Greggs USA, Inc. v. 400 East Professional Associates, LP

• Citation: 2021 IL App (1st) 200959,198 N.E.3d 1062,459 Ill.Dec. 685
• Decision Date: 16 June 2021
• Docket Number: 1-20-0959
• Parties: GREGGS USA, INC., Plaintiff and Counterdefendant-Appellant, v. 400 EAST PROFESSIONAL ASSOCIATES, LP, Defendant and Counterplaintiff-Appellee.
• Court: United States Appellate Court of Illinois

2021 IL App (1st) 200959

198 N.E.3d 1062

459 Ill.Dec. 685

GREGGS USA, INC., Plaintiff and Counterdefendant-Appellant,

v.400 EAST PROFESSIONAL ASSOCIATES, LP, Defendant and Counterplaintiff-Appellee.

No. 1-20-0959

Appellate Court of Illinois, First District, THIRD DIVISION.

Filed June 16, 2021

Rehearing Denied August 27, 2021

Arthur E. Rosenson, of Rosenson & Zuckerman LLC, of Chicago, for appellant.

Cary G. Schiff and Christopher R. Johnson, of Gary G. Schiff & Associates, of Chicago, for appellee.

OPINION

JUSTICE McBRIDE delivered the judgment of the court, with opinion.

¶ 1 Greggs USA, Inc. (Greggs), brought a single count amended complaint against its landlord, 400 East Professional Associates, LP (400 East), in which it alleged that breach of a commercial lease prevented Greggs from using the premises as it intended for a bakery and restaurant and caused Greggs to lose more than $100,000 in renovation expenses. 400 East counterclaimed, was granted summary judgment, and was awarded $154,613.82 in back rent, late fees, and attorney fees. Greggs seeks reversal of the summary judgment ruling, either because the record affirmatively shows the landlord's breach or because there was a material fact dispute that should have been construed in the nonmoving party's favor.

¶ 2 On June 24, 2020, the trial court granted the landlord's motion for summary judgment and ruled that the landlord was contractually entitled to $94,425.03 in unpaid rent and late fees and an amount of attorney fees to be determined from the landlord's petition filed within 21 days. On September 2, 2020, the court denied the tenant's motion for reconsideration and granted the landlord's petition for $60,188.79 in attorney fees. On September 10, 2020, the tenant filed its notice of appeal. We have jurisdiction over the tenant's timely appeal from a final judgment order based on Illinois Supreme Court Rule 301 (eff. Feb. 1, 1994) and Rule 303 (eff. July 1, 2017).

¶ 3 The parties executed a written lease for Unit A, 400 East Randolph Drive, Chicago, Illinois, which is a commercial premises of about 1375 square feet on the ground floor of a 40-story high-rise condominium building. The space had previously been used as a coffee shop. In paragraph 3, Greggs agreed to "occupy and use the Premises space as a bakery and restaurant." In paragraph 2, Greggs agreed that "all Rent shall be paid to Landlord without offset or deduction, and the covenant to pay Rent shall be independent of every other covenant in this Lease." In addition, if rent was not timely paid, a 5% late charge and 12% interest would begin accruing after five days. Paragraph 2 also indicated Greggs's rent obligation would begin 150 days after Greggs took possession and then continue for the next 60 months. Monthly rent was $3781.25 during the first year and then increased annually until it was $4342.70 during the fifth and final year. Rent was, however, 100% abated for the first 4 months of the 60 month period and 50% abated for the subsequent 8 months, which effectively reduced the first year's monthly rent to $1890.63. The lease specified that Greggs took possession upon full lease execution, i.e. , Greggs took possession when it contracted with 400 East on June 21, 2016. Paragraph 4 addressed the condition of the property when Greggs took possession, stating:

"4. CONDITION OF PREMISES. Tenant's taking possession of the Premises shall be conclusive evidence that the Premises were in good order and satisfactory condition when Tenant took possession. No agreement of Landlord to alter, remodel, decorate, clean or improve the Premises or the Building (or to provide Tenant with any credit or allowance for the same), and no representation regarding the condition of the Premises or the Building, have been made by or on behalf of Landlord or relied upon by Tenant, except as stated herein or in a separate work letter, if any, executed by Landlord and Tenant."

The "Work Letter" attached as "Exhibit C" to the lease stated in relevant part:

"1. DELIVERY. Landlord shall deliver the Premises to Tenant in ‘as is, where is’ condition. Any desired construction and improvements to the Premises shall be performed by Tenant at its sole cost and expense.

* * *

30. BLACK IRON

. The existing black iron shall be delivered to Tenant in good working order and in a clean condition. Tenant shall be responsible for maintaining the black iron and having it professionally cleaned at least once per year at its sole cost and expense."

