGT]
of its election [to purchase], [Lincoln] shall be conclusively deemed to have elected to
permit [VGT] to sell the Property ***.
If [Lincoln] elects to purchase the Property at the Offered Price ***, then (i)
[Lincoln] shall purchase the Property in ‘as is’ condition, [and] (ii) a closing of the
purchase and sale shall occur ninety (90) days after [Lincoln] elects to purchase.”
¶6 We note that while the parties throughout the proceedings refer to the provisions under
paragraph 28 as a “purchase option,” “right of first refusal,” and “right of first offer,” they
do not appear to dispute that once that right was triggered, the landlord was obligated to
inform the tenant of its intention to sell the property at a certain price and the tenant would
then have the opportunity to purchase it at that price.
¶7 Also attached to the complaint was plaintiff’s 30-day notice to Lincoln, which stated that
its tenancy at the property would be terminated on May 31, 2009, or after 30 days of service
-3-
of the notice, at which time Lincoln was to vacate the premises. As alleged in the complaint,
the notice was issued on May 19, 2009.
¶8 Defendants filed an answer, which also contained affirmative defenses, counterclaims
and a third-party complaint against VGT, and Wendy and William Spatz. In their answer,
defendants admit that VGT sent them a letter offering to sell Lincoln the property pursuant
to paragraph 28 of the lease, but, contrary to plaintiff’s allegation, defendants contend that
they did, in fact, accept VGT’s offer to purchase the property in “as is” condition. According
to defendants, they had no obligation to tender a contract for purchase to plaintiff or VGT,
and no closing took place only because VGT refused to consummate the sale of the property
after Lincoln accepted its offer. Furthermore, defendants admitted that they did not vacate
the property after receiving Spatz’s notice to vacate, nor did they renew their lease, but
explained that since they had exercised the option to purchase the property, such renewal was
not necessary.
¶9 Defendants further alleged that VGT, acting in concert with plaintiff, refused to honor
Lincoln’s acceptance of VGT’s offer, even though, according to defendants, the lease
required VGT to offer the property to Lincoln for purchase before offering it for sale to any
third party. They explained that plaintiff is an entity established and controlled by Wendy and
William Spatz, who are VGT’s board members, and in an attempt to evade Lincoln’s right
of first refusal, VGT and Spatz agreed on several restrictions of use of the property that
benefit VGT as part of the purchase contract, and included those same restrictions in the
offer that VGT made to Lincoln. According to defendants, while no such restrictions
previously existed, VGT’s offer to sell the property to Lincoln included the conditions that:
(1) the portion of the property operated as a theater under the name Victory Gardens
Greenhouse be permitted to continue to operate in such manner for a period of time; (2) VGT
be granted use of office space on the property at no charge for a period of six months; and
(3) Lincoln grant VGT a right of first refusal for any subsequent sale of the theater space.
Defendants asserted that since the lease gave Lincoln an option to purchase the property for
an all cash price in “as is” condition, VGT was required to offer to sell the property to
Lincoln with no such restrictions. Thus, defendants claim that when Lincoln accepted VGT’s
offer to purchase the property for $2,250,000 but refused the restrictions imposed, VGT had
the obligation to close on the sale and convey the property to Lincoln, which it did not do.
Plaintiff and VGT subsequently recorded a “memorandum of declaration,” which restricts
the use of the property in accordance to the restrictions to which plaintiff agreed when it
contracted to purchase the property. According to defendants, encumbering the property in
that manner was an effort by VGT and plaintiff to frustrate Lincoln’s purchase option under
the lease.
¶ 10 Based on those allegations, defendants assert two affirmative defenses to plaintiff’s
complaint, namely, breach of contract and breach of good faith and fair dealing by VGT
when it failed to offer to sell the property to Lincoln without new restrictions and
subsequently refused to honor Lincoln’s election to purchase the property for the price
offered. Since Spatz was VGT’s purported successor in interest, defendants further asserted
that plaintiff assumed all rights and obligations under the lease and was subject to the same
claims and defenses as defendants may have against VGT for failing to perform its
-4-
obligations under the lease. Defendants’ counterclaims and third-party complaint included:
(1) breach of contract; (2) specific performance, in which it sought ownership of the
property; (3) tortious interference with a contract; (4) tortious interference with prospective
economic advantage; (5) commercial disparagement; (6) fraudulent transfer and quiet title;
and (7) unjust enrichment.
