Kanter & Eisenberg v. Madison Associates

• Decision Date: 22 May 1987
• Docket Number: No. 63564,63564
• Citation: Kanter & Eisenberg v. Madison Associates, 508 N.E.2d 1053, 116 Ill.2d 506, 108 Ill.Dec. 476 (Ill. 1987)
• Parties: , 108 Ill.Dec. 476 KANTER & EISENBERG, Appellant, v. MADISON ASSOCIATES et al., Appellees.
• Court: Illinois Supreme Court

Page 1053

508 N.E.2d 1053

116 Ill.2d 506, 108 Ill.Dec. 476

KANTER & EISENBERG, Appellant, v. MADISON ASSOCIATES et al., Appellees.

No. 63564.

Supreme Court of Illinois.

May 22, 1987.

David M. Stahl, Donald C. Clark, Jr., for Madison Associates and Hines Chicago Associates Limited, appellees; Isham, Lincoln & Beale, Chicago, of counsel.

Bruce L. Wald, Richard W. Hillsberg, Charles E. Alexander, for Kanter & Eisenberg, appellant; Tishler & Wald, Ltd. Chicago, of counsel.

Justice SIMON delivered the opinion of the court:

Defendant Madison Associates, through its managing partner, defendant Hines Chicago Associates, Ltd. (hereafter collectively referred to as Madison), leased a floor in the Three First National Plaza Building in Chicago to the plaintiff, the law firm of Kanter & Eisenberg (Kanter). The 10-year lease, which commenced on February 1, 1982, provided that Kanter would pay both a "base rental" and "additional rent." The base rental is a fixed sum, and the additional rent represents Kanter's share of the costs of operating the building to the extent they exceed an amount stipulated in the lease. The stipulated amount, or "initial basic cost," is $4.50 per square foot.

Kanter has paid the base rental without challenge, but has objected to Madison's demands for additional rent. In February 1984, Madison demanded that Kanter pay $170,352.34, representing accrued additional rent, and when Kanter refused, Madison served Kanter with a five-day notice under the forcible entry and detainer statute (Ill.Rev.Stat.1985, ch. 110, par. 9-209).

Kanter paid the claimed additional rent but filed a verified four-count complaint against the defendants in the circuit court of Cook County. The complaint alleged that the defendants' agent had fraudulently represented prior to execution of the lease that the $4.50 initial basic cost would be sufficient to prevent Kanter from incurring any additional rent in the first year of the lease. Kanter also alleged that it was denied access to Madison's books in violation of the lease provisions. The counts relevant here sought reformation of the initial basic cost term, a preliminary injunction against the collection of additional rent, and damages.

On June 7, 1985, while that complaint was pending, Madison served another five-day notice, this time demanding payment of $275,906.93 for additional rent accrued subsequent to the first demand. Kanter sought a temporary restraining order to prevent Madison from terminating its lease, initiating any action to evict, or attempting to collect any additional rent. In support of its request, Kanter filed the affidavit of one of its partners, and also referred to earlier testimony, apparently elicited in a pending action between Madison and another tenant (with which this case had been consolidated for discovery). The testimony concerned whether Madison's agent had ever made the alleged misrepresentation of the adequacy of the $4.50 initial basic cost. The affidavit repeated the complaint's allegations of Madison's misrepresentation and refusal to open its books to Kanter. The affiant further stated that Kanter had spent approximately one million dollars on improvements, fixtures and furnishings for the leasehold, and that the leasehold was valuable and unique. The affidavit concluded by alleging that Kanter was threatened with irreparable harm for which it had no legal remedy. The affidavit failed, however, to demonstrate that such harm would occur and nothing further was offered to establish that fact.

Without hearing any additional evidence, the trial judge entered a preliminary injunction on June 11. That injunction restrained Madison from filing an action to evict, required Kanter to pay the additional rent claimed into an escrow account, extended by agreement the five-day notice, and continued Madison's request that part of the money be paid to Madison. Ten days later, Kanter tendered the full amount claimed at another court appearance in which the trial judge modified the injunction. The injunction as modified prevents Madison from filing an action to evict, requires Madison to escrow a part of the $275,906.93 paid by Kanter, and provides for a similar procedure for escrowing portions of future additional rent payments (if made) pending a final decision. It also recited that Kanter's payment "cures and satisfies" the five-day notice.

Madison appealed the injunction order, and the appellate court held that the trial judge erred in enjoining Madison from proceeding with its forcible detainer action and in requiring Madison to escrow a portion of the rent paid. (144 Ill.App.3d 588, 98 Ill.Dec. 371, 494 N.E.2d 493.) We granted Kanter's petition for leave to appeal. 103 Ill.2d R. 315(a).

