Ceres Terminals, Inc. v. Chicago City Bank and Trust Co., 10062

• Decision Date: 31 March 1994
• Docket Number: D,No. 10062,No. 1-91-0085,10062,1-91-0085
• Citation: 635 N.E.2d 485,259 Ill.App.3d 836,200 Ill.Dec. 146
• Parties: , 200 Ill.Dec. 146 CERES TERMINALS, INC., Plaintiff, Counter-defendant, Appellant, and Cross-Appellee, v. CHICAGO CITY BANK AND TRUST CO. as Trustee under Trustefendants, Counter-plaintiffs, Appellees.
• Court: United States Appellate Court of Illinois

Page 485

635 N.E.2d 485

259 Ill.App.3d 836, 200 Ill.Dec. 146

CERES TERMINALS, INC., Plaintiff, Counter-defendant Appellant, and Cross-Appellee, v. CHICAGO CITY BANK AND TRUST CO. as Trustee under Trust No 10062, Defendants, Counter-plaintiffs, Appellees.

No. 1-91-0085.

Appellate Court of Illinois First District, Fifth Division.

March 31, 1994.

As Amended on Denial of Rehearing May 13, 1994.

Robert A. Knuti, Hugh C. Griffin, Pamela Moore-Gibbs, Diane I. Jennings, Lord, Bissell & Brook, Chicago, for appellant.

Stuart Smith, Gordon & Glickson P.C., Chicago, for appellee.

Justice GORDON delivered the opinion of the court:

BACKGROUND

In 1957, the predecessor in interest of appellant Ceres Terminals, Inc. (Ceres) entered into a 20-year lease for approximately 16 acres of waterfront property with the predecessor in interest of defendants-lessors (defendants). Under a renewal clause contained in the lease, Ceres was allowed to extend the lease after the initial 20-year period for four 5-year periods. Under this lease, the amount of rent to be paid during these 5-year periods was to be based on a 5% "net" return of the property's fair market value as determined by appraisers of the parties.

Ceres exercised its renewal option for the period between February 1, 1977, and January 31, 1982. After the parties failed to agree on a fair market value of the land, defendants filed a declaratory judgment action in the circuit court. In 1979, after hearing testimony from three appraisers, Judge Dunne found that the subject property had a fair market value of $1,850,000 for purposes of calculating the rent. In Chicago City Bank and Trust Co. v. Ceres Terminals, Inc. (1981), 93 Ill.App.3d 623, 49 Ill.Dec. 108, 417 N.E.2d 798, the appellate court affirmed that ruling, stating that that valuation was not against the manifest weight of the evidence.

On September 5, 1979, while the appeal from Judge Dunne's determination was pending, Ceres filed a complaint for declaratory relief seeking a declaration that defendants must perform all necessary maintenance and repairs including repairs to docks and warehouses located on the property. Defendants filed a counter-complaint seeking damages in the amount of the cost of repairs.

On March 20, 1981, defendants informed Ceres that the lease would be terminated as of January 31, 1982, because Ceres had failed to timely renew the lease for the next five-year period (1982-87). In October 1981, Ceres amended its declaratory judgment complaint to add a second count which sought specific performance to enforce the lease renewal option for the next five-year period.

Defendants filed a motion for summary judgment with respect to the second count of Ceres' complaint. On May 10, 1982, the trial court granted summary judgment in favor of defendants on that count finding that Ceres had not exercised its renewal option in a timely manner. Ceres appealed this ruling and in Ceres Terminals, Inc. v. Chicago City Bank and Trust Co. (1983), 117 Ill.App.3d 399, 72 Ill.Dec. 860, 453 N.E.2d 735, the appellate court affirmed the trial court.

Ceres remained on the subject property after January 31, 1982 (the date the lease expired), while awaiting the trial court's determination on the validity of its attempt to renew the lease for the 1982-87 period. Ceres continued to occupy the property after the trial court entered the May 10, 1982, summary judgment in favor of defendants pursuant to a stay granted by the appellate court. Under that stay order, Ceres continued to pay rent to defendants during this period and filed a $200,000 appeal bond. Ceres subsequently vacated the property on March 15, 1984, after the appellate court affirmed the trial court's decision and the supreme court denied Ceres' petition for leave to appeal.

In April 1985, defendants filed a motion in which they sought increased rent for the period of the stay (February 1, 1982 to March 14, 1984), claiming that Ceres' monthly rental payments during that period were below the fair rental value of the property. Defendants then filed an amended counter-complaint for damages resulting from Ceres' alleged failure to make certain repairs to docks and warehouses on the property. This was apparently the same relief it sought in its original counter-complaint which the trial court had not yet decided. After a bench trial on these claims, during which appraisal evidence on the property's value was heard, the trial court entered a judgment against Ceres for $151,593.75 in increased rent and $54,500 in damages for repairs to two warehouses on the property. Ceres filed this appeal from that order and defendants cross-appealed.

