Checkers, Simon & Rosner v. Lurie Corp.

• Decision Date: 21 December 1988
• Docket Number: No. 87-3081,87-3081
• Citation: 864 F.2d 1338
• Parties: CHECKERS, SIMON & ROSNER, a Partnership, and H.M. Walken Company, Inc., Plaintiffs-Appellants, v. The LURIE CORPORATION, a California Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1338

864 F.2d 1338

12 Fed.R.Serv.3d 1162

CHECKERS, SIMON & ROSNER, a Partnership, and H.M. Walken Company, Inc., Plaintiffs-Appellants, v. The LURIE CORPORATION, a California Corporation, Defendants-Appellees.

No. 87-3081.

United States Court of Appeals Seventh Circuit.

Argued June 2, 1988.

Decided Dec. 21, 1988.

E. James Gildea, Chicago, Ill., for plaintiffs-appellants.

Peter Petrakis, Katten Muchin & Zavis, Chicago, Ill., for defendants-appellees.

Before POSNER, COFFEY and KANNE, Circuit Judges.

COFFEY, Circuit Judge.

Checkers, Simon & Rosner and H.M. Walken Company, Inc., appeal from the district court's order entering summary judgment in favor of Checkers, Simon & Rosner in the amount of $14,593.34 in a diversity action arising out of leases between Checkers, Simon & Rosner and the Lurie Company. We affirm.

I

Checkers, Simon & Rosner, a partnership whose members all reside in Illinois, and the Lurie Company, a California corporation, entered into four separate lease agreements covering the rental of four separate suites on the same floor of a building Lurie owned at 33 North LaSalle Street in Chicago, Illinois. Each lease ran through April 30, 1986. Three of the four leases (Suites # 1900, 1919 and 1927) provided that "[i]f the terms of any lease, other than this Lease, made by Tenant for any premises in the Building shall be terminated or terminable after the making of this Lease because of any default by Tenant under such other lease, such fact shall empower Landlord, at Landlord's sole option, to terminate this Lease by notice to Tenant." None of the leases contained any additional language conditioning obligations under the leases upon duties contained in any of the other leases.

On or about April 1, 1983, Checkers, Simon & Rosner (CSR) notified Lurie that it had leased alternative office space and would vacate the entire premises in December 1983. CSR vacated on December 1, 1983, but retained the keys to the suites. CSR continued to make the rent payments called for in the lease and were never in default. During the terms of its leases CSR was never made aware of any infringement upon its right to possess any of the space leased from Lurie.

CSR moved to a building owned by H.M. Walken Company, Inc., an Illinois corporation. Pursuant to a September 15, 1983, letter agreement between CSR and Walken, Walken agreed to assume CSR's liability for rent under the leases between CSR and Lurie in exchange for the right to sublet or assign the leases. However, CSR continued to make the rent payments to Lurie. During the remaining term of the leases between CSR and Lurie, CSR and Walken made unsuccessful attempts to secure new tenants for the suites formerly occupied by CSR.

Although the record is not clear as to the specific date of agreement, on either August 9, 1985, or September 19, 1985, Lurie entered into a contract leasing 6,662 square feet of the space formerly occupied by CSR to the law firm of Taylor, Miller, Sprowl, Hoffnagle & Marletti, with the lease commencing on May 1, 1986, immediately following the expiration of the lease agreements between Lurie and CSR. CSR and Walken allege that this lease comprised the area covered in two of CSR's leases (Suites 1900 and 1910) with Lurie and part of the area covered under a third CSR lease with Lurie (Suite 1927). As part of the agreement between Lurie and the Taylor law firm, Lurie agreed to make alterations in the leased premises. These alterations were begun on February 10, 1986, and cost Lurie $151,800. The alterations were made without the knowledge or consent of CSR.

On December 18, 1985, Lurie entered into another lease agreement, this time with Prentice Hall Corporations Systems, Inc., covering 3,980 square feet of the premises subject to CSR's lease for Suite 1927. The Prentice Hall lease was amended in February 1986 to include an additional 867 square feet which had also been part of the same CSR lease, with the amended lease commencing on February 15, 1986, two and one-half months prior to the April 30, 1986, termination date of CSR's lease for the same space. The lease called for a monthly rent of $7,296.67. Lurie received two months' rental payments from Prentice Hall during the months of March and April 1986, for a total rent payment of $14,593.34. However, Lurie did not inform CSR or Walken of its lease agreement with Prentice Hall prior to the termination of CSR's lease on April 30, 1986. Thus, during this period Lurie was also receiving rent payments from CSR for the same location. Like the Taylor law firm lease, the Prentice Hall lease called for alterations to the premises, which commenced on February 1, 1986.