¶ 11 Attached to defendants’ answer, counterclaims and third-party complaint was, inter alia,
a letter from VGT to Lincoln, dated April 22, 2008, which stated that VGT had entered into
an agreement to sell the property to Spatz, but before doing so, VGT was thereby offering
to sell it to Lincoln for the same price and under the same terms and conditions as set forth
in the agreement. The letter further stated that Lincoln had 90 days from receipt of that letter
to make an election to purchase the property under those terms. The sales agreement between
VGT and Spatz was enclosed and provided, as noted in defendants’ answer, that the purchase
price was $2,250,000, that the theater space of the property would be used primarily as a
theater for a period of 25 years, that VGT would have the right of first refusal should the
purchaser sell the theater space, and that VGT would have the right to use the office area in
the theater space free of charge for 6 months. Also attached to defendants’ answer was a copy
of their letter, dated May 1, 2008, in response to VGT’s offer letter. In their response,
defendants presumed that CAF was still one of the owners of the property, and stated that
“[i]f both Landlords are offering to sell the Property to Tenant in ‘as is’ condition for a
purchase price of $2,250,000, then Tenant is willing to purchase the Property in ‘as is’
condition for the purchase price of $2,250,000 upon such terms and conditions as are
mutually acceptable to Landlords and Tenant.” Defendants then “request[ed] a meeting” with
the property owners to discuss the terms and conditions that may be acceptable to both
parties with respect to the purchase of the property by Lincoln.
¶ 12 On the first day of trial, the court granted defendants’ motion for voluntary nonsuit of
their counterclaim and third-party complaint, thereby dismissing VGT, as well as Wendy and
William Spatz individually. Spatz’s first witness was Burleson, the president of Lincoln, who
testified that in his experience in the restaurant business, purchasing property “as is” means
that “[t]he seller gives you the keys and walks out.” Burleson further acknowledged that he
received the notice to vacate from Spatz, but had not yet vacated it as required. He stated that
when he received the offer letter from VGT and saw the terms of the contract between VGT
and Spatz, he believed that he was not obligated to abide to all the restrictions under the
contract because Lincoln had the right of first refusal under the lease. Burleson
acknowledged that he never deposited any earnest money to VGT, did not receive a bank’s
letter of commitment to finance the purchase, and did not provide it with a real estate
contract. Instead, he only directed his attorney to tell VGT what Lincoln’s position was with
regard to their offer. When asked if he took steps to purchase the property upon receipt of the
letter, Burleson responded that he took steps to “clarify it,” but did not close on the property.
¶ 13 On examination by Lincoln’s counsel, Burleson testified that when he met with VGT’s
counsel, Jeffrey Rappin, to discuss his right of first refusal under the lease agreement, nobody
explained to him the meaning of taking the property in “as is” condition. However, Burleson
averred that when he entered into the lease, he understood that the right of first refusal would
allow him to purchase the property to use as he saw fit, and he would not have agreed to
-5-
those restrictions as a condition to exercise that right. With regard to the offer letter from
VGT, Burleson explained that when he saw the contract between VGT and Spatz, he
believed that those parties had worked out a deal, and that VGT added the restrictions “just
to start negotiations” with Lincoln. Thus, when Lincoln’s counsel replied to VGT’s offer
letter, Burleson’s understanding was that he informed VGT that Lincoln was willing to
purchase the property for the offered price of $2,250,000 without the restrictions and that
Lincoln wanted to meet with VGT to discuss the purchase. Burleson further stated that a
meeting later took place between himself, VGT and their respective attorneys, where Rappin
stated that VGT would not sell the property without those restrictions and that it intended to
close on the contract with Spatz. After that meeting, Burleson made sure that Lincoln would
be able to finance the purchase and directed his counsel to continue negotiations with VGT,
such that his counsel proceeded to make phone calls to discuss the sale. Burleson
acknowledged that under the lease, he had 90 days from the receipt of an offer to close on
the purchase, but averred that his lawyers tried to do that within that period. Lincoln never
tendered any payments to buy the property because VGT did not agree to sell it without the
restrictions, which Burleson considered a breach of the right of first refusal. After Spatz
closed on the property, William Spatz contacted Burleson to tell him that he wanted Lincoln
to vacate the property, and Burleson responded that he believed that the sale to Spatz was
invalid and that Lincoln was the rightful owner. Burleson further testified that he continued
to make rent payments after the expiration of the lease in May 2009 pursuant to an agreed
court order between the parties, but explained that some of the checks were sent back.
