Chicago Auditorium Ass'n v. Cramer

• Decision Date: 29 December 1925
• Docket Number: No. 3586.,3586.
• Citation: 8 F.2d 998
• Parties: CHICAGO AUDITORIUM ASS'N v. CRAMER et al.
• Court: U.S. District Court — Northern District of Illinois

8 F.2d 998 (1925)

CHICAGO AUDITORIUM ASS'N v. CRAMER et al.

No. 3586.

District Court, N. D. Illinois, E. D.

December 29, 1925.

Butz, von Ammon & Marx, of Chicago, Ill., for intervener Bullock.

Hamlin, Topliff & Cooper, Follansbee, Shorey & Schupp, Elting & Judson, George W. Gordon, King, Brower & Hurlbut, McCulloch & McCulloch, and Hay & Brown, all of Chicago, Ill., and Perkins, Malone & Washburn, of New York City, N. Y., for defendants.

Louis M. Greeley, Roswell B. Mason, and Henry Russell Platt, all of Chicago, Ill., guardians ad litem.

WILKERSON, District Judge.

Plaintiff is the lessee under leases covering the ground upon which the Chicago Auditorium Building is erected. The leases cover five separate parcels of land and were executed in 1887. In two of the leases Wirt D. Walker was the lessor, and Mark Skinner Willing, as trustee, and other defendants, as set forth in the pleadings, have succeeded to his interest. In another of the leases Walter G. Peck, Clarence I. Peck, and Ferd W. Peck were the lessors, and William A. Slater, as trustee, and other defendants, as set forth in the pleadings, have succeeded to this interest. In two of the leases Studebaker Bros. Manufacturing Company was the lessor, and Emily C. Chapin and other defendants, as set forth in the bill, succeeded to this interest.

In essential respects the provisions of the leases are the same. They are for the period of 99 years. The lessee agrees to forthwith begin and to build on the premises a substantial and solid fireproof building of brick, stone, iron, steel, and tile, and such other materials as are necessary and usual in fireproof buildings in the city of Chicago, the same to be in all respects in accordance with the building ordinances of the city of Chicago, and to carry on and prosecute the erection of the building with all reasonable dispatch, and to have the same completed before August 1, 1889; the building in the character of the materials to be used in its construction, to be as follows:

"All columns shall be of iron, stone, or brick, and all iron and steel columns and girders shall be fireproofed with a covering of porous terra cotta or hollow tile, or like material; all beams, joists, and roofing beams and joists shall be of iron or steel; all constructional floors shall be arches of hollow tile or like materials; all partitions shall be of brick or hollow tile; the roof shall be iron, brick, or hollow tile; the stage of the auditorium in said building, however, may be built of such material and in such manner as may seem most expedient to party of the second part."

In one of the Walker leases it is provided that the building to be built on the premises shall cost not less than $475,000; in the other it is provided that the building shall cost not less than $275,000. In the Peck lease it is provided that the building on the premises shall cost not less than $400,000. In the Studebaker leases it is provided that the building to be erected on each parcel shall cost not less than $50,000. The leases provide for fixed rentals until August 1, 1906, after which date the rent is to be 6 per cent. upon the value of the premises, exclusive of improvements; such valuations to be made on August 1, 1906, and every 10 years thereafter, in the manner provided in the leases.

The leases contain the usual covenants for payment of water rates, taxes, and assessments, against assignment without consent of the lessor, for the payment of rent, and for the termination of the lease in case of default of the lessee in complying with the covenants of the lease. Each of the leases contains the following provision:

"And the said party of the second part further covenants and agrees that it will at all times during the term hereby demised, at its own proper cost and charges, keep the building situated upon said demised premises, and all appurtenances belonging thereto, in good repair, and in a safe and secure condition, and that it will keep all rooms in said building in a good, safe, clean, and tenantable condition and repair during the entire term of this lease."

