Court Opinion

ID: 9745490
Source: CourtListenerOpinion
Date Created: 2023-08-26 23:02:34.627092+00
Date Added: 2024-06-11T07:25:01.667903
License: Public Domain

JUSTICE THEIS, specially concurring: In this case, the majority finds that equity should not excuse plaintiff from strict compliance with the terms of the termination option of its lease. I agree with the majority’s reasoning and holding, but write separately to explain the equitable relief that plaintiff requests. I will also explain why these equitable principles do not aid plaintiff in this case. It is well settled that a court may exercise its equitable powers to relieve a party of strict compliance with the requirements of exercising an option in a lease agreement where there has been an unavoidable accident, fraud, surprise, or mistake. 2 J. Pomeroy, Equity Jurisprudence §451, at 283; §453b, at 296-97 (5th ed. 1941); F.B. Fountain Co. v. Stein, 97 Conn. 619, 624, 118 A. 47, 49 (1922); see also Dikeman v. Sunday Creek Coal Co., 184 Ill. 546, 551, 56 N.E. 864, 865 (1900). For example, a court would exercise its equitable powers to relieve strict compliance where a party has made an honest effort to comply with the requirements of a contract and there was a miscarriage of the mail. See 2 J. Pomeroy, Equity Jurisprudence §453, at 292 (5th ed. 1941) (discussing mistake and accident in the context of forfeitures arising from the failure to pay rent); see also Gold Standard Enterprises, Inc. v. United Investors Management Co., 182 Ill. App. 3d 840, 845-46, 538 N.E.2d 636, 639-40 (1989) (post office failed to deliver letter because, unbeknownst to party mailing letter to exercise option, it lacked sufficient postage); Providence Insurance Co. v. La Salle National Bank, 118 Ill. App. 3d 720, 723, 455 N.E.2d 238, 240-41 (1983) (although letter may have been in lessor’s post office box on the Saturday due date, the lessor did not pick up the letter from the post office box until Monday, which was first business day following the due date). It is also well settled that a court will not exercise its equitable powers to relieve a party of gross or willful negligence in failing to timely and properly exercise an option to renew or terminate a lease. 2 J. Pomeroy, Equity Jurisprudence §453b, at 296-97 (5th ed. 1941); F.B. Fountain, 97 Conn. at 624, 118 A. at 49. However, jurisdictions across the country are split over whether a court may exercise its equitable powers to relieve a party’s mere carelessness, forgetfulness, or ordinary negligence in failing to properly exercise an option. Thomson Learning, Inc. v. Olympia Properties, LLC, 365 Ill. App. 3d 621, 633 n.4, 850 N.E.2d 314, 325 n.4 (2006) (and cases cited therein); Andrews v. Blake, 205 Ariz. 236, 244-45 nn.4-5, 69 P.3d 7, 15-16 nn.4-5 (2003) (and cases cited therein). More than 100 years ago, in Dikeman v. Sunday Creek Coal Co., 184 Ill. 546, 551, 56 N.E. 864, 865 (1900), our supreme court held that a court must enforce an agreement as written unless “some stipulation [has been] waived or there is a just excuse for non-compliance.” The court then went on to explain that in that case, there was no “fraud, accident or mistake on account of which complainant neglected to avail itself of the option, and it assign[ed] no explanation or excuse for the delay except the negligence of its own agent.” Dikeman, 184 Ill. at 551, 56 N.E. at 865. Absent a “just excuse” such as “fraud, accident, or mistake,” the court thus declined to exercise its equitable powers to “relieve against mere forgetfulness.” Dikeman, 184 Ill. at 551, 56 N.E. at 865; see also Moore v. Kriebel, 742 So. 2d 139, 145-46 (Miss. App. 1999) (interpreting and relying upon Dikeman to reach this same holding). Thus, Illinois sided with those jurisdictions maintaining that equity will never relieve “mere negligence as by forgetfulness” in failing to timely and properly exercise an option in a lease agreement. See F.B. Fountain, 97 Conn. at 625, 118 A. at 49; see also Thomson Learning, 365 Ill. App. 3d at 633 n.4, 850 N.E.2d at 325 n.4 (and cases cited therein). However, numerous other jurisdictions have relied on the equitable maxim that “equity abhors forfeiture” to reach a different result. 15 R. Lord, Williston on Contracts §46.11, at 437-38 (4th ed. 2000); see also Andrews, 205 Ariz. at 244 n.4, 69 P.3d at 15 n.4 (citing cases from jurisdictions allowing equitable interventions for negligent or inadvertent failures to strictly comply with the terms of an option). The rationale behind this position is that equity abhors forfeiture so much so that equity would allow a party time beyond the time established by a contract to perform in order to save that party from an egregious forfeiture. 15 R. Lord, Williston on Contracts §46.11, at 437-38 (4th ed. 2000). However, not all potential forfeitures warrant equitable relief. 15 R. Lord, Williston on Contracts §46.11, at 439-41 (4th ed. 2000). To determine what degree of forfeiture would prompt a court to equitably intervene, the court must weigh the delay and culpability of the delaying party against the degree of the potential forfeiture. 15 R. Lord, Williston on Contracts §46.11, at 440-41 (4th ed. 2000). Where there has been no forfeiture, equity may also act to prevent another unconscionable result. 1 J. Perillo, Corbin on Contracts §2.15, at 202 (1993). Courts across the country have applied a three-part test to determine when equity should relieve strict compliance in order to prevent a forfeiture or other unconscionable result. 