¶ 14 On redirect examination by plaintiff’s counsel, Burleson acknowledged that Lincoln and
its lawyers did not file a lawsuit to enforce its right of first refusal after they learned of the
contract between VGT and Spatz. He explained that they took no legal action because they
were “surprised” by it, were “trying to get an understanding of what was going on,” and were
“left out of the negotiations.” Burleson further stated that he did not believe that VGT’s offer
letter actually extended him an opportunity to purchase the property under the terms of the
attached contract because he “could see that [VGT and Spatz] had a scheme going on.” He
admitted that the only legal action that he took was filing an affidavit of interest on the
property on November 26, 2008, well after Spatz closed on the purchase. Furthermore, he
acknowledged that on August 25, 2008, William Spatz offered to sell to Lincoln only the
portion of the property occupied by the restaurant for $1,800,000.
¶ 15 Plaintiff next called Rappin, who had been a board member of VGT at all times relevant
to the dispute, and who, as noted above, represented VGT in connection with the sale to
Spatz. Rappin testified that the property was never submitted to a real estate broker for
consideration for placement on a multiple-listing service, advertised for sale, placed on the
market for sale generally, or even offered it to anyone. Instead, the board only voted to accept
the offer made by Wendy Spatz after the property was appraised. According to Rappin’s
understanding of VGT’s obligations under the lease, VGT was not obligated to offer to sell
the property to Lincoln, and only did so because Spatz requested it.
¶ 16 Rappin further testified that when he received Lincoln’s letter in response to VGT’s offer,
he understood it as a counteroffer because it did not comply with the terms set forth in
VGT’s letter from April 22, 2008. He assumed that the ultimate intent of the letter was to
-6-
request a meeting with VGT and its counsel to discuss terms and conditions under which the
parties may reach an agreement. Rappin further stated that Lincoln never tendered any
earnest money to VGT as would have been required to satisfy the conditions of the offer to
purchase the property. Moreover, Rappin testified that the property was offered to Lincoln
on an “as is” basis, which, in his opinion, means that it was offered with whatever title
exceptions existed at that time.
¶ 17 Plaintiff subsequently called William Spatz, who testified that the Spatz foundation
became the sole owner of the property in question around August 1, 2008. According to
William, he did not believe that VGT was obligated to offer to sell the property to Lincoln
because it was never offered to the public generally. He nevertheless instructed Rappin to
send Lincoln the offer letter because if Lincoln was willing to purchase the property on the
same terms as Spatz was ready to purchase it, Spatz would not have objected to it. William
stated that when he asked Burleson and his attorneys whether they were interested in
renewing Lincoln’s lease of the bar space, he did not receive a response. He further explained
that the purpose of delivering the 30-day notice to vacate was to notify Lincoln that the lease
was about to expire on May 31, 2009, and Spatz was thereby demanding that Lincoln vacate
the premises at that time. According to William, Lincoln did not leave, but continued to pay
rent after the lease expired.
¶ 18 On cross-examination, William admitted that he told Rappin, in an e-mail dated May 6,
2008, that he intended to close on the purchase of the property regardless of Burleson’s
position, but later explained that he understood that Burleson’s position, as expressed in his
response letter, was not an acceptance of the offer. With regard to the notice to vacate, he
explained that the reason the notice gave Lincoln until May 31, 2009, or 30 days after May
19, 2009, was for Spatz to “cover” itself in case it was required to give the tenant 30 days to
vacate. In addition, he acknowledged that, before the lease expired, he offered to sell the bar
portion of the property to Lincoln for $1,800,000, after purchasing the entire property for
$2,250,000. William further admitted that while Lincoln made rent payments after the
property was sold to Spatz, those checks were made to VGT, which then forwarded the
payments to Spatz. He also acknowledged that Lincoln had filed an affidavit of interest in
which it disputed the sale to Spatz and claimed that it had exercised its right of first refusal
for the purchase of the property.
¶ 19 After the plaintiff rested, defendants called Gary Saipe, Lincoln’s counsel at the time it
received the offer letter from VGT. Saipe testified that the letter was an indication that
Lincoln’s right of first offer had been triggered because the letter stated that it was being
delivered pursuant to paragraph 28 of the lease. According to Saipe, he worked to
consummate the acceptance of VGT’s offer without the additional restrictions for about four
months, but was “put off” and prevented from closing. In Saipes’ 37 years of experience as
a real estate attorney, he believed that the term “as is” relates not only to the physical
condition of the property, but also to the status of its title. Thus, Saipes believed that VGT’s
offer was not to sell the property “as is” because of the restrictions it contained. Saipes
explained that in his response letter to VGT, he was conveying his election to purchase the
property for the offered price of $2,250,000, but not subject to the restrictions. According to
Saipes, Illinois law provides that when a tenant has a right to first offer or first refusal in a
-7-
lease, that tenant can accept an offer to purchase at the same time as it rejects the provisions
that are not in accordance with the terms of the lease.