The leases contain provisions for the insurance of the premises and with reference to the collection and use of the insurance in case of loss. It is provided:

"If said buildings, or any part thereof, shall at any time or times during the continuance of the term hereby granted, be destroyed or damaged by fire, the party of the second part shall rebuild or repair the same upon the same plan as before the said fire happened, or such other plans as by the party of the first part shall be approved in writing, and have the same rebuilt and ready for occupancy within two years from such loss or destruction; and that as often as said buildings or improvements shall be burnt down or damaged by fire, all and every sum or sums of money which shall be recovered or received by the party of the second part for or in respect of said insurance, shall be laid out by it in rebuilding or repairing said building."

The leases also provide:

"That in the event of the determination of this lease at any time before the expiration of the term of 99 years hereby demised, for the breach of any of the covenants herein contained, then and in such case all buildings, fixtures and improvements, then situate upon said demised premises, shall belong to and be the property of said lessor, and no compensation therefor shall be allowed or paid to said lessee."

The leases provide for appraisal at the expiration of the term of the "actual cash value of any and all building or buildings, and any and all improvements that are then situate and standing upon said premises," and for securing to the lessee reimbursement for such value. It is provided:

"In making said appraisement of the value of said improvements, the appraisers or court shall take into consideration the suitableness of said improvements as to character and condition to secure the largest returns from the demised premises to the owner thereof, and the appraised value of said improvements shall in no case exceed the difference between the value of the entire property, land and improvements as a whole, and the value which said demised premises would then have, if vacant."

Upon the execution of the five leases, the lessee, with the knowledge and consent of the lessors, erected the Auditorium Building upon the five parcels of ground covered by the leases. The building is a single structure, and is not separable into parts apportionable to the separate leaseholds. The building was completed about December 1, 1889. In 1891 the Walker and Peck leases were modified. The term in each case was extended for an additional period of 100 years, so that the leases expire on August 1, 2085. The provisions for revaluation were eliminated and a fixed rental provided for the entire term of the leases. It was provided that all the covenants, agreements, conditions, and provisions of the original leases, except as modified by the agreement of 1891, should continue in full force and effect.

The facts, averred in the pleadings and established by the evidence, upon which plaintiff bases its claim for relief in equity, are as follows:

The Auditorium Building was erected before the development of modern steel construction. It is only 10 stories in height. Many more stories are required to produce an adequate return upon the ground value in central districts of cities like New York or Chicago. The Auditorium represents an obsolete type of construction. It has walls of brick and stone resting upon floating foundations. The foundation for a modern steel construction building of the best type should consist of caissons extending down to bed rock. The exterior walls of the Auditorium are what are commonly known as bearing walls, which are constructed of masonry throughout; whereas, the exterior walls of a modern fireproof building of the highest type are known as screen walls, and are supported upon the construction of the various floors, which are in turn supported by steel columns carrying the weight of the entire building. The columns used in the construction of the Auditorium are of cast iron, having lugs with which to support the beams and girders of the floor systems, which are bolted thereto; whereas, the columns in a modern fireproof building of the highest type are built up of structural steel members, which are riveted together and proportioned to carry the load thrown upon them. The beams and girders of the Auditorium have only bolted connections with the columns; whereas, in modern fireproof construction of the highest type, all joints are made with splice plates, lugs, and angles, with riveted connections for rigid fastening and accurate predetermination of the strength and construction.

The engineering formulas now employed in the construction of a modern fireproof building of the highest type state the limitations of the steal stresses and of the strength of materials used, but such formulas were not complied with in the construction of the Auditorium Building, for the reason that they had not been determined. Owing to the lack of experience and lack of precedents, the methods of design and construction actually employed in the erection of the Auditorium, while the best and most advanced known at the date of its construction, were inadequate and improper from a modern point of view.

Since the construction of the Auditorium, the value of the land upon which it is built has increased greatly. The character of the property in its neighborhood has changed completely. The west side of Michigan avenue is in great demand for large and expensive buildings for hotels, offices, and stores. Upon a 6 per cent. basis, the rents fixed in the leases represent a valuation of $637,500. The present value of the fee of the property in question (exclusive of the building) is more than $3,500,000. The present value of plaintiff's leasehold interest, estimated upon a 5 per...