On appeal, Ceres argues that the defendants should have been barred under the doctrine of judicial estoppel from introducing appraisal evidence of the property's market value because they had previously appeared before the Tax Board of Appeals and represented that the subject property's fair market value was substantially less during the period in question. Ceres also contends that the trial court used the wrong measure of damages in determining its liability for the failure to make the warehouse repairs. In their cross-appeal, defendants argue that the trial court erred in: (1) finding that the annual rental did not include the expense of the applicable property taxes; (2) undervaluing the subject property when determining its fair market value; and (3) awarding increased rent for only 11 acres of the 16 acres Ceres purportedly occupied. For the reasons set forth below we affirm in part and reverse in part.

FACTS

A. Factual History

In 1957, Ceres' predecessor in interest, Overseas Shipping Inc., entered into a lease to occupy approximately 16 acres of real estate located on the shore of Lake Calumet at Stony Island and 130th Ave. (the subject property). This lease was entered into with Manor Real Estate, a subsidiary of Pennsylvania Central Railroad (Penn Central) as lessor, for an initial term of 20 years and included an option to renew for 4 successive 5-year terms. The renewal clause of the lease provided that:

"The Lessee shall have the right at its election to extend this lease of the said premises for four (4) Five (5) year succeeding periods beyond the initial twenty (20) year period at a fair and equitable rate of rental. * * *

If the Lessor and the Lessee are unable to agree upon the rental for any extended five (5) year period, the value of the premises hereby leased shall be appraised and valued * * * and the amount of the rental to be paid by the Lessee for the extended term shall be based on a five percent (5%) net return on such valuation."

In 1975 at a time when Penn Central was in bankruptcy, Manor Real Estate sold the 38-acre tract of land which included the subject property to Calumet Harbor Properties, a partnership comprised of members of the Pinkert family for $1,000,000. The 38 acres were divided into two parcels. The first parcel was approximately six acres in size and did not include any waterfront property. The second parcel covered approximately 32 acres and included the subject property which was at that time being occupied by Ceres pursuant to the 1957 lease Overseas Shipping had entered into with Manor Real Estate. The 32-acre parcel was bisected by a railroad easement with Ceres occupying the property north of the railroad tracks. One-half of this easement, approximately 2.38 acres, covered land which was leased to Ceres. The property occupied by Ceres also contained an 85,000 square foot wooden warehouse and a 55,000 square foot metal warehouse and 1,800 feet of lineal seawall. The property south of the railroad tracks was not waterfront property and did not contain any improvements. With respect to maintenance on the improvement and property taxes, the 1957 lease provided:

"For the second term of said term and each succeeding year until the termination of this lease Lessor shall maintain the exterior of all improvements on the demised premises, it being distinctly understood, however, that Lessee shall continue to maintain the interior of the improvements in a manner as above provided during the term of this lease. Lessor shall also assume and pay all general taxes, special assessments and charges against the demised premises for the second and each succeeding year of the term of the lease, and of any extension or renewal thereof."

In 1975, Calumet Harbor Properties put the property into a land trust with Chicago City Bank and Trust Co. (Chicago City Bank) serving as land trustee and Calumet Harbor Properties as beneficiary. Also in 1975, Calumet Harbor Properties leased out the entire 38 acres to Scrap Corporation of America (Scrap), a company which was also owned and controlled by the Pinkert family. That lease was subject to Ceres' 1957 lease wherein Ceres would still occupy the 16-acre site, but thenceforth would pay its rent to Scrap. The remaining acreage was to be used by Scrap for its metal processing business. In January 1976, Ceres exercised its option under the 1957 lease to renew the lease for an additional five-year term, extending its occupancy until January 31, 1982.

In 1977, the Pinkert family sold 50% of their interest in Scrap to Tang Industries (Tang). Calumet Harbor Properties, acting through Chicago City Bank, then entered into a second lease with Scrap as the lessee for the six-acre parcel and the portion of the 32-acre parcel that was not occupied by Ceres. This was a 40-year lease with an annual rent of $80,000. Under the terms of this lease, Scrap was expressly made liable for all the real estate taxes, maintenance and insurance on the property.

Ceres and defendants could not agree on the proper interpretation of the lease option renewal procedure which was designed to value the property so as to calculate the rental rate for the 1977-1982 period and accordingly defendants filed suit in the circuit court seeking a determination on the proper...