¶ 20 On March 7, 2012, the trial court entered its order, in which it awarded possession of the
property to Spatz, and declined to address plaintiff’s holdover claims. In its written order, the
court found that plaintiff is the current owner of the property, but “that status could change.”
It noted that under its lease with VGT, Lincoln had an option to have the right of first offer
to purchase the property, but that “Lincoln dragged its feet in exercise of that option.” The
court then stated that “[i]t is very difficult for the [c]ourt to determine the status of the
[d]efendant, Lincoln. That are no longer a [l]essee pursuant to the terms of the lease which
has expired, they may be a holdover tenant or a tenant at sufferance. I think what they are is
a ‘vendee in possession’ ***.” The court then ordered:
¶ 21 “In this case there will be a finding for the landlord [Spatz] an order of possession will
be entered, stayed 90 days, with the caveat that Lincoln continues to pay use and occupancy.
In the event Lincoln has purchased and consummated the deal pursuant to the term of the
1994 lease, that is for $2,250,000 in cash, in as is condition, and subject to restriction [sic]
only that existed in 1994 then the [c]ourt will vacate the order of possession and dismiss the
suit.”
¶ 22 On June 11, 2012, the trial court ruled on plaintiff’s petition for attorney fees pursuant
to paragraph 14(f) of the lease, which provided that Lincoln “shall pay all [l]andlord’s costs,
charges and expenses, including the fees of counsel *** incurred in enforcing [Lincoln’s]
obligations hereunder.” In its petition, plaintiff sought $91,554.40 in fees, and attached a
summary of the amounts incurred by its counsel throughout the proceedings, as well as her
invoices itemizing those costs. Defendants responded that a large portion of the fees sought
by plaintiff were incurred for work entirely unrelated to plaintiff’s enforcement of the lease,
and listed numerous items of plaintiff’s counsel’s invoice which described work performed
for parties other than Spatz, such as VGT, or William and Wendy, or are vague descriptions
of the work performed. The fees challenged by defendants were a total of $35,979.22. The
trial court awarded plaintiff’s attorney fees, but reduced the amount to $50,000 while noting
that plaintiff’s counsel’s hourly fees are reasonable, but without providing its rationale for
the fee reduction.
¶ 23 On July 23, 2011, defendants filed a motion for directed finding, in which they argued
that the notice to vacate that they received from Spatz was invalid and could not support an
order of possession in Spatz’s favor. They also claimed that Spatz’s demand for, and
acceptance of rent and utility payments created a new tenancy between Spatz and Lincoln.
The trial court declined to adopt Lincoln’s argument and entered an order of possession in
Spatz’s favor on March 12, 2012. Notably, paragraph 25 of the lease, which was admitted
into evidence, states:
“No receipt of money by Landlord from Tenant after the termination of this Lease,
the service of any notice, the commencement of any suit or final judgment for possession
shall reinstate, continue or extend the Term of affect such notice, demand, suit or
judgment.”
-8-
¶ 24 ANALYSIS
¶ 25 On appeal from the trial court’s judgment, defendants contend that the court erred in
awarding possession of the property to Spatz because, as the court itself noted, Lincoln was
a vendee in possession. Defendants maintain that the evidence presented at trial showed that
it validly accepted VGT’s offer to purchase the property for the offered price. They maintain
that while Lincoln rejected the additional restrictions in VGT’s offer, paragraph 28 of the
lease gave them the option of purchasing the property for an all cash price in “as is
condition,” which according to Lincoln, relates not only to the physical condition of the
property, but to any restrictions on its title as well.
¶ 26 Plaintiff responds that the trial court’s statement that Lincoln was a “vendee” is non-
binding dictum, since ordering possession in plaintiff’s favor would be inconsistent with such
a finding. It further argues that the trial court was correct in entering such an order because
Lincoln failed to exercise its right of first offer when it responded to VGT’s offer letter.
According to plaintiff, the term “as is” refers only to the physical condition of the property,
and when Lincoln responded that it would only agree to purchase the property without the
restrictions outlined in the contract, that amounted to a counteroffer, which is not an
acceptance. Moreover, plaintiff contends that, even if Lincoln’s response amounted to
acceptance, it abandoned the contract by failing to take any steps to close within 90 days as
required under the lease. Plaintiff further argues that, in any event, the court was required to
disregard most of Lincoln’s allegations against VGT because they related to actions of a
nonparty to the case.
¶ 27 In determining whether the trial court erred in entering a judgment in favor of plaintiff
in an action brought under the Forcible Entry and Detainer Act (735 ILCS 5/9-101 et seq.