CSR and Walken learned of Lurie's leases with the Taylor law firm and with Prentice Hall after the April 30, 1986, expiration of CSR's leases. When Walken gained knowledge of these leases, it requested and received copies of the agreements. Following Walken's receipt of these copies, Lurie's Accounting Manager, Philip E. Elworth, sent a letter, dated June 23, 1986, to Jerry Harris of CSR stating, in pertinent part:

"Review of the accounting records of the leases for the spaces known as 1900, 1910, 1919 and 1927 at the American National Bank Building revealed an error in billing during the last two months of the lease terms expiring on April 30, 1986. The investigation reveals that 3,980 square feet of the space was released to a new tenant effective March 1, 1986. Correspondingly, a credit should have been afforded your firm cancelling this portion of the leases.

"Accordingly, a check totaling $14,182.07 has been enclosed representing two months of the average rent paid on the space during March and April, 1986."

Neither CSR nor Walken has negotiated this check.

The lease agreements between CSR and Lurie provided Lurie with certain rights under the contracts. First, section 19 of the leases for Suites 1900, 1919 and 1927 provided Lurie with a right to remodel the premises for a new tenant during the final portion of the former tenant's occupancy:

"Landlord shall have the following rights, each of which Landlord may exercise without notice to Tenant and without liability to Tenant for damage or injury to property, person or business on account of the exercise thereof, and the exercise of any such rights shall not be deemed to constitute an eviction or disturbance of Tenant's use or possession of the Premises and shall not give rise to any claim for set-off or abatement of rent or any other claim:

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"(d) During the last ninety (90) days of the Term or prior to that time in the event that Tenant vacates or abandons the Premises, to decorate, remodel, repair, alter or otherwise prepare the Premises for reoccupancy." ¹

Second, three of the four leases (Suites 1900, 1919 and 1927) contained a section 21 which included the following language relevant to Lurie's rights upon a tenant's abandonment of the premises:

"All rights and remedies of Landlord herein enumerated shall be cumulative and none shall exclude any other right or remedy allowed by law:

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"(b) If Tenant defaults in the payment of rent, and Tenant does not cure the default within ten (10) days after demand for payment of such rent or if Tenant defaults in the prompt and full performance of any other provision of this Lease and Tenant does not cure the default within twenty (20) days (forthwith if the default involves a hazardous condition) after written demand by Landlord that the default be cured unless the default involves a hazardous condition, which shall be cured forthwith upon Landlord's demand, or if the leasehold interest of Tenant be levied upon under execution or be attached by process of law, or if Tenant makes an assignment for the benefit of creditors, or if a receiver be appointed for any property of Tenant, or if Tenant abandons the Premises, then and in any such event Landlord may, if Landlord so elects but not otherwise, and with or without notice of such election and with or without any demand whatsoever, either forthwith terminate this Lease and Tenant's right to possession of the Premises or, without terminating this Lease forthwith terminate Tenant's right to possession of the premises.

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"(d) If Tenant abandons the Premises or otherwise entitles Landlord so to elect and Landlord elects to terminate Tenant's right to possession only, without terminating the Lease, Landlord may, at Landlord's option enter into the Premises, remove Tenant's signs and other evidence of tenancy, and take and hold possession thereof ... without such entry and possession terminating the Lease or releasing Tenant, in whole or in part, from Tenant's obligation to pay the rent hereunder for the full Term. Upon and after entry into possession without termination of the Lease, Landlord may, but need not, relet the Premises or any part thereof for the account of Tenant to any person, firm or corporation other than Tenant for such rent, for such time and upon such terms as Landlord in Landlord's sole discretion shall determine, and Landlord shall not be required to accept any tenant offered by Tenant or to observe any instructions given by Tenant about such reletting. In any case, Landlord may make repairs, alterations and additions in or to the Premises and redecorate the same to the extent deemed by Landlord necessary or desirable, and Tenant shall, upon demand, pay the cost thereof, together with Landlord's expenses of the reletting. If the consideration collected by Landlord upon any such reletting for Tenant's account is not sufficient to pay monthly the full amount of the rent reserved in this Lease, together with costs of repairs, alterations, additions, redecorating and Landlord's expenses, Tenant shall pay to Landlord the amount of each monthly deficiency upon demand." ²

Three of the four leases (Suites 1900, 1919 and 1927) also contained provisions stipulating that the leases were to be "governed by and...