Paragraph 25 of the lease, titled "MISCELLANEOUS," stated:

"B. Entire Agreement. This Lease, and the riders and exhibits, if any, attached hereto which are hereby made a part of this Lease, represent the complete agreement between Landlord and Tenant; and Landlord has made no representations or warranties except as expressly set forth in this Lease. No modification or amendment of or waiver under this Lease shall be binding upon Landlord or Tenant unless in writing signed by Landlord and Tenant."

¶ 4 After Greggs took possession in June 2016, it began renovating the commercial space. However, the board of directors of the condominium association for 400 East Randolph Drive ordered Greggs in September 2016 to stop its construction work immediately. During an inspection on September 27, 2016, the association's chief engineer had found unlicensed and uninsured contractors working at the premises. Greggs gave up possession on an unspecified date in 2017.

¶ 5 Greggs filed suit on March 30, 2017, based entirely on the statement in paragraph 30 of work letter: "The existing black iron shall be delivered to Tenant in good working order and in a clean condition." In a first amended complaint, Greggs alleged that "black iron" was a term for a ventilation system for smoke and cooking vapors and the return of fresh air, the ventilation system was essential for Greggs to use the leased property as a bakery and restaurant, and 400 East had breached its obligation to deliver the black iron in good working order as stated in paragraph 30. Greggs claimed that 400 East's breach of contract entitled Greggs to recoup its renovation expenditures, payments to 400 East, loss of income, and other funds, totaling in excess of $100,000. In its answer, 400 East denied the material allegations and alleged as affirmative defenses that (1) Greggs "had every opportunity to inspect the Premises [(including the ventilation system)] prior to Lease execution and delivery to determine the feasibility of make-up air calculations for Plaintiff's intended use," (2) Greggs had defaulted on the lease and owed in excess of $28,000 in rent and other charges specified in the lease, and (3) 400 East would have to expend "significant" funds to remedy Greggs's "improvements" to the property.

¶ 6 In its verified counterclaim, 400 East alleged that Greggs paid no rent after taking possession during June 2016, 400 East had mitigated its damages by reletting the unit effective July 2019 (with the assistance of a commercial real estate agent), and the gap between Greggs's abandonment in 2017 and the new tenant in 2019 was due to the poor quality or unfinished state of Greggs's renovations. 400 East further alleged that its new tenant operated a restaurant but was unable to use any of Greggs's modifications and that all of the renovations had been removed. 400 East sought unpaid rent, unpaid electric costs, and late fees specified in the lease; the cost of removing the unusable renovation materials; court costs, attorney fees and expert witness fees as the "prevailing party" pursuant to the lease; and any other damages it incurred. Greggs denied the material allegations of 400 East's counterclaim and contended the landlord's breach had released Greggs from the lease.

¶ 7 During discovery, Greggs's expert witness, Olabode M. Beckley, was deposed by 400 East. Beckley was a licensed professional engineer and structural engineer. Beckley said "black iron" was a term that technicians used to describe the supply and exhaust system in relation to ventilation of a space. An engineer, however, would use the term "HVAC," meaning "heating, ventilation, and air conditioning," and also the more specific terms "supply duct," "exhaust duct," "supply fan," and "exhaust fan" when talking about "moving air around." In Beckley's opinion, 400 East breached paragraph 30 of the work letter by providing only the exhaust half of a supply-and-exhaust system. 400 East had refused Greggs's request to allow its contractor to create a hole in the building's 90-inch by 10-inch metal air duct in order to attach Greggs's air supply. Beckley acknowledged, however, that the air duct was solid and did not have a hole in it when the lease was signed.

¶ 8 400 East filed a motion for summary judgment in which it argued that paragraph 30, contrary to Greggs's assertions, only obligated 400 East regarding the existing black iron as of the date the parties executed the lease. Greggs's president and general contractor had inspected the premises before the lease was executed, then the president had contracted to take the premises " ‘as is’ " knowing that any desired construction and improvements would be undertaken solely at Greggs's expense. The contract language Greggs was relying upon did not obligate 400 East to make or allow any structural modifications to any components of its property.

¶ 9 In response to 400 East's motion, Greggs tendered an affidavit from its president and owner, Dedun Sonaike, and an affidavit from the project engineer, Beckley, indicating that they were assured by 400 East that there was an existing ventilation system which Greggs could access for its bakery and restaurant. Sonaike's sworn statement referred to conversations she had prior to executing the lease on June 21, 2016, and Beckley's affidavit referred to a conversation he had "[i]n the summer of 2016." Beckley also stated that the subsequent renovation work was performed in a good and workmanlike manner in...