(West 2008)), the standard of review is whether the ruling was against the manifest weight
of the evidence. S&D Service, Inc. v. 915-925 W. Schubert Condominium Ass’n, 132 Ill. App.
3d 1019, 1021 (1985). For a finding to be against the manifest weight of the evidence, it must
appear from the record that the “ ‘opposite conclusion is clearly evident’ ” or the findings of
fact are “ ‘unreasonable, arbitrary and not based upon any of the evidence.’ ” Maple v.
Gustafson, 151 Ill. 2d 445, 454 (1992) (quoting Villa v. Crown Cork & Seal Co., 202 Ill.
App. 3d 1082, 1089 (1990)). The role of a reviewing court is not to re-interpret the evidence,
but only to determine whether the evidence on the record supports the lower court’s
judgment. Midstate Siding & Window Co. v. Rogers, 204 Ill. 2d 314, 319 (2003).
¶ 28 It is well established, and the parties do not dispute, that the only matter to be resolved
in an action for forcible entry and detainer is the right of possession. S&D Service, 132 Ill.
App. 3d at 1021. Furthermore, this court has repeatedly recognized that when a lease
contains an option to purchase and such an option is accepted and exercised according to its
terms, it becomes a present contract for the sale of the property and the lease agreement
extinguishes, thereby transforming the partes’ relationship from lessor-lessee to vendor-
vendee. Wolfram Partnership, Ltd. v. LaSalle National Bank, 328 Ill. App. 3d 207, 216-17
(2001). Once a lessee becomes a vendee, it then enjoys a complete defense to an action for
eviction. See, e.g., Bakaitis v. Fink, 340 Ill. 440, 444 (1930). However, the lessee must
exercise the option in strict conformity with all the conditions prescribed by the lessor, and
the failure by the lessee to comply with those conditions renders any attempt to exercise the
-9-
option ineffective in creating a binding sale contract. Wolfram, 328 Ill. App. 3d at 217. In
such a case, the lease and the parties’ relationship as lessor-lessee continue. Id. In contrast,
if the lessee properly exercises the option, the lessor loses any rights that it may have had
under the lease. Id.
¶ 29 Defendants rely on Vincent v. Doebert, 183 Ill. App. 3d 1081, 1088 (1989), Foster
Enterprises, Inc. v. Germania Federal Savings & Loan Ass’n, 97 Ill. App. 3d 22, 30-31
(1981), and Scheidecker v. Westgate, 164 Ill. App. 389, 394 (1911), for the proposition that
when a lessor makes an offer to a lessee pursuant to the latter’s right of first offer, but the
offer does not comply with the terms of the lease, the lessee may effectively exercise its
option by accepting the offer as it should have been made. See, e.g., Vincent, 183 Ill. App.
3d at 1088-89 (where lease gave the lessee the right to purchase the property on the same
terms as offered to a third party, but lessor’s offer to lessee contained a guarantee
requirement that was not present in the offer made to the third-party purchaser, the lessee
effectively exercised the option by agreeing to purchase the property at the price offered to
the third party while rejecting the additional requirement). However, even assuming,
arguendo, that Lincoln could have exercised its option by agreeing to purchase the property
for $2,250,000 without the additional restrictions, it would still have to comply with the
terms of the lease insofar as it described the manner in which Lincoln must exercise its
option. See, e.g., Northwest Racing Ass’n v. Hunt, 20 Ill. App. 2d 393, 399 (1959) (“When
the lessee is given the first privilege of purchasing the premises, he must, after notice from
the lessor of the receipt of a bona fide offer, elect to exercise his privilege in accordance with
the terms of the lease or the right is lost.” (Internal quotation marks omitted.)).
¶ 30 Turning to the issue of whether Lincoln effectively exercised its option pursuant to
paragraph 28 of the lease, our supreme court’s opinion in Dodds v. Giachini, 84 Ill. 2d 284,
295 (1981), is instructive. In that case, an agreement between the president of a bank, who
loaned funds to the majority holder of the bank’s stocks, gave the lender the option to
purchase shares of stock from the borrower, but placed an expiration date on the right to
exercise that option. Dodds, 84 Ill. 2d at 287. Prior to the expiration of the option, the lender
sent a letter to the borrower stating that it “ ‘serve[d] notice of exercise of option to
purchase,’ ” in which he also noted that the borrower had breached certain terms of the
agreement, and stated that if the borrower was interested in selling more shares than specified
in the option, he would purchase those as well. Id. at 291-92. However, the borrower did not
respond to that letter, and when the option expired, the lender had not tendered any payments
for the shares that he could have bought under the option. Id. at 293. In ruling that the lender
had not effectively exercised his option, our supreme court found that the lender’s words in
his letter, when viewed in context, may have meant that he planned to exercise his option
despite the borrower’s breach of the lease, and would do so in the future, when the borrower
decided how many additional shares he was willing to sell, if any. Id. at 295. The supreme
court then found that when the lender failed to tender payment for the optioned shares of
stock by the expiration date, the option lapsed. Id.