The primary issue in this case is not, as Kanter suggests, whether a court of equity has jurisdiction to enjoin a landlord from terminating a lease. Madison concedes that in proper circumstances equity could so act. The real question is whether the preliminary injunction entered by the trial judge was proper on the record in this case. As observed below, the answer to this question depends on the scope to be given to the ruling in Illinois Merchants Trust Co. v. Harvey (1929), 335 Ill. 284, 167 N.E. 69.

The standard for issuance of a preliminary injunction has been the subject of a "dizzying diversity of formulations." (Leubsdorf, The Standard for Preliminary Injunctions, 91 Harv.L.Rev. 525, 526 (1978); Buzz Barton & Associates, Inc. v. Giannone (1985), 108 Ill.2d 373, 387, 91 Ill.Dec. 636, 483 N.E.2d 1271.) Certain threads, however, run through virtually all statements of the test: the possibility of irreparable harm to the plaintiff's legal rights pending the outcome of trial if the preliminary injunction does not issue, the potential irreparable harm to the defendant's rights if it does, and the plaintiff's likelihood of success on the merits. (108 Ill.2d 373, 387, 91 Ill.Dec. 636, 483 N.E.2d 1271; Roland Machinery Co. v. Dresser Industries, Inc. (7th Cir.1984), 749 F.2d 380, 386-87.) Because the decision to grant or deny interlocutory relief is necessarily made on a truncated record, the aim of the analysis must be to minimize the risk of choosing wrongly. Leubsdorf, The Standard for Preliminary Injunctions, 91 Harv.L.Rev. 525, 540-41 (1978); Sierra On-Line, Inc. v. Phoenix Software, Inc. (9th Cir.1984), 739 F.2d 1415, 1422.

A court faced with a request for temporary injunctive relief must first consider whether the plaintiff will sustain irreparable harm by waiting for a decision on the merits. If there is an adequate legal or equitable remedy which will make the plaintiff whole after trial, a preliminary injunction should not issue. Sampson v. Murray (1974), 415 U.S. 61, 88, 94 S.Ct. 937, 951-52, 39 L.Ed.2d 166, 185-86; Friendship Materials, Inc. v. Michigan Brick, Inc. (6th Cir.1982), 679 F.2d 100, 102-03; Continental Group, Inc. v. Amoco Chemicals Corp. (3rd Cir.1980), 614 F.2d 351, 356; O. Fiss & D. Rendleman, Injunctions 331 (2d ed. 1984).

The initial inquiry, then, is whether Kanter would be irreparably harmed in the absence of a preliminary injunction restraining Madison from proceeding under the forcible entry and detainer statute. The gist of Kanter's underlying complaint is that it was fraudulently induced to agree to the initial basic cost of $4.50 and that the payments demanded are therefore higher than Kanter would have otherwise agreed to. Madison argues that Kanter has an adequate legal remedy in that Kanter can simply pay the disputed rent--thus avoiding any risk of losing the lease--and proceed with an action for damages for the alleged fraudulent misrepresentation. Accepting Madison's argument, the availability of the legal remedy and the absence of any showing that Kanter is financially unable to pay demonstrates that Kanter will not suffer irreparable harm if the preliminary injunction restraining Madison's forcible detainer action is refused. In response Kanter argues that this court's decision in Illinois Merchants Trust Co. v. Harvey (1929), 335 Ill. 284, 167 N.E. 69, forecloses any legal remedy and requires that it be protected by the issuance of an injunction.

In Illinois Merchants, the landlord insisted that the lease required the tenant to pay the landlord's income taxes on the rental payments. The tenant protested but, threatened with forfeiture of the lease, paid the claimed amount. Subsequent to the tenant's payment, this court ruled in another case that a similar lease provision did not require payment of income taxes by the lessee. The tenant in Illinois Merchants then filed suit to recover the amounts paid under protest. This court found that the tenant could not recover under the "voluntary-payment doctrine."

The voluntary-payment doctrine provides that money paid under a claim of right by one who has knowledge of the relevant facts cannot be recovered on the ground that the claim was illegal unless the payment was made under compulsion. (Freund v. Avis Rent-A-Car System, Inc. (1986), 114 Ill.2d 73, 79, 101 Ill.Dec. 885, 499 N.E.2d 473; Illinois Glass Co. v. Chicago Telephone Co. (1908), 234 Ill. 535, 541, 85 N.E. 200.) In Illinois Merchants the court applied the voluntary-payment...