Court Opinion

ID: 9716847
Source: CourtListenerOpinion
Date Created: 2023-08-26 06:52:21.693034+00
Date Added: 2024-06-11T18:23:49.391591
License: Public Domain

JUSTICE BILANDIC, dissenting: I agree with the majority that the trial court correctly ruled against Evans on its counterclaim. However, I respectfully dissent from the conclusion drawn by the majority that “wholesale sales” are included in the determination of percentage rental under the lease. The percentage lease has its roots in the English feudal lease where the serf paid the lord of the land or “land-lord,” an agreed portion of the crops he raised. This age-old principle is now applied to the retail business, substituting a percentage of the lease income for a percentage of the crops raised. Percentage leases are common in all urban centers throughout the country. See Denz, Lease Provisions Designed to Meet Changing Economic Provisions, 1952 U. Ill. L. F. 344, 351. “Since the rent payable under a percentage lease is based upon business volume, it is applicable only when two factors exist: (1) Goods or services are sold at retail. (2) The volume of sales bears a direct relationship to the nature and location of the premises.” Denz, 1952 U. Ill. L.F. at 351-52. “[O]ne of the foremost purposes of percentage leases is to allow the landowner-lessor to receive a rental based on the value of the location of the leased premises; thus, it can be presumed that parties to a percentage lease intend that all receipts representing profit-making transactions reasonably related to the location are to be included in the calculation of percentage rentals.” (Annot., 58 A.L.R.3d 384, 397 (1974).) In light of this purpose, the rental base should be presumed not to include sales to employees, transfers to branch stores, and sales to other stores at wholesale. The physical location of the business plays an insignificant role in these situations. Note, Resolving Disputes Under Percentage Leases, 51 Minn. L. Rev. 1139, 1150 (1967). The lease executed on March 7, 1978, at the very outset identifies the parties, the demised premises, the term and a broad description of the use of the premises. The fixed rental of over $41/2 million and the manner of payment is covered in one paragraph. Pages 4 through 15 of the lease are devoted to the percentage rental formula. It is undisputed that the parties are well informed and experienced business people. Obviously they were aware of the purpose and function of a percentage lease.'It is a tool that is not designed for a wholesale operation. Referring to Denz, Lease Provisions Designed to Meet Changing Economic Conditions, 1952 U. Ill. L.F. 344, the majority states: “Moreover, the article does not contain any pronouncement that wholesale sales may never be included in percentage leases. Instead, it simply says that percentage leases are ‘not adapted *** to most wholesale businesses.’ (Emphasis added.) [Citation.]” (176 Ill. App. 3d at 1052.) The lease at bar does not specifically state between pages 4 and 15 that “wholesale sales” shall be included in computing percentage rental. On the contrary, the percentage rental provisions end at page 15 with a clear expression of a contrary intent. “In view of the fact that the rental payable to the Lessors under the terms of this Lease is in part based upon the volume of gross sales made in, at and from the demised premises, the Lessee covenants and agrees that during the term of this Lease, the Lessee *** will at all times maintain its corporate existence and conduct in the demised premises primarily a store for the sale at retail of men’s, women’s and misses’ wearing apparel ***.” (Emphasis added.) The final clause of the percentage rental provisions states: “[T]he Lessee shall at all times during the term hereof continue to conduct and operate on the demised premises a store for the sale at retail of men’s, women’s and misses’ wearing apparel of essentially the same character as the store heretofore conducted and operated in said Building by the Lessee.” (Emphasis added.) It is clear to me that the correct construction of the percentage lease provisions is that the percentage is computed primarily on the basis of retail sales. Likewise, it is clear that the parties did not intend to include “wholesale sales” as a part of the percentage formula. The prior series of leases did not have a provision that specifically included “wholesale sales.” The parties chose not to make a specific inclusion of “wholesale sales” in the percentage rental formula in the 1978 lease. This specific omission leads me to the conclusion that the parties did not intend to include “wholesale sales” as part of the percentage rental formula. The analysis of the majority requires us to create an inclusion of “wholesale sales” by implication. “[Wjhere there is any doubt or uncertainty as to the meaning of the language used in a lease it should be construed most strongly against the lessor and in favor of the lessee.” J.B. Stein & Co. v. Sandberg (1981), 95 Ill. App. 3d 19, 22, 419 N.E.2d 652; see also 24 Ill. L. & Prac. Landlord & Tenant §44 (1980). It is important to recognize that the amount of rent to be paid to the lessor should be clear and unequivocal. It should not be the subject of speculation or require an inference or implication. There is no specific provision for inclusion of “wholesale sales.” It is not appropriate for us to create one by implication. Having determined that “wholesale sales” are not included in gross sales for the purpose of computing percentage rental, it is my opinion that the judgment of the trial court in favor of the plaintiff and against the defendant on count I should be reversed. This conclusion would require a reversal of the award of attorney fees to the plaintiff, render moot the extension of the percentage rental period and prejudgment interest, and require remandment to the trial court for determination of reasonable attorney fees to the defendant for its successful defense of all four counts of plaintiff’s complaint.