¶ 31 In this case, as noted above, Lincoln’s response to VGT’s offer letter stated that Lincoln
was “willing” to purchase the property for the offered price in “as is” condition upon terms
and conditions acceptable to both parties, and requested a meeting to discuss such terms and
-10-
conditions. Paragraph 28 of the lease specified that a closing must occur within 90 days after
Lincoln chooses to accept the offer, and there is no dispute that no such closing took place
or that defendants never tendered payment for the property or any earnest money at any time.
While Burleson testified that his lawyers tried to close within those 90 days, and that the
reason for not tendering payments was that VGT would not agree to sell the property without
the restrictions, he also stated that he did not take further steps to protect his interest because
he “couldn’t believe” there was already a contract between VGT and Spatz and he was
“trying to get an understanding of what was going on.” Thus, we conclude that the trial court
did not err in granting plaintiff possession of the property.
¶ 32 While the trial court stated in its written order that it “thought” Lincoln was a vendee in
possession, it did so after noting that Lincoln may be a tenant at sufferance or holdover
tenant. In any event, those statements do not affect our conclusion as we can affirm the trial
court’s ruling on any basis found in the record. See Studt v. Sherman Health Systems, 2011
IL 108182, ¶ 48 (noting that “an appellate court may affirm a trial court’s judgment on any
grounds which the record supports [citation]”). Having reached such conclusion, we need not
address whether the restrictions in VGT’s offer letter to Lincoln are a breach of VGT’s
agreement to offer to sell the property in “as is” condition. See Dodds, 84 Ill. 2d at 297.
¶ 33 Defendants next contend, however, that even if Lincoln had not exercised its right of first
offer, the trial court still erred in ordering possession to plaintiff because plaintiff’s notice
of eviction was invalid. They maintain that while the notice demanded that Lincoln vacate
the property when the lease expired on May 31, 2009, or within 30 days of May 19, 2009,
Spatz was required to give Lincoln until the last day of June. According to defendants, even
if Spatz was not initially obligated to serve Lincoln with an eviction notice before the lease
expired, once it chose to do so, it was required to do so in conformance with Illinois law.
Defendants further argue that Spatz extended the lease and created a month-to-month tenancy
by accepting rent after the expiration of the lease, and by allowing Lincoln to remain on the
premises until June 19, 2009, after the lease expired.
¶ 34 In support of their contentions, defendants rely on section 9-207 of the Code, which
requires landlords to send tenants a 30-day notice to terminate a tenancy of less than one
year. 735 ILCS 5/9-207 (West 2008). They also rely on Hoefler v. Erickson, 331 Ill. App.
577, 583 (1947), which found that “a tenancy from month to month expires at midnight on
the last day of the month” following service of the 30-day notice.
¶ 35 We first note, however, that neither section 9-207 of the Code nor the finding in Hoefler
is controlling because the lease in this case was for a set term of 15 years. Furthermore, while
the notice to vacate was sent to Lincoln on May 19, 2009 and reminded Lincoln that the lease
was about to expire on May 31, the notice still gave Lincoln 30 days to vacate the property,
thus complying with section 9-207 of the Code. Moreover, while the notice gave Lincoln two
alternative dates to vacate the property, it is settled:
“ ‘In the absence of controlling provisions in the lease *** if the date stated in the notice
for termination is not the end of a period or is too short a time before the end of a period,
the notice will be effective to terminate the lease at the earliest possible date after the
date stated.’ [Citation.] *** The purpose underlying a notice requirement is to provide
-11-
the parties with sufficient time to adjust their affairs before the actual termination.
[Citation.] If the notice informs the tenant that the landlord wants him to quit the
premises, then the question should not be the validity of the notice, but rather, how soon
the tenant must leave.” Steffen v. Paulus, 125 Ill. App. 3d 356, 359 (1984).
