Design Studio International, Inc. v. Chicago Title & Trust Co.

541 N.E.2d 1166, 185 Ill. App. 3d 797, 133 Ill. Dec. 728, 1989 Ill. App. LEXIS 962
CourtAppellate Court of Illinois
DecidedJune 26, 1989
Docket1-87-0915
StatusPublished
Cited by15 cases

This text of 541 N.E.2d 1166 (Design Studio International, Inc. v. Chicago Title & Trust Co.) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Design Studio International, Inc. v. Chicago Title & Trust Co., 541 N.E.2d 1166, 185 Ill. App. 3d 797, 133 Ill. Dec. 728, 1989 Ill. App. LEXIS 962 (Ill. Ct. App. 1989).

Opinion

JUSTICE O’CONNOR

delivered the opinion of the court:

This is an appeal from a declaratory judgment entered in favor of plaintiff, Design Studio International, Inc. (Design Studio). The trial court held that Design Studio’s obligation under its lease to pay a portion of any real estate tax increases paid by its lessor, Helene Curtis, should be based on the building as it existed prior to the improvements made by Helene Curtis. We affirm.

On February 16, 1979, plaintiff, Design Studio, executed a lease and rider with L.I.R. Associates, as agents for Michigan Avenue National Bank, as trustee under trust No. 1158.

The lease was for a term of five years from June 1, 1979, through May 31, 1984, and covered a store and basement premises in what was then known as the Exhibitors Building at 331-35 North Wells Street, Chicago, Illinois. The building was a 70-year-old, nine-story brick building with a small lobby housing some 30 to 40 tenants who exhibited home furnishings for sale to retailers or the public.

Howard Caller (Caller), the president of Design Studio, negotiated the lease directly with Daniel Comroe (Comroe), the then owner of the Exhibitors Building. The provisions of the lease which were the subject of this declaratory judgment action are paragraphs 23(A) and 24(A) of the rider. Paragraph 23(A) provided:

“Lessee agrees to pay as additional rental hereafter for each calendar year succeeding 1978, the ‘base year,’ during the remainder of the term, including any extensions or renewals thereof, a portion of any increase in the real estate taxes paid by lessor during the ‘base year.’ Said proportion shall be such fraction as the number of square feet of rental space of the leased premises bears to the total rental space in the said building.
Said additional rental shall be payable in a lump sum on the first day of June of each calendar year for which the additional rent is payable, but only after Lessor renders a Statement to Lessee thereof.”

Paragraph 24(A) provided:

“2. ‘Building Area’ in Building means all of the office and store area.
3. ‘Occupancy Factor’ is 5% (.05) which is the ratio of the premises to the total Building area in the Building.”

In October of 1981, Helene Curtis purchased the property in which Design Studio’s premises were located for about $2 million. Title was taken by Helene Curtis in the name of Chicago Title & Trust Company, as trustee under trust No. 41080664. Helene Curtis terminated the leases of every tenant in the Exhibitors Building with the exception of Design Studio, which could not be terminated because of the renewal provisions in its lease.

Between 1982 and 1984, Helene Curtis spent approximately $20 million renovating the building which it renamed the Helene Curtis Building. The building was gutted and two new floors were added. The building was rewired, and new plumbing, heating, air-conditioning, ventilation and windows were installed. The building is now used exclusively by Helene Curtis with the exception of the portion leased by Design Studio. The area leased by Design Studio was left essentially unchanged except for some work on the heating and sprinkler systems. Defendant does not dispute that Design Studio has no access to, nor is it allowed to make any use of, the new building.

In 1982, the Exhibitors Building had an assessed value of $631,975, real estate taxes were $81,977.79, and Design Studio’s proportionate share of the real estate tax was $2,133. Design Studio paid its tax bill for 1981, 1982 and 1983 based on the above assessed value. In 1984, Helene Curtis received the first real estate tax bill based on the value of the new building as determined by the quadrennial reassessment. The assessed value of the property after renovation was $2,605,692 and real estate taxes were $488,309.82. Helene Curtis subsequently sent Design Studio a bill for $20,958.48.

Design Studio refused to pay the bill but responded that pursuant to its lease, it would pay the amount of taxes it owed based upon the Exhibitors Building. Thereafter, in February of 1986, Helene Curtis served Design Studio with a five-day notice for nonpayment of rent.

Design Studio filed a declaratory judgment action and a temporary restraining order. On February 24, 1987, a declaratory judgment was entered in favor of Design Studio and defendant now brings this appeal.

Defendant contends that the trial court’s order of February 24, 1987, finding that Design Studio’s obligation to pay a portion of the real estate taxes paid by Helene Curtis should be based on the condition of the property as it existed prior to the improvements was an abuse of discretion and contrary to the manifest weight of the evidence. Defendant notes that Caller, plaintiff’s principal representative, had sophisticated knowledge of real estate matters, which was evidenced by Caller and his counsel’s decision to strike certain portions of the lease and to insert language protecting his own interests. Defendant points out that plaintiff did not revise or delete certain portions of the lease reserving the lessor’s right to make any alterations or additions to the building. Nor did he strike or amend paragraph 23(A), which provided for a payment of additional rental fees based upon the increase in real estate taxes paid by the lessor. Defendant’s principal assertion is that the terms of the lease were unambiguous and thus there was no need for the trial court to rely on extrinsic and parole evidence in construing the lease.

Defendant argues that the unambiguous lease provisions setting out Design Studio’s obligation to pay real estate taxes could not become retroactively ambiguous by reason of the improvements to the building by Helene Curtis between 1982 and 1984. Defendant maintains that the lease clearly foresaw a sale of the building and major remodeling or improvements by a new owner. Furthermore, defendant points out that Design Studio exercised an option to extend the lease in June 1984 at a time when the improvements to the building were near completion and Design Studio had knowledge of them. Defendant maintains that if the parties to the lease had intended to limit Design Studio’s tax payment obligations to the condition of the building as it existed at the time the lease was made, the lease would have so stated.

Defendant relies on Bradley v. S.S. Kresge Co. (7th Cir. 1954), 214 F.2d 692. In Bradley, the passage of the Butler Law in Illinois caused an unusual real estate tax increase. The court held the tenant liable for the increased real estate taxes on the basis that the provision in the lease for the payment of real estate taxes was not ambiguous and therefore the lease had to be construed from the language used in the instrument itself. Bradley, 214 F.2d at 694-95.

The rules for construing a lease are the same as those for construing a contract. (Book Production Industries, Inc. v. Blue Star Auto Stores, Inc. (1961), 33 Ill. App. 2d 22,

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Bluebook (online)
541 N.E.2d 1166, 185 Ill. App. 3d 797, 133 Ill. Dec. 728, 1989 Ill. App. LEXIS 962, Counsel Stack Legal Research, https://law.counselstack.com/opinion/design-studio-international-inc-v-chicago-title-trust-co-illappct-1989.