15 R. Lord, Willis-ton on Contracts §46.12, at 461-62 (4th ed. 2000); 1 J. Perillo, Corbin on Contracts §2.15, at 203 (1993). According to Corbin on Contracts, strict compliance with the terms of the option may be excused where: (1) the delay in notice was slight; (2) the delay did not prejudice the other party by a change in position; and (3) the failure to grant relief would result in such hardship as to make literal enforcement of the renewal provision unconscionable. 1 J. Perillo, Corbin on Contracts §2.15, at 203 (1993). The Corbin test was first articulated in F.B. Fountain, 97 Conn. at 627, 118 A. at 50. The court in F.B. Fountain explained that this test applied where a party was neglectful, but not willfully or grossly negligent. F.B. Fountain, 97 Conn. at 627, 118 A. at 50. Further, the court in F.B. Fountain explained that the three-part test does not apply where an independent ground for equity to relieve a party of strict compliance exists, such as accident, fraud, surprise, or mistake “free from culpable negligence.” F.B. Fountain, 97 Conn. at 626, 118 A. at 49-50. Other variations of this three-part test also exist. The Second District of this court in Thomson Learning applied a variation of the Corbin test, which the majority applies here. Thomson Learning, 365 Ill. App. 3d at 633, 850 N.E.2d at 324. Williston on Contracts articulates yet another version of the test, under which the late exercise of an option may be excused where: (1) the failure is caused by inadvertence or oversight; (2) the other party has not substantially changed position in rebanee on the failure to timely exercise the option; and (3) the application of the general rule that time is of the essence would work an unconscionable result or a forfeiture. 15 R. Lord, Wilbston on Contracts §46.12, at 461-62 (4th ed. 2000). Although our supreme court has never overruled its holding in Dikeman, this court in Linn Corp. v. LaSalle National Bank, 98 Ill. App. 3d 480, 424 N.E.2d 676 (1981), reversed the grant of a motion to dismiss, finding that the circuit court could exercise its equitable powers to relieve a party’s negbgent failure to properly exercise an option based on the factors in the three-part test. There, the court found that strict compliance with a one-year written notice to renew requirement could be excused where strict enforcement would have resulted in the forfeiture of some $200,000 worth of improvements to a premises and where the failure to exercise strict comphance did not cause the lessor any undue hardship because the lessee had orally notified the lessor of the intention to renew before the deadline. Linn, 98 Ill. App. 3d at 484, 424 N.E.2d at 679. In so holding, the Linn court erroneously cited Dikeman for the proposition that it could simply excuse strict comphance with the terms of an option where “right and justice” so require. Linn, 98 Ill. App. 3d at 483, 424 N.E.2d at 678. The Linn court failed to recognize that what Dikeman considered to be “just excuse for noncompliance” included only fraud, accident, or nonnegligent mistake, which are traditional grounds for equitable intervention. Dikeman, 184 Ill. at 551, 56 N.E. at 865; F.B. Fountain, 97 Conn. at 624, 118 A. at 49; see also 2 J. Pomeroy, Equity Jurisprudence §453b, at 296 (5th ed. 1941). Since Linn, the Illinois Appellate Court has continued to use the three-part test in determining whether to excuse strict compliance with the terms of an option. See, e.g., Thomson Learning, 365 Ill. App. 3d at 633, 850 N.E.2d at 324; Ceres Terminals, Inc. v. Chicago City Bank & Trust Co., 117 Ill. App. 3d 399, 404-05, 453 N.E.2d 735, 738 (1983); see also Providence Insurance, 118 Ill. App. 3d at 723, 455 N.E.2d at 240 (not applying the three-part test, but citing Linn for the proposition that strict compliance may be excused under “proper circumstances” even where the failure to provide the stipulated notice is due solely to the lessee’s negligence). There has been no Illinois Supreme Court decision on this point since Dikeman. Thus, the holding of Dikeman, that Illinois courts will never exercise their equitable powers to relieve negligent or careless failures to timely and properly comply with the terms of an option, is still the law. Here, plaintiff concedes that it negligently failed to properly exercise its option to terminate the lease in question. Further, plaintiff has not asserted a traditional grounds for equitable relief, such as fraud, mistake, duress, or accident. Therefore, because Dikeman is still the law, the court should not excuse plaintiff’s negligent noncompliance. However, even if the three-part test were adopted, I would reach the same conclusion. Under either the Williston or Corbin version of the three-part test, it is clear that there must be a risk of forfeiture or other unconscionable result before the court will relieve a party of strict compliance. 15 R. Lord, Williston on Contracts §46.12, at 461-62 (4th ed. 2000); 1 J. Perillo, Corbin on Contracts §2.15, at 203 (1993). Consistent with this requirement, this court in Ceres Terminals, 117 Ill. App. 3d at 405, 453 N.E.2d at 738, did not excuse a party’s failure to timely exercise an option where that party would have suffered nothing more than normal business costs as a result of its failure. Here, plaintiff has not claimed that it will suffer a forfeiture or other unconscionable result if strict compliance were not excused. Rather, as in Ceres Terminals, plaintiff will only suffer the normal business costs that would be suffered by any lessee that has failed to properly exercise a lease option. See Ceres Terminals, 117 Ill. App. 3d at 405, 453 N.E.2d at 739. Therefore, under either the Williston or Corbin version of the three-part test, plaintiff should not be relieved of strict compliance with the requirements of the option contract. Accordingly, I agree with the majority’s conclusion affirming the judgment of the circuit court.