Oak Forest Properties v. RER Financial, Inc. — Breach of Lease Contract Dispute Resolved — Chicago Real-Estate Litigation Attorneys

Where circuit court did not err when it ordered plaintiff and defendant to each pay their own attorneys’ fees in case for breach of a lease agreement because the plaintiff and defendant both won and lost on some of their claims, and neither party prevailed on claims that were significantly complex.

Oak Forest Properties is a landlord that operates a strip mall in Oak Forest, Illinois. RER Financial is a franchisee of a consumer tax preparation business. The two companies entered into a commercial lease agreement. Oak Forest agreed to divide one of its buildings into two spaces, and RER agreed to lease one of those spaces. Oak Forest agreed to take on the construction costs of the division, and RER agreed to bear the costs of any interior construction of the space after the division.

The agreement required Oak Forest to finish construction before RER started any aspects of its interior build-out. The parties, however, ignored that requirement and combined their efforts to divide and build-out space, using the same contractor and a single building permit for all work. Eventually, the parties’ relationship broke down and RER exercised an option to terminate the lease.

Oak Forest sued RER in Illinois state court, as well as Maurice Rodgers, an owner of RER who had personally guaranteed the lease agreement. Oak Forest alleged that RER breached its contract with Oak Forest, breached its guaranty, and was unjustly enriched. RER filed a counterclaim for breach of contract, arguing that Oak Forest’s failure to timely divide the space caused RER to suffer losses to its business. After a trial, the circuit court ruled that RER had properly exercised its option to terminate, but found that RER was not entitled to any damages beyond the return of its security deposit. The court also ordered both parties to bear their own attorneys’ fees. RER then appealed.

On appeal, RER challenged the trial court’s decision that each party was responsible for its own attorneys’ fees. The appellate court cited Forest Preserve District v. Continental Community Bank & Trust Co., stating that Illinois follows the “American Rule” which prohibits a prevailing party from recovering attorney fees absent express statutory or contractual languages authorizing recovery. The appellate court stated that any contracts that allow a prevailing party to recover attorneys’ fees are contrary to common law, and must be strictly construed.

The panel then stated that in a case involving multiple claims, where each party prevails on some of the claims, it may be inappropriate to determine that either of the parties has prevailed. The appellate court then stated that the circuit court did not err in finding that the claim that RER was successful on, the return of its security deposit, was insignificant compared to the claims that it failed to succeed on. The appellate court pointed out that the plaintiff and defendant both sought damages in excess of $100,000 on their breach of contract claims, and that the security deposit amounted to only $3400. The court also found that, even though the trial was complex, the issue of the security deposit was simple, and was therefore not a significant issue in the case. The appellate court affirmed the decision of the circuit court.

You can read the full opinion here.

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