¶ 36 Here, since it is readily apparent from the language in the notice to vacate that it informed
Lincoln that Spatz wanted it to leave the premises, the trial court correctly granted possession
to plaintiff. See Meyer v. Cohen, 260 Ill. App. 3d 351, 361 (1993) (notice to vacate is
sufficient if it adequately informed the tenant of landlord’s intention to terminate the tenant’s
right of possession). Further, since plaintiff did not file its forcible entry and detainer action
until July 6, 2009, after more than 30 days from service of its notice to Lincoln, and after the
last day of June, its action was not rendered premature by the notice to vacate, even if
Lincoln did have until June 30, 2009 to vacate the premises. Cf. Avdich v. Kleinert, 69 Ill.
2d 1, 6 (1977) (where landlord chose to give tenant five days to vacate the premises, action
for forcible entry and detainer was premature before the end of those five days).
¶ 37 We are similarly unpersuaded that Spatz extended the lease and created a month-to-
month tenancy by accepting rent after sending the notice and by allowing Lincoln until after
the expiration date to leave the premises. While there is some dispute as to whether Lincoln
paid actual “rent” to Spatz, or only the water bill, we need not address it. It is the intention
of the landlord, not the tenant, that determines whether a holdover tenancy is to be created.
Troccoli v. L&B Products of Illinois, Inc., 189 Ill. App. 3d 319, 321 (1989). Although a
landlord’s acceptance of rent following the expiration of a lease may indicate the landlord’s
intention to treat the tenant as a holdover, other facts and circumstances bearing on the
landlord’s intent, such as efforts to regain possession of the property, must also be
considered. Id. at 321-22. Here, not only does the lease unequivocally state that no receipt
of money by the landlord after the lease expired is to be construed as an extension, but Spatz
filed the present forcible entry and detainer action to regain possession of the premises just
after a month once the lease expired. Under these circumstances, we conclude that Spatz did
not intend to extend the lease, and its acceptance of payments from Lincoln, even coupled
with its willingness to allow Lincoln until June 19, 2009 to vacate the premises, did not
create a holdover tenancy. See id. at 322.
¶ 38 Defendants next contend that the trial court erred in awarding a judgment of attorney fees
in favor of plaintiff. Reiterating their initial argument, defendants maintain that since the
lease was extinguished when they exercised their option to purchase the property, and
plaintiff’s right to recover attorney fees only applies to actions to enforce its rights under the
lease, plaintiff is not entitled to such fees. Having concluded above that defendants did not
effectively exercise their option to purchase under their right of first offer, we need not
address this argument. Defendants, nevertheless, argue that even if they did not exercise their
right to purchase the property, awarding attorney fees to plaintiff was still erroneous because
the lease agreement which provided for such fees in an action to enforce the lease had already
expired when plaintiff filed its complaint.
¶ 39 Plaintiff responds that the trial court was correct in awarding attorney fees because this
entire case was centered on enforcement of the lease, including Lincoln’s rights and
obligations under paragraph 28, as well as its obligation to move at the end of its term. On
-12-
cross-appeal, plaintiff contends that the trial court erred in reducing the attorney fees award
from $91,554.40 to $50,000 because nothing on the record shows that the fees were not
reasonable.
¶ 40 Trial courts have broad discretionary powers when it comes to awarding attorney fees,
and its decision will not be reversed absent an abuse of discretion. Richardson v. Haddon,
375 Ill. App. 3d 312, 314 (2007). Thus, contract provisions governing attorney fees are to be
strictly construed and enforced at the trial court’s discretion. Mirar Development, Inc. v.
Kroner, 308 Ill. App. 3d 483, 488 (1999). While we review de novo the trial court’s
interpretation of such provisions, our review of the court’s judgment in applying them to the
facts of the case is based on an abuse of discretion standard. Peleton, Inc. v. McGivern’s,
Inc., 375 Ill. App. 3d 222, 225-26 (2007). Furthermore, when assessing the reasonableness
of fees, a trial court may consider a multitude of factors, including the nature of the case, its
difficulty level, the skill and standing of the attorney, the degree of responsibility required,
the usual and customary charges for similar work, and the connection between the litigation
and the fees charged. Richardson, 375 Ill. App. 3d at 314-15. However, when a trial court
reduces the amount requested in a fee petition, its ruling should include the reasons justifying
such a reduction. Id. at 315.
¶ 41 In this case, there is no dispute that the lease required Lincoln to pay for its landlord’s
attorney fees incurred in enforcing Lincoln’s obligations under the lease. While the lease had
expired by the time plaintiff filed the present action, it appears that the action was brought
to enforce plaintiff’s rights under paragraph 14 of the lease, which provides that “upon
termination of this [l]ease, [Lincoln] shall surrender possession and vacate the premises
immediately and deliver possession thereof to [l]andlord.” We, therefore, conclude that the
trial court did not abuse its discretion in awarding plaintiff attorney fees. See, e.g., Coldwell
Banker Havens, Inc. v. Renfro, 288 Ill. App. 3d 442, 448-49 (1997) (while contract
containing provision for attorney fees’ award had terminated when the suit was brought,
those fees should have been awarded in an action relating to that contract).
¶ 42 With respect to the trial court’s decision to reduce the fees from $91,554.40 to $50,000,
we note that defendants pointed to numerous items on plaintiff’s counsel’s invoice which
appear to have been incurred in matters unrelated to the enforcement of the lease. Those
costs, such as “draft 2-615 motion to include arguments as to Wendy and VGT,” could have
been incurred in representing VGT or William and Wendy personally, and in defending from
Lincoln’s counterclaim and third-party claims. Other items, such as “meeting with client at
client office,” do not clearly indicate that they were incurred in plaintiff’s enforcement of the
lease. However, if the trial court had stricken from plaintiff’s petition only the fees which
were specifically challenged by defendants, it would have reduced the fee to $55,575.18,
rather than $50,000. Further, the trial court’s written order stated that the plaintiff’s counsel’s
hourly rates were reasonable, but did not provide an objective basis justifying the fee
reduction or explaining the rationale behind the amount by which they were reduced.
Accordingly, we remand this matter for a petition hearing before the circuit court. See, e.g.,
Richardson, 375 Ill. App. 3d at 315-16 (matter remanded where trial court failed to provide
its basis for a drastic fee reduction).
¶ 43 Lastly, plaintiff contends, also on cross-appeal, that the trial court erred in denying
-13-
Spatz’s holdover claim when it failed to address that claim, in which plaintiff sought to
recover double rent from defendants as provided by section 9-202 of the Code. See 735 ILCS
5/9-202 (West 2008). Plaintiff does not dispute that under current Illinois law, a tenant is not
to be charged double rent under the holdover statute if it remains in possession of the
premises for “colorably justifiable reasons.” See J.M. Beals Enterprises, Inc. v. Industrial
Hard Chrome, Ltd., 271 Ill. App. 3d 257, 261-62 (1995). Instead, plaintiff maintains that the
holding in J.M. Beals Enterprises, 271 Ill. App. 3d 257, does not address what should happen
in a case where a tenant “should know” that its actions in remaining on the premises are
improper. Plaintiff further argues that this court should enunciate a brighter line by holding
tenants liable for double rent unless they take legal action to protect their alleged rights to the
premises before the landlord filed a forcible entry and detainer action.
¶ 44 As this court recognized in J.M. Beals Enterprises, 271 Ill. App. 3d at 261, section 9-202
of the Code requires the payment of “double the yearly value of the lands” only to tenants
who are “willfully holding over.” Id. at 259 (quoting 735 ILCS 5/9-202 (West 1992)). It then
noted that courts of this State have long interpreted that language to mean that even a
tenant’s intentional holding over of the premises after the lease expired does not fall within
the statute unless his actions were “ ‘knowingly and willfully wrongful,’ ” such that the tenant
does not incur the double rent penalty if he remained on the premises under “a reasonable
belief that he was doing so rightfully.” (Emphasis in original.) J.M. Beals Enterprises, 271
Ill. App. 3d at 261 (quoting Stuart v. Hamilton, 66 Ill. 253, 255-56 (1872)). The reason for
such requirements is that the statute is highly penal, such that recovery can only be granted
when the landlord strictly complies with its terms. Stride v. 120 West Madison Building
Corp., 132 Ill. App. 3d 601, 605 (1985). Accordingly, a landlord is not entitled to double rent
when the tenant did not retain possession of the premises in bad faith, such as there is a bona
fide dispute as to such rights to possession. Id. at 606.
¶ 45 Here, defendants’ affirmative defense to plaintiff’s action, after they dismissed their
counterclaims and third-party claims, indicate that there was a legitimate dispute as to
whether Lincoln had the right to remain on the premises as a vendee. Contrary to plaintiff’s
argument, defendants’ failure to assert their alleged rights until after plaintiff filed its action
does not amount to the willfulness, or bad faith, as would be required for the plaintiff to
recover double rent under section 9-202. In light of the rationale of this court’s prior
holdings, we decline to change the current law as plaintiff suggests and conclude that the trial
court did not err in declining to award plaintiff double rent under the statute.
¶ 46 For the foregoing reasons, we affirm in part the judgment of the circuit court of Cook
County and remand in part for further proceedings on plaintiff’s petition for attorney fees.
¶ 47 Affirmed in part and remanded in part.
-14-